(ICON)
Nicholas-
Applegate
Growth
Equity
Fund
SEMI
ANNUAL
REPORT
June 30, 1997
(LOGO)
<PAGE>
Nicholas-Applegate Growth Equity
Fund
Performance At A Glance.
The domestic stock market favored
larger companies over smaller
companies, and
value stocks over growth stocks for
most of the six-months ended June
30, 1997.
It was a difficult environment for
the fund's style and capitalization
range.
The Fund finished the reporting
period behind similar funds tracked
by Lipper
Analytical Services. However,
beginning in May, we saw an
encouraging
broadening of the stock market away
from a market with very narrow
leadership.
Indeed, over the final three months
of the reporting period, your Fund
posted
more competitive returns of 12.7%
compared to 15.8% for Lipper.
Cumulative Total Returns1
As of 6/30/97
<TABLE>
<CAPTION>
Six
One Five Ten
Since
Months
Year Years Years
Inception2
<S> <C>
<C> <C> <C>
<C>
Class A 4.4%
7.8% 113.9% 213.9%
235.7%
Class B 4.0
7.0 105.2 N/A
128.8
Class C 4.0
7.0 N/A N/A
55.5
Class Z N/A
N/A N/A N/A
7.7
Lipper Growth
Fund Avg.3 14.3
24.0 121.6 243.8
***
</TABLE>
Average Annual Total Returns1
As of 6/30/97
<TABLE>
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<S>
<C> <C> <C>
<C>
Class A
7.8% 16.4% 12.1%
12.6%
Class B
7.0 15.5 N/A
14.6
Class C
7.0 N/A N/A
16.4
</TABLE>
Past performance is not indicative
of future results. Principal and
investment
return will fluctuate so that an
investor's shares, when redeemed,
may be worth
more or less than their original
cost.
1Source: Prudential Investments
Fund Management and Lipper
Analytical Services.
The cumulative total returns do not
take into account sales charges.
The
average annual returns do take into
account applicable sales charges.
The Fund
charges a maximum front-end sales
load of 5% for Class A shares and
a
declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1%
and 1%
over six years, for Class B shares.
Class C shares have a 1% CDSC for
one year.
Class B shares automatically
convert to Class A shares on a
quarterly basis,
after approximately seven years.
Class Z shares are not subject to a
sales
charge or distribution fee.
2Inception dates: 4/23/87 for Class
A; 6/10/91 for Class B; 8/1/94 for
Class
C; and 3/18/97 for Class Z.
3The Lipper Growth Fund Average
includes 669 funds for one year;
255 funds for
five years; and 157 funds since
inception of Class A shares on
4/23/87.
***Lipper since inception returns
are: Class A, 259.3%; Class B,
146.9%; Class
C, 81.6%; and Class Z, 11.8% for
all funds in each lipper share
class.
How Investments Compared.
(As of 6/30/97)
(CHART)
Source: Lipper Analytical Services.
Financial markets change, so a
mutual
fund's past performance should
never be used to predict future
results. The
risks to each of the investments
listed above are different -- we
provide
12-month total returns for several
Lipper mutual fund categories to
show you
that reaching for higher returns
means tolerating more risk. The
greater the
risk, the larger the potential
reward or loss. In addition, we've
included
historical 20-year average annual
returns. These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a
great deal. Investors have received
higher
historical total returns from
stocks than from most other
investments. Smaller
capitalization stocks offer greater
potential for long-term growth but
may be
more volatile than larger
capitalization stocks.
General Bond Funds provide more
income than stock funds, which can
help smooth
out their total returns year by
year. But their prices still
fluctuate
(sometimes significantly) and their
returns have been historically
lower than
those of stock funds.
General Municipal Debt Funds invest
in bonds issued by state
governments,
state agencies and/or
municipalities. This investment
provides income that
is usually exempt from federal and
state income taxes.
Money Market Funds attempt to
preserve a constant share value;
they don't
fluctuate much in price but,
historically, their returns have
been generally
among the lowest of the major
investment categories.
<PAGE>
Jack C. Marshall, Fund Manager
(PHOTO)
Portfolio
Manager's Report
The Nicholas-Applegate Growth
Equity Fund seeks to deliver
capital appreciation
through investment in growth
companies with market
capitalizations
predominantly between $500 million
and $5 billion. Our bottom-up
growth
philosophy focuses on identifying
and investing in stocks meeting our
criteria
of sustainable, accelerating
earnings growth, and market
leadership. There can
be no assurance that the Fund will
achieve its investment objective.
Overview.
The focus of our investment
philosophy is to identify companies
benefiting from
positive, timely and sustainable
change. As a result of our
disciplined search
for these equity opportunities, our
Growth Equity Fund invests in what
we
believe are the best growth stocks
with strong capital appreciation
potential.
Strategy Session.
- -----------------------------------
- -----------------------------------
- ---------
Nicholas-Applegate uses a bottom-up
method of selecting stocks for
their
individual merit, rather than a top
down method of choosing stocks
based on
market, monetary, political, fiscal
or economic trends. Our portfolio
management team uses three strict
criteria: positive change,
sustainability,
and timeliness. Stocks in the
portfolio that do not consistently
meet these
three criteria, are replaced with
more appropriate selections.
Nicholas-Applegate uses a
disciplined, consistent method of
investing for the
Growth Equity Fund. This means that
investors are protected against
what is
known as "style drift" -- Nicholas-
Applegate funds hold to their
original
objectives regardless of market
trends. Although the market may
have favored
the stocks of larger companies
throughout the period, the Fund
still managed to
find the stocks of mid-sized
companies with attractive
valuations and high
earnings growth. We believe these
strong fundamentals make the Fund
well
positioned to outperform other
investment opportunities in the
future and to
provide superior long-term growth
of capital.
Throughout the period we found many
opportunities for growth within the
retail
trade industry, specifically in
department and discount stores. We
attribute
the growth in retail trade to the
strong economic environment. Our
holdings in
retail trade increased from 3.6% to
10% during the period.
In the technology area, we reduced
our holdings from 33% to 20%
although the
beginning of the period showed a
few of our technology holdings
performed
well. Fears of interest rate hikes
had negative effects on several of
our
holdings in this industry later in
the period.
Portfolio Breakdown.
Expressed as a percentage of
total investments as of 6/30/97.
(CHART)
<PAGE>
What Went Well.
- -----------------------------------
- ------------------------
In the midst of a long period of
underperformance in the mid-cap
stock range,
the stocks of mid-sized companies
began to show signs of renewed
strength
during the month of May. Nicholas-
Applegate continued to find stocks
with
strong fundamentals. The low
valuations and high earnings growth
of stocks in
the Fund lead us to believe that
they are attractively priced and
poised for
capital appreciation.
In the beginning of the year, the
Fund's technology stocks helped
performance.
For example, BMC software was one
of the Fund's top performers for
the first
quarter of the year. Later in the
period, we found many excellent
stock
opportunities in semiconductors
with ASM Lithography as one of the
Fund's top
stocks.
A robust economic environment
contributed to growth in retail
trade. As a
result we found many opportunities
in retail companies. For example,
Borders
and Consolidated Stores Corporation
were two of the Fund's best
performers.
The number one performing stock for
the period was Jones Apparel Group
which
beat its earnings expectations due
to strong sales, improved gross
margins,
and lower expense ratios.
And Not So Well.
- -----------------------------------
- ------------------------
A narrow advance in the beginning
of the year favored large companies
and hurt
the stocks of mid-sized companies.
Just a few of the largest companies
accounted for most of the returns
in the market's most popular
indexes, such
as the S&P 500 and the Dow Jones
Industrial Average.
While some of our technology stocks
contributed strongly to the Fund's
performance early in the year, fear
of interest rate hikes, followed by
an
actual rate increase resulted in a
negative impact on a few of the
Fund's
technology stocks.
The Fund's underweight position in
investment management/bank
brokerage houses
relative to the benchmark was a
negative factor during the period.
Throughout
the period stocks of these
financial companies did very well,
yet recently
this group has started to weaken.
Five Largest
Holdings.
2.7% Revlon, Inc.
Retail -- Services
2.6% Costco Companies, Inc.
Retail/Wholesale Chain
2.4% Jones Apparel Group, Inc.
Apparel & Textiles
2.4% Elan Corp. PLC (ADR)
Drug & Healthcare
2.3% Smith International, Inc.
Oil & Gas--
Production/Pipeline
Expressed as a percentage of total
investments as of 6/30/97.
Looking Ahead.
- -----------------------------------
- ------------------------
Our outlook for the midcap range of
the Growth Equity Fund is very
positive,
based on the prospects for a
favorable environment for mid-cap
stocks. We base
this opinion on the low inflation
environment, the capital gains tax
cut, and
highly attractive valuations in the
mid-cap markets. Confident in our
stock
selections, and the market's
renewed interest in mid-sized
companies, we
believe the Growth Equity Fund is
well positioned for a market
turnaround
favoring high-growth stocks.
1
<PAGE>
NICHOLAS-APPLEGATE FUND, INC.
Portfolio of Investments
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND June 30, 1997 (Unaudited)
- -----------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Value
Shares Description
(Note 1)
- -----------------------------------
- ---------------------
<C> <S>
<C>
LONG-TERM INVESTMENTS-
- -98.1%
COMMON STOCKS--93.2%
CAPITAL GOODS--21.5%
Drugs & Healthcare--
0.4%
50,000 Sybron International
Corp.*................... $
1,993,750
- ------------
Manufacturing--7.3%
172,500 Corning,
Inc............... 9,595,312
265,000 Owens-Illinois,
Inc.*...... 8,215,000
75,000 Tyco International
Ltd..... 5,217,188
159,700 U.S. Industries,
Inc....... 5,689,313
130,000 Wyman-Gordon
Co.*.......... 3,510,000
- ------------
32,226,813
- ------------
Paper--1.6%
10,000 Buckeye Cellulose
Corp.*... 337,500
122,000 Fort Howard
Corp.*......... 6,176,250
30,000 Jefferson Smurfit
Corp.*... 480,000
- ------------
6,993,750
- ------------
Retail/Wholesale
Specialty Chain--10.0%
330,200 Borders Group, Inc.
*...... 7,966,075
84,875 Consolidated Stores
Corp.*...................
2,949,406
339,200 Costco Companies,
Inc...... 11,151,200
176,300 Dollar Tree Stores
Inc.*... 8,881,112
114,700 Meyer, (Fred),
Inc.*....... 5,928,556
25,900 Safeway
Inc................ 1,194,638
220,000 TJX Companies,
Inc......... 5,802,500
- ------------
43,873,487
- ------------
Telecommunication--
2.2%
100,000 NEXTEL
Communications,
Inc.*....................
1,893,750
7,691,775
225,400 Teleport
Communications
Group Inc.
*.............
- ------------
9,585,525
- ------------
CONSUMER NON-DURABLES-
- -21.9%
Business Services--
2.5%
249,000 AccuStaff
Inc.............. $ 5,898,188
118,500 Manpower,
Inc.............. 5,273,250
- ------------
11,171,438
- ------------
Drugs & Healthcare--
14.6%
200,000 BioChem Pharma
Inc.*....... 4,450,000
209,800 Centocor,
Inc.*............ 6,516,912
45,500 Dura Pharmaceuticals,
Inc.*....................
1,814,313
226,500 Elan Corp. PLC
(ADR)*...... 10,249,125
312,200 Health Management
Assoc.,
Inc.*....................
8,897,700
300,000 HealthSouth
Corp.*......... 7,481,250
72,900 McKesson
Corporation....... 5,649,750
27,500 Oxford Health Plans,
Inc.*....................
1,973,125
199,400 Tenet Healthcare
Corp.*.... 5,894,762
161,200 Vencor,
Inc.*.............. 6,810,700
95,400 Wellpoint Health
Networks
Inc.*....................
4,376,475
- ------------
64,114,112
- ------------
Hotels & Restaurants-
- -2.6%
35,000 CKE Restaurants,
Inc....... 1,106,875
72,000 Four Seasons Hotels,
Inc......................
2,133,000
463,100 Host Marriott
Corp.*....... 8,248,969
- ------------
11,488,844
- ------------
Leisure And
Recreation--2.2%
231,800 Carnival
Corp.............. $ 9,561,750
- ------------
ENERGY--9.9%
Electrical Utilities-
- -1.4%
83,000 AES
Corporation*...........
5,872,250
- ------------
Oil & Gas-
Production/Pipeline--4.2%
174,600 Calenergy Co.
Inc.*........ 6,634,800
167,500 Devon Energy
Corp.......... 6,155,625
155,000 Valero Energy
Corp......... 5,618,750
- ------------
18,409,175
- ------------
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
NICHOLAS-APPLEGATE FUND, INC.
Portfolio of Investments
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND June 30, 1997 (Unaudited)
- -----------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Value
Shares Description
(Note 1)
- -----------------------------------
- ---------------------
<C> <S>
<C>
Oil Services--4.3%
40,000 Camco International,
Inc...................... $
2,190,000
48,000 Diamond Offshore
Drilling,
Inc.*....................
3,750,000
59,800 ENSCO International
Inc.*....................
3,154,450
163,200 Smith International,
Inc.*....................
9,914,400
- ------------
19,008,850
- ------------
ENVIRONMENTAL--2.7%
Pollution Control
Equipment &
Service--2.7%
60,000 Culligan Water
Technologies,
Inc.*...... 2,685,000
42,400 U.S. Filter
Corp.*......... 1,155,400
198,100 United Waste Systems,
Inc.*....................
8,122,100
- ------------
11,962,500
- ------------
FINANCIAL SERVICES--
5.1%
Financial/Business
Services--4.1%
45,500 Associates First
Capital
Corp.....................
2,525,250
128,000 Equifax,
Inc............... 4,760,000
85,900 GreenPoint Financial
Corp.....................
5,717,719
110,200 MGIC Investment
Corp....... 5,282,712
- ------------
18,285,681
- ------------
Insurance--1.0%
80,000 Provident Companies,
Inc......................
4,280,000
- ------------
GENERAL BUSINESS--
12.6%
Apparel & Textiles--
3.0%
219,300 Jones Apparel Group,
Inc.*....................
10,471,575
122,600 Mohawk Industries,
Inc.*... 2,789,150
- ------------
13,260,725
- ------------
Media--2.9%
109,400 Clear Channel
Communications,
Inc.*.... 6,728,100
131,100 Evergreen Media
Corp.*..... 5,850,338
- ------------
12,578,438
- ------------
Retail-Services--5.4%
200,000 Panamerican
Beverages,
Inc...................... $
6,575,000
225,600 Revlon,
Inc.*.............. 11,688,900
168,700 Service Corp.
International............
5,546,012
- ------------
23,809,912
- ------------
Transportation--1.3%
98,100 GATX
Corp..................
5,665,275
- ------------
TECHNOLOGY--19.5%
Computer-Local
Networks--0.6%
60,000 3Com
Corp.*................
2,700,000
- ------------
Computers-Services--
4.2%
50,000 Comdisco,
Inc.............. 1,300,000
150,700 Computer Horizons
Corp.*... 5,161,475
66,700 EMC
Corp.*.................
2,601,300
219,600 Sterling Commerce,
Inc.*... 7,219,350
42,100 Stratus Computer,
Inc.*.... 2,105,000
- ------------
18,387,125
- ------------
Computer-Software--
6.8%
125,300 BMC Software
Inc.*......... 6,938,488
212,700 Cognos,
Inc.*.............. 6,620,288
151,000 Compuware
Corp.*........... 7,210,250
110,100 McAfee Associates,
Inc.*... 6,950,062
111,700 Rational Software
Corp.*... 1,877,956
- ------------
29,597,044
- ------------
Electronic Components-
- -2.0%
130,000 ASM Lithography
Holding
NV.......................
7,605,000
60,000 C-Cube Microsystems,
Inc.*....................
1,053,750
- ------------
8,658,750
- ------------
Telecommunications
Equipment--5.9%
77,000 ADC
Telecommunications,
Inc.*....................
2,569,875
114,900 Advanced Fibre
Communications*..........
6,937,087
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
Value
Shares Description
(Note 1)
<C> <S>
<C>
Telecommunications
Equipment (cont'd.)
129,600 Ericsson (L.M.)
Telephone
Co., Inc.
(ADR).......... $ 5,103,000
60,100 Nokia Corp.
(ADR)*......... 4,432,375
122,400 Tellabs,
Inc.*............. 6,839,100
- ------------
25,881,437
- ------------
Total common stocks
(cost
$346,456,155)...... 409,366,631
- ------------
PREFERRED STOCKS--
2.6%
31,200 McKesson
Corporation....... 1,903,200
80,000 AES
Corporation............
4,710,000
50,000 Crown Cork & Seal
Co.,
Inc......................
2,525,000
20,000 Williams Companies
(The),
Inc......................
2,075,000
- ------------
Total preferred
stocks
(cost
$10,299,700)....... 11,213,200
- ------------
<CAPTION>
Principal
Amount
(000)
- ----------
<C> <S>
<C>
CONVERTIBLE BONDS--
2.3%
$ 5,000 Diamond Offshore
Drilling,
Inc.
3.75%,
2/15/07........... 5,725,000
1,438 Sanifill, Inc.
5.00%,
3/1/06............ 2,099,480
50 Nortel Inversora SA
10.00%,
12/31/00......... 2,456,250
- ------------
Total convertible
bonds
(cost
$9,638,026)........ 10,280,730
- ------------
Total long-term
investments
(cost
$366,393,881)...... 430,860,561
- ------------
SHORT-TERM
INVESTMENTS--1.2%
Commercial Paper--
1.2%
$ 5,104 Merrill Lynch & Co.,
Inc.
6.20%,
7/1/97............ $ 5,104,000
- ------------
Other
Seven Seas Money
Market
Fund
180 5.29%,
7/1/97.............. 179,654
- ------------
Total short-term
investments
(cost
$5,283,654)........ 5,283,654
- ------------
Total Investments--
99.3%
(cost $371,677,535;
Note
4).......................
436,144,215
- ------------
Other assets in
excess of
liabilities--
0.7%........ 3,139,705
- ------------
Net Assets--
100%........... $439,283,920
- ------------
- ------------
</TABLE>
- ---------------
* Non-income producing.
ADR--American Depository Receipt.
See Notes to Financial Statements.
4
<PAGE>
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets
June 30, 1997
- -------------
<S>
<C>
Investments, at value (cost
$371,677,535)......................
........................... $
436,144,215
Cash...............................
...................................
....................
117,441
Receivable for investments
sold...............................
............................
9,700,939
Receivable for Fund shares
sold...............................
............................
1,551,266
Dividends and interest
receivable.........................
................................
181,717
Prepaid
expenses...........................
...................................
............ 8,874
- -------------
Total
assets.............................
...................................
.......... 447,704,452
- -------------
Liabilities
Payable for investments
purchased..........................
...............................
6,175,488
Payable for Fund shares
reacquired.........................
...............................
1,397,046
Management fee
payable............................
...................................
..... 348,514
Distribution fee
payable............................
...................................
... 273,079
Accrued
expenses...........................
...................................
............ 226,405
- -------------
Total
liabilities........................
...................................
.......... 8,420,532
- -------------
Net
Assets.............................
...................................
................ $ 439,283,920
- -------------
- -------------
Net assets were comprised of:
Common stock, at
par................................
...................................
. $ 295,818
Paid-in capital in excess of
par................................
........................
322,954,632
- -------------
323,250,450
Accumulated net investment
loss...............................
..........................
(2,918,674)
Accumulated net realized gain on
investments........................
....................
54,485,464
Net unrealized appreciation on
investments........................
......................
64,466,680
- -------------
Net assets, June 30,
1997...............................
..................................
$ 439,283,920
- -------------
- -------------
Class A:
Net asset value and redemption
price per share
($136,582,986 / 8,771,055
shares of common stock issued and
outstanding)..............
$15.57
Maximum sales charge (5% of
offering
price).............................
................ .82
- -------------
Maximum offering price to
public.............................
...........................
$16.39
- -------------
- -------------
Class B:
Net asset value, offering price
and redemption price per share
($295,769,459 / 20,334,522
shares of common stock issued and
outstanding).............
$14.55
- -------------
- -------------
Class C:
Net asset value, offering price
and redemption price per share
($6,861,201 / 471,715 shares of
common stock issued and
outstanding)..................
$14.55
- -------------
- -------------
Class Z:
Net asset value, offering price
and redemption price per share
($70,274 / 4,508 shares of
common stock issued and
outstanding).......................
$15.59
- -------------
- -------------
</TABLE>
- -----------------------------------
- -----------------------------------
- ----------
See Notes to Financial Statements.
5
<PAGE>
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Net Investment Loss
1997
- ------------
<S>
<C>
Income
Dividends (net of foreign
withholding
taxes of
$13,050).................. $
737,317
Interest...........................
.. 685,176
- ------------
Total
income.......................
1,422,493
- ------------
Expenses
Management
fees......................
2,107,216
Distribution fee--Class
A............ 123,976
Distribution fee--Class
B............ 1,496,166
Distribution fee--Class
C............ 33,117
Transfer agent's fees and
expenses... 347,000
Custodian's fees and
expenses........ 79,000
Reports to
shareholders..............
50,000
Directors'
fees......................
38,000
Registration
fees....................
31,000
Audit fees and
expense...............
18,000
Legal fees and
expenses..............
12,000
Miscellaneous......................
.. 5,692
- ------------
Total
expenses.....................
4,341,167
- ------------
Net investment
loss....................
(2,918,674)
- ------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain on investment
transactions.......................
.. 49,088,791
Net change in unrealized
appreciation/
depreciation on
investments..........
(28,475,945)
- ------------
Net gain on
investments................
20,612,846
- ------------
Net Increase in Net Assets
Resulting from
Operations.............. $
17,694,172
- ------------
- ------------
</TABLE>
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six
Months
Ended
Year Ended
Increase (Decrease) June
30, December 31,
in Net Assets 1997
1996
---------
- ---- -------------
<S> <C>
<C>
Operations
Net investment loss... $
(2,918,674) $ (6,716,644)
Net realized gain on
investment
transactions........
49,088,791 72,328,335
Net change in
unrealized
appreciation/depreciation
on investments......
(28,475,945) (173,258)
---------
- ---- -------------
Net increase in net
assets resulting
from operations.....
17,694,172 65,438,433
---------
- ---- -------------
Distributions to
shareholders from net
realized gains on
investments
Class A.............
(4,691,759) (18,962,078)
Class B.............
(10,882,128) (44,527,983)
Class C.............
(235,576) (917,000)
----------
- --- -------------
(15,809,463) (64,407,061)
----------
- --- -------------
Fund share transactions
(Note 5) (net of share
conversions)
Net proceeds from
shares subscribed...
352,820,581 899,616,382
Net asset value of
shares issued to
shareholders in
reinvestment of
distributions.......
14,311,793 58,287,125
Cost of shares
reacquired..........
(399,356,170) (909,300,156)
----------
- --- -------------
Net increase
(decrease) in net
assets from Fund
share transactions..
(32,223,796) 48,603,351
----------
- --- -------------
Total increase
(decrease)............
(30,339,087) 49,634,723
Net Assets
Beginning of period.....
469,623,007 419,988,284
----------
- --- -------------
End of period........... $
439,283,920 $ 469,623,007
---------
- ---- -------------
---------
- ---- -------------
</TABLE>
- -----------------------------------
- -----------------------------------
- ----------
See Notes to Financial Statements.
6
<PAGE>
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND
Notes to Financial Statements
(Unaudited)
Nicholas-Applegate Growth Equity
Fund (the 'Fund') is currently the
only
series of Nicholas-Applegate Fund,
Inc. The Fund commenced operations
as a
closed-end, diversified management
investment company on April 9,
1987. On June
7, 1991, the Fund ceased operations
as a closed-end investment company.
Effective June 10, 1991, trading in
the Fund's shares was discontinued
on the
New York Stock Exchange and the
Fund commenced operations as an
open-end,
diversified management investment
company.
The Fund's investment objective
is capital appreciation. It seeks
to achieve
this objective by investing
primarily in common stocks and in
securities
convertible into or excercisable
for common stocks (such as
convertible
preferred stocks, convertible
debentures and warrants), the
earnings and
securities prices of which the
investment adviser expects to grow
at a rate
above that of the S&P 500.
Note 1. Accounting The
following is a summary
Policies of
significant accounting poli-
cies
followed by the Fund in the
preparation of
its financial statements.
Security Valuation: Investments are
stated at value. Investments for
which
market quotations are readily
available are valued at the last
reported sales
price. If there are no sales on the
date of valuation, then investments
are
valued at the mean between the most
recently quoted bid and asked
prices
provided by principal market
makers. Securities for which market
quotations are
not readily available are valued at
fair value as determined in good
faith by or
under the direction of the Fund's
Board of Directors. Short-term
securities are
valued at amortized cost.
In connection with transactions
in repurchase agreements, it is the
Fund's
policy that its custodian or
designated subcustodians, as the
case may be under
triparty repurchase agreements,
take possession of the underlying
collateral
securities, the value of which
exceeds the principal amount of the
repurchase
transaction, including accrued
interest. If the seller defaults
and the value of
the collateral declines or if
bankruptcy proceedings are
commenced with respect
to the seller of the security,
realization of the collateral by
the Fund may be
delayed or limited.
Securities Transactions and Net
Investment Income: Securities
transactions are
recorded on the trade date.
Realized and unrealized gains and
losses from
security transactions are
calculated on the identified cost
basis. Dividend
income is recorded on the ex-
dividend date and interest income
is recorded on an
accrual basis. Expenses are
recorded on the accrual basis which
may require the
use of certain estimates by
management.
Net investment income (other
than distribution fees) and
unrealized and
realized gains or losses are
allocated daily to each class of
shares based upon
the relative proportion of net
assets of each class at the
beginning of the day.
Dividends and Distributions:
Dividends from net investment
income and
distributions of net capital gains
in excess of capital loss
carryforwards, if
any, are declared and paid
annually. Dividends and
distributions are recorded on
the ex-dividend date.
Income distributions and capital
gain distributions are determined
in
accordance with income tax
regulations which may differ from
generally accepted
accounting principles.
Federal Income Taxes: It is the
Fund's policy to continue to meet
the
requirements of the Internal
Revenue Code applicable to
regulated investment
companies and to distribute all of
its taxable income to shareholders.
Therefore, no tax provision is
required.
Withholding taxes on foreign
dividends have been provided for in
accordance
with the Fund's understanding of
the applicable country's tax rules
and rates.
Note 2. Agreements The
Fund has a management
agreement with Prudential
Investments Fund
Management LLC ('PIFM'). Pursuant
to the management agreement, PIFM
has
responsibility for all investment
advisory services and supervises
the
subadviser's performance of such
services. PIFM has entered into a
subadvisory
agreement with Nicholas-Applegate
Capital Management ('NACM'); NACM
furnishes
investment advisory services in
connection with the management of
the Fund. PIFM
pays for the services of the
subadviser, the compensation of
officers of the
Fund who are employees of PIFM,
occupancy and certain clerical and
bookkeeping
costs of the Fund. The Fund bears
all other costs and expenses.
- -----------------------------------
- -----------------------------------
- ----------
7
<PAGE>
The management fee paid PIFM is
computed daily and payable monthly
at an
annual rate of .95% of the average
daily net assets of the Fund. PIFM
pays NACM,
as compensation for its services
pursuant to the subadvisory
agreement, a fee at
the rate of .75% of the average
daily net assets of the Fund.
During the six
months ended June 30, 1997, PIFM
earned $2,107,216 in management
fees of which
it paid $1,664,701 to NACM under
the foregoing agreements.
The Fund has a distribution
agreement with Prudential
Securities Incorporated
('PSI'), which acts as the
distributor of the Class A, Class
B, Class C and
Class Z shares of the Fund. The
Fund compensates PSI for
distributing and
servicing the Fund's Class A, Class
B and Class C shares, pursuant to
plans of
distribution, (the 'Class A, B and
C Plans') regardless of expenses
actually
incurred by them. The distribution
fees for Class A, B and C shares
are accrued
daily and payable monthly. No
distribution or service fees are
paid to PSI as
distributor for the Class Z shares
of the Fund.
Pursuant to the Class A, B and C
Plans, the Fund compensates PSI for
distribution-related activities at
an annual rate of up to .30 of 1%,
1% and 1%,
of the average daily net assets of
the Class A, B and C shares,
respectively.
Such expenses under the Plans were
.18 of 1% of average daily net
assets of
Class A shares and 1% of the
average daily net assets of both
the Class B and
Class C shares, respectively, for
the six months ended June 30, 1997.
PSI has advised the Fund that it
has received approximately $91,000
in
front-end sales charges resulting
from sales of Class A shares during
the six
months ended June 30, 1997. From
these fees, PSI paid such sales
charges to
PRUCO Securities Corporation
('PRUSEC'), an affiliated broker-
dealer, which in
turn paid commissions to
salespersons and incurred other
distribution costs.
PSI advised the Fund that for
the six months ended June 30, 1997,
it received
approximately $322,800 in
contingent deferred sales charges
imposed upon certain
redemptions by Class B and C
shareholders.
PSI, PIFM and PRUSEC are
(indirect) wholly-owned
subsidiaries of The
Prudential Insurance Company of
America. ('Prudential')
The Fund, along with other
affiliated registered investment
companies (the
'Funds'), entered into a credit
agreement (the 'Agreement') on
December 31, 1996
with an unaffiliated lender. The
maximum commitment under the
Agreement is
$200,000,000. The Agreement expires
on December 30, 1997. Interest on
any such
borrowings outstanding will be at
market rates. The purposes of the
Agreement is
to serve as an alternative source
of funding for capital share
redemptions. The
Fund has not borrowed any amounts
pursuant to the Agreement as of
June 30, 1997.
The Funds pay a commitment fee at
an annual rate of .055 of 1% on the
unused
portion of the credit facility. The
commitment fee is accrued and paid
quarterly
on a pro-rata basis by the Funds.
Note 3. Other
Prudential Mutual Fund Ser-
Transactions vices
LLC ('PMFS'), a
with Affiliates
wholly-owned subsidiary of
PIFM,
serves as the Fund's transfer
agent. During
the six months ended June 30, 1997,
the Fund incurred fees of
approximately
$321,500 for the services of PMFS.
As of June 30, 1997, approximately
$53,600 of
such fees were due to PMFS.
Transfer agent fees and expenses in
the Statement of
Operations also include certain out
of pocket expenses paid to non-
affiliates.
Note 4. Portfolio
Purchases and sales of invest-
Securities ment
securities, other than
short-
term investments, for the six
months ended
June 30, 1997 aggregated
$438,157,178 and $468,341,231,
respectively.
The cost basis of investments
for federal income tax purposes at
June 30,
1997 was $372,188,383 and,
accordingly, net unrealized
appreciation of
investments for federal income tax
purposes was $63,955,832 (gross
unrealized
appreciation--$70,464,519; gross
unrealized depreciation--
$6,508,687).
Note 5. Capital The
Fund offers Class A,
Class
B, Class C and Class Z shares.
Class A
shares are sold with a front-end
sales charge of
up to 5%. Class B shares are sold
with a contingent deferred sales
charge which
declines from 5% to zero depending
upon the period of time the shares
are held.
Class C shares are sold with a
contingent deferred sales charge of
1% during the
first year. Class B shares will
automatically convert to Class A
shares on a
quarterly basis approximately seven
years after purchase. A special
exchange
privilege is also available for
shareholders who qualified to
purchase Class A
shares at net asset value.
Effective March 18, 1997, the Fund
commenced offering
Class Z shares. Class Z shares are
not subject to any sales or
redemption charge
and are offered exclusively for
sale to a limited group of
investors.
- -----------------------------------
- -----------------------------------
- ----------
8
<PAGE>
The Fund has authorized 100
million shares of common stock at
$.01 par value
per share equally divided into four
classes, designated Class A, Class
B, Class
C and Class Z shares.Transactions
in shares of common stock were as
follows:
<TABLE>
<CAPTION>
Class A
Shares Amount
- ------------------------------ ---
- -------- -------------
<S> <C>
<C>
Six months ended
June 30, 1996:
Shares sold...................
17,243,278 $ 257,396,794
Shares issued in reinvestment
of dividends and
distributions...............
253,955 3,895,673
Shares reacquired.............
(18,485,268) (276,268,416)
---
- -------- -------------
Net decrease in shares
outstanding before
conversion..................
(988,035) (14,975,949)
Shares issued upon conversion
from Class B................
341,723 5,135,322
---
- -------- -------------
Net decrease in shares
outstanding.................
(646,312) $ (9,840,627)
---
- -------- -------------
---
- -------- -------------
Year ended
December 31, 1996:
Shares sold...................
45,256,796 $ 735,771,997
Shares issued in reinvestment
of distributions............
983,300 15,498,673
Shares reacquired.............
(45,642,294) (743,356,355)
---
- -------- -------------
Net increase in shares
outstanding before
conversion..................
597,802 7,914,315
Shares issued upon conversion
from Class B................
628,501 10,055,961
---
- -------- -------------
Net increase in shares
outstanding.................
1,226,303 $ 17,970,276
---
- -------- -------------
---
- -------- -------------
<CAPTION>
Class B
- ------------------------------
<S> <C>
<C>
Six months ended
June 30, 1997:
Shares sold...................
6,661,396 $ 92,354,318
Shares issued in reinvestment
of distributions............
709,898 10,194,138
Shares reacquired.............
(8,623,511) (119,949,168)
---
- -------- -------------
Net decrease in shares
outstanding before
conversion..................
(1,252,217) (17,400,712)
Shares reacquired upon
conversion into Class A.....
(365,346) (5,135,322)
---
- -------- -------------
Net decrease in shares
outstanding.................
(1,617,563) $ (22,536,034)
---
- -------- -------------
---
- -------- -------------
<CAPTION>
Class B
Shares Amount
- ------------------------------ ---
- -------- -------------
<S> <C>
<C>
Year ended
December 31, 1996:
Shares sold...................
10,219,707 $ 155,199,983
Shares issued in reinvestment
of distributions............
2,823,157 41,917,160
Shares reacquired.............
(10,486,306) (158,450,669)
---
- -------- -------------
Net increase in shares
outstanding before
conversion..................
2,556,558 38,666,474
Shares reacquired upon
conversion into Class A.....
(664,025) (10,055,961)
---
- -------- -------------
Net increase in shares
outstanding.................
1,892,533 $ 28,610,513
---
- -------- -------------
---
- -------- -------------
<CAPTION>
Class C
- ------------------------------
<S> <C>
<C>
Six months ended
June 30, 1997:
Shares sold...................
211,661 $ 2,989,459
Shares issued in reinvestment
of distributions............
15,459 221,982
Shares reacquired.............
(220,676) (3,124,944)
---
- -------- -------------
Net increase in shares
outstanding.................
6,444 $ 86,497
---
- -------- -------------
---
- -------- -------------
Year ended
December 31, 1996:
Shares sold...................
564,965 $ 8,644,402
Shares issued in reinvestment
of distributions............
58,630 871,292
Shares reacquired.............
(496,192) (7,493,132)
---
- -------- -------------
Net increase in shares
outstanding.................
127,403 $ 2,022,562
---
- -------- -------------
---
- -------- -------------
<CAPTION>
Class Z
- ------------------------------
<S> <C>
<C>
March 18, 1997(a)
through June 30, 1997:
Shares sold...................
5,480 $ 80,010
Shares issued in reinvestment
of distributions
- -- --
Shares reacquired
(972) (13,642)
---
- -------- -------------
Net increase in shares
outstanding
4,508 $ 66,368
---
- -------- -------------
---
- -------- -------------
</TABLE>
- ---------------
(a) Commencement of offering of
Class Z shares.
- -----------------------------------
- -----------------------------------
- ----------
9
<PAGE>
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
- -----------------------------------
- -----------------------------------
- ---
Six Months
Ended Year
Ended December 31,
June 30, --------------------
- -----------------------------------
- --
1997 1996 1995(a)
1994(a) 1993(a) 1992(a)
- ----------- -------- ------
- -- ------- ------- ----
- ---
<S>
<C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................
. $ 15.41 $ 15.18 $
11.99 $ 13.56 $ 12.77 $
11.73
- ----------- -------- ------
- -- ------- ------- ----
- ---
Income from investment operations:
Net investment
loss...................
(0.06) (0.14) (0.11)
(0.07) (0.07) (0.07)
Net realized and unrealized gain
(loss) on investment
transactions... 0.73
2.64 3.82 (1.19)
2.63 1.11
- ----------- -------- ------
- -- ------- ------- ----
- ---
Total from investment
operations.... 0.67
2.50 3.71 (1.26)
2.56 1.04
- ----------- -------- ------
- -- ------- ------- ----
- ---
Less distributions:
Distributions from net realized
gains
from investment
transactions........ (0.51)
(2.27) (0.52) (0.31)
(1.77) --
- ----------- -------- ------
- -- ------- ------- ----
- ---
Total
distributions.................
(0.51) (2.27) (0.52)
(0.31) (1.77) --
- ----------- -------- ------
- -- ------- ------- ----
- ---
Net asset value, end of
period........ $ 15.57 $
15.41 $ 15.18 $ 11.99
$ 13.56 $ 12.77
- ----------- -------- ------
- -- ------- ------- ----
- ---
- ----------- -------- ------
- -- ------- ------- ----
- ---
TOTAL
RETURN(b):......................
4.39% 16.45% 31.20%
(9.53)% 20.26% 8.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)....... $ 136,583
$145,120 $124,340 $88,069
$97,596 $84,169
Average net assets
(000).............. $ 138,893
$136,482 $109,740 $93,620
$90,332 $74,005
Ratios to average net assets:
Expenses, including distribution
fee...............................
1.39%(e) 1.41% 1.44%
1.49%(d) 1.42%(d) 1.54%(d)
Expenses, excluding distribution
fee................................
. 1.21%(e) 1.23%
1.27% 1.32%(d) 1.30%(d)
1.44%(d)
Net investment
loss.................
(0.75)%(e) (0.93)% (0.83)%
(0.59)% (0.53)% (0.63)%
For Class A, B, C and Z shares:
Portfolio turnover
rate(c)............ 102%
113% 106% 110%
112% 107%
Average commission rate paid per
share $.0589 $.0588
$.0592 N/A N/A
N/A
</TABLE>
- ---------------
(a) Calculated based upon weighted
average shares outstanding during
the
periods due to effects of open-
ending, Fund share sales and the
resulting
share issuance from the stock
rights offering.
(b) Total return does not consider
the effects of sales loads. Total
return is
calculated assuming a purchase
of shares on the first day and a
sale on the
last day of each period
reported and includes reinvestment
of dividends and
distributions. Total returns
for periods less than a full year
are not
annualized.
(c) Portfolio turnover is
calculated on the basis of the Fund
as a whole
without distinguishing between
the classes of shares issued.
(d) Current year amounts have been
restated from prior periods
presentation.
(e) Annualized.
- -----------------------------------
- -----------------------------------
- ----------
See Notes to Financial Statements.
10
<PAGE>
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class B
- -----------------------------------
- -----------------------------------
- ----------
<S>
<C> <C> <C>
<C> <C> <C>
Six Months
Ended
Year Ended December 31,
June 30, --------------------
- -----------------------------------
- ---------
1997 1996 1995(a)
1994(a) 1993(a) 1992(a)
- ----------- -------- ------
- -- -------- -------- --
- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period..........................
$ 14.48 $ 14.49 $
11.56 $ 13.18 $ 12.56
$ 11.65
- ----------- -------- ------
- -- -------- -------- --
- ----------
Income from investment operations:
Net investment loss...............
(0.12) (.24) (0.22)
(0.17) (0.18) (0.16)
Net realized and unrealized gain
(loss) on investment
transactions....................
0.70 2.50 3.67
(1.14) 2.57 1.07
- ----------- -------- ------
- -- -------- -------- --
- ----------
Total from investment
operations......................
0.58 2.26 3.45
(1.31) 2.39 0.91
- ----------- -------- ------
- -- -------- -------- --
- ----------
Less distributions:
Distributions from net realized
gains from investment
transactions....................
(0.51) (2.27) (0.52)
(0.31) (1.77) --
- ----------- -------- ------
- -- -------- -------- --
- ----------
Total distributions.............
(0.51) (2.27) (0.52)
(0.31) (1.77) --
- ----------- -------- ------
- -- -------- -------- --
- ----------
Net asset value, end of period....
$ 14.55 $ 14.48 $
14.49 $ 11.56 $ 13.18
$ 12.56
- ----------- -------- ------
- -- -------- -------- --
- ----------
- ----------- -------- ------
- -- -------- -------- --
- ----------
TOTAL RETURN(b):..................
3.97% 15.54% 30.11%
(10.20)% 19.21% 7.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...
$ 295,770 $317,768
$290,751 $257,059 $252,911
$123,306
Average net assets (000)..........
$ 301,713 $304,841
$265,597 $261,285 $179,456
$ 80,531
Ratios to average net assets:
Expenses, including distribution
fee...........................
2.21%(d) 2.23% 2.27%
2.32%(c) 2.30%(c)
2.44%(c)
Expenses, excluding distribution
fee.............................
1.21%(d) 1.23% 1.27%
1.32%(c) 1.30%(c)
1.44%(c)
Net investment loss.............
(1.57)%(d) (1.75)% (1.66)%
(1.39)% (1.40)% (1.56)%
</TABLE>
- ---------------
(a) Calculated based upon weighted
average shares outstanding during
the
periods due to effects of open-
ending, Fund share sales and the
resulting
share issuance from the stock
rights offering.
(b) Total return does not consider
the effects of sales loads. Total
return is
calculated assuming a purchase
of shares on the first day and a
sale on the
last day of each period
reported and includes reinvestment
of dividends and
distributions. Total returns
for periods less than a full year
are not
annualized.
(c) Current year amounts have been
restated from prior periods
presentation.
(d) Annualized.
- -----------------------------------
- -----------------------------------
- ----------
See Notes to Financial Statements.
11
<PAGE>
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY
FUND
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class C
Class Z
- -----------------------------------
- ----------------------------- -
- ----------
August 1, March 18,
Six Months
1994(c) 1997(f)
Ended Year Ended
December 31, Through
Through
June 30, ------------------
- --------- December 31,
June 30,
1997 1996
1995(a) 1994(a)
1997
- ----------- -------- --
- ---------- ------------ -
- ----------
<S>
<C> <C>
<C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................
$ 14.48 $ 14.49 $
11.56 $ 11.62 $
14.48
- ----------- -------- --
- ---------- ------------ -
- ----------
Income from investment operations:
Net investment
loss..................
(0.11) (0.22)
(0.22) (0.05)
(0.01)
Net realized and unrealized gain
(loss) on investment
transactions.......................
0.69 2.48
3.67 (0.01)
1.12
- ----------- -------- --
- ---------- ------------ -
- ----------
Total from investment
operations... 0.58
2.26 3.45
(0.06) 1.11
- ----------- -------- --
- ---------- ------------ -
- ----------
Less distributions:
Distributions from net realized
gains
from investment
transactions....... (0.51)
(2.27) (0.52)
- -- --
- ----------- -------- --
- ---------- ------------ -
- ----------
Total
distributions................
(0.51) (2.27)
(0.52) --
- --
- ----------- -------- --
- ---------- ------------ -
- ----------
Net asset value, end of
period....... $ 14.55
$ 14.48 $ 14.49
$ 11.56 $ 15.59
- ----------- -------- --
- ---------- ------------ -
- ----------
- ----------- -------- --
- ---------- ------------ -
- ----------
TOTAL
RETURN(b):.....................
3.97% 15.54%
30.11% (0.52)%
7.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...... $ 6,861 $
6,735 $ 4,897 $
1,100 $ 70
Average net assets
(000)............. $ 6,678
$ 5,862 $ 2,961
$ 225 $ 28
Ratios to average net assets:
Expenses, including distribution
fee..............................
2.21%(d) 2.23%
2.27% 6.23%(d)(e)
1.21%(d)
Expenses, excluding distribution
fee................................
1.21%(d) 1.23%
1.27% 5.23%(d)(e)
1.21%(d)
Net investment
loss................
(1.57)%(d) (1.75)%
(1.63)% (3.36)%(d)
(0.53)%(d)
</TABLE>
- ---------------
(a) Calculated based upon weighted
average shares outstanding during
the
periods due to effects of open-
ending, Fund share sales and the
resulting
share issuance from the stock
rights offering.
(b) Total return does not consider
the effects of sales loads. Total
return is
calculated assuming a purchase
of shares on the first day and a
sale on the
last day of each period
reported and includes reinvestment
of dividends and
distributions. Total returns
for periods less than a full year
are not
annualized.
(c) Commencement of offering Class
C shares.
(d) Annualized.
(e) Current year amounts have been
restated from prior periods
presentation.
(f) Commencement of offering Class
Z shares.
- -----------------------------------
- -----------------------------------
- ----------
See Notes to Financial Statements.
12
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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Arthur E. Nicholas, Chairman
Dann V. Angeloff
Fred C. Applegate
Theodore J. Coburn
Robert F. Gunia
Arthur B. Laffer
Charles E. Young
Officers
Jack C. Marshall, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant
Treasurer
S. Jane Rose, Secretary
Robert E. Carlson, Assistant
Secretary
Deborah A. Docs, Assistant
Secretary
Manager
Prudential Investments Fund
Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Nicholas-Applegate Capital
Management
600 West Broadway
San Diego, CA 92101
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Ernst & Young LLP
515 South Flower Street
Los Angeles, CA 90071
Legal Counsel
Paul, Hastings, Janofsky & Walker
LLP
555 South Flower Street
Los Angeles, CA 90071
The views expressed in this report
and information about the Fund's
portfolio
holdings are for the period covered
by this report and are subject to
change
thereafter.
The accompanying financial
statements as of June 30, 1997 were
not audited
and, accordingly, no opinion is
expressed on them.
This report is not authorized for
distribution to prospective
investors unless
preceded or accompanied by a
current prospectus.
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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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