<PAGE>
Annual
Report
- -------------------------
October 31, 1997
Common Sense Trust
FAMILY OF FUNDS
<PAGE>
Shareholders' Message
November 20, 1997
Dear Shareholder,
As reported previously, on August 25 Smith Barney agreed to assume
investment advisory responsibilities for Common Sense Trust ("CST") from Van
Kampen American Capital, pending regulatory approval and approval by the boards
of trustees and shareholders of the CST Funds. Smith Barney is being recommended
to provide shareholders with more fund choices. Under the proposed acquisition,
each CST Fund will be managed by Smith Barney Mutual Fund Management, Inc.
If approved, it is anticipated that the transaction will be completed by
January 1998. Please refer to the proxy statement for additional details, or
call PFS Shareholder Services at 1-800-544-5445 between 9:00 a.m. and 6:00 p.m.
Eastern time, Monday through Friday.
Economic Overview
Robust economic growth and strong job creation continued to characterize
the U.S. economic environment during the reporting period. After performing
solidly in late 1996, the domestic economy grew at its fastest pace in nine
years during the first quarter of 1997. Meanwhile, the nation's unemployment
rate fell to its lowest level since 1973.
Despite the tight labor market and the rapid pace of economic activity,
there was little evidence of inflation. Wholesale prices actually fell during
each of the first seven months of the 1997 calendar year, the longest stretch of
consecutive monthly declines in history. At the consumer level, prices increased
by 2.1 percent during the 12 months through October.
Several factors contributed to keeping inflation in check. First, a strong
rally in the U.S. dollar helped limit price increases on imported goods. At the
same time, continued moderation in the cost of employee benefit packages offset
mild upward pressure on wages. Also, a sharp acceleration in productivity gains
allowed employers to absorb higher worker salaries without significantly raising
prices.
The inflationary implications of the low unemployment rate caused the
Federal Reserve Board to raise short-term interest rates by 0.25 percent in
March. Signs that economic growth slowed modestly during the second and third
quarters, however, led Fed policymakers to leave interest rates unchanged at
subsequent meetings.
Market Review
Global and domestic equity markets experienced a sharp increase in
volatility during the later stages of the reporting period. In particular, the
currency crisis which roiled most Southeast Asian economies beginning in July
spilled over into the region's equity markets, creating an avalanche of selling
which ultimately spread to the U.S. stock market as well. From its peak in early
August, the Dow Jones Industrial Average fell by nearly 16 percent before
rebounding during the final week of October.
Despite the choppy market conditions, U.S. stocks continued to gain ground.
The Wilshire 5000 Index climbed 23.16 percent during the fiscal year. Market
leadership, however, underwent a significant shift. During the first half of the
reporting period, large-capitalization stocks continued their outperformance of
smaller issues. But beginning in April, investors poured money into small-caps,
attracted by the sector's favorable relative valuations and indications that the
strong U.S. dollar could undermine the earnings of large multinational
corporations. For the 12 months through October, the Russell 1000 Index of
large-cap stocks gained 22.89 percent, compared to
Continued on page two
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19.48 percent for the Russell 2000 Index of small-cap companies. The Asian
crisis took its toll on foreign equity markets, however, with the Morgan Stanley
Capital International EAFE Index returning 3.04 percent for the reporting
period.
Domestic bond yields followed a mild up-down pattern. As the U.S. economy
strengthened early in the year, the yield on the Treasury's benchmark 30-year
bond climbed to 7.17 percent amid fears of higher inflation. When those concerns
proved unfounded, bond yields gradually fell back to 6.15 percent by the end of
the reporting period. Treasury securities were aided by a global "flight to
quality" as the currency crisis in Asia and domestic equity-market turbulence
made government bonds an attractive alternative. High-yield bonds were the top-
performing sector of the fixed-income market, with the Merrill Lynch High Yield
Index returning 13.82 percent during the fiscal year. For the same period, the
Merrill Lynch Domestic Master Index gained 8.99 percent.
Outlook
We expect that the recent upheavals in Southeast Asia will have a mixed
impact on the domestic economy and financial markets. Overall, we believe that
lower currency values in Asia will result in less inflation in the U.S. and a
greater likelihood of stable or falling interest rates. This scenario is
favorable for high-quality bonds over the long term. While equities also usually
benefit from low inflation and declining interest rates, we anticipate that
corporate profits could be negatively impacted by lower foreign sales and
intense competitive pressure from imports.
The new economic environment must be viewed against a backdrop in which
U.S. equity prices have appreciated substantially in recent years. The return of
significant market volatility is a reminder of the ongoing need to carefully
monitor your portfolio for proper diversification among asset classes. We urge
fund shareholders to use this opportunity to consider how their fund holdings
are currently divided among stocks, bonds, and cash. Uneven moves in the various
markets can distort a carefully planned investment program. We encourage you to
review your portfolio with an eye toward correcting imbalances in the way assets
have grown to be allocated.
Common Sense Trust Funds
On the following pages are performance results for the 12-month period
ended October 31, 1997, and interviews with portfolio managers from the equity
and fixed-income sectors. As always, we appreciate your continued confidence in
your investment.
Sincerely,
/s/ Don G. Powell
Don G. Powell
Chairman
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Portfolio Perspective
The following is an interview with the portfolio management team of the Common
Sense Trust stock funds. The team includes: Stephen L. Boyd, Common Sense Growth
Fund; Gary M. Lewis, Common Sense Emerging Growth Fund; James A. Gilligan,
Common Sense Growth and Income Fund; James B. Conheady and Jeffrey Russell,
Common Sense International Equity Fund; and Alan T. Sachtleben, chief investment
officer for equity investments at Van Kampen American Capital.
Q. What were the key factors in the performance of the stock funds during the
year ended October 31, 1997?
A. Highly publicized volatility at the end of the reporting period overshadowed
what was a very positive year for the U.S. stock market. During the past 12
months, moderate economic growth and historically low inflation provided a
very favorable environment for equity investments and drove the U.S. stock
market to new heights. The economy enjoyed a strong fourth quarter of 1996,
which gave stock prices upward momentum to start the new year. The first
half of 1997 saw the market continue to climb, with large well-established
companies faring better than their smaller competitors. As the economy
continued to flourish, investors began to worry that inflation might start
to rise. This concern increased volatility in stock prices and sparked a
month-long market correction in March that wiped out all year-to-date gains.
Stocks rebounded quickly, and in May the Dow Jones Industrial Average
(DJIA) rallied to record-breaking heights, recouping its losses. After
peaking in early August, the market declined and began two months of
volatility. During this time, the DJIA hovered around 8000, and small-cap
stocks took center stage from blue-chip issues and were able to reach new
highs. The reporting period ended on a turbulent note, as economic weakness
in Asia had a worldwide ripple effect. The U.S. markets became more
volatile, and the last week in October saw the DJIA drop and then regain a
record number of points, to close the month at its lowest level since late
spring.
The major development in global equity markets during the reporting
period was the widespread collapse of currencies and stock prices in the Far
East. Weakening economies and widening trade deficits made the currencies of
many Southeast Asian nations vulnerable to attack from speculators and hedge
funds. When Thailand succumbed to the pressure and devalued the baht in
July, near-panic conditions set in throughout the region. Since the
beginning of the year, equity markets in the Philippines, Indonesia and
Thailand each have fallen by more than 50 percent, while Singapore and South
Korea declined by nearly 40 percent. Other emerging markets, most notably
Latin America, experienced severe downturns as well.
Despite some spillover volatility from the chaos in Asia, Europe
continued to enjoy prosperity and strong equity markets. Most European
economies are in an earlier stage of the business cycle than is the United
States, and interest rates and inflation continue to decline throughout the
region. Despite a political setback in France earlier this year, the drive
for the establishment of a single European currency beginning in 1999 is
gaining strength.
Q. How did you react to these changes in managing the portfolios?
A. One result of the market's climb to unprecedented highs has been the
continuous appreciation in market prices. In the shadow of steep valuations,
our focus on the Common Sense Growth and Income Fund's value-oriented
strategy has proven to be increasingly important. As we manage the Fund's
portfolio, we seek securities with fair valuations relative to the market
and their peers, as well as strong fundamentals and positive earnings
growth. Consequently, we have shifted assets among different market sectors
when we have seen opportunities to benefit the Fund.
Common Sense Growth & Income Fund
Holding by Sector
[PIE CHART APPEARS HERE]
Percentage of Long-Term Investments
10/31/97
Finance 14.7%
Technology 12.0%
Health Care 12.0%
Energy 10.9%
Utilities 10.5%
Producer Manufacturing 9.1%
Consumer Non-Durables 7.6%
Raw Materials/Processing
Industries 5.2%
Consumer Services 4.8%
Consumer Distribution 4.4%
Consumer Durables 2.4%
Transportation 1.2%
Other 5.2%
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For example, we reduced or eliminated weightings in some higher-priced
stocks within the pharmaceutical sector, and added growth companies with
attractive prices, such as Pharmacia & Upjohn, Inc. and American Home
Products. We enacted similar changes within our holdings in oil companies,
as we strengthened our position in Coastal Oil, which demonstrated favorable
earnings growth in relation to its price-to-earnings ratio. And as the
utility sector slowly works through the growing pains of deregulation and
increased competition, we have continued to take advantage of buying
opportunities.
Industrial processing companies have recently shown indications of
positive changes and corporate restructuring, particularly among paper
companies. As a result, we added new positions in Boise Cascade and Union
Camp. Finally, in the technology sector, we have renewed and reinforced our
holding in IBM. As one of the single largest holding in the Fund's
portfolio, IBM is an example of the type of company we seek. In addition to
acceleration in both top-line and earnings growth, this stock has a solid
price-to-earnings ratio and the enviable position of financial strength that
has allowed the company to buy back more than $15 billion in stock over the
last two years.
The stock market's bias toward large companies during much of the year
posed some challenges for the Common Sense Emerging Growth Fund, which
focuses on small- and medium-sized growth companies. As always, we sought
out stocks with rising earnings expectations and rising valuations, but the
valuations of emerging growth stocks were on the decline during the first
five months of the reporting period. We chose to invest a portion of the
Fund's assets in large companies--primarily technology leaders such as
Microsoft and Intel--in order to take advantage of their accelerating stock
prices. Lately, small-cap stocks have outperformed the overall market, and
the smaller issues in the Fund's portfolio have supported its performance.
Although the portfolio tends to reflect where we found good
opportunities on a stock-by-stock basis, the technology and energy sectors
were among the best performers overall. Technology currently represents the
largest sector in the portfolio, with 27 percent of the Fund's long-term
investments allocated primarily to computer software and electronic data
processing companies. In terms of stock price appreciation during the
reporting period, stand-outs in the technology sector included large
companies such as Compuware and smaller ones such as Citrix Systems. Also,
the Fund is relatively overweighted in energy stocks right now, focusing on
oil industry service providers. Good performers here included Halter Marine,
Patterson Energy, and Maverick Tube. The Fund's broad diversification across
many industries has helped us to take advantage of attractive stocks in many
areas of the market.
The Common Sense Growth Fund benefited from the strength of the overall
market, particularly the dominance of large, blue-chip stocks during most of
the reporting period. Restructuring businesses continued to be key holdings
in the portfolio, with takeover target ITT enjoying strong price
appreciation amidst a feverish bidding war. Another area of interest was the
retail sector. While the Fund has historically been overweighted in retail
food and drug stocks, we broadened its holdings to include more department
store/apparel and discount vendors. Prices are low in this sector, and the
stocks show promising growth potential, which should be triggered by
favorable economic conditions.
Common Sense Emerging Growth Fund
Holdings by Sector
[PIE CHART APPEARS HERE]
Percentage of Long-Term Investments
10/31/97
Technology 29.1%
Health Care 12.8%
Energy 12.6%
Consumer Distribution 12.6%
Consumer Services 9.6%
Finance 8.4%
Producer Manufacturing 5.6%
Transportation 3.4%
Consumer Non-Durables 3.3%
Raw Materials/Processing
Industries 1.4%
Utilities 1.2%
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When the economic crisis in Southeast Asia began to unfold in late spring,
we took several measures to protect the Common Sense Growth Fund from
potential backlash in other emerging markets. First, we reduced our exposure
to companies in any of the emerging markets. The Fund was holding just two at
that time: Telebras, a Brazilian telecommunications company, was eliminated
from the portfolio in the summer, and YPF, an Argentinean oil company, was
reduced substantially in October. Both adjustments were completed before the
tide turned on Latin American markets.
Secondly, we tried to determine which companies rely most heavily on
consumers in Asian countries, where the currency crisis is expected to
curtail spending. After careful analysis, we reduced the Fund's allocation to
technology stocks and invested those assets in domestic utilities, including
electric companies and regional Bell telephone companies. Utility securities
have historically been defensive investments, often providing relative
stability amidst market fluctuations. We believe these changes have prepared
the Fund for future global developments.
Common Sense Growth Fund
Holdings by Sector
[PIE CHART APPEARS HERE]
Percentage of Long Term-Holdings
10/31/97
Transportation 0.6%
Technology 17.5%
Finance 17.8%
Consumer Distribution 12.5%
Consumer Non-Durables 9.0%
Producer Manufacturing 7.9%
Utilities 7.8%
Health Care 7.6%
Energy 7.4%
Consumer Services 5.6%
Raw Materials/Processing Industries 3.3%
U.S. Treasury Securities 3.0%
Consumer Durables 2.0%
In recognition of the growing difficulties in Asia, the Common Sense
International Equity Fund was significantly underweighted in that region's
equity markets during the reporting period. As of October 31, 1997 only 13.7
percent of long-term investments were invested in Asia, down from 26.0
percent one year earlier. Conversely, we found attractive values in Europe.
The Fund had 77.7 percent of long-term investments placed in European markets
at the fiscal-year end, up from 64.9 percent in October 1996.
The Fund's sector weightings remained relatively unchanged over the
reporting period. We continue to be overweighted in pharmaceuticals, oil
services, and intelligent technology. We are underweighted in slower growth
sectors, such as packaging, automotive, conglomerates, and utilities.
Common Sense International Equity Fund
Holdings by Country
[PIE CHART APPEARS HERE]
Percentage of Long-Term Investments
10/31/97
Finland 1.4%
Mexico 1.3%
Malaysia 0.6%
Netherlands 18.7%
United Kingdom 14.8%
Norway 13.7%
Ireland 8.9%
Japan 8.9%
Sweden 7.6%
Germany 5.0%
Hong Kong 4.2%
United States 3.4%
Austria 3.0%
Switzerland 2.6%
Australia 2.4%
Italy 2.0%
Israel 1.5%
Q. How did the portfolios perform during the 12-month reporting period?
A. Common Sense Growth and Income Fund Class 1 shares achieved a total return at
net asset value (NAV) of 27.35 percent, including reinvestment of dividends
and capital gains totaling $2.4765 per share. Class 1 shares of the Common
Sense Growth Fund generated a total return at NAV of 26.93 percent, including
reinvestment of dividends and capital gains totaling $1.5339 per share. By
comparison, the Standard & Poor's 500-Stock Index, an unmanaged index that
reflects general stock market performance, returned 32.10 percent, including
reinvestment of distributions for the same period.
The total return at NAV of the Common Sense Emerging Growth Fund Class A
shares was 18.90 percent. During the same period, the Russell 2000 Index, an
unmanaged index that reflects the performance of small-company stocks, posted
a total return of 29.33 percent, including reinvestment of distributions for
the same period.
*Performance is noted for either Class 1 or Class A shares, depending upon which
class of shares has the longest performance record.
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The Common Sense International Equity Fund Class A shares achieved a
total return at NAV of 9.74 percent. By comparison, the Morgan Stanley
Capital International EAFE Index, an unmanaged index that reflects general
performance of major international stock markets, posted a total return of
4.92 percent.
Please keep in mind that the indices mentioned above are unmanaged
statistical composites that do not reflect any commissions or fees that
would be paid by an investor purchasing the securities they represent. For
more complete performance information on each fund, please refer to pages
10 through 12.
Q. What is your outlook for the market in the months ahead?
A. The reporting period ended on a note of uncertainty, which we believe could
continue for awhile. Although U.S. investors have enjoyed a low level of
market volatility during the past few years, market movements in both
directions are normal. Investors who have long-term goals such as
retirement or college tuition must realize that short-term market
fluctuations have historically posed little threat to those goals. We
encourage you to focus on your long-term goals and disregard the short-term
distractions that ultimately may have little impact on your plans.
Remember that the U.S. stock market is still enjoying the best of all
possible environments: low inflation, moderate economic growth, and solid
corporate earnings. The economy continues to grow fast enough to produce
further earnings growth, and the absence of inflation suggests stable
interest rates, which in turn would provide support for high stock
valuations.
We are particularly optimistic about the prospects for European
equities. Interest rates are declining, inflation remains tame, domestic
demand for stocks is growing, and the prospects are positive for a single
European currency in 1999. Our outlook for Asia is more subdued, as the new
economic realities that the region faces in the aftermath of the currency
realignment have yet to be fully understood. Consequently, we anticipate
retaining an underweighted position in Asia. We are also concerned that
currency speculators will next turn their attention to any of a number of
relatively weak Latin American currencies. For that reason, the Fund
expects to limit its exposure to Latin American equities for the
foreseeable future.
<TABLE>
<CAPTION>
<S> <C> <C>
[Logo of Alan T. Sachtleben] [Logo of Stephen L. Boyd] [Logo of James A. Gilligan]
Alan T. Sachtleben Stephen L. Boyd James A. Gilligan
Chief Investment Officer Portfolio Manager Portfolio Manager
Equity Investments Common Sense Growth Fund Common Sense Growth and
Income Fund
[Logo of Gary M. Lewis] [Logo of James B. Conheady] [Logo of Jeffrey Russell]
Gary M. Lewis James B. Conheady Jeffrey Russell
Portfolio Manager Portfolio Co-Manager Portfolio Co-Manager
Common Sense Common Sense Common Sense
Emerging Growth Fund International Equity Fund International Equity Fund
</TABLE>
6
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The following is an interview with the portfolio management team of the Common
Sense Trust fixed-income funds. The team includes: Timothy D. Haney, Common
Sense Municipal Bond Fund; John R. Reynoldson, Common Sense Government Fund;
David R. Troth, Common Sense Money Market Fund; and Peter W. Hegel, chief
investment officer for fixed-income investments at Van Kampen American Capital.
The following excerpts reflect their views on the Funds' performance during the
12-month period ended October 31, 1997.
Q: What were the key factors in the performance of the fixed-income funds
during the past fiscal year?
A: The last quarter of 1996 brought renewed strength and rumblings of
inflation, which continued to feed investors' uncertainties about the
direction of interest rates. This was reflected in the volatility of taxable
yields, with the 30-year Treasury ranging from a high 6.92 percent to a low
of 6.35 percent, and ending the period at 6.64 percent.
The economy grew at a brisk 3.9 percent annual rate during the first three
quarters of 1997. At the same time, the federal budget deficit fell to its
lowest level in 23 years, while consumer prices rose less than 2.0 percent
on an annual basis and producer prices declined 1.4 percent.
The bond market advanced in price during the first 10 months of 1997, but
its ascension was not a smooth ride. Bond prices fell early in the period as
economic growth soared, fueling concerns about rising inflation and a
potential interest rate hike by the Federal Reserve Board. When the Fed did
raise interest rates by a modest 0.25 percent in late March, bond prices
fell further, sending the yield of the 30-year U.S. Treasury bond above 7.0
percent of the first time in six months. By mid-April, however, the market's
mood had changed, showing few signs of price pressures despite the economy's
strength. Bonds also benefited from continued heavy purchases by foreign
investors and concerns that the stock market rally was nearing an end. The
7.0 percent slump in the Dow Jones Industrial Average on October 27
reinforced the wisdom of owning bonds to preserve capital. By the end of
October, the yield on the 30-year Treasury bond was near its lowest level in
20 months, at 6.15 percent.
Throughout 1997, municipal bond yields moved in the same direction as the
Treasury bond market, but gained less when Treasury prices rallied and lost
less when Treasuries fell. Between December 31, 1996 and October 31, 1997,
the yield on the long-term municipal revenue bond index fell 36 basis points
as the yield on the 30-year Treasury bond fell 48 basis points. Because
yields move in the opposite direction of prices, the smaller yield decline
of municipal bonds indicates that their prices did not rise as much as
Treasuries.
Q: How did you react to these market conditions in managing the portfolios?
A: In managing the Common Sense Municipal Bond Fund, we maintained a portfolio
heavily invested in municipal securities rated AAA, the highest rating for
investment quality issued by Standard & Poor's Ratings Group. Approximately
60 percent of the portfolio's assets were allocated to the highest rating
group. This structure, though somewhat defensive from a credit standpoint,
was a response to the compression of yields between investment-grade and
lower-rated bonds.
During the last 12-month period, yields between investment-grade bonds and
lower-rated bonds have narrowed considerably, making it more difficult to
increase the Fund's yield. Much of this challenge can be attributed to
[pie chart]
Common Sense Municipal Bond Fund
Quality Rating
Percentage of Long-Term Investments
10/31/97
AAA 59.9%
AA 7.6%
A 10.1%
BBB 12.0%
BB 0.7%
Non-Rated 9.7%
Based upon the highest credit quality ratings as determined by Standard &
Poor's or Moody's.
7
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the increased issuance of insured bonds, which has led to decreased
availability of attractive lower- and non-rated bonds. The lower-rated bonds
that were available did not offer enough added yield relative to their
inherently higher risk.
By carefully monitoring the municipal market, we were able to extract
value from bonds at the upper end of the credit quality spectrum. We were
able to find value in the new-issue market, particularly in multi-family
housing unit bond issues during the first half of the year. Specialty state
issues, including several in Colorado, Pennsylvania, and New York, proved
beneficial for the Fund during the last six months of the year.
Specifically, insured hospital and school districts in New York and
Pennsylvania, along with bonds used to finance Denver's airport and nearby
tollway.
In addition to altering the Fund's holdings, we adjusted its duration
closer to the benchmark in response to our outlook for interest rates. In
anticipation that the Fed would increase interest rates in March, we
shortened the Fund's duration from 7.58 years to 7.45 years. This was
slightly lower than the Fund's benchmark of 8.16 years. When rates began to
fall shortly after its March up-tick, we remained in a defensive posture,
when a more neutral position might have been more beneficial. This
conservative stance weakened our performance early in the summer, but
rebounded toward the end of June and into July.
We maintained a relatively defensive position in managing the Common Sense
Government Fund during the past 12 months. Our asset allocation decisions
were directed in part by the attractiveness of the mortgage sector in the
face of reduced marketplace volatility. We held more than 60 percent of the
portfolio's long-term investments in mortgage-backed securities in July;
currently, the portfolio has approximately 58 percent of long-term
investments invested in the mortgage sector. In light of increasingly narrow
yield spreads, we are reducing the Fund's exposure in areas that would be
adversely affected by decreasing mortgage refinancing rates.
We continued to position the portfolio in a "barbell" pattern,
distributing mortgage assets into higher and lower coupon securities with
longer maturities shying away from 7.5 and 8.0 percent paper. The barbelled
issues tend to be older and generally exhibit more stable prepayment. This
not only helps make the Fund more resilient to lower interest rate
environments, but it also creates a more predictable future income stream.
Among our Treasury holdings, we sought to capitalize on the flattening yield
curve in a falling interest rate environment by overweighting longer
duration Treasuries within the portfolio.
Over the course of the fiscal year, we primarily maintained the Fund's
duration at a level slightly below that of its benchmark. Under normal
conditions, we make prudent adjustments to the duration when we feel there
is value to be captured, capitalizing on the movement of interest rates. Our
overriding objective, however, is to maintain a consistent risk profile and
a competitive dividend stream. The Fund's duration is currently 6.4 years,
which we feel provides the base-line level of exposure to changes in
interest rates that investors generally seek in this type of fund.
In the relatively benign economic environment during the past 12-month
period, our strategy for the Common Sense Money Market Fund focused on
increasing its yield. Early in the year, in anticipation that the Fed would
raise short-term interest rates, we maintained an investment maturity in the
25 to 30-day range. When the Fed did not raise rates at subsequent meetings,
the maturity was adjusted closer to the benchmark average of 50 days.
To further seek to enhance the Fund's return, we increased our overall
weighting of corporate obligations versus government obligations. During the
first half of the year, 73 percent of the Fund's long-term investments were
invested in government obligations--government agencies and repurchase
agreements--with the remaining 27 percent in corporate notes. By year-end,
we shifted long-term investments to a more even ratio of 41 percent
government obligations and 59 percent corporate notes. The additional yield
offered by the corporate obligations served the portfolio well during the
second half of the reporting period. Currently, the Fund is positioned to
track well with the market and we believe it is likely to weather most
interest rate movements.
8
<PAGE>
Q: How did the portfolios perform during the reporting period?
A: The total return at NAV of Common Sense Municipal Bond Fund Class 1 shares
was 8.04 percent, including reinvestment of dividends and capital gains
totaling $0.7000 per share. Over the same period, the Lehman Brothers
Municipal Bond Index generated a total return of 8.49 percent.
Common Sense Government Fund Class 1 shares generated a total return at
net asset value of 8.56 percent, reflecting the reinvestment of all
dividends. By comparison, the Lehman Brothers General U.S. Government Index
posted a return of 8.66 percent for the same period.
The Common Sense Money Market Fund Class 1 shares provided a 12-month
total return at net asset value of 4.58 percent.
Please keep in mind that the indices referenced above are unmanaged
statistical composites used as benchmarks for many government and municipal
funds. They do not reflect any commissions or fees that would be paid by an
investor purchasing the securities they represent. For more complete
performance information on each fund, please refer to pages 10 through 12.
Q: What is your outlook for the market in the months ahead?
A: Our expectations for the next several months will be guided largely by the
health of the economy. The current combination of positive economic growth,
job growth, and wage gains provides a supportive environment for the
consumer. Furthermore, continuing low interest rates may stimulate increased
automobile and housing demand. All of these factors paint a healthy economic
picture. Our concern is how much more positive this picture can get until
inflation emerges. Fortunately, inflation has been contained to date. We
will continue to monitor for changes on the horizon and adjust our strategy
accordingly.
/s/ Peter W. Hegel /s/ John R. Reynoldson
Peter W. Hegel John R. Reynoldson
Chief Investment Officer Portfolio Manager
Fixed Income Investments Common Sense Government Fund
/s/ Timothy D. Haney /s/ David R. Troth
Timothy D. Haney David R. Troth
Portfolio Manager Portfolio Manager
Common Sense Municipal Bond Fund Common Sense Money Market Fund
9
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Performance Results for the Period Ended October 31, 1997
Common Sense Trust
<TABLE>
<CAPTION>
1 Shares A Shares B Shares
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Sense Emerging Growth Fund
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................................... 8.50% 5.50% 5.00%
One-year total returns:
Average annual at net asset value............................................................... 19.15% 18.90% 17.94%
Average annual with maximum sales charge or CDSC................................................ 9.01% 12.37% 12.94%
Inception total returns:*
Cumulative at net asset value................................................................... 23.81% 86.96% 83.15%
Average annual at net asset value............................................................... 18.96% 26.19% 25.23%
Average annual with maximum sales charge or CDSC................................................ 10.68% 23.55% 24.46%
*Class 1 shares inception of August 8, 1996, Class A and Class B inception of February 21, 1995.
Common Sense Government Fund
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................................... 6.75% 4.75% 4.00%
One-year total returns:
Average annual at net asset value............................................................... 8.56% 8.35% 7.55%
Average annual with maximum sales charge or CDSC................................................ 1.26% 3.19% 3.55%
Five-year total returns:
Cumulative at net asset value................................................................... 35.60% N/A N/A
Average annual at net asset value............................................................... 6.28% N/A N/A
Average annual with maximum sales charge or CDSC................................................ 4.80% N/A N/A
Ten-year total returns:
Cumulative at net asset value................................................................... 120.80% N/A N/A
Average annual at net asset value............................................................... 8.24% N/A N/A
Average annual with maximum sales charge or CDSC................................................ 7.49% N/A N/A
Inception total returns:*
Cumulative at net asset value................................................................... 117.37% 22.22% 19.10%
Average annual at net asset value............................................................... 7.64% 5.90% 5.12%
Average annual with maximum sales charge or CDSC................................................ 6.93% 4.43% 4.49%
*Class 1 shares inception of April 14, 1987, Class A and Class B inception of May 3, 1994.
Common Sense Growth Fund
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................................... 8.50% 5.50% 5.00%
One-year total returns:
Average annual at net asset value............................................................... 26.93% 26.65% 25.66%
Average annual with maximum sales charge or CDSC................................................ 16.15% 19.66% 20.66%
Five-year total returns:
Cumulative at net asset value................................................................... 120.12% N/A N/A
Average annual at net asset value............................................................... 17.09% N/A N/A
Average annual with maximum sales charge or CDSC................................................ 15.03% N/A N/A
Ten-year total returns:
Cumulative at net asset value................................................................... 342.01% N/A N/A
Average annual at net asset value............................................................... 16.02% N/A N/A
Average annual with maximum sales charge or CDSC................................................ 15.00% N/A N/A
Inception total returns:*
Cumulative at net asset value................................................................... 262.02% 84.52% 80.25%
Average annual at net asset value............................................................... 12.97% 19.13% 18.33%
Average annual with maximum sales charge or CDSC................................................ 12.02% 17.22% 17.86%
*Class 1 shares inception of April 14, 1987, Class A and Class B inception of May 3, 1994.
</TABLE>
10
<PAGE>
Performance Results for the Period Ended October 31, 1997 (Continued)
Common Sense Trust
<TABLE>
<CAPTION>
1 Shares A Shares B Shares
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Sense Growth and Income Fund
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC). 8.50% 5.50% 5.00%
One-year total returns:
Average annual at net asset value............................. 27.35% 27.04% 26.08%
Average annual with maximum sales charge or CDSC.............. 16.54% 20.08% 21.08%
Five-year total returns:
Cumulative at net asset value................................. 115.68% N/A N/A
Average annual at net asset value............................. 16.62% N/A N/A
Average annual with maximum sales charge or CDSC.............. 14.57% N/A N/A
Ten-year total returns:
Cumulative at net asset value................................. 295.48% N/A N/A
Average annual at net asset value............................. 14.74% N/A N/A
Average annual with maximum sales charge or CDSC.............. 13.73% N/A N/A
Inception total returns:*
Cumulative at net asset value................................. 242.18% 82.62% 77.94%
Average annual at net asset value............................. 12.37% 18.77% 17.90%
Average annual with maximum sales charge or CDSC.............. 11.43% 16.86% 17.42%
*Class 1 shares inception of April 14, 1987, Class A and
Class B inception of May 3, 1994.
Common Sense International Equity Fund
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC). 8.50% 5.50% 5.00%
One-year total returns:
Average annual at net asset value............................. 9.99% 9.74% 8.93%
Average annual with maximum sales charge or CDSC.............. .66% 3.72% 3.93%
Inception total returns:*
Cumulative at net asset value................................. 13.50% 52.18% 49.41%
Average annual at net asset value............................. 10.84% 17.31% 16.50%
Average annual with maximum sales charge or CDSC.............. 3.10% 14.83% 15.60%
*Class 1 shares inception of August 8, 1996, Class A and
Class B inception of March 17, 1995 (date the Fund's
investment strategy was implemented).
Common Sense Money Market Fund
One-year total returns:
Average annual at net asset value............................. 4.58% 4.49% 3.82%
Five-year total returns:
Cumulative at net asset value................................. 20.92% N/A N/A
Average annual at net asset value............................. 3.87% N/A N/A
Inception total returns:*
Cumulative at net asset value................................. 63.49% 5.54% 4.57%
Average annual at net asset value............................. 5.10% 4.48% 3.70%
*Class 1 shares inception of December 15, 1987, Class A and
Class B inception of August 8, 1996.
</TABLE>
An investment in the Common Sense Money Market Fund is neither insured nor
guaranteed by the U.S. government, and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per share. There is a
one-time $15 set-up fee for the Money Market Fund.
11
<PAGE>
Performance Results for the Period Ended October 31, 1997 (Continued)
Common Sense Trust
<TABLE>
<CAPTION>
1 Shares A Shares B Shares
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Sense Municipal Bond Fund
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)............................... 4.75% 4.50% 4.00%
One-year total returns:
Average annual at net asset value.......................................................... 8.04% 7.77% 6.98%
Average annual with maximum sales charge or CDSC........................................... 2.90% 2.93% 2.98%
Five-year total returns:
Cumulative at net asset value.............................................................. 42.11% N/A N/A
Average annual at net asset value.......................................................... 7.28% N/A N/A
Average annual with maximum sales charge or CDSC........................................... 6.24% N/A N/A
Inception total returns:*
Cumulative at net asset value.............................................................. 100.31% 8.98% 7.97%
Average annual at net asset value.......................................................... 7.76% 7.24% 6.43%
Average annual with maximum sales charge or CDSC........................................... 7.20% 3.29% 3.22%
*Class 1 shares inception of July 13, 1988, Class A and Class B inception of August 8, 1996.
</TABLE>
N/A=Not Applicable
Performance data quoted represents past performance, which is not indicative of
future performance. The investment return and principal value may fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original value.
12
<PAGE>
Emerging Growth Fund Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 92.9%
Consumer Distribution 11.7%
Barnes & Noble, Inc. (a).................................. 28,000 $ 715,750
Bed Bath & Beyond, Inc. (a)............................... 20,000 635,000
Best Buy, Inc. (a)........................................ 13,000 363,188
Brightpoint, Inc. (a)..................................... 18,500 610,500
CompUSA, Inc. (a)......................................... 42,000 1,375,500
Consolidated Stores Corp. (a)............................. 28,000 1,116,500
Costco Cos., Inc. (a)..................................... 27,000 1,039,500
CVS Corp.................................................. 13,500 827,719
Dollar General Corp....................................... 21,250 702,578
Dollar Tree Stores, Inc. (a).............................. 9,000 364,500
Family DLR Stores, Inc.................................... 24,000 564,000
General Nutrition Cos., Inc. (a).......................... 39,500 1,244,250
Inacom Corp. (a).......................................... 6,000 184,875
Interstate Bakeries Corp.................................. 15,000 958,125
Jacor Communications, Inc. (a)............................ 10,000 418,750
Kohls Corp. (a)........................................... 11,000 738,375
Mckesson Corp............................................. 4,000 429,250
Meyer Fred, Inc. (a)...................................... 28,000 799,750
Miller Herman, Inc........................................ 25,000 1,221,875
Pacific Sunwear of California (a)......................... 14,250 393,656
Pier 1 Imports, Inc....................................... 31,500 574,875
Proffitts, Inc. (a)....................................... 26,000 745,875
Ross Stores, Inc.......................................... 40,000 1,495,000
Safeway, Inc. (a)......................................... 12,025 698,953
Stage Stores, Inc. (a).................................... 10,000 365,000
Tech Data Corp. (a)....................................... 17,000 756,500
TJX Cos., Inc............................................. 43,000 1,273,875
U.S. Office Products Co. (a).............................. 17,000 531,250
Williams Sonoma, Inc. (a)................................. 15,000 601,875
-----------
21,746,844
-----------
Consumer Non-Durables 3.1%
Action Performance Cos., Inc. (a)......................... 10,000 256,250
Borders Group, Inc. (a)................................... 29,000 752,188
Jones Apparel Group, Inc. (a)............................. 25,000 1,271,875
Linens N Things, Inc. (a)................................. 14,000 503,125
Liz Claiborne, Inc........................................ 12,000 608,250
Morningstar Group, Inc. (a)............................... 12,000 513,000
Nautica Enterprises, Inc. (a)............................. 13,000 346,125
Smithfield Foods, Inc. (a)................................ 18,000 537,750
Westpoint Stevens, Inc. (a)............................... 11,000 451,000
Wolverine World Wide, Inc................................. 23,500 517,000
-----------
5,756,563
-----------
Consumer Services 9.0%
AccuStaff, Inc. (a)....................................... 10,000 285,625
Americredit Corp. (a)..................................... 8,500 247,031
Amresco, Inc. (a)......................................... 17,000 533,375
Anchor Gaming (a)......................................... 11,500 902,750
</TABLE>
See Notes to Financial Statements
13
<PAGE>
Emerging Growth Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Consumer Services (Continued)
Apollo Group, Inc., Class A (a)........................... 13,500 $ 570,375
Capstar Hotel Co. (a)..................................... 8,000 283,500
Caribiner International, Inc. (a)......................... 14,000 623,875
Chancellor Media Corp. (a)................................ 29,500 1,618,812
CKE Restaurants, Inc...................................... 13,000 519,188
CKS Group, Inc. (a)....................................... 8,000 290,000
Clear Channel Communications, Inc. (a).................... 14,000 924,000
Consolidated Graphics, Inc. (a)........................... 14,000 726,250
CORESTAFF, Inc. (a)....................................... 14,000 346,500
Doubletree Corp. (a)...................................... 13,000 541,125
FIRSTPLUS Financial Group, Inc. (a)....................... 32,000 1,760,000
Foodmaker, Inc. (a)....................................... 17,000 279,438
Imax Corp. (a)............................................ 4,000 101,500
Interpublic Group of Cos., Inc............................ 21,000 997,500
Landry's Seafood Restaurant, Inc. (a)..................... 13,000 364,000
Meredith Corp............................................. 30,000 1,021,875
Omnicom Group, Inc........................................ 13,000 918,125
Promus Hotel Corp. (a).................................... 10,000 392,500
Rainforest Cafe, Inc. (a)................................. 10,000 341,250
Robert Half International, Inc. (a)....................... 22,000 900,625
Signature Resorts, Inc. (a)............................... 22,500 587,812
Staffmark, Inc. (a)....................................... 7,000 217,000
Univision Communications, Inc., Class A (a)............... 2,000 124,000
Valassis Communications, Inc. (a)......................... 9,000 265,500
-----------
16,683,531
-----------
Energy 11.7%
BJ Services Co. (a)....................................... 11,000 932,250
BJ Services Co. Warrants (expiring 04/13/20) (a).......... 60 3,563
Cliffs Drilling Co. (a)................................... 13,000 944,937
Coflexip SA - ADR (France)................................ 11,000 605,000
Comstock Resources, Inc. (a).............................. 20,000 335,000
Cooper Cameron Corp. (a).................................. 18,500 1,336,625
Diamond Offshore Drilling, Inc. (a)....................... 30,000 1,867,500
ENSCO International, Inc.................................. 65,000 2,734,062
EVI, Inc. (a)............................................. 22,000 1,412,125
Falcon Drilling, Inc. (a)................................. 42,000 1,527,750
Global Marine, Inc. (a)................................... 15,000 466,875
Key Energy Group, Inc. (a)................................ 7,500 235,313
Marine Drilling Cos., Inc. (a)............................ 37,000 1,096,125
Nabors Industries, Inc. (a)............................... 33,000 1,357,125
National Oilwell, Inc. (a)................................ 8,000 612,500
Parker Drilling Co. (a)................................... 16,000 237,000
Patterson Energy, Inc. (a)................................ 8,000 448,000
Pool Energy Services Co. (a).............................. 14,000 475,125
Precision Drilling Corp. (a).............................. 10,000 307,500
Rowan Cos., Inc. (a)...................................... 38,000 1,477,250
Smith International, Inc. (a)............................. 23,000 1,753,750
Tidewater, Inc............................................ 14,500 952,469
Varco International, Inc. (a)............................. 11,000 670,312
-----------
21,788,156
-----------
</TABLE>
See Notes to Financial Statements
14
<PAGE>
Emerging Growth Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Finance 7.8%
Astoria Financial Corp.................................... 10,000 $ 522,500
Bank United Corp.......................................... 5,000 210,000
Charter One Financial, Inc................................ 4,000 232,500
CMAC Investment Corp...................................... 18,000 984,375
Comdisco, Inc............................................. 20,750 654,922
Concentra Managed Care, Inc. (a).......................... 12,000 391,500
Cullen Frost Bankers, Inc................................. 7,500 378,750
E-Trade Group, Inc. (a)................................... 17,500 540,312
Everest Reinsurance Holdings, Inc......................... 8,000 301,000
Finova Group, Inc......................................... 33,000 1,449,937
Franklin Resources, Inc................................... 4,200 377,475
Golden State Bancorp, Inc. (a)............................ 18,000 598,500
Green Tree Financial Corp................................. 11,600 488,650
GreenPoint Financial Corp................................. 12,000 772,500
Mercury General Corp...................................... 10,000 424,375
Money Store, Inc.......................................... 12,500 354,688
National Commerce Bancorp................................. 10,000 296,250
North Fork Bancorp, Inc................................... 29,000 853,687
Peoples Heritage Financial Group, Inc..................... 12,000 472,500
Silicon Valley Bancshares (a)............................. 7,000 382,375
Sovereign Bancorp, Inc.................................... 25,000 443,750
St. Paul Bancorp, Inc..................................... 18,000 432,000
Star Banc Corp............................................ 12,000 588,750
Starwood Lodging Trust.................................... 5,000 299,063
State Street Corp......................................... 26,000 1,449,500
Transatlantic Holdings, Inc............................... 3,000 207,563
Vesta Insurance Group, Inc................................ 7,000 406,875
-----------
14,514,297
-----------
Healthcare 11.9%
Agouron Pharmaceuticals, Inc. (a)......................... 11,000 501,875
Arterial Vascular Engineering, Inc. (a)................... 15,000 796,875
Centocor, Inc. (a)........................................ 8,500 374,000
Curative Health Services, Inc. (a)........................ 8,000 241,000
DeKalb Genetics Corp...................................... 4,000 143,500
Dura Pharmaceuticals, Inc. (a)............................ 36,000 1,741,500
ESC Medical Systems Ltd. (a).............................. 20,500 804,625
FPA Medical Management, Inc. (a).......................... 18,000 434,250
Guidant Corp.............................................. 43,000 2,472,500
Gulf South Medical Supply, Inc. (a)....................... 7,500 247,500
HBO & Co.................................................. 83,500 3,632,250
Health Care & Retirement Corp. (a)........................ 10,000 378,125
Health Management Assn., Inc., Class A (a)................ 39,000 950,625
HEALTHSOUTH Corp. (a)..................................... 67,000 1,712,687
Medicis Pharmaceutical Corp., Class A (a)................. 16,000 770,000
MiniMed, Inc. (a)......................................... 9,000 351,000
Omnicare, Inc............................................. 39,000 1,084,687
Parexel International Corp. (a)........................... 14,000 505,750
Quintiles Transnational Corp. (a)......................... 12,500 906,250
Renal Treatment Centers, Inc. (a)......................... 12,000 398,250
</TABLE>
See Notes to Financial Statements
15
<PAGE>
Emerging Growth Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Healthcare (Continued)
Rexall Sundown, Inc. (a).............................. 26,000 $ 568,750
Sofamor/Danek Group Inc. (a).......................... 7,000 482,125
Sunrise Assisted Living, Inc. (a)..................... 5,000 185,625
Sybron International Corp. (a)........................ 10,000 401,250
Theragenics Corp. (a)................................. 10,000 436,250
Total Renal Care Holdings, Inc. (a)................... 20,000 616,250
Universal Health Services, Inc., Class B (a).......... 11,000 484,688
Watson Pharmaceuticals, Inc. (a)...................... 15,000 476,250
-----------
22,098,437
-----------
Producer Manufacturing 5.2%
Allied Waste Industries, Inc. (a)..................... 29,000 590,875
ASM Lithography Holding NV (Netherlands) (a).......... 22,000 1,611,500
Danaher Corp.......................................... 11,000 602,937
Federal Mogul Corp.................................... 12,000 507,750
Global Industries, Inc. (a)........................... 31,400 631,925
Mueller Industries, Inc. (a).......................... 5,000 220,938
Newpark Resources, Inc. (a)........................... 16,000 664,000
Precision Castparts Corp.............................. 11,000 646,937
Sipex Corp. (a)....................................... 12,500 410,938
Tyco International Ltd................................ 38,000 1,434,500
United States Filter Corp. (a)........................ 19,000 762,375
USA Waste Services, Inc. (a).......................... 44,800 1,657,600
-----------
9,742,275
-----------
Raw Materials/Processing Industries 1.3%
Maverick Tube Corp. (a)............................... 16,000 564,000
NS Group, Inc. (a).................................... 13,000 347,750
Safeskin Corp. (a).................................... 14,500 657,938
Sealed Air Corp. (a).................................. 6,500 335,156
Witco Corp............................................ 4,500 195,750
Zoltek Companies, Inc. (a)............................ 7,500 356,250
-----------
2,456,844
-----------
Technology 26.9%
Advanced Fibre Communications, Inc. (a)............... 44,000 1,278,750
America Online, Inc. (a).............................. 21,500 1,655,500
Apex PC Solutions, Inc. (a)........................... 10,000 257,500
Applied Graphics Technologies (a)..................... 8,000 428,000
ASE Test Ltd. (a)..................................... 7,500 410,625
Aspect Development, Inc. (a).......................... 6,000 280,500
Baan's Co. NV (Netherlands) (a)....................... 7,000 490,875
BMC Software, Inc. (a)................................ 40,000 2,415,000
Cambridge Technology Partners, Inc. (a)............... 16,000 584,000
CBT Group PLC - ADR (Ireland) (a)..................... 8,500 652,375
Cellstar Corp. (a).................................... 28,000 950,250
CHS Electronics, Inc. (a)............................. 28,500 696,469
Ciber, Inc. (a)....................................... 11,000 486,750
CIENA Corp. (a)....................................... 13,000 715,000
Citrix Systems, Inc. (a).............................. 23,000 1,689,062
Compaq Computer Corp.................................. 27,500 1,753,125
</TABLE>
See Notes to Financial Statements
16
<PAGE>
Emerging Growth Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Technology (Continued)
Computer Horizons Corp. (a)......................... 13,000 $ 394,875
Compuware Corp. (a)................................. 48,000 3,174,000
Comverse Technology, Inc. (a)....................... 16,000 660,000
Dallas Semiconductor Corp........................... 14,000 684,250
Dell Computer Corp. (a)............................. 105,000 8,413,125
Digital Microwave Corp. (a)......................... 11,000 396,000
DII Group, Inc. (a)................................. 7,000 172,375
EMC Corp. (a)....................................... 27,000 1,512,000
General Scanning, Inc. (a).......................... 10,000 258,125
Harbinger Corp. (a)................................. 10,000 297,500
HNC Software, Inc. (a).............................. 11,000 407,000
Information Management Resources, Inc. (a).......... 10,000 257,500
Input/Output, Inc. (a).............................. 8,500 227,906
Jabil Circuit, Inc. (a)............................. 27,000 1,225,125
Keane, Inc. (a)..................................... 24,000 711,000
Legato Systems Inc. (a)............................. 8,500 363,375
Level One Communications, Inc. (a).................. 15,000 675,000
Micrel, Inc. (a).................................... 14,500 520,187
Nice Systems Ltd. (a)............................... 7,500 349,688
Orbotech Ltd. (a)................................... 11,000 470,250
Peoplesoft, Inc. (a)................................ 32,000 2,012,000
Quantum Corp. (a)................................... 16,000 506,000
Saville Systems PLC - ADR (Ireland) (a)............. 8,000 478,000
Siebel Systems, Inc. (a)............................ 21,500 868,062
Smart Modular Technologies, Inc. (a)................ 13,500 671,625
SunGard Data Systems, Inc. (a)...................... 34,000 803,250
Tekelec, Inc. (a)................................... 5,900 247,063
Teledata Communications, Inc. (a)................... 12,000 372,000
Tellabs, Inc. (a)................................... 20,000 1,080,000
Teradyne, Inc. (a).................................. 38,000 1,422,625
Uniphase Corp. (a).................................. 11,000 738,375
Veritas Software Co. (a)............................ 12,000 499,500
Viasoft, Inc. (a)................................... 10,000 410,000
Visio Corp. (a)..................................... 16,000 595,000
Vitesse Semiconductor Corp. (a)..................... 21,000 910,875
VLSI Technology, Inc. (a)........................... 25,500 755,437
Wind River Systems, Inc. (a)........................ 13,000 498,875
World Access, Inc. (a).............................. 14,000 371,000
Yahoo!, Inc. (a).................................... 21,000 920,719
Yurie Systems, Inc. (a)............................. 5,000 151,563
-----------
50,225,031
-----------
Transportation 3.2%
Airborne Freight Corp............................... 15,000 950,625
CNF Transportation, Inc............................. 17,000 758,625
Continental Airlines, Inc., Class B (a)............. 22,500 973,125
Expeditores International Washington, Inc........... 4,200 154,350
Halter Marine Group, Inc. (a)....................... 15,000 784,688
Southwest Airlines Co............................... 27,000 880,875
</TABLE>
See Notes to Financial Statements
17
<PAGE>
Emerging Growth Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation (Continued)
Tower Automotive, Inc. (a)............................................................. 8,000 $ 335,000
U.S. Airways Group, Inc. (a)........................................................... 24,000 1,125,000
------------
5,962,288
------------
Utilities 1.1%
AES Corp. (a).......................................................................... 25,000 990,625
AirTouch Communications, Inc. (a)...................................................... 21,000 811,125
Premiere Technologies, Inc. (a)........................................................ 10,000 340,000
------------
2,141,750
------------
Total Long-Term Investments 92.9% (Cost $132,941,678)............................................... 173,116,016
------------
Short-Term Investments 6.8%
Repurchase Agreement 5.3%
DLJ Securities ($9,840,000 par collateralized by U.S. Government obligations in a
pooled cash account, dated 10/31/97, to be sold on 11/03/97 at $9,844,649)........................ 9,840,000
U.S. Government Obligation 1.5%
Federal Home Loan Bank Discount Note ($3,000,000 par, yielding 5.55%,
03/13/98 maturity)................................................................................ 2,940,030
------------
Total Short-Term Investments (Cost $12,780,150)..................................................... 12,780,030
------------
Total Investments 99.7% (Cost $145,721,828)......................................................... 185,896,046
Other Assets in Excess of Liabilities 0.3%.......................................................... 502,591
------------
Net Assets 100.0%................................................................................... $186,398,637
============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
18
<PAGE>
Emerging Growth Fund Statement of Assets and Liabilities
October 31, 1997
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total Investments (Cost $145,721,828)........................................................................ $185,896,046
Cash......................................................................................................... 4,191
Receivables:
Fund Shares Sold........................................................................................... 2,011,754
Investments Sold........................................................................................... 195,681
Dividends.................................................................................................. 16,340
Unamortized Organizational Costs............................................................................. 9,730
Other...................................................................................................... 10,557
------------
Total Assets............................................................................................... 188,144,299
------------
Liabilities:
Payables:
Investments Purchased...................................................................................... 1,136,786
Fund Shares Repurchased.................................................................................... 206,460
Distributor and Affiliates................................................................................. 127,899
Investment Advisory Fee.................................................................................... 108,053
Accrued Expenses............................................................................................. 153,402
Trustees' Retirement Plan.................................................................................... 13,062
------------
Total Liabilities......................................................................................... 1,745,662
------------
Net Assets................................................................................................... $186,398,637
============
Net Assets Consist of:
Capital...................................................................................................... $144,398,590
Net Unrealized Appreciation.................................................................................. 40,174,218
Accumulated Net Realized Gain................................................................................ 1,828,333
Accumulated Net Investment Loss.............................................................................. (2,504)
------------
Net Assets................................................................................................... $186,398,637
============
Maximum Offering Price Per Share:
Class 1 Shares:
Net asset value and redemption price per share (Based on net assets of $6,114,920 and 276,032 shares of
beneficial interest issued and outstanding)............................................................. $ 22.15
Maximum sales charge (8.50%* of offering price)........................................................... 2.06
------------
Maximum offering price to public.......................................................................... $ 24.21
============
Class A Shares:
Net assets value and redemption price per share (Based on net assets of $100,566,787 and 4,555,287 shares
of beneficial interest and outstanding)................................................................. $ 22.08
Maximum sales charge (5.50%* of offering price)........................................................... 1.29
------------
Maximum offering price to public.......................................................................... $ 23.37
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $79,716,930 and 3,684,878 shares of
beneficial interest issued and outstanding)............................................................. $ 21.63
============
</TABLE>
* On sales of $10,000 of more for Class 1 shares and $50,000 or more for Class A
shares, the sales charge will be reduced.
See Notes to Financial Statements
19
<PAGE>
Emerging Growth Fund Financial Statements
October 31, 1997
Statement of Operations:
<TABLE>
<CAPTION>
Year Ended
October 31, 1997
----------------
<S> <C>
Investment Income:
Interest................................................................................. $ 766,115
Dividends................................................................................ 305,574
-----------
Total Income........................................................................... 1,071,689
-----------
Expenses:
Investment Advisory Fee.................................................................. 904,959
Shareholder Services..................................................................... 842,079
Distribution (12b-1) and Service Fees (Attributed to Class A and B of $193,021 and
$587,116, respectively)................................................................. 780,137
Registration and Filing Fees............................................................. 68,276
Trustees' Fees and Expenses.............................................................. 19,064
Amortization of Organizational Costs..................................................... 4,179
Custody.................................................................................. 2,286
Other.................................................................................... 165,605
-----------
Total Expenses......................................................................... 2,786,585
-----------
Net Investment Loss...................................................................... $(1,714,896)
============
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments............................................................................ $ 4,461,453
Futures................................................................................ 1,155,657
-----------
Net Realized Gain........................................................................ 5,617,110
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................................................ 17,310,941
End of the Period:
Investments........................................................................... 40,174,218
-----------
Net Unrealized Appreciation During the Period............................................ 22,863,277
-----------
Net Realized and Unrealized Gain......................................................... $28,480,387
===========
Net Increase in Net Assets From Operations............................................... $26,765,491
===========
Statement of Changes in Net Assets
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Loss...................................................................... $ (1,714,896) $(1,068,737)
Net Realized Gain/Loss................................................................... 5,617,110 (3,758,785)
Net Unrealized Appreciation During the Period............................................ 22,863,277 15,144,176
------------ -----------
Change in Net Assets from Operations..................................................... 26,765,491 10,316,654
------------ -----------
From Capital Transactions:
Proceeds from Shares Sold................................................................ 92,655,877 62,308,648
Cost of Shares Repurchased............................................................... (24,299,367) (8,092,239)
------------ -----------
Net Change in Net Assets from Capital Transactions....................................... 68,356,510 54,216,409
------------ -----------
Total Increase in Net Assets............................................................. 95,122,001 64,533,063
Net Assets:
Beginning of the Period.................................................................. 91,276,636 26,743,573
------------ -----------
End of the Period (Including accumulated net investment loss of $2,504
and $1,258, respectively).............................................................. $186,398,637 $91,276,636
============ ===========
</TABLE>
See Notes to Financial Statements
20
<PAGE>
Emerging Growth Fund Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
August 8, 1996
(Commencement
Year Ended of Distribution) to
October 31, 1997 October 31, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Class 1 Shares
Net Asset Value, Beginning of the Period............. $18.593 $17.890
------- -------
Net Investment Loss................................ (.078) (.015)
Net Realized and Unrealized Gain................... 3.638 .718
------- -------
Total from Investment Operations..................... 3.560 .703
------- -------
Net Asset Value, End of the Period................... $22.153 $18.593
======= =======
Total Return (a)..................................... 19.15% 3.91%*
Net Assets at End of Period (In millions)............ $ 6.1 $ 0.7
Ratio of Expenses to Average Net Assets.............. 1.39% 1.74%
Ratio of Net Investment Loss to Average Net Assets... (.63%) (1.09%)
Portfolio Turnover................................... 100% 80%
Average Commission Paid Per Equity Share Traded (b).. $ .0290 $ .0498
</TABLE>
* Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable.
See Notes to Financial Statements
21
<PAGE>
Emerging Growth Fund Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
February 21, 1995
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class A Shares October 31, 1997 October 31, 1996 October 31, 1995 (a)
..............................................................................................................................
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period................ $ 18.574 $ 15.12 $ 11.81
---------------- ---------------- ------------------
Net Investment Loss................................... (.156) (.178) (.24)
Net Realized and Unrealized Gain...................... 3.659 3.632 3.55
---------------- ---------------- ------------------
Total from Investment Operations........................ 3.503 3.454 3.31
---------------- ---------------- ------------------
Net Asset Value, End of the Period...................... $ 22.077 $ 18.574 $ 15.12
================ ================ ==================
Total Return (b)........................................ 18.90% 22.82% 28.11%(c)
Net Assets at End of Period (In millions)............... $ 100.6 $ 51.5 $ 15.9
Ratio of Expenses to Average Net Assets (d)............. 1.69% 2.21% 2.75%
Ratio of Net Investment Loss to Average Net Assets (d).. (.92%) (1.52%) (1.65%)
Portfolio Turnover...................................... 100% 80% 83%*
Average Commission Paid Per Equity Share Traded (e)..... $ .0290 $ .0498 $ -
- ------------------------------------------------------------------------------------------------------------------------------
February 21, 1995
(Commencement
of Investment
Year Ended Year Ended Operations) to
Class B Shares October 31, 1997 October 31, 1996 October 31, 1995 (a)
..............................................................................................................................
Net Asset Value, Beginning of the Period................ $ 18.339 $ 15.04 $ 11.81
---------------- ---------------- ------------------
Net Investment Loss................................... (.266) (.270) (.35)
Net Realized and Unrealized Gain...................... 3.561 3.569 3.58
---------------- ---------------- ------------------
Total from Investment Operations........................ 3.295 3.299 3.23
---------------- ---------------- ------------------
Net Asset Value, End of the Period...................... $ 21.634 $ 18.339 $ 15.04
================ ================ ==================
Total Return (b)........................................ 17.94% 21.94% 27.43%(c)
Net Assets at End of Period (In millions)............... $ 79.7 $ 39.1 $ 10.8
Ratio of Expenses to Average Net Assets (d)............. 2.44% 2.96% 3.49%
Ratio of Net Investment Loss to Average Net Assets (d).. (1.67%) (2.27%) (2.45%)
Portfolio Turnover...................................... 100% 80% 83%*
Average Commission Paid Per Equity Share Traded (e)..... $ .0290 $ .0498 $ -
</TABLE>
* Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) Total Return from March 17, 1995 (date the Fund's investment strategy was
implemented) through October 31, 1995 without annualization.
(d) If the Adviser had not waived fees for the period ended October 31, 1995,
the total return would have been lower and the Ratios of Expenses to Average
Net Assets and Net Investment Loss to Average Net Assets would have been
3.37% and (2.27%) for Class A shares and 4.11% and (3.07%) for Class B
shares, respectively.
(e) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
See Notes to Financial Statements
22
<PAGE>
Government Fund Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Government Agency Obligations 58.1%
<C> <S> <C> <C> <C>
$ 3,304 Federal Home Loan Mortgage Corp. Gold 5 Year Balloon....................... 6.500% 11/01/97-07/01/98 $ 3,330,118
4,299 Federal Home Loan Mortgage Corp. Gold 30 Year Pools........................ 7.000 07/01/24-10/01/24 4,320,140
20,893 Federal Home Loan Mortgage Corp. Gold 30 Year Pools........................ 7.500 04/01/24-09/01/26 21,359,129
333 Federal Home Loan Mortgage Corp. Gold 30 Year Pools........................ 8.000 06/01/24-11/01/24 345,641
3,864 Federal National Mortgage Association 15 Year Dwarf Pools.................. 7.500 12/01/06-08/01/12 3,962,529
10,052 Federal National Mortgage Association Pools................................ 6.500 01/01/26-07/01/26 9,879,141
8,674 Federal National Mortgage Association Pools................................ 7.000 04/01/24-05/01/25 8,715,582
15,364 Federal National Mortgage Association Pools................................ 7.500 02/01/16-02/01/26 15,704,670
25 Federal National Mortgage Association Pools................................ 8.000 08/01/25 25,501
9,983 Government National Mortgage Association Pools............................. 6.500 01/15/26-07/15/26 9,873,849
18,963 Government National Mortgage Association Pools............................. 7.000 06/15/22-10/15/25 19,069,743
6,367 Government National Mortgage Association Pools............................. 7.500 03/15/22-10/15/24 6,510,315
4,899 Government National Mortgage Association Pools............................. 8.000 06/15/16-08/15/24 5,083,811
25,074 Government National Mortgage Association Pools (a)......................... 8.500 12/15/05-06/15/23 26,466,702
18,851 Government National Mortgage Association Pools (a)......................... 9.000 12/15/17 20,394,935
10 Government National Mortgage Association Pools............................. 10.000 03/15/16 10,758
------------
Total U.S. Government Agency Obligations........................................................... 155,052,564
------------
U.S. Government Obligations 39.6%
1,000 U.S. Treasury Bonds (a).................................................... 7.125 02/15/23 1,111,090
12,000 U.S. Treasury Bonds (a).................................................... 8.125 08/15/19 14,696,280
10,000 U.S. Treasury Bonds (a).................................................... 11.125 08/15/03 12,570,300
1,200 U.S. Treasury Notes (a).................................................... 6.500 08/15/05 1,244,436
20,000 U.S. Treasury Notes (a).................................................... 7.000 07/15/06 21,440,600
20,000 U.S. Treasury Notes (a).................................................... 7.500 05/15/02 21,378,200
19,000 U.S. Treasury Notes (a).................................................... 8.500 02/15/00 20,145,890
12,000 U.S. Treasury Notes (a).................................................... 8.500 11/15/00 12,915,000
------------
Total U.S. Government Obligations.................................................................. 105,501,796
------------
Forward Purchase Commitment 1.9%
5,000 Federal National Mortgage Association 15 Year Jan Dwarf.................... 7.000 12/31/23 5,052,750
------------
Total Long-Term Investments 99.6%
(Cost $257,991,762)............................................................................................. 265,607,110
Repurchase Agreement 1.0%
Lehman Brothers ($2,630,000 par collateralized by U.S. Government obligations
in a pooled cash account, dated 10/31/97, to be sold on 11/03/97 at $2,631,245) (Cost $2,630,000)............... 2,630,000
------------
Total Investments 100.6% (Cost $260,621,762)...................................................................... 268,237,110
Liabilities in Excess of Other Assets (0.6%)...................................................................... (1,674,906)
------------
Net Assets 100.0%................................................................................................. $266,562,204
============
</TABLE>
(a) Assets segregated as collateral for open futures and forward transactions.
See Notes to Financial Statements
23
<PAGE>
Government Fund Statement of Assets and Liabilities
October 31, 1997
<TABLE>
<S> <C>
Assets:
Total Investments (Cost $260,621,762).................................................................. $268,237,110
Cash................................................................................................... 13,703
Receivables:
Investments Sold..................................................................................... 12,251,629
Interest............................................................................................. 3,300,585
Fund Shares Sold..................................................................................... 906,255
Variation Margin on Futures.......................................................................... 133,187
Other.................................................................................................. 85,395
------------
Total Assets........................................................................................... 284,927,864
------------
Liabilities:
Payables:
Investments Purchased................................................................................ 17,303,817
Fund Shares Purchased................................................................................ 393,498
Income Distributions................................................................................. 187,609
Investment Advisory Fee.............................................................................. 135,124
Forward Commitments.................................................................................. 110,670
Distributor and Affiliates........................................................................... 91,278
Trustees' Retirement Plan.............................................................................. 86,749
Accrued Expenses....................................................................................... 56,915
------------
Total Liabilities...................................................................................... 18,365,660
------------
Net Assets............................................................................................. $266,562,204
============
Net Assets Consist of:
Capital................................................................................................ $294,228,329
Net Unrealized Appreciation............................................................................ 9,903,471
Accumulated Undistributed Net Investment Income........................................................ 277,980
Accumulated Net Realized Loss.......................................................................... (37,847,576)
------------
Net Assets............................................................................................. $266,562,204
============
Maximum Offering Price Per Share:
Class 1 Shares:
Net asset value and redemption price per share (Based on net assets of $240,652,226 and 22,741,103
shares of beneficial interest issued and outstanding)............................................... $ 10.58
Maximum sales charge (6.75%* of offering price)..................................................... .77
------------
Maximum offering price to public.................................................................... $ 11.35
============
Class A Shares:
Net asset value and redemption price per share (Based on net assets of $13,533,017 and 1,278,958
shares of beneficial interest issued and outstanding)............................................... $ 10.58
Maximum sales charge (4.75%* of offering price)..................................................... .53
------------
Maximum offering price to public.................................................................... $ 11.11
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $12,376,961 and 1,169,696
shares of beneficial interest issued and outstanding)............................................... $ 10.58
============
</TABLE>
* On sales of $25,000 or more for Class 1 shares and $100,000 or more for Class
A shares, the sales charge will be reduced.
See Notes to Financial Statements
24
<PAGE>
Government Fund Financial Statements
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
October 31, 1997
----------------
<S> <C>
Investment Income:
Interest....................................................................................... $ 21,554,683
------------
Expenses:
Investment Advisory Fee........................................................................ 1,702,968
Shareholder Services........................................................................... 519,560
Distribution (12b-1) and Services Fees (Attributed to Classes A and B of $30,357
and $128,349, respectively).................................................................. 158,706
Custody........................................................................................ 46,510
Trustees' Fees and Expenses.................................................................... 33,426
Other.......................................................................................... 251,009
------------
Total Expenses.............................................................................. 2,712,179
------------
Net Investment Income.......................................................................... $ 18,842,504
============
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments.................................................................................. $ (1,953,241)
Futures...................................................................................... 699,199
Forwards..................................................................................... 400,000
------------
Net Realized Loss.............................................................................. (854,042)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period...................................................................... 5,358,494
------------
End of the Period:
Investments................................................................................ 7,615,348
Futures.................................................................................... 2,398,793
Forwards................................................................................... (110,670)
------------
9,903,471
------------
Net Unrealized Appreciation During the Period.................................................. 4,544,977
------------
Net Realized and Unrealized Gain............................................................... $ 3,690,935
============
Net Increase in Net Assets from Operations..................................................... $ 22,533,439
============
</TABLE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income......................................................... $ 18,842,504 $ 21,280,840
Net Realized Loss............................................................. (854,042) (3,976,596)
Net Unrealized Appreciation/Depreciation During the Period.................... 4,544,977 (3,590,273)
------------ ------------
Change in Net Assets from Operations.......................................... 22,533,439 13,713,971
------------ ------------
Distributions from Net Investment Income...................................... (18,641,556) (21,657,232)
Distributions in Excess of Net Investment Income.............................. 0 (124,957)
------------ ------------
Distributions from and in Excess of Net Investment Income................... (18,641,556) (21,782,189)
------------ ------------
Net Change in Net Assets from Investment Activities........................... 3,891,883 (8,068,218)
------------ ------------
From Capital Transactions:
Proceeds from Shares Sold..................................................... 22,622,445 56,574,484
Net Asset Value of Shares Issued Through Dividend Reinvestment................ 16,100,273 18,761,150
Cost of Shares Repurchased.................................................... (88,400,501) (83,934,267)
------------ ------------
Net Change in Net Assets from Capital Transactions............................ (49,677,783) (8,598,633)
------------ ------------
Total Decrease in Net Assets.................................................. (45,785,900) (16,666,851)
Net Assets:
Beginning of the Period....................................................... 312,348,104 329,014,955
------------ ------------
End of the Period (Including accumulated undistributed net investment income
of $277,980 and $(6,653), respectively)..................................... $266,562,204 $312,348,104
============ ============
</TABLE>
See Notes to Financial Statements
25
<PAGE>
Government Fund Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
Year Ended October 31
-----------------------------------------------------
Class 1 Shares 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $10.406 $ 10.67 $ 9.99 $ 11.80 $ 11.56
------- ------- ------- ------- -------
Net Investment Income...................................... .692 .701 .70 .69 .7616
Net Realized and Unrealized
Gain/Loss................................................. .168 (.247) .6779 (1.358) .4249
------- ------- ------- ------- -------
Total from Investment Operations............................ .860 .454 1.3779 (.668) 1.1865
------- ------- ------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income......................................... .684 .718 .6979 .6878 .7615
Distributions from and in Excess of Net
Realized Gain............................................. -0- -0- -0- .4542 .185
------- ------- ------- ------- -------
Total Distributions......................................... .684 .718 .6979 1.142 .9465
------- ------- ------- ------- -------
Net Asset Value, End of the Period.......................... $10.582 $10.406 $ 10.67 $ 9.99 $ 11.80
======= ======= ======= ======= =======
Total Return (a)............................................ 8.56% 4.58% 14.27% (5.45%) 10.55%
Net Assets at End of the Period (In millions)............... $ 240.7 $ 287.4 $ 329.0 $ 335.0 $ 370.2
Ratio of Expenses to Average Net Assets..................... .90% .84% .83% .89% .89%
Ratio of Net Investment Income to Average Net Assets........ 6.69% 6.79% 6.84% 7.06% 7.35%
Portfolio Turnover.......................................... 104% 276% 214% 256% 218%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------ -----------------------------------------
Year Ended Period Ended Year Ended Period Ended
October 31, 1997 October 31, 1996 (b) October 31, 1997 October 31, 1996 (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $10.411 $ 10.32 $10.411 $ 10.32
------- ------- ------- -------
Net Investment Income.................. .666 .152 .590 .137
Net Realized and Unrealized
Gain.................................. .168 .090 .167 .090
------- ------- ------- -------
Total from Investment Operations........ .834 .242 .757 .227
Less Distributions from and in Excess of
Net Investment Income.................. .664 .151 .587 .136
------- ------- ------- -------
Net Asset Value, End of the Period...... $10.581 $10.411 $10.581 $10.411
======= ======= ======= =======
Total Return (a)........................ 8.35% 2.36%* 7.55% 2.18*
Net Assets at End of the Period (In
millions).............................. $ 13.5 $ 11.1 $ 12.4 $ 13.9
Ratio of Expenses to Average Net Assets. 1.15% 1.09% 1.90% 1.84%
Ratio of Net Investment Income to
Average Net Assets..................... 6.44% 6.50% 5.69% 5.74%
Portfolio Turnover...................... 104% 276% 104% 276%
</TABLE>
* Non-Annualized
(a) Total return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Class A and Class B shares commenced distribution on August 8, 1995.
See Notes to Financial Statements
26
<PAGE>
Growth Fund Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 92.6%
Consumer Distribution 12.0%
American Stores Co.................................... 1,350,000 $ 34,678,125
AutoZone, Inc. (a).................................... 800,000 23,650,000
Dayton Hudson Corp.................................... 650,000 40,828,125
Dillards Department Stores, Inc., Class A............. 450,000 17,268,750
Dominick's Supermarkets, Inc. (a)..................... 400,000 14,600,000
Duckwall-ALCO Stores, Inc. (a)........................ 200,000 2,975,000
Federated Department Stores, Inc. (a)................. 500,000 22,000,000
Gap, Inc.............................................. 280,000 14,892,500
J.C. Penney, Inc...................................... 600,000 35,212,500
Kroger Co. (a)........................................ 1,286,200 41,962,275
Lear Corp. (a)........................................ 750,000 36,046,875
Lowe's Cos., Inc...................................... 550,000 22,893,750
May Department Stores Co.............................. 400,000 21,550,000
Pier 1 Imports, Inc................................... 600,000 10,950,000
Polo Ralph Lauren Corp. (a)........................... 211,600 5,501,600
Rite Aid Corp......................................... 358,600 21,291,875
Safeway, Inc. (a)..................................... 408,100 23,720,812
TJX Cos. Inc.......................................... 700,000 20,737,500
Wal-Mart Stores, Inc.................................. 1,200,000 42,150,000
-----------
452,909,687
-----------
Consumer Durables 1.9%
Black & Decker Corp................................... 300,000 11,418,750
Eaton Corp............................................ 125,000 12,078,125
Ford Motor Co......................................... 425,000 18,567,188
General Motors Corp................................... 465,000 29,847,187
-----------
71,911,250
-----------
Consumer Non-Durables 8.5%
Avon Products, Inc.................................... 500,000 32,750,000
Clorox Co............................................. 300,000 21,000,000
Colgate Palmolive Co.................................. 700,000 45,325,000
ConAgra, Inc.......................................... 1,100,000 33,137,500
CPC International, Inc................................ 425,000 42,075,000
Kimberly Clark Corp................................... 400,000 20,775,000
Liz Claiborne, Inc.................................... 606,500 30,741,969
Nabisco Holdings Corp., Class A....................... 500,000 20,562,500
Sara Lee Corp......................................... 550,000 28,118,750
Tyson Foods, Inc., Class A............................ 600,000 11,325,000
Unilever NV -- (Netherlands).......................... 700,000 37,362,500
-----------
323,173,219
-----------
Consumer Services 5.3%
Cox Communications, Inc., Class A (a)................. 550,000 16,912,500
Cracker Barrel Old Country Store, Inc................. 350,000 10,325,000
FIRSTPLUS Financial Group, Inc. (a)................... 100,000 5,500,000
HFS, Inc. (a)......................................... 200,000 14,100,000
Hilton Hotels Corp.................................... 293,400 9,040,387
Host Marriott Corp. (a)............................... 675,000 14,090,625
</TABLE>
See Notes to Financial Statements
27
<PAGE>
Growth Fund Portfolio of Investments (Continued)
October 31 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Consumer Services (Continued)
Marriott International, Inc........................... 300,000 $ 20,925,000
New York Times Co..................................... 400,000 21,900,000
Omnicom Group, Inc.................................... 6,300 444,938
Stewart Enterprises, Inc., Class A.................... 29,900 1,240,850
Tele-Communications TCI Ventures Group, Series A (a).. 636,648 14,682,694
Tele-Communications, Inc., Class A (a)................ 900,002 20,643,796
Time Warner, Inc...................................... 900,000 51,918,750
------------
201,724,540
------------
Energy 7.1%
Amerada Hess Corp..................................... 300,000 18,431,250
British Petroleum Co. PLC-ADR (United Kingdom)........ 100,000 8,775,000
Chevron Corp.......................................... 300,000 24,881,250
Coastal Corp.......................................... 550,000 33,068,750
Cooper Cameron Corp. (a).............................. 200,000 14,450,000
McDermott International, Inc.......................... 600,000 21,787,500
Noble Affiliates, Inc................................. 200,000 8,212,500
Schlumberger, Ltd..................................... 250,000 21,875,000
Texaco, Inc........................................... 300,000 17,081,250
USX-Marathon Group.................................... 1,300,000 46,475,000
Western Atlas, Inc. (a)............................... 425,000 36,629,688
YPF Sociedad Anonima, Class D-ADR (Argentina)......... 475,000 15,200,000
------------
266,867,188
------------
Finance 15.1%
Allstate Corp......................................... 244,300 20,261,631
American Express Co................................... 250,000 19,500,000
American General Corp................................. 600,000 30,600,000
BankAmerica Corp...................................... 440,000 31,460,000
BankBoston Corp....................................... 425,000 34,451,562
Charter One Financial, Inc............................ 214,830 12,486,994
Chase Manhattan Corp.................................. 365,000 42,111,875
CIGNA Corp............................................ 125,000 19,406,250
CoreStates Financial Corp............................. 200,000 14,550,000
Federal National Mortgage Association................. 800,000 38,750,000
First Union Corp...................................... 800,000 39,250,000
Fleet Financial Group, Inc............................ 200,000 12,862,500
Green Tree Financial Corp............................. 300,000 12,637,500
GreenPoint Financial Corp............................. 600,000 38,625,000
Household International, Inc.......................... 200,000 22,650,000
Merrill Lynch & Co., Inc.............................. 260,000 17,582,500
MGIC Investment Corp.................................. 631,900 38,111,469
NationsBank Corp...................................... 300,000 17,962,500
Nationwide Financial Services, Inc., Class A.......... 300,000 9,131,250
Paine Webber Group, Inc............................... 250,000 11,046,875
Patriot American Hospitality, Inc..................... 280,500 9,256,500
SAFECO Corp........................................... 500,000 23,812,500
Summit Bancorp........................................ 150,000 6,403,125
</TABLE>
See Notes to Financial Statements
28
<PAGE>
Growth Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Finance (Continued)
TCF Financial Corp.................................. 150,000 $ 8,531,250
U.S. Bancorp........................................ 400,000 40,675,000
------------
572,116,281
------------
Healthcare 7.2%
Abbott Laboratories................................. 500,000 30,656,250
Aetna, Inc.......................................... 450,000 31,978,125
American Home Products Corp......................... 250,000 18,531,250
Becton, Dickinson & Co.............................. 350,200 16,131,088
Bristol-Myers Squibb Co............................. 500,000 43,875,000
HEALTHSOUTH Corp.(a)................................ 973,300 24,879,981
MedPartners, Inc. (a)............................... 1,700,000 43,243,750
Medtronic, Inc...................................... 400,000 17,400,000
Schering-Plough Corp................................ 600,000 33,637,500
United Healthcare Corp.............................. 300,000 13,893,750
------------
274,226,694
------------
Producer Manufacturing 7.6%
Canadian Pacific Ltd................................ 1,150,000 34,284,375
Coltec Industries, Inc. (a)......................... 500,000 10,000,000
Cummins Engine, Inc................................. 150,000 9,140,625
Deere & Co.......................................... 357,000 18,787,125
Federal Mogul Corp.................................. 100,000 4,231,250
Honeywell, Inc...................................... 200,000 13,612,500
Ingersoll-Rand Co................................... 300,000 11,681,250
ITT Corp. (a)....................................... 1,000,000 74,687,500
LucasVarity PLC-ADR (United Kingdom)................ 600,000 20,475,000
U.S. Filter Corp. (a)............................... 476,000 19,099,500
United Technologies Corp............................ 150,000 10,500,000
Westinghouse Electric Corp.......................... 2,250,000 59,484,375
------------
285,983,500
------------
Raw Materials/Processing Industries 3.2%
Air Products & Chemicals, Inc....................... 300,000 22,800,000
Boise Cascade Corp.................................. 150,000 5,193,750
Champion International Corp......................... 350,000 19,315,625
DuPont (E.I.) De Nemours & Co....................... 200,000 11,375,000
Fort James Corp..................................... 250,000 9,921,875
International Paper Co.............................. 300,000 13,500,000
Louisiana-Pacific Corp.............................. 200,000 4,200,000
Morton International, Inc........................... 250,000 8,250,000
Praxair, Inc........................................ 381,200 16,606,025
Union Carbide Corp.................................. 200,000 9,137,500
------------
120,299,775
------------
Technology 16.7%
3Com Corp. (a)...................................... 400,000 16,575,000
Adaptec, Inc. (a)................................... 500,000 24,218,750
America Online, Inc. (a)............................ 200,000 15,400,000
</TABLE>
See Notes to Financial Statements
29
<PAGE>
Growth Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------
<S> <C> <C>
Technology (Continued)
Analog Devices, Inc. (a).................... 900,000 $ 27,506,250
BMC Software, Inc. (a)...................... 700,000 42,262,500
CIENA Corp. (a)............................. 300,000 16,500,000
Cisco Systems, Inc. (a)..................... 525,000 43,066,406
Compaq Computer Corp........................ 1,000,000 63,750,000
Computer Associates International, Inc...... 625,000 46,601,563
Compuware Corp. (a)......................... 500,000 33,062,500
Dell Computer Corp. (a)..................... 150,000 12,018,750
DSC Communications Corp. (a)................ 800,000 19,500,000
EMC Corp. (a)............................... 375,000 21,000,000
Hewlett-Packard Co.......................... 285,000 17,580,938
International Business Machines Corp........ 625,000 61,289,062
Linear Technology Corp...................... 250,000 15,718,750
Lucent Technologies, Inc.................... 300,000 24,731,250
Microsoft Corp. (a)......................... 166,000 21,580,000
Nokia Corp. -- ADR (Finland)................ 300,000 26,475,000
Peoplesoft, Inc............................. 150,000 9,431,250
SCI Systems, Inc. (a)....................... 400,000 17,600,000
Tellabs, Inc. (a)........................... 400,000 21,600,000
Texas Instruments, Inc...................... 100,000 10,668,750
VLSI Technology, Inc. (a)................... 750,000 22,218,750
-------------
630,355,469
-------------
Transportation 0.6%
Continental Airlines, Inc., Class B (a)..... 500,000 21,625,000
-------------
Utilities 7.4%
Ameritech Corp.............................. 500,000 32,500,000
AT&T Corp................................... 250,000 12,234,375
Bell Atlantic Corp.......................... 250,000 19,968,750
Bellsouth Corp.............................. 400,000 18,925,000
Boston Edison Co............................ 400,000 12,625,000
Duke Energy Co.............................. 700,000 33,775,000
Entergy Corp................................ 450,000 10,996,875
Houston, Industries, Inc.................... 1,000,000 21,750,000
ICG Communications, Inc. (a)................ 400,000 9,200,000
Illinova Corp............................... 525,000 11,681,250
LCI International, Inc. (a)................. 500,000 12,937,500
Pinnacle West Capital Corp.................. 375,000 13,054,687
Public Service Co. of New Mexico............ 250,000 4,859,375
SBC Communications, Inc..................... 300,000 19,087,500
Sprint Corp................................. 100,000 5,200,000
Teleport Communications Group, Class A (a).. 300,000 14,512,500
Texas Utilities Co.......................... 500,000 17,937,500
Worldcom, Inc. (a).......................... 300,000 10,087,500
-------------
281,332,812
-------------
Total Common Stocks 92.6%................................ 3,502,525,415
-------------
</TABLE>
See Notes to Financial Statements
30
<PAGE>
Growth Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Discipline Market Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
U. S. Treasury Securities 2.9%
U. S. Treasury Bonds ($85,000,000 par, 8.75% coupon, 05/15/17 maturity)............................. $ 109,225,000
--------------
Total Long-Term Investments 95.5% (Cost $2,895,482,337)............................................ 3,611,750,415
--------------
Short-Term Investments 6.2%
Repurchase Agreements 3.7%
DLJ Mortgage Acceptance Corp. ($66,075,000 par collateralized by U.S. Government Obligations in
a pooled cash account, dated 10/31/97, to be sold on 11/03/97 at $66,106,220)..................... 66,075,000
Lehman Brothers, Inc. ($28,020,000 par collateralized by U.S. Government Obligations in a pooled
cash account, dated 10/31/97, to be sold on 11/03/97 at $28,033,263).............................. 28,020,000
Lehman Brothers, Inc. ($44,760,000 par collateralized by U.S. Government Obligations in a pooled
cash account, dated 10/31/97, to be sold on 11/03/97 at $44,781,224).............................. 44,760,000
--------------
Total Repurchase Agreements......................................................................... 138,855,000
--------------
U. S. Government Agency Obligations 2.5%
Federal National Mortgage Association ($25,000,000 par, yielding 5.47%, 11/04/97 maturity).......... 24,985,000
Federal National Mortgage Association ($14,435,000 par, yielding 5.50%, 11/10/97 maturity).......... 14,413,267
Federal National Mortgage Association ($26,456,000 par, yielding 5.51%, 01/15/98 maturity).......... 26,151,492
Federal National Mortgage Association ($30,000,000 par, yielding 5.52%, 01/21/98 maturity).......... 29,627,400
--------------
Total U. S. Government Agency Obligations........................................................... 95,177,159
--------------
Total Short-Term Investments (Cost $234,034,260).................................................... 234,032,159
--------------
Total Investments 101.7% (Cost $3,129,516,597)..................................................... 3,845,782,574
Liabilities in Excess of Other Assets (1.7%)........................................................ (63,913,460)
--------------
Net Assets 100.0%................................................................................... $3,781,869,114
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
31
<PAGE>
Growth Fund Assets & Liabilities
<TABLE>
Assets:
<S> <C>
Total Investments (Cost $3,129,516,597)........................................................ $3,845,782,574
Cash........................................................................................... 5,686
Receivables:
Investments Sold............................................................................. 25,891,306
Dividends.................................................................................... 3,785,750
Interest..................................................................................... 3,435,802
Other.......................................................................................... 709,800
--------------
Total Assets............................................................................... 3,879,610,918
--------------
Liabilities:
Payables:
Investments Purchased........................................................................ 91,688,633
Investment Advisory Fee...................................................................... 1,925,625
Fund Shares Repurchased...................................................................... 1,826,574
Distributor and Affiliates................................................................... 1,294,172
Trustees' Retirement Plan...................................................................... 759,042
Accrued Expenses............................................................................... 247,758
--------------
Total Liabilities.......................................................................... 97,741,804
--------------
Net Assets..................................................................................... $3,781,869,114
==============
Net Assets Consist of:
Capital........................................................................................ $2,439,221,996
Net Unrealized Appreciation.................................................................... 716,265,977
Accumulated Net Realized Gain.................................................................. 603,678,844
Accumulated Undistributed Net Investment Income................................................ 22,702,297
--------------
Net Assets..................................................................................... $3,781,869,114
==============
Maximum Offering Price Per Share:
Class 1 Shares:
Net asset value and redemption price per share (Based on net assets of $3,547,123,339 and
169,366,980 shares of beneficial interest issued and outstanding).......................... $ 20.94
Maximum sales charge (8.50%* of offering price)............................................ 1.95
--------------
Maximum offering price to public........................................................... $ 22.89
==============
Class A Shares:
Net asset value and redemption price per share (Based on net assets of $108,496,435 and
5,193,124 shares of beneficial interest issued and outstanding)............................ $ 20.89
Maximum sales charge (5.50%* of offering price)............................................ 1.22
--------------
Maximum offering price to public........................................................... $ 22.11
==============
Class B Shares:
Net asset value and offering price per share (Based on net assets of $126,249,340 and
6,083,077 shares of beneficial interest issued and outstanding)............................ $ 20.75
==============
</TABLE>
* On sales of $10,000 or more on Class 1 shares and $50,000 or more on Class A
shares, the sales charge will be reduced.
32
<PAGE>
Growth Fund Financial Statements
<TABLE>
<CAPTION>
Statement of Operations
Year Ended
Investment Income: October 31, 1997
----------------
<S> <C> <C>
Dividends............................................................................. $ 40,919,149
Interest.............................................................................. 20,210,151
----------------
Total Income...................................................................... 61,129,300
----------------
Expenses:
Investment Advisory Fee............................................................... 20,533,544
Shareholder Services.................................................................. 7,701,309
Distribution (12b-1) and Service Fees (Attributed to Classes A and B of $192,932 and
$999,572, respectively)............................................................. 1,192,504
Custody............................................................................... 186,032
Trustees Fees and Expenses............................................................ 138,472
Other................................................................................. 2,383,815
----------------
Total Expenses.................................................................... 32,135,676
----------------
Net Investment Income................................................................. $ 28,993,624
================
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments......................................................................... $ 572,078,039
Futures............................................................................. 39,341,228
----------------
Net Realized Gain..................................................................... 611,419,267
----------------
Unrealized Appreciation/Depreciation:
Beginning of the Period............................................................. 532,627,910
End of the Period:
Investments....................................................................... 716,265,977
----------------
Net Unrealized Appreciation During the Period......................................... 183,638,067
----------------
Net Realized and Unrealized Gain...................................................... $ 795,057,334
================
Net Increase in Net Assets from Operations............................................ $ 824,050,958
================
- ---------------------------------------------------------------------------------------------------------------------------
Statement of Changes in Net Assets
Year Ended Year Ended
From Investment Activities: October 31, 1997 October 31, 1996
---------------- ----------------
Operations:
Net Investment Income................................................................. $ 28,993,624 $ 30,433,636
Net Realized Gain..................................................................... 611,419,267 233,324,224
Net Unrealized Appreciation During the Period......................................... 183,638,067 266,287,919
---------------- ----------------
Change in Net Assets from Operations.................................................. 824,050,958 530,045,779
---------------- ----------------
Distributions from Net Investment Income.............................................. (30,428,882) (27,245,960)
Distributions from Net Realized Gain.................................................. (234,552,764) (358,762,393)
---------------- ----------------
Total Distributions............................................................... (264,981,646) (386,008,353)
---------------- ----------------
Net Change in Net Assets from Investment Activities................................... 559,069,312 144,037,426
---------------- ----------------
From Capital Transactions:
Proceeds from Shares Sold............................................................ 306,116,644 386,037,987
Net Asset Value of Shares Issued Through Dividend Reinvestment....................... 263,450,902 383,855,779
Cost of Shares Repurchased........................................................... (475,355,079) (396,848,766)
---------------- ----------------
Net Change in Net Assets from Capital Transactions................................... 94,212,467 373,045,000
---------------- ----------------
Total Increase in Net Assets......................................................... 653,281,779 517,082,426
Net Assets:
Beginning of the Period.............................................................. 3,128,587,335 2,611,504,909
---------------- ----------------
End of the Period (Including accumulated undistributed net investment income of
$22,702,297 and $24,137,555, respectively)......................................... $3,781,869,114 $3,128,587,335
================ ================
</TABLE>
See Notes to Financial Statements
33
<PAGE>
Growth Fund Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the period indicated.
<TABLE>
<CAPTION>
Year Ended October 31
------------------------------------------------------------
Class 1 Shares 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $ 17.977 $ 17.46 $ 15.31 $ 16.26 $ 16.02
-------- -------- -------- -------- --------
Net Investment Income........................... .172 .187 .16 .13 .116
Net Realized and Unrealized Gain................ 4.328 2.916 3.18 .2075 2.0065
-------- -------- -------- -------- --------
Total from Investment Operations................. 4.500 3.103 3.34 .3375 2.1225
-------- -------- -------- -------- --------
Less:
Distributions from Net Investment Income........ .178 .183 .155 .1125 .115
Distributions from and in Excess of Net
Realized Gain.................................. 1.356 2.403 1.035 1.175 1.7675
-------- -------- -------- -------- --------
Total Distributions.............................. 1.534 2.586 1.19 1.2875 1.8825
-------- -------- -------- -------- --------
Net Asset Value, End of the Period............... $ 20.943 $ 17.977 $ 17.46 $ 15.31 $ 16.26
======== ======== ======== ======== ========
Total Return (a)................................. 26.93% 19.94% 24.01% 2.04% 14.27%
Net Assets at End of the Period (In millions).... $3,547.1 $3,005.2 $2,611.5 $2,169.9 $2,065.7
Ratio of Expenses to Average Net Assets.......... .88% .93% 1.00% 1.09% 1.14%
Ratio of Net Investment Income to
Average Net Assets.............................. .86% 1.08% 1.04% .89% .80%
Portfolio Turnover............................... 165% 202% 230% 164% 166%
Average Commission Paid Per Equity Share
Traded (b)...................................... $ .0302 $ .0602 - - -
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Shares Class B Shares
------------------------------------- ---------------------------------------
Year Ended Period Ended Year Ended Period Ended
October 31, 1997 October 31, 1996 (c) October 31, 1997 October 31, 1996 (c)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $17.959 $16.630 $17.928 $16.630
------- ------- ------- -------
Net Investment Income........................... .145 .017 .008 (.011)
Net Realized and Unrealized
Gain........................................... 4.305 1.312 4.282 1.309
------- ------- ------- -------
Total from Investment Operations................. 4.450 1.329 4.290 1.298
------- ------- ------- -------
Less:
Distributions from Net Investment Income........ .161 -0- .108 -0-
Distributions from Net Realized Gain............ 1.356 -0- 1.356 -0-
------- ------- ------- -------
Total Distributions.............................. 1.517 -0- 1.464 -0-
------- ------- ------- -------
Net Asset Value, End of the Period............... $20.892 $17.959 $20.754 $17.928
======= ======= ======= =======
Total Return (a)................................. 26.65% 8.00%* 25.66% 7.82%*
Net Assets at End of the Period (In millions).... $ 108.5 $ 49.3 $ 126.2 $ 74.1
Ratio of Expenses to Average Net Assets.......... 1.13% 1.17% 1.88% 1.93%
Ratio of Net Investment Income/Loss
to Average Net Assets........................... .57% .46% (.16%) (.29%)
Portfolio Turnover............................... 165% 202% 165% 202%
Average Commission Paid Per Equity Share
Traded (b)...................................... $ .0302 $ .0602 $.0302 $ .0602
</TABLE>
* Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Presents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
(c) Class A and Class B shares commenced distribution on August 18, 1996.
See Notes to Financial Statements
34
<PAGE>
Growth and Income Fund Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock 86.1%
Consumer Distribution 3.9%
Federated Department Stores, Inc. (a).............................. 463,700 $ 20,402,800
Gap, Inc........................................................... 372,300 19,801,706
Gymboree Corp. (a)................................................. 426,500 10,342,625
------------
50,547,131
------------
Consumer Durables 2.2%
Black & Decker Corp................................................ 215,000 8,183,437
Eastman Kodak Co................................................... 138,600 8,298,675
Masco Corp......................................................... 87,300 3,830,288
Whirlpool Corp..................................................... 133,100 8,069,187
------------
28,381,587
------------
Consumer Non-Durables 6.9%
Adidas-ADR (Germany), 144A-Private Placement (a) (c)............... 146,200 10,581,225
Avon Products, Inc................................................. 144,000 9,432,000
Colgate-Palmolive Co............................................... 213,000 13,791,750
CPC International, Inc............................................. 91,000 9,009,000
Nabisco Holdings Corp., Class A.................................... 473,000 19,452,125
Ralston-Ralston Purina Group....................................... 202,000 18,129,500
Tommy Hilfiger Corp. (a)........................................... 188,800 7,469,400
------------
87,865,000
------------
Consumer Services 4.4%
Bell & Howell Co. (a).............................................. 185,100 5,101,819
Cognizant Corp..................................................... 347,300 13,609,819
Gannett, Inc....................................................... 44,000 2,312,750
H & R Block, Inc................................................... 358,400 13,260,800
Lone Star Steakhouse & Saloon (a).................................. 422,700 9,774,937
New York Times Co.................................................. 34,000 1,861,500
Readers Digest Association, Inc., Class A Non-Voting............... 141,000 3,207,750
Walt Disney Co..................................................... 82,500 6,785,625
------------
55,915,000
------------
Energy 9.9%
Coastal Corp....................................................... 255,000 15,331,875
El Paso Natural Gas Co............................................. 178,000 10,668,875
Exxon Corp......................................................... 165,000 10,137,188
McDermott International, Inc....................................... 248,800 9,034,550
Royal Dutch Peteroleum Co.-N.Y. Registered Shares (Netherlands).... 313,500 16,497,937
Texaco, Inc........................................................ 458,000 26,077,375
Unocal Corp........................................................ 140,000 5,775,000
USX-Marathon Group................................................. 406,000 14,514,500
Valero Energy Corp................................................. 78,000 2,349,750
YPF Sociedad Anonima, Class D-ADR (Argentina)...................... 487,000 15,584,000
------------
125,971,050
------------
Finance 13.4%
Allstate Corp...................................................... 228,800 18,976,100
Bankamerica Corp................................................... 398,000 28,457,000
</TABLE>
See Notes to Financial Statements
35
<PAGE>
<TABLE>
<CAPTION>
Growth and Income Fund Portfolio of Investments (Continued)
October 31, 1997
Description Shares Market Value
- --------------------------------------------------------------------------------------------------------
Finance (Continued)
<S> <C> <C>
BankBoston Corp.................................................................. 178,000 $ 14,429,125
Bankers Trust New York Corp...................................................... 47,000 5,546,000
Chase Manhattan Corp............................................................. 172,000 19,844,500
CIGNA Corp....................................................................... 76,000 11,799,000
Conseco, Inc..................................................................... 246,900 10,771,012
Equitable Cos., Inc.............................................................. 191,000 7,866,813
Everest Reinsurance Holdings, Inc................................................ 223,800 8,420,475
First Union Corp................................................................. 209,000 10,254,062
Golden West Financial Corp....................................................... 47,000 4,077,250
NationsBank Corp................................................................. 94,000 5,628,250
Provident Cos., Inc.............................................................. 318,600 10,633,275
Washington Mutual, Inc........................................................... 186,000 12,729,375
Weingarten Realty Investors...................................................... 35,800 1,425,288
-----------
170,857,525
-----------
Healthcare 10.9%
Aetna, Inc....................................................................... 128,000 9,096,000
Alza Corp. (a)................................................................... 243,000 6,333,188
American Home Products Corp...................................................... 177,000 13,120,125
Merck & Co., Inc................................................................. 134,000 11,959,500
Mylan Laboratories, Inc.......................................................... 335,000 7,349,062
PacifiCare Health Systems, Class B (a)........................................... 282,800 18,311,300
Pfizer, Inc...................................................................... 61,000 4,315,750
Pharmacia & Upjohn, Inc.......................................................... 345,400 10,966,450
Rhone-Poulenc, SA, Units (Convertible into 5,518 warrants and 237,482 shares
of common stock) (a)............................................................. 243,000 10,935,000
Rhone-Poulenc, SA, Class A -- ADR (France) (a).................................... 27,000 1,140,750
SmithKline Beecham PLC -- ADR (United Kingdom).................................... 529,000 25,193,625
Warner-Lambert Co................................................................ 82,000 11,741,375
Watson Pharmaceuticals, Inc. (a)................................................. 275,800 8,756,650
-----------
139,218,775
-----------
Producer Manufacturing 8.2%
Agco Corp........................................................................ 298,000 8,642,000
AlliedSignal, Inc................................................................ 208,800 7,516,800
Canadian Pacific Ltd............................................................. 625,200 18,638,775
Flowserve Corp................................................................... 237,000 7,050,750
Fluor Corp....................................................................... 176,000 7,238,000
Ingersoll-Rand Co................................................................ 388,500 15,127,219
ITT Corp. (a).................................................................... 105,000 7,842,188
Johnson Controls, Inc............................................................ 243,900 10,945,012
Philips Electronics N.V. -- N.Y. Registered Shares (Netherlands).................. 170,100 13,331,587
Rockwell International Corp...................................................... 111,000 5,439,000
Waste Management, Inc............................................................ 134,400 3,141,600
-----------
104,912,931
-----------
Raw Materials/Processing Industries 4.8%
Betzdearborn, Inc......................................................... 131,000 8,400,375
Boise Cascade Corp........................................................ 264,000 9,141,000
Crown Cork & Seal Co., Inc................................................ 317,800 14,320,862
Fort James Corp........................................................... 195,000 7,739,063
</TABLE>
See Notes to Financial Statements
36
<PAGE>
Growth and Income Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw Materials/Processing Industries (Continued)
Grace (W.R.) & Co...................................... 149,000 $ 10,132,000
Reynolds Metals Co..................................... 94,000 5,728,125
Union Camp Corp........................................ 100,000 5,418,750
--------------
60,880,175
--------------
Technology 10.9%
3Com Corp. (a)......................................... 86,400 3,580,200
Alcatel Alsthom Compagnie Generale d' Electricite
-- ADR (France)....................................... 295,000 7,172,187
America Online, Inc. (a)............................... 43,200 3,326,400
Analog Devices, Inc. (a)............................... 133,000 4,064,813
BMC Software, Inc. (a)................................. 186,000 11,229,750
Cabletron Systems, Inc. (a)............................ 248,000 7,192,000
Cisco Systems, Inc. (a)................................ 34,000 2,789,063
Commscope, Inc. (a).................................... 59,400 653,400
Computer Associates International, Inc................. 176,000 13,123,000
Creative Technology Ltd. (a)........................... 314,000 7,987,375
Ericsson L M Telephone Co., Class B -- ADR
(Sweden).............................................. 204,700 9,057,975
International Business Machines Corp................... 288,000 28,242,000
Motorola, Inc.......................................... 158,000 9,756,500
Newbridge Networks Corp. (a)........................... 189,000 10,017,000
Nokia Corp. -- ADR (Finland)........................... 162,400 14,331,800
Xerox Corp............................................. 77,000 6,107,062
--------------
138,630,525
--------------
Transportation 1.1%
Canadian National Railway Co........................... 253,700 13,683,944
--------------
Utilities 9.5%
AirTouch Communications, Inc. (a)...................... 129,000 4,982,625
AT&T Corp.............................................. 170,300 8,334,056
BellSouth Corp......................................... 260,000 12,301,250
Boston Edison Co....................................... 216,000 6,817,500
Cincinnati Bell, Inc................................... 398,000 10,746,000
CMS Energy Corp........................................ 92,800 3,387,200
Edison International................................... 264,000 6,765,000
FPL Group, Inc......................................... 126,000 6,512,625
GPU, Inc............................................... 302,500 10,946,719
GTE Corp............................................... 179,300 7,609,044
Houston Industries, Inc................................ 343,000 7,460,250
Northeast Utilities.................................... 668,000 7,682,000
PG&E Corp.............................................. 368,600 9,422,338
SBC Communications, Inc................................ 141,000 8,971,125
U. S. West Media Group................................. 247,000 9,833,687
--------------
121,771,419
--------------
Total Common Stocks 86.1%...................................... 1,098,635,062
--------------
</TABLE>
See Notes to Financial Statements
37
<PAGE>
Growth and Income Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Preferred and Convertible Preferred Stock 0.9%
Fresenius National Med Care, Inc., Series D (a)........ 14,000 $ 840
Kmart Financing, 7.75% (Convertible into 262,977 common
shares)............................................... 78,900 4,492,369
Microsoft Corp., Series A, $2.196 dividend per share
(Convertible into 78,500 common shares)............... 78,500 6,927,625
--------------
Total Preferred and Convertible Preferred Stock................. 11,420,834
--------------
Convertible Corporate Obligations 3.8%
ADT Operations, Inc., LYON ($15,600,000 par, 0% coupon, 07/06/10
maturity, convertible into 423,946 common shares).............. 16,068,000
Deutsche Finance Netherlands, 144A -- Private Placement
($23,000,000 par, 0% coupon, 02/12/17 maturity, convertible
into 113,919 Daimler-Benz common shares)(c).................... 9,976,250
Hewlett Packard Co. 144A -- Private Placement, LYON ($9,000,000
par, 0% coupon, 10/14/17 maturity, convertible into 48,870
common shares)(c).............................................. 4,680,000
Merrill Lynch, STRYPES ($97,700 par, 6.00% coupon, 06/01/99
maturity, convertible into 80,075 Cox Communications common
shares)........................................................ 2,627,641
Roche Holdings, Inc., LYON ($23,500,000 par, 0% coupon, 04/20/10
maturity, convertible into 111,475 American Depository Shares). 11,750,000
Sandoz Ltd. ($2,600,000 par, 2.00% coupon, 10/06/02 maturity,
convertible into 2,435 common shares).......................... 3,867,500
--------------
Total Convertible Corporate Obligations......................... 48,969,391
--------------
Total Long-Term Investments 90.8% (Cost $947,623,963)........... 1,159,025,287
--------------
Short-Term Investments 9.3%
Repurchase Agreement 3.5%
BA Securities ($44,680,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 10/31/97, to be
sold on 11/03/97 at $44,701,297)(b)............................ 44,680,000
--------------
U.S. Government Agency Obligations 5.8%
Federal National Mortgage Association Discount Note ($15,000,000
par, yielding 5.479%, 01/20/98 maturity)(b).................... 14,815,950
Federal National Mortgage Association Discount Note ($19,440,000
par, yielding 5.492%, 11/06/97 maturity)(b).................... 19,422,439
Student Loan Marketing Discount Note ($39,340,000 par,
yielding 5.633%, 11/03/97 maturity)............................ 39,321,543
--------------
Total U.S. Government Agency Obligations........................ 73,559,932
--------------
Total Short-Term Investments (Cost $118,241,732)................ 118,239,932
--------------
Total Investments 100.1% (Cost $1,065,865,695).................. 1,277,265,219
Liabilities in Excess of Other Assets (0.1%).................... (771,780)
--------------
Net Assets 100.0%............................................... $1,276,493,439
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) Assets segregated for open futures transactions.
(c) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
LYON -- Liquid yield option note.
STRYPES -- Structured yield product exchangeable for common stock.
See Notes to Financial Statements
38
<PAGE>
Growth and Income Fund Statement of Assets and Liabilities
October 31, 1997
<TABLE>
<S> <C>
Assets:
Total Investments (Cost $1,065,865,695)....................... $1,277,265,219
Cash.......................................................... 12,369
Receivables:
Investments Sold............................................ 17,258,268
Fund Shares Sold............................................ 2,509,114
Dividends................................................... 1,309,656
Variation Margin on Futures................................. 1,097,250
Interest.................................................... 26,234
Other......................................................... 247,274
--------------
Total Assets................................................ 1,299,725,384
--------------
Liabilities:
Payables:
Investments Purchased....................................... 20,834,808
Fund Shares Purchased....................................... 902,268
Investment Advisory Fee..................................... 721,262
Distributor and Affiliates.................................. 410,903
Trustees' Retirement Plan..................................... 252,346
Accrued Expenses.............................................. 110,358
--------------
Total Liabilities........................................... 23,231,945
--------------
Net Assets.................................................... $1,276,493,439
==============
Net Assets Consist of:
Capital....................................................... $ 858,721,444
Net Unrealized Appreciation................................... 209,987,461
Accumulated Net Realized Gain................................. 206,793,123
Accumulated Undistributed Net Investment Income............... 991,411
--------------
Net Assets.................................................... $1,276,493,439
==============
Maximum Offering Price Per Share:
Class 1 Shares
Net asset value and redemption price per share (Based on
net assets of $1,097,202,968 and 54,584,869 shares of
beneficial interest issued and outstanding)............. $ 20.10
Maximum sales charge (8.50%* of offering price)........... 1.87
--------------
Maximum offering price to public.......................... $ 21.97
==============
Class A Shares
Net asset value and redemption price per share (Based on
net assets of $79,850,203 and 3,972,090 shares of
beneficial interest issued and outstanding)............. $ 20.10
Maximum sales charge (5.50%* of offering price)........... 1.17
--------------
Maximum offering price to public.......................... $ 21.27
==============
Class B Shares
Net asset value and offering price per share (Based on
net assets of $99,440,268 and 4,953,823 shares of
beneficial interest issued and outstanding)............. $ 20.07
==============
</TABLE>
* On sales of $10,000 or more for Class 1 shares and $50,000 or more for Class A
shares, the sales charge will be reduced.
See Notes to Financial Statements
39
<PAGE>
Growth and Income Fund Financial Statements
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
October 31, 1997
----------------
<S> <C>
Investment Income:
Dividends ........................................................................... $ 19,283,587
Interest ............................................................................ 5,752,864
------------
Total Income .................................................................... 25,036,451
------------
Expenses:
Investment Advisory Fee ............................................................. 7,574,209
Shareholder Services ................................................................ 1,869,767
Distribution (12b-1) and Services Fees (Attributed to Classes A and B of $137,612
and $752,643, respectively) ....................................................... 890,255
Custody ............................................................................. 73,063
Trustees' Fees and Expenses ......................................................... 57,030
Other ............................................................................... 790,937
------------
Total Expenses .................................................................. 11,255,261
------------
Net Investment Income ............................................................... $ 13,781,190
------------
Realized and Unrealized Gain/Loss:
Net Realized Gain/Loss:
Investments ..................................................................... $200,835,964
Futures ......................................................................... 8,997,755
------------
Net Realized Gain ................................................................... 209,833,719
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period ......................................................... 156,698,636
------------
End of the Period:
Investments ................................................................. 211,399,524
Futures ..................................................................... (1,412,063)
------------
209,987,461
------------
Net Unrealized Appreciation During the Period ....................................... 53,288,825
------------
Net Realized and Unrealized Gain .................................................... $263,122,544
============
Net Increase in Net Assets From Operations .......................................... $276,903,734
============
- ------------------------------------------------------------------------------------------------------
</TABLE>
Statement of Changes in Net Assets
<TABLE>
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income ............................................ $ 13,781,190 $ 16,358,276
Net Realized Gain ................................................ 209,833,719 120,884,493
Net Unrealized Appreciation During the Period .................... 53,288,825 39,842,064
-------------- --------------
Change in Net Assets from Operations ............................. 276,903,734 177,084,833
-------------- --------------
Distributions from Net Investment Income ......................... (17,210,779) (17,629,557)
Distributions from Net Realized Gain ............................. (123,032,325) (85,264,726)
-------------- --------------
Total Distributions .......................................... (140,243,104) (102,894,283)
-------------- --------------
Net Change in Net Assets from Investment Activities .............. 136,660,630 74,190,550
-------------- --------------
From Capital Transactions:
Proceeds from Shares Sold ........................................ 154,800,388 168,779,871
Net Asset Value of Shares Issued Through Dividend Reinvestment ... 138,128,597 101,272,424
Cost of Shares Repurchased ....................................... (180,524,822) (145,132,999)
-------------- --------------
Net Change in Net Assets from Capital Transactions ............... 112,404,163 124,919,296
-------------- --------------
Total Increase in Net Assets ..................................... 249,064,793 199,109,846
Net Assets:
Beginning of the Period .......................................... 1,027,428,646 828,318,800
-------------- --------------
End of the Period (Including accumulated undistributed net
investment income of $991,411 and $4,421,000, respectively) .... $1,276,493,439 $1,027,428,646
============== ==============
</TABLE>
See Notes to Financial Statements
40
<PAGE>
Growth and Income Fund Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the period indicated.
<TABLE>
<CAPTION>
Year Ended October 31
--------------------------------------------------------
Class 1 Shares 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......................... $ 18.106 $ 16.95 $ 15.77 $ 17.13 $ 15.54
-------- ------- ------- ------- -------
Net Investment Income.......................................... .237 .308 .36 .29 .29
Net Realized and Unrealized
Gain/Loss.................................................... 4.235 2.943 2.715 (.2125) 1.8775
-------- ------- ------- ------- -------
Total from Investment Operations................................. 4.472 3.251 3.075 .0775 2.1675
-------- ------- ------- ------- -------
Less:
Distributions from Net Investment Income....................... .295 .340 .30 .275 .2775
Distributions from Net Realized Gain........................... 2.182 1.755 1.595 1.1625 .30
-------- ------- ------- ------- -------
Total Distributions.............................................. 2.477 2.095 1.895 1.4375 .5775
-------- ------- ------- ------- -------
Net Asset Value, End of the Period............................... $ 20.101 $18.106 $ 16.95 $ 15.77 $ 17.13
======== ======= ======= ======= =======
Total Return (a)................................................. 27.35% 20.58% 22.45% .51% 14.13%
Net Assets at End of the Period (In millions).................... $1,097.2 $ 942.9 $ 828.3 $ 712.9 $ 712.4
Ratio of Expenses to Average Net Assets.......................... .88% .91% .96% 1.02% 1.05%
Ratio of Net Investment Income to Average Net Assets............. 1.25% 1.78% 2.27% 1.84% 1.76%
Portfolio Turnover............................................... 93% 121% 117% 88% 51%
Average Commission Paid Per Equity Share Traded (b).............. $ .0296 $ .0564 - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Period Ended Year Ended Period Ended
October 31, 1997 October 31, 1996(c) October 31, 1997 October 31, 1996(c)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period....... $18.105 $17.190 $18.087 $17.190
------- ------- ------- -------
Net Investment Income........................ .198 .071 .060 .042
Net Realized and Unrealized Gain............. 4.232 .906 4.221 .899
------- ------- ------- -------
Total from Investment Operations............... 4.430 .977 4.281 .941
------- ------- ------- -------
Less:
Distributions from Net Investment
Income....................................... .250 .062 .113 .044
Distributions from Net Realized Gain......... 2.182 -0- 2.182 -0-
------- ------- ------- -------
Total Distributions............................ 2.432 .062 2.295 .044
------- ------- ------- -------
Net Asset Value, End of the Period............. $20.103 $18.105 $20.073 $18.087
======= ======= ======= =======
Total Return (a)............................... 27.04% 5.72%* 26.08% 5.49%*
Net Assets at End of the Period (In millions).. $ 79.9 $ 32.5 $ 99.4 $ 52.1
Ratio of Expenses to Average Net Assets........ 1.12% 1.16% 1.88% 1.91%
Ratio of Net Investment Income to Average
Net Assets................................... .96% 1.78% .22% 1.05%
Portfolio Turnover............................. 93% 121% 93% 121%
Average Commission Paid Per Equity Share
Traded (b)................................... $ .0296 $ .0564 $ .0296 $ .0564
</TABLE>
* Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Represents the average brokerage commission paid per equity share traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
(c) Class A and Class B shares commenced distribution on August 18, 1996.
See Notes to Financial Statements
41
<PAGE>
International Equity Fund Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock and Equivalents 99.2%
Australia 2.4%
Coca-Cola Amatil....................................... 102,171 $ 768,814
----------
Austria 3.0%
VA Technologies, AG.................................... 3,000 532,328
Wolford, AG............................................ 6,000 435,159
----------
967,487
----------
Finland 1.4%
Nokia (AB), Series A, Preferred Stock.................. 4,600 401,914
Nokia (AB), Series K................................... 400 34,678
----------
436,592
----------
Germany 5.0%
SAP AG................................................. 500 143,433
SAP AG, Preferred Stock................................ 2,500 744,721
SGL Carbon............................................. 5,000 701,938
----------
1,590,092
----------
Hong Kong 4.1%
China Resources........................................ 124,000 340,012
HSBC Holdings.......................................... 20,812 471,073
Hutchison Whampoa...................................... 75,000 518,981
----------
1,330,066
----------
Ireland 8.8%
Bank of Ireland........................................ 52,102 659,760
Elan Corp., PLC - ADR.................................. 10,000 502,352
Independent News....................................... 61,926 363,209
Iona Technologies, PLC - ADR (a)....................... 25,000 395,312
Irish Continental...................................... 75,200 916,055
----------
2,836,688
----------
Israel 1.4%
Teva Pharmaceutical Industries, Ltd.................... 10,000 467,500
----------
Italy 2.0%
Telecom Italia, Mobile................................. 175,000 649,144
----------
Japan 8.8%
Bank of Tokyo.......................................... 550 7,175
Fujitsu................................................ 50,000 548,400
Kato Spring Works...................................... 60,000 150,062
Noritsu Koki Co........................................ 10,200 339,011
Ohmoto Gumi Co......................................... 600 3,415
Rohm Co................................................ 7,000 692,148
Takedo Chemical Industries............................. 40,000 1,090,154
----------
2,830,365
----------
</TABLE>
See Notes to Financial Statements
42
<PAGE>
International Equity Fund Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
Malaysia 0.6%
<S> <C> <C>
Sungei Way Holdings.................................... 165,000 $ 108,895
Sunway Building Technology............................. 125,000 86,621
----------
195,516
----------
Mexico 1.3%
Gruma, Series B........................................ 107,204 419,355
----------
Netherlands 18.6%
Baan Co., NV - ADR..................................... 12,000 841,500
Getronics, NV.......................................... 30,271 999,419
Hunter Douglas, NV..................................... 20,312 836,961
IHC Caland, NV......................................... 15,000 922,483
ING Groep, NV Warrants (expiring 03/15/01) (a)......... 75,000 772,212
Simac Techniek......................................... 12,555 1,605,669
----------
5,978,244
----------
Norway 13.6%
Saevik Supply.......................................... 66,666 1,528,730
Smedvig................................................ 5,000 151,202
Smedvig, Series B...................................... 20,000 590,478
Tomra Systems, AS...................................... 40,000 1,031,903
Transocean Offshore, Inc. - ADR........................ 20,000 1,080,000
----------
4,382,313
----------
Sweden 7.5%
Astra, AB, Series A.................................... 30,000 484,653
Autoliv, Inc. - SDR.................................... 10,000 394,375
Ericsson (LM) Telephone, Series B...................... 10,000 440,593
Munters (a)............................................ 20,000 202,940
Nobel Biocare.......................................... 25,000 323,769
Prosolvia, AB (a)...................................... 16,300 561,476
----------
2,407,806
----------
Switzerland 2.6%
Novartis, AG........................................... 533 834,757
----------
United Kingdom 14.7%
Boxmore International.................................. 132,000 602,380
Capita Group........................................... 100,000 516,747
Colt Telecom Group (a)................................. 50,000 429,085
Dr. Solomons Group, PLC - ADR (a)...................... 30,000 918,750
Misys.................................................. 25,000 634,190
Powerscreen International.............................. 60,674 708,499
Serco Group............................................ 65,000 908,418
----------
4,718,069
----------
United States 3.4%
Santa Fe International Corp............................ 22,000 1,082,125
----------
</TABLE>
43
<PAGE>
International Equity Fund Portfolio Investments
October 31, 1997
<TABLE>
<CAPTION>
Description Market Value
- --------------------------------------------------------------------------------
<S> <C>
Total Long-Term Investments 99.2% (Cost $25,511,067).............. $31,894,933
Repurchase Agreement 2.5%
State Street Bank & Trust (U.S. Treasury Note, $793,000 par,
5.000% coupon, due 08/15/98, dated 10/31/97, to be sold on
11/03/97 at $793,330)............................................ 793,000
-----------
Total Investments 101.7% (Cost $26,304,067)....................... 32,687,933
Foreign Currency 1.5% (Various Denominations) (Cost $460,463)..... 465,024
Liabilities in Excess of Other Assets (3.2%)...................... (1,018,531)
-----------
Net Assets 100.0%................................................. $32,134,426
===========
</TABLE>
(a) Non-income producing security as this stock does not currently declare
dividends.
See Notes to Financial Statements
44
<PAGE>
International Equity Fund Statement of Assets and Liabilities
October 31, 1997
<TABLE>
<S> <C>
Assets:
Total Investments (Cost $26,304,067)............................................................................... $32,687,933
Foreign Currency (Cost $460,463)................................................................................... 465,024
Cash............................................................................................................... 810
Receivables:
Dividends........................................................................................................ 26,800
Foreign Currency Contracts....................................................................................... 487
Unamortized Organizational Costs................................................................................... 9,742
Other.............................................................................................................. 4,057
-----------
Total Assets..................................................................................................... 33,194,853
-----------
Liabilities:
Payables:
Investments Purchased............................................................................................ 884,410
Fund Shares Repurchased.......................................................................................... 64,462
Distributor and Affiliates....................................................................................... 36,453
Investment Advisory Fee.......................................................................................... 27,777
Accrued Expenses................................................................................................... 44,510
Trustees' Retirement Plan.......................................................................................... 2,815
-----------
Total Liabilities............................................................................................... 1,060,427
-----------
Net Assets......................................................................................................... $32,134,426
===========
Net Assets Consist of:
Capital............................................................................................................ $26,667,446
Net Unrealized Appreciation........................................................................................ 6,378,021
Accumulated Net Investment Loss.................................................................................... (394)
Accumulated Net Realized Loss...................................................................................... (910,647)
-----------
Net Assets......................................................................................................... $32,134,426
===========
Maximum Offering Price Per Share:
Class 1 Shares:
Net asset value and redemption price per share (Based on net assets of $1,644,265 and
90,545 shares of beneficial interest issued and outstanding)................................................... $ 18.16
Maximum sales charge (8.50% of offering price).................................................................. 1.69
-----------
Maximum offering price to public................................................................................ $ 19.85
===========
Class A Shares:
Net asset value and redemption price per share (Based on net assets of $16,572,917 and
913,789 shares of beneficial interest issued and outstanding).................................................. $ 18.14
Maximum sales charge (5.50%* of offering price)................................................................. 1.06
-----------
Maximum offering price to public................................................................................ $ 19.20
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of $13,917,244 and
781,557 shares of beneficial interest issued and outstanding).................................................. $ 17.81
===========
</TABLE>
*On sales of $10,000 or more for Class 1 shares and $50,000 or more for Class A
shares, the sales charge will be reduced.
See Notes to Financial Statements
45
<PAGE>
<TABLE>
<CAPTION>
International Equity Fund Financial Statements
Statement of Operations
Year Ended
October 31, 1997
----------------
<S> <C>
Investment Income:
Dividends (Net of foreign withholding taxes of $22,549)...................................................... $ 232,842
Interest..................................................................................................... 28,063
----------
Total Income............................................................................................... 260,905
----------
Expenses:
Investment Advisory Fee...................................................................................... 267,897
Distribution (12b-1) and Service Fees (Attributed to Classes A and B of $36,192 and $113,854, respectively).. 150,046
Shareholder Services......................................................................................... 132,162
Custody...................................................................................................... 95,490
Trustees' Fees and Expenses................................................................................... 17,057
Amortization of Organization Costs........................................................................... 4,179
Other........................................................................................................ 101,115
----------
Total Expenses............................................................................................ 767,946
----------
Net Investment Loss.......................................................................................... $ (507,041)
==========
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments................................................................................................ $ (877,360)
Foreign Currency Transactions.............................................................................. (20,004)
----------
Net Realized Loss............................................................................................ (897,364)
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period.................................................................................... 2,846,054
----------
End of the Period:
Investments............................................................................................... 6,383,866
Foreign Currency Translation of Other Assets and Liabilities.............................................. (5,845)
----------
6,378,021
----------
Net Unrealized Appreciation During the Period................................................................ 3,531,967
----------
Net Realized and Unrealized Gain............................................................................. $2,634,603
==========
Net Increase in Net Assets From Operations................................................................... $2,127,562
==========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
From Invesment Activities:
Operations:
Net Investment Loss.......................................................................... $ (507,041) $ (243,652)
Net Realized Loss............................................................................ (897,364) (44,990)
Net Unrealized Appreciation During the Period................................................ 3,531,967 2,240,564
----------- -----------
Net Change in Net Assets from Investment Activities.......................................... 2,127,562 1,951,922
----------- -----------
From Capital Transactions:
Proceeds from Shares Sold.................................................................... 16,078,659 11,512,611
Cost of Shares Repurchased................................................................... (4,645,207) (4,212,850)
----------- -----------
Net Change in the Net Assets from Capital Transactions....................................... 11,433,452 7,299,761
----------- -----------
Total Increase in Net Assets................................................................. 13,561,014 9,251,683
Net Assets:
Beginning of the Period...................................................................... 18,573,412 9,321,729
----------- -----------
End of the Period (Including accumulated net investment loss of $394
and $812, respectively).................................................................... $32,134,426 $18,573,412
=========== ===========
</TABLE>
See Notes to Financial Statements
46
<PAGE>
International Equity Fund Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
August 8, 1996
(Commencement of
Year Ended Distribution) to
Class 1 Shares October 31, 1997 October 31,1996 (a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................................................ $ 16.517 $ 16.00
---------------- -------------------
Net Investment Loss................................................................... (.169) (.028)
Net Realized and Unrealized Gain...................................................... 1.812 .545
---------------- -------------------
Total from Investment Operations........................................................ 1.643 .517
---------------- -------------------
Net Asset Value, End of the Period...................................................... $ 18.160 $ 16.517
================ ===================
Total Return* (b)....................................................................... 9.99% 3.25%**
Net Assets at End of the Period (In millions)........................................... $ 1.6 $ .2
Ratio of Expenses to Average Net Assets*................................................ 2.26% 2.50%
Ratio of Net Investment Loss to Average Net Assets*..................................... (1.24%) (1.31%)
Portfolio Turnover...................................................................... 57% 78%
Average Commission Paid Per Equity Share Traded (c)..................................... $ .0220 $ .0314
*If certain expenses had not been waived or reimbursed by VKAC, Total Return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................................................. N/A 3.87%
Ratio of Net Investment Loss to Average Net Assets...................................... N/A (2.67%)
</TABLE>
** Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable.
N/A = Not Applicable
See Notes to Financial Statements
47
<PAGE>
<TABLE>
International Equity Fund Financial Highlights (Continued)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<S> <C> <C> <C>
February 21, 1995
(Commencement
of Investment
Year Ended Year ended Operations) to
Class A Shares October 31, 1997 October 31, 1996 October 31, 1995(a)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period.. $16.543 $ 13.86 $11.81
------- ------- ------
Net Investment Loss..................... (.262) (.189) (.14)
Net Realized and Unrealized Gain........ 1.855 2.872 2.19
------- ------- ------
Total from Investment Operations.......... 1.593 2.683 2.05
------- ------- ------
Net Asset Value, End of the Period........ $18.136 $16.543 $13.86
======= ======= ======
</TABLE>
<TABLE>
<S> <C> <C> <C>
Total Return* (b)................................................ 9.74% 19.34% 16.28%**(c)
Net Assets at End of Period (In millions)........................ $ 16.6 $ 10.4 $ 6.6
Ratio of Expenses to Average Net Assets*......................... 2.56% 2.75% 3.64%
Ratio of Net Investment Loss to Average Net Assets*.............. (1.59%) (1.56%) (1.40%)
Portfolio Turnover............................................... 57% 78% 17%**
Average Commission Paid Per Equity Share Traded (d).............. $ .0220 $ .0314 --
*If certain expenses had not been waived or reimbursed by VKAC,
Total Return would have been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets.......................... N/A 4.12% 5.97%
Ratio of Net Investment Loss to Average Net Assets............... N/A (2.92%) (3.73%)
- ---------------------------------------------------------------------------------------------------------------------------------
February 21, 1995
(Commencement
of Investment
Year Ended Year ended Operations) to
Class B Shares October 31, 1997 October 31, 1996 October 31, 1995(a)
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period......................... $16.364 $ 13.79 $11.81
------- ------- ------
Net Investment Loss............................................. (.323) (.254) (.21)
Net Realized and Unrealized Gain................................ 1.766 2.828 2.19
------- ------- ------
Total from Investment Operations................................. 1.443 2.574 1.98
------- ------- ------
Net Asset Value, End of the Period............................... $17.807 $16.364 $13.79
======= ======= ======
Total Return* (b)................................................ 8.93% 18.64% 15.69%**(c)
Net Assets at End of Period (In millions)........................ $ 13.9 $ 8.0 $ 2.7
Ratio of Expenses to Average Net Assets*......................... 3.30% 3.50% 4.33%
Ratio of Net Investment Loss to Average Net Assets*.............. (2.34%) (2.31%) (2.80%)
Portfolio Turnover............................................... 57% 78% 17%**
Average Commission Paid Per Equity Share Traded (d).............. $ .0220 $ .0314 --
*If certain expenses had not been waived or reimbursed by VKAC,
Total Return would have been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets.......................... N/A 4.87% 6.67%
Ratio of Net Investment Loss to Average Net Assets............... N/A (3.67%) (5.13%)
** Non-Annualized
</TABLE>
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) Total Return from March 17, 1995 (date the Fund's investment strategy was
implemented) through October 31, 1995 without annualization.
(d) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable.
N/A = Not Applicable
See Notes to Financial Statements
48
<PAGE>
<TABLE>
<CAPTION>
Money Market Fund Portfolio of Investments
October 31, 1997
Discount
Par Yield on
Amount Date of Amortized
(000) Description Maturity Purchase Cost
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper 63.8%
$ 3,000 American Express Co....................... 02/09/98 5.52% $ 2,953,540
3,000 Associates Corp. of North America......... 11/17/97 5.48 2,992,237
3,000 Chevron Oil Finance Co.................... 11/03/97 5.50 2,998,625
3,000 CIT Group Holdings, Inc................... 12/01/97 5.50 2,985,792
3,000 Commercial Credit Corp.................... 01/16/98 5.50 2,964,708
3,000 Ford Motor Credit Co...................... 01/13/98 5.54 2,965,837
3,000 General Electric Capital Corp............. 11/03/97 5.49 2,998,628
3,000 General Electric Co....................... 11/17/97 5.50 2,992,208
3,000 IBM Credit Corp........................... 12/08/97 5.48 2,982,647
3,000 John Deere Capital Corp., Class B......... 02/09/98 5.50 2,953,708
3,000 Merrill Lynch & Co., Inc.................. 01/26/98 5.54 2,959,835
3,000 Metlife Funding, Inc...................... 12/17/97 5.49 2,978,497
3,000 Prudential Funding Corp................... 01/13/98 5.55 2,965,775
-----------
Total Commercial Paper................................................... 38,692,037
-----------
U.S. Government Agency Obligations 29.4%
7,000 Federal Home Loan Bank.................... 01/08/98 5.39 6,927,751
5,000 Federal National Mortgage Association..... 11/06/97 5.44 4,995,467
3,000 Federal National Mortgage Association..... 01/22/98 5.50 2,961,958
3,000 Federal National Mortgage Association..... 03/03/98 5.41 2,944,547
-----------
Total U.S. Government Agency Obligations................................. 17,829,723
-----------
Repurchase Agreement - 5.7%
BA Securities, Inc. ($3,475,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 10/31/97, to be sold on
11/03/97 at $3,476,656)................................................ 3,475,000
-----------
Total Investments 98.9% (a)............................................................ 59,996,760
Other Assets in Excess of Liabilities 1.1%............................................. 665,075
-----------
Net Assets 100.0%...................................................................... $60,661,835
===========
</TABLE>
(a) At October 31, 1997, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
49
<PAGE>
Money Market Fund Statements of Assets and Liabilities
October 31, 1997
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total Investments, at Amortized Cost which Approximates Market.................... $59,996,760
Cash.............................................................................. 136
Receivable for Fund Shares Sold................................................... 992,560
Other............................................................................. 17,486
-----------
Total Assets.................................................................... 61,006,942
-----------
Liabilities:
Payables:
Fund Shares Repurchased......................................................... 223,293
Distributor and Affiliates...................................................... 80,058
Income Distributions............................................................ 4,054
Accrued Expenses.................................................................. 20,961
Trustees, Retirement Plans........................................................ 16,741
-----------
Total Liabilities............................................................... 345,107
-----------
Net Assets........................................................................ $60,661,835
===========
Net Assets Consist of:
Capital........................................................................... $60,659,909
Accumulated Undistributed Net Investment Income................................... 1,926
-----------
Net Assets........................................................................ $60,661,835
===========
Maximum Offering Price Per Share:
Class 1 Shares:
Net asset value per share (Based on net assets of $52,990,886 and 52,989,453
shares of beneficial interest issued and outstanding).......................... $ 1.00
===========
Class A Shares:
Net asset value per share (Based on net assets of $7,396,242 and 7,396,005
shares of beneficial interest issued and outstanding).......................... $ 1.00
===========
Class B Shares:
Net asset value per share (Based on net assets of $274,707 and 274,699 shares
of beneficial interest issued and outstanding)................................. $ 1.00
===========
</TABLE>
See Notes to Financial Statements
50
<PAGE>
<TABLE>
<CAPTION>
Money Market Fund Financial Statements
Statement of Operations
Year Ended
October 31, 1997
----------------
<S> <C>
Investment Income:
Interest.................................................................................................. $3,360,214
----------
Expenses:
Shareholder Services...................................................................................... 601,447
Investment Advisory Fee................................................................................... 305,876
Registration and Filing Fees.............................................................................. 53,138
Reports to Shareholders................................................................................... 35,972
Trustees' Fees and Expenses............................................................................... 18,286
Custody................................................................................................... 11,917
Distribution (12b-1) and Service Fees (Attributed to Classes A and B of $4,073 and $1,166, respectively).. 5,239
Other..................................................................................................... 92,738
----------
Total Expenses.......................................................................................... 1,124,613
Less Fees Waived and Expenses Reimbursed ($305,876 and $201,531, respectively).......................... 507,407
----------
Net Expenses.............................................................................................. 617,206
----------
Net Investment Income..................................................................................... $2,743,008
==========
Net Increase in Net Assets From Operations................................................................ $2,743,008
==========
</TABLE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income................................................................... $ 2,743,008 $ 2,761,594
Distributions from Net Investment Income................................................ (2,742,485) (2,761,337)
------------ ------------
Net Change in Net Assets from Investment Activities..................................... 523 257
------------ ------------
From Capital Transactions:
Proceeds from Shares Sold............................................................... 70,230,768 68,178,381
Net Asset Value of Shares Issued Through Dividend Reinvestment.......................... 2,692,755 2,715,171
Cost of Shares Repurchased.............................................................. (72,918,035) (70,542,884)
------------ ------------
Net Change in Net Assets from Capital Transactions...................................... 5,488 350,668
------------ ------------
Total Increase in Net Assets............................................................ 6,011 350,925
Net Assets:
Beginning of the Period................................................................. 60,655,824 60,304,899
------------ ------------
End of the Period (Including accumulated undistributed net investment income of $1,926
and $1,403, respectively)............................................................. $ 60,661,835 $ 60,655,824
============ ============
</TABLE>
See Notes to Financial Statements
51
<PAGE>
Money Market Fund Financial Highlights
The following schedule presents financial highlights for one share of the
Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
Year Ended October 31
----------------------------------------------------------
Class 1 Shares 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income.............................................. .045 .045 .0492 .0288 .023
------ ------ -------- ------- -------
Less Distributions from Net Investment Income...................... (.045) (.045) (.0492) (.0288) (.023)
Net Asset Value, End of the Period................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======== ======= =======
Total Return*(b)................................................... 4.58% 4.57% 5.01% 2.91% 2.31%
Net Assets at End of the Period (In millions)...................... $ 53.0 $ 59.9 $ 60.3 $ 56.4 $ 59.2
Ratio of Expenses to Average Net Assets*........................... 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income to Average Net Assets*.............. 4.49% 4.48% 4.89% 2.87% 2.30%
*If certain expenses had not been waived or reimbursed by VKAC,
Total Return would have been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets............................ 1.83% 1.86% 1.71% 1.84% 1.74%
Ratio of Net Investment Income to Average Net Assets............... 3.66% 3.62% 4.18% 2.03% 1.56%
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------ -------------------------------------
Year Ended Period Ended Year Ended Period Ended
October 31, 1997 October 31, 1996(a) October 31, 1997 October 31, 1996(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Net Investment Income.................................. .044 .010 .037 .007
Less Distributions from Net Investment Income.......... (.044) (.010) (.037) (.007)
-------- -------- -------- --------
Net Asset Value, End of the Period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return*(b)....................................... 4.49% 1.00%** 3.82% .73%**
Net Assets at End of the Period (In millions).......... $ 7.4 $ .7 $ .3 $ .0
Ratio of Expenses to Average Net Assets*............... 1.10% 1.09% 1.76% 1.75%
Ratio of Net Investment Income to Average Net Assets*.. 4.45% 4.49% 3.81% 4.17%
*If certain expenses had not been waived or
reimbursed by VKAC, Total Return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................ 1.93% 1.96% 2.59% 2.61%
Ratio of Net Investment Income to Average Net Assets... 3.62% 3.62% 2.98% 3.31%
</TABLE>
** Non-Annualized
(a) Class A and Class B Shares commenced distribution on August 8, 1996.
(b) Total Return is based upon net asset value which does not include
payment of the contingent deferred sales charge for Class B Shares.
See Notes to Financial Statements
52
<PAGE>
Municipal Bond Fund Portfolio of Investments
October 31, 1997
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Bonds 99.6%
Alaska 1.0%
$ 1,000 Valdez, AK Marine Term Rev Sohio Pipeline Rfdg................. 7.125% 12/01/25 $1,120,690
----------
Arizona 0.6%
400 Maricopa Cnty, AZ Indl Dev Auth Multi-Family Hsg Rev Rfdg...... 6.500 07/01/09 427,812
225 Scottsdale, AZ Indl Dev Auth Rev First Mtg Westminster Vlg Ser
A Rfdg......................................................... 8.250 06/01/15 249,545
----------
677,357
----------
California 3.0%
100 California Spl Dist Fin Auth Ctfs Partn Ser A.................. 8.500 07/01/18 104,529
500 Compton, CA Ctfs Partn Ser B................................... 7.500 08/01/15 501,275
560 Del Mar, CA Racetrack Auth Rev Rfdg............................ 6.000 08/15/01 580,451
1,000 Orange Cnty, CA Recovery Ctfs Ser A (MBIA Insd)................ 6.000 07/01/08 1,115,120
1,000 Orange Cnty, CA Recovery Ctfs Ser A Rfdg (MBIA Insd)........... 6.000 06/01/09 1,115,060
----------
3,416,435
----------
Colorado 8.2%
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev E-470 Proj Ser B
(Prerefunded @ 08/31/05)....................................... 7.000 08/31/26 1,185,700
7,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev E-470 Proj Ser C
(Prerefunded @ 08/31/05)....................................... * 08/31/26 1,027,810
500 Arvada, CO Sales & Use Tax Rev Rfdg & Impt (FGIC Insd)......... 6.250 12/01/12 538,400
250 Berry Creek Metro Dist CO Rfdg & Impt.......................... 8.250 12/01/11 276,437
1,000 E-470 Pub Hwy Auth CO Rev Sr Ser A (MBIA Insd)................. 5.000 09/01/17 977,780
1,000 E-470 Pub Hwy Auth CO Rev Cap Apprec Rfdg Sr Ser B (MBIA Insd). * 09/01/22 264,350
2,000 E-470 Pub Hwy Auth CO Rev Sr Ser A Rfdg (MBIA Insd)............ 5.000 09/01/26 1,911,700
400 Edgewater, CO Redev Auth Tax Increment Rev..................... 6.750 12/01/08 436,196
500 Highlands Ranch Metro Dist No 1 CO Rfdg & Impt Ser A
(Prerefunded @ 09/01/02)....................................... 7.300 09/01/12 576,650
1,000 Highlands Ranch Metro Dist No 2 CO Rfdg (FSA Insd)............. 6.500 06/15/10 1,154,330
100 Jefferson Cnty, CO Districtwide Sales Tax Rev
(Prerefunded @ 12/01/98)....................................... 8.200 12/01/13 104,495
1,000 Larimer Cnty, CO Sch Dist No R1 Poudre Ctfs Partn Lease
(MBIA Insd).................................................... 5.650 12/01/16 1,039,580
----------
9,493,428
----------
Connecticut 1.0%
1,000 Mashantucket Western Pequot Tribe CT Ser A, 144A -- Private
Placement (c).................................................. 6.500 09/01/05 1,109,140
----------
Delaware 0.3%
250 Delaware St Econ Dev Auth Rev Osteopathic Hosp Assoc DE
Ser A.......................................................... 6.750 01/01/13 286,643
----------
District of Columbia 0.5%
20 District of Columbia Rev Howard Univ Ser A (MBIA Insd)......... 8.000 10/01/17 20,726
500 District of Columbia Ser A (Prerefunded @ 06/01/00)
(AMBAC Insd)................................................... 7.500 06/01/10 549,925
----------
570,651
----------
</TABLE>
See Notes to Financial Statements
53
<PAGE>
Municipal Bond Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Florida 1.7%
$ 410 Broward Cnty, FL Res Recovery Rev Waste Energy North Proj............. 7.950% 12/01/08 $ 446,605
1,000 Florida St Correctional Privatization Comm Ctfs Partn (AMBAC Insd).... 5.000 08/01/17 975,890
500 Saint Petersburg, FL Hlth Fac Auth Rev Allegany Hlth Sys Ser B
(Prerefunded @ 12/01/99).............................................. 7.750 12/01/15 546,780
-----------
1,969,275
-----------
Hawaii 0.9%
1,000 Hawaii St Ser CD Rfdg................................................. 5.000 02/01/03 1,027,320
-----------
Illinois 6.3%
500 Chicago, IL Metro Wtr Reclamation Dist Gtr Chicago.................... 7.000 01/01/11 597,715
500 Chicago, IL Wastewtr Transmission Rev (Prerefunded @ 01/01/03)
(FGIC Insd)........................................................... 6.300 01/01/12 553,020
500 Cook Cnty, IL (Prerefunded @ 11/01/00) (MBIA Insd).................... 7.000 11/01/10 550,070
500 Cook Cnty, IL Cmnty College Dist No 508 Chicago Ctfs Partn (FGIC Insd) 8.750 01/01/07 645,890
250 Crestwood, IL Tax Increment Rev Rfdg.................................. 7.250 12/01/08 265,810
500 DuPage Cnty, IL Alt Rev Stormwtr Proj (Prerefunded @ 01/01/02)........ 6.550 01/01/21 551,950
250 Illinois Dev Fin Auth Rev Columbus Cuneo Cabrini Med Cent Rfdg
(Prerefunded @ 02/01/00).............................................. 8.500 02/01/15 277,723
1,000 Illinois Hlth Fac Auth Rev Sherman Hlth Sys (AMBAC Insd).............. 5.250 08/01/17 983,020
500 Illinois Hlth Fac Auth Rev Delnor Cmnty Hosp Proj
(Prerefunded @ 05/15/99).............................................. 8.000 05/15/19 539,235
500 Illinois Hlth Fac Auth Rev IL Masonic Med Cent Ser B
(Perefunded @ 10/01/99)............................................... 7.700 10/01/19 543,005
500 Illinois Hlth Fac Auth Rev Lutheran Hlth Sys Ser B Rfdg (MBIA Insd)... 6.000 04/01/18 512,190
250 Illinois Hlth Fac Auth Rev Mem Hosp................................... 7.250 05/01/24 269,075
300 Illinois Hlth Fac Auth Rev Mercy Cent for Hlthcare Svcs............... 6.625 10/01/12 318,543
500 Illinois Hlth Fac Auth Rev Northwestern Mem Hosp...................... 6.750 08/15/11 547,375
78 Illinois Hlth Fac Auth Rev Ser A (MBIA Insd).......................... 7.900 08/15/03 79,019
40 Illinois Hlth Fac Auth Rev Ser A Rfdg (MBIA Insd)..................... 7.900 08/15/03 46,133
-----------
7,279,773
-----------
Indiana 1.0%
100 Carmel, IN Retirement Rental Hsg Rev Beverly Enterprises
Inc Proj Rfdg......................................................... 8.750 12/01/08 113,744
500 Merrillville, IN Multi Sch Bldg Corp First Mtg
(Prerefunded @ 07/15/00).............................................. 7.500 07/15/09 552,645
500 Saint Joseph Cnty, IN Hosp Auth Hosp Fac Rev Mem Hosp
South Bend Proj (MBIA Insd)........................................... 6.250 08/15/22 533,255
-----------
1,199,644
-----------
Iowa 0.9%
1,000 Des Moines, IA Pkg Fac Rev Ser A (FGIC Insd).......................... 7.250 07/01/15 1,067,010
-----------
Kansas 0.2%
250 Newton, KS Hosp Rev Newton Hlthcare Corp Ser A........................ 7.375 11/15/14 274,000
-----------
Kentucky 0.8%
1,000 Jefferson Cnty, KY Hlth Fac Rev (MBIA Insd)........................... 5.125 10/01/27 957,940
-----------
</TABLE>
See Notes to Financial Statements
54
<PAGE>
Municipal Bond Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Louisiana 0.2%
$ 210 Louisiana Pub Fac Auth Rev Indl Dev Beverly Enterprises Inc Rfdg ............ 8.250% 09/01/08 $ 233,556
-----------
Maine 0.5%
250 Maine St Hsg Auth Mtg Pur Ser B ............................................. 7.900 11/15/06 258,678
250 Regional Waste Sys Inc ME Solid Waste Res Recovery Rev ...................... 7.950 07/01/10 267,480
-----------
526,158
-----------
Massachusetts 4.0%
500 Boston, MA Rev Boston City Hosp Ser A (FHA Gtd) (Prerefunded @ 08/15/00) .... 7.625 02/15/21 554,815
1,000 Holyoke, MA Ser B Rfdg (FSA Insd) ........................................... 6.000 06/15/07 1,098,830
5 Massachusetts Muni Wholesale Elec Co Pwr Supply Sys Rev Ser A ............... 8.750 07/01/18 5,975
250 Massachusetts St Hsg Fin Agy Hsg Rev Single Family Ser 31 ................... 6.450 12/01/16 263,788
250 Massachusetts St Indl Fin Agy Indl Rev Beverly Enterprises Inc/Gloucester &
Lexington Proj Rfdg ......................................................... 8.000 05/01/02 269,902
500 Massachusetts St Wtr Res Auth Ser A (Prerefunded @ 04/01/00) ................ 7.500 04/01/16 548,570
2,000 Massachusetts Str Tpk Auth Sr Ser A (MBIA Insd) ............................. 5.000 01/01/27 1,905,560
-----------
4,647,440
-----------
Michigan 4.0%
500 Detroit, MI Area No 1 Ser A (Prerefunded @ 07/01/99) ........................ 7.600 07/01/10 538,190
2,000 Detroit, MI Downtown Dev Auth Tax Increment Rev Dev Area No 1 Proj Ser C1 ... 6.250 07/01/25 2,118,000
200 Huron Vly, MI Sch Dist (Prerefunded @ 05/01/01) (FGIC Insd) ................. 7.100 05/01/08 222,398
500 Kent Hosp Fin Auth MI Hosp Fac Rev Ser A (Prerefunded @ 01/15/00) ........... 7.250 01/15/12 542,160
195 Michigan St Hosp Fin Auth Rev Detroit Med Cent Ser A Rfdg (Prerefunded @
08/15/98) ................................................................... 8.125 08/15/12 205,169
1,000 Western Michigan Univ Rev Rfdg (FGIC Insd) .................................. 5.125 11/15/22 974,520
-----------
4,600,437
-----------
Minnesota 0.1%
150 Minneapolis, MN Hlthcare Fac Rev Ebenezer Society Proj Ser A ................ 7.000 07/01/12 158,706
-----------
Mississippi 0.9%
500 Mississippi Hosp Equip & Fac Auth Rev Magnolia Hosp Proj Ser A .............. 7.375 10/01/21 529,420
500 Ridgeland, MS Urban Renewal Rev The Orchard Ltd Proj Ser A Rfdg ............. 7.750 12/01/15 538,755
-----------
1,068,175
-----------
Missouri 5.4%
2,750 Kansas City, MO Muni Assistance Corp Rev Rfdg (MBIA Insd) ................... 5.000 04/15/20 2,656,362
500 Missouri St Hlth & Edl Fac Auth Hlth Fac Rev Heartland Hlth Sys Proj ........ 6.875 11/15/04 545,180
500 Missouri St Hlth & Edl Fac Auth Hlth Fac Rev Lake of the Ozarks Hosp
(Prerefunded @ 02/15/99) .................................................... 8.000 02/15/11 534,430
500 Missouri St Hlth & Edl Fac Auth Hlth Fac Rev Lake of the Ozarks Hosp Rfdg ... 6.000 02/15/06 525,275
250 Missouri St Hlth & Edl Fac Auth Rfdg & Impt ................................. 8.125 10/01/10 272,868
1,615 Saint Charles Cnty, MO Indl Dev Auth Indl Rev Westchester Vlg Apt Ser A Rfdg
(FNMA Collateralized) ....................................................... 6.050 02/01/17 1,690,178
-----------
6,224,293
-----------
</TABLE>
See Notes to Financial Statements
55
<PAGE>
Municipal Bond Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nevada 1.9%
$2,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser C Rfdg
(AMBAC Insd)(b)...................................................... 7.200% 10/01/22 $2,244,260
----------
New Hampshire 0.9%
370 New Hampshire Higher Edl & Hlth Fac Auth Rev First Mtg
Odd Fellows Home Rfdg................................................ 9.000 06/01/14 437,096
520 New Hampshire Higher Edl & Hlth Fac Auth Rev New
London Hosp Assn Proj................................................ 7.500 06/01/05 582,410
----------
1,019,506
----------
New Jersey 3.3%
1,500 Mercer Cnty, NJ Impt Auth Rev Cap Apprec............................. * 04/01/11 766,230
1,000 New Jersey Bldg Auth Str Bldg (MBIA Insd)............................ 5.000 06/15/18 977,300
880 New Jersey Econ Dev Auth Holt Hauling & Warehsg Rev Ser G Rfdg....... 8.400 12/15/15 960,441
1,000 New Jersey St Tpk Auth Tpk Rev Ser C Rfdg (MBIA Insd)................ 6.500 01/01/16 1,161,210
----------
3,865,181
----------
New Mexico 0.9%
1,000 Farmington, NM Pollutn Ctl Rev Southern CA
Edison Co Ser A Rfdg................................................. 7.200 04/01/21 1,089,870
----------
New York 9.1%
1,035 Monroe Woodbury NY Cent Sch Dist 1 (MBIA Insd)....................... 5.625 05/15/20 1,063,556
350 New York City Indl Dev Agy Civic Fac Marymount Manhattan College Proj 7.000 07/01/23 373,663
1,000 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev.................... 5.250 06/15/29 972,880
500 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev Ser C
(Prerefunded @ 06/15/01)............................................. 7.750 06/15/20 567,020
865 New York City Ser B.................................................. 7.000 08/15/16 978,185
135 New York City Ser B (Prerefunded @ 08/15/04)......................... 7.000 08/15/16 157,047
500 New York St Dorm Auth Rev City Univ Sys Ser C Rfdg................... 6.000 07/01/16 510,050
3,000 New York St Dorm Auth Rev Mental Health Svcs Fac Impt Ser B.......... 5.375 02/15/26 2,921,070
750 New York St Dorm Auth Rev St Univ Edl Fac Ser A
(Prerefunded @ 05/15/00)............................................. 7.700 05/15/12 829,815
500 New York St Med Care Fac Fin Agy Rev Hosp & Nursing Home Ser A
(FHA Gtd) (Prerefunded @ 02/15/99)................................... 7.250 02/15/24 530,485
1,000 New York, NY City Muni Wtr Fin Auth Wtr & Swr Sys Rev
(AMBAC Insd)......................................................... 5.125 06/15/22 980,070
500 Triborough Brdg & Tunnel Auth NY Rev Ser R
(Prerefunded @ 01/01/00)............................................. 7.375 01/01/16 541,700
150 Triborough Brdg & Tunnel Auth NY Spl Oblig Mtg
Recording Tax Ser A (Prerefunded @ 01/01/98)......................... 8.000 01/01/18 153,287
----------
10,578,828
----------
North Carolina 1.2%
500 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev Ser A Rfdg
(Prerefunded @ 01/01/22)............................................. 4.500 01/01/24 456,940
400 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev Ser A Rfdg
(Prerefunded @ 01/01/98)............................................. 8.000 01/01/21 410,732
</TABLE>
See Notes to Financial Statements
56
<PAGE>
Municipal Bond Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
North Carolina (Continued)
$ 250 North Carolina Med Care Cmnty Hlthcare Fac Rev
(Prerefunded @ 10/01/99)............................................................... 7.800% 10/01/19 $ 272,202
250 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev Rfdg
(Prerefunded @ 01/01/98)............................................................... 7.875 01/01/19 256,655
----------
1,396,529
----------
Ohio 7.8%
1,840 Brecksville Broadview Heights, OH City Sch Dist (FGIC Insd)............................ 6.500 12/01/16 2,083,174
500 Cleveland, OH Pkg Fac Rev (Prerefunded @ 09/15/02)..................................... 8.000 09/15/12 588,025
500 Cuyahoga Cnty, OH Hlthcare Fac Rev Judson Retirement Cmnty Ser A Rfdg.................. 7.000 11/15/10 528,745
660 Delaware Cnty, OH Hlthcare Fac Rev Mtg Centrum at Willow Brook (FHA Gtd)............... 6.550 02/01/35 715,777
1,000 Dublin, OH City Sch Dist (FGIC Insd)................................................... 5.000 12/01/18 972,030
1,000 Dublin, OH City Sch Dist Rfdg (MBIA Insd).............................................. 5.000 12/01/19 969,150
1,000 Greater Cincinnati OH Elderly Hsg Dev Corp Mtg Rev Ser A Rfdg (FSA Insd)............... 6.600 08/01/25 1,077,500
1,000 Miami Cnty, OH Hosp Fac Rev Upper Vly Med Cent Ser A Rfdg & Impt....................... 6.000 05/15/06 1,055,980
1,000 Ohio St Wtr Dev Auth Pollutn Ctl Fac Rev OH Edison Co Proj Rfdg........................ 5.950 05/15/29 1,014,180
----------
9,004,561
----------
Oklahoma 0.5%
500 Tulsa, OK Indl Auth Hosp Rev Tulsa Regl Med Cent
(Prerefunded @ 06/01/03)............................................................... 7.200 06/01/17 576,860
----------
Pennsylvania 8.4%
1,000 Allegheny Cnty, PA Hosp Dev Auth Rev Hosp St Francis Med Cent Proj..................... 5.750 05/15/17 1,018,550
250 Emmaus, PA Genl Auth Rev Ser A (BIGI Insd)............................................. 8.150 05/15/18 259,108
500 Erie Cnty, PA Higher Edl Bldg Auth College Rev Ser A (Prerefunded @ 06/01/99).......... 8.500 06/01/15 544,120
1,500 Jim Thorpe PA Area Sch Dist Ser A (MBIA Insd).......................................... 5.375 03/15/22 1,500,465
500 Lebanon Cnty, PA Hlth Fac Auth Hlth Cent Rev United Church of Christ Homes Rfdg........ 6.750 10/01/10 508,730
280 Montgomery Cnty, PA Indl Dev Auth Rev Pennsburg Nursing & Rehab Cent................... 7.625 07/01/18 317,411
100 Northeastern PA Hosp Auth Rev Nesbitt Mem Hosp Ser A Rfdg (Prerefunded @ 07/01/00)..... 7.500 07/01/12 110,172
1,000 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Bryn Mawr College (MBIA Insd)... 5.625 12/01/27 1,024,330
500 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Hahnemann Univ Proj
(Prerefunded @ 07/01/99) (MBIA Insd)................................................... 7.200 07/01/19 535,420
150 Pennsylvania St Higher Edl Fac Auth Hosp Rev (Prerefunded @ 01/01/98).................. 8.000 01/01/18 154,011
250 Pennsylvania St Higher Edl Fac Auth Rev Med College PA Ser A (Prerefunded @ 03/01/99).. 8.375 03/01/11 269,057
1,400 Philadelphia, PA....................................................................... 5.000 05/15/27 1,323,672
500 Philadelphia, PA Hosps & Higher Edl Fac Auth Hosp Rev PA Hosp Rfdg..................... 6.250 07/01/06 535,670
250 Scranton-Lackawanna, PA Hlth & Welfare Auth Rev Moses Taylor Hosp Proj Ser B
(Prerefunded @ 07/01/01)............................................................... 8.500 07/01/20 290,172
</TABLE>
See Notes to Financial Statements
57
<PAGE>
Municipal Bond Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Per
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Pennsylvania (Continued)
$2,000 Shaler, PA Area Sch Dist Ser A (FGIC Insd) (a)......................... * 11/15/20 $ 556,620
500 Shenandoah Vly, PA Sch Dist Ser B...................................... * 02/01/12 234,975
500 Warren Cnty, PA Hosp Auth Rev Warren Genl Hosp Proj Ser A.............. 6.900% 04/01/11 539,370
------------
9,721,853
------------
Rhode Island 0.5%
500 Rhode Island Depositors Econ Protection Corp Spl Oblig Ser A
(Prerefunded @ 08/01/02) (FSA Insd).................................... 6.625 08/01/19 558,855
------------
South Dakota 0.7%
500 South Dakota St Hlth & Edl Fac Auth Rev Huron Regl Med Cent............ 7.250 04/01/20 545,845
20 South Dakota St Hlth & Edl Fac Auth Rev Sioux Vly Hosp................. 7.625 11/01/13 22,433
230 South Dakota St Hlth & Edl Fac Auth Rev Sioux Vly Hosp
(Prerefunded @ 11/01/98)............................................... 7.625 11/01/13 242,797
------------
811,075
------------
Tennessee 1.7%
1,000 Franklin, TN Indl Dev Brd Multi-Family Rev Hsg Landings Apt
Proj Ser A Rfdg (FSA Insd)............................................. 5.900 10/01/16 1,036,520
890 Tennessee Hsg Dev Agy Home Ownership Pgm............................... 6.800 07/01/17 939,546
------------
1,976,066
------------
Texas 11.2%
685 Austin, TX Hsg Fin Corp Multi-Family Hsg Rev Stassney Woods
Apt Proj Rfdg.......................................................... 6.500 10/01/10 713,756
500 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev Saint Luke's Lutheran Hosp
(Prerefunded @ 05/01/03)............................................... 7.900 05/01/18 582,680
250 Brazoria Cnty, TX Muni Util Dist No 2.................................. 7.000 09/01/08 264,013
500 Brownsville, TX Util Sys Rev (Prerefunded @ 09/01/00) (AMBAC Insd)..... 6.500 09/01/17 541,300
500 Ector Cnty, TX Hosp Dist Hosp Rev Med Cent Hosp........................ 7.125 04/15/02 542,535
1,000 El Paso Cnty, TX Pkg Fac Rev Ctfs Oblig (Prerefunded @ 08/15/99)....... 6.500 08/15/11 1,061,390
500 Frenship, TX Indpt Sch Dist Rfdg....................................... 5.500 02/15/03 522,240
500 Frenship, TX Indpt Sch Dist Rfdg....................................... 5.500 02/15/04 520,255
250 Harris Cnty, TX Hlth Fac Dev Corp Mem Hosp Sys Proj Rfdg............... 7.125 06/01/15 288,245
1,250 Harris Cnty, TX Hlth Fac Dev Corp Thermal Util Rev Teco Proj Ser A
(AMBAC Insd)........................................................... 7.250 02/15/15 1,347,575
500 Houston, TX Wtr Sys Rev (Prerefunded @ 12/01/97)....................... 7.250 12/01/07 511,400
1,500 Irving, TX Flood Ctl Dist Section 3 Rfdg (AMBAC Insd).................. * 09/01/08 885,960
250 Rusk Cnty, TX Hlth Fac Corp Hosp Rev Henderson Mem Hosp Proj Rfdg...... 7.750 04/01/13 272,862
250 Tarrant Cnty, TX Hlth Fac Dev Corp Hosp Rev Rfdg & Impt................ 7.000 05/15/28 271,455
250 Tarrant Cnty, TX Hlth Fac Dev Corp Hosp Rev Rfdg & Impt
(Prerefunded @ 05/15/03)............................................... 7.000 05/15/28 285,235
1,000 Tarrant Cnty, TX Hlth Fac Dev TX Hlth Res Sys Ser A (MBIA Insd)........ 5.000 02/15/26 943,630
1,370 Temple, TX Junior College Dist Hsg Sys & Use Fee Rev Rfdg (MBIA Insd).. 5.375 07/01/21 1,370,356
130 Texas Genl Svcs Comm Partn Interests Office Bldg & Land
Acquisition Proj....................................................... 7.000 08/01/14 133,513
330 Texas Genl Svcs Comm Partn Interests Office Bldg & Land
Acquisition Proj....................................................... 7.000 08/01/24 338,917
</TABLE>
See Notes to Financial Statements
58
<PAGE>
Municipal Bond Fund Portfolio of Investments (Continued)
October 31, 1997
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Texas (Continued)
$ 485 Texas Hsg Agy Residential Dev Rev Ser A (GNMA Collateralized) ................ 7.600% 07/01/16 $ 514,692
215 Texas Hsg Agy Single Family Mtg Rev Ser A Rfdg ............................... 7.150 09/01/12 228,278
500 Texas Wtr Res Fin Auth Rev (AMBAC Insd) ...................................... 7.500 08/15/13 527,750
250 Winters, TX Wtrwks & Swr Sys Rev Rfdg (Prerefunded @ 08/01/03) ............... 8.500 08/01/17 302,677
------------
12,970,714
------------
Utah 0.3%
250 Utah St Bldg Ownership Auth Lease Rev Dept Employment Security Proj
(Prerefunded @ 08/15/98) ..................................................... 7.800 08/15/10 257,745
45 Utah St Hsg Fin Agy Mtg Ser G ................................................ 8.100 07/01/16 46,942
------------
304,687
------------
Virginia 5.2%
3,500 Chesapeake Bay Brdg & Tunnel Comm VA Dist Rev Rfdg (MBIA Insd)(b) ............ 5.000 07/01/22 3,360,805
200 Faifax Cnty, VA Multi-Family Hsg Paul Spring Cent Ser A Rfdg (FHA Gtd)(b) .... 5.900 06/15/17 207,880
750 Faifax Cnty, VA Multi-Family Hsg Paul Spring Cent Ser A Rfdg (FHA Gtd) ....... 6.000 12/15/28 779,385
1,000 Peninsula Ports Auth VA Coal Terminal Rev Rfdg ............................... 7.375 06/01/20 1,089,990
500 Prince William Cnty, VA Indl Dev Auth Rev Potomac Place Ser A Rfdg
(GNMA Collateralized) ........................................................ 6.250 12/20/27 528,650
------------
5,966,710
------------
Washington 2.2%
2,000 Washington St Hlthcare Fac Virginia Mason Med Cent Ser A Rfdg (MBIA Insd) .... 5.125 08/15/17 1,945,320
250 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev (FGIC Insd) ........... 7.125 07/01/16 304,275
250 Washington St Pub Pwr Supply Sys Nuclear Proj No 2 Rev
(Prerefunded @ 01/01/01) ..................................................... 7.625 07/01/10 279,385
------------
2,528,980
------------
Wisconsin 2.3%
250 Jefferson, WI Sewage Sys Wtrwks & Elec Sys Mtg Rev (Prerefunded @ 07/01/01) .. 7.400 07/01/16 277,217
2,000 Southeast Wisconsin Prof Baseball Park Dist Lease Ctfs Partn (MBIA Insd) ..... * 12/15/08 1,171,140
150 Wisconsin Hsg & Econ Dev Auth Hsg Rev Ser B .................................. 8.000 11/01/18 156,893
1,000 Wisconsin St Hlth & Edl Fac Auth Rev Marquette Univ Proj (FGIC Insd) ......... 6.450 12/01/19 1,091,970
------------
2,697,220
------------
Total Investments 99.6%
(Cost $106,964,600) ............................................................................... 115,219,826
Other Assets in Excess of Liabilities 0.4% ............................................................... 483,012
------------
Net Assets 100.0% ........................................................................................ $115,702,838
============
</TABLE>
* Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery
purchase commitments, open option and open futures transactions.
(c) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
See Notes to Financial Statements
59
<PAGE>
Municipal Bond Fund Statement of Assets and Liabilities
October 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Assets:
Total Investments (Cost $106,964,600)............................ $115,219,826
Receivables:
Interest....................................................... 1,917,161
Investments Sold............................................... 981,503
Fund Shares Sold............................................... 204,908
Variation Margin on Futures.................................... 10,000
Other............................................................ 27,717
------------
Total Assets................................................... 118,361,115
------------
Liabilities:
Payables:
Investments Purchased.......................................... 1,532,243
Custodian Bank................................................. 784,173
Fund Shares Repurchased........................................ 97,745
Income Distributions........................................... 65,580
Investment Advisory Fee........................................ 59,048
Distributor and Affiliates..................................... 40,951
Trustees' Retirement Plan........................................ 31,400
Accrued Expenses................................................. 30,731
Options at Market Value (Net premiums paid of $43,321)........... 16,406
------------
Total Liabilities.............................................. 2,658,277
------------
Net Assets....................................................... $115,702,838
============
Net Assets Consist of:
Capital.......................................................... $106,093,304
Net Unrealized Appreciation...................................... 8,365,945
Accumulated Net Realized Gain.................................... 948,278
Accumulated Undistributed Net Investment Income.................. 295,311
------------
Net Assets....................................................... $115,702,838
============
Maximum Offering Price Per Share:
Class 1 Shares:
Net asset value and redemption price per share (Based on net
assets of $104,134,036 and 7,328,426 shares of beneficial
interest issued and outstanding)............................. $ 14.21
Maximum sale charge (4.75%* of offering price)................ .71
------------
Maximum offering price to public.............................. $ 14.92
============
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $8,750,932 and 615,828 shares of beneficial
interest issued and outstanding)............................. $ 14.21
Maximum sales charge (4.50%* of offering price)............... .67
------------
Maximum offering price to public.............................. $ 14.88
============
Class B Shares:
Net asset value and offering price per share (Based on net
assets of $2,817,870 and 198,487 shares of beneficial
interest issued and outstanding)............................. $ 14.20
============
</TABLE>
*On sales of $100,000 or more for Class 1 and Class A shares, the sales charge
will be reduced.
See Notes to Financial Statements
60
<PAGE>
Municipal Bond Fund
Financial Statements
<TABLE>
<CAPTION>
Year Ended
October 31, 1997
----------------
Statement of Operations
<S> <C>
Investment Income:
Interest.......................................................................................................... $6,956,491
----------
Expenses:
Investment Advisory Fee........................................................................................... 704,693
Shareholder Services.............................................................................................. 218,925
Registration and Filing Fees...................................................................................... 36,754
Distribution (12b-1) and Service Fees (Attributed to Classes A and B of $13,371 and $16,122, respectively)........ 29,493
Trustees' Fees and Expenses....................................................................................... 20,828
Custody........................................................................................................... 11,019
Other............................................................................................................. 159,130
----------
Total Expenses................................................................................................. 1,180,842
----------
Net Investment Income............................................................................................. $5,775,649
==========
Realized and Unrealized Gain/Loss:
Realized Gain/Loss:
Investments..................................................................................................... $ 697,904
Options......................................................................................................... 164,591
Futures......................................................................................................... 67,016
----------
Net Realized Gain................................................................................................. 929,511
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period......................................................................................... 6,030,189
----------
End of the Period:
Investments.................................................................................................... 8,255,226
Futures........................................................................................................ 83,804
Options........................................................................................................ 26,915
----------
8,365,945
----------
Net Unrealized Appreciation During the Period..................................................................... 2,335,756
----------
Net Realized and Unrealized Gain.................................................................................. $3,265,267
==========
Net Increase in Net Assets from Operations........................................................................ $9,040,916
==========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.......................................................................... $ 5,775,649 $ 6,220,668
Net Realized Gain.............................................................................. 929,511 350,316
Net Unrealized Appreciation During the Period.................................................. 2,335,756 491,252
------------ ------------
Change in Net Assets from Operations........................................................... 9,040,916 7,062,236
------------ ------------
Distributions from Net Investment Income....................................................... (5,569,383) (6,299,276)
Distributions from Net Realized Gain........................................................... (322,924) (373,830)
------------ ------------
Total Distributions.......................................................................... (5,892,307) (6,673,106)
------------ ------------
Net Change in Net Assets from Investment Activities............................................ 3,148,609 389,130
------------ ------------
From Capital Transactions:
Proceeds from Shares Sold...................................................................... 22,216,810 29,491,790
Net Assets Value of Shares Issued Through Dividend Reinvestment................................ 5,060,897 5,768,806
Cost of Shares Repurchased..................................................................... (36,189,108) (33,307,016)
------------ ------------
Net Change in Net Assets from Capital Transactions............................................. (8,911,401) 1,953,580
------------ ------------
Total Increase/Decrease in Net Assets.......................................................... (5,762,792) 2,342,710
Net Assets:
Beginning of the Period........................................................................ 121,465,630 119,122,920
------------ ------------
End of the Period (Including accumulated undistributed net investment income of
$295,311 and $89,045, respectively)........................................................ $115,702,838 $121,465,630
============ ============
</TABLE>
See Notes to Financial Statements
61
<PAGE>
Municipal Bond Fund Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
Year Ended October 31
---------------------------------------------
Class 1 Shares 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.............................. $13.829 $ 13.77 $12.89 $ 14.07 $13.03
------- ------- ------ ------- ------
Net Investment Income............................................... .691 .704 .74 .71 .728
Net Realized and Unrealized Gain/Loss............................... .390 .111 .867 (1.182) 1.038
------- ------- ------ ------- ------
Total from Investment Operations.................................... 1.081 .815 1.607 (.472) 1.766
------- ------- ------ ------- ------
Less:
Distributions from and in Excess of Net
Investments Income............................................... .662 .713 .727 .708 .726
Distributions from and in Excess of Net
Realized Gain.................................................... .038 .043 .000 .000 .000
------- ------- ------ ------- ------
Total Distributions................................................... .700 .756 .727 .708 .726
------- ------- ------ ------- ------
Net Asset Value, End of the Period.................................... $14.210 $13.829 $13.77 $ 12.89 $14.07
======= ======= ====== ======= ======
Total Return (a)...................................................... 8.04% 6.09% 12.72% (3.38%) 13.84%
Net Assets at End of the Period (In millions)......................... $ 104.1 $ 118.7 $119.1 $ 112.1 $ 95.9
Ratio of Expenses to Average Net Assets............................... .98% 1.05% .96% .99% .96%
Ratio of Net Investment Income to Average
Net Assets........................................................... 4.93% 5.13% 5.58% 5.27% 5.29%
Portfolio Turnover.................................................... 50% 80% 49% 4% 4%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares
Year Ended Period Ended Year Ended Period Ended
---------------------------------- -------------------------------------
October 31, 1997 October 31, 1996(b) October 31, 1997 October 31, 1996(b)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.. $13.827 $13.780 $13.822 $13.780
------- ------- ------- -------
Net Investment Income................... .652 .106 .542 .091
Net Realized and Unrealized
Gain.................................. .396 .045 .395 .038
------- ------- ------- -------
Total from Investment Operations.......... 1.048 .151 .937 .129
------- ------- ------- -------
Less:
Distributions from and in Excess of
Net Investments Income............... .627 .104 .524 .087
Distributions from Net Realized Gains. .038 .000 .038 .000
------- ------- ------- -------
Total Distributions....................... .665 .104 .562 .087
------- ------- ------- -------
Net Asset Value, End of the Period........ $14.210 $13.827 $14.197 $13.822
======= ======= ======= =======
Total Return (a).......................... 7.77% 1.12%* 6.98% .93%*
Net Assets at End of the Period
(In millions)............................ $ 8.8 $ 2.1 $ 2.8 $ 0.7
Ratio of Expenses to Average Net Assets... 1.19% 1.30% 1.94% 2.05%
Ratio of Net Investment Income to Average
Net Assets............................... 4.79% 4.82% 4.04% 4.06%
Portfolio Turnover........................ 50% 80% 50% 80%
</TABLE>
* Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Class A and Class B shares commenced distribution on August 18, 1996.
See Notes to Financial Statements
62
<PAGE>
Notes to Financial Statements
October 31, 1997
Note 1--Significant Accounting Policies
Common Sense Trust (the "Trust"), is registered under the Investment Company Act
of 1940, as amended, as a diversified open-end management investment company
comprised of seven funds: Emerging Growth Fund ("Emerging Growth"), Government
Fund ("Government"), Growth Fund ("Growth"), Growth and Income Fund ("Growth and
Income"), International Equity Fund ("International Equity"), Money Market Fund
("Money Market") and Municipal Bond Fund ("Municipal Bond") (collectively the
"Funds"). Each Fund is accounted for as a separate entity and currently offers
three classes of shares, Class 1, Class A and Class B.
The investment goals of each Fund are as follows: Emerging Growth seeks
capital appreciation by primarily investing in common stock of small and medium-
sized companies. Government seeks high current return consistent with
preservation of capital by primarily investing in debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Growth
seeks capital appreciation by investing in common stocks. Growth & Income seeks
reasonable growth and income by primarily investing in equity securities that
provide dividend income and securities that are convertible into common or
preferred stocks. International Equity seeks growth and income by investing at
least 65% of its assets in non-United States equity securities. Money Market
seeks protection of capital and income through investments in short-term money
market instruments. Municipal Bond seeks as high a level of current income
exempt from federal income tax as is consistent with preservation of capital.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. 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 amounts may differ from the estimates.
A. Security Valuations
Investments in securities listed on a securities exchange are valued at
their sale price as of the close of such securities exchange. Fixed income
investments are stated at value using market quotations. Unlisted
securities and listed securities for which the last sales price is not
available are valued at the last bid price. For those securities where
quotations or prices are not available, valuations are determined in
accordance with procedures established in good faith by the Board of
Trustees. Short-term securities with remaining maturities of 60 days or
less are valued at amortized cost. For Money Market, all investments are
valued at amortized cost.
Investments in foreign securities involve certain risks not ordinarily
associated with investments in securities of domestic issuers, including
fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other
foreign governmental laws or restrictions.
Municipal Bond investments include lower-rated debt securities which may be
more susceptible to adverse economic conditions than other investment grade
holdings. These securities are often subordinated to the prior claims of
other senior lenders and uncertainties exist as to an issuer's ability to
meet principal and interest payments. At the end of the period, debt
securities rated below investment grade and comparable unrated securities
represented approximately 10.4% of Municipal Bond's investment portfolio.
Issuers of certain securities owned by Municipal Bond have obtained
insurance guaranteeing their timely payment of principal at maturity and
interest. The insurance reduces financial risk but not market risk of these
securities.
B. Security Transactions
Security transactions are recorded on a trade date basis. Realized gains
and losses are determined on an identified cost basis. Government and
Municipal Bond may purchase and sell securities on a "when issued" or
"delayed delivery" basis, with settlement to occur at a later date. The
value of the security so purchased is subject to market fluctuations during
this period. Government and Municipal Bond will maintain, in a segregated
account with its custodian, assets having an aggregate value at least equal
to the amount of the when issued or delayed delivery purchase commitments
until payment is made.
The Funds may invest in repurchase agreements which are short-term
investments in which a Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified
price. Each Fund may invest independently in repurchase agreements, or
transfer uninvested cash balances into a pooled cash account along
63
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
with certain other investment companies advised by Van Kampen American
Capital Asset Management, Inc. (the "Adviser") or its affiliates, the daily
aggregate of which is invested in repurchase agreements. Repurchase
agreements are fully collateralized by the underlying debt security. Each
Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The
seller is required to maintain the value of the underlying security at not
less than the repurchase proceeds due each Fund.
C. Investment Income
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis. Issuers of Payment-in-Kind securities may
make dividend or interest payments by issuing additional stocks or bonds in
lieu of cash payments. Original issue discount is amortized over the
expected life of each applicable security. With the exception of Money
Market and Municipal Bond, premiums on debt securities are not amortized.
Under the applicable foreign tax laws, a tax may be imposed on interest,
dividends, and realized gains generated from foreign investments. Such
taxes are generally reflected on the Statement of Operations as a reduction
of the related income or gains.
D. Organizational Costs
Emerging Growth and International Equity have reimbursed PFS Distributors
or its affiliates (collectively "PFS") for costs incurred in connection
with each Fund's organization in the amount of $20,906 per Fund. These
costs for Emerging Growth and International Equity are being amortized on a
straight line basis over the 60 month period ending February, 2000 and
March, 2000, respectively. The Adviser has agreed that in the event any of
the initial shares of these Funds originally purchased by Van Kampen
American Capital Distributors, Inc. or its affiliates (collectively "VKAC")
are redeemed during the amortization period, these Funds will be reimbursed
for any unamortized organizational costs in the same proportion as the
number of shares redeemed bears to the number of initial shares held at the
time of redemption.
E. Federal Income Taxes
It is each Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required.
Each Fund intends to utilize provisions of the Federal income tax laws
which allow it to carry a realized capital loss forward for eight years
following the year of the loss and offset such losses against any future
capital gains realized by such Fund. The following table presents the
realized capital loss carryforward at October 31, 1997, along with its
expiration period.
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
-------- ---------- ------ ---------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Realized capital loss
carryforward -0- $35,228,075 -0- -0- $910,647 $ 4,809 -0-
Expiration dates of capital loss
carryforward -- 2002-2005 -- -- 2004 2002-2005 --
</TABLE>
At October 31, 1997, for federal income tax purposes, cost of long- and short-
term investments, the aggregate gross unrealized appreciation, the aggregate
gross unrealized depreciation, and the net unrealized appreciation/depreciation
for each Fund are as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
------------ ------------ -------------- -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Identified Cost $145,747,399 $255,824,030 $3,140,215,931 $1,066,847,025 $26,764,530 $59,996,760 $106,964,600
Gross Unrealized
Appreciation 44,663,206 7,931,173 771,371,645 241,335,184 7,937,191 -0- 8,365,945
Gross Unrealized
Depreciation 4,514,559 540,843 65,805,002 30,916,990 1,559,170 -0- -0-
Net Unrealized Appreciation 40,148,647 7,390,330 705,566,643 210,418,194 6,378,021 -0- 8,365,945
</TABLE>
64
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
F. Distribution of Income and Gains
Government, Money Market and Municipal Bond declare dividends from net
investment income on each business day. Growth and Income declares dividends
quarterly. Emerging Growth, Growth and International Equity declare dividends
annually. Dividends and distributions to shareholders are recorded on the
record date. Distributions from net realized gains for book purposes may
include short-term capital gains and gains on option and futures
transactions. All short-term capital gains and a portion of option and
futures gains are included in ordinary income for tax purposes.
For the year ended October 31, 1997, distributions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
-------- ----------- ------------ ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Distributions From
and in Excess of
Net Investment Income:
Class 1 $ -0- $17,132,863 $ 29,480,834 $ 16,077,880 $ -0- $2,556,414 $5,267,861
Class A -0- 779,374 482,315 706,960 -0- 180,211 240,492
Class B -0- 729,319 465,733 425,939 -0- 5,860 61,030
-------- ----------- ------------ ------------ ------------- ---------- ----------
Total $ -0- $18,641,556 $ 30,428,882 $ 17,210,779 $ -0- $2,742,485 $5,569,383
======== =========== ============ ============ ============= ========== ==========
Distributions From
Net Realized Gain:
Class 1 $ -0- $ -0- $224,652,726 $112,127,401 $ -0- $ -0- $ 312,015
Class A -0- -0- 4,062,147 4,331,457 -0- -0- 8,242
Class B -0- -0- 5,837,891 6,573,467 -0- -0- 2,667
-------- ----------- ------------ ------------ ------------- ---------- ----------
Total $ -0- $ -0- $234,552,764 $123,032,325 $ -0- $ -0- $ 322,924
======== =========== ============ ============ ============= ========== ==========
For the year ended October 31, 1996, distributions were as follows:
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
-------- ----------- ------------ ------------ ------------- ---------- ----------
Distributions From
and in Excess of
Net Investment Income:
Class 1 $ -0- $21,453,795 $ 27,245,960 $ 17,403,926 $ -0- $2,758,939 $6,288,593
Class A -0- 153,693 -0- 103,649 -0- 2,375 7,781
Class B -0- 174,701 -0- 121,982 -0- 23 2,902
-------- ----------- ------------ ------------ ------------- ---------- ----------
Total $ -0- $21,782,189 $ 27,245,960 $ 17,629,557 $ -0- $2,761,337 $6,299,276
======== =========== ============ ============ ============= ========== ==========
Distributions From
Net Realized Gain:
Class 1 $ -0- $ -0- $358,762,393 $ 85,264,726 $ -0- $ -0- $ 373,830
Class A -0- -0- -0- -0- -0- -0- -0-
Class B -0- -0- -0- -0- -0- -0- -0-
-------- ----------- ------------ ------------ ------------- ---------- ----------
Total $ -0- $ -0- $358,762,393 $ 85,264,726 $ -0- $ -0- $ 373,830
======== =========== ============ ============ ============= ========== ==========
</TABLE>
65
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and
federal income tax purposes, the following permanent differences between book
and tax basis reporting for the 1997 fiscal year have been identified and
appropriately reclassified.
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
-------- ---------- ------ ---------- ------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated Undistributed
Net Investment
Income: (a,b,c) $1,713,650 $ 83,685 $-0- $-0- $ 507,459 $-0- $-0-
Accumulated Net Realized
Gain/Loss: (b,c) -0- (83,685) -0- -0- 20,004 -0- -0-
Capital (a,b,c)
Class 1 (932) -0- -0- -0- (18,461) -0- -0-
Class A (791,228) -0- -0- -0- (284,830) -0- -0-
Class B (921,490) -0- -0- -0- (224,172) -0- -0-
</TABLE>
(a) For federal income tax purposes, net operating losses may not be used to
offset income generated in future tax years, therefore, these losses have
been reclassified from accumulated net investment income to capital.
(b) For federal income tax purposes, realized gains and losses on transactions
in foreign currencies are included as ordinary income. These realized gains
and losses are included in net realized gain/loss for financial reporting
purposes and have been reclassified from accumulated net realized gain/loss
to accumulated undistributed net investment income.
(c) Accretion of market discounts on bonds and paydowns of mortgage pool
obligations are recognized as ordinary income for federal income tax
purposes but as realized gains or losses for book purposes. These permanent
differences have been reclassified from accumulated net realized gain/loss
to accumulated undistributed net investment income.
G. Foreign Currency Translation
The market values of foreign securities, forward currency exchange contracts
and other assets and liabilities denominated in a foreign currency are
translated into U.S. dollars based on quoted exchange rates as of noon
Eastern Time. The cost of securities is determined using historical exchange
rates. Income and expenses are translated at prevailing exchange rates when
accrued or incurred. Gains and losses on the sale of securities are not
segregated for financial reporting purposes between amounts arising from
changes in exchange rates and amounts arising from changes in the market
prices of securities. Realized gain and loss on foreign currency includes
the net realized amount from the sale of currency and the amount realized
between trade date and settlement date on security transactions.
H. Private Placements
A Fund may own securities purchased in private placement transactions, which
have not been registered under the Securities Act of 1933. Such securities
generally may be resold only in a privately negotiated transaction with a
limited number of purchasers or in a public offering after they have been
registered under the Securities Act of 1933. The issuers of privately placed
debt securities held by a Fund generally have agreed to register the
securities within specified time periods or increase the interest paid on
such securities.
66
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
Note 2--Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee, payable
monthly, based on the average daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
Emerging Growth,
Growth and
Growth and Income Government Municipal Bond Money Market
- ------------------------ ------------------------ ------------------------ ------------------------
Average Daily Annual Average Daily Annual Average Daily Annual Average Daily Annual
Net Assets Rate Net Assets Rate Net Assets Rate Net Assets Rate
- --------------- ------ ---------------- ------ ---------------- ------ ---------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
First $1 billion .65% First $1 billion .60% First $1 billion .60% First $2 billion .50%
Next $1 billion .60% Next $1 billion .55% Next $1 billion .55% Next $2 billion .475%
Next $1 billion .55% Next $1 billion .50% Next $1 billion .50% Over $4 billion .45%
Next $1 billion .50% Next $1 billion .45% Over $3 billion .45%
Over $4 billion .45% Next $1 billion .40%
Over $5 billion .35%
</TABLE>
The Adviser has entered into a subadvisory agreement with Smith Barney Mutual
Funds Management, Inc. (the "Subadviser"), who provides advisory services to
International Equity and the Adviser with respect to its investments in foreign
securities. Advisory fees for International Equity are calculated monthly, based
on the average daily net assets of the Fund at the annual rate of 1.00%. The
Adviser pays 50% of its advisory fee to the Subadviser.
The Adviser has voluntarily elected to reimburse Money Market for any ordinary
business expenses in excess of 1.00% of its average daily net assets. The
Adviser may modify or terminate this election at any time without prior notice.
During the period, the adviser waived advisory fees of $305,876 and reimbursed
other expenses of $201,531.
The Adviser has agreed that it will reimburse the Funds for any expenses
(including the advisory fee, but excluding interest, brokerage commissions,
distribution and service fees, and other extraordinary expenses) in excess of
2.5% of the Funds's average daily net assets up to $30 million, 2.0% of the next
$70 million of such net assets and 1.5% of the Fund's net assets in excess of
$100 million. The Adviser and, in the case of International Equity, the
Subadviser may, from time to time, agree to waive their respective investment
advisory fees or any portion thereof or elect to reimburse a Fund for ordinary
business expenses in excess of an agreed upon amount.
Amounts paid by the Trust to affiliates during the period were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
-------- ---------- --------- ---------- ------------- -------- ---------
Accounting services............ $ 37,198 $ 55,786 $ 420,043 $ 161,748 $ 21,601 $ 28,174 $ 39,999
Shareholder servicing fees..... 715,736 408,004 6,649,936 1,709,153 112,857 457,873 173,978
</TABLE>
For the year ended October 31, 1997, the Funds incurred expenses as shown in the
table above representing VKAC'S cost of providing accounting and cash management
services to the Funds. These services are provided by VKAC at cost.
PFS Shareholder Services ("PFSS"), an affiliate of the Distributor, serves as
the shareholder servicing agent for the Funds. For the year ended October 31,
1997, the Funds incurred expenses as shown in the preceding table, representing
PFSS' cost of providing transfer agency and shareholder services plus a profit.
PFS Distributors (the "Distributor"), a wholly owned subsidiary of Travelers
Group, Inc., serves as distributor of the Fund's shares. The Distributor has an
exclusive selling agreement with PFS Investments Inc. to sell shares of the
Trust. During the period, the Trust paid brokerage commissions of approximately
$47,500 to companies which are deemed affiliates of the Distributor's parent
because it owns more than 5% of the companies' outstanding voting securities.
Certain officers and trustees of the Funds are also officers and directors of
PFS and VKAC. The Funds do not compensate their officers or trustees who are
officers of PFS and VKAC.
67
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
The Trustees of the Trust instituted a Retirement Plan (the "Plan"), effective
April 1, 1996. The Plan is not funded, and obligations under the Plan will be
paid solely out of the Trust's general account. The Trust will not reserve or
set aside funds for the payment of its obligations under the Plan by any form of
trust or escrow. For the current Trustees not affiliated with the Adviser, the
annual retirement benefit payable per year for a ten-year period is based upon
the highest total annual compensation received in any of the three calendar
years preceding retirement. Trustees with more than five but less than ten years
of service at retirement will receive a proportionally reduced benefit. Under
the Plan, for those Trustees retiring with the effectiveness of the Plan, the
annual retirement benefit payable per year for a ten-year period is equal to 75%
of the total compensation received from the Trust during the 1995 calendar year.
Note 3-Capital Transactions
The Funds have three classes of shares of beneficial interest, Classes 1, A and
B, each with a par value of $.01 per share. There are an unlimited number of
shares authorized.
For the year ended October 31, 1997, share transactions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
---------- ----------- ----------- ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Class 1............. 251,646 1,205,980 10,880,085 3,488,655 83,388 56,118,841 835,266
Class A............. 2,551,721 693,337 2,879,483 2,492,244 453,796 13,489,220 589,115
Class B............. 2,002,340 289,459 2,294,738 2,229,471 382,972 622,707 176,471
---------- ----------- ----------- ----------- ------------- ------------ ----------
Total Sales......... 4,805,707 2,188,776 16,054,306 8,210,370 920,156 70,230,768 1,600,852
========== =========== =========== =========== ============= ============ ==========
Dividend
Reinvestment
Class 1............. -0- 1,415,924 14,808,162 7,431,728 -0- 2,509,452 343,915
Class A............. -0- 72,004 265,659 291,090 -0- 177,944 15,254
Class B............. -0- 68,294 368,874 411,475 -0- 5,359 4,446
---------- ----------- ----------- ----------- ------------- ------------ ----------
Total Dividend
Reinvestment........ -0- 1,556,222 15,442,695 8,134,293 -0- 2,692,755 363,615
========== =========== =========== =========== ============= ============ ==========
Repurchases
Class 1............. (13,719) (7,497,352) (23,492,980) (8,410,702) (2,656) (65,551,045) (2,433,057)
Class A............. (768,249) (554,785) (696,268) (605,697) (166,953) (6,999,969) (142,483)
Class B............. (448,622) (518,360) (715,979) (566,087) (92,709) (367,021) (29,641)
---------- ----------- ----------- ----------- ------------- ------------ ----------
Total Repurchases... (1,230,590) (8,570,497) (24,905,227) (9,582,486) (262,318) (72,918,035) (2,605,181)
========== =========== =========== =========== ============= ============ ==========
</TABLE>
68
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
For the year ended October 31, 1996, share transactions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
------------ ------------ -------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Class 1............ 38,105 2,871,610 16,457,335 5,320,300 9,813 67,367,316 1,942,660
Class A............ 2,000,873 1,149,244 2,868,484 1,861,875 396,481 797,434 153,756
Class B............ 1,592,107 1,410,035 4,253,128 2,953,516 335,699 13,631 47,012
------------ ------------ -------------- ------------- ------------- ------------ ------------
Total Sales........ 3,631,085 5,430,889 23,578,947 10,135,691 741,993 68,178,381 2,143,428
============ ============ ============== ============= ============= ============ ============
Dividend
Reinvestment
Class 1............ -0- 1,767,746 24,543,242 6,129,820 -0- 2,712,773 418,529
Class A............ -0- 14,411 -0- 5,681 -0- 2,375 561
Class B............ -0- 16,399 -0- 6,789 -0- 23 210
------------ ------------ -------------- ------------- ------------- ------------ ------------
Total Dividend
Reinvestment....... -0- 1,798,556 24,543,242 6,142,290 -0- 2,715,171 419,300
============ ============ ============== ============= ============= ============ ============
Repurchases
Class 1............ -0- (7,862,750) (23,362,241) (8,236,939) -0- (70,471,885) (2,428,730)
Class A............ (283,852) (95,253) (124,234) (73,103) (243,560) (70,999) (375)
Class B............ (178,667) (96,131) (117,684) (81,341) (43,903) -0- (11)
------------ ------------ -------------- ------------- ------------- ------------ ------------
Total Repurchases.. (462,519) (8,054,134) (23,604,159) (8,391,383) (287,463) (70,542,884) (2,429,116)
============ ============ ============== ============= ============= ============ ============
For the year ended October 31, 1997, capital transactions were as follows:
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
------------ ------------ -------------- ------------- ------------- ------------ ------------
Sales
Class 1............ $ 4,839,858 $ 12,458,874 $ 206,496,699 $ 65,290,895 $ 1,478,581 $ 56,118,841 $ 11,582,065
Class A............ 49,413,474 7,167,186 55,660,699 47,330,942 7,942,743 13,489,220 8,177,333
Class B............ 38,402,545 2,996,385 43,959,246 42,178,551 6,657,335 622,707 2,457,412
------------ ------------ -------------- ------------- ------------- ------------ ------------
Total Sales........ $ 92,655,877 $ 22,622,445 $ 306,116,644 $ 154,800,388 $ 16,078,659 $ 70,230,768 $ 22,216,810
============ ============ ============== ============= ============= ============ ============
Dividend
Reinvestment
Class 1............ $ -0- $ 14,649,052 $ 252,629,466 $ 126,213,231 $ -0- $ 2,509,452 $ 4,785,894
Class A............ -0- 745,086 4,532,135 4,961,135 -0- 177,944 212,974
Class B............ -0- 706,135 6,289,301 6,954,231 -0- 5,359 62,029
------------ ------------ -------------- ------------- ------------- ------------ ------------
Total Dividend
Reinvestment....... $ -0- $ 16,100,273 $ 263,450,902 $ 138,128,597 $ -0- $ 2,962,755 $ 5,060,897
============ ============ ============== ============= ============= ============ ============
Repurchases
Class 1............ $ (276,562) $(77,332,161) $ (448,115,560) $(158,272,168) $ (46,769) $(65,551,044) $(33,796,634)
Class A............ (15,221,200) (5,718,500) (13,510,527) (11,511,567) (2,982,586) (6,999,969) (1,981,903)
Class B............ (8,801,605) (5,349,840) (13,728,992) (10,741,087) (1,615,852) (367,022) (410,571)
------------ ------------ -------------- ------------- ------------- ------------ ------------
Total Repurchases.. $(24,299,367) $(88,400,501) $ (475,355,079) $(180,524,822) $ (4,645,207) $(72,918,035) $(36,189,108)
============ ============ ============== ============= ============= ============ ============
Ending Capital
Class 1............ $ 5,286,680 $268,701,424 $2,250,171,831 $ 704,924,274 $ 1,575,846 $ 52,989,206 $ 94,821,197
Class A............ 77,118,717 13,277,543 89,027,244 69,347,170 13,239,185 7,396,005 8,520,311
Class B............ 61,993,193 12,249,362 100,022,921 84,450,000 11,852,415 274,698 2,751,796
------------ ------------ -------------- ------------- ------------- ------------ ------------
Total Capital...... $144,398,590 $294,228,329 $2,439,221,996 $ 858,721,444 $ 26,667,446 $ 60,659,909 $106,093,304
============ ============ ============== ============= ============= ============ ============
</TABLE>
69
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
For the year ended October 31, 1996, capital transactions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
------------ ------------ -------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Class 1................. $ 724,896 $ 30,153,836 $ 276,405,770 $ 91,685,267 $ 163,259 $ 67,367,316 $ 26,742,300
Class A................. 34,657,451 11,822,387 44,341,185 29,746,398 6,181,070 797,434 2,109,316
Class B................. 26,926,301 14,598,261 65,291,032 47,348,206 5,168,282 13,631 640,174
------------ ------------ -------------- ------------- ----------- ------------ ------------
Total Sales............. $ 62,308,648 $ 56,574,484 $ 386,037,987 $ 168,779,871 $11,512,611 $ 68,178,381 $ 29,491,790
============ ============ ============== ============= =========== ============ ============
Dividend
Reinvestment
Class 1................. $ -0- $ 18,444,465 $ 383,855,779 $ 101,050,427 $ -0- $ 2,712,773 $ 5,758,155
Class A................. -0- 148,139 -0- 101,172 -0- 2,375 7,749
Class B................. -0- 168,546 -0- 120,825 -0- 23 2,902
------------ ------------ -------------- ------------- ----------- ------------ ------------
Total Dividend
Reinvestment............ $ -0- $ 18,761,150 $ 383,855,779 $ 101,272,424 $ -0- $ 2,715,171 $ 5,768,806
============ ============ ============== ============= =========== ============ ============
Repurchases
Class 1................. $ -0- $(81,974,033) $ (392,656,318) $(142,390,951) $ -0- $(70,471,885) $(33,301,708)
Class A................. (4,998,044) (977,331) (2,155,576) (1,300,278) (3,522,695) (70,999) (5,158)
Class B................. (3,094,195) (982,903) (2,036,872) (1,441,770) (690,155) -0- (150)
------------ ------------ -------------- ------------- ----------- ------------ ------------
Total Repurchases....... $ (8,092,239) $(83,934,267) $ (396,848,766) $(145,132,999) $(4,212,850) $(70,542,884) $(33,307,016)
============ ============ ============== ============= =========== ============ ============
Ending Capital
Class 1................. $ 724,316 $318,925,659 $2,239,161,226 $ 671,692,316 $ 162,496 $ 59,911,957 $112,249,872
Class A................. 43,717,671 11,083,771 42,344,937 28,566,660 8,563,858 728,810 2,111,907
Class B................. 33,313,743 13,896,682 63,503,366 46,058,305 7,035,103 13,654 642,926
------------ ------------ -------------- ------------- ----------- ------------ ------------
Total Capital........... $ 77,755,730 $343,906,112 $2,345,009,529 $ 746,317,281 $15,761,457 $ 60,654,421 $115,004,705
============ ============ ============== ============= =========== ============ ============
</TABLE>
Class B shares are offered without a front end sales charge, but are subject to
a contingent deferred sales charge (CDSC).
The CDSC will be imposed on most redemptions made within five years of the
purchase as detailed in the following schedule. Class B shares bear the expense
of their respective deferred sales arrangements, including higher distribution
and service fees and incremental transfer agency costs.
<TABLE>
<CAPTION>
Emerging Growth, Growth,
Class B Share Contingent Deferred Sales Charge Growth and Income & Government &
Year of Redemption International Equity Municipal Bond
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First ...................................................... 5.00% 4.00%
Second ...................................................... 4.00% 4.00%
Third ...................................................... 3.00% 3.00%
Fourth ...................................................... 2.50% 2.50%
Fifth ...................................................... 1.50% 1.50%
Sixth and Thereafter........................................... None None
</TABLE>
For the year ended October 31, 1997, PFS, as distributor for the Funds, received
commissions on sales of the Funds' Class 1 and Class A shares of approximately
$4,086,600 and CDSC on redeemed shares of approximately $1,069,500. Sales
charges do not represent expenses of the Funds.
70
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
Note 4--Investment Transactions
During the period, the cost of purchases and proceeds from sales of investment
securities, excluding short-term investments and forward purchase commitments,
were:
<TABLE>
<CAPTION>
Emerging Growth International Municipal
Growth Government Growth and Income Equity Bond
------------ ------------ -------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases.................. $185,925,721 $291,270,718 $5,344,669,925 $1,027,741,567 $26,482,820 $57,840,453
Sales...................... 123,789,404 346,788,600 5,341,172,972 1,096,910,907 14,920,934 63,369,355
</TABLE>
Note 5--Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Funds have a variety of reasons to use derivative instruments, such as to
attempt to protect the Funds against possible changes in the market value of its
portfolio, manage the portfolio's effective yield, foreign currency exposure,
maturity and duration or generate potential gain. All of the Funds' portfolio
holdings, including derivative instruments, are marked to market each day with
the change in value reflected in unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
exercising an option contract or taking delivery of a security underlying a
futures contract. In these instances, the recognition of gain or loss is
postponed until the disposal of the security underlying the option or futures
contract.
Summarized below are the specific types of derivative financial instruments used
by the Funds.
A. Option Contracts
An option contract gives the buyer the right, but not the obligation to buy
(call) or sell (put) an underlying item at a fixed exercise price during a
specified period. Municipal Bond generally invests in options on U.S.
Treasury bonds which are generally used to manage the portfolioOs effective
maturity and duration.
Transactions in options for Municipal Bond for the year ended October 31,
1997, were as follows:
<TABLE>
<CAPTION>
Contracts Premium
--------- ---------
<S> <C> <C>
Outstanding at October 31, 1996.......................................... 17 $ (32,012)
Options Written and Purchased (Net)...................................... 1,881 (205,192)
Options Expired.......................................................... (961) 243,050
Options Terminated in Closing Transactions (Net)......................... (787) 37,475
--------- ---------
Outstanding at October 31, 1997.......................................... 150 $ 43,321
========= =========
</TABLE>
The related futures contracts of the outstanding option transactions for
Municipal Bond as of October 31, 1997, and the description and market value
are as follows:
<TABLE>
<CAPTION>
Market
Exp. Month/ Value of
Contracts Exercise Price Options
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Bond Index Futures December 1997--Written Puts
(Current Notional Value of $118,469 per contract)...................... 150 Dec / 115 $16,406
=======
</TABLE>
71
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
B. Futures Contracts
A futures contract is an agreement involving the delivery of a particular
asset on a specified future date at an agreed upon price. Government
generally invests in exchange traded futures on U.S. Treasury bonds and notes
which are typically used to manage the portfolio's effective maturity and
duration. Growth and Growth and Income generally invest in futures on the S&P
500 Index as a substitute for purchasing or selling specific securities. Upon
entering into futures contracts, the Funds maintain, in a segregated account
with its custodian, securities with a value equal to its obligation under the
futures contracts. During the period the futures contract is open, payments
are received from or made to the broker based upon changes in the value of
the contract (the variation margin).
For the year ended October 31, 1997, futures transactions were as follows:
<TABLE>
<CAPTION>
Emerging Growth and Municipal
Growth Government Growth Income Bond
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Outstanding at October 31, 1996..... -0- 605 280 95 -0-
Futures Opened...................... 78 6,110 3,935 340 62
Futures Closed...................... (78) (6,167) (4,215) (330) (30)
---- ------ ------ ---- ---
Outstanding at October 31, 1997..... -0- 548 0 105 32
==== ====== ====== ==== ===
</TABLE>
The futures contracts outstanding as of October 31, 1997, and the
descriptions and unrealized appreciation/ depreciation are as follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation/
Contracts Depreciation
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Government
Long Contracts:
U.S. Treasury Bond Futures December 1997 (Current Notional Value of $118,469 per contract)............. 397 $2,036,318
Five-year U.S. Treasury Note Futures December 1997 (Current Notional Value of $108,406 per contract)... 20 42,873
Ten-year U.S. Treasury Note Futures December 1997 (Current Notional Value of $111,750 per contract).... 131 319,602
--- -----------
Total Government..................................................................................... 548 $ 2,398,793
=== ===========
Growth and Income
Long Contracts:
S&P 500 Index Futures December 1997 (Current Notional Value of $462,000 per contract).................. 105 $(1,412,063)
=== ===========
Municipal Bond
Long Contracts:
U.S. Treasury Bond Futures December 1997 (Current Notional Value of $118,469 per contract)............. 32 $ 83,804
=== ===========
</TABLE>
72
<PAGE>
Notes to Financial Statements (Continued)
October 31, 1997
C. Forward Commitments
The Government Fund trades certain securities under the terms of forward
commitments, whereby the settlement occurs at a specific future date. Forward
commitments are privately negotiated transactions between the Fund and
dealers. While forward commitments are outstanding, the Fund maintains
sufficient collateral of cash or securities in a segregated account with its
custodian. Forward commitments are marked to market on a daily basis with
changes in value reflected as a component of unrealized appreciation/
depreciation. The following forward commitments were outstanding as of
October 31, 1997:
<TABLE>
<CAPTION>
Par Amount Current Unrealized
(000) Description Value Depreciation
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short Contracts:
$12,000 Government National Mortgage Association, 7.50%...................... $12,256,920 $ 5,670
12,000 Government National Mortgage Association, 30-Year, 7.50%............. 12,270,000 60,000
12,000 Government National Mortgage Association, 8.00%...................... 12,450,000 45,000
--------
$110,670
========
</TABLE>
D. Forward Currency Contracts
The International Equity Fund invests in forward currency contracts generally
as a hedge against currency fluctuations. A forward currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Upon the settlement of the contract, a realized gain
or loss is recognized and is included as a component of realized gain/loss.
Note 6--Distribution and Service Plans
The Funds and their shareholders have adopted a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
such Fund's shares, ongoing shareholder services and maintenance of shareholder
accounts.
Annual fees under the Plans of up to .25% (.10% for Money Market) of Class A net
assets and 1.00% (.75% for Money Market) of Class B net assets are accrued
daily.
Note 7--Subsequent Events
On August 25, 1997, VKAC entered into an agreement for the sale and assignment
of the Trust's Investment Advisory Agreements to Smith Barney Mutual Funds
Management Inc. (SBMFM) which is expected to be completed on or about December
31, 1997. This assignment will result in the automatic termination of the
current Investment Advisory Agreements. Subject to shareholder approval at the
December 18, 1997 meeting, new Investment Advisory Agreements between the Trust
and SBMFM will commence upon the date of such assignment. Under the terms of the
new Investment Advisory Agreements, SBMFM will provide investment advice and
facilities to the Trust for an annual fee which is the same as the annual fee
under the current Investment Advisory Agreements with VKAC.
The Board of Trustees has approved the sale of the Money Market Fund's assets
and liabilities to the Smith Barney Money Funds, Inc.--Cash Portfolio (the
"SB--Cash Portfolio"). This transaction, subject to approval by the Money Market
Fund's shareholders, is expected to be completed in December 1997. As a result
of this transaction, Money Market Fund shareholders of all classes will receive
Class A shares of the SB--Cash Portfolio equal in value to their net assets.
73
<PAGE>
Fund Performance Data
Each of the graphs below shows the total return performance of a different
Common Sense Fund compared to a benchmark index. While the Securities and
Exchange Commission requires that we provide this comparison, it may not be
meaningful in evaluating your fund's performance against its specific
objectives and your time frame. The indexes do not reflect any commissions or
fees that would be paid by an investor purchasing the securities they
represent. All sales charges and all other fees and expenses are reflected in
the performance shown for Class 1 or Class A shares of each Common Sense Fund
at maximum offering price. In addition, since investors purchase shares of the
Funds with varying sales charges depending primarily on volume purchased, each
Fund's performance at net asset value also is shown. The performance of the
other classes of shares of each Fund will differ from that of the class shown
because of the difference in sales charges and/or expenses paid by shareholders
investing in the various classes of shares of the Fund. Performance is noted
for either Class 1 or Class A, depending upon which class of shares has the
longest performance.
For details on market conditions and each fund's performance during the
reporting period, see pages 3 through 9 of this report.
Comparison of $10,000 Investment in
Common Sense Emerging Growth Fund
vs. Russell 2000 Stock Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Average Annual Inception
Total Returns--Class A 1 Year (2/21/95)
- -------------------------------------------------------------
<S> <C> <C>
At Net Asset Value 18.90% 26.19%
- -------------------------------------------------------------
With maximum
5.50% sales charge 12.37% 23.55%
- -------------------------------------------------------------
</TABLE>
Comparison of $10,000 Investment in
Common Sense Government Fund vs.
Lehman Brothers Mutual Fund General U.S. Government Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Average Annual Inception
Total Returns--Class 1 1 Year 5 Years (4/14/87)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
At Net Asset Value 8.56% 6.28% 7.64%
- ----------------------------------------------------------------------------
With maximum
6.75% sales charge 1.26% 4.80% 6.93%
- ----------------------------------------------------------------------------
</TABLE>
Comparison of $10,000 Investment in
Common Sense Growth Fund vs. S&P 500
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Average Annual Inception
Total Returns--Class 1 1 Year 5 Years (4/14/87)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
At Net Asset Value 26.93% 17.09% 12.97%
- ----------------------------------------------------------------------------
With maximum
8.50% sales charge 16.15% 15.03% 12.02%
- ----------------------------------------------------------------------------
</TABLE>
Comparison of $10,000 Investment in
Common Sense Growth & Income Fund vs. S&P 500
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Average Annual Inception
Total Returns--Class 1 1 Year 5 Years (4/14/87)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
At Net Asset Value 27.35% 16.62% 12.37%
- ----------------------------------------------------------------------------
With maximum
8.50% sales charge 16.54% 14.57% 11.43%
- ----------------------------------------------------------------------------
</TABLE>
74
<PAGE>
Fund Performance Data (Continued)
Comparison of $10,000 Investment in
Common Sense International Equity Fund
vs. Europe-Australasia-Far East Index & DV
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -----------------------------------------------------
Average Annual Inception
Total Returns--Class A 1 Year (3/17/95)
- -----------------------------------------------------
<S> <C> <C>
At Net Asset Value 9.74% 17.31%
- -----------------------------------------------------
With maximum
5.50% sales charge 3.72% 14.83%
- -----------------------------------------------------
</TABLE>
Comparison of $10,000 Investment in
Common Sense Municipal Bond Fund
vs. Lehman Brothers Municipal Bond Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Average Annual Inception
Total Returns--Class 1 1 Year 5 Years (7/13/88)
- --------------------------------------------------------------------
<S> <C> <C> <C>
At Net Asset Value 8.04% 7.28% 7.76%
- --------------------------------------------------------------------
With maximum
4.75% sales charge 2.90% 6.24% 7.20%
- --------------------------------------------------------------------
</TABLE>
* Past performance is not indicative of future performance. The comparative
indices used are broad-based, unmanaged indices of securities that do not
reflect any commissions or fees that would be paid by an investor purchasing
the securities they represent.
75
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of
Common Sense Trust
We have audited the accompanying statements of assets and liabilities
(including the portfolio of investments) of Common Sense Growth Fund, Common
Sense Growth and Income Fund, Common Sense Government Fund, Common Sense
Municipal Bond Fund, Common Sense Money Market Fund, Common Sense Emerging
Growth Fund, and Common Sense International Equity Fund (cumulatively the
"Funds"), constituting the series of the Common Sense Trust (the "Trust"), as of
October 31, 1997, and for each of the Funds, the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds of the Common Sense Trust listed above at October
31, 1997, the results of their operations, the changes in their net assets and
the financial highlights for each of the periods identified above, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
November 14, 1997
76
<PAGE>
Common Sense Trust
This Page Intentionally Left Blank
<PAGE>
Common Sense Trust
Board of Trustees
Donald M. Carlton
A. Benton Cocanougher
Stephen Randolph Gross
Jeffrey B. Lane*
Alan G. Merten
Steven Muller
R. Richardson Pettit
Don G. Powell*--Chairman
Alan B. Shepard, Jr.
- ------------------------------------------------------
Officers
Don G. Powell*
President and Chief Executive Officer
Dennis J. McDonnell*
Executive Vice President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood III*
Vice President and Chief Financial Officer
Curtis W. Morell*
Vice President and Chief Accounting Officer
John L. Sullivan*
Treasurer
Tanya Loden*
Controller
Alan T. Sachtleben*
Paul R. Wolkenberg*
D. Richard Williams*
Vice Presidents
- ------------------------------------------------------
Investment Adviser
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza, Oakbrook Terrace, IL 60181
- ------------------------------------------------------
Investment Subadviser (International Equity Fund)
Smith Barney Mutual Funds Management, Inc.
388 Greenwich Street, New York, New York 10013
- ------------------------------------------------------
Distributor
PFS Distributors
3100 Breckinridge Blvd., Duluth, Georgia 30199
- ------------------------------------------------------
Shareholder Service Agent
PFS Shareholder Services
3100 Breckinridge Blvd., Duluth, Georgia 30199
- ------------------------------------------------------
Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, Massachusetts 02110
- ------------------------------------------------------
Legal Counsel
Sullivan & Worcester LLP
1025 Connecticut Avenue N.W., Washington, D.C. 20036
- ------------------------------------------------------
Independent Accountants
Ernst & Young LLP
1221 McKinney Street, Suite 2400, Houston, Texas 77010
- ------------------------------------------------------
- ------------------------------------------------------
This report is submitted for the general information
of the shareholders of the Trust. It is not authorized
for distribution to prospective investors unless it
has been preceded or is accompanied by an effective
prospectus of the Trust which contains additional
information on how to purchase shares, the sales
charge, and other pertinent data.
- ------------------------------------------------------
- ------------------------------------------------------
Shareholder inquiries should be directed in writing to
the Shareholder Service Agent. PFS Shareholder
Services, 3100 Breckinridge Blvd., Duluth, Georgia
30199-0062, or by calling (800) 544-5445.
- ------------------------------------------------------
* "Interested" persons of the Trust, as defined in the Investment Company
Act of 1940.
<PAGE>
Common Sense Trust ---------------
FAMILY OF FUNDS BULK RATE
U.S. POSTAGE
PFS Shareholder Services PAID
3120 Breckinridge Blvd. Permit No. 3918
Duluth, Georgia 30099-0001 Atlanta, GA
---------------
If you have any questions, please contact
one of our Client Services Representatives
1-800-544-5445
PRINTED MATTER
Printed in U.S.A. ###-##-####
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> Common Sense Trust Growth Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 3,129,516,597<F1>
<INVESTMENTS-AT-VALUE> 3,845,782,574<F1>
<RECEIVABLES> 33,112,858<F1>
<ASSETS-OTHER> 709,800<F1>
<OTHER-ITEMS-ASSETS> 5,686<F1>
<TOTAL-ASSETS> 3,879,610,918<F1>
<PAYABLE-FOR-SECURITIES> 91,688,633<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,053,171<F1>
<TOTAL-LIABILITIES> 97,741,804<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,250,171,831
<SHARES-COMMON-STOCK> 169,366,980
<SHARES-COMMON-PRIOR> 167,171,713
<ACCUMULATED-NII-CURRENT> 22,702,297<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 603,678,844<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 716,265,977<F1>
<NET-ASSETS> 3,547,123,339
<DIVIDEND-INCOME> 40,919,149<F1>
<INTEREST-INCOME> 20,210,151<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (32,135,676)<F1>
<NET-INVESTMENT-INCOME> 28,993,624<F1>
<REALIZED-GAINS-CURRENT> 611,419,267<F1>
<APPREC-INCREASE-CURRENT> 183,638,067<F1>
<NET-CHANGE-FROM-OPS> 824,050,958<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (29,480,834)
<DISTRIBUTIONS-OF-GAINS> (224,652,726)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,880,085
<NUMBER-OF-SHARES-REDEEMED> (23,492,980)
<SHARES-REINVESTED> 14,808,162
<NET-CHANGE-IN-ASSETS> 541,960,770
<ACCUMULATED-NII-PRIOR> 24,137,555<F1>
<ACCUMULATED-GAINS-PRIOR> 226,812,341<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 20,533,544<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 32,135,676<F1>
<AVERAGE-NET-ASSETS> 3,332,256,020
<PER-SHARE-NAV-BEGIN> 17.977
<PER-SHARE-NII> 0.172
<PER-SHARE-GAIN-APPREC> 4.328
<PER-SHARE-DIVIDEND> (0.178)
<PER-SHARE-DISTRIBUTIONS> (1.356)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.943
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> Common Sense Trust Growth Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 3,129,516,597<F1>
<INVESTMENTS-AT-VALUE> 3,845,782,574<F1>
<RECEIVABLES> 33,112,858<F1>
<ASSETS-OTHER> 709,800<F1>
<OTHER-ITEMS-ASSETS> 5,686<F1>
<TOTAL-ASSETS> 3,879,610,918<F1>
<PAYABLE-FOR-SECURITIES> 91,688,633<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,053,171<F1>
<TOTAL-LIABILITIES> 97,741,804<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,027,244
<SHARES-COMMON-STOCK> 5,193,124
<SHARES-COMMON-PRIOR> 2,744,250
<ACCUMULATED-NII-CURRENT> 22,702,297<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 603,678,844<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 716,265,977<F1>
<NET-ASSETS> 108,496,435
<DIVIDEND-INCOME> 40,919,149<F1>
<INTEREST-INCOME> 20,210,151<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (32,135,676)<F1>
<NET-INVESTMENT-INCOME> 28,993,624<F1>
<REALIZED-GAINS-CURRENT> 611,419,267<F1>
<APPREC-INCREASE-CURRENT> 183,638,067<F1>
<NET-CHANGE-FROM-OPS> 824,050,958<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (482,315)
<DISTRIBUTIONS-OF-GAINS> (4,062,147)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,879,483
<NUMBER-OF-SHARES-REDEEMED> (696,268)
<SHARES-REINVESTED> 265,659
<NET-CHANGE-IN-ASSETS> 59,211,591
<ACCUMULATED-NII-PRIOR> 24,137,555<F1>
<ACCUMULATED-GAINS-PRIOR> 226,812,341<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 20,533,544<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 32,135,676<F1>
<AVERAGE-NET-ASSETS> 77,110,108
<PER-SHARE-NAV-BEGIN> 17.959
<PER-SHARE-NII> 0.145
<PER-SHARE-GAIN-APPREC> 4.305
<PER-SHARE-DIVIDEND> (0.161)
<PER-SHARE-DISTRIBUTIONS> (1.356)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.892
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> Common Sense Trust Growth Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 3,129,516,597<F1>
<INVESTMENTS-AT-VALUE> 3,845,782,574<F1>
<RECEIVABLES> 33,112,858<F1>
<ASSETS-OTHER> 709,800<F1>
<OTHER-ITEMS-ASSETS> 5,686<F1>
<TOTAL-ASSETS> 3,879,610,918<F1>
<PAYABLE-FOR-SECURITIES> 91,688,633<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,053,171<F1>
<TOTAL-LIABILITIES> 97,741,804<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,022,921
<SHARES-COMMON-STOCK> 6,083,077
<SHARES-COMMON-PRIOR> 4,135,444
<ACCUMULATED-NII-CURRENT> 22,702,297<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 603,678,844<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 716,265,977<F1>
<NET-ASSETS> 126,249,340
<DIVIDEND-INCOME> 40,919,149<F1>
<INTEREST-INCOME> 20,210,151<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (32,135,676)<F1>
<NET-INVESTMENT-INCOME> 28,993,624<F1>
<REALIZED-GAINS-CURRENT> 611,419,267<F1>
<APPREC-INCREASE-CURRENT> 183,638,067<F1>
<NET-CHANGE-FROM-OPS> 824,050,958<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (465,733)
<DISTRIBUTIONS-OF-GAINS> (5,837,891)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,294,738
<NUMBER-OF-SHARES-REDEEMED> (715,979)
<SHARES-REINVESTED> 368,874
<NET-CHANGE-IN-ASSETS> 52,109,418
<ACCUMULATED-NII-PRIOR> 24,137,555<F1>
<ACCUMULATED-GAINS-PRIOR> 226,812,341<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 20,533,544<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 32,135,676<F1>
<AVERAGE-NET-ASSETS> 99,977,113
<PER-SHARE-NAV-BEGIN> 17.928
<PER-SHARE-NII> 0.008
<PER-SHARE-GAIN-APPREC> 4.282
<PER-SHARE-DIVIDEND> (0.108)
<PER-SHARE-DISTRIBUTIONS> (1.356)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.754
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> CST Growth and Income
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 1,065,865,695<F1>
<INVESTMENTS-AT-VALUE> 1,277,265,219<F1>
<RECEIVABLES> 22,200,522<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 259,643<F1>
<TOTAL-ASSETS> 1,299,725,384<F1>
<PAYABLE-FOR-SECURITIES> 20,834,808<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,397,137<F1>
<TOTAL-LIABILITIES> 23,231,945<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 704,924,274
<SHARES-COMMON-STOCK> 54,584,869
<SHARES-COMMON-PRIOR> 52,075,188
<ACCUMULATED-NII-CURRENT> 991,411<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 206,793,123<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 209,987,461<F1>
<NET-ASSETS> 1,097,202,968
<DIVIDEND-INCOME> 19,283,587<F1>
<INTEREST-INCOME> 5,752,864<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (11,255,261)<F1>
<NET-INVESTMENT-INCOME> 13,781,190<F1>
<REALIZED-GAINS-CURRENT> 209,833,719<F1>
<APPREC-INCREASE-CURRENT> 53,288,825<F1>
<NET-CHANGE-FROM-OPS> 276,903,734<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (16,077,880)
<DISTRIBUTIONS-OF-GAINS> (112,127,401)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,488,655
<NUMBER-OF-SHARES-REDEEMED> (8,410,702)
<SHARES-REINVESTED> 7,431,728
<NET-CHANGE-IN-ASSETS> 154,334,461
<ACCUMULATED-NII-PRIOR> 4,421,000<F1>
<ACCUMULATED-GAINS-PRIOR> 119,991,729<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,574,209<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 11,255,261<F1>
<AVERAGE-NET-ASSETS> 1,049,905,531
<PER-SHARE-NAV-BEGIN> 18.106
<PER-SHARE-NII> 0.237
<PER-SHARE-GAIN-APPREC> 4.235
<PER-SHARE-DIVIDEND> (0.295)
<PER-SHARE-DISTRIBUTIONS> (2.182)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.101
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 22
<NAME> CST Growth and Income
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 1,065,865,695<F1>
<INVESTMENTS-AT-VALUE> 1,277,265,219<F1>
<RECEIVABLES> 22,200,522<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 259,643<F1>
<TOTAL-ASSETS> 1,299,725,384<F1>
<PAYABLE-FOR-SECURITIES> 20,834,808<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,397,137<F1>
<TOTAL-LIABILITIES> 23,231,945<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,347,170
<SHARES-COMMON-STOCK> 3,972,090
<SHARES-COMMON-PRIOR> 1,794,453
<ACCUMULATED-NII-CURRENT> 991,411<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 206,793,123<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 209,987,461<F1>
<NET-ASSETS> 79,850,203
<DIVIDEND-INCOME> 19,283,587<F1>
<INTEREST-INCOME> 5,752,864<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (11,255,261)<F1>
<NET-INVESTMENT-INCOME> 13,781,190<F1>
<REALIZED-GAINS-CURRENT> 209,833,719<F1>
<APPREC-INCREASE-CURRENT> 53,288,825<F1>
<NET-CHANGE-FROM-OPS> 276,903,734<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (706,960)
<DISTRIBUTIONS-OF-GAINS> (4,331,457)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,492,244
<NUMBER-OF-SHARES-REDEEMED> (605,697)
<SHARES-REINVESTED> 291,090
<NET-CHANGE-IN-ASSETS> 47,360,868
<ACCUMULATED-NII-PRIOR> 4,421,000<F1>
<ACCUMULATED-GAINS-PRIOR> 119,991,729<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,574,209<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 11,255,261<F1>
<AVERAGE-NET-ASSETS> 55,002,206
<PER-SHARE-NAV-BEGIN> 18.105
<PER-SHARE-NII> 0.198
<PER-SHARE-GAIN-APPREC> 4.232
<PER-SHARE-DIVIDEND> (0.250)
<PER-SHARE-DISTRIBUTIONS> (2.182)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.103
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> CST Growth and Income
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 1,065,865,695<F1>
<INVESTMENTS-AT-VALUE> 1,277,265,219<F1>
<RECEIVABLES> 22,200,522<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 259,643<F1>
<TOTAL-ASSETS> 1,299,725,384<F1>
<PAYABLE-FOR-SECURITIES> 20,834,808<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,397,137<F1>
<TOTAL-LIABILITIES> 23,231,945<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,450,000
<SHARES-COMMON-STOCK> 4,953,823
<SHARES-COMMON-PRIOR> 2,878,964
<ACCUMULATED-NII-CURRENT> 991,411<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 206,793,123<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 209,987,461<F1>
<NET-ASSETS> 99,440,268
<DIVIDEND-INCOME> 19,283,587<F1>
<INTEREST-INCOME> 5,752,864<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (11,255,261)<F1>
<NET-INVESTMENT-INCOME> 13,781,190<F1>
<REALIZED-GAINS-CURRENT> 209,833,719<F1>
<APPREC-INCREASE-CURRENT> 53,288,825<F1>
<NET-CHANGE-FROM-OPS> 276,903,734<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (425,939)
<DISTRIBUTIONS-OF-GAINS> (6,573,467)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,229,471
<NUMBER-OF-SHARES-REDEEMED> (566,087)
<SHARES-REINVESTED> 411,475
<NET-CHANGE-IN-ASSETS> 47,369,464
<ACCUMULATED-NII-PRIOR> 4,421,000<F1>
<ACCUMULATED-GAINS-PRIOR> 119,991,729<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 7,574,209<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 11,255,261<F1>
<AVERAGE-NET-ASSETS> 75,247,554
<PER-SHARE-NAV-BEGIN> 18.087
<PER-SHARE-NII> 0.060
<PER-SHARE-GAIN-APPREC> 4.221
<PER-SHARE-DIVIDEND> (0.113)
<PER-SHARE-DISTRIBUTIONS> (2.182)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 20.073
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 31
<NAME> CST Government
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 260,621,762<F1>
<INVESTMENTS-AT-VALUE> 268,237,110<F1>
<RECEIVABLES> 16,591,656<F1>
<ASSETS-OTHER> 85,395<F1>
<OTHER-ITEMS-ASSETS> 13,703<F1>
<TOTAL-ASSETS> 284,927,864<F1>
<PAYABLE-FOR-SECURITIES> 17,303,817<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,061,843<F1>
<TOTAL-LIABILITIES> 18,365,660<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 268,701,424
<SHARES-COMMON-STOCK> 22,741,103
<SHARES-COMMON-PRIOR> 27,616,551
<ACCUMULATED-NII-CURRENT> 277,980<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (37,847,576)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 9,903,471<F1>
<NET-ASSETS> 240,652,226
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 21,554,683<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,712,179)<F1>
<NET-INVESTMENT-INCOME> 18,842,504<F1>
<REALIZED-GAINS-CURRENT> (854,042)<F1>
<APPREC-INCREASE-CURRENT> 4,544,977<F1>
<NET-CHANGE-FROM-OPS> 22,533,439<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (17,132,863)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,205,980
<NUMBER-OF-SHARES-REDEEMED> (7,497,352)
<SHARES-REINVESTED> 1,415,924
<NET-CHANGE-IN-ASSETS> (46,722,049)
<ACCUMULATED-NII-PRIOR> (6,653)<F1>
<ACCUMULATED-GAINS-PRIOR> (36,909,849)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,702,968<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,712,179<F1>
<AVERAGE-NET-ASSETS> 258,969,479
<PER-SHARE-NAV-BEGIN> 10.406
<PER-SHARE-NII> 0.692
<PER-SHARE-GAIN-APPREC> 0.168
<PER-SHARE-DIVIDEND> (0.684)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.582
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 32
<NAME> CST Government
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 260,621,762<F1>
<INVESTMENTS-AT-VALUE> 268,237,110<F1>
<RECEIVABLES> 16,591,656<F1>
<ASSETS-OTHER> 85,395<F1>
<OTHER-ITEMS-ASSETS> 13,703<F1>
<TOTAL-ASSETS> 284,927,864<F1>
<PAYABLE-FOR-SECURITIES> 17,303,817<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,061,843<F1>
<TOTAL-LIABILITIES> 18,365,660<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,277,543
<SHARES-COMMON-STOCK> 1,278,958
<SHARES-COMMON-PRIOR> 1,068,402
<ACCUMULATED-NII-CURRENT> 277,980<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (37,847,576)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 9,903,471<F1>
<NET-ASSETS> 13,533,017
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 21,554,683<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,712,179)<F1>
<NET-INVESTMENT-INCOME> 18,842,504<F1>
<REALIZED-GAINS-CURRENT> (854,042)<F1>
<APPREC-INCREASE-CURRENT> 4,544,977<F1>
<NET-CHANGE-FROM-OPS> 22,533,439<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (779,374)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 693,337
<NUMBER-OF-SHARES-REDEEMED> (554,785)
<SHARES-REINVESTED> 72,004
<NET-CHANGE-IN-ASSETS> 2,409,403
<ACCUMULATED-NII-PRIOR> (6,653)<F1>
<ACCUMULATED-GAINS-PRIOR> (36,909,849)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,702,968<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,712,179<F1>
<AVERAGE-NET-ASSETS> 12,146,791
<PER-SHARE-NAV-BEGIN> 10.411
<PER-SHARE-NII> 0.666
<PER-SHARE-GAIN-APPREC> 0.168
<PER-SHARE-DIVIDEND> (0.664)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.581
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 33
<NAME> CST Government
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 260,621,762<F1>
<INVESTMENTS-AT-VALUE> 268,237,110<F1>
<RECEIVABLES> 16,591,656<F1>
<ASSETS-OTHER> 85,395<F1>
<OTHER-ITEMS-ASSETS> 13,703<F1>
<TOTAL-ASSETS> 284,927,864<F1>
<PAYABLE-FOR-SECURITIES> 17,303,817<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,061,843<F1>
<TOTAL-LIABILITIES> 18,365,660<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,249,362
<SHARES-COMMON-STOCK> 1,169,696
<SHARES-COMMON-PRIOR> 1,330,303
<ACCUMULATED-NII-CURRENT> 277,980<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (37,847,576)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 9,903,471<F1>
<NET-ASSETS> 12,376,961
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 21,554,683<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,712,179)<F1>
<NET-INVESTMENT-INCOME> 18,842,504<F1>
<REALIZED-GAINS-CURRENT> (854,042)<F1>
<APPREC-INCREASE-CURRENT> 4,544,977<F1>
<NET-CHANGE-FROM-OPS> 22,533,439<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (729,319)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 289,459
<NUMBER-OF-SHARES-REDEEMED> (518,360)
<SHARES-REINVESTED> 68,294
<NET-CHANGE-IN-ASSETS> (1,473,254)
<ACCUMULATED-NII-PRIOR> (6,653)<F1>
<ACCUMULATED-GAINS-PRIOR> (36,909,849)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,702,968<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,712,179<F1>
<AVERAGE-NET-ASSETS> 12,845,531
<PER-SHARE-NAV-BEGIN> 10.411
<PER-SHARE-NII> 0.590
<PER-SHARE-GAIN-APPREC> 0.167
<PER-SHARE-DIVIDEND> (0.587)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.581
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 41
<NAME> CST Money Market Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 59,996,760<F1>
<INVESTMENTS-AT-VALUE> 59,996,760<F1>
<RECEIVABLES> 992,560<F1>
<ASSETS-OTHER> 17,486<F1>
<OTHER-ITEMS-ASSETS> 136<F1>
<TOTAL-ASSETS> 61,006,942<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 345,107<F1>
<TOTAL-LIABILITIES> 345,107<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,989,206
<SHARES-COMMON-STOCK> 52,989,453
<SHARES-COMMON-PRIOR> 59,912,205
<ACCUMULATED-NII-CURRENT> 1,926<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 52,990,886
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 3,360,214<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (617,206)<F1>
<NET-INVESTMENT-INCOME> 2,743,008<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 2,743,008<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,556,414)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 56,118,841
<NUMBER-OF-SHARES-REDEEMED> (65,551,045)
<SHARES-REINVESTED> 2,509,452
<NET-CHANGE-IN-ASSETS> (6,922,448)
<ACCUMULATED-NII-PRIOR> 1,403<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 305,876<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,124,613<F1>
<AVERAGE-NET-ASSETS> 56,984,584
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.045
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.045)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 42
<NAME> CST Money Market Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 59,996,760<F1>
<INVESTMENTS-AT-VALUE> 59,996,760<F1>
<RECEIVABLES> 992,560<F1>
<ASSETS-OTHER> 17,486<F1>
<OTHER-ITEMS-ASSETS> 136<F1>
<TOTAL-ASSETS> 61,006,942<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 345,107<F1>
<TOTAL-LIABILITIES> 345,107<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,396,005
<SHARES-COMMON-STOCK> 7,396,005
<SHARES-COMMON-PRIOR> 728,810
<ACCUMULATED-NII-CURRENT> 1,926<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 7,396,242
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 3,360,214<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (617,206)<F1>
<NET-INVESTMENT-INCOME> 2,743,008<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 2,743,008<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (180,211)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,489,220
<NUMBER-OF-SHARES-REDEEMED> (6,999,969)
<SHARES-REINVESTED> 177,944
<NET-CHANGE-IN-ASSETS> 6,667,407
<ACCUMULATED-NII-PRIOR> 1,403<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 305,876<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,124,613<F1>
<AVERAGE-NET-ASSETS> 4,058,082
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.044
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.044)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 43
<NAME> CST Money Market Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 59,996,760<F1>
<INVESTMENTS-AT-VALUE> 59,996,760<F1>
<RECEIVABLES> 992,560<F1>
<ASSETS-OTHER> 17,486<F1>
<OTHER-ITEMS-ASSETS> 136<F1>
<TOTAL-ASSETS> 61,006,942<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 345,107<F1>
<TOTAL-LIABILITIES> 345,107<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 274,698
<SHARES-COMMON-STOCK> 274,699
<SHARES-COMMON-PRIOR> 13,654
<ACCUMULATED-NII-CURRENT> 1,926<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 274,707
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 3,360,214<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (617,206)<F1>
<NET-INVESTMENT-INCOME> 2,743,008<F1>
<REALIZED-GAINS-CURRENT> 0<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 2,743,008<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (5,860)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 622,707
<NUMBER-OF-SHARES-REDEEMED> (367,021)
<SHARES-REINVESTED> 5,359
<NET-CHANGE-IN-ASSETS> 261,052
<ACCUMULATED-NII-PRIOR> 1,403<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 305,876<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,124,613<F1>
<AVERAGE-NET-ASSETS> 154,097
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.037
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.037)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.76
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 51
<NAME> CST Municipal Bond Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 106,964,600<F1>
<INVESTMENTS-AT-VALUE> 115,219,826<F1>
<RECEIVABLES> 3,103,572<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 37,717<F1>
<TOTAL-ASSETS> 118,361,115<F1>
<PAYABLE-FOR-SECURITIES> 1,532,243<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,126,034<F1>
<TOTAL-LIABILITIES> 2,658,277<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,520,311
<SHARES-COMMON-STOCK> 615,828
<SHARES-COMMON-PRIOR> 153,942
<ACCUMULATED-NII-CURRENT> 295,311<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 948,278<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 8,365,945<F1>
<NET-ASSETS> 104,134,036
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 6,956,491<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,180,842)<F1>
<NET-INVESTMENT-INCOME> 5,775,649<F1>
<REALIZED-GAINS-CURRENT> 929,511<F1>
<APPREC-INCREASE-CURRENT> 2,335,756<F1>
<NET-CHANGE-FROM-OPS> 9,040,916<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (240,492)
<DISTRIBUTIONS-OF-GAINS> (8,242)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 589,115
<NUMBER-OF-SHARES-REDEEMED> (142,483)
<SHARES-REINVESTED> 15,254
<NET-CHANGE-IN-ASSETS> 6,622,380
<ACCUMULATED-NII-PRIOR> 89,045<F1>
<ACCUMULATED-GAINS-PRIOR> 341,691<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 704,693<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,180,842<F1>
<AVERAGE-NET-ASSETS> 5,342,123
<PER-SHARE-NAV-BEGIN> 13.827
<PER-SHARE-NII> 0.649
<PER-SHARE-GAIN-APPREC> 0.397
<PER-SHARE-DIVIDEND> (0.625)
<PER-SHARE-DISTRIBUTIONS> (0.038)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.210
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 52
<NAME> CST Municipal Bond Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 106,964,600<F1>
<INVESTMENTS-AT-VALUE> 115,219,826<F1>
<RECEIVABLES> 3,103,572<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 37,717<F1>
<TOTAL-ASSETS> 118,361,115<F1>
<PAYABLE-FOR-SECURITIES> 1,532,243<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,126,034<F1>
<TOTAL-LIABILITIES> 2,658,277<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,751,796
<SHARES-COMMON-STOCK> 198,487
<SHARES-COMMON-PRIOR> 47,211
<ACCUMULATED-NII-CURRENT> 295,311<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 948,278<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 8,365,945<F1>
<NET-ASSETS> 8,750,932
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 6,956,491<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,180,842)<F1>
<NET-INVESTMENT-INCOME> 5,775,649<F1>
<REALIZED-GAINS-CURRENT> 929,511<F1>
<APPREC-INCREASE-CURRENT> 2,335,756<F1>
<NET-CHANGE-FROM-OPS> 9,040,916<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (61,030)
<DISTRIBUTIONS-OF-GAINS> (2,667)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 176,471
<NUMBER-OF-SHARES-REDEEMED> (29,641)
<SHARES-REINVESTED> 4,446
<NET-CHANGE-IN-ASSETS> 2,165,304
<ACCUMULATED-NII-PRIOR> 89,045<F1>
<ACCUMULATED-GAINS-PRIOR> 341,691<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 704,693<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,180,842<F1>
<AVERAGE-NET-ASSETS> 1,610,281
<PER-SHARE-NAV-BEGIN> 13.822
<PER-SHARE-NII> 0.540
<PER-SHARE-GAIN-APPREC> 0.395
<PER-SHARE-DIVIDEND> (0.522)
<PER-SHARE-DISTRIBUTIONS> (0.038)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.197
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 53
<NAME> CST Municipal Bond Fund
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 106,964,600<F1>
<INVESTMENTS-AT-VALUE> 115,219,826<F1>
<RECEIVABLES> 3,103,572<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 37,717<F1>
<TOTAL-ASSETS> 118,361,115<F1>
<PAYABLE-FOR-SECURITIES> 1,532,243<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,126,034<F1>
<TOTAL-LIABILITIES> 2,658,277<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94,821,197
<SHARES-COMMON-STOCK> 7,328,426
<SHARES-COMMON-PRIOR> 8,582,302
<ACCUMULATED-NII-CURRENT> 295,311<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 948,278<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 8,365,945<F1>
<NET-ASSETS> 2,817,870
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 6,956,491<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,180,842)<F1>
<NET-INVESTMENT-INCOME> 5,775,649<F1>
<REALIZED-GAINS-CURRENT> 929,511<F1>
<APPREC-INCREASE-CURRENT> 2,335,756<F1>
<NET-CHANGE-FROM-OPS> 9,040,916<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (5,267,861)
<DISTRIBUTIONS-OF-GAINS> (312,015)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 835,266
<NUMBER-OF-SHARES-REDEEMED> (2,433,057)
<SHARES-REINVESTED> 343,915
<NET-CHANGE-IN-ASSETS> (14,550,476)
<ACCUMULATED-NII-PRIOR> 89,045<F1>
<ACCUMULATED-GAINS-PRIOR> 341,691<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 704,693<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,180,842<F1>
<AVERAGE-NET-ASSETS> 110,554,700
<PER-SHARE-NAV-BEGIN> 13.829
<PER-SHARE-NII> 0.688
<PER-SHARE-GAIN-APPREC> 0.391
<PER-SHARE-DIVIDEND> (0.660)
<PER-SHARE-DISTRIBUTIONS> (0.038)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.210
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 101
<NAME> CST Emerging Growth
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 145,721,828<F1>
<INVESTMENTS-AT-VALUE> 185,896,046<F1>
<RECEIVABLES> 2,223,775<F1>
<ASSETS-OTHER> 20,287<F1>
<OTHER-ITEMS-ASSETS> 4,191<F1>
<TOTAL-ASSETS> 188,144,299<F1>
<PAYABLE-FOR-SECURITIES> 1,136,786<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 608,876<F1>
<TOTAL-LIABILITIES> 1,745,662<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,286,680
<SHARES-COMMON-STOCK> 276,032
<SHARES-COMMON-PRIOR> 38,105
<ACCUMULATED-NII-CURRENT> (2,504)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,828,333<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 40,174,218<F1>
<NET-ASSETS> 6,114,920
<DIVIDEND-INCOME> 305,574<F1>
<INTEREST-INCOME> 766,115<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,786,585)<F1>
<NET-INVESTMENT-INCOME> (1,714,896)<F1>
<REALIZED-GAINS-CURRENT> 5,617,110<F1>
<APPREC-INCREASE-CURRENT> 22,863,277<F1>
<NET-CHANGE-FROM-OPS> 26,765,491<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 251,646
<NUMBER-OF-SHARES-REDEEMED> (13,719)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,406,447
<ACCUMULATED-NII-PRIOR> (1,258)<F1>
<ACCUMULATED-GAINS-PRIOR> (3,788,777)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 904,959<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,786,585<F1>
<AVERAGE-NET-ASSETS> 3,429,212
<PER-SHARE-NAV-BEGIN> 18.593
<PER-SHARE-NII> (0.078)
<PER-SHARE-GAIN-APPREC> 3.638
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 22.153
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 102
<NAME> CST Emerging Growth
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 145,721,828<F1>
<INVESTMENTS-AT-VALUE> 185,896,046<F1>
<RECEIVABLES> 2,223,775<F1>
<ASSETS-OTHER> 20,287<F1>
<OTHER-ITEMS-ASSETS> 4,191<F1>
<TOTAL-ASSETS> 188,144,299<F1>
<PAYABLE-FOR-SECURITIES> 1,136,786<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 608,876<F1>
<TOTAL-LIABILITIES> 1,745,662<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77,118,717
<SHARES-COMMON-STOCK> 4,555,287
<SHARES-COMMON-PRIOR> 2,771,815
<ACCUMULATED-NII-CURRENT> (2,504)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,828,333<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 40,174,218<F1>
<NET-ASSETS> 100,566,787
<DIVIDEND-INCOME> 305,574<F1>
<INTEREST-INCOME> 766,115<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,786,585)<F1>
<NET-INVESTMENT-INCOME> (1,714,896)<F1>
<REALIZED-GAINS-CURRENT> 5,617,110<F1>
<APPREC-INCREASE-CURRENT> 22,863,277<F1>
<NET-CHANGE-FROM-OPS> 26,765,491<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,551,721
<NUMBER-OF-SHARES-REDEEMED> (768,249)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 49,082,961
<ACCUMULATED-NII-PRIOR> (1,258)<F1>
<ACCUMULATED-GAINS-PRIOR> (3,788,777)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 904,959<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,786,585<F1>
<AVERAGE-NET-ASSETS> 77,205,590
<PER-SHARE-NAV-BEGIN> 18.574
<PER-SHARE-NII> (0.156)
<PER-SHARE-GAIN-APPREC> 3.659
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 22.077
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 103
<NAME> CST Emerging Growth
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 145,721,828<F1>
<INVESTMENTS-AT-VALUE> 185,896,046<F1>
<RECEIVABLES> 2,223,775<F1>
<ASSETS-OTHER> 20,287<F1>
<OTHER-ITEMS-ASSETS> 4,191<F1>
<TOTAL-ASSETS> 188,144,299<F1>
<PAYABLE-FOR-SECURITIES> 1,136,786<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 608,876<F1>
<TOTAL-LIABILITIES> 1,745,662<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,993,193
<SHARES-COMMON-STOCK> 3,684,878
<SHARES-COMMON-PRIOR> 2,131,160
<ACCUMULATED-NII-CURRENT> (2,504)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,828,333<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 40,174,218<F1>
<NET-ASSETS> 79,716,930
<DIVIDEND-INCOME> 305,574<F1>
<INTEREST-INCOME> 766,115<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,786,585)<F1>
<NET-INVESTMENT-INCOME> (1,714,896)<F1>
<REALIZED-GAINS-CURRENT> 5,617,110<F1>
<APPREC-INCREASE-CURRENT> 22,863,277<F1>
<NET-CHANGE-FROM-OPS> 26,765,491<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,002,340
<NUMBER-OF-SHARES-REDEEMED> (448,622)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 40,632,593
<ACCUMULATED-NII-PRIOR> (1,258)<F1>
<ACCUMULATED-GAINS-PRIOR> (3,788,777)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 904,959<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,786,585<F1>
<AVERAGE-NET-ASSETS> 58,690,732
<PER-SHARE-NAV-BEGIN> 18.339
<PER-SHARE-NII> (0.266)
<PER-SHARE-GAIN-APPREC> 3.561
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 21.634
<EXPENSE-RATIO> 2.44
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 111
<NAME> CST International Equity
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 26,304,067<F1>
<INVESTMENTS-AT-VALUE> 32,687,933<F1>
<RECEIVABLES> 27,287<F1>
<ASSETS-OTHER> 13,799<F1>
<OTHER-ITEMS-ASSETS> 465,834<F1>
<TOTAL-ASSETS> 33,194,853<F1>
<PAYABLE-FOR-SECURITIES> 884,410<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 176,017<F1>
<TOTAL-LIABILITIES> 1,060,427<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,575,846
<SHARES-COMMON-STOCK> 90,545
<SHARES-COMMON-PRIOR> 9,813
<ACCUMULATED-NII-CURRENT> (394)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (910,647)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6,378,021<F1>
<NET-ASSETS> 1,644,265
<DIVIDEND-INCOME> 232,842<F1>
<INTEREST-INCOME> 28,063<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (767,946)<F1>
<NET-INVESTMENT-INCOME> (507,041)<F1>
<REALIZED-GAINS-CURRENT> (897,364)<F1>
<APPREC-INCREASE-CURRENT> 3,531,967<F1>
<NET-CHANGE-FROM-OPS> 2,127,562<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 83,388
<NUMBER-OF-SHARES-REDEEMED> (2,656)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,482,187
<ACCUMULATED-NII-PRIOR> (812)<F1>
<ACCUMULATED-GAINS-PRIOR> (33,287)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 267,897<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 767,946<F1>
<AVERAGE-NET-ASSETS> 927,479
<PER-SHARE-NAV-BEGIN> 16.517
<PER-SHARE-NII> (0.169)
<PER-SHARE-GAIN-APPREC> 1.812
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.160
<EXPENSE-RATIO> 2.26
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 112
<NAME> CST International Equity
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 26,304,067<F1>
<INVESTMENTS-AT-VALUE> 32,687,933<F1>
<RECEIVABLES> 27,287<F1>
<ASSETS-OTHER> 13,799<F1>
<OTHER-ITEMS-ASSETS> 465,834<F1>
<TOTAL-ASSETS> 33,194,853<F1>
<PAYABLE-FOR-SECURITIES> 884,410<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 176,017<F1>
<TOTAL-LIABILITIES> 1,060,427<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,239,185
<SHARES-COMMON-STOCK> 913,789
<SHARES-COMMON-PRIOR> 626,946
<ACCUMULATED-NII-CURRENT> (394)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (910,647)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6,378,021<F1>
<NET-ASSETS> 16,572,917
<DIVIDEND-INCOME> 232,842<F1>
<INTEREST-INCOME> 28,063<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (767,946)<F1>
<NET-INVESTMENT-INCOME> (507,041)<F1>
<REALIZED-GAINS-CURRENT> (897,364)<F1>
<APPREC-INCREASE-CURRENT> 3,531,967<F1>
<NET-CHANGE-FROM-OPS> 2,127,562<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 453,796
<NUMBER-OF-SHARES-REDEEMED> (166,953)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,201,063
<ACCUMULATED-NII-PRIOR> (812)<F1>
<ACCUMULATED-GAINS-PRIOR> (33,287)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 267,897<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 767,946<F1>
<AVERAGE-NET-ASSETS> 14,476,854
<PER-SHARE-NAV-BEGIN> 16.543
<PER-SHARE-NII> (0.262)
<PER-SHARE-GAIN-APPREC> 1.855
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.136
<EXPENSE-RATIO> 2.56
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 113
<NAME> CST International Equity
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 26,304,067<F1>
<INVESTMENTS-AT-VALUE> 32,687,933<F1>
<RECEIVABLES> 27,287<F1>
<ASSETS-OTHER> 13,799<F1>
<OTHER-ITEMS-ASSETS> 465,834<F1>
<TOTAL-ASSETS> 33,194,853<F1>
<PAYABLE-FOR-SECURITIES> 884,410<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 176,017<F1>
<TOTAL-LIABILITIES> 1,060,427<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,852,415
<SHARES-COMMON-STOCK> 781,557
<SHARES-COMMON-PRIOR> 491,294
<ACCUMULATED-NII-CURRENT> (394)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (910,647)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 6,378,021<F1>
<NET-ASSETS> 13,917,244
<DIVIDEND-INCOME> 232,842<F1>
<INTEREST-INCOME> 28,063<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (767,946)<F1>
<NET-INVESTMENT-INCOME> (507,041)<F1>
<REALIZED-GAINS-CURRENT> (897,364)<F1>
<APPREC-INCREASE-CURRENT> 3,531,967<F1>
<NET-CHANGE-FROM-OPS> 2,127,562<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 382,972
<NUMBER-OF-SHARES-REDEEMED> (92,709)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,877,764
<ACCUMULATED-NII-PRIOR> (812)<F1>
<ACCUMULATED-GAINS-PRIOR> (33,287)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 267,897<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 767,946<F1>
<AVERAGE-NET-ASSETS> 11,385,386
<PER-SHARE-NAV-BEGIN> 16.364
<PER-SHARE-NII> (0.323)
<PER-SHARE-GAIN-APPREC> 1.766
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 17.807
<EXPENSE-RATIO> 3.30
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1> This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
