<PAGE> 1
HOTCHKIS AND WILEY FUNDS
725 SOUTH FIGUEROA STREET
SUITE 4000
LOS ANGELES, CALIFORNIA 90017-5400
800-236-4479
INVESTMENT ADVISOR
HOTCHKIS AND WILEY
725 SOUTH FIGUEROA STREET
SUITE 4000
LOS ANGELES, CALIFORNIA 90017-5400
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
AND TRANSFER AGENT
FIRSTAR MUTUAL FUND SERVICES, LLC
615 EAST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53202
CUSTODIAN
FIRSTAR BANK MILWAUKEE, N.A.
615 EAST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53202
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
ANNUAL REPORT
JUNE 30, 1999
[HOTCHKIS AND WILEY FUNDS LOGO]
HOTCHKIS AND WILEY FUNDS
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
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BALANCED FUND
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TOTAL RETURN BOND FUND
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LOW DURATION FUND
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SHORT-TERM INVESTMENT FUND
HOTCHKIS AND WILEY: INVESTMENT ADVISOR
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[HOTCHKIS AND WILEY FUNDS LOGO]
EQUITY INCOME FUND
Seeks current income and long-term growth of income, accompanied by growth of
capital. The Fund invests primarily in U.S. stocks.
MID-CAP FUND
Seeks current income and long-term growth of income, accompanied by growth of
capital. The Fund invests primarily in stocks of U.S. companies with market
capitalizations of less than $10 billion.
SMALL CAP FUND
Seeks capital appreciation. The Fund invests primarily in stocks of U.S.
companies with market capitalizations of less than $2 billion.
INTERNATIONAL FUND
Seeks current income and long-term growth of income, accompanied by growth of
capital. The Fund invests in international stocks.
GLOBAL EQUITY FUND
Seeks current income and long-term growth of income, accompanied by growth of
capital. The Fund invests in U.S. and international stocks.
BALANCED FUND
Seeks to preserve capital while producing a high total return. The Fund's assets
are allocated between stocks and bonds.
TOTAL RETURN BOND FUND
Seeks to maximize long-term total return. The Fund invests in bonds 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 bonds 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 bonds of varying maturities with a portfolio duration which will
generally not exceed one year.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
SHAREHOLDER LETTER..................................... 3
SCHEDULE OF INVESTMENTS:
EQUITY INCOME FUND................................... 15
MID-CAP FUND......................................... 17
SMALL CAP FUND....................................... 19
INTERNATIONAL FUND................................... 21
GLOBAL EQUITY FUND................................... 24
BALANCED FUND........................................ 28
TOTAL RETURN BOND FUND............................... 32
LOW DURATION FUND.................................... 36
SHORT-TERM INVESTMENT FUND........................... 41
STATEMENT OF ASSETS AND LIABILITIES.................... 44
STATEMENT OF OPERATIONS................................ 46
STATEMENT OF CHANGES IN NET ASSETS..................... 48
NOTES TO THE FINANCIAL STATEMENTS...................... 52
FINANCIAL HIGHLIGHTS................................... 59
REPORT OF INDEPENDENT ACCOUNTANTS...................... 68
</TABLE>
[HOTCHKIS AND WILEY FUNDS LOGO]
HOTCHKIS AND WILEY FUNDS
<PAGE> 4
[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, 1999.
EQUITY INCOME FUND
The last six months of calendar-year 1998 were a time of great volatility and
dramatic events in the marketplace. July began strongly with a narrow group of
the largest growth stocks accounting for most of the gain. Underneath this
narrow group, the erosion of stock prices, which had began in April, continued
with value stocks underperforming dramatically.
On July 17, 1998, the entire market fell sharply, culminating in a selling
crescendo in the last three trading days in August. During the sell-off, a shift
in investor preference began to emerge, as investors refocused on underlying
valuation support and were drawn to truly over-sold opportunities within the
market. From August 26 through October 8, the more value-oriented stocks
performed well relative to the S&P 500 Index. In particular, the Fund gained
significantly against the S&P 500. From August 26 through October 8, the Fund
generated a -3.4% return while the S&P 500 returned -11.2% and the Russell 1000
Value Index returned -8.1%.
The correction ended in early October when the market was reignited by three
rate cuts in quick succession as the Federal Reserve pumped liquidity into the
global marketplace. Investors once again crowded into a handful of the largest,
most liquid names and the market, as measured by the S&P 500, produced
sensational but narrow returns. There continued to be a wide disparity in
performance between growth and value styles, as well as between mega-cap stocks
and all the others - large, mid, and small-cap.
Moving into the first quarter of 1999, equity investors continued to ignore
value and, instead, focused their preference on the more growth-oriented areas
of the market. Technology issues led the charge (+14.1%), as this already highly
priced sector extended its earnings multiples to ever higher levels. Meanwhile,
the S&P 500 managed to post another impressive gain of 5.0% for the quarter.
As a disciplined value investor, the Fund did not participate in this
momentum-driven euphoria. Our lack of exposure to the volatile technology
sector, a sector that we saw as becoming greatly overvalued, hurt our relative
performance. Our fundamental research and value orientation dictated that we
remain invested in the cheapest areas of the market. History tells us that
fundamental underlying valuation is ultimately recognized by investors, and
consequently, we remained heavily committed to many of the overlooked
manufacturing cyclicals and utility stocks.
Finally, during the second quarter of 1999, value-oriented investors enjoyed a
bullish move in the equity market, particularly during the nine weeks from the
second week of April to mid June. Strong economic activity in the U.S., along
with signs of earlier-than-expected recoveries in Asia and Latin America,
spurred investor interest in industrial stocks. The basic industry sector of the
S&P 500 rose a healthy 20.2% for the quarter. Although the initial catalyst
behind the abrupt shift in investor preference appeared to have been economic
strength, exceptional valuation opportunities attracted general investor
interest into other value areas of the market in April and May. At the same time
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many growth stock issues began to falter; for example, the healthcare sector of
the S&P 500 fell 5.0% during these two months.
For the year, returns in the Fund came predominantly from basic material stocks
and telephones. Alcoa, Georgia-Pacific and Weyerhaeuser were up 84.7%, 57.9% and
48.0%, respectively. Alltel and AT&T also were strong performers, posting gains
of 55.4% and 47.5%, respectively. Returns were hampered by our holdings in the
energy sector, which suffered from historically low oil prices, and from the
Fund's lack of exposure to technology and drug companies, which were among the
best performing sectors and continue to trade at what we believe are excessive
valuation levels.
Given the prolonged dynamics which favored momentum and growth stocks in 1998
and the first quarter of 1999, we believe the opportunity for value investing is
considerable. Although we began to see a significant broadening of performance
and rotation into value (value indices outpaced the growth indices an average of
over 9% in April 1999), we believe this recent trend has captured only a small
portion of the opportunity for value investors.
The roaring bull market has produced phenomenal performance during the past five
years, with an average annualized return of 27.4% for the large cap-weighted S&P
500. The cost of this phenomena, however, is historic high-price valuations and
an increased risk profile for the capitalization-weighted indices and similarly
structured equity portfolios. By comparison, we believe the valuation profile of
our portfolio is reasonable and in line with earnings and growth prospects.
Furthermore, we believe that we are particularly well positioned to take
advantage of any continued rebound of value securities in the equity market.
MID-CAP FUND
In 1998, the world economy grew at a less than expected 2%, the slowest rate
since 1991 and less than half the growth rate of 1997. This economic meltdown,
led by depressions in Asia, caused a flight to quality in financial markets that
was exacerbated by illiquid hedge funds. In response, many investors viewed
stocks with large market capitalizations and high liquidity as a safe haven from
turbulent markets, notwithstanding their valuation characteristics. As a result,
investors bid up these stocks, paying enormous liquidity premiums, correlating
size to safety. Not surprisingly, small and medium sized companies were
penalized during this period.
Our value orientation focused our attention on those companies that were hardest
hit by the turmoil: oil companies, basic materials stocks and almost any company
with under $2 billion in market capitalization. Initially, increasing our
positions in these areas hurt the Fund's performance. During the last six months
of calendar 1998, the Fund was down 11.8% versus a positive 0.9% return for the
Russell Midcap Index. In hindsight we increased positions early. However, it was
the sharp reversal of this dynamic that helped the Fund return 22.0% in the
first half of calendar 1999 versus 10.3% for the Russell Midcap Index. We
believe the world economic outlook for 1999 should continue to improve and the
valuation premium for size should continue to diminish.
While 1999 year-to-date outperformance has been substantial, we believe the case
for value investing in the mid-cap universe still holds. For instance, thirteen
of the stocks we currently hold were up more than 30% in the second quarter.
Yet, the median stock within this group is still almost 40% off of its 52-week
high. Six of these stocks are still trading below 10x projected earnings.
As we mentioned earlier, we are finding many inexpensive stocks with modest
earnings outlooks and cyclical exposure. The valuations are still inexpensive
and the earnings outlook is continuing to improve with the world economy. For
example, we added to a U.S. steel company trading near book value and less than
10x projected earnings. The U.S. steel industry should regain pricing power by
next year as a strong U.S. economy and restrictions on imports create a tight
market. The average investor, however, appears
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<PAGE> 6
uninterested in this company's improved earnings outlook. The Fund continues to
emphasize stocks with both low valuation metrics and growth expectations.
SMALL CAP FUND
For the past four quarters, U.S. small cap value stocks have suffered from a
severe bear market. During most of the last year, investors favored large cap,
liquid, blue chip stocks. This investor preference resulted from an uncertain
worldwide economic environment. Major Asian economies such as Japan were
experiencing recessionary conditions while economic conditions in the emerging
markets such as Russia continued to worsen. Here in the U.S., the announcement
of hedge fund losses in the third quarter of 1998 and their uncertain
ramifications on large financial institutions spooked an already frightened
equity market. Thus, this combination of international economic turmoil coupled
with an uncertain outlook here in the U.S. created one of the most volatile
periods in recent memory. In response, many investors viewed stocks with large
market capitalizations and high liquidity as a safe haven from turbulent
markets, notwithstanding their valuation characteristics. As a result, investors
bid up these stocks, paying enormous liquidity premiums, correlating size to
safety. Not surprisingly, small caps were penalized during this period.
The performance of U.S. small cap value stocks for the first six months of 1999
showed remarkable contrast between their uncertain outlook at the start of this
year and their dramatic rebound during the second quarter. After a dismal 1998,
small cap stocks continued to have a cloudy outlook for much of the first
quarter of 1999 despite vast valuation disparities between small cap and large
cap stocks. Small caps continued to be plagued by overall investor preference
for larger cap and more liquid stocks in the marketplace. However, the second
quarter of 1999 marked a sharp turnaround for U.S. small cap value stocks. The
Russell 2000 Index of small cap companies outperformed the S&P 500 Index by over
863 basis points, the magnitude of which had not been seen for the last six
years! So what happened? First, the relative valuation of small caps versus
large caps was near an all time high. Second, the relative valuation of value
stocks versus growth stocks was also near an all time high. Lastly, investor
sentiment with respect to the global economy improved, which sparked a rally in
beaten down cyclical stocks. This rally broadened to include value stocks that
were well represented by many small cap issues. As investors rushed to small cap
value stocks, a strong rebound from oversold levels drove small cap returns past
those of large cap growth stocks. The Fed's adoption of a tightening bias in its
monetary policy slowed the small cap rally but continued to buoy value stocks.
Although the second quarter returns of small cap stocks were stellar, we believe
small cap stocks are still attractive due to their strong relative valuation.
1998 through the first quarter of 1999 was one of the worst small cap value
markets on record. Positive returns were concentrated in a narrow band of large
blue chip growth stocks and highflying internet related stocks. For example, in
1998, the top 10% of the S&P 500 contributed over 80% of the Index's return and
18 internet related issues contributed nearly 40% of the Russell 2000 Index's
1999 year-to-date return. We believe the recent rebound in small cap stocks and
value stocks has plenty of potential given the degree of their undervaluation
compared to historical levels.
For the twelve months ended June 30, 1999, the Fund returned a negative 14.3%
versus a positive 1.5% for the Russell 2000 Index. This underperformance was
largely attributable to a dismal first nine months, when large cap stocks
handily beat the smaller issues. However, the rotation into small cap stocks in
the second quarter of 1999 was very gratifying. We were particularly pleased to
see that investors not only shifted their focus from large cap stocks to small
cap stocks but also from growth to value. Historically, these two
characteristics, small cap and value, have been associated with superior returns
but in 1998 and the first quarter of 1999 they were associated with severe
underperformance relative to the Russell 2000 and the S&P 500. As our portfolio
was smaller than the Russell 2000 in market capitalization and much deeper in
value, we suffered overall during the last
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twelve months, but benefited greatly from these two factors in the second
quarter of 1999. Companies continue to see value in small cap stocks as merger
and acquisition activity remains brisk in 1999. During the first quarter of
1999, Chubb Insurance bought Executive Risk at a 56% premium, and Eaton Corp.
bought Aeroquip-Vickers at a 65% premium. Both stocks were large portfolio
holdings. During the second quarter of 1999, CMP Group Inc., another large
portfolio holding, received a takeover offer at a 45% premium. We think it is
logical for larger competitors to acquire their lower priced small cap peers in
this unusual market.
We are encouraged by the market's rotation to small cap value stocks in the
second quarter of 1999. Notwithstanding the recent snapback, we continue to find
value in small cap stocks and a wide valuation gap between small cap and large
cap stocks.
INTERNATIONAL FUND
The International Fund's Investor Class return of 4.2% lagged the MSCI EAFE
Index (7.9%) for the twelve-month period ending June 30, 1999. The twelve-month
period could be divided into two distinct periods, where in the first half the
Asian economic crisis spread to all the emerging markets. The contagion effect
made investors spurn the shares of economically cyclical industries, allowing
the Fund a rare opportunity to add some cheaply priced stocks. As Russia
defaulted, reacting to perceptions of an imminent financial meltdown, central
bankers in the U.S., Europe, the U.K., China and Hong Kong all eased monetary
policies with an eye to avoiding a recession and counteracting the credit
contraction. This created a veritable flood of money in the world financial
system. This wall of money flowed into the large cap, liquid stocks, leaving the
rest of the market far behind. This effect was most pronounced in the U.K.,
where the ten largest stocks captured virtually all the performance for calendar
year 1998.
In the second half, January proved to be a continuation of the previous six
months. By late February, however, stability returned to world markets and the
global economic outlook started to brighten, turning investor sentiment positive
towards the pariahs of the previous year. The Fund thus performed strongly
versus the international markets in the second half. In Europe, the Fund
benefited significantly from corporate activity as financial and corporate
buyers capitalized on the enormous valuation disparities created during the
financial panic that seized the world's markets last year. This was particularly
true in the U.K., where a number of the Fund's holdings were the target of
mergers or management buyouts. In Asia too, investor sentiment turned strongly
positive. Our strategy to focus on Asian companies leveraged to growth in global
trade was especially rewarding.
We anticipate that above-consensus global GDP growth rates should benefit the
Fund, which is geared to companies in the economically sensitive cyclical
sectors. In Europe and the U.K., where we expect to see the economic recovery
gather pace, we continue to emphasize financials, industrials and materials. As
equities become increasingly popular in Europe, we expect a rising tide of
equity issuances from European companies over the next 12 months. As these
transactions compete for investors' attention, the initial offering prices
should remain attractive. For example, the Fund recently added shares in the
newly issued Swiss building and construction products company Geberit, offered
at a significant valuation discount to the stock of comparable companies. The
renewed emphasis on capital efficiency and a growing regard for the shareholder
is becoming increasingly evident in the Asian and European markets -- factors
that play strongly to the capital-intensive nature of the companies held in the
Fund. The Fund continues to boast a healthy dividend yield premium over the
benchmark: as of June 30, 1999, the Fund had over a 60% yield premium to the
MSCI EAFE Index.*
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GLOBAL EQUITY FUND
The Global Equity Fund's return of 5.4% lagged the MSCI World Index (16.1%) for
the twelve-month period ended June 30, 1999. The twelve-month period could be
divided into two distinct periods, where in the first half the Asian economic
crisis spread to all the emerging markets. Returns in the U.S. were hampered by
our holdings in the energy sectors, which suffered from historically low oil
prices and the lack of exposure to the richly valued technology and
pharmaceutical stocks. The contagion effect made investors spurn the shares of
economically cyclical industries, allowing the Fund a rare opportunity to add
some cheaply priced stocks to the portfolio.
The Fund performed strongly in the second half, as stability returned to world
markets. As the global economic outlook started to brighten, investor sentiment
turned positive towards the pariahs of the previous year. In the U.S.,
disciplined value-oriented investors finally enjoyed a change of equity market
sentiment beginning in the second quarter of 1999. Strong economic activity in
the U.S., along with signs of earlier-than-expected recoveries in Asia and Latin
America, spurred investor interest in industrial stocks. The basic industry
sector of the S&P 500 Index rose a healthy 20.2% in the final quarter. Although
the initial catalyst behind the abrupt shift in investor preference appears to
have been economic strength, exceptional valuation opportunities attracted
general investor interest into other areas of the market. At the same time many
growth stock issues began to falter. The best performing stocks in the Fund for
the quarter included New Holland and Alcoa, both benefiting from the shift into
value stocks. Laggards included Tenneco as its corporate restructuring fell
short of Wall Street expectations. In Europe, the Fund benefited significantly
from corporate activity as financial and corporate buyers capitalized on the
enormous valuation disparities created during the financial panic that seized
the world's markets last year. This was particularly true in the U.K., where a
number of the Fund's holdings were the targets of mergers or management buyouts.
In Asia, our strategy to focus on companies leveraged to growth in global trade
was especially rewarding.
We anticipate that above-consensus global GDP growth rates should benefit the
Fund, which is geared to companies in the economically sensitive cyclical
sectors. In Europe and the U.K., where we expect to see the economic recovery
gather pace, we continue to emphasize banking, industrials and materials. As
equities become increasingly popular in Europe, we expect a rising tide of
equity issuances from European companies over the next 12 months. As these
transactions compete for investors' attention, the initial offering prices
should remain attractive. In the U.S., we have seen a significant broadening of
performance and rotation into value (the Russell 1000 Value Index outpaced the
Russell 1000 Growth Index over 9% in April). This recent trend has captured only
a small portion of the opportunity. The Fund continues to boast a healthy
dividend yield premium over the benchmark: as of June 30, 1999, the Fund had
over an 89% yield premium to the MSCI World Index.*
BALANCED FUND
ASSET ALLOCATION SUMMARY
<TABLE>
<CAPTION>
Average
Asset Current 8/13/85 - Low Equity High Equity
Category 6/30/99 6/30/99 10/16/87 8/11/89
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<S> <C> <C> <C> <C>
Equities 47% 46% 27% 59%
Fixed-Income 53% 54% 73% 41%
</TABLE>
Equity portfolio returns made the most significant contribution to performance
during the current six months and for the fiscal year ended June 30, 1999. Bond
holdings, in general, suffered from a rise in interest rates and a widening of
yield spreads. Nonetheless, the fixed income investments made a consistent
contribution to realized income.
Value-oriented stocks reached a high of 52% of total Fund assets in May. By end
of June, the equity allocation had been reduced to 47%, which is near the
historical average. More importantly, the current allocation between common
stocks and bonds reflects our focus on relative valuation and control of the
Fund's overall risk profile.
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<PAGE> 9
At June 30, 1999, the equity portfolio was diversified into 83 common stocks
invested in 31 industry categories and nine broad economic sectors. A P/E ratio
of 15.1x compared favorably to the S&P 500 Index P/E ratio of 31.9x, and the
dividend yield on stock holdings in the Fund was over twice the Index level.*
Basic industry stocks made the greatest contribution to return for the 12-month
period, followed by utilities (which included telecommunications, electrics and
natural gas), consumer durables such as autos and appliances, healthcare and
finance. Capital spending-related holdings represented a drag on performance
over the year but made a meaningful contribution in the most recent quarter.
Fixed income investments were concentrated in intermediate maturity,
investment-grade issues. As of June 30, 1999, average portfolio maturity was 4.7
years, with a duration of 3.4 years. These measures represented a decline in
risk profile from the year earlier period and were slightly lower than the
benchmark Lehman Brothers Government/Corporate Intermediate Index. Average
credit quality remained high.+ Further information about market factors that
impacted equity and fixed income performance appears in the Equity Income Fund
section and below in the bond fund section of this letter.
SHORT-TERM
INVESTMENT FUND
LOW DURATION FUND
TOTAL RETURN BOND FUND
The twelve-month period ended June 30, 1999 was marked by extreme volatility in
fixed income markets, driven by significant events at home and abroad: Russia's
default on its domestic debt; the bailout of Long Term Capital Management (LTCM)
orchestrated by the Federal Reserve Bank of New York; the impeachment trial of
President Clinton; military conflicts in Iraq and the Balkans; and continued
economic troubles for several of America's most significant trading partners. By
far, the most significant of these occurrences for fixed income markets was the
Russian default and the ensuing financial crisis that made the third quarter of
1998 one of the worst in memory. Hedge funds, including LTCM, were forced to
quickly liquidate many of their positions in risky assets, particularly emerging
market debt, as these securities suddenly plummeted in value. Broker-dealers,
unwilling to hold these assets, refused to make a market, putting a huge premium
on the most liquid assets. In August alone, corporate spreads widened more than
they did during the entire six-month recession of 1990. Even less-liquid
"off-the-run" U.S. Treasury securities were trading at a discount to similar
"on-the-run" Treasuries. While it was a very difficult time for fixed income
investors, including the Hotchkis and Wiley bond funds, an extended crisis was
averted thanks to Alan Greenspan and the Federal Open Market Committee (FOMC).
In a rare and unexpected move, the FOMC lowered interest rates in between its
regular meetings. It was the second of three rate cuts last fall that
collectively calmed investor fears, set U.S. stocks back on their feet, and
returned some liquidity to fixed income markets.
Emerging virtually unscathed from the financial crisis was the U.S. economy,
surging forward for the ninth consecutive year. The current expansion became the
longest in peacetime history, continuing to defy the numerous economists who had
called for a slowdown. Despite the slumping manufacturing sector, which
continued to feel the effects of the Asian economic and financial crisis, gross
domestic product (GDP) growth averaged 4.1% (quarter over quarter, annual rate)
over the past four quarters. At the same time, consumer price inflation came in
under 2% (year over year) in 10 months of the 12-month period. Consumer
spending, which accounts for two-thirds of U.S. GDP, was the key driver of
growth during the past year. Thanks to large equity gains and an unemployment
rate just north of 4.0%, consumer confidence rose to a 30-year high during the
past year. Although financial markets largely ignored the strength of the
economy during last fall's liquidity squeeze, they put economic data releases
under the microscope in the first half of this year. As a result, interest rates
trended higher through the period, even though it was not until mid-May that it
became fairly clear that the FOMC would raise interest
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<PAGE> 10
rates by 25 basis points at its June 29-30th meeting. The yield on the benchmark
30-year Treasury bond, which fell to 4.72% during the height of the liquidity
crisis last October, rose nearly 150 basis points to 6.16% in the last week of
June.
The Hotchkis and Wiley bond funds, which traditionally are over-weight in spread
product, had a difficult time last fall when every fixed income sector lagged
Treasuries by a significant amount. Although our long duration position and bias
towards high credit quality provided some protection, the considerable spread
widening for corporates, mortgages, and asset-backed securities clearly hurt
performance. During the turn of the year, however, the results were reversed as
liquidity returned to the market. In November, corporates had their best month
in history, outperforming Treasuries by 240 basis points. Mortgage and
asset-backed performance was similarly favorable. Spreads continued to tighten
through the first quarter of 1999, helping to enhance our relative performance.
In February, we moved durations shorter than the benchmarks, and this was a
positive contribution to the funds' returns as rates continued to rise. This was
offset to some extent in June, when spread product gave back a portion of its
impressive rebound from early in the year. Entering the second half of 1999, we
believe the FOMC will not hesitate to take back more of last fall's rate cuts if
the economy continues to grow at a pace that it believes to be inflationary.
However, we believe the economic environment is fundamentally sound, and we
would add yield if temporary weaknesses emerge in spread products.
As always, we appreciate the trust you place in us. We thank you for your
continued support and look forward to reporting to you again in six months.
Sincerely,
/s/ Nancy D. Celick
Nancy D. Celick
President
HOTCHKIS AND WILEY FUNDS
The above reflects opinions of portfolio managers as of June 30, 1999. They are
subject to change and any forecasts made cannot be guaranteed. The Funds might
not continue to hold any securities mentioned and have no obligation to disclose
purchases or sales in these securities. Past performance is no guarantee of
future performance. Performance and index descriptions follow.
* Refers to yield of securities held in the Fund's portfolio. Not reflective of
dividends distributed to Fund shareholders.
+ Balanced Fund Credit Quality Breakdown: UST = 32.8%; Agency = 13.2%;
AAA = 22.8%; A = 18.2%; BBB = 12.3%; B = 0.7%
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How a $10,000 Investment Has Grown:
The following charts show the growth of a $10,000 investment for each of the
Hotchkis and Wiley Funds as compared to the performance of representative market
indices. The tables below the charts show the total returns of an investment
over various periods. Returns for periods greater than one year are average
annual total returns.
[MID-CAP LINE GRAPH]
<TABLE>
<CAPTION>
MID-CAP FUND RUSSELL MIDCAP INDEX
------------ --------------------
<S> <C> <C>
12/96 10000.00 10000.00
10290.00 9918.00
6/97 11714.10 11262.90
13302.60 12758.60
12/97 13244.00 12900.20
14135.40 14294.70
6/98 13469.60 14078.90
11104.30 11992.40
12/98 11885.00 14203.80
11476.10 14137.00
6/99 14501.20 15672.30
</TABLE>
[EQUITY INCOME LINE GRAPH]
<TABLE>
<CAPTION>
EQUITY INCOME FUND S&P 500 INDEX
------------------ -------------
<S> <C> <C>
6/89 10000.00 10000.00
11081.00 11060.00
10545.80 11281.20
9958.39 10942.80
6/90 9959.38 11621.20
7973.48 10017.50
8641.66 10909.00
10171.20 12501.80
6/91 10651.30 12464.30
11289.30 13124.90
11633.70 14227.40
12270.00 13871.70
6/92 12705.60 14135.20
12548.10 14573.40
13257.00 15302.10
14007.40 15975.40
6/93 14189.50 16039.30
14610.90 16456.30
15347.30 16834.00
14626.00 16195.10
6/94 14672.80 16259.90
15365.30 17059.80
14804.50 17061.60
16314.50 18716.50
6/95 17685.00 20494.60
19101.50 22132.10
19905.70 23446.80
21062.20 24724.60
6/96 21230.70 25847.10
21570.40 26648.40
23362.90 28902.80
23708.70 29660.10
6/97 26776.60 34850.60
29679.20 37502.70
30643.70 38552.80
33803.10 43950.20
6/98 32832.90 45409.30
29273.90 40932.00
31972.90 49654.60
31103.20 52117.40
6/99 35236.90 55724.00
</TABLE>
[SMALL CAP LINE GRAPH]
<TABLE>
<CAPTION>
SMALL CAP FUND RUSSELL 2000 INDEX
-------------- ------------------
<S> <C> <C>
6/89 10000.00 10000.00
11348.00 10675.00
11185.70 10146.60
11250.60 9922.35
6/90 12055.00 10305.40
8738.68 7776.42
10177.90 8167.57
12510.70 10596.60
6/91 12730.90 10432.40
13620.80 11282.60
15087.80 11929.10
16092.60 12823.80
6/92 15154.40 11949.20
15213.50 12292.10
17159.30 14126.10
17469.90 14729.30
6/93 18154.70 15050.40
19013.50 16365.80
19319.60 16791.30
19447.10 16338.00
6/94 18848.10 15700.80
19349.50 16784.10
19535.20 16470.30
20449.50 17229.50
6/95 21633.50 18831.90
23130.50 20692.50
23135.20 21141.50
22684.00 22226.10
6/96 24712.00 23337.40
25601.60 23430.70
26433.70 24649.10
27792.30 23374.80
6/97 32055.70 27184.80
38434.80 31235.40
36858.90 30173.40
42056.10 33220.90
6/98 39175.20 31656.20
28613.60 25277.50
31131.60 29400.20
26710.90 27812.60
6/99 33580.90 32137.50
</TABLE>
Past performance is no guarantee of future performance.
Please see page 13 for important performance and risk disclosures.
10
<PAGE> 12
[SHORT-TERM INVESTMENT LINE GRAPH]
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENT FUND MERRILL LYNCH 6-MTH TREAS. INDEX
-------------------------- --------------------------------
<S> <C> <C>
6/93 10028.00 10033.00
10272.70 10121.30
10505.90 10203.30
10650.90 10271.60
6/94 10778.70 10362.00
10870.30 10476.00
10971.40 10599.60
11216.00 10786.20
6/95 11401.10 10966.30
11591.50 11122.00
11830.30 11293.30
12048.00 11428.80
6/96 12225.10 11571.70
12354.70 11734.80
12559.70 11893.30
12711.70 12046.70
6/97 12929.10 12228.60
13146.30 12398.60
13335.60 12557.30
13549.00 12730.60
6/98 13754.90 12905.00
14005.30 13111.50
14104.70 13258.30
14252.80 13405.50
6/99 14401.00 13546.20
</TABLE>
[TOTAL RETURN BOND LINE GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN BOND FUND LEHMAN AGGREGATE INDEX
---------------------- ----------------------
<S> <C> <C>
10033.00 10006.00
10497.50 10510.30
6/95 11187.20 11150.40
11555.30 11368.90
12172.30 11853.20
11882.60 11643.40
6/96 11971.70 11709.80
12311.70 11926.40
12700.80 12284.20
12754.10 12215.40
6/97 13224.80 12663.70
13608.30 13084.20
14066.90 13468.90
14331.30 13679.00
6/98 14686.80 13999.10
15305.10 14591.20
15303.50 14640.80
15175.00 14567.60
6/99 15026.30 14439.40
</TABLE>
[LOW DURATION LINE GRAPH]
<TABLE>
<CAPTION>
LOW DURATION FUND MERRILL LYNCH 1-3 YR TREAS. INDEX
----------------- ---------------------------------
<S> <C> <C>
6/93 10053.00 10058.00
10579.80 10201.80
10713.10 10262.00
10872.70 10210.70
6/94 10961.90 10218.90
11149.30 10320.00
11274.20 10320.50
11616.90 10667.20
6/95 12083.90 11009.60
12330.40 11174.80
12711.40 11456.40
12818.20 11494.20
6/96 12988.70 11610.30
13239.40 11801.90
13502.80 12026.10
13627.10 12105.50
6/97 14000.50 12371.80
14272.10 12614.30
14527.50 12826.20
14736.70 13014.70
6/98 15003.50 13213.90
15362.00 13620.90
15348.20 13724.40
15420.40 13806.70
6/99 15479.00 13885.40
</TABLE>
[BALANCED FUND LINE GRAPH]
<TABLE>
<CAPTION>
LB GOVT/CORP INT.
CPI+4% INDEX BALANCED FUND S&P 500 INDEX
------ ----------------- ------------- -------------
<S> <C> <C> <C> <C>
6/89 10000.00 10000.00 10000.00 10000.00
10173.00 10121.00 10527.00 11060.00
10364.30 10462.10 10524.90 11281.20
10682.40 10446.40 10380.70 10942.80
6/90 10890.70 10781.70 10630.90 11621.20
11234.90 10970.40 9746.39 10017.50
11441.60 11420.20 10477.40 10909.00
11659.00 11706.80 11554.40 12501.80
6/91 11863.00 11915.20 11630.70 12464.30
12087.20 12489.50 12204.10 13124.90
12271.00 13089.00 12628.80 14227.40
12520.10 12969.90 12954.60 13871.70
6/92 12727.90 13483.50 13392.50 14135.20
12957.00 14078.10 13515.70 14573.40
13142.30 14027.50 13817.10 15302.10
13432.70 14582.90 14498.30 15975.00
6/93 13642.30 14897.90 14743.30 16055.30
13845.60 15234.60 15380.20 16472.70
14051.90 15260.50 15549.40 16851.60
14328.70 14950.70 15188.60 16211.20
6/94 14550.80 14861.00 15282.80 16276.10
14834.50 14982.90 15866.60 17073.60
15012.50 14966.40 15669.90 17075.30
15333.80 15263.40 16688.40 18731.60
6/95 15599.10 16403.10 17706.40 20511.10
15826.80 16675.30 18765.30 22149.90
16016.70 17262.30 19480.20 23465.60
16409.10 17119.00 20091.90 24744.50
6/96 16681.50 17226.90 20369.20 25867.90
16965.10 17531.80 20674.70 26669.80
17221.30 17961.30 21764.30 28926.10
17545.10 17941.60 22014.50 29684.00
6/97 17750.30 18470.80 23577.60 34878.60
18027.20 18969.60 24827.20 37532.90
18218.30 19375.50 25423.00 38583.80
18504.40 19677.80 26694.20 43985.60
6/98 18789.30 20049.70 26720.90 45445.90
19044.90 20949.90 25836.40 40964.90
19342.00 21010.70 26740.70 49694.60
19630.20 20970.70 26339.60 52179.30
6/99 20014.90 20886.90 27806.70 55790.10
</TABLE>
Past performance is no guarantee of future performance.
Please see page 13 for important performance and risk disclosures.
11
<PAGE> 13
[INTERNATIONAL FUND LINE GRAPH]
<TABLE>
<CAPTION>
INTERNATIONAL FUND MSCI-EAFE INDEX
------------------ ---------------
<S> <C> <C>
10049.00 11063.00
10643.90 11896.00
6/91 10134.10 11256.00
11413.00 12230.80
12094.30 12446.10
11902.00 10978.70
6/92 12967.30 11221.30
12076.40 11400.80
11772.10 10971.00
13170.60 12296.30
6/93 13922.70 13543.20
14883.30 14450.60
17157.50 14585.00
16448.90 15104.20
6/94 16249.80 15886.60
17265.50 15912.00
16652.50 15760.80
16954.00 16066.60
6/95 18052.60 16196.70
19204.30 16885.10
19964.80 17582.50
20825.30 18102.90
6/96 21412.60 18403.40
21755.20 18385.00
23608.70 18692.00
23823.60 18413.50
6/97 26036.80 20816.50
26781.40 20683.30
24866.50 19076.20
28243.40 21897.50
6/98 28062.70 22145.00
22910.40 19011.50
26461.50 22956.40
26551.40 23291.50
6/99 29243.70 23899.40
</TABLE>
[GLOBAL EQUITY LINE GRAPH]
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND MSCI WORLD INDEX
------------------ ----------------
<S> <C> <C>
12/96 10000.00 10000.00
3/97 10220.00 10040.00
6/97 11232.80 11563.10
9/97 11404.70 11905.30
12/97 10779.70 11623.20
3/98 12241.40 13300.40
6/98 12087.20 13582.40
9/98 9930.82 11966.10
12/98 11502.90 14505.30
3/99 11460.30 15036.20
6/99 12741.60 15766.90
</TABLE>
Past performance is no guarantee of future performance.
Please see page 13 for important performance and risk disclosures.
12
<PAGE> 14
IMPORTANT PERFORMANCE AND RISK DISCLOSURES
- --------------------------------------------------------------------------------
Total returns and average annual total returns are net of all charges and fees
and assume reinvestment of capital gains distributions and shareholder dividends
at net asset value. The investment advisor pays annual operating expenses of the
Equity Income and Balanced Funds in excess of 0.95% (1.00% before 3/1/99),
Mid-Cap Fund in excess of 1.15% (1.00% before 3/1/99), Global Equity Fund in
excess of 1.25% (1.00% before 3/1/99), Total Return Bond Fund in excess of
0.65%, Low Duration Fund in excess of 0.58%, and Short-Term Investment Fund in
excess of 0.48% of the average net assets of each Fund's Investor Class shares.
The investment advisor pays annual operating expenses of the Distributor Class
shares of the Total Return Bond Fund in excess of 0.90% of average net assets
and, upon commencement of offering the Distributor Class shares, will pay annual
operating expenses in excess of 1.15% of the average net assets of the Balanced
Fund's Distributor Class shares and those in excess of 0.83% of average net
assets of the Low Duration Fund's Distributor Class shares. Were it not to pay
such expenses, net returns would be lower. Investment return and principal will
vary so that shares, when redeemed, may be worth more or less than their
original cost. Past performance is no guarantee of future performance.
The Small Cap, International, Balanced, Total Return Bond and Low Duration Funds
also offer Distributor Class shares which charge a 0.25% annual 12b-1 fee, and
which will have some different expenses and net performance than Investor Class
shares. At June 30, 1999, there was no performance for the Small Cap, Balanced
and Low Duration Funds' Distributor Classes.
Investment by the Small Cap Fund in small companies and the Mid-Cap Fund in
medium-size companies presents greater risk than investment in larger, more
established companies. The Total Return Bond, Low Duration and Short-Term
Investment Funds may invest a portion of their assets in non-investment grade
debt securities commonly referred to as high yield or "junk" bonds. Junk bonds
may be subject to greater market fluctuations and risk of loss of income and
principal than securities in higher rating categories. Investment by the
International, Global Equity, Low Duration, Short-Term Investment and Total
Return Bond Funds in foreign securities involves special risks including
fluctuating foreign exchange rates, foreign government regulations, differing
degrees of liquidity, and the possibility of substantial volatility due to
adverse political, economic or other developments.
13
<PAGE> 15
- --------------------------------------------------------------------------------
MARKET INDICES
The following are definitions for indices used in the performance summary charts
as of June 30, 1999. These indices are unmanaged and include the reinvestment of
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 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 (ML 1-3) is an index of Treasury
securities with maturities ranging from one to three years which are guaranteed
as to the timely payment of principal and interest by the U.S. Government. The
Low Duration Fund invests in securities that are not reflected in the index or
guaranteed.
MERRILL LYNCH 6 MONTH U.S. TREASURY BILL INDEX (ML 6-mo.) is an index of
Treasury securities with maturities of six months which are guaranteed as to the
timely payment of principal and interest by the U.S. Government. The Short-Term
Investment Fund invests in securities that are not reflected in the index or
guaranteed.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX is a
arithmetical average weighted by market value of the performance of over 1,000
non-U.S. companies representing 20 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 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 26% of the total market
capitalization of the Russell 1000 Index. The Russell 1000 Index is comprised of
the largest 1,000 companies in the Russell 3000 Index.
S&P 500 INDEX 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.
14
<PAGE> 16
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 98.8% Shares Value
- ------------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 5.5%
............................................................
Lockheed Martin Corporation 87,900 $ 3,274,275
............................................................
Northrop Grumman Corporation 51,700 3,428,356
............................................................
Rockwell International
Corporation 25,000 1,518,750
..................... ...................... -----------
8,221,381
- ------------------------------------------------------------
APPAREL & TEXTILES -- 0.5%
............................................................
Russell Corporation 40,000 780,000
- ------------------------------------------------------------
AUTO PARTS -- 4.1%
............................................................
Dana Corporation 62,900 2,897,331
............................................................
Delphi Automotive Systems
Corporation 42,949 797,241
............................................................
Meritor Automotive, Inc. 7,100 181,050
............................................................
TRW Inc. 40,300 2,211,463
..................... ...................... -----------
6,087,085
- ------------------------------------------------------------
AUTOS & TRUCKS -- 4.6%
............................................................
Ford Motor Company 70,000 3,950,625
............................................................
General Motors Corporation 44,000 2,904,000
..................... ...................... -----------
6,854,625
- ------------------------------------------------------------
BANKS -- 7.8%
............................................................
Bank One Corporation 57,400 3,418,887
............................................................
First Security Corporation 42,800 1,166,300
............................................................
First Union Corporation 50,400 2,368,800
............................................................
Fleet Financial Group, Inc. 47,000 2,085,625
............................................................
KeyCorp 61,000 1,959,625
............................................................
UnionBanCal Corporation 17,300 624,963
..................... ...................... -----------
11,624,200
- ------------------------------------------------------------
BEVERAGES -- 0.7%
............................................................
Anheuser-Busch Companies, Inc. 14,500 1,028,594
- ------------------------------------------------------------
BUILDING & FOREST
PRODUCTS -- 2.7%
............................................................
Georgia-Pacific (Timber Group) 54,000 1,363,500
............................................................
Weyerhaeuser Company 38,000 2,612,500
..................... ...................... -----------
3,976,000
- ------------------------------------------------------------
CHEMICALS -- 1.9%
............................................................
The Dow Chemical Company 16,000 2,030,000
............................................................
Eastman Chemical Company 16,000 828,000
..................... ...................... -----------
2,858,000
- ------------------------------------------------------------
CONGLOMERATES -- 1.9%
............................................................
Tenneco, Inc. 120,000 2,865,000
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
ENGINEERING AND CONSTRUCTION -- 1.0%
............................................................
Harsco Corporation 48,595 $ 1,555,040
- ------------------------------------------------------------
FINANCIAL SERVICES -- 4.8%
............................................................
Associates First Capital
Corporation -- Class A 6,800 301,325
............................................................
Fannie Mae 46,000 3,145,250
............................................................
Household International, Inc. 53,400 2,529,825
............................................................
Transamerica Corporation 16,000 1,200,000
..................... ...................... -----------
7,176,400
- ------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 2.0%
............................................................
Whirlpool Corporation 41,000 3,034,000
- ------------------------------------------------------------
INSURANCE -- 5.2%
............................................................
American General Corporation 29,300 2,208,487
............................................................
Lincoln National Corporation 28,000 1,464,750
............................................................
Safeco Corporation 52,000 2,294,500
............................................................
St. Paul Companies, Inc. 57,600 1,832,400
..................... ...................... -----------
7,800,137
- ------------------------------------------------------------
LEISURE/TOYS -- 0.7%
............................................................
Fortune Brands, Inc. 24,500 1,013,687
- ------------------------------------------------------------
MACHINERY -- 2.0%
............................................................
New Holland N.V. 170,000 2,911,250
- ------------------------------------------------------------
METALS & MINING -- 4.4%
............................................................
Alcoa, Inc. 48,000 2,970,000
............................................................
Phelps Dodge Corporation 12,000 743,250
............................................................
Reynolds Metals Company 48,000 2,832,000
..................... ...................... -----------
6,545,250
- ------------------------------------------------------------
NATURAL GAS -- 0.8%
............................................................
Eastern Enterprises 27,000 1,073,250
- ------------------------------------------------------------
OIL -- DOMESTIC -- 8.3%
............................................................
Atlantic Richfield Company 23,507 1,964,303
............................................................
Occidental Petroleum
Corporation 133,000 2,809,625
............................................................
Phillips Petroleum Company 61,000 3,069,063
............................................................
Texaco Inc. 18,000 1,125,000
............................................................
USX-Marathon Group, Inc. 72,000 2,344,500
............................................................
Ultramar Diamond Shamrock
Corporation 47,200 1,029,550
..................... ...................... -----------
12,342,041
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
15
<PAGE> 17
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
PAPER -- 3.6%
............................................................
Georgia-Pacific Group 30,000 $ 1,421,250
............................................................
International Paper Company 78,000 3,939,000
..................... ...................... -----------
5,360,250
- ------------------------------------------------------------
PHOTOGRAPHY & OPTICAL -- 1.8%
............................................................
Eastman Kodak Company 39,700 2,689,675
- ------------------------------------------------------------
POLLUTION CONTROL -- 2.4%
............................................................
Browning-Ferris Industries,
Inc. 51,000 2,193,000
............................................................
Waste Management, Inc. 26,000 1,397,500
..................... ...................... -----------
3,590,500
- ------------------------------------------------------------
RAILROADS -- 1.9%
............................................................
CSX Corporation 17,500 792,969
............................................................
Norfolk Southern Corporation 67,000 2,018,375
..................... ...................... -----------
2,811,344
- ------------------------------------------------------------
RETAIL -- 4.1%
............................................................
Intimate Brands, Inc. 7,350 348,206
............................................................
J.C. Penney Company, Inc. 54,000 2,622,375
............................................................
May Department Stores Company 39,900 1,630,913
............................................................
Sears, Roebuck & Company 32,000 1,426,000
..................... ...................... -----------
6,027,494
- ------------------------------------------------------------
SAVINGS & LOANS -- 2.0%
............................................................
Washington Mutual, Inc. 85,400 3,021,025
- ------------------------------------------------------------
STEEL -- 2.7%
............................................................
Allegheny Teledyne, Inc. 41,000 927,625
............................................................
USX-U.S. Steel Group, Inc. 113,000 3,051,000
..................... ...................... -----------
3,978,625
- ------------------------------------------------------------
TOBACCO -- 3.5%
............................................................
Philip Morris Companies, Inc. 130,000 5,224,375
- ------------------------------------------------------------
TRUCKING -- 0.4%
............................................................
Ryder System, Inc. 21,000 546,000
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
UTILITY -- ELECTRIC -- 9.1%
............................................................
CMS Energy Corporation 55,000 $ 2,303,125
............................................................
Central & South West
Corporation 48,000 1,122,000
............................................................
DTE Energy Company 38,000 1,520,000
............................................................
Edison International 25,500 682,125
............................................................
Entergy Corporation 25,500 796,875
............................................................
GPU, Inc. 22,000 928,125
............................................................
Illinova Corporation 95,000 2,588,750
............................................................
PECO Energy Company 12,500 523,438
............................................................
P P & L Resources, Inc. 23,000 707,250
............................................................
Public Service Enterprises
Group, Inc. 30,000 1,226,250
............................................................
SCANA Corporation 46,000 1,075,250
..................... ...................... -----------
13,473,188
- ------------------------------------------------------------
UTILITY -- TELEPHONE -- 8.4%
............................................................
AT&T Corporation 65,000 3,627,813
............................................................
ALLTEL Corporation 40,000 2,860,000
............................................................
Bell Atlantic Corporation 44,500 2,909,187
............................................................
GTE Corporation 14,500 1,098,375
............................................................
SBC Communications, Inc. 33,000 1,914,000
..................... ...................... -----------
12,409,375
..................... ...................... -----------
Total common stock (cost 146,877,791
$114,699,851)
- ------------------------------------------------------------
VARIABLE RATE Principal
DEMAND NOTES* -- 1.3% Amount
- ------------------------------------------------------------
General Mills, Inc., 4.8250% $1,982,735 1,982,735
............................................................
Total variable rate demand
notes (cost $1,982,735) 1,982,735
- ------------------------------------------------------------
Total investments -- 100.1%
(cost $116,682,586) 148,860,526
............................................................
Liabilities in excess of other
assets -- (0.1%) (126,207)
..................... ...................... -----------
$148,734,319
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
* 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, 1999.
See Notes to the Financial Statements
16
<PAGE> 18
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 95.8% Shares Value
- -------------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 3.9%
.............................................................
Northrop Grumman Corporation 4,000 $ 265,250
- -------------------------------------------------------------
APPAREL & TEXTILES -- 3.8%
.............................................................
Coats Viyella PLC ADR 44,600 106,509
.............................................................
Russell Corporation 8,100 157,950
....................... ....................... ---------
264,459
- -------------------------------------------------------------
AUTO PARTS -- 4.6%
.............................................................
Dana Corporation 2,072 95,441
.............................................................
Lear Corporation # 2,800 139,300
.............................................................
Meritor Automotive, Inc. 3,300 84,150
....................... ....................... ---------
318,891
- -------------------------------------------------------------
BANKS -- 6.4%
.............................................................
Compass Bancshares, Inc. 1,725 47,006
.............................................................
Colonial BancGroup, Inc. 6,500 90,594
.............................................................
UnionBanCal Corporation 8,300 299,838
....................... ....................... ---------
437,438
- -------------------------------------------------------------
COMMUNICATIONS & MEDIA -- 3.1%
.............................................................
Groupe AB SA ADR # 65,300 212,225
- -------------------------------------------------------------
COMPUTER SOFTWARE &
SERVICES -- 5.8%
.............................................................
Cambridge Technology Partners, Inc.
# 1,900 33,369
.............................................................
InaCom Corporation # 19,212 242,551
.............................................................
PeopleSoft, Inc. # 7,100 122,475
....................... ....................... ---------
398,395
- -------------------------------------------------------------
ELECTRIC PRODUCTS -- 2.2%
.............................................................
UCAR International, Inc. # 6,000 151,500
- -------------------------------------------------------------
FINANCIAL SERVICES -- 2.5%
.............................................................
Radian Group Inc. 3,500 170,843
- -------------------------------------------------------------
FOODS -- 9.2%
.............................................................
Dean Foods Company 8,300 344,969
.............................................................
Interstate Bakeries Corporation 5,800 130,138
.............................................................
Nabisco Group Holdings Corporation 8,100 158,456
....................... ....................... ---------
633,563
- -------------------------------------------------------------
HEALTHCARE -- DRUGS -- 0.4%
.............................................................
Bergen Brunswig Corporation --Class
A 1,600 27,600
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Shares Value
<S> <C> <C>
HEALTHCARE -- MISCELLANEOUS -- 3.2%
.............................................................
Beverly Enterprises, Inc. # 9,000 $ 72,562
.............................................................
Total Renal Care Holdings, Inc. # 9,400 146,288
....................... ....................... ---------
218,850
- -------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 3.4%
.............................................................
Whirlpool Corporation 3,200 236,800
- -------------------------------------------------------------
INSURANCE -- 6.2%
.............................................................
ESG Re Limited 13,900 208,500
.............................................................
Harleysville Group, Inc. 3,400 69,700
.............................................................
IPC Holdings Limited 3,000 60,000
.............................................................
Ohio Casualty Corporation 1,200 43,350
.............................................................
St. Paul Companies, Inc. 1,400 44,538
....................... ....................... ---------
426,088
- -------------------------------------------------------------
MACHINERY -- 3.4%
.............................................................
New Holland N.V. 13,700 234,613
- -------------------------------------------------------------
METALS & MINING -- 0.9%
.............................................................
Reynolds Metals Company 1,000 59,000
- -------------------------------------------------------------
MISCELLANEOUS -- 1.2%
.............................................................
American Coin Merchandising, Inc. # 13,000 84,500
- -------------------------------------------------------------
OIL -- DOMESTIC -- 3.2%
.............................................................
Occidental Petroleum Corporation 6,300 133,088
.............................................................
Pennzoil-Quaker State Company 1,100 16,500
.............................................................
USX -- Marathon Group, Inc. 2,100 68,381
....................... ....................... ---------
217,969
- -------------------------------------------------------------
OIL & GAS DRILLING -- 8.8%
.............................................................
Amerada Hess Corporation 600 35,700
.............................................................
Diamond Offshore Drilling, Inc. 2,700 76,613
.............................................................
Kerr-McGee Corporation 2,300 115,431
.............................................................
PennzEnergy Company 3,600 60,075
.............................................................
Triton Energy Limited # 29,300 314,975
....................... ....................... ---------
602,794
- -------------------------------------------------------------
PAPER -- 2.7%
.............................................................
Chesapeake Corporation 1,800 67,387
.............................................................
Consolidated Papers, Inc. 4,500 120,375
....................... ....................... ---------
187,762
- -------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
17
<PAGE> 19
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------------------------
<S> <C> <C>
POLLUTION CONTROL -- 1.5%
.............................................................
Browning-Ferris Industries, Inc. 2,400 $ 103,200
- -------------------------------------------------------------
RETAIL -- JEWELRY -- 2.1%
.............................................................
Friedman's Inc. 16,500 143,344
- -------------------------------------------------------------
SAVINGS & LOANS -- 1.1%
.............................................................
Charter One Financial, Inc. 2,625 73,008
- -------------------------------------------------------------
SECURITY SERVICES -- 1.9%
.............................................................
Pittston Brink's Group 4,800 128,400
- -------------------------------------------------------------
STEEL -- 3.0%
.............................................................
USX-U.S. Steel Group, Inc. 7,600 205,200
- -------------------------------------------------------------
TOBACCO -- 2.8%
.............................................................
R.J. Reynolds Tobacco Holdings,
Inc. # 4,200 132,300
.............................................................
Universal Corporation/VA 2,200 62,562
....................... ....................... ---------
194,862
- -------------------------------------------------------------
TRANSPORTATION -- AIR -- 1.2%
.............................................................
AMR Corporation # 1,200 81,900
- -------------------------------------------------------------
TRUCKING -- 0.7%
.............................................................
Ryder System, Inc. 1,800 46,800
- -------------------------------------------------------------
UTILITY -- ELECTRIC -- 6.6%
.............................................................
CMP Group Inc. 6,500 170,219
.............................................................
Illinova Corporation 5,600 152,600
.............................................................
P P & L Resources, Inc. 2,339 71,924
.............................................................
SCANA Corporation 2,600 60,775
....................... ....................... ---------
455,518
....................... ....................... ---------
Total common stock (cost 6,580,772
$6,632,207)
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
VARIABLE RATE Principal
DEMAND NOTES* -- 4.9% Amount Value
<S> <C> <C>
General Mills, Inc., 4.8250% $171,873 $ 171,873
.............................................................
Pitney Bowes, Inc., 4.8250% 165,249 165,249
....................... ....................... ---------
Total variable rate demand notes 337,122
(cost $337,122)
- -------------------------------------------------------------
Total investments -- 100.7% (cost
$6,969,329) 6,917,894
.............................................................
Liabilities in excess of
other assets -- (0.7)% (47,214)
....................... ....................... ---------
$6,870,680
Total net assets -- 100.0%
- -------------------------------------------------------------
</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, 1999.
ADR -- American Depository Receipts.
# -- Non-income producing security.
See Notes to the Financial Statements
18
<PAGE> 20
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 96.7% Shares Value
- ------------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 4.8%
............................................................
AVTEAM, Inc. # 347,300 $ 2,539,631
- ------------------------------------------------------------
AUTO PARTS -- 3.5%
............................................................
Titan International, Inc. 157,900 1,875,063
- ------------------------------------------------------------
CHEMICALS -- 3.2%
............................................................
The Carbide/Graphite Group, Inc. # 119,500 1,710,344
- ------------------------------------------------------------
COMMERCIAL SERVICES -- 0.5%
............................................................
FirstService Corporation # 16,100 245,525
- ------------------------------------------------------------
COMMUNICATIONS & MEDIA -- 1.3%
............................................................
Groupe AB SA ADR # 215,500 700,375
- ------------------------------------------------------------
COMPUTERS -- 3.1%
............................................................
Creative Technology, Ltd. 46,700 627,531
............................................................
Hutchinson Technology, Inc. # 36,500 1,012,875
...................... ...................... ----------
1,640,406
- ------------------------------------------------------------
COMPUTER SOFTWARE &
SERVICES -- 10.2%
............................................................
Cambridge Technology Partners, Inc.
# 80,300 1,410,269
............................................................
Engineering Animation, Inc. # 24,200 512,737
............................................................
InaCom Corporation # 239,348 3,021,768
............................................................
Tech Data Corporation # 12,750 487,687
...................... ...................... ----------
5,432,461
- ------------------------------------------------------------
COMPUTER SYSTEMS -- 1.7%
............................................................
Radisys Corporation # 23,100 898,006
- ------------------------------------------------------------
ELECTRONICS -- 0.9%
............................................................
Stoneridge, Inc. # 34,900 471,150
- ------------------------------------------------------------
ENGINEERING AND
CONSTRUCTION -- 0.3%
............................................................
Stone & Webster, Inc. 5,700 151,762
- ------------------------------------------------------------
ENTERTAINMENT -- 3.2%
............................................................
Midway Games Inc. # 69,300 896,569
............................................................
THQ Inc. # 29,100 836,625
...................... ...................... ----------
1,733,194
- ------------------------------------------------------------
FINANCE -- MISCELLANEOUS -- 2.2%
............................................................
Executive Risk, Inc. 13,600 1,156,850
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO -- 8.4%
............................................................
Canandaigua Brands, Inc. # 5,000 $ 262,189
............................................................
Interstate Bakeries Corporation 77,400 1,736,662
............................................................
J & J Snack Foods Corporation # 74,300 1,783,200
............................................................
The Earthgrains Company 27,900 720,169
...................... ...................... ----------
4,502,220
- ------------------------------------------------------------
HEALTHCARE -- MISCELLANEOUS -- 7.2%
............................................................
Beverly Enterprises, Inc. # 132,500 1,068,281
............................................................
Total Renal Care Holdings, Inc. # 145,300 2,261,231
............................................................
Ventas, Inc. 99,700 535,888
...................... ...................... ----------
3,865,400
- ------------------------------------------------------------
INSURANCE -- 7.0%
............................................................
ESG Re Limited 206,400 3,096,000
............................................................
Horace Mann Educators Corporation 7,400 201,187
............................................................
Stirling Cooke Brown Holdings
Limited 107,600 443,850
...................... ...................... ----------
3,741,037
- ------------------------------------------------------------
MACHINERY -- 8.5%
............................................................
Denison International PLC ADR # 138,700 2,132,513
............................................................
Hawk Corporation Class A # 96,300 848,644
............................................................
JLG Industries, Inc. 3,000 61,125
............................................................
New Holland N.V. 88,700 1,518,987
...................... ...................... ----------
4,561,269
- ------------------------------------------------------------
MISCELLANEOUS -- 4.0%
............................................................
American Coin Merchandising, Inc. # 282,000 1,833,000
............................................................
Mac-Gray Corporation # 33,300 291,375
............................................................
Ralcorp Holdings, Inc. # 2,500 40,156
...................... ...................... ----------
2,164,531
- ------------------------------------------------------------
OIL EXPLORATION &
PRODUCTION -- 0.6%
............................................................
Abraxas Petroleum Corporation # 74,500 88,469
............................................................
Tom Brown, Inc. # 14,300 222,544
...................... ...................... ----------
311,013
- ------------------------------------------------------------
OIL & GAS DRILLING -- 1.0%
............................................................
Triton Energy Limited # 51,200 550,400
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
19
<PAGE> 21
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
PUBLISHING -- 3.0%
............................................................
Playboy Enterprises, Inc. Class A # 34,200 $ 803,700
............................................................
Playboy Enterprises, Inc. # 29,100 772,969
...................... ...................... ----------
1,576,669
- ------------------------------------------------------------
RETAIL -- APPAREL -- 2.0%
............................................................
Payless ShoeSource, Inc. # 20,400 1,091,400
- ------------------------------------------------------------
RETAIL -- JEWELRY -- 2.4%
............................................................
Friedman's, Inc. 150,500 1,307,469
- ------------------------------------------------------------
SECURITY SERVICES -- 6.3%
............................................................
Pittston Brink's Group 124,900 3,341,075
- ------------------------------------------------------------
STEEL -- 0.9%
............................................................
Armco Inc. # 70,200 465,075
- ------------------------------------------------------------
TRANSPORTATION -- AIR
FREIGHT -- 3.5%
............................................................
AirNet Systems, Inc. # 139,900 1,888,650
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
UTILITY -- ELECTRIC -- 7.0%
............................................................
Central Hudson Gas & Electric
Corporation 2,000 $ 84,000
............................................................
CMP Group Inc. 119,000 3,116,312
............................................................
Cleco Corporation 2,600 78,975
............................................................
MDU Resources Group, Inc. 4,000 91,250
............................................................
Public Service Company of New
Mexico 4,200 83,475
............................................................
Rochester Gas and Electric
Corporation 3,300 87,656
............................................................
UGI Corporation 4,400 88,825
............................................................
The United Illuminating Company 2,000 84,875
...................... ...................... ----------
3,715,368
...................... ...................... ----------
Total common stock (cost 51,636,343
$60,313,444)
- ------------------------------------------------------------
Total investments -- 96.7% (cost
$60,313,444) 51,636,343
............................................................
Other assets in excess of
liabilities -- 3.3% 1,740,425
...................... ...................... ----------
$53,376,768
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
ADR -- American Depository Receipts.
# -- Non-income producing security.
See Notes to the Financial Statements
20
<PAGE> 22
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 93.5% Shares Value
- ------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 3.3%
- ------------------------------------------------------------
BANKS -- 1.6%
............................................................
Australia and New Zealand
Banking Group, Ltd. 2,981,050 $ 21,919,833
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.7%
............................................................
Pioneer International, Ltd. 9,105,173 23,202,883
..................... ..................... ------------
45,122,716
Total Australia
- ------------------------------------------------------------
AUSTRIA -- 0.5%
- ------------------------------------------------------------
STEEL -- 0.5%
............................................................
Boehler -- Uddeholm AG 140,010 6,929,744
..................... ..................... ------------
6,929,744
Total Austria
- ------------------------------------------------------------
CANADA -- 3.7%
- ------------------------------------------------------------
BANKS -- 1.2%
............................................................
Canadian Imperial Bank of
Commerce 715,022 16,956,471
- ------------------------------------------------------------
DIVERSIFIED
INDUSTRIALS -- 1.5%
............................................................
Imasco, Ltd. 733,630 19,677,799
- ------------------------------------------------------------
METALS & MINERALS -- 1.0%
............................................................
Noranda, Inc. 1,070,329 14,029,040
..................... ..................... ------------
50,663,310
Total Canada
- ------------------------------------------------------------
FINLAND -- 2.4%
- ------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 2.4%
............................................................
Metra OYJ 507,332 10,726,388
............................................................
UPM-Kymmene OYJ 780,340 22,373,610
..................... ..................... ------------
33,099,998
Total Finland
- ------------------------------------------------------------
FRANCE -- 9.5%
- ------------------------------------------------------------
BANKS -- 2.5%
............................................................
Banque Nationale de Paris 171,685 14,307,083
............................................................
Societe Generale 115,655 20,385,148
..................... ..................... ------------
34,692,231
- ------------------------------------------------------------
BEVERAGES -- 1.4%
............................................................
Pernod Ricard SA 287,923 19,301,769
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.5%
............................................................
Lafarge SA 218,032 20,732,828
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
CONSUMER DURABLES -- MISCELLANEOUS -- 1.1%
............................................................
Societe BIC SA 286,125 $ 15,094,156
- ------------------------------------------------------------
OIL -- INTERNATIONAL -- 3.0%
............................................................
Elf Aquitaine SA 156,755 23,005,607
............................................................
Total SA 138,143 17,823,524
..................... ..................... ------------
40,829,131
..................... ..................... ------------
130,650,115
Total France
- ------------------------------------------------------------
GERMANY -- 7.5%
- ------------------------------------------------------------
BANKS -- 1.0%
............................................................
Commerzbank AG 457,680 13,901,275
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.6%
............................................................
Dyckerhoff AG 41,200 12,450,083
............................................................
Friedrich Grohe AG 32,968 9,316,452
..................... ..................... ------------
21,766,535
- ------------------------------------------------------------
CHEMICALS -- 2.2%
............................................................
Hoechst AG 482,306 21,837,081
............................................................
SGL Carbon AG # 113,719 8,796,334
..................... ..................... ------------
30,633,415
- ------------------------------------------------------------
CONSUMER DURABLES -- MISCELLANEOUS -- 0.9%
............................................................
Buderus AG 33,100 13,279,600
- ------------------------------------------------------------
DIVERSIFIED
INDUSTRIALS -- 1.8%
............................................................
VEBA AG 415,695 24,437,515
..................... ..................... ------------
104,018,340
Total Germany
- ------------------------------------------------------------
HONG KONG -- 4.4%
- ------------------------------------------------------------
METALS & MINING -- 0.6%
............................................................
Yanzhou Coal Mining Co., Ltd. 21,746,000 7,707,471
- ------------------------------------------------------------
PRINTING & PUBLISHING -- 1.2%
............................................................
South China Morning Post
(Holdings), Ltd. 30,941,000 17,346,963
- ------------------------------------------------------------
REAL ESTATE
DEVELOPMENT -- 2.6%
............................................................
Hang Lung Development Company 12,148,000 15,148,011
............................................................
New World Development Co.,
Ltd. 6,851,000 20,529,424
..................... ..................... ------------
35,677,435
..................... ..................... ------------
60,731,869
Total Hong Kong
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
21
<PAGE> 23
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
IRELAND -- 2.7%
- ------------------------------------------------------------
FOOD PRODUCERS -- 1.1%
............................................................
Greencore Group PLC 4,885,960 $ 15,117,451
- ------------------------------------------------------------
PAPER -- 1.6%
............................................................
Jefferson Smurfit Group PLC 9,664,145 22,675,258
..................... ..................... ------------
37,792,709
Total Ireland
- ------------------------------------------------------------
ITALY -- 3.0%
- ------------------------------------------------------------
OIL EXPLORATION & PRODUCTION -- 1.3%
............................................................
ENI SPA 3,111,524 18,580,573
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 1.7%
............................................................
Telecom Italia SPA 1,933,600 20,101,782
............................................................
Telecom Italia SPA -- RNC 586,000 3,179,002
..................... ..................... ------------
23,280,784
..................... ..................... ------------
41,861,357
Total Italy
- ------------------------------------------------------------
JAPAN -- 8.5%
- ------------------------------------------------------------
ELECTRONIC COMPONENTS -- 3.5%
............................................................
Nintendo Co., Ltd. 340,800 47,893,364
- ------------------------------------------------------------
ELECTRONICS -- 1.1%
............................................................
Nichicon Corporation 1,105,000 16,113,075
- ------------------------------------------------------------
FINANCIAL SERVICES -- 2.1%
............................................................
Promise Company, Ltd. 493,400 29,145,844
- ------------------------------------------------------------
LEISURE -- TOYS -- 1.8%
............................................................
NAMCO, Ltd. 926,300 24,871,757
..................... ..................... ------------
118,024,040
Total Japan
- ------------------------------------------------------------
NETHERLANDS -- 7.8%
- ------------------------------------------------------------
BANKS -- 1.0%
............................................................
ABN AMRO Holding N.V. 648,880 14,053,713
- ------------------------------------------------------------
CHEMICALS -- 1.5%
............................................................
Akzo Nobel N.V. 473,351 19,918,235
- ------------------------------------------------------------
ELECTRONICS -- 2.0%
............................................................
Koninklijke (Royal) Philips
Electronics N.V. 276,570 27,283,373
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
INSURANCE -- MULTI-LINE -- 2.3%
............................................................
Fortis (NL) N.V. 302,977 $ 9,358,665
............................................................
ING Groep N.V. 414,711 22,454,958
..................... ..................... ------------
31,813,623
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 1.0%
............................................................
Koninklijke KPN N.V. 298,195 13,993,268
..................... ..................... ------------
107,062,212
Total Netherlands
- ------------------------------------------------------------
NORWAY -- 0.6%
- ------------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 0.6%
............................................................
Kvaerner PLC -- Class A # 400,043 8,232,069
..................... ..................... ------------
8,232,069
Total Norway
- ------------------------------------------------------------
SINGAPORE -- 2.9%
- ------------------------------------------------------------
COMPUTERS -- 2.0%
............................................................
Creative Technology, Ltd. 2,107,252 28,316,199
- ------------------------------------------------------------
DIVERSIFIED
INDUSTRIALS -- 0.9%
............................................................
Jardine Matheson Holdings,
Ltd. 2,534,600 12,673,000
..................... ..................... ------------
40,989,199
Total Singapore
- ------------------------------------------------------------
SPAIN -- 2.8%
- ------------------------------------------------------------
BANKS -- 1.4%
............................................................
Banco Santander Central
Hispano, S.A. 1,774,800 18,487,500
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 1.4%
............................................................
Telefonica de Espana S.A. 404,973 19,509,374
..................... ..................... ------------
37,996,874
Total Spain
- ------------------------------------------------------------
SWEDEN -- 1.5%
- ------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.5%
............................................................
Electrolux AB -- Class B 985,730 20,637,490
..................... ..................... ------------
20,637,490
Total Sweden
- ------------------------------------------------------------
SWITZERLAND -- 6.1%
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.3%
............................................................
Geberit International AG # 78,877 17,986,554
- ------------------------------------------------------------
INSURANCE -- 0.6%
............................................................
Schweizerische
Rueckversicherungs-
Gesellschaft "registered" 4,634 8,823,260
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
22
<PAGE> 24
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
MACHINERY & EQUIPMENT -- 2.2%
............................................................
SIG Schweizerische Industrie-
Gesellschaft Holding 20,307 $ 12,095,897
............................................................
Sulzer AG "registered" # 29,435 17,892,754
..................... ..................... ------------
29,988,651
- ------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 2.0%
............................................................
Novartis AG "registered' 18,488 26,995,857
..................... ..................... ------------
83,794,322
Total Switzerland
- ------------------------------------------------------------
UNITED KINGDOM -- 26.3%
- ------------------------------------------------------------
AUTOS -- 1.2%
............................................................
Lex Service PLC 1,828,630 16,862,367
- ------------------------------------------------------------
BANKS -- 3.1%
............................................................
Lloyds TSB Group PLC 1,512,287 20,500,738
............................................................
National Westminster Bank PLC 1,034,061 21,923,267
..................... ..................... ------------
42,424,005
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.5%
............................................................
Hanson PLC 2,275,447 20,211,450
- ------------------------------------------------------------
CHEMICALS -- 3.4%
............................................................
BOC Group PLC 1,009,808 19,737,735
............................................................
Laporte PLC 2,424,113 27,397,368
..................... ..................... ------------
47,135,103
- ------------------------------------------------------------
CONSUMER DURABLES -- MISCELLANEOUS -- 1.0%
............................................................
Reckitt & Colman PLC 1,332,381 13,892,970
- ------------------------------------------------------------
DIVERSIFIED -- 2.0%
............................................................
Cookson Group PLC 8,227,860 27,754,761
- ------------------------------------------------------------
DIVERSIFIED
INDUSTRIALS -- 3.2%
............................................................
Tomkins PLC 5,996,213 25,992,411
............................................................
Williams PLC 2,638,437 17,425,995
..................... ..................... ------------
43,418,406
- ------------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 3.1%
............................................................
Invensys PLC 3,888,748 18,404,738
............................................................
TI Group PLC 3,551,130 23,789,884
..................... ..................... ------------
42,194,622
- ------------------------------------------------------------
FOOD & BEVERAGES -- 1.7%
............................................................
Allied Domecq PLC 2,432,594 23,467,017
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
INSURANCE -- 2.5%
............................................................
Allied Zurich AG PLC 1,304,264 $ 16,395,816
............................................................
CGU PLC 1,286,795 18,589,969
..................... ..................... ------------
34,985,785
- ------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 0.6%
............................................................
Medeva PLC 4,627,140 7,512,538
- ------------------------------------------------------------
PRINTING & PUBLISHING -- 1.0%
............................................................
United News & Media PLC 1,488,355 14,311,106
- ------------------------------------------------------------
RETAIL -- FOOD CHAINS -- 0.7%
............................................................
Safeway PLC 2,502,850 10,030,732
- ------------------------------------------------------------
TOBACCO -- 0.9%
............................................................
B.A.T. Industries PLC 1,338,714 12,587,372
- ------------------------------------------------------------
WATER -- TREATMENT -- 0.4%
............................................................
Thames Water PLC 367,874 5,833,563
..................... ..................... ------------
362,621,797
Total United Kingdom
..................... ..................... ------------
Total common stock 1,290,228,161
(cost $1,138,929,554)
- ------------------------------------------------------------
Principal
SHORT-TERM INVESTMENTS -- 2.5% Amount
- ------------------------------------------------------------
COMMERCIAL PAPER -- 2.2%
- ------------------------------------------------------------
TRW Incorporated
6.05%, 7/01/1999 $30,000,000 30,000,000
- ------------------------------------------------------------
VARIABLE RATE DEMAND
NOTES* -- 0.3%
- ------------------------------------------------------------
Chase Manhattan Bank, 3.3593% 4,683,200 4,683,200
..................... ..................... ------------
Total short-term investments 34,683,200
(cost $34,683,200)
- ------------------------------------------------------------
Total investments -- 96.0%
(cost $1,173,612,754) 1,324,911,361
............................................................
Other assets in excess of
liabilities -- 4.0% 55,134,613
..................... ..................... ------------
$1,380,045,974
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
# Non-income producing security.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rate listed is as of June 30, 1999.
See Notes to the Financial Statements
23
<PAGE> 25
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 98.1% Shares Value
- -------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 3.5%
- -------------------------------------------------------------
BANKS -- 1.7%
.............................................................
Australia and New Zealand Banking
Group, Ltd. 16,940 $ 124,561
- -------------------------------------------------------------
BUILDING MATERIALS -- 1.4%
.............................................................
Pioneer International, Ltd. 41,863 106,680
- -------------------------------------------------------------
DIVERSIFIED COMPANIES -- 0.4%
.............................................................
Reinsurance Australia Corporation,
Ltd. 39,233 32,720
....................... ....................... ---------
263,961
Total Australia
- -------------------------------------------------------------
CANADA -- 1.1%
- -------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.0%
.............................................................
Nexfor, Inc. 1 6
- -------------------------------------------------------------
METALS & MINERALS -- 1.1%
.............................................................
Noranda, Inc. 6,385 83,690
- -------------------------------------------------------------
OIL EXPLORATION &
PRODUCTION -- 0.0%
.............................................................
Canadian Hunter Exploration Ltd. # 1 11
....................... ....................... ---------
83,707
Total Canada
- -------------------------------------------------------------
FRANCE -- 5.8%
- -------------------------------------------------------------
BANKS -- 2.3%
.............................................................
Banque Nationale de Paris 820 68,333
.............................................................
Societe Generale 625 110,161
....................... ....................... ---------
178,494
- -------------------------------------------------------------
BEVERAGES -- 1.1%
.............................................................
Pernod Ricard SA 1,200 80,446
- -------------------------------------------------------------
BUILDING MATERIALS -- 1.5%
.............................................................
Lafarge SA 1,202 114,299
- -------------------------------------------------------------
OIL -- INTERNATIONAL -- 0.9%
.............................................................
Total SA 514 66,317
....................... ....................... ---------
439,556
Total France
- -------------------------------------------------------------
GERMANY -- 5.2%
- -------------------------------------------------------------
BANKS -- 1.0%
.............................................................
Commerzbank AG 2,500 75,933
- -------------------------------------------------------------
CHEMICALS -- 1.7%
.............................................................
Hoechst AG 2,759 124,918
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Shares Value
<S> <C> <C>
DIVERSIFIED INDUSTRIALS -- 1.6%
.............................................................
VEBA AG 2,014 $ 118,397
- -------------------------------------------------------------
MEDICAL PRODUCTS -- 0.9%
.............................................................
Draegerwerk AG 4,985 70,436
....................... ....................... ---------
389,684
Total Germany
- -------------------------------------------------------------
HONG KONG -- 3.5%
- -------------------------------------------------------------
BANKS -- 1.5%
.............................................................
Dao Heng Bank Group, Ltd. 25,500 114,372
- -------------------------------------------------------------
REAL ESTATE DEVELOPMENT -- 1.3%
.............................................................
New World Development Co., Ltd. 33,000 98,886
- -------------------------------------------------------------
RETAIL -- SPECIALTY -- 0.7%
.............................................................
Dickson Concepts International,
Ltd. 73,500 52,102
....................... ....................... ---------
265,360
Total Hong Kong
- -------------------------------------------------------------
IRELAND -- 2.9%
- -------------------------------------------------------------
FOOD PRODUCERS -- 0.9%
.............................................................
Greencore Group PLC 21,160 65,470
- -------------------------------------------------------------
PAPER -- 2.0%
.............................................................
Jefferson Smurfit Group PLC 63,990 150,142
....................... ....................... ---------
215,612
Total Ireland
- -------------------------------------------------------------
ITALY -- 2.7%
- -------------------------------------------------------------
OIL EXPLORATION &
PRODUCTION -- 1.0%
.............................................................
ENI SPA 12,000 71,658
- -------------------------------------------------------------
TELECOMMUNICATIONS -- 1.7%
.............................................................
Telecom Italia SPA 10,600 110,198
.............................................................
Telecom Italia SPA -- RNC 3,425 18,580
....................... ....................... ---------
128,778
....................... ....................... ---------
200,436
Total Italy
- -------------------------------------------------------------
JAPAN -- 7.5%
- -------------------------------------------------------------
AUTO PARTS -- 1.0%
.............................................................
NIFCO, Inc. 8,000 76,867
- -------------------------------------------------------------
ELECTRONIC COMPONENTS -- 3.2%
.............................................................
Nintendo Co., Ltd. 1,700 238,905
- -------------------------------------------------------------
ELECTRONICS -- 1.6%
.............................................................
Nichicon Corporation 8,000 116,656
- -------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
24
<PAGE> 26
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES -- 1.7%
.............................................................
Promise Company, Ltd. 2,200 $ 129,957
....................... ....................... ---------
562,385
Total Japan
- -------------------------------------------------------------
NETHERLANDS -- 6.5%
- -------------------------------------------------------------
BANKS -- 1.0%
.............................................................
ABN AMRO Holding N.V. 3,585 77,645
- -------------------------------------------------------------
CHEMICALS -- 1.3%
.............................................................
Akzo Nobel N.V. 2,420 101,832
- -------------------------------------------------------------
ELECTRONICS -- 1.8%
.............................................................
Koninklijke (Royal) Philips
Electronics N.V. 1,343 132,505
- -------------------------------------------------------------
INSURANCE -- MULTI-LINE -- 1.6%
.............................................................
ING Groep N.V. 2,255 122,099
- -------------------------------------------------------------
TELECOMMUNICATIONS -- 0.8%
.............................................................
Koninklijke KPN N.V. 1,300 61,005
....................... ....................... ---------
495,086
Total Netherlands
- -------------------------------------------------------------
NEW ZEALAND -- 1.3%
- -------------------------------------------------------------
BUILDING MATERIALS -- 1.3%
.............................................................
Fletcher Challenge Building 69,015 100,573
....................... ....................... ---------
100,573
Total New Zealand
- -------------------------------------------------------------
SINGAPORE -- 2.9%
- -------------------------------------------------------------
COMPUTERS -- 2.0%
.............................................................
Creative Technology, Ltd. 11,200 150,500
- -------------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 0.9%
.............................................................
Jardine Matheson Holdings, Ltd. 14,000 70,000
....................... ....................... ---------
220,500
Total Singapore
- -------------------------------------------------------------
SPAIN -- 1.4%
- -------------------------------------------------------------
TELECOMMUNICATIONS -- 1.4%
.............................................................
Telefonica de Espana S.A. 2,244 108,104
....................... ....................... ---------
108,104
Total Spain
- -------------------------------------------------------------
SWEDEN -- 1.5%
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.5%
.............................................................
Electrolux AB -- Class B 5,525 115,673
....................... ....................... ---------
115,673
Total Sweden
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Shares Value
<S> <C> <C>
SWITZERLAND -- 6.8%
- -------------------------------------------------------------
BUILDING MATERIALS -- 2.2%
.............................................................
Forbo Holding AG "registered" 161 $ 64,002
.............................................................
Geberit International AG # 451 102,843
....................... ....................... ---------
166,845
- -------------------------------------------------------------
INSURANCE -- 0.7%
.............................................................
Schweizerische Rueckversicherungs-
Gesellschaft "registered" 27 51,409
- -------------------------------------------------------------
MACHINERY & EQUIPMENT -- 2.0%
.............................................................
Saurer AG "registered" # 141 76,278
.............................................................
SIG Schweizerische
Industrie-Gesellschaft Holding 126 75,052
....................... ....................... ---------
151,330
- -------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.9%
.............................................................
Novartis AG "registered" 99 144,558
....................... ....................... ---------
514,142
Total Switzerland
- -------------------------------------------------------------
UNITED KINGDOM -- 20.4%
- -------------------------------------------------------------
APPAREL & TEXTILES -- 1.6%
.............................................................
Coats Viyella PLC 154,380 124,108
- -------------------------------------------------------------
BANKS -- 3.1%
.............................................................
Lloyds TSB Group PLC 8,337 113,017
.............................................................
National Westminster Bank PLC 5,700 120,847
....................... ....................... ---------
233,864
- -------------------------------------------------------------
BUILDING MATERIALS -- 1.5%
.............................................................
Hanson PLC 12,770 113,428
- -------------------------------------------------------------
DIVERSIFIED -- 1.2%
.............................................................
Cookson Group PLC 27,000 91,078
- -------------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 2.9%
.............................................................
Elementis PLC 55,010 90,180
.............................................................
Tomkins PLC 29,832 129,316
....................... ....................... ---------
219,496
- -------------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 2.5%
.............................................................
Invensys PLC 11,106 52,563
.............................................................
TI Group PLC 20,540 137,603
....................... ....................... ---------
190,166
- -------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
25
<PAGE> 27
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGES -- 1.9%
.............................................................
Allied Domecq PLC 12,690 $ 122,419
.............................................................
Tesco PLC 7,520 19,351
....................... ....................... ---------
141,770
- -------------------------------------------------------------
INSURANCE -- 2.2%
.............................................................
Allied Zurich AG PLC 5,870 73,791
.............................................................
CGU PLC 6,340 91,592
....................... ....................... ---------
165,383
- -------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 0.6%
.............................................................
Medeva PLC 25,878 42,015
- -------------------------------------------------------------
PRINTING & PUBLISHING -- 1.0%
.............................................................
United News & Media PLC 8,276 79,577
- -------------------------------------------------------------
TOBACCO -- 0.9%
.............................................................
B.A.T. Industries PLC 7,230 67,981
- -------------------------------------------------------------
WATER -- TREATMENT -- 1.0%
.............................................................
Pennon Group PLC 4,518 75,632
....................... ....................... ---------
1,544,498
Total United Kingdom
- -------------------------------------------------------------
UNITED STATES -- 25.1%
- -------------------------------------------------------------
AEROSPACE -- 1.0%
.............................................................
Northrop Grumman Corporation 1,100 72,944
- -------------------------------------------------------------
AUTO PARTS -- 1.5%
.............................................................
Dana Corporation 2,400 110,550
- -------------------------------------------------------------
AUTOS & TRUCKS -- 0.9%
.............................................................
Ford Motor Company 1,260 71,111
- -------------------------------------------------------------
BANKS -- 1.7%
.............................................................
Bank One Corporation 2,106 125,439
- -------------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 1.3%
.............................................................
Weyerhaeuser Company 1,450 99,688
- -------------------------------------------------------------
CONGLOMERATES -- 1.3%
.............................................................
Tenneco, Inc. 4,000 95,500
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Shares Value
<S> <C> <C>
FINANCIAL SERVICES -- 1.4%
.............................................................
Household International, Inc. 2,210 $ 104,699
- -------------------------------------------------------------
INSURANCE -- 1.1%
.............................................................
Safeco Corporation 1,800 79,425
- -------------------------------------------------------------
MACHINERY -- 2.2%
.............................................................
New Holland N.V. 9,750 166,969
- -------------------------------------------------------------
METALS & MINING -- 1.6%
.............................................................
Alcoa, Inc. 2,000 123,750
- -------------------------------------------------------------
OIL -- DOMESTIC -- 2.2%
.............................................................
Occidental Petroleum Corporation 3,400 71,825
.............................................................
Phillips Petroleum Company 1,840 92,575
....................... ....................... ---------
164,400
- -------------------------------------------------------------
PHOTOGRAPHY & OPTICAL -- 1.3%
.............................................................
Eastman Kodak Company 1,400 94,850
- -------------------------------------------------------------
SAVINGS & LOANS -- 0.9%
.............................................................
Fannie Mae 1,050 71,794
- -------------------------------------------------------------
TOBACCO -- 1.5%
.............................................................
Philip Morris Companies, Inc. 2,905 116,745
- -------------------------------------------------------------
UTILITY -- ELECTRIC -- 0.9%
.............................................................
GPU, Inc. 1,590 67,078
- -------------------------------------------------------------
UTILITY -- TELEPHONE -- 4.3%
.............................................................
AT&T Corporation 1,950 108,834
.............................................................
ALLTEL Corporation 1,800 128,700
.............................................................
GTE Corporation 1,200 90,900
....................... ....................... ---------
328,434
....................... ....................... ---------
1,893,376
Total United States
- -------------------------------------------------------------
Total common stock
(cost $6,810,227) 7,412,653
- -------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
26
<PAGE> 28
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
SHORT-TERM Principal
INVESTMENTS -- 1.4% Amount Value
- -------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 1.4%
- -------------------------------------------------------------
Chase Manhattan Bank, 3.3593% $107,718 $ 107,718
- -------------------------------------------------------------
CASH EQUIVALENTS -- 0.0%
- -------------------------------------------------------------
Chase Bank Domestic Liquidity Fund 689 689
....................... ....................... ---------
Total short-term investments (cost 108,407
$108,407)
- -------------------------------------------------------------
Total investments -- 99.5%
(cost $6,918,634) 7,521,060
.............................................................
Other assets in excess of
liabilities -- 0.5% 40,836
....................... ....................... ---------
$7,561,896
Total net assets -- 100.0%
- -------------------------------------------------------------
# Non-income producing security.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rate listed is as of June 30, 1999.
See Notes to the Financial Statements
27
<PAGE> 29
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 47.1% Shares Value
- ------------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 2.3%
............................................................
Lockheed Martin Corporation 23,300 $ 867,925
............................................................
Northrop Grumman Corporation 15,400 1,021,212
............................................................
Rockwell International
Corporation 5,800 352,350
...................... ...................... ----------
2,241,487
- ------------------------------------------------------------
APPAREL & TEXTILES -- 0.3%
............................................................
Russell Corporation 15,000 292,500
- ------------------------------------------------------------
AUTO PARTS -- 1.8%
............................................................
Dana Corporation 15,800 727,788
............................................................
Delphi Automotive Systems
Corporation 13,294 246,770
............................................................
Meritor Automotive, Inc. 2,000 51,000
............................................................
TRW Inc. 13,600 746,300
...................... ...................... ----------
1,771,858
- ------------------------------------------------------------
AUTOS & TRUCKS -- 2.2%
............................................................
Ford Motor Company 21,000 1,185,188
............................................................
General Motors Corporation 14,300 943,800
...................... ...................... ----------
2,128,988
- ------------------------------------------------------------
BANKS -- 2.5%
............................................................
Bank One Corporation 17,300 1,030,431
............................................................
First Security Corporation 8,200 223,450
............................................................
First Union Corporation 15,000 705,000
............................................................
KeyCorp 8,600 276,275
............................................................
UnionBanCal Corporation 5,900 213,137
...................... ...................... ----------
2,448,293
- ------------------------------------------------------------
BEVERAGES -- 0.6%
............................................................
Anheuser-Busch Companies, Inc. 9,000 638,438
- ------------------------------------------------------------
BUILDING & FOREST
PRODUCTS -- 1.2%
............................................................
Georgia-Pacific Corporation
(Timber Group) 13,000 328,250
............................................................
Weyerhaeuser Company 12,300 845,625
...................... ...................... ----------
1,173,875
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
CHEMICALS -- 1.3%
............................................................
The Dow Chemical Company 5,200 $ 659,750
............................................................
Eastman Chemical Company 9,400 486,450
............................................................
Millennium Chemicals, Inc. 4,442 104,665
...................... ...................... ----------
1,250,865
- ------------------------------------------------------------
CONGLOMERATES -- 1.0%
............................................................
Tenneco, Inc. 39,600 945,450
- ------------------------------------------------------------
ENGINEERING &
CONSTRUCTION -- 0.5%
............................................................
Harsco Corporation 14,000 448,000
- ------------------------------------------------------------
FINANCIAL SERVICES -- 2.0%
............................................................
Associates First Capital
Corporation -- Class A 2,400 106,350
............................................................
Fannie Mae 12,500 854,688
............................................................
Fleet Financial Group, Inc. 600 26,625
............................................................
Household International, Inc. 11,200 530,600
............................................................
Transamerica Corporation 6,000 450,000
...................... ...................... ----------
1,968,263
- ------------------------------------------------------------
HEALTHCARE -- DRUGS -- 0.2%
............................................................
American Home Products
Corporation 600 34,500
............................................................
Bristol Myers Squibb Company 1,700 119,744
...................... ...................... ----------
154,244
- ------------------------------------------------------------
HEALTHCARE -- MEDICAL PRODUCTS -- 0.1%
............................................................
Baxter International, Inc. 2,200 133,375
- ------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 1.0%
............................................................
Whirlpool Corporation 13,000 962,000
- ------------------------------------------------------------
INSURANCE -- 3.0%
............................................................
American General Corporation 9,100 685,913
............................................................
Harleysville Group, Inc. 14,500 297,250
............................................................
Lincoln National Corporation 10,400 544,050
............................................................
Safeco Corporation 18,500 816,312
............................................................
St. Paul Companies, Inc. 20,600 655,337
...................... ...................... ----------
2,998,862
- ------------------------------------------------------------
LEISURE/TOYS -- 0.5%
............................................................
Fortune Brands, Inc. 13,000 537,875
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
28
<PAGE> 30
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
MACHINERY -- 1.1%
............................................................
Deere & Company 1,400 $ 55,475
............................................................
New Holland N.V. 57,200 979,550
...................... ...................... ----------
1,035,025
- ------------------------------------------------------------
METALS & MINING -- 2.3%
............................................................
Alcoa, Inc. 14,000 866,250
............................................................
Phelps Dodge Corporation 8,400 520,275
............................................................
Reynolds Metals Company 14,500 855,500
...................... ...................... ----------
2,242,025
- ------------------------------------------------------------
OIL -- DOMESTIC -- 3.7%
............................................................
Atlantic Richfield Company 6,200 518,088
............................................................
Occidental Petroleum
Corporation 26,500 559,812
............................................................
Phillips Petroleum Company 22,500 1,132,031
............................................................
Texaco Inc. 4,500 281,250
............................................................
USX-Marathon Group, Inc. 25,000 814,062
............................................................
Ultramar Diamond Shamrock
Corporation 14,700 320,644
...................... ...................... ----------
3,625,887
- ------------------------------------------------------------
PAPER -- 1.8%
............................................................
Georgia-Pacific Group 10,000 473,750
............................................................
International Paper Company 26,000 1,313,000
...................... ...................... ----------
1,786,750
- ------------------------------------------------------------
PHOTOGRAPHY & OPTICAL -- 0.8%
............................................................
Eastman Kodak Company 11,600 785,900
- ------------------------------------------------------------
POLLUTION CONTROL -- 1.4%
............................................................
Browning-Ferris Industries,
Inc. 18,400 791,200
............................................................
Waste Management, Inc. 10,000 537,500
...................... ...................... ----------
1,328,700
- ------------------------------------------------------------
RAILROADS -- 1.1%
............................................................
CSX Corporation 9,700 439,531
............................................................
Norfolk Southern Corporation 22,000 662,750
...................... ...................... ----------
1,102,281
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
RETAIL -- 2.0%
............................................................
Intimate Brands, Inc. 2,940 $ 139,283
............................................................
J.C. Penney Company, Inc. 19,100 927,544
............................................................
May Department Stores Company 12,600 515,025
............................................................
Sears, Roebuck & Company 8,800 392,150
...................... ...................... ----------
1,974,002
- ------------------------------------------------------------
SAVINGS & LOANS -- 0.9%
............................................................
Washington Mutual, Inc. 24,300 859,612
- ------------------------------------------------------------
STEEL -- 0.8%
............................................................
USX-U.S. Steel Group, Inc. 29,000 783,000
- ------------------------------------------------------------
TOBACCO -- 1.9%
............................................................
Philip Morris Companies, Inc. 47,400 1,904,887
- ------------------------------------------------------------
TRUCKING -- 0.1%
............................................................
Ryder System, Inc. 4,500 117,000
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 5.0%
............................................................
CMS Energy Corporation 9,500 397,813
............................................................
Central & South West
Corporation 14,500 338,937
............................................................
DTE Energy Company 12,000 480,000
............................................................
Edison International 19,000 508,250
............................................................
Entergy Corporation 7,700 240,625
............................................................
GPU, Inc. 5,800 244,687
............................................................
Illinova Corporation 28,000 763,000
............................................................
PECO Energy Company 14,000 586,250
............................................................
P P & L Resources, Inc. 10,000 307,500
............................................................
PacifiCorp 12,000 220,500
............................................................
Public Service Enterprises
Group, Inc. 7,000 286,125
............................................................
SCANA Corporation 14,000 327,250
............................................................
Texas Utilities Company 6,300 259,875
...................... ...................... ----------
4,960,812
- ------------------------------------------------------------
UTILITY -- GAS PIPELINE -- 0.2%
............................................................
Peoples Energy Corporation 4,500 169,594
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
29
<PAGE> 31
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
UTILITY -- TELEPHONE -- 3.5%
............................................................
AT&T Corporation 15,800 $ 881,837
............................................................
ALLTEL Corporation 9,400 672,100
............................................................
Bell Atlantic Corporation 12,500 817,188
............................................................
GTE Corporation 4,000 303,000
............................................................
SBC Communications, Inc. 13,000 754,000
...................... ...................... ----------
3,428,125
- ------------------------------------------------------------
Total common stock (cost
$38,969,491) 46,197,973
- ------------------------------------------------------------
Principal
CORPORATE BONDS -- 14.6% Amount
- ------------------------------------------------------------
BANKS -- 1.5%
............................................................
MBNA Corporation, 5.505%,
6/17/2002 # $ 1,500,000 1,492,602
- ------------------------------------------------------------
EUROBANKS -- 6.1%
............................................................
Foreningsbanken Kredit AB, CLB
12/18/2001, 5.92625%,
12/29/2049 # 2,500,000 2,474,991
............................................................
Nordbanken, CLB 10/25/2001
5.92625%, 10/29/2049 # 2,000,000 1,956,940
............................................................
Okobank, CLB 9/09/2002
5.59875%, 9/29/2049 # 1,500,000 1,510,722
...................... ...................... ----------
5,942,653
- ------------------------------------------------------------
FINANCIAL SERVICES -- 3.5%
............................................................
Countrywide Home Loans, Inc.,
6.84%, 10/22/2004 2,500,000 2,483,303
............................................................
Lehman Brothers Holdings,
5.50125%, 6/01/2001 # 900,000 897,442
...................... ...................... ----------
3,380,745
- ------------------------------------------------------------
RETAIL -- 1.2%
............................................................
Rite Aid Corp. (Acquired
12/16/1998, cost $747,645),
6.00%, 12/15/2005 r 750,000 695,127
............................................................
Rite Aid Corp. 7.125%,
1/15/2007 475,000 462,860
...................... ...................... ----------
1,157,987
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION -- 2.3%
............................................................
Delta Air Lines ETC:
9.90%, 1/02/2002 $ 150,000 $ 159,729
10.50%, 4/30/2016 750,000 923,674
............................................................
Northwest Airlines, Inc.,
11.30%, 12/21/2012 1,049,292 1,216,657
...................... ...................... ----------
2,300,060
- ------------------------------------------------------------
Total corporate bonds (cost
$15,656,856) 14,274,047
- ------------------------------------------------------------
GOVERNMENT AGENCY
MORTGAGE-BACKED
SECURITIES -- 6.0%
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.4%
............................................................
Federal Home Loan Mortgage
Corporation
1588 SA, 7.48888%, 9/15/2023
# 700,000 564,527
............................................................
2067 PD, 6.50%, 9/15/2026 2,900,000 2,809,361
...................... ...................... ----------
3,373,888
- ------------------------------------------------------------
PASS-THROUGH SECURITIES -- 2.4%
............................................................
Federal National Mortgage
Association
Pool #313608, 6.50%,
7/01/2012 2,360,375 2,329,921
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.2%
............................................................
Federal National Mortgage
Association
1994-53 E (PO), 0.00%,
11/25/2023 214,503 210,946
- ------------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $6,062,799) 5,914,755
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
30
<PAGE> 32
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
BALANCED FUND
NON-AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 13.7% Amount Value
- ------------------------------------------------------------
ASSET-BACKED SECURITIES -- 9.7%
............................................................
Ditech Home Loan Owner Trust,
CLB 1997-1 A3, 6.71%,
8/15/2018 $ 1,750,000 $ 1,755,679
............................................................
GMAC Commercial Mortgage
Securities Inc., 1999-C2 A2,
6.945%, 9/15/2033 1,150,000 1,148,879
............................................................
GREAT 1998-1 A1 (Acquired
7/02/98, cost $1,106,571)
7.33%, 9/15/2007 r + 1,106,571 331,971
............................................................
Green Tree Financial
Corporation, CLB 1996-5 B2,
8.45%, 7/15/2027 1,549,754 1,353,299
............................................................
Heilig-Meyers Master Trust
(Acquired 2/20/1998, cost
$1,399,872), CLB 1998-1A A,
6.125%, 1/20/2007 r 1,400,000 1,376,739
............................................................
Nomura Asset Securities
Corporation:
CLB 1995-MD3 A1B, 8.15%,
3/04/2020 1,000,000 1,053,465
............................................................
CLB 1998-D6 A1B, 6.59%,
3/17/2028 2,500,000 2,431,463
...................... ...................... ----------
9,451,495
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.4%
............................................................
Independent National Mortgage
Corporation, CLB 1996-D A2,
7.00%, 5/25/2026 9,114 9,106
............................................................
PNC Mortgage Securities
Corporation, CLB 1996-1 A11,
7.50%, 6/25/2026 1,986,978 1,979,040
............................................................
Prudential Home Mortgage
Securities, CLB 1993-54,
Class A17, 3.77545%,
1/25/2024 # 500,000 394,688
...................... ...................... ----------
2,382,834
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 1.6%
............................................................
Chase Commercial Mortgage
Securities Corporation, CLB
1997-1 X (IO), 1.438176%,
4/19/2015 # 21,952,535 1,536,677
- ------------------------------------------------------------
Total non-agency
mortgage-backed securities
(cost $13,518,409) 13,371,006
- ------------------------------------------------------------
PREFERRED STOCKS -- 0.9% Shares Value
- ------------------------------------------------------------
Home Ownership Funding 2,
(Acquired 2/20/1997, Cost
$1,000,000) r 1,000 $ 861,000
- ------------------------------------------------------------
U.S. TREASURY Principal
OBLIGATIONS -- 17.2% Amount
- ------------------------------------------------------------
U.S. Treasury Notes:
4.00%, 10/31/2000 $12,500,000 12,245,605
............................................................
5.75%, 4/30/2003 3,150,000 3,153,937
............................................................
6.50%, 10/15/2006 1,350,000 1,393,454
- ------------------------------------------------------------
Total U.S. Treasury obligations
(cost $16,882,919) 16,792,996
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.0%
- ------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 0.0%
............................................................
General Mills, Inc., 4.8250% 7,874 7,874
............................................................
Sara Lee, Corp., 4.8200% 465 465
...................... ...................... ----------
Total short-term investments 8,339
(cost $8,339)
- ------------------------------------------------------------
Total investments -- 99.5%
(cost $92,098,813) 97,420,116
............................................................
Other assets in excess of
liabilities -- 0.5% 477,986
...................... ...................... ----------
$97,898,102
Total net assets -- 100.0%
- ------------------------------------------------------------
# Variable rate security. The rate listed is as of June 30, 1999.
* 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, 1999.
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.
+ -- Security Fair Valued under procedures established by the Board of Trustees
(See Note 1).
See Notes to the Financial Statements
31
<PAGE> 33
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
AND NOTES -- 33.5% Amount Value
- ------------------------------------------------------------
<S> <C> <C>
BANKS -- 2.6%
............................................................
MBNA Corporation, 5.505%,
6/17/2002 # $ 500,000 $ 497,534
............................................................
Sovereign Bancorp, CLB 6.625%,
3/15/2001 1,750,000 1,744,405
............................................................
Unibanco Grand Cayman (Acquired
4/21/1999, cost $1,050,809),
10.75%, 4/28/2000 r 1,050,000 1,057,875
..................... ...................... ----------
3,299,814
- ------------------------------------------------------------
CABLE -- 4.5%
............................................................
Charter Communication Holdings
LLC (Acquired 3/12/1999, cost
$2,592,070), CLB 4/01/2004,
8.625%, 4/01/2009 r 2,600,000 2,509,000
............................................................
CSC Holdings Inc., 7.25%,
7/15/2008 2,200,000 2,101,000
............................................................
USA Networks Inc., 6.75%,
11/15/2005 1,000,000 960,843
..................... ...................... ----------
5,570,843
- ------------------------------------------------------------
EUROBANKS -- 1.0%
............................................................
Nordbanken, CLB 9/27/2001
5.9925%, 9/29/2049 # 1,300,000 1,282,112
- ------------------------------------------------------------
FINANCIAL SERVICES -- 7.9%
............................................................
AT & T Capital Corp., 5.34%,
10/24/2000 # 500,000 499,769
............................................................
Countrywide Home Loans, Inc.,
6.25%, 4/15/2009 2,000,000 1,845,204
............................................................
Countrywide Home Loans, Inc.,
6.85%, 6/15/2004 1,700,000 1,701,525
............................................................
Golden State Holdings, CLB
8/1/2000, 5.995%, 8/01/2003 # 3,000,000 2,947,218
............................................................
Lehman Brothers Holdings,
6.20%, 1/15/2002 1,900,000 1,871,276
............................................................
Pan Pacific Ind. Inv. PLC
(Acquired 6/18/1999, cost
$971,987), 0.00%, 4/28/2007 r 2,000,000 990,960
..................... ...................... ----------
9,855,952
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
INDUSTRIAL -- 3.0%
............................................................
Coca-Cola Femsa SA, 8.95%,
11/01/2006 $1,110,000 $ 1,101,925
............................................................
Lennar Corp., CLB 7.625%,
3/01/2009 2,750,000 2,612,505
..................... ...................... ----------
3,714,430
- ------------------------------------------------------------
MISCELLANEOUS -- 1.5%
............................................................
Liberty Property LP, CLB 7.75%,
4/15/2009 1,200,000 1,154,710
............................................................
Republic of Brazil, 11.625%,
4/15/2004 750,000 697,500
..................... ...................... ----------
1,852,210
- ------------------------------------------------------------
RETAIL -- 4.3%
............................................................
Great Atlantic & Pacific Tea,
7.70%, 1/15/2004 2,500,000 2,465,855
............................................................
Rite Aid Corp.:
(Acquired 12/16/1998, cost
$1,246,075), 6.00%,
12/15/2005 r 1,250,000 1,158,545
............................................................
(Acquired 3/30/1999, cost
$964,707), CLB 6.00%,
12/15/2005 r 1,000,000 926,836
............................................................
7.125%, 1/15/2007 850,000 828,276
..................... ...................... ----------
5,379,512
- ------------------------------------------------------------
SAVINGS & LOANS -- 0.4%
............................................................
Western Financial Savings, CLB
7/1/2000, 8.50%, 7/01/2003 500,000 457,604
- ------------------------------------------------------------
STEEL -- 2.2%
............................................................
Pohang Iron & Steel, 6.625%,
7/01/2003 2,900,000 2,745,218
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 2.6%
............................................................
Comcast Cellular Holdings, CLB
5/01/2002, 9.50%, 5/01/2007 1,300,000 1,460,875
............................................................
Telecom Argentina Stet. Fran.
(Acquired 6/25/1999, cost
$998,750), 9.75%, 7/12/2001 r 1,000,000 1,000,000
............................................................
MCI Worldcom, Inc., CLB
1/15/2001, 8.875%, 1/15/2006 775,000 822,559
..................... ...................... ----------
3,283,434
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
32
<PAGE> 34
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION -- 1.9%
............................................................
Bombardier Capital Inc.
(Acquired 1/22/1999, cost
$1,496,910), CLB 6.00%,
1/15/2002 r $1,500,000 $ 1,476,006
............................................................
Delta Air Lines ETC:
CLB 9.90%, 1/02/2002 250,000 266,214
............................................................
10.50%, 4/30/2016 500,000 615,782
..................... ...................... ----------
2,358,002
- ------------------------------------------------------------
UTILITIES -- 1.6%
............................................................
CMS Energy Corp., CLB 8.00%,
7/01/2001# 2,000,000 1,996,286
- ------------------------------------------------------------
Total corporate bonds and notes
(cost $42,743,995) 41,795,417
- ------------------------------------------------------------
GOVERNMENT AGENCY
MORTGAGE-BACKED
SECURITIES -- 22.8%
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 22.5%
............................................................
Federal Home Loan Mortgage
Corporation:
............................................................
1564 SE, CLB 9.12167%,
8/15/2008 # 119,179 122,195
............................................................
1565 OC, CLB 6.84544%,
8/15/2008 # 1,827,135 1,736,051
............................................................
1261 J, CLB 8.00%, 7/15/2021 703,629 725,247
............................................................
1573 GC, CLB 11.51138%,
1/15/2023 # 546,583 530,566
............................................................
1588 SA, 7.48888%, 9/15/2023
# 1,625,000 1,310,510
............................................................
2067 PD, 6.50%, 9/15/2026 1,200,000 1,162,494
............................................................
2118 Z, CLB 6.50%, 12/15/2028 605,555 517,785
............................................................
Pool #C00716, 6.00%,
2/01/2029 4,003,829 3,780,210
............................................................
Pool #C25556, 6.50%,
4/01/2029 4,983,343 4,829,393
............................................................
Pool #E00617, 5.50%,
1/01/2014 4,438,693 4,211,206
............................................................
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
Federal National Mortgage
Association:
Pool #313608, 6.50%,
7/01/2012 $2,360,375 $ 2,329,921
............................................................
1994-27 SD, 6.9478%,
3/25/2023 # 2,515,648 2,264,644
............................................................
G93-27 SB, 7.7434%, 8/25/2023
# 43,813 35,322
............................................................
Pool #481469, 6.00%,
2/01/2029 4,247,907 4,005,284
............................................................
1999-13 ZD, 9.7203%,
4/25/2029 # 433,562 451,952
..................... ...................... ----------
28,012,780
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.3%
............................................................
Federal National Mortgage
Association:
G93-32 E, 0.00% (PO),
9/25/2023 353,496 334,922
............................................................
1998-48 CI (IO), 6.50%,
8/25/2028 190,840 35,049
..................... ...................... ----------
369,971
- ------------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $29,163,799) 28,382,751
- ------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES -- 23.2%
- ------------------------------------------------------------
ASSET-BACKED
SECURITIES -- 17.7%
............................................................
Associates Manufactured Housing
Pass-Through Certificates,
CLB 1996-2 A4, 6.60%,
6/15/2027 500,000 502,207
............................................................
CIT Marine Trust, CLB 1999-A
A2, 5.80%, 4/15/2010 2,000,000 1,994,290
............................................................
Commercial Financial Services
Securitized Multiple Asset
Rated Trust (Acquired
9/24/1997, cost $360,984),
1997-5 A1, 7.72%, 6/15/2005 r
+ 361,069 108,321
............................................................
Commercial Mortgage Acceptance
Corporation (Acquired
3/13/1998, cost $282,837),
CLB 1996-C2 A2, 7.0357%,
9/15/2023 # r 279,733 284,036
............................................................
Commercial Resecuritization
Trust (Acquired 2/10/1999,
cost $967,760), CLB 1999-ABC1
A, 6.74%, 1/27/2009 r 977,998 953,548
............................................................
</TABLE>
See Notes to the Financial Statements
33
<PAGE> 35
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
CPS Auto Trust, CLB 1998-1 A,
6.00%, 8/15/2003 $ 330,961 $ 331,085
............................................................
The C.S. First Boston Mortgage
Securities Corp. Commercial
Mortgage Pass-Through
Certificates, 1998-C1 A1B,
6.48%, 5/17/2008 750,000 723,139
............................................................
Delta Funding Home Equity Loan
Trust, CLB 5.98%, 2/15/2023 2,000,000 1,985,370
............................................................
Ditech Home Loan Owner Trust,
CLB 1997-1 A3, 6.71%,
8/15/2018 600,000 601,947
............................................................
GMAC Commercial Mortgage
Securities Inc., CLB 1999-C2
A2, 6.945%, 9/15/2033 2,600,000 2,597,465
............................................................
GREAT (Acquired 7/02/1998, cost
$158,082), 1998-1 A1, 7.33%,
9/15/2007 r + 158,082 47,425
............................................................
Green Tree Financial
Corporation:
1995-4 A4, CLB 6.75%,
6/15/2025 382,658 385,013
............................................................
1996-5 B2, CLB 8.45%,
7/15/2027 799,873 698,477
............................................................
Green Tree Recreational,
Equipment & Consumer Trust,
CLB 1996-B CTFS, 7.70%,
7/15/2018 450,000 433,811
............................................................
Heilig-Meyers Master Trust
(Acquired 2/20/1998, cost
$499,954), CLB 1998-1A A,
6.125%, 1/20/2007 r 500,000 491,693
............................................................
Nomura Asset Securities
Corporation:
1995-MD3 A1B, CLB 8.15%,
3/04/2020 750,000 790,099
............................................................
1998-D6 A1B, CLB 6.59%,
3/17/2028 2,850,000 2,771,867
............................................................
Nomura Depositor Trust
(Acquired 6/28/1999, cost
$1,183,500), CLB 1998-ST1 A2,
5.475%, 1/15/2003 # r 1,200,000 1,183,500
............................................................
Nomura Depositor Trust
(Acquired 6/28/1999, cost
$486,914), CLB 1998-ST1 A3,
5.5675%, 1/15/2003 # r 500,000 485,390
............................................................
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
Resolution Trust Corporation,
1994-C2 G, CLB 8.00%,
4/25/2025 $ 514,528 $ 518,533
............................................................
1994-C1 E, CLB 8.00%,
6/25/2026 1,997,828 1,974,729
............................................................
Structured Asset Securities
Corporation, 1993-C1 C,
6.60%, CLB 10/25/2024 1,100,091 1,093,215
............................................................
The Ugly Duckling Auto Grantor
Trust, (Acquired 12/18/1998,
cost $1,072,044), CLB 1998-D
A, 5.90%, 5/15/2003 r 1,133,905 1,136,870
..................... ...................... ----------
22,092,030
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.5%
............................................................
Blackrock Capital Finance LP
(Acquired 6/23/1997, cost
$171,004), CLB 1997-AW (AP),
7.9377%, 12/25/2035 # r 172,053 179,013
............................................................
CMC Securities Corporation IV,
CLB 1994-G A4, 7.00%,
9/25/2024 200,000 190,421
............................................................
Citicorp Mortgage Securities,
Inc., CLB 1997-3 A2, 6.92%,
8/25/2027 62,935 63,121
............................................................
Collateralized Mortgage
Obligations Trust, CLB 57 D,
9.90%, 2/01/2019 259,015 272,363
............................................................
GE Capital Mortgage Services,
Inc., 1994-24 A4, 7.00%,
7/25/2024 169,843 161,933
............................................................
Housing Securities, Inc.:
1994-1 AB2, (Acquired
3/03/1995, cost $288,664),
CLB 6.50%, 3/25/2009 r 437,369 323,653
............................................................
1994-2 B1, CLB 6.50%,
7/25/2009 228,915 180,843
............................................................
Independent National Mortgage
Corporation, CLB 1995-F A5,
8.25%, 5/25/2010 750,000 766,270
............................................................
Ocwen Residential MBS Corp.
(Acquired 6/18/1998, cost
$564,912), CLB 1998-R2 AP,
6.1474%, 11/25/2034 r # 565,619 570,774
............................................................
Prudential Home Mortgage
Securities CLB 1993-50 A11,
8.75%, 11/25/2023 # 3,312,928 3,263,234
............................................................
</TABLE>
See Notes to the Financial Statements
34
<PAGE> 36
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
Prudential Home Mortgage
Securities CLB 1993-54 A17,
3.77545%, 1/25/2024 # $1,150,000 $ 907,781
..................... ...................... ----------
6,879,406
- ------------------------------------------------------------
Total non-agency
mortgage-backed securities
(cost $29,689,970) 28,971,436
- ------------------------------------------------------------
PREFERRED STOCKS -- 0.4% Shares
- ------------------------------------------------------------
Home Ownership Funding 2,
(Acquired 2/20/1997, cost
$500,000) r 500 430,500
- ------------------------------------------------------------
U.S. TREASURY Principal
OBLIGATIONS -- 14.1% Amount
- ------------------------------------------------------------
U.S. Treasury Bonds: 6.375%,
8/15/2027 $ 375,000 383,203
............................................................
U.S. Treasury Notes: 5.75%,
4/30/2003 9,500,000 9,511,875
............................................................
7.25%, 8/15/2004 2,750,000 2,921,875
............................................................
6.50%, 10/15/2006 3,950,000 4,077,143
............................................................
U.S. Treasury Strips: 0.00%,
2/15/2009 1,200,000 668,627
..................... ...................... ----------
Total U.S. Treasury obligations 17,562,723
(cost $17,904,412)
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.7%
- ------------------------------------------------------------
COMMERCIAL PAPER -- 5.7%
............................................................
Conseco, Inc., 5.42%, 7/01/1999
4(2) 400,000 400,000
............................................................
TRW Inc., 6.05%, 7/01/1999 4(2) 6,000,000 6,000,000
............................................................
Tyson Foods, Inc., 6.05%,
7/01/1999 700,000 700,000
..................... ...................... ----------
7,100,000
Total commercial paper
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
VARIABLE RATE DEMAND NOTES* -- 0.0%
............................................................
General Mills, Inc., 4.825%,
12/31/2031 $ 42,434 $ 42,434
- ------------------------------------------------------------
Total short term investments
(cost $7,142,434) 7,142,434
- ------------------------------------------------------------
Total investments -- 99.7%
(cost $127,144,610) 124,285,261
............................................................
Other assets in excess of
liabilities -- 0.3% 384,363
..................... ...................... ----------
$124,669,624
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
# Variable rate security. The rate listed is as of June 30, 1999.
* 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, 1999.
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.
+ -- Security Fair Valued under procedures established by the Board of Trustees
(See Note 1).
See Notes to the Financial Statements
35
<PAGE> 37
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
AND NOTES -- 37.2% Amount Value
- ------------------------------------------------------------
<S> <C> <C>
AUTO -- 1.2%
............................................................
TRW, Inc., (Acquired
6/18/1999, cost $5,100,000),
5.5987%, 6/28/2000 # r $ 5,100,000 $ 5,102,550
- ------------------------------------------------------------
BANKS -- 4.5%
............................................................
Korea Development Bank,
9.60%, 12/01/2000 4,220,000 4,366,223
............................................................
MBNA Corporation,
5.505%, 6/17/2002 # 1,125,000 1,119,452
............................................................
MBNA Global Capital
Securities, CLB 2/01/2007,
5.795%, 2/01/2027 # 2,000,000 1,740,560
............................................................
Sovereign Bancorp, CLB,
6.625%, 3/15/2001 7,150,000 7,127,141
............................................................
Unibanco Grand Cayman,
(Acquired 4/21/1999, cost
$4,003,082), 10.75%,
4/28/2000 r 4,000,000 4,030,000
..................... ...................... -----------
18,383,376
- ------------------------------------------------------------
CABLE -- 1.6%
............................................................
TCI Communications, Inc.,
8.00%, 8/01/2005 4,600,000 4,852,388
............................................................
USA Networks Inc.
6.75%, 11/15/2005 1,700,000 1,633,433
..................... ...................... -----------
6,485,821
- ------------------------------------------------------------
EUROBANKS -- 6.0%
............................................................
Foreningsbanken Kredit AB, CLB
12/18/2001, 5.92625%,
12/29/2049 # 5,750,000 5,692,480
............................................................
Nordbanken, CLB 10/25/2001,
5.595%, 10/29/2049 # 6,680,000 6,536,180
............................................................
Okobank:
CLB 9/09/2002, 5.5987%,
9/29/2049,# 3,750,000 3,776,805
............................................................
CLB 10/14/1999, 6.45%,
10/29/2049, # 2,000,000 2,006,900
............................................................
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
Skandinavinska Enskilda
Banken, CLB 6/28/2003,
6.26375%, 6/29/2049 # $ 3,500,000 $ 3,431,960
............................................................
Svenska Handls Banken, CLB
3/03/2002, 5.5687%,
3/29/2049 # 3,250,000 3,162,406
..................... ...................... -----------
24,606,731
- ------------------------------------------------------------
FINANCIAL SERVICES -- 10.8%
............................................................
AT & T Capital Corp.,
5.34%, 10/24/2000 # 2,750,000 2,748,730
............................................................
Case Credit Corporation,
6.15%, 3/01/2002 4,000,000 3,938,900
............................................................
Countrywide Home Loans, Inc.,
5.69%, 3/16/2005 # 5,000,000 4,987,650
............................................................
Golden State Holdings, CLB
8/01/2000, 5.995%, 8/01/2003
# 9,900,000 9,725,819
............................................................
Lehman Brothers Holdings,
5.50125%, 6/01/2001 # 800,000 797,726
............................................................
Lehman Brothers Holdings,
6.20%, 1/15/2002 9,100,000 8,962,426
............................................................
Pan Pacific Ind. Inv. Plc.,
(Acquired 6/18/1999, cost
$3,887,947), 0.00%,
4/28/2007 r 8,000,000 3,963,840
............................................................
Providian National Bank, CLB
4/10/2000, 5.60%, 4/10/2001
# 4,000,000 4,000,908
............................................................
U.S. West Capital Funding:
(Acquired 6/03/1999, cost
$5,000,000), CLB 9/15/1999,
5.546%, 6/15/2000 # r 5,000,000 4,997,900
............................................................
(Acquired 6/14/1999, cost
$249,985) CLB 9/15/1999,
5.546%, 6/15/2000 # r 250,000 249,895
..................... ...................... -----------
44,373,794
- ------------------------------------------------------------
INDUSTRIAL -- 1.0%
............................................................
Coca-Cola Femsa SA,
8.95%, 11/01/2006 2,875,000 2,854,084
............................................................
Suiza Foods Corp., CLB
12/15/2001, 10.00%,
12/15/2006 1,000,000 1,120,000
..................... ...................... -----------
3,974,084
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
36
<PAGE> 38
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS -- 0.6%
............................................................
Republic of Brazil,
11.625%, 4/15/2004 $ 2,700,000 $ 2,511,000
- ------------------------------------------------------------
RETAIL -- 3.9%
............................................................
Great Atlantic & Pacific Tea,
7.70%, 1/15/2004 6,433,000 6,345,138
............................................................
Rite Aid Corp.,
(Acquired 12/16/1998, cost
$3,943,167), 5.50%,
12/15/2000 r 3,950,000 3,874,721
............................................................
6.70%, 12/15/2001 4,200,000 4,184,170
............................................................
6.70%, 12/15/2001 1,450,000 1,444,535
..................... ...................... -----------
15,848,564
- ------------------------------------------------------------
STEEL -- 2.4%
............................................................
Pohang Iron & Steel,
6.625%, 7/01/2003 10,530,000 9,967,982
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 2.4%
............................................................
Comcast Cellular Holdings, CLB
5/01/2002, 9.50%, 5/01/2007 5,010,000 5,629,988
............................................................
Telecom Argentina Stet. Fran.
(Acquired 6/25/1999, cost
$3,995,000), 9.75%,
7/12/2001 r 4,000,000 4,000,000
..................... ...................... -----------
9,629,988
- ------------------------------------------------------------
TRANSPORTATION -- 1.6%
............................................................
Bombardier Capital, Inc., CLB
(Acquired 1/22/1999, cost
$6,711,147), 6.00%,
1/15/2002 r 6,725,000 6,617,427
- ------------------------------------------------------------
UTILITIES -- 1.2%
............................................................
CMS Energy Corp., CLB,
8.00%, 7/01/2001 # 5,000,000 4,990,715
..................... ...................... -----------
Total corporate bonds and
notes 152,492,032
(cost $153,969,651)
- ------------------------------------------------------------
GOVERNMENT AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 11.7% Amount Value
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 11.4%
............................................................
Federal Home Loan Mortgage Corporation:
............................................................
1564 SB, 8.4066%, 8/15/2008
# $ 771,272 $ 778,112
............................................................
Pool #E00617, 5.50%,
1/01/2014 12,921,527 12,259,289
............................................................
1336 H, 7.75%, 1/15/2021 174,071 176,702
............................................................
1477 P, 10.5233%, 3/15/2023
# 25,680 25,191
............................................................
1617 D, 6.50%, 11/15/2023 71,000 66,756
............................................................
2118 Z, CLB 6.50%,
12/15/2028, 2,961,148 2,531,958
............................................................
2141 WZ, 6.50%, 4/15/2029 2,619,864 2,560,944
............................................................
Federal National Mortgage
Association:
............................................................
1991-153 N, 7.50%, 2/25/2007 207,422 209,534
............................................................
1993-6 S, 10.6575%,
1/25/2008 # 876,208 853,821
............................................................
Pool #313608 , 6.50%,
7/01/2012 7,411,577 7,315,952
............................................................
Pool #413738, 6.50%,
1/01/2013 12,956,886 12,789,716
............................................................
1988-26 C, 7.50%, 7/25/2018 28,164 28,320
............................................................
1991-147 K, 7.00%, 1/25/2021 2,005 2,014
............................................................
1992-138 O, 7.50%, 7/25/2022 9,403 9,391
............................................................
1993-45 SB, 9.82%, 4/25/2023
# 592,169 573,177
............................................................
1997-59 SU, 8.6883%,
9/25/2023 # 893,675 875,208
............................................................
1994-60 D, 7.00%, 4/25/2024 30,000 29,080
............................................................
1997-76 FT, 5.43125%,
9/17/2027 # 973,868 936,683
............................................................
1999-13 ZC, 7.65919%,
4/25/2029 # 3,887,494 3,911,096
............................................................
1999-13 ZD, 9.72053%,
4/25/2029 # 932,157 971,696
..................... ...................... -----------
46,904,640
- ------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
37
<PAGE> 39
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.3%
............................................................
Federal National Mortgage
Association:
............................................................
1993-72 J (IO), 6.50%,
12/25/2006 $ 578,532 $ 26,424
............................................................
1993-97 L (IO), 7.50%,
5/25/2023 516,525 15,989
............................................................
1994-53 E (PO), 0.00%,
11/25/2023 1,131,506 1,112,741
............................................................
1998-48 CI (IO), 6.50%,
8/25/2028 756,185 138,879
..................... ...................... -----------
1,294,033
- ------------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $49,199,491) 48,198,673
- ------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES -- 31.4%
- ------------------------------------------------------------
ASSET-BACKED
SECURITIES -- 26.2%
............................................................
ACC Automobile Receivables
Trust, CLB, (Acquired
6/24/1999, cost
$2,601,604),1997-C A, 6.40%,
3/17/2004 r 2,595,925 2,601,605
............................................................
BankBoston Home Equity Loan
Trust, CLB, 1998-1 A1,
6.46%, 4/25/2012 1,331,112 1,330,533
............................................................
Champion Auto Grantor Trust
(Acquired 3/18/1998, cost
$951,512), CLB, 1998-A A,
6.11%, 10/15/2002 r 951,527 952,419
............................................................
CIT Marine Trust, CLB, 1999-A
A2, 5.80%, 4/15/2010 4,200,000 4,188,009
............................................................
Cityscape Home Equity Loan
Trust, CLB, 1996-4 A10,
7.40%, 9/25/2027 3,219,438 3,185,733
............................................................
Commercial Financial Services
Securitized Multiple Asset
Rated Trust (Acquired
9/24/1997, cost $2,256,682),
1997-5 A1, 7.72%, 6/15/2005
r + 2,256,682 677,005
............................................................
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
Commercial Mortgage Acceptance
Corporation, CLB, (Acquired
3/13/1998, cost $1,212,157),
1996-C2 A2, 7.0357%,
9/15/2023 # r $ 1,198,857 $ 1,217,298
............................................................
Commercial Mortgage Asset
Trust, CLB, 1999-C1 A1,
6.25%, 8/17/2006 1,975,243 1,944,064
............................................................
Commercial Resecuritization
Trust, CLB, (Acquired
2/10/1999, cost
$3,871,038),1999-ABC1 A,
6.74%, 1/27/2009 r 3,911,992 3,814,192
............................................................
Contimortgage Home Equity Loan
Trust, CLB, 1998-1 A5,
6.43%, 4/15/2016 7,550,000 7,520,442
............................................................
Countrywide Home Equity Loan
Trust, CLB, 1999-A CTFS,
5.3075%, 4/15/2025 # 1,230,961 1,230,769
............................................................
CPS Auto Trust, CLB, 1998-1 A,
6.00%, 8/15/2003 1,323,843 1,324,340
............................................................
Ditech Home Loan Owner Trust,
CLB, 1997-1 A2, 6.59%,
4/15/2013 1,711,466 1,715,941
............................................................
Ditech Home Loan Owner Trust,
CLB, 1997-1 A3, 6.71%,
8/15/2018 3,280,000 3,290,644
............................................................
Firstplus Home Loan Trust,
CLB, 1998-4 A4, 6.32%,
3/10/2017 5,000,000 4,978,975
............................................................
First Tennessee Auto Grantor
Trust, CLB, (Acquired
4/17/1998, cost $1,429,464),
1998-A A, 6.134%, 4/15/2003
r 1,429,464 1,435,145
............................................................
GREAT, (Acquired 7/02/1998,
cost $2,709,970), 1998-1 A1,
7.330%, 9/15/2007 r + 2,709,970 812,991
............................................................
Green Tree Financial
Corporation, CLB:
1995-4 A4, 6.75%, 6/15/2025 5,199,359 5,231,361
............................................................
1996-5 B2, 8.45%, 7/15/2027 4,145,001 3,619,560
............................................................
Green Tree Recreational,
Equipment & Consumer Trust,
CLB:
1996-C A1, 5.2275%,
10/15/2017 7,531,759 7,524,114
............................................................
1996-B CTFS, 7.70%,
7/15/2018 2,250,000 2,169,056
............................................................
</TABLE>
See Notes to the Financial Statements
38
<PAGE> 40
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
Heilig-Meyers Master Trust
(Acquired 2/20/1998, cost
$4,099,626), 1998-1A A,
6.125%, 1/20/2007 r $ 4,100,000 $ 4,031,879
............................................................
The Money Store Residential
Trust, CLB, 1998-I A2,
6.20%, 3/15/2008 2,250,000 2,250,281
............................................................
Nationslink Funding
Corporation, CLB, 1999-SL
A2, 6.0960%, 12/10/2001 2,050,000 2,043,922
............................................................
Nationslink Funding
Corporation, CLB, 1999-SL
A1V, 5.3025%, 4/10/2007 # 2,741,593 2,742,512
............................................................
Nomura Asset Securities
Corporation, CLB, 1995-MD3
A1B, 8.15%, 3/04/2020 2,750,000 2,897,029
............................................................
Nomura Depositor Trust, CLB,
(Acquired 6/28/1999, cost
$12,405,588), 1998-ST1 A3,
5.5675%, 1/15/2003 # r 12,738,992 12,366,771
............................................................
Resolution Trust Corporation,
CLB:
1992-C3 A3, 6.275%,
8/25/2023 # 184,279 184,279
............................................................
1992-C8 A2, 6.475%,
12/25/2023 # 601,483 602,815
............................................................
1994-C2 G, 8.00%, 4/25/2025 857,546 864,222
............................................................
1994-C1 E, 8.00%, 6/25/2026 6,813,205 6,734,431
............................................................
1994-C1 F, 8.00%, 6/25/2026 1,940,349 1,886,514
............................................................
Structured Asset Securities
Corporation, CLB, 1993-C1 C,
6.60%, 10/25/2024 4,250,350 4,223,785
............................................................
The Ugly Duckling Auto Grantor
Trust, CLB, (Acquired
12/18/1998, cost
$5,667,752), 1998-D A,
5.90%, 5/15/2003 r 5,669,524 5,684,349
..................... ...................... -----------
107,276,985
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.2%
............................................................
Blackrock Capital Finance
L.P., CLB, (Acquired
6/23/1997, Cost $940,524),
1997-R2 AW (AP), 7.9377%,
12/25/2035 # r $ 946,291 $ 984,570
............................................................
Citicorp Mortgage Securities,
Inc., CLB, 1997-3 A2, 6.92%,
8/25/2027 534,951 536,531
............................................................
Countrywide Funding
Corporation, CLB, 1994-17
A9, 8.00%, 7/25/2024 4,000 4,079
............................................................
First Union-Lehman Brothers
Commercial Mortgage
Trust,CLB, 1997-C1 A1,
7.15%, 2/18/2004 5,702,441 5,773,921
............................................................
Housing Securities, Inc., CLB,
1994-2 B1, 6.50%, 7/25/2009 204,928 161,893
............................................................
Independent National Mortgage
Corporation, CLB:
1995-A A4, 8.75%, 3/25/2025 13,069 13,210
............................................................
1996-D A2, 7.00%, 5/25/2026 39,061 39,027
............................................................
Morgan Stanley Mortgage Trust,
CLB, 8.9712%, 6/22/2018 962,170 978,326
............................................................
Ocwen Residential MBS Corp.,
CLB, (Acquired 6/18/1998,
cost $3,530,699), 1998-R2
AP, 6.1474%, 11/25/2034 # r 3,535,118 3,567,337
............................................................
Prudential Home Mortgage
Securities, Co., CLB,
1993-36 A10, 7.25%,
10/25/2023 372,501 374,365
............................................................
Residential Funding Mortgage
Securities, Inc., CLB:
1992-S5 A5, 7.50%, 2/25/2007 344,635 343,572
............................................................
1993-S9 A8, 9.479165%,
2/25/2008 # 58,127 58,127
............................................................
1998-S17 A6, 6.75%,
8/25/2028 2,316,820 2,321,095
............................................................
Salomon Brothers Mortgage
Securities VII, 1994-6 A1,
5.9511%, 5/25/2024 # 1,028,671 1,030,579
............................................................
</TABLE>
See Notes to the Financial Statements
39
<PAGE> 41
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
Structured Mortgage Asset
Residential Trust, CLB:
1992-3A AA, 8.00%,
10/25/2007 $ 109,594 $ 111,726
............................................................
1991-1 H, 8.25%, 6/25/2022 91,697 93,320
............................................................
1993-5A AA, 6.76079%,
6/25/2024 # 35,917 34,221
............................................................
Walsh Acceptance, CLB,
(Acquired 3/06/1997, cost
$1,107,663), 1997-2 A,
6.125%, 3/01/2027 # r 1,099,077 967,188
..................... ...................... -----------
17,393,087
- ------------------------------------------------------------
PASS-THROUGH
SECURITIES -- 0.1%
............................................................
Citicorp Mortgage Securities,
Inc., CLB:
............................................................
1988-16 A1, 10.00%,
11/25/2018 26,519 27,868
............................................................
1989-8 A1, 10.50%, 6/25/2019 294,596 312,869
..................... ...................... -----------
340,737
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.9%
............................................................
Asset Securitization
Corporation, 1997-D5 PS1
(IO), 1.396031%,
2/14/2041 # 14,702,676 1,360,071
............................................................
Chase Commercial Mortgage
Securities Corporation, CLB,
1997-1 X (IO), 1.4381%,
4/19/2015 # 24,292,939 1,700,506
............................................................
CS First Boston Mortgage
Securities Corporation, CLB,
(Acquired 8/14/1997, cost
$979,319), 1995-WF1 AX (IO),
3.3321%,
12/21/2027 # r 15,259,492 681,916
..................... ...................... -----------
3,742,493
- ------------------------------------------------------------
Total non-agency
mortgage-backed securities
(cost $134,650,061) 128,753,302
- ------------------------------------------------------------
PREFERRED STOCK -- 0.3% Shares
- ------------------------------------------------------------
Home Ownership Funding 2,
(Acquired 2/20/1997, cost
$1,500,000) r 1,500 1,291,500
- ------------------------------------------------------------
U.S. TREASURY Principal
OBLIGATIONS -- 17.7% Amount Value
- ------------------------------------------------------------
U.S. TREASURY NOTES:
............................................................
5.50%, 3/31/2000 $19,500,000 $ 19,548,750
............................................................
4.00%, 10/31/2000 20,000,000 19,592,969
............................................................
6.25%, 06/30/2002 30,775,000 31,275,094
............................................................
5.75%, 10/31/2002 2,000,000 2,005,000
..................... ...................... -----------
Total U.S. Treasury
obligations (cost 72,421,813
$72,335,249)
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 7.5%
- ------------------------------------------------------------
COMMERCIAL PAPER -- 7.5%
............................................................
Conseco, Inc., 5.42%,
7/01/1999 4(2) 6,900,000 6,900,000
............................................................
MCI Communications
Corporation, 5.78%,
1/27/2000 4(2) 8,000,000 7,730,267
............................................................
TRW Inc., 6.05%, 7/01/1999
4(2) 16,100,000 16,100,000
..................... ...................... -----------
30,730,267
Total commercial paper
- ------------------------------------------------------------
VARIABLE DEMAND NOTES
* -- 0.0%
............................................................
Pitney Bowes, Inc., 4.825%,
12/31/2031 72,075 72,075
- ------------------------------------------------------------
Total short-term investments
(cost $30,802,342) 30,802,342
- ------------------------------------------------------------
Total investments -- 105.8%
(cost $442,456,794) 433,959,662
............................................................
Liabilities in excess of other
assets -- (5.8)% (23,972,255)
..................... ...................... -----------
$409,987,407
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
# Variable rate security. The rate listed is as of June 30, 1999.
* 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, 1999.
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.
+ -- Security Fair Valued under procedures established by the Board of Trustees
(See Note 1).
See Notes to the Financial Statements
40
<PAGE> 42
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
AND NOTES -- 36.1% Amount Value
- -------------------------------------------------------------
<S> <C> <C>
AUTO -- 1.9%
.............................................................
TRW Inc.(Acquired 6/18/1999, cost
$1,000,000), 5.5987%, 6/28/2000
# r $1,000,000 $ 1,000,500
- -------------------------------------------------------------
BANKS -- 5.2%
.............................................................
Korea Development Bank, 9.60%,
12/01/2000 675,000 698,389
.............................................................
MBNA Corporation, 5.505%,
6/17/2002 # 500,000 497,534
.............................................................
Providian National Bank, CLB
4/10/2000, 5.60%, 4/10/2001 # 1,000,000 1,000,227
.............................................................
Unibanco Grand Cayman (Acquired
4/21/1999, cost $450,371),
10.75%, 4/28/2000 r 450,000 453,375
...................... ....................... ----------
2,649,525
- -------------------------------------------------------------
EUROBANKS -- 7.6%
.............................................................
Foreningsbanken Kredit AB, CLB
12/18/2001, 5.92625%,
12/29/2049 # 750,000 742,497
.............................................................
Nordbanken, CLB 10/25/2001,
5.5950%, 10/29/2049 # 550,000 538,158
.............................................................
Okobank, CLB 9/09/2002 5.59875%,
9/29/2049 # 1,050,000 1,057,505
.............................................................
Skandinavinska Enskilda Banken,
CLB 6/28/2003, 6.26375%,
6/29/2049 # 800,000 784,448
.............................................................
Svenska Hndls Banken, CLB
3/03/2002, 5.5687%, 3/29/2049 # 750,000 729,786
...................... ....................... ----------
3,852,394
- -------------------------------------------------------------
FINANCIAL SERVICES -- 20.4%
.............................................................
Associates Corp. NA, 5.12%,
5/17/2002 # 1,000,000 999,376
.............................................................
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
AT & T Capital Corp., 5.34%,
10/24/2000 # $ 500,000 $ 499,769
.............................................................
AT & T Capital Corp., 5.17%,
04/09/2001 # 750,000 750,067
.............................................................
Bear Stearns Co. Inc., 5.425%,
3/15/2002 # 1,500,000 1,499,652
.............................................................
Countrywide Home Loans, Inc.,
5.6900%, 3/16/2005 # 750,000 748,147
.............................................................
Golden State Holdings, CLB
8/01/2000, 5.995%, 8/01/2003 # 1,900,000 1,866,571
.............................................................
Lehman Brothers Holdings,
5.50125%, 6/01/2001# 900,000 897,442
.............................................................
Lehman Brothers Holdings, 6.20%,
1/15/2002 900,000 886,394
.............................................................
Orix Credit Alliance (Acquired
4/06/1999, cost $750,000),
6.40%, 1/31/2000 r 750,000 747,002
.............................................................
Pan Pacific Ind. Inv. PLC
(Acquired 6/18/1999, cost
$485,993), 0.00%, 4/28/2007 r 1,000,000 495,480
.............................................................
US West Capital Funding (Acquired
6/03/1999, cost $1,000,000),
5.54625%, CLB 9/15/1999,
6/15/2000 # r 1,000,000 999,580
...................... ....................... ----------
10,389,480
- -------------------------------------------------------------
UTILITIES -- 1.0%
.............................................................
CMS Energy Corp., 8.00%, CLB
7/01/2001# 500,000 499,071
- -------------------------------------------------------------
Total corporate bonds and notes
(cost $18,407,352) 18,390,970
- -------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
41
<PAGE> 43
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
GOVERNMENT AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 5.4% Amount Value
- -------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.0%
.............................................................
Federal Home Loan Mortgage
Corporation, CLB 2118 Z, 6.50%,
12/15/2028 $ 370,144 $ 316,495
.............................................................
Federal National Mortgage
Association: 1993-142 SA,
9.33832%,
10/25/2022 # 179,912 177,102
.............................................................
1999-13 ZC, 7.65919%, 4/25/2029
# 1,017,333 1,023,509
...................... ....................... ----------
1,517,106
- -------------------------------------------------------------
PASS-THROUGH SECURITIES -- 2.3%
.............................................................
Federal Housing Authority
Project, 7.43%, 2/01/2023 132,776 134,818
.............................................................
Government National Mortgage
Association:
8570, 6.1250%, 10/20/2019 # 222,853 227,434
.............................................................
8346, 6.1250%, 12/20/2023 # 788,060 801,767
...................... ....................... ----------
1,164,019
- -------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.1%
.............................................................
Federal National Mortgage
Association:
1993-129 J (IO), 6.50%,
2/25/2007 626,849 45,090
.............................................................
1993-97 L (IO), 7.50%,
5/25/2023 190,496 5,897
...................... ....................... ----------
50,987
- -------------------------------------------------------------
Total government agency mortgage-
backed securities (cost
$2,773,673) 2,732,112
- -------------------------------------------------------------
NON-AGENCY
MORTGAGE-BACKED
SECURITIES -- 35.7%
- -------------------------------------------------------------
ASSET-BACKED SECURITIES -- 34.4%
.............................................................
ACC Automobile Receivables Trust
(Acquired 6/24/1999, cost
$991,087), CLB 1997-C A, 6.40%,
3/17/2004 r 988,924 991,088
.............................................................
Americredit Automobile
Receivables Trust, CLB 1998-A
A2, 5.0725%, 11/05/2001 # 844,304 844,603
.............................................................
Americredit Automobile
Receivables Trust, CLB 1999-A
A2, 5.383%, 4/05/2002 900,000 899,617
.............................................................
<TABLE>
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------
<S> <C> <C>
Associates Manufactured Housing
Pass-Through Certificates, CLB
1996-2 A4, 6.60%, 6/15/2027 $ 500,000 $ 502,208
.............................................................
BankBoston Home Equity Loan
Trust, CLB 1998-1 A1, 6.46%,
4/25/2012 459,004 458,805
.............................................................
Champion Auto Grantor Trust
(Acquired 10/28/1997, cost
$57,203), CLB 1997-D A, 6.27%,
9/15/2002 r 57,203 57,239
.............................................................
CIT Marine Trust, CLB 1999-A A1,
5.45%, 9/15/2006 965,036 965,600
.............................................................
Commercial Financial Services
Securitized Multiple Asset
Rated Trust (Acquired
9/24/1997, cost $361,069),
1997-5 A1, 7.72%, 6/15/2005 r + 361,069 108,321
.............................................................
Countrywide Home Equity Loan
Trust, CLB 1999-A CTFS 5.3075%,
4/15/2025 # 984,769 984,615
.............................................................
Ditech Home Loan Owner Trust, CLB
1997-1 A2, 6.59%, 4/15/2013 684,586 686,376
.............................................................
First Tennessee Auto Grantor
Trust (Acquired 4/17/1998, cost
$386,342), CLB 1998-A A,
6.134%, 4/15/2003 r 386,342 387,877
.............................................................
Green Tree Home Improvement Loan
Trust, CLB 1997-A HEA5, 7.21%,
3/15/2028 840,634 847,893
.............................................................
Green Tree Recreational,
Equipment & Consumer Trust, CLB
1996-C A1, 5.2275%, 10/15/2017
# 876,423 875,533
.............................................................
Harley-Davidson Eaglemark
Motorcycle Trust, CLB 1999-1
A1, 5.25%, 7/15/2003 913,696 909,927
.............................................................
Nationslink Funding Corporation,
CLB 1999-SL A1V, 5.3025%,
4/10/2007 # 740,971 741,219
.............................................................
Navistar Financial Corp. Owner
Trust, CLB 1996-B A3, 6.33%,
4/21/2003 411,538 413,384
.............................................................
Nomura Asset Securities
Corporation, CLB 1995-MD3 A1A,
8.17%, 3/04/2020 819,020 845,396
.............................................................
</TABLE>
See Notes to the Financial Statements
42
<PAGE> 44
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------
<S> <C> <C>
Nomura Depositor Trust (Acquired
6/28/1999, cost $1,084,875),
CLB 1998-ST1 A2, 5.4075%,
1/15/2003 # r $1,100,000 $ 1,084,875
.............................................................
Peco Energy Transition Trust, CLB
1999-A A3, 5.1875%, 3/1/2006 # 1,000,000 997,085
.............................................................
Resolution Trust Corporation:
1992-C3 A3, CLB 6.275%,
8/25/2023 # 307,131 307,131
.............................................................
1992-C8 A2, CLB 6.475%,
12/25/2023 # 816,678 818,487
.............................................................
1994-C2 G, CLB 8.00%, 4/25/2025 343,018 345,689
.............................................................
Structured Asset Securities
Corporation, CLB 1993-C1 C,
6.60%, 10/25/2024 500,041 496,916
.............................................................
The Ugly Duckling Auto Grantor
Trust (Acquired 12/18/1998,
cost $755,700), CLB 1998-D A,
5.90%, 5/15/2003 r 755,936 757,913
.............................................................
Duck Auto Grantor Trust (Acquired
4/21/1999, cost $470,840), CLB
1999-A A, 5.65%, 3/15/2004 r 470,914 470,723
.............................................................
Union Acceptance Corporation, CLB
1998-C A2, 5.44%, 10/09/2001 712,572 713,103
...................... ....................... ----------
17,511,623
- -------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.3%
.............................................................
Residential Funding Mortgage
Securities Inc., CLB 1998-S17
A6, 6.75%, 8/25/2028 231,682 232,109
.............................................................
Salomon Brothers Mortgage
Securities CLB VI, 1986-1 A,
6.00%, 12/25/2011 280,679 279,776
.............................................................
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
Walsh Acceptance (Acquired
3/06/1997, cost $184,611), CLB
1997-2 A, 6.125%, 3/01/2027 # r $ 183,179 $ 161,198
...................... ....................... ----------
673,083
- -------------------------------------------------------------
Total non-agency mortgage-backed
securities (cost $18,466,089) 18,184,706
- -------------------------------------------------------------
U.S. TREASURY
OBLIGATIONS -- 9.0%
- -------------------------------------------------------------
U.S. Treasury Notes:
5.75%, 10/31/2000 2,600,000 2,610,564
6.25%, 6/30/2002 1,925,000 1,956,281
...................... ....................... ----------
Total U.S. Treasury Notes (cost 4,566,845
$4,596,045)
- -------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 25.9%
- -------------------------------------------------------------
COMMERCIAL PAPER -- 25.9%
.............................................................
Conseco, Inc., 5.42%, 7/01/1999
4(2) 2,500,000 2,500,000
.............................................................
Firstar Corporation, 5.25%,
7/22/1999 4(2) 2,200,000 2,193,262
.............................................................
MCI Communications Corporation,
5.78%, 1/27/2000 4(2) 1,100,000 1,062,912
.............................................................
Ratheon Company, 5.10%, 7/01/1999
4(2) 2,500,000 2,500,000
.............................................................
TRW Inc., 6.05%, 7/01/1999 4(2) 2,500,000 2,500,000
.............................................................
Tyson Foods, Inc., 6.05%,
7/01/1999 2,400,000 2,400,000
...................... ....................... ----------
Total short-term investments 13,156,174
(cost $13,156,174)
- -------------------------------------------------------------
Total investments -- 112.1% (cost
$57,399,333) 57,030,807
.............................................................
Liabilities in excess of other
assets -- (12.1%) (6,174,462)
...................... ....................... ----------
$50,856,345
Total net assets -- 100.0%
- -------------------------------------------------------------
</TABLE>
# Variable rate security. The rate listed is as of June 30, 1999.
IO -- Interest Only.
CLB -- Callable.
r -- Restricted Security. Purchased in a private placement transaction; resale
to the public may require registration or may extend only to qualified
institutional buyers.
4(2) -- Restricted Security requiring resale to institutional investors.
+ -- Security Fair Valued under procedures established by the Board of Trustees
(See Note 1).
See Notes to the Financial Statements
43
<PAGE> 45
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
Equity
Income Mid-Cap Small
Fund Fund Cap Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value*.................................... $148,860,526 $6,917,894 $51,636,343
Cash...................................................... -- -- --
Dividends and interest receivable......................... 359,122 11,939 24,801
Receivable for investments sold........................... 7,221,964 -- 1,331,569
Receivable for Fund shares sold........................... 41,300 16,574 826,173
Prepaid expenses.......................................... 13,921 7,050 22,159
------------ ---------- -----------
Total assets.......................................... 156,496,833 6,953,457 53,841,045
------------ ---------- -----------
LIABILITIES:
Payable for forward currency exchange contracts........... -- -- --
Payable to Advisor........................................ 99,245 -- 36,678
Payable for investments purchased......................... 6,754,735 60,748 340,111
Payable for Fund shares repurchased....................... 838,780 10,153 40,520
Dividends payable......................................... -- -- --
Accrued expenses and other liabilities.................... 69,754 11,876 46,968
------------ ---------- -----------
Total liabilities..................................... 7,762,514 82,777 464,277
------------ ---------- -----------
Net assets............................................ $148,734,319 $6,870,680 $53,376,768
============ ========== ===========
NET ASSETS CONSIST OF:
Paid in capital........................................... $101,687,250 $7,028,474 $69,722,301
Undistributed (distributions in excess of) net investment
income.................................................. 43,953 86,963 --
Undistributed net realized gain (loss) on securities...... 14,825,176 (193,322) (7,668,432)
Net unrealized appreciation (depreciation) of securities
and foreign currency.................................... 32,177,940 (51,435) (8,677,101)
------------ ---------- -----------
Net assets............................................ $148,734,319 $6,870,680 $53,376,768
============ ========== ===========
CALCULATION OF NET ASSET VALUE PER SHARE -- INVESTOR CLASS:
Net assets................................................ $148,734,319 $6,870,680 $53,376,768
Shares outstanding (unlimited shares of no par value
authorized)............................................. 7,451,017 571,338 2,539,030
Net asset value per share (offering and redemption
price).................................................. $ 19.96 $ 12.03 $ 21.02
============ ========== ===========
CALCULATION OF NET ASSET VALUE PER SHARE -- DISTRIBUTOR
CLASS:
Net assets................................................
Shares outstanding (unlimited shares of no par value
authorized).............................................
Net asset value per share (offering and redemption
price)..................................................
*Cost of Investments........................................ $116,682,586 $6,969,329 $60,313,444
============ ========== ===========
</TABLE>
See Notes to the Financial Statements
44
<PAGE> 46
- --------------------------------------------------------------------------------
<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> <C>
$1,324,911,361 $7,521,060 $ 97,420,116 $124,285,261 $433,959,662 $57,030,807
-- 16,178 -- -- -- --
6,524,231 31,345 763,365 1,357,260 4,859,874 263,858
5,224,109 -- 12,586,495 184 20,279,671 3,121
49,114,266 -- 19,901 2,450,458 1,327,510 50,406
88,812 8,852 21,362 20,043 43,297 10,288
-------------- ---------- ------------ ------------ ------------ -----------
1,385,862,779 7,577,435 110,811,239 128,113,206 460,470,014 57,358,480
-------------- ---------- ------------ ------------ ------------ -----------
-- 428 -- -- -- --
824,747 86 52,950 25,950 99,035 11,578
2,666,784 -- 12,337,237 2,679,857 37,285,739 1,433,349
1,395,831 -- 467,695 538,138 12,787,124 4,997,014
-- -- -- 137,281 100,292 36,770
929,443 15,025 55,255 62,356 210,417 23,424
-------------- ---------- ------------ ------------ ------------ -----------
5,816,805 15,539 12,913,137 3,443,582 50,482,607 6,502,135
-------------- ---------- ------------ ------------ ------------ -----------
$1,380,045,974 $7,561,896 $ 97,898,102 $124,669,624 $409,987,407 $50,856,345
============== ========== ============ ============ ============ ===========
$1,170,840,321 $6,791,031 $ 88,791,457 $128,981,397 $419,909,000 $51,417,475
12,552,468 125,981 72,755 (79,637) 596,912 (18,601)
45,477,625 43,374 3,712,587 (1,372,787) (2,021,373) (174,003)
151,175,560 601,510 5,321,303 (2,859,349) (8,497,132) (368,526)
-------------- ---------- ------------ ------------ ------------ -----------
$1,380,045,974 $7,561,896 $ 97,898,102 $124,669,624 $409,987,407 $50,856,345
============== ========== ============ ============ ============ ===========
$1,378,899,059 $7,561,896 $ 97,898,102 $124,319,616 $409,987,407 $50,856,345
53,595,475 638,927 5,153,281 9,673,381 41,363,601 5,062,821
$ 25.73 $ 11.84 $ 19.00 $ 12.85 $ 9.91 $ 10.05
============== ========== ============ ============ ============ ===========
$ 1,146,915 $ 350,008
44,593 27,233
$ 25.72 $ 12.85
============== ============
$1,173,612,754 $6,918,634 $ 92,098,813 $127,144,610 $442,456,794 $57,399,333
============== ========== ============ ============ ============ ===========
</TABLE>
See Notes to the Financial Statements
45
<PAGE> 47
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Equity Small
Income Mid-Cap Cap
Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income*
Dividends............................................... $ 4,613,052 $ 140,304 $ 397,179
Interest................................................ 96,121 12,380 68,572
------------ --------- ------------
Total income........................................ 4,709,173 152,684 465,751
------------ --------- ------------
Expenses
Advisory fee............................................ 1,178,513 46,081 442,635
Legal and auditing fees................................. 17,870 1,007 14,116
Custodian fees and expenses............................. 41,443 4,085 28,757
Accounting and transfer agent fees and expenses......... 90,191 49,592 122,017
Administration fee...................................... 58,925 1,713 25,625
Trustees' fees and expenses............................. 7,929 1,992 3,677
Reports to shareholders................................. 15,477 963 23,997
Registration fees....................................... 20,160 18,251 40,691
Distribution fees -- Distributor Class.................. -- -- --
Other expenses.......................................... 4,360 383 1,524
------------ --------- ------------
Total expenses...................................... 1,434,868 124,067 703,039
Less, expense reimbursement............................. (2,088) (59,578) (84,856)
------------ --------- ------------
Net expenses........................................ 1,432,780 64,489 618,183
------------ --------- ------------
Net investment income (loss)............................ 3,276,393 88,195 (152,432)
------------ --------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on securities and foreign
currency.............................................. 18,492,251 (192,150) (7,393,487)
Net change in unrealized appreciation (depreciation) of
securities and foreign currency....................... (11,950,809) 309,930 (9,556,411)
------------ --------- ------------
Net gain (loss) on investments............................ 6,541,442 117,780 (16,949,898)
------------ --------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 9,817,835 $ 205,975 $(17,102,330)
============ ========= ============
*Net of Foreign Taxes Withheld.............................. $ 15,172 $ 1,751 $ 12,760
============ ========= ============
</TABLE>
See Notes to the Financial Statements
46
<PAGE> 48
- --------------------------------------------------------------------------------
<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>
$ 36,458,801 $266,131 $ 1,508,116 $ 62,528 $ 187,582 $ --
2,899,944 1,580 3,627,224 5,429,419 23,070,713 2,553,946
------------ -------- ----------- ----------- ------------ ----------
39,358,745 267,711 5,135,340 5,491,947 23,258,295 2,553,946
------------ -------- ----------- ----------- ------------ ----------
10,084,942 52,154 774,800 467,665 1,699,295 169,705
232,864 1,085 14,867 12,186 60,292 5,616
827,737 11,951 35,204 29,672 89,115 18,784
944,477 54,728 95,712 95,292 255,881 52,003
250,009 2,366 41,047 28,763 137,731 13,769
55,403 2,092 6,077 5,382 18,221 3,814
266,658 1,360 12,163 8,705 43,198 4,509
46,228 17,940 27,191 27,991 50,776 20,164
208 -- -- 63 -- --
43,638 429 1,776 1,394 6,713 954
------------ -------- ----------- ----------- ------------ ----------
12,752,164 144,105 1,008,837 677,113 2,361,222 289,318
-- (68,393) (26,952) (125,162) (230,145) (85,670)
------------ -------- ----------- ----------- ------------ ----------
12,752,164 75,712 981,885 551,951 2,131,077 203,648
------------ -------- ----------- ----------- ------------ ----------
26,606,581 191,999 4,153,455 4,939,996 21,127,218 2,350,298
------------ -------- ----------- ----------- ------------ ----------
70,779,798 80,356 3,908,674 (572,730) (737,715) (50,623)
(42,099,206) 75,740 (3,677,845) (3,760,047) (9,809,554) (407,341)
------------ -------- ----------- ----------- ------------ ----------
28,680,592 156,096 230,829 (4,332,777) (10,547,269) (457,964)
------------ -------- ----------- ----------- ------------ ----------
$ 55,287,173 $348,095 $ 4,384,284 $ 607,219 $ 10,579,949 $1,892,334
============ ======== =========== =========== ============ ==========
$ 2,147,066 $ 13,239 $ 4,767 $ -- $ -- $ --
============ ======== =========== =========== ============ ==========
</TABLE>
See Notes to the Financial Statements
47
<PAGE> 49
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity Income Fund Mid-Cap Fund
----------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..................... $ 3,276,393 $ 3,776,239 $ 88,195 $ 64,398
Net realized gain (loss) on securities and
foreign currency transactions.................. 18,492,251 29,878,073 (192,150) 928,847
Net change in unrealized appreciation
(depreciation) of securities and foreign
currency....................................... (11,950,809) 5,189,945 309,930 (555,561)
------------ ------------ ----------- ----------
Net increase (decrease) in net assets
resulting from operations.................. 9,817,835 38,844,257 205,975 437,684
------------ ------------ ----------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income............................ (3,285,265) (3,812,071) -- (66,341)
Net realized gain on securities transactions..... (24,468,165) (26,619,074) (807,762) (129,478)
------------ ------------ ----------- ----------
Total dividends and distributions............ (27,753,430) (30,431,145) (807,762) (195,819)
------------ ------------ ----------- ----------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold.................... 45,268,422 23,627,560 3,117,822 6,338,383
Shares issued in connection with payment of
dividends and distributions.................... 25,424,531 29,778,874 806,204 194,620
Cost of shares redeemed.......................... (79,277,624) (72,438,773) (3,990,739) (1,222,885)
------------ ------------ ----------- ----------
Net increase (decrease) in net assets from
Fund share transactions.................... (8,584,671) (19,032,339) (66,713) 5,310,118
------------ ------------ ----------- ----------
Total increase (decrease) in net assets.............. (26,520,266) (10,619,227) (668,500) 5,551,983
NET ASSETS:
Beginning of year................................ 175,254,585 185,873,812 7,539,180 1,987,197
------------ ------------ ----------- ----------
End of year*..................................... $148,734,319 $175,254,585 $ 6,870,680 $7,539,180
============ ============ =========== ==========
*Including undistributed (distributions in excess of)
net investment income of: $ 43,953 $ 52,825 $ 86,963 $ --
============ ============ =========== ==========
CHANGES IN SHARES OUTSTANDING -- INVESTOR CLASS:
Shares sold...................................... 2,249,985 1,065,609 290,589 489,941
Shares issued in connection with payment of
dividends and distributions.................... 1,400,456 1,451,197 83,631 15,545
Shares redeemed.................................. (4,157,729) (3,307,554) (386,607) (92,361)
------------ ------------ ----------- ----------
Net increase (decrease)...................... (507,288) (790,748) (12,387) 413,125
============ ============ =========== ==========
CHANGES IN SHARES OUTSTANDING -- DISTRIBUTOR CLASS:
Shares sold......................................
Shares issued in connection with payment of
dividends and distributions....................
Shares redeemed..................................
Net increase.................................
</TABLE>
** Attributable to Investor Class only.
*** Net proceeds from shares sold includes $1,126,235 related to the Distributor
Class.
See Notes to the Financial Statements
48
<PAGE> 50
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small Cap Fund International Fund Global Equity Fund
----------------------------- --------------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ (152,432) $ (154,400) $ 26,606,581 $ 27,073,883 $ 191,999 $ 111,802
(7,393,487) 9,968,991 70,779,798 3,289,299 80,356 121,357
(9,556,411) (3,968,125) (42,099,206) 70,706,856 75,740 225,531
------------ ------------ --------------- --------------- ----------- ----------
(17,102,330) 5,846,466 55,287,173 101,070,038 348,095 458,690
------------ ------------ --------------- --------------- ----------- ----------
-- (111,869) (14,481,803) (32,976,929) (76,144) (175,171)
(4,099,720) (5,072,568) (19,626,614) -- (15,242) (91,582)
------------ ------------ --------------- --------------- ----------- ----------
(4,099,720) (5,184,437) (34,108,417)** (32,976,929) (91,386) (266,753)
------------ ------------ --------------- --------------- ----------- ----------
92,751,659 140,132,855 2,003,135,366*** 1,292,839,186 857,258 4,309,902
3,981,064 5,017,869 29,138,880 29,643,512 90,117 263,932
(117,067,181) (78,429,678) (2,150,212,412) (802,298,868) (987,473) (1,150,082)
------------ ------------ --------------- --------------- ----------- ----------
(20,334,458) 66,721,046 (117,938,166) 520,183,830 (40,098) 3,423,752
------------ ------------ --------------- --------------- ----------- ----------
(41,536,508) 67,383,075 (96,759,410) 588,276,939 216,611 3,615,689
94,913,276 27,530,201 1,476,805,384 888,528,445 7,345,285 3,729,596
------------ ------------ --------------- --------------- ----------- ----------
$ 53,376,768 $ 94,913,276 $ 1,380,045,974 $ 1,476,805,384 $ 7,561,896 $7,345,285
============ ============ =============== =============== =========== ==========
$ -- $ -- $ 12,552,468 $ (6,410,587) $ 125,981 $ (24,779)
============ ============ =============== =============== =========== ==========
4,577,685 5,096,875 85,591,643 52,830,892 79,898 388,720
208,433 207,693 1,297,951 1,253,628 8,656 25,235
(5,831,667) (2,875,106) (91,604,448) (32,528,515) (95,127) (104,646)
------------ ------------ --------------- --------------- ----------- ----------
(1,045,549) 2,429,462 (4,714,854) 21,556,005 (6,573) 309,309
============ ============ =============== =============== =========== ==========
44,593
--
--
---------------
44,593
===============
</TABLE>
See Notes to the Financial Statements
49
<PAGE> 51
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
--------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income................................... $ 4,153,455 $ 4,562,817
Net realized gain (loss) on securities transactions..... 3,908,674 5,754,835
Net change in unrealized appreciation (depreciation) of
securities............................................. (3,677,845) 2,122,314
------------ ------------
Net increase in net assets resulting from
operations.......................................... 4,384,284 12,439,966
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- INVESTOR
CLASS:
Net investment income................................... (4,073,380) (4,563,299)
Net realized gain on securities transactions............ (4,515,885) (5,598,223)
------------ ------------
Total dividends and distributions................... (8,589,265) (10,161,522)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- DISTRIBUTOR
CLASS:
Net investment income...................................
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold........................... 28,758,855 34,493,608
Shares issued in connection with payment of dividends
and distributions...................................... 8,305,107 9,851,285
Cost of shares redeemed................................. (39,556,292) (32,186,438)
------------ ------------
Net increase (decrease) in net assets from Fund
share transactions.................................. (2,492,330) 12,158,455
------------ ------------
Total increase (decrease) in net assets..................... (6,697,311) 14,436,899
NET ASSETS:
Beginning of year....................................... 104,595,413 90,158,514
------------ ------------
End of year*............................................ $ 97,898,102 $104,595,413
============ ============
*Including undistributed (distributions in excess of) net
investment income of: $ 72,755 $ 1,426
============ ============
CHANGES IN SHARES OUTSTANDING -- INVESTOR CLASS:
Shares sold............................................. 1,518,693 1,728,761
Shares issued in connection with payment of dividends
and distributions...................................... 445,955 508,237
Shares redeemed......................................... (2,083,905) (1,616,205)
------------ ------------
Net increase (decrease)............................. (119,257) 620,793
============ ============
CHANGES IN SHARES OUTSTANDING -- DISTRIBUTOR CLASS:
Shares sold.............................................
Shares issued in connection with payment of dividends
and distributions......................................
Shares redeemed.........................................
Net increase........................................
</TABLE>
** Net proceeds from shares sold and shares issued in connection with payment of
dividends and distributions include $349,125 and $1,610, respectively,
related to the Distributor Class.
See Notes to the Financial Statements
50
<PAGE> 52
- --------------------------------------------------------------------------------
<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, 1999 June 30, 1998 June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,939,996 $ 1,532,385 $ 21,127,218 $ 12,919,157 $ 2,350,298 $ 1,509,613
(572,730) 318,597 (737,715) 1,052,667 (50,623) (42,539)
(3,760,047) 504,670 (9,809,554) (221,716) (407,341) (20,572)
------------ ----------- ------------- ------------- ------------- ------------
607,219 2,355,652 10,579,949 13,750,108 1,892,334 1,446,502
------------ ----------- ------------- ------------- ------------- ------------
(5,340,145) (1,622,000) (21,925,763) (13,340,819) (2,307,426) (1,509,613)
(611,925) -- (642,509) (1,045,647) -- --
------------ ----------- ------------- ------------- ------------- ------------
(5,952,070) (1,622,000) (22,568,272) (14,386,466) (2,307,426) (1,509,613)
------------ ----------- ------------- ------------- ------------- ------------
(1,610)
------------
125,455,048** 33,566,256 535,272,087 182,933,522 121,678,835 50,189,024
5,443,498** 1,101,255 22,210,113 12,908,812 1,750,451 894,623
(46,130,262) (4,460,475) (388,657,005) (113,269,472) (100,196,327) (44,698,826)
------------ ----------- ------------- ------------- ------------- ------------
84,768,284 30,207,036 168,825,195 82,572,862 23,232,959 6,384,821
------------ ----------- ------------- ------------- ------------- ------------
79,421,823 30,940,688 156,836,872 81,936,504 22,817,867 6,321,710
45,247,801 14,307,113 253,150,535 171,214,031 28,038,478 21,716,768
------------ ----------- ------------- ------------- ------------- ------------
$124,669,624 $45,247,801 $ 409,987,407 $ 253,150,535 $ 50,856,345 $ 28,038,478
============ =========== ============= ============= ============= ============
$ (79,637) $ 34,272 $ 596,912 $ -- $ (18,601) $ (72,392)
============ =========== ============= ============= ============= ============
9,353,948 2,516,857 52,973,512 17,898,633 12,032,563 4,944,329
408,076 82,830 2,201,641 1,263,801 173,571 88,164
(3,450,832) (334,936) (38,637,818) (11,074,513) (9,911,294) (4,404,554)
------------ ----------- ------------- ------------- ------------- ------------
6,311,192 2,264,751 16,537,335 8,087,921 2,294,840 627,939
============ =========== ============= ============= ============= ============
27,108
125
--
------------
27,233
============
</TABLE>
See Notes to the Financial Statements
51
<PAGE> 53
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
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, 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.
Effective April 1, 1999, the Balanced, Small Cap, International, Total Return
Bond and Low Duration Funds have issued two classes of shares: Investor Class
and Distributor Class. Distributor Class shares are subject to an annual Rule
12b-1 fee of 0.25% of average net assets. Investor Class shares do not pay a
12b-1 fee. Each class of shares for each Fund has identical rights and
privileges except with respect to Rule 12b-1 fees paid by the Distributor Class,
voting rights on matters pertaining to a single class of shares and the exchange
privileges of each class of shares. As of June 30, 1999, the Balanced, Small Cap
and Low Duration Funds had no Distributor Class activity except for the purchase
of one share by Hotchkis and Wiley (the "Advisor") representing net assets of
$19, $21, and $10, respectively.
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
52
<PAGE> 54
not exist, the proceeds received upon the disposal of such securities may differ
from quoted values previously furnished by such market makers. Securities for
which market quotations are not otherwise available are valued at fair value as
determined in good faith by 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. 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 substantially all of its investment company net taxable
income and net capital gains to shareholders. Therefore, no federal income tax
provision is required.
INCOME AND 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. Net investment income, other than
class specific expenses, and realized and unrealized gains and losses are
allocated daily to each class of shares based upon the relative net asset value
of outstanding shares of each class of shares at the beginning of the day (after
adjusting for the current day's capital share activity of the respective class).
RESTRICTED SECURITIES: The Balanced, Total Return Bond, Low Duration and
Short-Term Investment Funds own investment securities which are unregistered and
thus restricted as to resale. 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, 1999, the Balanced, Total Return Bond, Low Duration and
Short-Term Investment Funds had restricted securities with an aggregate market
value of $3,264,837, $15,313,945, $73,922,498 and $7,715,171, respectively,
representing 3%, 12%, 18% and 15% 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
53
<PAGE> 55
aggregate market value of $331,971, $155,745, $3,300,993 and $404,337,
respectively, representing 0.3%, 0.1%, 0.8% and 0.8% of the net assets of each
Fund, respectively.
WHEN-ISSUED SECURITIES: The Funds may purchase securities on a when-issued or
delayed delivery basis. Although the payment and interest terms of these
securities are established at the time the purchaser enters into the agreement,
these securities may be delivered and paid for at a future date, generally
within 45 days. The 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 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
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 and declared and paid annually for the Mid-Cap, Small Cap, International
and Global Equity Funds. Distributions of net realized capital gains, if any,
will be declared and paid at least annually. The Funds may utilize earnings and
profits distributed to shareholders on redemption of shares as part of the
dividends paid deduction.
OTHER: Security and shareholder transactions are recorded on trade date.
Realized gains and losses on sales of investments are calculated on the
identified cost basis. Dividend income and dividends and distributions to
shareholders are recorded on the ex-dividend date. Interest income is recognized
on the accrual basis. Generally accepted accounting principles require that
permanent financial reporting and tax differences relating to shareholder
distributions be reclassified within the capital accounts.
NOTE 2.
INVESTMENT ADVISORY AGREEMENTS. Each Fund has an investment advisory agreement
with the Advisor with whom certain officers and Trustees of the Trust are
affiliated. The Advisor is a division of Merrill Lynch Asset Management, L.P.,
an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. 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
54
<PAGE> 56
Fund's daily net assets. The annual expense caps for some of the Funds changed
effective March 1, 1999. For the year ended June 30, 1999, the Advisor
reimbursed the following expenses:
<TABLE>
<CAPTION>
International
Fund -- International
Equity Income Mid-Cap Small Cap Investor Fund --Distributor Global Equity Balanced
Fund Fund Fund Class Class Fund Fund
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Annual Advisory Rate....... 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Annual Cap on Expenses --
prior to March 1......... 1.00% 1.00% 1.00% 1.00% -- 1.00% 1.00%
Annual Cap on Expenses --
subsequent to March 1.... 0.95% 1.15% -- -- -- 1.25% 0.95%
Expenses Reimbursed........ $2,088 $59,578 $84,856 $0 $0 $68,393 $26,952
</TABLE>
<TABLE>
<CAPTION>
Total Return Total Return
Bond Fund -- Bond Fund -- Low Duration Short-Term
Investor Class Distributor Class Fund Investment Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Annual Advisory Rate......................... 0.55% 0.55% 0.46% 0.40%
Annual Cap on Expenses -- prior to March 1... 0.65% -- 0.58% 0.48%
Annual Cap on Expenses -- subsequent to March
1.......................................... 0.65% 0.90% 0.58% 0.48%
Expenses Reimbursed.......................... $125,093 $69 $230,145 $85,670
</TABLE>
The Trust has adopted a plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "12b-1 Plan") that allows the Distributor Class of the Small
Cap, International, Balanced, Total Return Bond and Low Duration Funds to make
payments to administrators, broker/dealers or other institutions that provide
accounting, recordkeeping or other services to investors and that have an
administration services agreement with the Trust or the Advisor to make
Distributor Class shares available to their clients ("Recipients"). Recipients
are paid an annual rate of 0.25% of the average net assets of the Distributor
Class shares invested through the Recipient as compensation for providing
distribution-related services such as advertising, printing and mailing
prospectuses to potential investors and training sales personnel regarding the
Funds. During the period ended June 30, 1999, the Distributor Class of the
International and Total Return Bond Funds incurred expenses of $208 and $63,
respectively, pursuant to the 12b-1 Plan.
Certain authorized agents of the Funds charge a fee for accounting and
shareholder services that they provide to the Funds on behalf of certain
shareholders; the portion of this fee paid by the Funds is included within
Accounting and transfer agent fees and expenses in the Statement of Operations.
The Advisor has entered into subadvisory agreements with Mercury Asset
Management International Limited and Merrill Lynch Asset Management U.K.
Limited, affiliated investment advisors that are indirect subsidiaries of
Merrill Lynch & Co., Inc. The subadvisory arrangements are for investment
research, recommendations, and other investment-related services to be provided
to the International and Global Equity Funds. There is no increase in the
aggregate fees paid by the Funds for these services.
The International and Global Equity Funds paid commissions on Fund transactions
to an affiliated broker in the amounts of $328,247 and $173, respectively,
during the year ended June 30, 1999.
55
<PAGE> 57
As permitted under Rule 10f-3 of the Investment Company Act of 1940, the Board
of Trustees of the Trust has 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.
NOTE 3.
SECURITIES TRANSACTIONS. Purchases and sales of investment securities, other
than short-term investments, for the year ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------------------------ ------------------------------
Fund U.S. Government Other U.S. Government Other
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income Fund.............................. -- $ 27,289,577 -- $ 60,758,419
Mid-Cap Fund.................................... -- 6,756,175 -- 7,362,305
Small Cap Fund.................................. -- 61,652,661 -- 85,862,362
International Fund.............................. -- 526,880,293 -- 640,486,123
Global Equity Fund.............................. -- 2,750,821 -- 2,781,463
Balanced Fund................................... $112,137,782 24,637,111 $105,585,575 37,520,070
Total Return Bond Fund.......................... 158,522,021 110,173,269 127,775,304 62,817,428
Low Duration Fund............................... 531,227,253 329,611,371 476,477,567 207,104,333
Short-Term Investment Fund...................... 26,202,362 41,028,878 24,339,321 19,196,120
</TABLE>
As of June 30, 1999, 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.......................................... $ 31,907,975 $38,196,720 $ (6,288,745)
Mid-Cap Fund................................................ (82,447) 648,455 (730,902)
Small Cap Fund.............................................. (10,444,080) 3,228,820 (13,672,900)
International Fund.......................................... 139,098,914 219,815,064 (80,716,150)
Global Equity Fund.......................................... 556,460 1,191,669 (635,209)
Balanced Fund............................................... 5,267,232 9,682,465 (4,415,233)
Total Return Bond Fund...................................... (2,859,349) 394,539 (3,253,888)
Low Duration Fund........................................... (8,501,116) 1,227,971 (9,729,087)
Short-Term Investment Fund.................................. (368,526) 99,480 (468,006)
</TABLE>
At June 30, 1999, the cost of investments for federal income tax purposes was
$116,952,551, $7,000,341, $62,080,423, $1,185,812,447, $6,964,600, $92,152,884,
$127,144,610, $442,460,778 and $57,399,333 for the Equity Income, Mid-Cap, Small
Cap, International, Global Equity, Balanced, Total Return Bond, Low Duration and
Short-Term Investment Funds, respectively. Any differences between book and tax
are due primarily to wash sale losses. 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.
56
<PAGE> 58
At June 30, 1999, the following Funds deferred, on a tax basis, post-October
losses of:
<TABLE>
<CAPTION>
Fund Post-October Losses
- -----------------------------------------------------------------------------------
<S> <C>
Mid-Cap Fund................................................ $ 339,647
Small Cap Fund.............................................. 4,058,500
Total Return Bond Fund...................................... 1,372,787
Low Duration Fund........................................... 1,293,682
Short-Term Investment Fund.................................. 73,268
</TABLE>
Such amounts may be used to offset future capital gains.
At June 30, 1999, the Small Cap Fund had accumulated net realized capital loss
carryovers of $1,842,953 expiring in 2007. The Low Duration Fund had accumulated
net realized capital loss carryovers of $723,707 expiring in 2007. The
Short-Term Investment Fund had accumulated net realized capital loss carryovers
of $61,761 expiring in 2004 and $38,974 expiring in 2005. The Short-Term
Investment Fund utilized capital loss carryovers of $5,206 in 1999. To the
extent that the Funds realize future net capital gains, those gains will be
offset by any unused capital loss carryover.
NOTE 4.
FORWARD CURRENCY EXCHANGE CONTRACT. At June 30, 1999, the Global Equity Fund had
entered into a "portfolio hedge" forward currency exchange contract that
obligates the Fund to deliver and receive currency at a specified future date.
The net unrealized depreciation of $428 is included in the net unrealized
appreciation (depreciation) section of the accompanying financial statements.
The terms of the open contract are as follows:
<TABLE>
<CAPTION>
Currency to U.S. $ Value at Currency to U.S. $ Value at
Settlement Date be Delivered June 30, 1999 be Received June 30, 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8/31/99.............. 29,548,500 Japanese Yen $246,501 U.S. Dollars $246,073
</TABLE>
NOTE 5.
FEDERAL TAX DISCLOSURE (UNAUDITED). For the year ended June 30, 1999, the
following percent of dividends distributed were derived from interest on U.S.
government securities which is generally exempt from state income tax: Balanced
Fund 9%, Total Return Bond Fund 18%, Low Duration Fund 16% and Short-Term
Investment Fund 9%. For the year ended June 30, 1999, the following percent of
ordinary distributions paid qualifies for the dividend received deduction
available to corporate shareholders: Equity Income Fund 100%, Mid-Cap Fund 12%,
Small Cap Fund 3%, Global Equity Fund 26%, Balanced Fund 35%, Total Return Bond
Fund 1% and Low Duration Fund 1%.
During the year ended June 30, 1999, the International Fund generated
$39,260,565 of foreign source income and paid $2,147,066 of foreign taxes. The
Fund elects to pass foreign taxes through to the Fund's shareholders for their
1999 tax returns. Updated data will be sent with 1999 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 1999 income tax returns.
57
<PAGE> 59
During the year ended June 30, 1999, the following Funds paid capital gain
dividends (taxable as long-term capital gains).
<TABLE>
<CAPTION>
Fund Per Share
- -------------------------------------------------------------------------
<S> <C>
Equity Income Fund.......................................... $2.8078
Mid-Cap Fund................................................ $0.3471
Small Cap Fund.............................................. $1.0951
International Fund.......................................... $0.3357
Global Equity Fund.......................................... $0.0227
Balanced Fund............................................... $0.7148
Total Return Bond Fund...................................... $0.0058
Low Duration Fund........................................... $0.0038
</TABLE>
Information regarding these distributions was provided with the 1998 Forms
1099-DIV sent to shareholders in January 1999.
58
<PAGE> 60
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------
EQUITY INCOME FUND 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.......................... $22.02 $21.25 $18.91 $17.24 $15.07
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.41 0.46 0.49 0.45(1) 0.49
Net realized and unrealized gain on investments......... 0.82 4.02 4.15 2.89 2.48
------ ------ ------ ------ ------
Total from investment operations........................ 1.23 4.48 4.64 3.34 2.97
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................. (0.41) (0.46) (0.48) (0.57) (0.44)
Distributions (from realized gains)..................... (2.88) (3.25) (1.82) (1.10) (0.36)
------ ------ ------ ------ ------
Total distributions..................................... (3.29) (3.71) (2.30) (1.67) (0.80)
------ ------ ------ ------ ------
Net Asset Value, End of Year................................ $19.96 $22.02 $21.25 $18.91 $17.24
====== ====== ====== ====== ======
TOTAL RETURN................................................ 7.32% 22.60% 26.15% 20.04% 20.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).......................... $148.7 $175.3 $185.9 $182.5 $127.1
Ratio of expenses to average net assets:
Before expense reimbursement............................ 0.91% 0.87% 0.88% 0.98% 1.02%
After expense reimbursement............................. 0.91% 0.87% 0.88% 0.98% 1.00%
Ratio of net investment income to average net assets:
Before expense reimbursement............................ 2.09% 1.99% 2.49% 2.56% 3.11%
After expense reimbursement............................. 2.09% 1.99% 2.49% 2.56% 3.14%
Portfolio turnover rate..................................... 18% 23% 44% 24% 50%
</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 the Financial Statements
59
<PAGE> 61
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30, January 2, 1997*
-------------------- through
MID-CAP FUND 1999 1998 June 30, 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $12.92 $11.65 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.16 0.13 0.07
Net realized and unrealized gain on investments......... 0.46 1.60 1.64
------ ------ ------
Total from investment operations........................ 0.62 1.73 1.71
------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................. -- (0.14) (0.06)
Distributions (from realized gains)..................... (1.51) (0.32) --
------ ------ ------
Total distributions..................................... (1.51) (0.46) (0.06)
------ ------ ------
Net Asset Value, End of Period.............................. $12.03 $12.92 $11.65
====== ====== ======
TOTAL RETURN................................................ 7.66% 15.00% 17.15%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)........................ $6.9 $7.5 $2.0
Ratio of expenses to average net assets:
Before expense reimbursement............................ 2.02% 2.72% 8.26%+
After expense reimbursement............................. 1.05% 1.00% 1.00%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement............................ 0.46% (0.52)% (5.39)%+
After expense reimbursement............................. 1.43% 1.20% 1.87%+
Portfolio turnover rate..................................... 113% 71% 23%++
</TABLE>
* Commencement of operations.
+ Annualized.
++ Not Annualized.
See Notes to the Financial Statements
60
<PAGE> 62
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------
SMALL CAP FUND 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.......................... $26.48 $23.83 $21.33 $21.53 $19.53
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............................ (0.05)(2) (0.06)(1) 0.03 0.05(1) (0.06)
Net realized and unrealized gain (loss) on
investments........................................... (3.88) 5.13 5.62 2.80 2.84
------ ------ ------ ------ ------
Total from investment operations........................ (3.93) 5.07 5.65 2.85 2.78
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................. -- (0.05) (0.09) -- --
Distributions (from realized gains)..................... (1.53) (2.37) (3.06) (3.05) (0.78)
------ ------ ------ ------ ------
Total distributions..................................... (1.53) (2.42) (3.15) (3.05) (0.78)
------ ------ ------ ------ ------
Net Asset Value, End of Year................................ $21.02 $26.48 $23.83 $21.33 $21.53
====== ====== ====== ====== ======
TOTAL RETURN................................................ (14.26)% 22.24% 29.74% 14.24% 14.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).......................... $53.4 $94.9 $27.5 $16.5 $20.5
Ratio of expenses to average net assets:
Before expense reimbursement............................ 1.19% 0.94% 1.30% 1.21% 1.49%
After expense reimbursement............................. 1.05% 0.94% 1.00% 1.00% 1.00%
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement............................ (0.40)% (0.23)% (0.20)% 0.03% (0.82)%
After expense reimbursement............................. (0.26)% (0.23)% 0.10% 0.24% (0.34)%
Portfolio turnover rate..................................... 105% 85% 88% 119% 81%
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
(2) Net investment income per share is calculated using ending balances prior to
consideration of adjustments for permanent book and tax differences.
See Notes to the Financial Statements
61
<PAGE> 63
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Distributor Class Investor Class
Investor Class June 2, 1999* Year Ended June 30,
Year Ended through --------------------------------------------
INTERNATIONAL FUND June 30, 1999 June 30, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 25.33 $25.20 $ 24.17 $20.44 $17.70 $16.79
-------- ------ -------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.59 0.05 0.59 0.59(1) 0.56(1) 0.28
Net realized and unrealized gain on
investments............................. 0.40 0.47 1.23 3.78 2.51 1.52
-------- ------ -------- ------ ------ ------
Total from investment operations.......... 0.99 0.52 1.82 4.37 3.07 1.80
-------- ------ -------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income).... (0.25) -- (0.66) (0.48) (0.14) (0.44)
Distributions (from realized gains)....... (0.34) -- -- (0.16) (0.19) (0.45)
-------- ------ -------- ------ ------ ------
Total distributions....................... (0.59) -- (0.66) (0.64) (0.33) (0.89)
-------- ------ -------- ------ ------ ------
Net Asset Value, End of Period................ $ 25.73 $25.72 $ 25.33 $24.17 $20.44 $17.70
======== ====== ======== ====== ====== ======
TOTAL RETURN.................................. 4.22% 2.06%++ 7.77% 21.59% 18.61% 11.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)............ $1,378.9 $1.1 $1,476.8 $888.5 $331.0 $51.5
Ratio of expenses to average net assets:
Before expense reimbursement.............. 0.95% 1.30%+ 0.89% 1.07% 1.11% 1.39%
After expense reimbursement............... 0.95% 1.30%+ 0.89% 1.00% 1.00% 1.00%
Ratio of net investment income to average net
assets:
Before expense reimbursement.............. 1.98% 2.77%+ 2.32% 2.59% 2.67% 2.45%
After expense reimbursement............... 1.98% 2.77%+ 2.32% 2.66% 2.78% 2.83%
Portfolio turnover rate....................... 41%+++ 41%+++ 20% 18% 12% 24%
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
* Commencement of operations.
+ Annualized.
++ Not Annualized.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
See Notes to the Financial Statements
62
<PAGE> 64
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30, January 2, 1997*
------------------------------ through
GLOBAL EQUITY FUND 1999 1998 June 30, 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $11.38 $11.09 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.35 0.28 0.14
Net realized and unrealized gain on investments......... 0.24 0.51 1.09
------ ------ ------
Total from investment operations........................ 0.59 0.79 1.23
------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................. (0.11) (0.32) (0.14)
Distributions (from realized gains)..................... (0.02) (0.18) --
------ ------ ------
Total distributions..................................... (0.13) (0.50) (0.14)
------ ------ ------
Net Asset Value, End of Period.............................. $11.84 $11.38 $11.09
====== ====== ======
TOTAL RETURN................................................ 5.40% 7.61% 12.32%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)........................ $7.6 $7.3 $3.7
Ratio of expenses to average net assets:
Before expense reimbursement............................ 2.07% 2.88% 4.43%+
After expense reimbursement............................. 1.09% 1.00% 1.00%+
Ratio of net investment income to average net assets:
Before expense reimbursement............................ 1.78% 0.00% 0.07%+
After expense reimbursement............................. 2.76% 1.88% 3.50%+
Portfolio turnover rate..................................... 40% 54% 18%++
</TABLE>
* Commencement of operations.
+ Annualized.
++ Not Annualized.
See Notes to the Financial Statements
63
<PAGE> 65
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------
BALANCED FUND 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.......................... $19.84 $19.38 $18.27 $16.74 $15.71
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.77 0.89 0.90(1) 0.94 0.89
Net realized and unrealized gain (loss) on
investments........................................... (0.04) 1.58 1.86 1.53 1.53
------ ------ ------ ------ ------
Total from investment operations........................ 0.73 2.47 2.76 2.47 2.42
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................. (0.75) (0.90) (0.99) (0.92) (0.80)
Distributions (from realized gains)..................... (0.82) (1.11) (0.66) (0.02) (0.57)
Return of capital....................................... -- -- -- -- (0.02)
------ ------ ------ ------ ------
Total distributions..................................... (1.57) (2.01) (1.65) (0.94) (1.39)
------ ------ ------ ------ ------
Net Asset Value, End of Year................................ $19.00 $19.84 $19.38 $18.27 $16.74
====== ====== ====== ====== ======
TOTAL RETURN................................................ 4.04% 13.29% 15.75% 15.04% 16.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).......................... $97.9 $104.6 $90.2 $70.6 $32.1
Ratio of expenses to average net assets:
Before expense reimbursement............................ 0.98% 0.93% 0.98% 1.06% 1.19%
After expense reimbursement............................. 0.95% 0.93% 0.98% 1.00% 1.00%
Ratio of net investment income to average net assets:
Before expense reimbursement............................ 3.99% 4.49% 4.77% 5.20% 5.44%
After expense reimbursement............................. 4.02% 4.49% 4.77% 5.26% 5.63%
Portfolio turnover rate..................................... 135% 121% 117% 92% 51%
</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 the Financial Statements
64
<PAGE> 66
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Distributor Class Investor Class Investor Class
Investor Class June 2, 1999* Year Ended June 30, December 6, 1994*
Year Ended through ------------------------ through
TOTAL RETURN BOND FUND June 30, 1999 June 30, 1999 1998 1997 1996 June 30, 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $13.46 $12.88 $13.04 $12.78 $12.94 $12.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.81 0.06 0.89 0.99 0.84(1) 0.46
Net realized and unrealized gain (loss)
on investments....................... (0.49) (0.03) 0.50 0.30 0.06 0.94
------ ------ ------ ------ ------ ------
Total from investment operations....... 0.32 0.03 1.39 1.29 0.90 1.40
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment
income).............................. (0.83) (0.06) (0.97) (0.92) (0.93) (0.46)
Distributions (from realized gains).... (0.10) -- -- (0.11) (0.13) --
------ ------ ------ ------ ------ ------
Total distributions.................... (0.93) (0.06) (0.97) (1.03) (1.06) (0.46)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period............. $12.85 $12.85 $13.46 $13.04 $12.78 $12.94
====== ====== ====== ====== ====== ======
TOTAL RETURN............................... 2.30% 0.23%++ 11.04% 10.48% 7.05% 11.88%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)....... $124.3 $0.4 $45.2 $14.3 $43.4 $15.3
Ratio of expenses to average net assets:
Before expense reimbursement........... 0.79% 1.18%+ 1.02% 0.95% 0.98% 2.93%+
After expense reimbursement............ 0.65% 0.90%+ 0.65% 0.65% 0.68% 0.80%+
Ratio of net investment income to average
net assets:
Before expense reimbursement........... 5.64% 5.98%+ 6.28% 6.78% 6.86% 4.92%+
After expense reimbursement............ 5.78% 6.26%+ 6.65% 7.08% 7.16% 7.05%+
Portfolio turnover rate.................... 233%+++ 233%+++ 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.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
See Notes to the Financial Statements
65
<PAGE> 67
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------
LOW DURATION FUND 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.......................... $10.20 $10.23 $10.12 $10.15 $ 9.93
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.60 0.66 0.66 0.68 0.75
Net realized and unrealized gain (loss) on
investments........................................... (0.28) 0.05 0.10 0.06 0.23
------ ------ ------ ------ ------
Total from investment operations........................ 0.32 0.71 0.76 0.74 0.98
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................. (0.59) (0.68) (0.64) (0.72) (0.75)
Distributions (from realized gains)..................... (0.02) (0.06) (0.01) (0.05) (0.01)
------ ------ ------ ------ ------
Total distributions..................................... (0.61) (0.74) (0.65) (0.77) (0.76)
------ ------ ------ ------ ------
Net Asset Value, End of Year................................ $ 9.91 $10.20 $10.23 $10.12 $10.15
====== ====== ====== ====== ======
TOTAL RETURN................................................ 3.15% 7.19% 7.79% 7.47% 10.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).......................... $410.0 $253.2 $171.2 $189.2 $123.3
Ratio of expenses to average net assets:
Before expense reimbursement............................ 0.64% 0.65% 0.66% 0.60% 0.75%
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............................ 5.65% 6.39% 6.26% 7.07% 7.43%
After expense reimbursement............................. 5.71% 6.46% 6.34% 7.09% 7.61%
Portfolio turnover rate..................................... 201% 119% 202% 50% 71%
</TABLE>
See Notes to the Financial Statements
66
<PAGE> 68
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------
SHORT-TERM INVESTMENT FUND 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.......................... $10.13 $10.15 $10.17 $10.12 $10.21
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.57 0.63 0.58 0.66 0.66
Net realized and unrealized gain (loss) on
investments........................................... (0.11) 0.00 (0.01) 0.05 (0.09)
------ ------ ------ ------ ------
Total from investment operations........................ 0.46 0.63 0.57 0.71 0.57
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................. (0.54) (0.65) (0.59) (0.66) (0.66)
Return of capital....................................... -- -- -- (0.00) --
------ ------ ------ ------ ------
Total distributions..................................... (0.54) (0.65) (0.59) (0.66) (0.66)
------ ------ ------ ------ ------
Net Asset Value, End of Year................................ $10.05 $10.13 $10.15 $10.17 $10.12
====== ====== ====== ====== ======
TOTAL RETURN................................................ 4.70% 6.37% 5.77% 7.23% 5.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).......................... $50.9 $28.0 $21.7 $18.7 $19.8
Ratio of expenses to average net assets:
Before expense reimbursement............................ 0.68% 0.92% 0.96% 0.88% 1.26%
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............................ 5.32% 5.92% 5.34% 6.15% 5.74%
After expense reimbursement............................. 5.52% 6.36% 5.82% 6.55% 6.52%
Portfolio turnover rate..................................... 144% 121% 154% 60% 81%
</TABLE>
See Notes to the Financial Statements
67
<PAGE> 69
HOTCHKIS
AND WILEY FUNDS
- --------------------------------------------------------------------------------
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, 1999, 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, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS
Milwaukee, WI
August 11, 1999
68
