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PEGASUS FUNDS
Strength in Investing
ANNUAL REPORT
December 31, 1996
PEGASUS FUNDS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1 Letter to Shareholders
2 Management's Discussion and Analysis
39 Statements of Assets and Liabilities
45 Statements of Operations
48 Statements of Changes in Net Assets
55 Portfolios of Investments
157 Notes to Financial Statements
177 Financial Highlights
197 Report of Independent Public Accountants
</TABLE>
Pegasus Funds are not bank deposits or obligations of, or guaranteed or
endorsed by First Chicago NBD Corporation or any of its affiliates, and are
not federally insured or guaranteed by the U.S. government, FDIC, or any
governmental agency. Investment in the Funds involves risks, including the
possible loss of principal.
Pegasus Funds
(800) 688-3350
INVESTMENT ADVISER
First Chicago NBD Investment Management
Company (FCNIMCO)
Three First National Plaza, MS 0334
Chicago, IL 60670-0334
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS
UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
i
<PAGE>
Pegasus Funds
Management's Discussion
- ------------------------------------------------------------------------------
Dear Shareholders:
1996 has been a year of positive change as the former Prairie Funds and
Woodward Funds were combined into the new Pegasus Funds family.
As of year end 1996, the Pegasus Funds are comprised of 26 funds with over
$13 billion in assets, which places the funds' complex among the 50 largest
in the U.S. in total assets.
We know that the fund merger process may have been confusing at times. Many
of you underwent proxy solicitations, changes in statement formats, or were
otherwise affected. We want to thank you for your cooperation and
understanding.
With the merger behind us, we are confident that our new, larger fund family
will provide our shareholders with many benefits: more fund choices, enhanced
shareholder services, and even greater depth and talent with the fund manager
ranks of FCNIMCO, the funds' investment advisor.
Thank you for your continued support.
/s/ Marco Hanig
Marco Hanig
Managing Director,
First Chicago NBD Investment Management Company
- ------------------------------------------------------------------------------
Market Commentary:
Asset allocation was a critical component of investment performance in 1996.
The stock market continued its march to record territory as the Standard &
Poor's 500 Index returned 23.0% for the year. This outstanding return
combined with the 37.5% return of 1995 marks the strongest back-to-back
performance in decades. The bond market on the other hand, was relegated to
the sidelines as moderate economic growth generated inflationary concerns
forcing interest rates higher along the entire yield curve.
Equity Highlights
Within the equity markets several trends were evident during 1996. Large
capitalization technology stocks again turned in outstanding gains. The
financial services industry performed well as the banking industry continued
to consolidate and specialty finance companies prospered. Energy stocks,
particularly those of smaller companies, did well by responding favorably to
steadily firming oil and natural gas prices. The poorest performing industry
was utilities, as both electric and telephone utility stocks did poorly
reflecting the uncertainty brought on by deregulation. In addition, consumer
durable stocks meaningfully lagged the market based on sluggish demand trends
for autos and appliances. The year was marked by the continuation of strength
from momentum oriented investment styles early in the year. The market became
somewhat more broad-based and valuation oriented later in the year after a
mid-year rotation pounded the small-cap growth sector. As the year ended,
large capitalization stocks clearly were the market leaders with smaller
issues lagging.
Fixed Income Highlights
Interest rates were fairly volatile during 1996 with the 30-year U.S.
Treasury yield beginning the year at 5.96%, reaching a high of 7.19% in July
before falling back to 6.64% at year-end. Investors' thirst for yield
continued throughout the year producing strong demand for "spread" products
such as mortgage-backed securities, corporates and asset-backed securities.
Corporate spreads in particular have reached exceptionally narrow levels
allowing for limited upside potential.
With the presidential elections behind us and discussions of tax reform off
the front page, the municipal market recovered most of its "oversold"
position and returned to more normal relative yield levels. The municipal
market outperformed the investment grade taxable fixed income market on a
relative (tax adjusted) and absolute basis. The relative cheapness of the
tax-exempt market versus taxable securities attracted demand from property
and casualty companies and "crossover" buyers which helped to absorb
new issue volume of nearly $185 billion. General obligation bonds provided
the best performance for the year followed by the revenue sector and
specifically hospital bonds.
We believe the Pegasus Funds provide a solid foundation for meeting your
investment goals and we thank you for your continued confidence in selecting
us as your investment advisor.
<PAGE>
Sincerely,
/s/ George F. Abel
George F. Abel
Chief Investment Officer,
First Chicago NBD Investment Management Company
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Managed Assets Funds
- -----------------------------------------------------------------------------
An Interview with Claude Erb
Portfolio Manager
- -----------------------------------------------------------------------------
Q. Last year was a great year for the stock market, how did the funds do?
The Managed Assets Conservative Fund returned 10.43% (I Shares) for the year
ended December 31, 1996. The Managed Assets Balanced Fund returned 13.04% (I
Shares) for the year ended December 31, 1996. Because both funds had a
significant weighting in bonds, they trailed the strong performance of the
S&P 500 Index which returned 23.0% for the year.
Q. Why do you believe U.S. stocks were so strong in comparison to other
markets in 1996?
A few factors contributed to this performance. The first was the better than
expected economic conditions in the U.S. Moderate economic growth and
inflation allowed companies to have better than expected earnings, and
allowed valuations to drift up. Second, and maybe more importantly, we saw a
flood of money into domestic stock mutual funds. This money was put to work
in the stock market and was a constant source of support for the market. At
the moment all of these factors remain in place, but we are monitoring
potential changes in the market regime.
Q. What in particular drove the funds' performance?
There were two offsetting factors driving the funds' performance. The
positive factor was strong security selection within the portfolios. Our
investments in bonds, large cap value and smaller capitalization U.S. stocks,
and international equities all outperformed their respective benchmarks.
However this was offset by our underweighting large capitalization U.S.
equities, like those found in the S&P 500 Index.
Q. How were the portfolios' assets allocated throughout the year?
At the macro level we were underweight in equities and overweight in bonds
through much of the year. The U.S. bond market, as measured by the Lehman
Aggregate Bond Index, returned only 3.62% in 1996. Within the funds' equity
sector we were overweight in large capitalization value stocks, and
correspondingly underweight large capitalization growth stocks. In addition
we emphasized international stocks which trailed the U.S. market in 1996.
Q. What is your outlook for the year ahead?
We are unlikely to see a repeat of the strong performance for the U.S. equity
markets. Relatively high valuations and slowing profit growth could hold back
returns for the year. We are more enthusiastic about the prospects for the
overseas equity markets. In particular we believe the emerging markets should
outperform domestic equities. On the interest rate front we do not expect
much change in interest rates in 1997, which contrasts greatly with 1996
where we saw the yield on the 30 year U.S. government bond increase from
5.96% to 6.64%.
Q. How have you positioned the fund to take advantage of your outlook?
In light of our cautious stance on the domestic stock market we remain
underweight in U.S. stocks. Within the domestic equity sector we think that
relative valuations favor value stocks over growth stocks, and we have
positioned the portfolio accordingly. We have also overweighted international
stocks in the portfolio, and they could play catch-up to the U.S. market in
the coming year. Corresponding to our underweight in equities, we are
overweight in fixed income instruments. We believe relatively stable interest
rates should allow the fund to reap returns on bonds in line with their
current yields.
Q. How has the ability to invest in other Pegasus funds changed the way you
manage the funds?
This is a very exciting development for us. The ability to invest in other
Pegasus funds will allow us to directly access the skills of other Pegasus
fund managers. This will streamline our investment process, and make for
consistent investment results. It also allows us to efficiently manage the
new Pegasus Managed Assets Growth Fund which will be structured like the
other two funds, but will be more heavily invested in equities versus fixed
income securities.
2
<PAGE>
Growth of $10,000 Invested in the
Pegasus Managed Assets Conservative Fund, the
S&P 500 Index* and Lehman Brothers Aggregate Bond Index**
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS MANAGED ASSETS CONSERVATIVE FUND
DATE A-Shares(1) S&P 500(2) Lehman(2)
<S> <C> <C> <C>
01/23/86 9500 10000 10000
9714 11820 10848
10195 12516 10975
10288 11643 11235
12/86 10789 12293 11601
11416 14917 11792
11524 15665 11582
11603 16698 11266
12/87 10681 12936 11921
11515 13672 12371
11924 14583 12516
12118 14631 12766
12/88 12577 15079 12861
12955 16146 13006
13882 17569 14043
14560 19447 14202
12/89 14973 19846 14729
14880 19249 14611
15431 20460 15145
14722 17651 15274
12/90 15399 19232 16047
16535 22022 16494
16984 21971 16760
18219 23143 17712
12/91 19115 25079 18610
19254 24446 18372
19783 24910 19115
20616 25695 19936
12/92 20783 26986 19988
21795 28164 20814
22039 28299 21366
22678 29029 21923
12/93 22842 29701 21935
21803 28577 21305
21863 28696 21086
22408 30097 21215
12/94 22404 30092 21296
23604 33019 22370
25353 36166 23734
26805 39038 24201
12/95 28314 41386 25231
28932 43608 24781
29395 45562 24923
29951 46971 25382
12/96 31176 50883 26143
<FN>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An 'A' shareholder investment at the original 4.5% sales charge is
currently valued at $31,340.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Ten Since
Through 12/31/96 Date Year Year Year Inception
--------------------------- --------- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
Pegasus Managed Assets Conservative Fund
A Shares with 5.00% Load 1/23/86 4.60% 9.15% 10.63% 10.95%((1))
S&P 500 Index* 1/23/86 22.95% 15.20% 15.26% 16.03%
Lehman Brothers Aggregate Index Bond** 1/23/86 3.62% 7.03% 8.46% 9.18%
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.5% sales
charge was 11.00%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The S&P 500 Index is an unmanaged index generally representative of the
U.S. stock market as a whole.
** The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
3
<PAGE>
Growth of $10,000 Invested in the
Pegasus Managed Assets Conservative Fund, the
S&P 500 Index* and Lehman Brothers Aggregate Bond Index**
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS MANAGED ASSETS CONSERVATIVE FUND
DATE I-Shares B-Shares(1) S&P 500(2) Lehman Bond(2)
<S> <C> <C> <C> <C>
03/03/95 10000 10000 10000 10000
3/95 10194 10194 10295 9130
6/95 10961 10927 11276 10706
9/95 11591 11535 12171 10917
12/95 12255 12161 12904 11382
3/96 12547 12405 13597 11179
6/96 12756 12578 14206 11242
9/96 12999 12760 14645 11450
12/96 13533 12853 15865 11793
<FN>
(1) Includes contingent deferred sales charge of 4.00%.
(2) Excludes expenses.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Since
Through 12/31/96 Date Year Inception
--------------------------- --------- ---- ---------
<S> <C> <C> <C>
Pegasus Managed Assets Conservative Fund
I Shares 3/3/95 10.43% 18.01%
B Shares with 4.00% CDSC 3/3/95 4.97% 14.65%
S&P 500 Index* 3/3/95 22.95% 28.68%
Lehman Brothers Aggregate Bond Index** 3/3/95 3.62% 9.43%
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The S&P 500 Index is an unmanaged index generally representative of the
U.S. stock market as a whole.
** The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
4
<PAGE>
Growth of $10,000 Invested in the
Pegasus Managed Assets Balanced Fund and
a 60% S&P 500 Index*; 40% Lehman Brothers Aggregate Bond Index** Blend
[ GRAPH ]
<TABLE>
<CAPTION>
MANAGED ASSETS BALANCED
DATE A-Shares(1) I-Shares Index Blend(2)
<S> <C> <C> <C>
12/31/93 9500 10000 10000
9245 9732 9657
6/94 9226 9712 9643
9425 9921 9951
12/94 9310 9800 9967
9921 10443 10749
6/95 10531 11085 11624
10975 11552 12268
12/95 11466 12070 12922
11732 12350 13241
6/96 11957 12587 13627
12329 12976 13987
12/96 12956 13644 14855
<FN>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An 'A' Shareholder investment at the original 4.50% sales charge is
currently valued at $13,024.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Since
Through 12/31/96 Date Year Inception
--------------------------- --------- ---- ---------
<S> <C> <C> <C>
Pegasus Managed Assets Balanced Fund
I Shares 1/1/94 13.04% 10.91%
A Shares with 5.00% Load 1/1/94 7.35% 9.02%(1)
B Shares with 5.00% CDSC 8/26/96 N/A 2.29%
60% S&P 500 Index* and 40% Lehman Brothers Aggregate 1/1/94 14.96% 13.86%(2)
Bond Index**
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 9.21%.
(2) Index return since 8/26/96 was 9.12%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
** The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
5
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Equity Income Fund
- -----------------------------------------------------------------------------
An Interview with Chris Gassen and Richard Neumann
Portfolio Managers
- -----------------------------------------------------------------------------
Q. How did the Equity Income Fund perform in 1996?
We are pleased to report that your Equity Income Fund had a good year. We
continued to participate in the exuberant market environment. Our results
exceed most equity income mutual funds as measured by Lipper Analytical
Services. However, as expected, we lagged the S&P 500 Index for 1996.
Q. You say you expected to lag the S&P 500 Index? Why should I invest in such
a Fund?
Our primary objective is to earn a high current yield on our investments.
Thus, we own companies which on average pay out more of their earnings stream
in the form of dividends rather than reinvesting those earnings in the
business. Equity income portfolios like ours tend to be more conservative
than the market and lag in "hot" periods like we had in 1996. Investors
should keep in mind that recent market returns are clearly above average
relative to the market's long-term average and are not "the norm". While we
usually lag on the upside during hot markets, we typically provide more
cushion on the downside. Over the years, this fund has been an excellent
vehicle for conservative investors to earn very competitive returns with
below market risk and high current income versus other equity funds.
Q. That sounds reasonable. Could you be more specific about 1996 though?
Last year we performed well in three areas where we had large stock
concentrations: finance, energy, and consumer non-durables. Our finance
stocks rose 27 percent on average in 1996. Many were purchased this year and
helped to add nearly 200 basis points to our total portfolio return. Our best
performer was Home Beneficial Corp., a life insurer which was acquired by
American General and rose over 50 percent. In the energy sector, rising oil
and gas prices helped boost our stocks to a 25 percent average return last
year. Consumer non-durable issues were also strong with stocks like Warner
Lambert rising over 50 percent and Unilever up over 30 percent. We note that
our portfolio did not benefit from the surge in technology stocks last year,
which was a primary reason we lagged the market. Technology is an area where
we rarely invest because these stocks typically pay little or no dividends.*
Q. What do you see for 1997?
We usually don't speculate about what the near term holds since we try to
invest for the long run. We remain committed to maintaining our disciplined
investment approach based on sensible valuations of good businesses. This is
a real challenge today where professional money managers are under constant
pressure to "outperform" and reach somebody's top ten list with dazzling
short-term results. Indeed, quick and easy profits have become the normal
expectation for many investors with stocks representing merely pieces of
paper to trade rather than an ownership interest in an ongoing business.
Federal Reserve Chairman Greenspan recently used the term "irrational
exuberance" when describing investors' appetite for stock. We would use the
term "speculation". In this environment, we firmly believe that our patient
investment style based on sound sensible valuations will be more rewarding
over the long haul. While our investments in the Equity Income Fund are not
"hot concepts", they are financially solid and sensibly priced. We look
forward to the challenging months ahead. Thanks for your continued
confidence.
* The portfolio's composition is subject to change.
6
<PAGE>
Growth of $10,000 Invested in the
Pegasus Equity Income Fund and the
Russell 1000 Value Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS EQUITY INCOME FUND
DATE A-Shares(1) B-Shares(2) I-Shares R1000 Value(3)
<S> <C> <C> <C> <C>
01/27/95 9500 10000 10000 10000
9951 10457 10476 10644
6/95 10692 11219 11264 11597
11521 12068 12154 12611
12/95 12329 12894 13027 13441
12907 13479 13661 14209
06/96 13076 13622 13846 14454
13476 14012 15416 14874
12/96 14706 14849 15576 16358
<FN>
(1) Includes maximum sales charge of 5.00%.
(2) Includes contingent deferred sales charge of 4.00%.
(3) Excludes expenses.
(4) An 'A' shareholder investment at the original 4.50% sales charge is
currently valued at $14,783.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Since
Through 12/31/96 Date Year Inception
- --------------------------- --------- ---- ---------
<S> <C> <C> <C>
Pegasus Equity Income Fund
I Shares 1/27/95 19.58% 25.83%
A Shares with 5.00% Load 1/27/95 13.32% 22.10%((1))
B Shares with 4.00% CDSC 1/27/95 14.27% 22.75%
Russell 1000 Value Index* 1/27/96 21.64% 29.11%
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 22.47%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Russell 1000 Value Index is an unmanaged index generally representative
of the largest 1000 companies with a greater-than-average value
orientation.
7
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Growth Fund
- -----------------------------------------------------------------------------
An Interview with Jeffrey Beard
Portfolio Manager
- -----------------------------------------------------------------------------
Q. 1996 was a good year for equity markets. How well did the Pegasus Growth
Fund perform?
The total return for the Growth Fund exceeded the return of the average
growth fund manager as determined by Lipper Analytical Services. And although
the Fund managed to keep pace with the market through the first nine months
of the year, matching the 13.5% return before adjusting for fees, the
market's strong advance in the final quarter was difficult to keep pace with.
This is partially attributable to the market's strong contribution in the
quarter from the energy and utility sectors -- these are typically
characterized as more defensive in nature and usually are under represented
in growth funds because of their lackluster growth profiles.
Q. Given the environment, how did you approach the market?
The Fund continues to be managed with a long view belief in a slow growth,
contained inflation, global economic backdrop. Within this framework, the
Fund has sought opportunities where fundamentals and earnings momentum are
firmly in place, expectations are rising, the company is in solid financial
shape, and, all else equal, where the valuations are still reasonable. At the
same time, the Fund remains diversified in its holdings.
Q. Which sectors did you emphasize?
Healthcare and capital goods were two areas of emphasis. These sectors have
traditionally demonstrated the most consistent and predictable growth at this
stage of the economic cycle, particularly important when visibility of
earnings is awarded a premium by investors. Technology was also emphasized,
in large part due to the superior growth in demand for new products and
services driving topline growth.
Q. What is your outlook for 1997, and given this outlook, how has the Fund been
positioned?
Not much has changed. Earnings expectations, although more reasonable,
continue to look somewhat swollen, and could result in disappointment and
poor stock performance. Similarly, inflation, which has remained benign over
the last several months, may be the cause of some nervousness over the next
several months, but should remain controlled. In anticipation of this, the
Fund has been reducing its exposure to the financial sector, and emphasizing
multinational growth and higher quality growth companies in portfolio
construction.
8
<PAGE>
Growth of $10,000 Invested in the
Pegasus Growth Fund and
Russell 1000 Growth Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS GROWTH FUND
(3) A-Shares(1) B-Shares(2) I-Shares R1000 Growth(3)
<S> <C> <C> <C> <C>
01/27/95 9500 10000 10000 10000
10118 10630 10650 10816
6/95 10749 11269 11317 11879
11583 12129 12211 12957
12/95 12347 12915 13038 13548
12987 13553 13724 14324
06/96 13423 13974 14200 15235
13955 14458 14734 15784
12/96 14830 14975 15692 16737
<FN>
(1) Includes maximum sales load of 5.00%.
(2) Includes contingent deferred sales charge of 4.00%.
(3) Excludes expenses.
(4) An 'A' Shareholder investment at the original 4.50% sales charge is
currently valued at $14,908.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Since
Through 12/31/96 Date Year Inception
--------------------------- --------- ---- ---------
<S> <C> <C> <C>
Pegasus Growth Fund
I Shares 1/27/95 20.36% 26.31%
A Shares with 5.00% Load 1/27/95 14.10% 22.67%(1)
B Shares with 4.00% CDSC 1/27/95 15.04% 23.29%
Russell 1000 Growth Index* 1/27/95 23.12% 30.42%
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 23.50%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Russell 1000 Growth Index is an unmanaged index generally
representative of the largest 1000 companies with a greater-than-average
growth orientation.
9
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Mid-Cap Opportunity Fund and Small Cap Opportunity Fund
- -----------------------------------------------------------------------------
An Interview with Ronald Doyle and Joseph Gatz
Portfolio Manager
- -----------------------------------------------------------------------------
Q. 1996 was a good year for equities. How did the Mid-Cap Opportunity Fund
and Small Cap Opportunity Fund perform in 1996?
Both funds had very good performance. The Mid-Cap Opportunity Fund returned
25.0 percent (I Shares), for the twelve months ended December 31, 1996,
compared to the 17.9 percent return for the Lipper Mid-Cap Universe Average
and the 19.1 percent return for the Russell 2500 Index. The Small Cap
Opportunity Fund returned 25.6 percent (I Shares), for the twelve month
period compared to the 20.2 percent return for the Lipper Small Company
Growth Average and the Russell 2000 Index return of 16.5 percent. Despite the
fact most mid- and small-cap managers lagged the broader market during the
year, both funds exceeded the 23.0 percent return of the larger-cap oriented
S&P 500 Index.
Q: What is the difference between these two funds?
The Mid-Cap Opportunity Fund seeks to invest in companies of a market
capitalization ranging between $500 million to $3 billion. The average market
capitalization of the fund is $1.4 billion. The Small Cap Opportunity Fund
invests in companies with market capitalizations ranging between $75 million
to $750 million. The average weighted market capitalization of the small-cap
fund is $619 million. Both funds employ similar strategies, seeking high
quality, above average growth companies selling at reasonable prices.
Q: Which sectors did you emphasize in 1996?
Both funds are managed in a "bottom-up" style, emphasizing fundamental
research on companies and valuation as opposed to sector rotation or asset
allocation. However, our research efforts resulted in a modest overweight in
financial and capital goods stocks in the Mid-Cap fund for most of the year.
The Small Cap fund was underweighted in technology stocks during the volatile
summer months, but has built that position to a market weight by year end.
Q: What's the outlook for 1997?
We remain optimistic about the prospects for both the Mid-Cap and Small Cap
Opportunity funds. Although the equity market seems to be well above its
historical valuation parameters, the fundamental outlook remains positive.
1996 marked the second consecutive year small and mid-sized company stocks
lagged the performance of larger companies. As a result, the valuation of
medium and small sized companies appears somewhat more attractive relative to
larger companies.
Q: Given this outlook, how are the funds positioned?
We believe our attention to company valuations was a key contributor to our
strong performance in 1996. Given the overall valuation of the equity market,
we feel attention to valuation will continue to be important in determining
successful investment styles in 1997. We intend to continue with our
long-standing approach of investing in fundamentally sound companies with
strong growth prospects but reasonable valuations.
Small capitalization equity funds typically carry additional risks and,
historically, their stocks have experienced a greater degree of market
volatility than stocks on average.
10
<PAGE>
Mid-Cap Opportunity Fund
Growth of $10,000 Invested in the
Pegasus Mid-Cap Opportunity Fund
and the Russell 2500 Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS MID-CAP OPPORTUNITY
A-Shares(1) I-Shares R2500(2)
<S> <C> <C> <C>
06/01/91 10000 10000
9661 9564
10019 10386
12/91 10531 11204
05/01/92 9500 11003 11683
9232 10804 11153
9923 11612 11457
12/92 11208 13116 13017
12901 14151 13634
12344 14446 13920
13223 15475 14904
12/93 13899 16266 15170
13588 15903 14836
13234 15488 14317
13844 16201 15348
12/94 13445 15735 15026
14188 16604 16138
15209 17799 17574
16011 18737 19261
12/95 16102 18844 19787
17234 20170 20946
17827 20863 21818
18810 22036 22310
12/96 20113 23561 23553
<FN>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An 'A' Shareholder investment at the original 4.50% sales charge is
currently valued at $20,219.
(4) Investment in the S&P 500 Index (the 1995 benchmark) is currently valued
at $22,119.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Year Inception
--------------------------- --------- ---- ---- ---------
<S> <C> <C> <C> <C>
Pegasus Mid-Cap Opportunity Fund
I Shares 6/1/91 25.03% 17.48% 16.57%
A Shares with 5.00% Load 5/1/92 18.67% N/A 16.14%(1)
B Shares with 5.00% CDSC 9/23/96 N/A N/A 3.07%
Russell 2500 Index* 6/1/91 19.05%(3) 16.00% 16.83%(2)
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 16.27%.
(2) Index return since 9/23/96 was 6.69%.
(3) Return for the S&P 500 Index (the 1995 benchmark) was 22.95%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
* The Russell 2500 Index is an unmanaged index generally representative of
the small-to-medium-small stock market. The index was changed from the 1995
benchmark (the S&P 500 Index) to better reflect the Fund's objective.
11
<PAGE>
Small Cap Opportunity Fund
Growth of $10,000 Invested in the
Pegasus Small Cap Opportunity Fund and
Russell 2000 Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS SMALL CAP OPPORTUNITY
DATE A-Shares(1) B-Shares(2) I-Shares R2000(3)
<S> <C> <C> <C> <C>
01/27/95 9500 10000 10000 10000
10070 10590 10600 10550
6/95 10113 10600 10640 11539
11195 11720 11798 12788
12/95 11856 12376 12486 12954
12245 12764 12906 13614
06/96 12750 13274 13460 14296
13440 14040 14272 14344
12/96 14771 14997 15713 15090
<FN>
(1) Includes maximum sales charge of 5.00%.
(2) Includes contingent deferred sales charge of 4.00%.
(3) Excludes expenses.
(4) An 'A' Shareholder investment at the original 4.50% sales charge is
currently valued at $14,849.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Since
Through 12/31/96 Date Year Inception
--------------------------- --------- ---- ---------
<S> <C> <C> <C>
Pegasus Small Cap Opportunity Fund
I Shares 1/27/95 25.63% 26.29%
A Shares with 5.00% Load 1/27/95 18.36% 22.42%((1))
B Shares with 4.00% CDSC 1/27/95 20.42% 23.38%
Russell 2000 Index* 1/27/95 16.49% 23.82%
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 22.75%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Russell 2000 Index is an unmanaged index generally representative of
the small-cap equity market.
12
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Intrinsic Value Fund
- -----------------------------------------------------------------------------
An Interview with Chris Gassen and Richard Neumann
Portfolio Managers
- -----------------------------------------------------------------------------
Q. How did the Intrinsic Value Fund perform in 1996?
We are pleased to report that your Fund had a great year. We continued to
participate in a euphoric market environment. The Fund finished 1996 with a
return ahead of the S&P 500 Index and substantially above most growth and
income mutual funds as measured by Lipper Analytical Services.
Q. What went well and what did not?
Our strong performance last year is attributable to excellent results from
our two largest areas of concentration, finance and consumer non-durable
stocks. Our diversified group of finance holdings returned over 30 percent on
average. The best finance performer was our longtime holding in Home
Beneficial Corp., a life insurer that was acquired by American General and
produced a stellar 60 percent return in 1996. Consumer non-durable stocks
also returned over 30 percent on average, with holdings in Payless
Shoesource, Block Drug, and Unifi (textiles) returning over 40 percent.
Another pleasant surprise was the acquisition of Flightsafety International
by Berkshire Hathaway. Poor performers last year included Bandag, Luby's
Cafeterias and Stanhome, which remain out of favor amidst sluggish earnings.
However, we think these are excellent businesses with good longer-term
potential and added to our positions throughout the year.*
Q. Well 1996 was certainly a good year, but what about the longer term record
of the Fund?
We believe the Fund's longer term record is even more important since our
investment philosophy emphasizes a patient, disciplined investment approach
stressing good company fundamentals and sensible prices. We are not market
speculators or "momentum" players. Our long term results are highly
competitive with the market and outdistance most comparable mutual funds.
This is especially noteworthy since our investment style exposes our
investors to significantly less risk than the overall market and many other
funds. Compared to many riskier funds we have traveled quite a bit farther
with a much smoother ride.
Q. So far so good, but where do we go from here?
Going forward, we remain committed to maintaining our disciplined investment
approach based on sensible valuations of good businesses. This is a real
challenge today where professional money managers are under constant pressure
to "outperform" and reach somebody's top ten list with dazzling short-term
results. Indeed, expectations of quick and easy profits are becoming more the
norm in today's market. The term "investing" has become more and more
synonymous with "speculating," and stocks represent merely pieces of paper to
trade rather than an ownership interest in an ongoing business. We firmly
believe that a patient approach based on sound and sensible valuations will
be more rewarding over the long haul. Our companies are not flashy or "hot
concepts" but they are financially solid and sensibly valued. We look forward
to the challenging months ahead. Thanks for your continued confidence.
* The portfolio's composition is subject to change.
13
<PAGE>
Growth of $10,000 Invested in the
Pegasus Intrinsic Value Fund and the
S&P 500 Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS INTRINSIC VALUE
A-Shares(1) I-Shares S&P 500(2)
<S> <C> <C> <C>
06/01/91 10000 10000
9555 9549
9963 10061
12/91 10152 10902
05/01/92 9500 10919 10627
9196 10769 10829
9377 10981 11170
12/92 9930 11629 11731
10446 12233 12242
10610 12425 12301
10876 12736 12619
12/93 11391 13340 12911
11016 12901 12422
11040 12929 12474
11521 13492 13083
12/94 11323 13260 13080
12115 14188 14353
12932 15145 15721
13573 15896 16969
12/95 14083 16492 17991
14840 17379 18957
15583 18249 19806
16080 18849 20418
12/96 17434 20449 22119
<FN>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An 'A' shareholder investment at the original 4.50% sales charge is
currently valued at $17,526.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Year Inception
--------------------------- --------- ---- ---- ---------Z
<S> <C> <C> <C> <C>
Pegasus Intrinsic Value Fund
I Shares 6/1/91 23.99% 15.03% 13.67%
A Shares with 5.00% Load 5/1/92 17.61% N/A 12.64%(1)
B Shares with 5.00% CDSC 9/23/96 19.24% N/A 3.42%
S&P 500 Index* 6/1/91 22.95% 15.20% 15.30%(2)
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 12.76%.
(2) Index return since 9/23/96 was 8.49%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
14
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Growth and Value Fund
- -----------------------------------------------------------------------------
An Interview with Gary L. Konsler
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the Growth and Value Fund perform relative to the market and other
mutual funds during 1996?
The S&P 500 Index finished 1996 with another dramatically above-average
return of 23.0%. When added to the 37.5% return earned in 1995, the combined
two year return has not been equaled since the mid-1970's. In terms of the
Dow Jones Industrial Average, it is the best two year period in 40 years. The
DJIA hit a new high on average once per week over the past two years, a
record. The Fund participated in this bull market generating a 19.4% return
(I Shares), in 1996. Likewise, the Fund performed in line with the 20.8%
return for Lipper Growth and Income Universe Average of mutual funds as well
as the 19.5% return for all diversified U.S. stock funds in the Lipper
database.
Q. What were the factors driving these dramatically above-average returns?
During 1996, stocks benefited from (1) a sixth year of economic expansion,
the third longest in history, with inflation at the lowest rate since World
War II, (2) growing corporate profits, resulting from investments in new
equipment and squeezing more efficiencies out of the labor force, but the
profit growth was at only half the growth rate of 1995, (3) record setting
cash flows into mutual funds, averaging 65 cent of every dollar saved, (4)
the Fed balancing monetary policy nearly perfectly plus Congress and the
Administration pledging fiscal reasonability, (5) a 71% increase in stock buy
backs and (6) record setting merger and acquisition activity.
Q. What stocks performed particularly well in the Fund and which did not meet
your expectations?
The best performing stocks were in the technology area, i.e., Intel and
Compaq. In the energy area Schlumberger and the natural gas stock MCN
performed especially well. Likewise, merger and acquisition activity
involving MCI, Duracell and Boeing provided major contributions. Finance was
additive with BankAmerica as was Toys"R"Us and Cracker Barrel. On the
negative side, the Fund was hurt by the sell-off in EDS following an EPS
announcement. In fact the common thread among our weaker investments were EPS
reports that were less than consensus expectations, e.g., Stewart &
Stevenson, Great Lakes Chemicals, AT&T, Rubbermaid.*
Q. You mentioned merger and acquisition activity, how did the Growth and Value
Fund participate in this M&A activity?
During 1996, the Fund participated in five of the 15 largest deals announced
in the mergers and acquisition area through its holdings in MCI, Boeing, U.S.
Healthcare, Duracell and Dun & Bradstreet.*
Q. What kind of turnover did you experience in 1996?
As a result of the large advance in stock prices, turnover was a bit
above-average at 42% for the year. Generally, buy and sale activity will
result in turnover of approximately 35% annually.
Q. There has been a lot of talk about cash in mutual funds. What is the Fund's
cash position and what is your philosophy regarding cash?
Cash equivalents were maintained in a 2% to 3% operational range. The Fund
will remain fully invested. Cash will not be used for market timing or asset
allocation purposes.
Q. The market appears high to many commentators, what do you think? How do you
invest in such an environment?
As the six year bull market accelerated at a dramatically above average rate
in 1996, corporate earnings disappointments in July and fears of potentially
higher rates were reversed within weeks to months. Each and every decline in
the market became an opportunity to buy. For example, during the fourth
quarter Fed Chairman Greenspan publicly wondered if investors were becoming
"irrationally exuberant." The market declined briefly but then accelerated to
new highs. As the year ended, investor psychology was extremely bullish. Many
investors had become convinced that rising stock prices are inevitable. The
danger in such an environment is to overly concentrate thereby incurring
above average risk on the assumption that above average returns are assured.
To secure good long term returns yet balance the risks associated with equity
investing, it is prudent to have the core of a common stock portfolio in a
fully invested, large cap, quality, broadly diversified fund which produces a
market rate of income, while exposing the investor to only approximately
average market risk. We believe the Growth and Value Fund is such a
fund.
* The portfolio's composition is subject to change.
15
<PAGE>
Growth of $10,000 Invested in the
Pegasus Growth and Value Fund and the
S&P 500 Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS GROWTH & VALUE
A-Shares(1) I-Shares S&P 500(2)
<S> <C> <C> <C>
06/01/91 10000 10000
9497 9549
9541 10061
12/91 10000 10902
05/01/92 9500 10170 10627
9358 10274 10829
9572 10509 11170
12/92 10015 11000 11731
10351 11364 12242
10666 11709 12301
10858 11921 12619
12/93 11397 12512 12911
11119 12207 12411
11335 12445 12474
11696 12840 13083
12/94 11459 12580 13080
12316 13522 14353
12988 14259 15721
13875 15233 16969
12/95 14670 16105 17991
15441 16952 18957
15933 17492 19806
16449 18607 20418
12/96 17493 19221 22119
<FN>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An 'A' shareholder investment at the original 4.50% sales charge is
currently valued at $17,585.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Year Inception
--------------------------- --------- ---- ---- ---------
<S> <C> <C> <C> <C>
Pegasus Growth and Value Fund
I Shares 6/1/91 19.35% 13.94% 12.42%
A Shares with 5.00% Load 5/1/92 13.29% N/A 12.73%((1))
B Shares with 5.00% CDSC 9/23/96 N/A N/A 1.34%
S&P 500 Index* 6/1/91 22.95% 15.20% 15.30%((2))
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 12.84%.
(2) Index return since 9/23/96 was 8.49%
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
* The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
16
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Equity Index Fund
- -----------------------------------------------------------------------------
An Interview with Richard Neumann
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the Equity Index Fund perform last year?
As should be expected, the Equity Index Fund closely tracked the performance
of the S&P 500 Index in 1996, returning 22.6 percent (I Shares), versus 23.0
percent for the S&P 500 Index.
Q. That was a close match but not exact. Why not?
Management fees account for the bulk of the difference. Trading costs
incurred by the Fund and not by the Index are also a negative drag on Fund
performance. In addition, small cash balances from dividend payments and
purchases of Fund shares create a drag on performance in the strong market
environment we witnessed last year. In general, we would expect the Fund to
remain within 0.2 percent of the Index on an annual basis before management
fees. Over longer periods of time the Fund has tracked within 0.1 percent of
the Index.
17
<PAGE>
Growth of $10,000 Invested in the
Pegasus Equity Index Fund and the
S&P 500 Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS EQUITY INDEX
DATE A-Shares(1) I-Shares S&P 500(2)
<S> <C> <C> <C>
07/10/92 9700 10000 10000
9839 10142 10149
12/92 10331 10648 10657
10777 11109 11126
10822 11155 11181
11092 11433 11472
12/93 11340 11688 11736
10897 11232 11290
10942 11279 11335
11461 11813 11891
12/94 11456 11807 11891
12568 12954 13048
13756 14178 14291
14845 15301 15426
12/95 15735 16219 16355
16576 17085 17233
17311 17843 18005
17823 18378 18562
12/96 19273 19880 20108
<FN>
(1) Includes maximum sales charge of 3.00%.
(2) Excludes expenses.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Since
Through 12/31/96 Dates Year Inception
- --------------------------- --------- --- -----
<S> <C> <C> <C>
Pegasus Equity Index Fund
I Shares 7/10/92 22.58% 16.58%
A Shares with 3.00% Load 7/10/92 18.81% 15.77%
B Shares with 3.00% CDSC 9/23/96 N/A 5.09%
S&P 500 Index* 7/10/92 22.95% 16.91%(1)
<FN>
(1) Index return since 9/23/96 was 8.49%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
* The S&P 500 Index is an unmanaged index generally representative of the U.S.
stock market as a whole.
18
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
International Equity Fund
- -----------------------------------------------------------------------------
An Interview with Richard P. Kost
Portfolio Manager
- -----------------------------------------------------------------------------
Q. Describe the Fund and its objectives.
The Pegasus International Equity Fund (the "Fund") is an equity mutual fund
which invests primarily in equity securities of non-U.S. companies. The
Fund's objective is to achieve long-term capital appreciation. The Fund seeks
to achieve this objective by emphasizing active country selection involving
global economic, financial and political assessments together with valuation
analysis of selected countries' securities markets. The Fund may exhibit more
volatility than the U.S. equity market in general.
Q. How did the Fund do in 1996?
During the calendar year ended December 31, 1996, the Fund returned 7.8
percent (I Shares). The Fund's performance compared favorably with the Morgan
Stanley Capital International EAFE Index, a market value weighted unmanaged
index of about 1,100 equity securities issued by foreign companies with a
total market value of approximately U.S. $5.7 trillion. This index is not
subject to expenses of a mutual fund. The Fund outperformed primarily due to
its underweighting of equities in Japan and overweighting of equities in
Europe.
Q. Describe the investment environment in which the Fund operated?
International equity markets appreciated during 1996 as continued economic
growth and modest inflationary pressures resulted in lower interest rates.
The Morgan Stanley Capital International EAFE Index returned 6.0 percent in
U.S. dollar terms during the year. European equity markets advanced 21.1
percent in U.S. dollars on good earnings gains and lower interest rates. The
Japanese stock market lagged with a U.S. dollar return of -15.5 percent. The
Japanese stock market declined during the year on concerns about the sluggish
economy, the inconclusive outcome of national elections, and investor
uncertainty about the competitive position of Japanese banks in a less
regulated environment. The MSCI Pacific ex-Japan index returned 20.5 percent,
led by a return of 33.1 percent in Hong Kong. Latin American equity markets
generally advanced as economic growth accelerated in a more stable
environment.
Q. What is your long term outlook for international equity investing?
Over the long term, international equities have historically provided returns
superior to U.S. large capitalization stocks, although at a higher level of
volatility. We continue to recommend that long-term investors have a portion
of their assets invested internationally to capture the benefits of portfolio
diversification and potential capital appreciation.
Q. Given your outlook how have you allocated the Fund's assets?
At year end, 54 percent of the Fund's assets were invested in Europe.
Approximately 35 percent were invested in the Far East, of which 25 percent
were in Japan. Investments in emerging market countries represented 7 percent
of assets, and cash equivalents accounted for 4 percent.*
* The portfolio's composition is subject to change. International investing
is subject to certain factors such as currency exchange rate volatility,
possible political, social or economic instability, foreign taxation and
differences in auditing and other financial standards.
19
<PAGE>
Growth of $10,000 Invested in the
Pegasus International Equity Fund and the
MSCI Europe, Australia, Far East Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS INTERNATIONAL EQUITY FUND
DATE A-Shares(1) I-Shares EAFE(2)
<S> <C> <C> <C>
12/03/94 9500 10000 10000
12/94 9504 10005 10012
3/95 9665 10174 10198
6/95 10004 10531 10273
9/95 10339 10883 10701
12/95 10595 11153 11134
3/96 10896 11470 11456
6/96 11102 11687 11637
9/96 11099 11710 11623
12/96 11390 12021 11808
<FN>
(1) Includes maximum sales charge of 5.00%.
(2) Excludes expenses.
(3) An 'A' shareholder investment at the original 4.50% sales charge is
currently valued at $11,390.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Since
Through 12/31/96 Date Year Inception
--------------------------- --------- ---- ---------
<S> <C> <C> <C>
Pegasus International Equity Fund
I Shares 12/3/94 7.79% 9.26%
A Shares with 5.00% Load 12/3/94 2.13% 6.46%(1)
B Shares with 5.00% CDSC 8/26/96 N/A -2.38%
MSCI EAFE Index* 12/3/94 6.00% 8.44%(2)
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 6.72%.
(2) Index return since 8/26/96 was 2.24%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The MSCI EAFE Index is an unmanaged index generally representative of the
foreign equity market as a whole.
20
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Bond and Intermediate Bond Funds
- -----------------------------------------------------------------------------
An Interview with Doug Swanson
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the Bond and Intermediate Bond Funds perform in 1996?
In a tough bond market they both performed extremely well relative to their
benchmark and peers. For the Bond Fund's fiscal year ended December 31, 1996
the Fund provided a total return of 5.08% ( I Shares) versus 3.63% for the
Lehman Brothers Aggregate Bond Index. This return also placed the Fund second
out of 120 in its Lipper category (Intermediate U.S. Government) for the
year. For the five years ended December 31, 1996 the Fund placed first out of
34 funds in this same Lipper category. For the Intermediate Bond Fund's
fiscal year ended December 31, 1996 the Fund provided a total return of 5.78%
(I Shares) versus 4.05% for the Lehman Intermediate Government/Corporate
Index. This placed the Fund third out of 89 in its Lipper category
(Short-Intermediate U.S. Government). For the five years ended December 31,
1996 the Fund placed first out of 36 funds in this same Lipper category. Past
performance is not indicative of future results.
Q. What were the primary reasons for these Funds' strong performance?
First we were overweighted in the Mortgage-Backed Securities sector which
outperformed most of the year. Also, our security selection within this
sector was excellent as Collateralized Mortgage Obligations (CMOs) generally
outperformed pass-throughs. Finally, many of our individual holdings
outperformed generic securities.
Q. What are the Funds' current duration and why is that important?
As of December 31, 1996 the Bond Fund had a duration of 4.8 years versus 4.8
years for the benchmark and the Intermediate Fund had a duration of 3.4 years
versus 3.4 years for the Index. It is important because duration is a measure
of interest rate risk of a portfolio or security. The higher the duration the
higher the interest rate risk.
Q. What are the Funds' sector allocations?
At the end of 1996 the Bond Fund held 43% in U.S. Treasuries, 34% in
Mortgage-Backed Securities, 7% in Asset-Backed Securities, 6% in Corporates,
2% in Foreign Bonds and 8% in overnight repurchase agreements. Also, the fund
held 94% in AAA securities.*
For the Intermediate Bond Fund 48% was invested in U.S. Treasuries, 34%
in Mortgage-Backed Securities, 10% in Asset-Backed Securities, 4% in
Corporates, 1% in Foreign Bonds and 3% in overnight repurchase agreements.
Also, 96% of the assets in the Fund were rated AAA.*
Q. What are some of your strategies for 1997?
We will in general have the duration of the Funds' similar to that of their
respective benchmarks. Our long term view on the bond market is positive so
we may increase our duration if there is a significant sell off in the bond
market in 1997. Although the Mortgage-Backed sector is not as undervalued as
it was, we think there are still many opportunities in this area. Finally, we
will continue to stress higher quality securities. With yield pickups so
narrow into lower quality issues, the risk/reward is not nearly as good for
these securities as it has been the last 5 years.
* The portfolio's composition is subject to change.
21
<PAGE>
Growth of $10,000 Invested in the
Pegasus Bond Fund and the
Lehman Brothers Aggregate Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS BOND FUND
Date I Shares A Shares Index
<S> <C> <C> <C>
06/01/91 10000 10000
06/30/91 9977 9994.92
07/31/91 10116 10133.52
08/31/91 10330 10352.81
09/30/91 10543.98 10562.59
10/31/91 10661.42 10680.2
11/30/91 10771.65 10778.12
12/31/91 11070 11098.22
01/31/92 10879.05 10947.23
02/29/92 10947.61 11018.41
03/31/92 10909.39 10956.3
05/01/92 10986.3 9550 11035.44
05/31/92 11177.96 9716.62 11243.67
06/30/92 11332.03 9850.55 11398.41
07/31/92 11500.26 9996.79 11630.97
08/31/92 11607 10089.56 11748.79
09/30/92 11768.9 10230.29 11888.06
10/31/92 11612.37 10094.24 11730.44
11/30/92 11620.27 10101.09 11733.09
12/31/92 11795.53 10253.47 11919.67
01/31/93 12029.2 10456.56 12148.24
02/28/93 12263.26 10660.05 12360.9
03/31/93 12355.4 10740.15 12412.41
04/30/93 12502.1 10867.66 12498.84
05/31/93 12532.82 10894.34 12514.76
06/30/93 12793.98 11121.39 12741.56
07/31/93 12896.6 11210.58 12813.63
08/31/93 13168.87 11447.24 13038.22
09/30/93 13176.09 11453.53 13074.03
10/31/93 13201.54 11475.64 13122.89
11/30/93 13091.81 11380.27 13011.25
12/31/93 13139.42 11421.66 13081.77
01/31/94 13307.4 11567.67 13258.39
02/28/94 13056.7 11349.74 13028.05
03/31/94 12778.99 11108.33 12706.86
04/30/94 12605.77 10957.76 12605.39
05/31/94 12532.97 10894.5 12603.62
06/30/94 12485.89 10853.54 12575.77
07/31/94 12652.86 10998.72 12825.56
08/31/94 12630.41 10979.16 12841.48
09/30/94 12396.83 10776.15 12652.47
10/31/94 12334.15 10721.66 12641.2
11/30/94 12230.93 10631.92 12613.13
12/31/94 12220.28 10622.67 12700.22
01/31/95 12507.95 10872.74 12951.57
02/28/95 12879.05 11195.32 13259.5
03/31/95 13035.41 11331.25 13340.85
04/30/95 13254.65 11521.83 13527.2
05/31/95 13910.4 12091.85 14050.67
06/30/95 14021.86 12188.71 14153.68
07/31/95 13971.44 12144.88 14122.07
08/31/95 14164.36 12312.6 14292.5
09/30/95 14329.96 12456.56 14431.55
10/31/95 14587.54 12680.47 14619.23
11/30/95 14849.37 12908.07 14838.3
12/31/95 15121.97 13145 15046.53
01/31/96 15226.18 13235.61 15146.45
02/29/96 14971.76 13014.46 14883.17
03/31/96 14876.78 12931.88 14779.72
04/30/96 14794.56 12860.43 14696.6
05/31/96 14809.34 12873.25 14666.76
06/30/96 14963.77 13007.49 14863.72
07/31/96 15039.94 13073.71 14904.39
08/31/96 15093.21 13117.15 14879.41
09/30/96 15352.04 13342.11 15138.71
10/31/96 15734.26 13661.03 15474.06
11/30/96 16026.41 13914.92 15739.11
12/31/96 15889.61 13799.48 15592.77
<FN>
(1) Includes sales charge of 4.50%.
(2) Excludes expenses.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Years Inception
--------------------------- --------- ---- ----- ---------
<S> <C> <C> <C> <C>
Pegasus Bond Fund
I Shares 6/1/91 5.08% 7.50% 8.64%
A Shares with 4.50% sales charge 5/1/92 0.26% N/A 7.13%
B Shares with 5.00% CDSC 8/26/96 N/A N/A -0.19%
Lehman Brothers Aggregate Bond Index* 6/1/91 3.63% 7.03% 8.28%(1)
<FN>
(1) Index return since 8/26/96 was 3.85%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
* The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
22
<PAGE>
Growth of $10,000 Invested in the
Pegasus Intermediate Bond Fund and the
Lehman Brothers Intermediate Government/Corporate Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS INTERMEDIATE BOND FUND
Date I Shares A Shares Index
<S> <C> <C> <C>
06/01/91 10000 10000
06/30/91 10002 10007.04
07/31/91 10107 10118.57
08/31/91 10321 10311.75
09/30/91 10492 10489.13
10/31/91 10609.64 10608.85
11/30/91 10726.27 10730.65
12/31/91 10966.44 10992.73
01/31/92 10843.82 10893.19
02/29/92 10865.77 10936.2
03/31/92 10821.7 10893.19
05/01/92 10930.38 9700 10988.92
05/31/92 11089.62 9841.3 11159.26
06/30/92 11269.11 10000.6 11324.46
07/31/92 11389.37 10107.32 11549.62
08/31/92 11496.25 10202.14 11665.14
09/30/92 11630.39 10321.2 11823.49
10/31/92 11495.83 10201.79 11670.09
11/30/92 11461.68 10171.49 11625.75
12/31/92 11623.21 10314.84 11781.43
01/31/93 11821.15 10490.49 12010.58
02/28/93 11971.33 10623.76 12199.95
03/31/93 12036.56 10681.66 12248.49
04/30/93 12163.2 10794.05 12347.07
05/31/93 12150.48 10782.76 12319.67
06/30/93 12335.34 10946.81 12513.04
07/31/93 12371.56 10978.94 12543.68
08/31/93 12555.76 11142.38 12742.57
09/30/93 12591.13 11173.77 12795.48
10/31/93 12606.54 11187.46 12829.74
11/30/93 12547.1 11134.71 12758.17
12/31/93 12600.34 11181.97 12816.6
01/31/94 12726.24 11293.71 12958.97
02/28/94 12547.51 11135.06 12767.31
03/31/94 12313.13 10927.06 12556.62
04/30/94 12138.98 10772.51 12471.17
05/31/94 12095.85 10734.28 12479.54
06/30/94 12069.85 10711.17 12481.25
07/31/94 12166.89 10797.32 12660.92
08/31/94 12198.14 10825.05 12700.51
09/30/94 12029.81 10675.64 12583.65
10/31/94 11978.05 10629.73 12581.93
11/30/94 11841.05 10508.14 12524.84
12/31/94 11805.72 10476.8 12569.18
01/31/95 12041.66 10686.15 12781.01
02/28/95 12363.81 10972.05 13046.13
03/31/95 12493.33 11087.02 13120.74
04/30/95 12682.05 11254.47 13282.71
05/31/95 13158.25 11677.09 13684.29
06/30/95 13258.16 11765.72 13776.03
07/31/95 13262.13 11769.25 13777.93
08/31/95 13389.46 11882.26 13903.35
09/30/95 13502.72 11982.79 14004.03
10/31/95 13691.56 12150.33 14160.1
11/30/95 13909.57 12343.81 14346.24
12/31/95 14104.94 12517.19 14496.59
01/31/96 14219.25 12618.64 14621.64
02/29/96 14089.38 12503.37 14449.96
03/31/96 14039.95 12459.51 14375.55
04/30/96 13997.17 12421.54 14324.73
05/31/96 14009.65 12432.62 14313.88
06/30/96 14129.53 12539.03 14465.95
07/31/96 14205.25 12606.22 14508.96
08/31/96 14280.81 12660.71 14520.38
09/30/96 14485.36 12842.16 14722.7
10/31/96 14776.58 13113.33 14982.87
11/30/96 14982.97 13283.79 15180.43
12/31/96 14919.55 13223.67 15083.17
<FN>
(1) Includes sales charge of 3.00%.
(2) Excludes expenses.
(3) An 'A' share investment with the original 4.50% sales charge is currently
valued at $13,019.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Years Inception
--------------------------- --------- --- ---- -----
<S> <C> <C> <C> <C>
Pegasus Intermediate Bond Fund
I Shares 6/1/91 5.78% 6.35% 7.42%
A Shares with 3.00% sales charge 5/1/92 2.48% N/A 6.17%((1))
B Shares with 3.00% CDSC 9/23/96 N/A N/A 0.50%
Lehman Brothers Intermediate 6/1/91 4.06% 6.53% 7.64%((2))
Government/Corporate Bond Index*
<FN>
(1) Return for an 'A' shareholder who invested at the original 4.50% sales
charge was 5.81%.
(2) Index return since 9/23/96 was 3.01%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
* The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index generally representative of the intermediate-term
government and corporate bond market as a whole.
23
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Short Bond Fund
- -----------------------------------------------------------------------------
An Interview with Rick Cipicchio
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the Short Bond Fund perform in 1996?
The Fund's I shares returned 4.56% versus 5.16% for the Salomon Brothers
Government/Corporate 1-3 Year Bond Index. The Index, however, is not subject
to the expenses of a mutual fund. The Fund's return compared favorably to the
Lipper Short U.S. Government universe average of 4.35% for the year.
Q. What factors affected the returns of the Fund?
The Fund's absolute return was hindered by the rise in interest rates. The
one, two and three-year Treasuries increased by 36, 72, and 80 basis points,
respectively. The Fund's position in Mortgage-Backed securities helped
returns due to their spread tightening and higher yield.
Q. What is the Fund's current duration and why is it important?
As of December 31, 1996, the Short Bond Fund duration was 1.7 years versus
1.8 years for the Index. Duration is a measure of interest rate risk of a
portfolio or security. The higher the duration the higher the interest rate
risk.
Q. How does this duration compare to other Funds?
The duration of the Short Bond Fund has the shortest duration of any Pegasus
taxable bond fund. This generally allows the Fund to have a more stable NAV
versus funds with longer duration. It is also important to realize that this
is not a money market fund and the NAV will fluctuate from day to day.
Q. What is the Short Bond Fund's sector allocation?
At the end of 1996, the Fund held 65% in Treasuries/Agencies, 16% in
Mortgage-Backed securities, 9% in Asset-Backed securities and 10% in high
quality corporate securities. The portfolio held 91% in AAA rated securities
and 9% in A or AA rated securities.*
Q. What are some of your strategies for 1997?
The Fund will seek to identify Mortgage-Backed and corporate securities that
have excellent risk/return characteristics. The Fund will also take advantage
of the steepness of the front end of the yield curve by minimizing maturities
under one year in favor of one to two year maturities with higher yields and
better price characteristics.
* The portfolio's composition is subject to change.
24
<PAGE>
Growth of $10,000 Invested in the
Pegasus Short Bond Fund and the
Salomon Brothers Government/Corporate 1-3 Year Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS SHORT BOND FUND
Date I Shares A Shares Index
<S> <C> <C> <C>
09/17/94 10000 9900 10000
09/30/94 9997 9897.03 9990.47
10/31/94 10016 9915.84 10013.69
11/30/94 9982.83 9883.01 9971.89
12/31/94 10007.99 9907.91 9992.91
01/31/95 10130.01 10028.71 10130.79
02/28/95 10252.65 10150.12 10267.94
03/31/95 10307.09 10204.01 10325.63
04/30/95 10392.77 10288.85 10417.8
05/31/95 10562.96 10457.33 10596.75
06/30/95 10610.93 10504.83 10653.95
07/31/95 10643.42 10536.99 10699.43
08/31/95 10707.64 10600.56 10763.23
09/30/95 10761.59 10653.98 10813.1
10/31/95 10847.66 10739.18 10903.8
11/30/95 10937.29 10827.92 10997.92
12/31/95 11015.62 10905.47 11081.04
01/31/96 11100.68 10989.67 11173.7
02/29/96 11052.03 10941.51 11136.78
03/31/96 11048.77 10938.29 11129.69
04/30/96 11053.13 10942.6 11137.02
05/31/96 11073.94 10963.2 11167.34
06/30/96 11154.23 11042.68 11247.04
07/31/96 11186.27 11074.41 11290.55
08/31/96 11225.01 11101.72 11333.09
09/30/96 11323.89 11199.57 11435.52
10/31/96 11442.82 11317.34 11566.31
11/30/96 11517.18 11390.96 11650.65
12/31/96 11517.63 11390.62 11652.85
<FN>
(1) Includes sales charge of 1.00%.
(2) Excludes expenses.
(3) An 'A' share investment with the original 3.00% sales charge is currently
valued at $11,161.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Years Inception
--------------------------- --------- --- ---- -----
<S> <C> <C> <C> <C>
Pegasus Short Bond Fund
I Shares 9/17/94 4.56% N/A 6.37%
A Shares with 1.00% sales charge 9/17/94 3.40% N/A 5.86%(1)
B Shares with 1.00% CDSC 9/23/96 N/A N/A 1.04%
Salomon Brothers Government/Corporate 1-3 Year Bond 9/17/94 5.16% N/A 6.91%(2)
Index*
<FN>
(1) Return for an 'A' shareholder who invested at the original 3.00% sales
charge was 4.91%.
(2) Index return since 9/23/96 was 2.24%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Salomon Brothers Government/Corporate 1-3 Year Bond Index is an
unmanaged index generally representative of the short-term government and
corporate bond markets.
25
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Income Fund
- -----------------------------------------------------------------------------
An Interview with Mark Jackson
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the Pegasus Income Fund perform in 1996?
The Fund's I Shares provided a total return of 3.14%. This compares favorably
to the Lipper Intermediate Investment Grade Bond Fund average net total
return of 3.12% and the 2.91% total return of the Lehman Brothers
Government/Corporate Bond Index.
Q. What factors affected the return of the Pegasus Income Fund?
The Fund's absolute return was adversely affected by the rise in market
interest rates during 1996. The yield on the benchmark ten year Treasury Note
rose more than 0.80%. A generally strong corporate bond market and superior
performance of selected portfolio holdings benefited fund performance.
Q. Why was the benchmark index for the Pegasus Income Fund changed this year?
The Pegasus Income Fund's goal of providing "as high a level of current
income as is consistent with relative stability of principal" and current
focus on the corporate bond market make the Lehman Brothers
Government/Corporate Bond Index the logical choice for performance
comparisons.
Q. What is the Income Fund's sector allocation?
As of December 31, 1996, 47% of the fund was invested in U.S. Treasury
securities, 6% in Government Agencies, 33% in corporate bonds with an average
credit quality of A1/A+, and 14% in asset-backed securities with an average
AAA credit rating.*
Q. Corporate bond yields are very low relative to U.S. Treasury securities.
What does this mean for the Pegasus Income Fund?
The incremental income gained by owning corporate bonds rather than U.S.
Treasuries is indeed at historically low levels. Increasing the percent of
investment grade corporate bonds held by the Pegasus Income Fund will only
marginally increase the overall yield of the portfolio. Also, corporate bonds
generally are unlikely to repeat 1996's favorable price performance versus
Treasuries. We will continue to search for corporate bonds that represent
superior value and to explore alternatives that will help the Fund continue
to reach its goals.
* The portfolio's composition is subject to change.
26
<PAGE>
Growth of $10,000 Invested in the
Pegasus Income Fund and the
Lehman Brothers Government/Corporate Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS INCOME FUND
Date I Shares A Shares G/C Index Int G/C Index
<S> <C> <C> <C> <C>
03/05/93 10000 9700 10000 10000
03/31/93 9964.08 9665.53 9926.9 9967.01
04/30/93 10042.22 9740.85 10003.27 10047.24
05/31/93 10012.01 9711.95 9997.97 10024.93
06/30/93 10150.5 9846.25 10224.9 10182.29
07/31/93 10179.79 9875.42 10290.21 10207.22
08/31/93 10306.24 9997.82 10526.49 10369.06
09/30/93 10355.59 10046.61 10563.11 10412.12
10/31/93 10370.46 10061.34 10606.29 10439.99
11/30/93 10334.28 10025.97 10486.43 10381.76
12/31/93 10375.7 10064.79 10532.25 10429.31
01/31/94 10471.64 10156.81 10690.76 10545.15
02/28/94 10334.39 10037.76 10458.22 10389.2
03/31/94 10215.7 9922.68 10202.46 10217.75
04/30/94 10158.36 9867.08 10117.98 10148.21
05/31/94 10166.71 9862.69 10099.28 10155.03
06/30/94 10172.81 9881.25 10075.59 10156.42
07/31/94 10295.17 10000.01 10276.96 10302.62
08/31/94 10326.23 10017.45 10281.17 10334.84
09/30/94 10240.04 9946.57 10125.47 10239.74
10/31/94 10153.14 9939.62 10114.24 10238.35
11/30/94 10219.85 9913.68 10096.16 10191.89
12/31/94 10277.23 9969.34 10162.72 10227.97
01/31/95 10421.38 10111.28 10357.85 10400.35
02/28/95 10678.01 10359.76 10598.03 10616.09
03/31/95 10731 10422.06 10669.1 10676.8
04/30/95 10883.54 10554.75 10817.94 10808.59
05/31/95 11275.82 10932.87 11271.33 11135.37
06/30/95 11361.83 11000.51 11361.42 11210.02
07/31/95 11338.14 10988.69 11317.62 11211.57
08/31/95 11468.61 11111.03 11462.41 11313.63
09/30/95 11570.19 11203.95 11578.84 11395.56
10/31/95 11730.38 11353.37 11748.88 11522.56
11/30/95 11931.29 11544.25 11942.3 11674.02
12/31/95 12078.67 11683.58 12118.26 11796.37
01/31/96 12167.32 11769.32 12193.7 11898.12
02/29/96 11970.16 11560.16 11934.98 11758.43
03/31/96 11881.44 11455.58 11834.76 11697.87
04/30/96 11790.41 11364.74 11753.56 11656.52
05/31/96 11775.11 11347.41 11733.76 11647.69
06/30/96 11894.3 11474.77 11890.4 11771.44
07/31/96 11939.69 11501.41 11918.14 11806.44
08/31/96 11908.73 11483.72 11888.84 11815.73
09/30/96 12106.06 11672.28 12100.19 11980.36
10/31/96 12373.61 11927.47 12382.6 12192.07
11/30/96 12589.57 12134.21 12610.62 12352.83
12/31/96 12458.03 12005.11 12470.04 12273.69
<FN>
(1) Includes sales charge of 3.00%.
(2) Excludes expenses.
(3) The Lehman Intermediate Government/Corporate Bond Index was used as the
benchmark in 1995. Excludes expenses.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
generally representative of the government and corporate bond market as a
whole.
27
<PAGE>
Growth of $10,000 Invested in the
Pegasus Income Fund and the
Lehman Brothers Government/Corporate Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS INCOME FUND
Date B Shares Index
<S> <C> <C>
05/31/95 10000 10000.41
06/30/95 10055.63 10080.34
07/31/95 10038.42 10041.49
08/31/95 10143.73 10169.95
09/30/95 10222.34 10273.25
10/31/95 10352.05 10424.12
11/30/95 10519.65 10595.73
12/31/95 10639.69 10751.85
01/31/96 10706.95 10818.78
02/29/96 10509.01 10589.23
03/31/96 10432.17 10500.31
04/30/96 10343.09 10428.27
05/31/96 10320.91 10410.7
06/30/96 10416.91 10549.68
07/31/96 10434.57 10574.29
08/31/96 10411.85 10548.3
09/30/96 10584.42 10735.81
10/31/96 10808.27 10986.38
11/30/96 10987.76 11188.69
12/31/96 10575 11063.96
<FN>
(1) Includes contingent deferred sales charge of 3.00%.
(2) Excludes expenses.
(3) A 'B' share investment with a 4.00% contingent deferred sales charge is
currently valued at $10,476.
(4) Investment in the Lehman Intermediate Government/Corporate Bond Index
(the 1995 benchmark) is currently valued at $11,030.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Years Inception
--------------------------- --------- ---- ----- ---------
<S> <C> <C> <C> <C>
Pegasus Income Fund
I Shares 3/5/93 3.14% N/A 5.91%
A Shares with 3.00% sales charge 3/5/93 -0.33% N/A 4.89%
B Shares with 3.00% CDSC 5/31/95 -0.79 N/A 3.50%(1)
Lehman Brothers Government/Corporate Bond Index* 3/5/93 2.91%(3) N/A 5.94%(2)
<FN>
(1) Return for a 'B' shareholder with a 4.00% contingent deferred sales
charge was 2.97%.
(2) Index return since 5/31/95 was 6.58%.
(3) Return for the Lehman Intermediate Government/Corporate Bond Index
(the 1995 benchmark) was 4.06%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
generally representative of the government and corporate bond market as a
whole.
28
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
International Bond Fund
- -----------------------------------------------------------------------------
An Interview with Claude Erb
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the International Bond Fund perform in 1996?
The fund did very well. In fact it outperformed its benchmark for the second
straight year. The International Bond Fund had a total return of 5.99% (I
Shares) versus 4.08% for the Salomon Brothers Non-U.S. Government Bond Index
(U.S. dollars unhedged) for the year ended December 31, 1996. We hope we can
continue this performance into the new year.
Q. What in particular drove the fund's good performance?
Two factors drove our relative performance. The first was our longer than
benchmark duration. Through much of 1996 we saw global interest rates
decline. Our fund had a higher than normal sensitivity to interest rates and
therefore reaped some reward. The second factor was positive returns to
country selection.
Q. If country selection is important for the fund, what markets did you
emphasize during the year?
Through much of the year we were underweighted in Japan, which returned -6.0%
in U.S. dollars. The yields on Japan have been very low for quite some time,
and we felt that there was little opportunity for significant returns there.
In addition the currency weakened throughout the year thereby lowering its
U.S. dollar return. In contrast we were overweight in well performing markets
like Australia and New Zealand. These markets returned 19.5% and 18.0%, in
U.S. dollars, respectively.
Q. We have been hearing a great deal lately about "convergence" in Europe. How
did it affect the fund?
Convergence describes the narrowing of yield spreads across European
countries. 1996 saw peripheral European markets like Italy and Sweden
outperform so-called core markets like Germany and France. The prospect of
inclusion in the new Euro currency gave investors a reason to bid up these
peripheral markets. The fund had full weightings in these markets including
Italy, Sweden, and Spain.
Q. Do you see this trend continuing into 1997?
We are unlikely to see such outsized gains again in 1997. For example Italy
in 1996 returned some 27.5% in U.S. dollars. The road to European currency
union is likely to be somewhat bumpy along the way. We think that there are
better opportunities outside of Continental Europe.
Q. If that is the case how do you have the fund positioned for the new year?
The fund is now relatively duration neutral versus the benchmark. We do not
believe that global interest rates have much chance of going greatly lower.
On the country selection side we continue to underweight Japan. Japan as a
country still has significant macroeconomic problems it needs to work
through, and we believe that the yields available there do not fully
compensate us for that risk. In contrast select markets, like the United
Kingdom, Australia, and New Zealand, have yields which we believe are
attractive relative to their own prospective inflation and relative to the
rest of the world.
International investing is subject to certain factors such as currency
exchange rate volatility, possible political, social or economic instability,
foreign taxation and differences in auditing and other financial standards.
29
<PAGE>
Growth of $10,000 Invested in the
Pegasus International Bond Fund and the
Salomon Brothers Non-U.S. World Government Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS INTERNATIONAL BOND FUND
Date I Shares A Shares B Shares Index
<S> <C> <C> <C> <C>
01/27/95 10000 9550 10000 10000
01/31/95 9980 9530.9 9980 10018.85
02/28/95 10287.79 9823.97 10281.27 10302.74
03/31/95 11210.07 10702.46 11193.3 11220.89
04/30/95 11421.58 10902.33 11395.71 11461.05
05/31/95 11639.05 11049.54 11602.85 11711.37
06/30/95 11702.56 11107.48 11656.65 11769.6
07/31/95 11848.65 11244.17 11792.51 11831.93
08/31/95 11573.05 10987.11 11507.02 11155.41
09/30/95 11882.29 11267.03 11802.12 11483.76
10/31/95 12009.19 11382.63 11915.06 11520.49
11/30/95 12062.54 11438.12 11965.84 11621.24
12/31/95 12209.84 11562.93 12088.39 11722.24
01/31/96 12114.89 11471.44 11985.92 11462.5
02/29/96 12164.54 11502.54 12011.49 11495.36
03/31/96 12183.72 11515.39 12017.6 11523.63
04/30/96 12165.98 11495.27 11989.42 11499.95
05/31/96 12171.7 11508.91 11996.07 11505.27
06/30/96 12224.41 11545.42 12026.54 11569.78
07/31/96 12489.61 11794.63 12277.21 11889.44
08/31/96 12557.63 11858.49 12334.83 11969.17
09/30/96 12548.9 11855.19 12337.36 11946.7
10/31/96 12814.39 12100.71 12591.66 12148.21
11/30/96 12970.77 12245.48 12732.83 12287.38
12/31/96 12940.83 12212.27 12319 12200.4
<FN>
(1) Includes sales charge of 4.50%.
(2) Includes contingent deferred sales charge of 4.00%.
(3) Excludes expenses.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Years Inception
--------------------------- --------- ---- ----- ---------
<S> <C> <C> <C> <C>
Pegasus International Bond Fund
I Shares 1/27/95 5.99% N/A 14.30%
A Shares with 4.50% sales charge 1/27/95 0.86% N/A 10.90%
B Shares with 4.00% CDSC 1/27/95 1.71% N/A 11.42%
Salomon Brothers Non-U.S. World Government Bond 1/27/95 4.08% N/A 10.85%
Index*
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Salomon Brothers Non-U.S. Government Bond Index is an unmanaged index
generally representative of the world government bond markets.
30
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Municipal Bond Fund
- -----------------------------------------------------------------------------
An Interview with Bob Grabowski
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the Fund perform during the year ended December 31, 1996?
The Fund's I shares return was 3.76% versus 4.43% for the Lehman Brothers
Municipal Bond Index (Index). The Index, however, is not subject to the
expenses of a mutual fund. The return number placed the Fund above the
average return of 3.30% in the Lipper General Municipal Debt Funds peer
group.
Q. What factors contributed to the Fund's performance?
The slight underperformance by the Fund relative to the Index during the year
was attributable to its longer duration in a down market, overweighting in
the prerefunded sector and an overall narrowing of quality spreads. Fund
performance was helped by its overweighting in the housing sector and yield
curve positioning. The minimal average cash position was also a positive for
the income component of the Fund's total return.
Q. What are the Fund's investment characteristics?
As of December 31, 1996, the Fund held 37% in insured securities, 29% in
revenue securities, 25% in general obligation bonds, 8% in prerefunded bonds
and 1% in cash. The Fund remains primarily invested in higher credit-quality
issues: 80% of the fund is rated Aa or better. The remaining 20%, of which 8%
is rated A and 12% is rated Baa, are issues which enhance the yield in the
Fund through selectively adding minimal credit risk. The Fund's average
maturity was 11.1 years and its duration (a measurement of interest rate
risk) was 7.6 years.*
Q. Why was the benchmark index for the Fund changed this year?
The prior index, the A.H. Williams Broad Market Municipal Index, was a
smaller, unpublished proprietary index. The Lehman Brothers family of indices
have grown over the last several years to become the standard benchmarks used
by many large investment managers, for both taxable and tax-exempt funds. In
addition, Lehman has continued to create new indices to meet the benchmarking
demands of the industry. This greater flexibility of the Lehman indices,
combined with their more recognized status as the industry standard, prompted
the change.
Q. What was the overall performance of the municipal market during 1996?
The municipal bond market outperformed the taxable bond market throughout the
year, both on a relative and absolute basis, as indicated in the returns of
the Lehman Brothers Municipal Bond and Aggregate Bond Indices. New-issue
volume totaled approximately $183 billion, below the 1993 peak of over $292
billion, but up 14% from 1995's figure of $160 billion. Demand came primarily
from property and casualty insurers taking advantage of the relative
cheapness of the tax-exempt market versus taxable securities. The best
performing investment grade sector for the year was general obligation bonds
with a 4.74% return. Revenue, insured and prerefunded bonds returned 4.46%,
4.25% and 3.86%, respectively. The best performing component of the revenue
sector was hospital bonds.
* The portfolio's composition is subject to change.
31
<PAGE>
Growth of $10,000 Invested in the
Pegasus Municipal Bond Fund and the
Lehman Brothers Municipal Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS MUNICIPAL BOND FUND
Date I Shares B Shares Index
<S> <C> <C> <C>
02/01/95 10000 10000
02/28/95 10269.17 10291
04/04/95 10395.01 10000 10409
04/30/95 10411.28 9974.1 10422
05/31/95 10741.32 10281.6 10754
06/30/95 10723.63 10264.6 10661
07/31/95 10844.86 10363.4 10762
08/31/95 11001.9 10503.2 10899
09/30/95 11028.21 10517.3 10967
10/31/95 11144.42 10625 11126
11/30/95 11312.59 10765.5 11311
12/31/95 11419.37 10863.7 11420
01/31/96 11491.56 10911.8 11506
02/29/96 11468.69 10879 11428
03/31/96 11286.61 10694.7 11282
04/30/96 11249.13 10650 11250
05/31/96 11222.27 10624.3 11246
06/30/96 11313.84 10693.5 11368
07/31/96 11444.8 10808.2 11472
08/31/96 11418.61 10774.5 11470
09/30/96 11567.94 10915 11630
10/31/96 11701.86 11020.6 11762
11/30/96 11901.38 11198.9 11977
12/31/96 11848.99 10741 11927
<FN>
(1) Includes contingent deferred sales charge of 4.00%.
(2) Excludes expenses.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of the municipal bond market as a whole.
** A.H. Williams Broad Market Municipal Index is an unmanaged index generally
representative of the investment-grade, tax exempt bond market.
32
<PAGE>
Growth of $10,000 Invested in the
Pegasus Municipal Bond Fund and the
Lehman Brothers Municipal Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS MUNICIPAL BOND FUND
Date A Shares Index MPA Index
<S> <C> <C> <C>
03/01/88 9550 10000 10000
03/31/88 9233.23 9884
04/30/88 9303.13 9959
05/31/88 9273.15 9930
06/30/88 9489.26 10075
07/31/88 9562.03 10141
08/31/88 9605.29 10150
09/30/88 9842.13 10333
10/31/88 10090.91 10516
11/30/88 9934.2 10419
12/31/88 10147.45 10526
01/31/89 10299.01 10744
02/28/89 10201.88 10621
03/31/89 10205.61 10596
04/30/89 10454.29 10847
05/31/89 10687.98 11073
06/30/89 10808.5 11223
07/31/89 10921.19 11376
08/31/89 10820.05 11264
09/30/89 10769.25 11231
10/31/89 10910.4 11368
11/30/89 11102.07 11567
12/31/89 11166.05 11662
01/31/90 11082.97 11607
02/28/90 11157.84 11710 10284
03/31/90 11162.04 11714
04/30/90 10999.02 11629
05/31/90 11323.34 11883
06/30/90 11413.87 11987
07/31/90 11619.39 12164
08/31/90 11374.15 11988
09/30/90 11410.72 11995
10/31/90 11627.98 12212
11/30/90 11982.96 12458
12/31/90 12032.62 12512
01/31/91 12183.79 12680
02/28/91 12287.7 12790 11279
03/31/91 12317.3 12795
04/30/91 12476.79 12966
05/31/91 12586.61 13081
06/30/91 12548.51 13068
07/31/91 12721.27 13227
08/31/91 12860.89 13401
09/30/91 13002.9 13576
10/31/91 13144.62 13698
11/30/91 13166.3 13736
12/31/91 13458.34 14031
01/31/92 13558.13 14063
02/29/92 13576.85 14067 12418
03/31/92 13533.97 14073
04/30/92 13629.66 14198
05/31/92 13805.29 14365
06/30/92 14013.86 14606
07/31/92 14458.89 15044
08/31/92 14257.86 14897
09/30/92 14343.72 14995
10/31/92 14151.29 14847
11/30/92 14543.98 15113
12/31/92 14728.3 15267
01/31/93 14925.41 15445
02/28/93 15526.01 16004 14274
03/31/93 15198.63 15834
04/30/93 15349.62 15994
05/31/93 15383.04 16084
06/30/93 15652.26 16353
07/31/93 15613.2 16374
08/31/93 15929.11 16714
09/30/93 16143.51 16905
10/31/93 16165.29 16937
11/30/93 16041.23 16788
12/31/93 16309.3 17142
01/31/94 16477.47 17338
02/28/94 16099.1 16889 15004
03/31/94 15699.25 16201
04/30/94 15814.04 16339
05/31/94 15909.35 16481
06/30/94 15881.84 16381
07/31/94 16112.57 16680
08/31/94 16208.55 16739
09/30/94 16018.69 16493
10/31/94 15843.74 16199
11/30/94 15636.88 15906
12/31/94 15987.18 16256
01/31/95 16403.37 16721
02/28/95 16842.57 17207 15387
03/31/95 17059.07 17405
04/30/95 17082.47 17426
05/31/95 17619.85 17982
06/30/95 17587.28 17825
07/31/95 17782.1 17995
08/31/95 18019.13 18223
09/30/95 18068.6 18338
10/31/95 18250.72 18604
11/30/95 18504.84 18913
12/31/95 18687.63 19094 16897
01/31/96 18798.89 19240
02/29/96 18739.77 19109
03/31/96 18435.32 18864
04/30/96 18369.71 18811
05/31/96 18337.15 18804
06/30/96 18467.79 19009
07/31/96 18677.7 19182
08/31/96 18646.57 19178
09/30/96 18884.74 19446
10/31/96 19098.57 19666
11/30/96 19421.17 20026
12/31/96 19316.02 19942 17650.61
<FN>
(1) Includes sales charge of 4.50%.
(2) Excludes expenses.
(3) The former index -- A.H. Williams Broad Market Municipal Index** excludes
expenses.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Years Inception
--------------------------- --------- ---- ----- ---------
<S> <C> <C> <C> <C>
Pegasus Municipal Bond Fund
I Shares 2/1/95 3.76% N/A 9.26%
A Shares with 4.00% sales charge 3/1/88 -1.29% 6.51% 7.73%
B Shares with 4.00% CDSC 4/4/95 -1.34% N/A 4.18%
Lehman Brothers Municipal Bond Index* 3/1/88 4.43%(2) 7.28% 8.13%(1)
<FN>
(1) Index return since 2/1/95 was 9.62%.
(2) Return for the A.H. Williams Broad Market Municipal Index**
(the 1995 benchmark) was 4.46%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of the municipal bond market as a whole.
** A.H. Williams Broad Market Municipal Index is an unmanaged index generally
representative of the investment-grade, tax exempt bond market.
33
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Intermediate Municipal Bond Fund
- -----------------------------------------------------------------------------
An Interview with Bob Grabowski
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the Fund perform during the year ended December 31, 1996?
The Fund's I shares return was 4.05% versus 4.36% for the Lehman Brothers
7-Year Municipal Bond Index. The Index, however, is not subject to the
expenses of a mutual fund. The return number compared favorably to the
average return of 3.70% in the Lipper Intermediate Municipal Debt Funds peer
group.
Q. What factors contributed to the Fund's performance?
Fund performance was helped by its overweighting in the housing sector and
premium coupon securities. The minimal average cash position was also a
positive for the income component of the Fund's total return. The Fund's
longer duration, overweighting in the prerefunded sector and an overall
narrowing of quality spreads were negative factors on Fund performance.
Q. What are the Fund's investment characteristics?
As of December 31, 1996, the Fund held 29% in revenue securities, 28% in
general obligation bonds, 26% in insured securities, 16% in prerefunded bonds
and 1% in cash. The Fund remains primarily invested in higher credit-quality
issues: 80% of the fund is rated Aa or better. The remaining 20%, of which
11% is rated A and 9% is rated Baa, are issues which enhance the yield in the
Fund through selectively adding minimal credit risk. The Fund's average
maturity was 7.4 years and its duration (a measurement of interest rate risk)
was 5.6 years.*
Q. Why was the benchmark index for the Fund changed this year?
The prior index, the A.H. Williams Intermediate Municipal Index, was a
smaller, unpublished proprietary index. The Lehman Brothers family of indices
have grown over the last several years to become the standard benchmarks used
by many large investment managers, for both taxable and tax-exempt funds. In
addition, Lehman has continued to create new indices to meet the benchmarking
demands of the industry. This greater flexibility of the Lehman indices,
combined with their more recognized status as the industry standard, prompted
the change.
Q. How has the disappearance of the potential for a flat tax affected the
municipal market?
The flat tax would have forced the municipal market to compete with other
investments without benefit of the tax-exempt status of interest income. As
the prospects for a flat tax continued during the course of the election
campaign, the municipal market was forced to reflect this possibility and, as
a result, yields on municipal securities narrowed relative to the yields on
alternative taxable fixed-income investments. This was the case at the
beginning of this year, when 30-year AAA-rated G.O. bonds yielded 87.5% of
comparable treasuries. However, at year-end the ratio had dropped to 82.1%, a
ratio more typical of the relationship between the two markets. This drop was
due primarily to the disappearance of the flat tax as a politically viable
option.
* The portfolio's composition is subject to change.
34
<PAGE>
Growth of $10,000 Invested in the
Pegasus Intermediate Municipal Bond Fund and the
Lehman Brothers 7-Year Municipal Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS INTERMEDIATE MUNICIPAL BOND FUND
Date I Shares B Shares Index
<S> <C> <C> <C>
01/30/95 10000 10000 10000
01/31/95 10027.21 10025.93 10000
02/28/95 10236.79 10228.6 10225
03/31/95 10341.91 10324.42 10332
04/30/95 10388.4 10354.14 10359
05/31/95 10631.06 10596.02 10635
06/30/95 10635.65 10591.85 10626
07/31/95 10728.55 10666.53 10761
08/31/95 10822.09 10749.18 10888
09/30/95 10862.68 10778.53 10930
10/31/95 10949.84 10862.47 11025
11/30/95 11053.82 10954.18 11146
12/31/95 11133.1 11020.9 11205
01/31/96 11221.34 11096.38 11314
02/29/96 11214.81 11078.61 11275
03/31/96 11083.56 10937.09 11166
04/30/96 11079.28 10914.3 11146
05/31/96 11067.67 10902.72 11129
06/30/96 11129.04 10954.24 11215
07/31/96 11248.01 11052.88 11308
08/31/96 11226.99 11031.99 11313
09/30/96 11323.54 11113.84 11415
10/31/96 11454.55 11232.52 11538
11/30/96 11612.67 11377.47 11731
12/31/96 11584.36 11040.67 11696
<FN>
(1) Includes contingent deferred sales charge of 3.00%.
(2) Excludes expenses.
(3) A 'B' share investment with a 4.00% contingent deferred sales charge is
currently valued at $10,940.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Brothers 7-Year Municipal Bond Index (which began in 1989) is
an unmanaged index generally representative of the intermediate-term
municipal bond market.
** A.H. Williams Intermediate Municipal Index is an unmanaged index generally
representative of the intermediate investment-grade, tax exempt bond
market.
35
<PAGE>
Growth of $10,000 Invested in the
Pegasus Intermediate Municipal Bond Fund and the
Lehman Brothers 7-Year Municipal Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS INTERMEDIATE MUNICIPAL BOND FUND
Date A Shares Index MPA Index
<S> <C> <C> <C>
03/01/88 9700 10000
03/31/88 9653.25
04/30/88 9726.19
05/31/88 9776.53
06/30/88 9882.07
07/31/88 9910.78
08/31/88 9914.86
09/30/88 10061.81
10/31/88 10219.24
11/30/88 10223.41
12/31/88 10334.77
01/31/89 10441.86
02/28/89 10361.54
03/31/89 10333.31
04/30/89 10498.31
05/31/89 10692.21
06/30/89 10797.94
07/31/89 10952.17
08/31/89 10901.83
09/30/89 10893.97
10/31/89 11052.67
11/30/89 11169.45
12/31/89 11265.77 10000
01/31/90 11208.54 9997
02/28/90 11294.29 10070 10308
03/31/90 11307.48 10044
04/30/90 11189.05 10000
05/31/90 11422.14 10188
06/30/90 11534.17 10274
07/31/90 11702.76 10411
08/31/90 11520.79 10329
09/30/90 11596.93 10345
10/31/90 11776.58 10529
11/30/90 12086.1 10711
12/31/90 12118.4 10740
01/31/91 12281.27 10908
02/28/91 12417.55 11021 11292
03/31/91 12446.56 10997
04/30/91 12566.45 11138
05/31/91 12667.81 11207
06/30/91 12619.51 11187
07/31/91 12816.03 11299
08/31/91 12948.53 11454
09/30/91 13096.36 11612
10/31/91 13263.97 11705
11/30/91 13266.3 11743
12/31/91 13556.82 11993
01/31/92 13625.88 12022
02/29/92 13631.51 12026 12245
03/31/92 13583.1 11985
04/30/92 13666.33 12090
05/31/92 13796.89 12215
06/30/92 13987.21 12410
07/31/92 14301.1 12779
08/31/92 14213.12 12647
09/30/92 14318.85 12751
10/31/92 14263.95 12665
11/30/92 14440.88 12854
12/31/92 14537.58 12959
01/31/93 14740.22 13148
02/28/93 15166.24 13550 13731
03/31/93 14948.96 13373
04/30/93 15075.26 13456
05/31/93 15131.03 13496
06/30/93 15329.1 13743
07/31/93 15313.88 13744
08/31/93 15588.39 13989
09/30/93 15744.46 14142
10/31/93 15816.53 14179
11/30/93 15774.53 14053
12/31/93 16001.22 14311
01/31/94 16162.53 14463
02/28/94 15928.95 14149 14309
03/31/94 15518.55 13771
04/30/94 15600.41 13873
05/31/94 15700.91 13941
06/30/94 15667.83 13916
07/31/94 15836.51 14112
08/31/94 15913.04 14186
09/30/94 15788.59 14050
10/31/94 15621.85 13909
11/30/94 15442.59 13706
12/31/94 15619.04 13914
01/31/95 15873.47 14175
02/28/95 16189.59 14494 14731
03/31/95 16365.94 14645
04/30/95 16422.59 14684
05/31/95 16816.79 15074
06/30/95 16806.71 15062
07/31/95 16949.88 15253
08/31/95 17093.34 15433
09/30/95 17152.7 15492
10/31/95 17299.37 15627
11/30/95 17458.74 15799
12/31/95 17578.73 15883 15942
01/31/96 17698.62 16037
02/29/96 17683.39 15982
03/31/96 17485.41 15827
04/30/96 17460.39 15799
05/31/96 17438.37 15775
06/30/96 17546.14 15896
07/31/96 17715.3 16028
08/31/96 17693.19 16036
09/30/96 17840.05 16181
10/31/96 18028.91 16355
11/30/96 18274.7 16629
12/31/96 18227.66 16579 16663
<FN>
(1) Includes sales charge of 3.00%.
(2) Excludes expenses.
(3) The former index -- A.H. Williams Intermediate Municipal Index** excludes
expenses.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Years Inception
--------------------------- --------- ---- ----- ---------
<S> <C> <C> <C> <C>
Pegasus Intermediate Municipal Bond Fund
I Shares 1/30/95 4.05% N/A 7.96%
A Shares with 3.00% sales charge 3/1/88 0.58% 5.46% 7.02%
B Shares with 3.00% CDSC 1/30/95 -0.06% N/A 5.29%(1)
Lehman Brothers 7-Year Municipal Bond Index* 12/31/89 4.36%(3) 6.69% 7.49%(2)
<FN>
(1) Return for a 'B' shareholder who invested at a 4.00% contingent deferred
sales charge was 4.79%.
(2) Index return since 1/30/95 was 8.52%.
(3) Return for the A.H. Williams Intermediate Municipal Index** (the 1995
benchmark) was 4.52%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Brothers 7-Year Municipal Bond Index (which began in 1989) is
an unmanaged index generally representative of the intermediate-term
municipal bond market.
** A.H. Williams Intermediate Municipal Index is an unmanaged index generally
representative of the intermediate investment-grade, tax exempt bond
market.
36
<PAGE>
Pegasus Funds
Management's Discussion and Analysis
Michigan Municipal Bond Fund
- -----------------------------------------------------------------------------
An Interview with Becky Gersonde
Portfolio Manager
- -----------------------------------------------------------------------------
Q. How did the Fund perform during the year ended December 31, 1996?
The Fund's I shares return was 3.44% versus 4.48% for the Lehman Brothers
Michigan Municipal Bond Index. The Index, however, is not subject to the
expenses of a mutual fund. The return number placed the Fund above the
average return of 3.17% in the Lipper Michigan Municipal Debt Funds peer
group.
Q. What factors contributed to the Fund's performance?
The underperformance by the Fund relative to the Index during the year is
primarily attributable to its longer duration in a down market and the
propensity for holding higher credit-quality issues. Fund performance was
helped by its overweighting in the revenue sector (the best performing sector
in the Michigan market), particularly the hospital sector, and its
underweighting in the prerefunded sector. The minimal average cash position
was also a positive for the income component of the Fund's total return.
Q. What are the Fund's investment characteristics?
As of December 31, 1996, the Fund held 39% in revenue securities, 38% in
insured securities, 17% in general obligation bonds, 3% in prerefunded bonds
and 3% in cash. The Fund remains primarily invested in higher credit-quality
issues: 91% of the fund is rated Aa or better. The remaining 9%, of which 4%
is rated A and 5% is rated Baa, are issues which enhance the yield in the
Fund through selectively adding minimal credit risk. The Fund's average
maturity was 10.4 years and its duration (a measurement of interest rate
risk) was 7.3 years.*
Q. What was the overall credit climate during the year in the municipal bond
market?
During 1996, the rating agencies upgraded more municipal credit ratings than
any other year in history. Upgrades exceeded downgrades by more than a 3 to 1
ratio and downgrades fell to their lowest levels in 10 years. In particular,
state general obligation bonds performed very well throughout the year as
they became the beneficiaries of unexpected growth. This increase in growth
led to greater tax receipts and improved financial conditions. On the
negative side, deregulation of the utility industry placed a significant
cloud of uncertainty over this sector of the market.
Q. What is the current state of the Michigan economy?
For the fourth straight year, the State ended with a cash surplus in its
coffers totaling $88.1 million. This surplus is a result of the State's
conservative budgeting practices along with a strong economy, record levels
of low unemployment (4.2% versus the national average of 5.3%) and high
personal income. The outlook remains favorable as the State's Budget
Stabilization Fund ("Rainy Day Fund") remains in excess of $1.1 billion and
overall debt levels are expected to remain below national averages.
* The portfolio's composition is subject to change.
37
<PAGE>
Growth of $10,000 Invested in the
Pegasus Michigan Municipal Bond Fund and the
Lehman Brothers Michigan Municipal Bond Index*
[ GRAPH ]
<TABLE>
<CAPTION>
PEGASUS MICHIGAN MUNICIPAL BOND FUND
Date I Shares A Shares Index
<S> <C> <C> <C>
02/01/93 10000 9550 10000
02/28/93 10329.99 9865.15 10362
03/31/93 10169.69 9712.06 10252
04/30/93 10287.25 9824.37 10356
05/31/93 10341.69 9876.32 10414
06/30/93 10532.93 10058.92 10588
07/31/93 10530.94 10057.01 10596
08/31/93 10781 10295.86 10819
09/30/93 10877.35 10387.92 10930
10/31/93 10920.55 10429.08 10941
11/30/93 10857.48 10368.91 10860
12/31/93 11052.71 10555.33 11085
01/31/94 11202.82 10698.67 11220
02/28/94 10889.71 10399.66 10932
03/31/94 10444.07 9974.12 10478
04/30/94 10491.61 10019.48 10574
05/31/94 10612.47 10134.94 10659
06/30/94 10520.89 10047.46 10599
07/31/94 10732.55 10249.54 10790
08/31/94 10774.34 10289.46 10825
09/30/94 10591.12 10114.5 10676
10/31/94 10366.08 9899.63 10479
11/30/94 10160.83 9703.56 10287
12/31/94 10454.03 9983.57 10522
01/31/95 10768.64 10284.01 10882
02/28/95 11072.41 10574.14 11199
03/31/95 11162.99 10660.67 11320
04/30/95 11178.52 10675.47 11341
05/31/95 11534.92 11015.83 11704
06/30/95 11399.61 10886.62 11590
07/31/95 11509.55 10991.57 11677
08/31/95 11647.04 11122.89 11834
09/30/95 11696.79 11170.44 11915
10/31/95 11879.63 11345.02 12115
11/30/95 12058.63 11515.96 12333
12/31/95 12178.84 11630.75 12462
01/31/96 12268.47 11716.42 12537
02/29/96 12168.17 11620.63 12439
03/31/96 12007.28 11466.97 12293
04/30/96 11966.61 11428.1 12275
05/31/96 11947.92 11410.24 12267
06/30/96 12047.45 11505.27 12404
07/31/96 12179.15 11631.04 12513
08/31/96 12167.07 11618.43 12510
09/30/96 12335.01 11775.82 12688
10/31/96 12456.44 11889.18 12840
11/30/96 12648.61 12070.82 13070
12/31/96 12597.69 12016.57 13019
<FN>
(1) Includes maximum sales charge of 4.50%.
(2) Excludes expenses.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return Inception One Five Since
Through 12/31/96 Date Year Years Inception
--------------------------- --------- ---- ----- ---------
<S> <C> <C> <C> <C>
Pegasus Michigan Municipal Bond Fund
I Shares 2/1/93 3.44% N/A 6.08%
A Shares with 4.50% sales charge 2/1/93 -1.33% N/A 4.80%
B Shares with 5.00% CDSC 9/23/96 N/A N/A -2.55%
Lehman Brothers Michigan Municipal Bond Index* 7/1/93 4.48% N/A 6.08%(1)
<FN>
(1) Index return since 9/23/96 was 2.62%.
</TABLE>
The performance data quoted represents past performance and is not an
indication of future results. The investment return and Net Asset Value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception date.
In such instances, and without waiver of fees, total return would have been
lower.
* The Lehman Brothers Michigan Municipal Bond Index (which began in 1993) is
an unmanaged index generally representative of the Michigan municipal bond
market.
38
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Assets Managed Assets Managed Assets
Conservative Fund Balanced Fund Growth Fund
----------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $70,179,857 $117,125,171 $654,935
=========== ============ ========
At value $74,848,895 $129,397,806 $662,481
Cash -- 211,662 --
Receivable for securities sold 1,122,684 81,487 --
Receivable for shares sold 80,861 55,094 23,870
Income receivable 582,898 672,821 182
Deferred organization costs, net 58,343 18,881 --
Prepaids and other assets 1,516 29,917 5,664
----------- ------------ --------
TOTAL ASSETS 76,695,197 130,467,668 692,197
----------- ------------ --------
LIABILITIES:
Payable for securities purchased -- 10,363 --
Accrued investment advisory fees 41,677 71,625 161
Accrued transfer agent fees 6,510 2,839 30
Accrued custodial fees 1,550 6,967 640
Administration fees payable 9,618 16,529 37
Shareholder services fees payable (Class A Shares) 14,526 5,552 10
Shareholder services fees payable (Class B Shares) 1,191 361 5
12b-1 fees payable (Class B Shares) 3,574 1,082 5
Dividends payable 15,088 36,651 --
Payable for shares redeemed 39,584 250 --
Other payables and accrued expenses 23,505 54,697 5,000
----------- ------------ --------
TOTAL LIABILITIES 156,823 206,916 5,888
----------- ------------ --------
NET ASSETS $76,538,374 $130,260,752 $686,309
=========== ============ ========
<PAGE>
<CAPTION>
Equity Growth Mid-Cap
Income Fund Fund Opportunity Fund
----------- ------ ----------------
<S> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $270,851,842 $428,530,302 $568,633,860
============ ============ ============
At value $328,834,027 $555,081,389 $764,860,632
Cash -- -- 2,407,048
Receivable for securities sold 745,147 2,146,614 2,069,617
Receivable for shares sold 916,556 906,832 1,449
Income receivable 1,274,624 529,957 832,247
Deferred organization costs, net 45,481 44,858 --
Prepaids and other assets 2,389 4,207 --
------------ ------------ ------------
TOTAL ASSETS 331,818,224 558,713,857 770,170,993
------------ ------------ ------------
LIABILITIES:
Payable for securities purchased 930,756 -- 34,816
Accrued investment advisory fees 137,324 284,531 378,436
Accrued transfer agent fees 2,671 4,867 16,992
Accrued custodial fees 4,758 7,006 8,396
Administration fees payable 41,197 71,133 94,609
Shareholder services fees payable (Class A Shares) 2,597 4,635 18,435
Shareholder services fees payable (Class B Shares) 419 227 23
12b-1 fees payable (Class B Shares) 1,203 680 90
Dividends payable 1,165,205 389,152 121,607
Payable for shares redeemed 3,419 80,333 --
Other payables and accrued expenses 38,895 97,911 219,561
------------ ------------ ------------
TOTAL LIABILITIES 2,328,444 940,475 892,965
------------ ------------ ------------
NET ASSETS $329,489,780 $557,773,382 $769,278,028
============ ============ ============
<FN>
See Notes to Financial Statements.
</TABLE>
39
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES - (Continued)
December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Assets Managed Assets Managed Assets
Conservative Fund Balanced Fund Growth Fund
----------------- -------------- --------------
<S> <C> <C> <C>
Net Asset Value and Maximum Offering Price per Share:
Class A Shares:
Net assets $69,301,512 $ 26,774,494 $ 75,374
Capital shares 4,518,141 2,302,965 7,476
----------- ------------ --------
Net asset value per share 15.34 11.63 10.08
Maximum Sales Charge(1) 0.81 0.61 0.53
=========== ============ ========
Maximum offering price per share $ 16.15 $ 12.24 $ 10.61
=========== ============ ========
Class B Shares:
Net assets $ 5,735,974 $ 1,889,936 $ 16,568
Capital shares 373,381 147,544 1,659
----------- ------------ --------
Net asset value per share $ 15.36 $ 12.81 $ 9.99
=========== ============ ========
Class I Shares:
Net assets $ 1,500,888 $101,596,322 $594,367
Capital shares 97,565 8,762,842 58,671
----------- ------------ --------
Net asset value per share $ 15.38 $ 11.59 $ 10.13
=========== ============ ========
COMPOSITION OF NET ASSETS:
Capital shares (unlimited number of shares authorized,
par value $.10 per share) $ 498,909 $ 1,121,335 $ 6,781
Additional paid-in capital 64,492,882 114,366,141 672,024
Accumulated undistributed net investment income (loss) 19,186 56,474 (42)
Accumulated undistributed net realized gains 6,858,359 2,444,167 --
Net unrealized appreciation on investments 4,669,038 12,272,635 7,546
----------- ------------ --------
NET ASSETS $76,538,374 $130,260,752 $686,309
=========== ============ ========
<PAGE>
<CAPTION>
Equity Growth Mid-Cap
Income Fund Fund Opportunity Fund
----------- ------ ----------------
<S> <C> <C> <C>
Net Asset Value and Maximum Offering Price per Share:
Class A Shares:
Net assets $ 12,956,269 $ 23,272,879 $ 91,515,703
Capital shares 975,040 1,841,030 5,196,783
------------ ------------ ------------
Net asset value per share 13.29 12.64 17.61
Maximum Sales Charge(1) 0.70 0.67 0.93
============ ============ ============
Maximum offering price per share $ 13.99 $ 13.31 $ 18.54
============ ============ ============
Class B Shares:
Net assets $ 1,884,616 $ 1,094,542 $ 154,588
Capital shares 141,876 87,143 16,157
------------ ------------ ------------
Net asset value per share $ 13.28 $ 12.56 $ 9.57
============ ============ ============
Class I Shares:
Net assets $314,648,895 $533,405,961 $677,607,737
Capital shares 23,739,941 42,218,766 38,475,172
------------ ------------ ------------
Net asset value per share $ 13.25 $ 12.63 $ 17.61
============ ============ ============
COMPOSITION OF NET ASSETS:
Capital shares (unlimited number of shares authorized,
par value $.10 per share) $ 2,485,686 $ 4,414,694 $ 4,368,811
Additional paid-in capital 254,642,226 418,891,549 561,108,221
Accumulated undistributed net investment income (loss) 365,273 14,327 625
Accumulated undistributed net realized gains 14,014,410 7,901,725 7,573,599
Net unrealized appreciation on investments 57,982,185 126,551,087 196,226,772
------------ ------------ ------------
NET ASSETS $329,489,780 $557,773,382 $769,278,028
============ ============ ============
<FN>
(1) All sales charges are 5.00% of Maximum Offering Price unless otherwise
noted.
See Notes to Financial Statements.
</TABLE>
40
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small Cap Intrinsic Value Growth and Value Equity Index International
Opportunity Fund Fund Fund Fund Equity Fund
---------------- --------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $108,852,783 $311,905,866 $610,103,283 $615,603,554 $376,063,526
============ ============ ============ ============ ============
At value $132,243,229 $382,089,620 $786,565,398 $868,896,426 $405,954,299
Cash 4,756 -- 4,931,718 200,714 2,978,857
Cash margin on deposit -- -- -- -- 538,815
Unrealized appreciation on foreign
exchange contracts -- -- -- -- 44,222
Receivable for securities sold -- -- 1,021,801 -- 12,708
Receivable for shares sold 508,272 78,946 5,000 5,466 596,609
Income receivable 31,869 1,119,333 1,606,785 1,510,483 942,164
Reclaim receivable -- -- -- -- 281,643
Deferred organization costs, net 45,300 -- -- 2,200 36,608
Prepaids and other assets 755 -- -- -- 78,091
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 132,834,181 383,287,899 794,130,702 870,615,289 411,464,016
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Payable for securities purchased 52,010 2,387,282 -- -- 8,471,887
Payable for variation margin on
futures contracts -- -- -- -- 36,399
Accrued investment advisory fees 74,646 184,608 395,937 73,453 262,297
Accrued transfer agent fees 1,104 5,419 12,215 6,105 3,958
Accrued custodial fees 6,625 5,328 8,690 10,614 47,301
Administration fees payable 15,995 46,152 98,984 110,179 49,181
Shareholder services fees payable
(Class A Shares) 1,193 4,509 12,089 7,440 2,047
Shareholder services fees payable
(Class B Shares) 19 24 30 16 236
12b-1 fees payable (Class B Shares) 56 71 70 48 708
Dividends payable -- 612,967 688,766 554,152 527,462
Payable for shares redeemed 2,800 -- -- -- --
Withholding tax payable -- -- -- -- 76,765
Other payables and accrued expenses 31,649 130,022 72,061 36,632 21,547
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES 186,097 3,376,382 1,288,842 798,639 9,499,788
------------ ------------ ------------ ------------ ------------
NET ASSETS $132,648,084 $379,911,517 $792,841,860 $869,816,650 $401,964,228
============ ============ ============ ============ ============
<FN>
See Notes to Financial Statements.
</TABLE>
41
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (Continued)
December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small Cap Intrinsic Value Growth and Value Equity Index International
Opportunity Fund Fund Fund Fund Equity Fund
---------------- --------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value and Maximum
Offering Price per Share:
Class A Shares:
Net assets $ 6,697,302 $ 22,370,312 $ 59,027,413 $ 35,336,228 $ 10,836,197
Capital shares 488,766 1,632,469 4,179,800 2,109,823 920,454
------------ ------------ ------------ ------------ ------------
Net asset value per share 13.70 13.70 14.12 16.75 11.77
Maximum Sales Charge(1) 0.72 0.72 0.74 0.52** 0.62
============ ============ ============ ============ ============
Maximum offering price per share $ 14.42 $ 14.42 $ 14.86 $ 17.27 $ 12.39
============ ============ ============ ============ ============
Class B Shares:
Net assets $ 110,472 $ 181,196 $ 182,991 $ 112,309 $ 1,131,191
Capital shares 8,132 17,797 19,644 10,696 102,058
------------ ------------ ------------ ------------ ------------
Net asset value per share $ 13.58 $ 10.18 $ 9.32 $ 10.50 $ 11.08
============ ============ ============ ============ ============
Class I Shares:
Net assets $125,840,310 $357,360,009 $733,631,456 $834,368,113 $389,996,840
Capital shares 9,115,753 26,072,063 51,941,688 49,823,539 33,067,406
------------ ------------ ------------ ------------ ------------
Net asset value per share $ 13.80 $ 13.71 $ 14.12 $ 16.75 $ 11.79
============ ============ ============ ============ ============
COMPOSITION OF NET ASSETS:
Capital shares (unlimited number of
shares authorized, par value $.10
per share) $ 961,265 $ 2,772,233 $ 5,614,113 $ 5,194,406 $ 3,408,992
Additional paid-in capital 103,585,260 305,516,594 588,797,996 610,483,580 370,972,762
Accumulated undistributed net
investment income (loss) (32,509) 58,093 612,320 477,119 6,249
Accumulated undistributed net
realized gains (losses) 4,743,622 1,380,843 21,355,316 368,673 (1,511,441)
Net unrealized appreciation on
investments 23,390,446 70,183,754 176,462,115 253,292,872 30,635,893
Net unrealized depreciation of
assets and liabilities
denominated in foreign currencies
and financial futures -- -- -- -- (1,548,227)
------------ ------------ ------------ ------------ ------------
NET ASSETS $132,648,084 $379,911,517 $792,841,860 $869,816,650 $401,964,228
============ ============ ============ ============ ============
<FN>
(1) All sales charges are 5.00% of Maximum Offering Price unless otherwise
noted.
** Sales charge is 3.00% of Maximum Offering Price.
See Notes to Financial Statements.
</TABLE>
42
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate Bond Short Bond Income
Fund Bond Fund Fund Fund
----------------- --------- ---------- ------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $403,464,651 $775,813,795 $169,689,801 $192,732,108
============ ============ ============ ============
At value $408,342,960 $795,953,075 $169,927,452 $194,594,501
Cash 1,973,532 2,267,984 1,749,036 --
Receivable for shares sold -- 989,521 -- --
Income receivable 4,360,083 8,237,363 2,441,691 2,819,977
Reclaim receivable -- -- -- --
Deferred organization costs, net -- -- 18,703 29,834
Prepaids and other assets -- -- 29,387 1,646
------------ ------------ ------------ ------------
TOTAL ASSETS 414,676,575 807,447,943 174,166,269 197,445,958
------------ ------------ ------------ ------------
LIABILITIES:
Payable for securities purchased -- -- 920,461 --
Accrued investment advisory fees 140,844 268,003 51,154 68,933
Accrued transfer agent fees 3,889 8,397 1,120 2,659
Accrued custodial fee 5,963 9,949 3,113 2,825
Administration fees payable 52,817 100,501 21,923 25,850
Shareholder services fees payable (Class A
Shares) 3,741 9,472 215 1,876
Shareholder services fees payable (Class B
Shares) 21 57 11 109
12b-1 fees payable (Class B Shares) 62 170 32 327
Dividends payable 880,754 1,887,004 637,264 878,989
Payable for shares redeemed -- 102,858 -- 40,000
Witholding tax payable -- -- -- --
Other payables and accrued expenses 37,779 177,881 14,945 12,647
------------ ------------ ------------ ------------
TOTAL LIABILITIES 1,125,870 2,564,292 1,650,238 1,034,215
------------ ------------ ------------ ------------
NET ASSETS $413,550,705 $804,883,651 $172,516,031 $196,411,743
============ ============ ============ ============
<PAGE>
<CAPTION>
Michigan
International Municipal Intermediate Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund
------------- --------- ---------------------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $52,839,661 $351,119,593 $376,483,430 $58,911,621
=========== ============ ============ ===========
At value $54,080,108 $362,946,762 $387,777,672 $59,940,484
Cash 48,431 -- 1 1
Receivable for shares sold 168,656 495,136 3,000 --
Income receivable 1,809,328 6,467,591 7,021,834 768,687
Reclaim receivable 12,086 -- -- --
Deferred organization costs, net 42,648 4,994 33,964 3,284
Prepaids and other assets 4,729 103,846 3,227 20,824
----------- ------------ ------------ -----------
TOTAL ASSETS 56,165,986 370,018,329 394,839,698 60,733,280
----------- ------------ ------------ -----------
LIABILITIES:
Payable for securities purchased -- -- -- --
Accrued investment advisory fees 32,568 123,649 133,266 20,150
Accrued transfer agent fees 5,890 3,100 1,187 1,367
Accrued custodial fee 9,300 6,200 10,318 1,675
Administration fees payable 6,979 46,368 49,974 7,556
Shareholder services fees payable (Class A
Shares) 367 6,102 4,041 3,841
Shareholder services fees payable (Class B
Shares) 10 134 129 23
12b-1 fees payable (Class B Shares) 29 402 386 70
Dividends payable 163,835 1,631,035 937,911 102,084
Payable for shares redeemed -- 50,000 -- --
Witholding tax payable 15,454 -- -- --
Other payables and accrued expenses 34,514 22,897 72,465 2,840
----------- ------------ ------------ -----------
TOTAL LIABILITIES 268,946 1,889,887 1,209,677 139,606
----------- ------------ ------------ -----------
NET ASSETS $55,897,040 $368,128,442 $393,630,021 $60,593,674
=========== ============ ============ ===========
<FN>
See Notes to Financial Statements.
</TABLE>
43
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (Continued)
December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate Bond Short Bond Income
Fund Bond Fund Fund Fund
----------------- --------- ---------- ------
<S> <C> <C> <C> <C>
Net Asset Value and Maximum Offering Price per Share:
Class A Shares:
Net assets $ 18,324,384 $ 46,976,975 $ 1,032,874 $ 8,797,772
Capital shares 1,780,068 4,574,321 102,185 1,121,909
------------ ------------ ------------ ------------
Net asset value per share 10.29 10.27 10.11 7.84
Maximum Sales Charge 0.32** 0.48* 0.10+ 0.24**
============ ============ ============ ============
Maximum offering price per share $ 10.61 $ 10.75 $ 10.21 $ 8.08
============ ============ ============ ============
Class B Shares:
Net assets $ 121,590 $ 279,604 $ 56,019 $ 502,297
Capital shares 11,918 27,222 5,590 63,988
------------ ------------ ------------ ------------
Net asset value per share $ 10.20 $ 10.27 $ 10.02 $ 7.85
============ ============ ============ ============
Class I Shares:
Net assets $395,104,731 $757,627,072 $171,427,138 $187,111,674
Capital shares 38,384,021 73,753,421 16,956,120 23,831,822
------------ ------------ ------------ ------------
Net asset value per share $ 10.29 $ 10.27 $ 10.11 $ 7.85
============ ============ ============ ============
COMPOSITION OF NET ASSETS:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 4,017,601 $ 7,835,496 $ 1,706,390 $ 2,501,772
Additional paid-in capital 413,617,621 800,074,876 170,375,328 191,997,498
Accumulated undistributed net investment income
(loss) 10,160 234,248 81,695 86,954
Accumulated undistributed net realized gains (losses) (8,972,986) (23,400,249) 114,967 (36,874)
Net unrealized appreciation on investments 4,878,309 20,139,280 237,651 1,862,393
Net unrealized depreciation of assets and liabilities
denominated in foreign currencies and financial
futures -- -- -- --
------------ ------------ ------------ ------------
NET ASSETS $413,550,705 $804,883,651 $172,516,031 $196,411,743
============ ============ ============ ============
<PAGE>
<CAPTION>
Michigan
International Municipal Intermediate Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund
------------- --------- ---------------------- ---------
<S> <C> <C> <C> <C>
Net Asset Value and Maximum Offering Price per Share:
Class A Shares:
Net assets $ 2,006,239 $ 29,352,216 $ 19,049,219 $18,574,882
Capital shares 185,931 2,373,965 1,574,071 1,771,630
----------- ------------ ------------ -----------
Net asset value per share 10.79 12.36 12.10 10.48
Maximum Sales Charge 0.51* 0.58* 0.37** 0.49*
=========== ============ ============ ===========
Maximum offering price per share $ 11.30 $ 12.94 $ 12.47 $ 10.97
=========== ============ ============ ===========
Class B Shares:
Net assets $ 46,004 $ 671,989 $ 611,392 $ 110,241
Capital shares 4,232 54,378 50,549 10,833
----------- ------------ ------------ -----------
Net asset value per share $ 10.87 $ 12.36 $ 12.10 $ 10.18
=========== ============ ============ ===========
Class I Shares:
Net assets $53,844,797 $338,104,237 $373,969,410 $41,908,551
Capital shares 4,962,535 27,363,117 30,886,029 3,997,337
----------- ------------ ------------ -----------
Net asset value per share $ 10.85 $ 12.36 $ 12.11 $ 10.48
=========== ============ ============ ===========
COMPOSITION OF NET ASSETS:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 515,270 $ 2,979,146 $ 3,251,065 $ 577,980
Additional paid-in capital 54,134,985 354,625,891 378,446,359 59,016,733
Accumulated undistributed net investment income
(loss) 24,021 1,054,788 590,714 92,984
Accumulated undistributed net realized gains (losses) (457) (2,358,552) 47,641 (122,886)
Net unrealized appreciation on investments 2,474,398 11,827,169 11,294,242 1,028,863
Net unrealized appreciation of assets and liabilities
denominated in foreign currencies and financial
futures (1,251,177) -- -- --
----------- ------------ ------------ -----------
NET ASSETS $55,897,040 $368,128,442 $393,630,021 $60,593,674
=========== ============ ============ ===========
<FN>
+ Sales charge is 1.00% of Maximum Offering Price.
* Sales charge is 4.50% of Maximum Offering Price.
** Sales charge is 3.00% of Maximum Offering Price.
See Notes to Financial Statements.
</TABLE>
44
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Assets Managed Assets Managed Assets Equity Growth Mid-Cap
Conservative Fund Balanced Fund Growth Fund(1) Income Fund Fund Opportunity Fund
----------------- -------------- -------------- ----------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 2,164,113 $ 3,724,747 $ 182 $ 1,846,685 $ 567,824 $ 1,127,619
Dividends 899,603 1,080,135 -- 11,172,997 5,410,972 6,267,117
----------- ----------- ------- ----------- ----------- ------------
TOTAL INVESTMENT INCOME 3,063,716 4,804,882 182 13,019,682 5,978,796 7,394,736
----------- ----------- ------- ----------- ----------- ------------
EXPENSES:
Investment advisory fees 411,918 815,815 161 1,543,034 2,424,551 4,865,124
Administration fees 95,058 66,113 37 462,910 578,449 366,806
Shareholder services
fees (Class A Shares) 145,108 25,472 10 14,428 23,830 91,946
Shareholder services
fees (Class B Shares) 10,476 1,520 5 3,283 1,869 31
12b-1 fees (Class B
Shares) 31,429 3,706 5 9,850 5,606 113
Distribution fees -- 9,251 -- -- -- 60,324
Professional fees 30,446 29,869 5,000 42,527 69,317 59,225
Custodian fees 56,530 78,377 640 101,912 131,683 99,684
Transfer and dividend
disbursing agent fees 84,164 31,625 30 11,598 24,598 132,250
Amortization of deferred
organization costs 18,107 9,434 -- 15,156 14,888 3,243
Registration, filing
fees and other
expenses 26,559 101,427 -- 94,892 103,364 120,369
Less: Expense
reimbursement (95,432) (74,462) (5,664) (233,127) (245,346) --
----------- ----------- ------- ----------- ----------- ------------
NET EXPENSES 814,363 1,098,147 224 2,066,463 3,132,809 5,799,115
----------- ----------- ------- ----------- ----------- ------------
NET INVESTMENT INCOME
(LOSS) 2,249,353 3,706,735 (42) 10,953,219 2,845,987 1,595,621
----------- ----------- ------- ----------- ----------- ------------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gains on:
Investment transactions 7,593,376 8,885,279 -- 28,916,705 39,693,748 57,875,884
Net change in unrealized
appreciation
(depreciation) on:
Investment securities (3,598,969) 1,454,970 7,546 16,384,426 37,068,731 97,381,421
----------- ----------- ------- ----------- ----------- ------------
NET REALIZED AND
UNREALIZED GAINS ON
INVESTMENTS AND
FOREIGN CURRENCY
TRANSACTIONS 3,994,407 10,340,249 7,546 45,301,131 76,762,479 155,257,305
----------- ----------- ------- ----------- ----------- ------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 6,243,760 $14,046,984 $ 7,504 $56,254,350 $79,608,466 $156,852,926
=========== =========== ======= =========== =========== ============
<FN>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
See Notes to Financial Statements.
</TABLE>
45
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small Cap Intrinsic Value Growth and Value Equity Index International
Opportunity Fund Fund Fund Fund Equity Fund
---------------- --------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 337,093 $ 2,452,783 $ 937,093 $ 194,724 $ 1,295,632
Dividends 573,279 6,929,187 14,840,935 16,184,854 3,629,859*
----------- ----------- ------------ ------------ -----------
TOTAL INVESTMENT INCOME 910,372 9,381,970 15,778,028 16,379,578 4,925,491
----------- ----------- ------------ ------------ -----------
EXPENSES:
Investment advisory fees 752,396 2,073,576 5,250,198 725,120 1,801,653
Administration fees 161,228 172,884 382,992 420,590 207,599
Shareholder services fees (Class
A Shares) 5,663 22,327 62,159 18,760 9,300
Shareholder services fees (Class
B Shares) 116 47 46 29 1,253
12b-1 fees (Class B Shares) 347 140 119 87 2,796
Distribution fees -- 19,349 52,916 25,320 5,735
Professional fees 25,162 37,912 58,752 64,635 57,539
Custodian fees 67,290 54,841 105,677 126,503 225,730
Transfer and dividend disbursing
agent fees 12,372 35,482 80,531 30,236 19,483
Amortization of deferred
organization costs 14,894 2,323 7,429 4,399 12,551
Registration, filing fees and
other expenses 50,882 107,533 111,385 140,601 107,773
Less: Expense reimbursement (147,469) -- -- -- --
----------- ----------- ------------ ------------ -----------
NET EXPENSES 942,881 2,526,414 6,112,204 1,556,280 2,451,412
----------- ----------- ------------ ------------ -----------
NET INVESTMENT INCOME (LOSS) (32,509) 6,855,556 9,665,824 14,823,298 2,474,079
----------- ----------- ------------ ------------ -----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gains (losses) on:
Investment transactions 17,881,429 16,465,095 87,410,523 16,222,665 190,484
Foreign currency transactions -- -- -- -- (139,036)
Futures transactions -- -- -- -- (1,547,669)
Net change in unrealized
appreciation (depreciation) on:
Investment securities 7,930,344 43,380,316 36,502,219 119,756,862 19,301,671
Assets and liabilities
denominated in foreign
currencies and financial
futures -- -- -- -- (1,554,584)
----------- ----------- ------------ ------------ -----------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS 25,811,773 59,845,411 123,912,742 135,979,527 16,250,866
----------- ----------- ------------ ------------ -----------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $25,779,264 $66,700,967 $133,578,566 $150,802,825 $18,724,945
=========== =========== ============ ============ ===========
<FN>
* Net of foreign taxes withheld of $476,672.
See Notes to Financial Statements.
</TABLE>
46
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate Short
Bond Bond Bond Income
Fund Fund Fund Fund
------------ ---- ----- -------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $27,533,516 $44,619,654 $10,278,780 $13,424,502
----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME 27,533,516 44,619,654 10,278,780 13,424,502
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees 2,214,927 3,163,598 909,166 820,574
Administration fees 200,629 400,303 85,917 307,715
Shareholder services fees (Class A Shares) 14,337 41,642 951 17,824
Shareholder services fees (Class B Shares) 40 194 17 1,074
12b-1 fees (Class B Shares) 123 516 51 3,233
Distribution fees 19,598 38,482 6,119 --
Professional fees 51,513 76,604 36,364 38,132
Custodian fees 72,635 95,680 37,125 84,846
Transfer and dividend disbursing agent fees 30,981 59,792 6,656 10,560
Amortization of deferred organization costs 3,565 6,439 6,801 8,925
Registration, filing fees and other expenses 68,378 130,399 86,668 71,460
Less: Expense reimbursement -- -- -- (183,139)
----------- ----------- ----------- -----------
NET EXPENSES 2,676,726 4,013,649 1,175,835 1,181,204
----------- ----------- ----------- -----------
NET INVESTMENT INCOME 24,856,790 40,606,005 9,102,945 12,243,298
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gains (losses) on:
Investment transactions 1,800,673 4,524,736 480,231 (21,631)
Foreign currency transactions -- -- -- --
Net change in unrealized appreciation (depreciation) on:
Investment securities (4,413,650) (10,189,588) (2,046,522) (5,355,005)
Assets and liabilities denominated in foreign
currencies and financial futures -- -- -- --
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (2,612,977) (5,664,852) (1,566,291) (5,376,636)
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $22,243,813 $34,941,153 $ 7,536,654 $ 6,866,662
=========== =========== =========== ===========
<PAGE>
<CAPTION>
Michigan
International Municipal Intermediate Municipal
Bond Bond Municipal Bond
Fund Fund Bond Fund Fund
------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 1,866,577* $14,921,427 $20,333,334 $3,023,200
----------- ----------- ----------- ----------
TOTAL INVESTMENT INCOME 1,866,577 14,921,427 20,333,334 3,023,200
----------- ----------- ----------- ----------
EXPENSES:
Investment advisory fees 218,366 1,101,456 1,561,163 308,496
Administration fees 46,583 413,046 585,436 28,964
Shareholder services fees (Class A Shares) 2,168 66,864 45,383 21,030
Shareholder services fees (Class B Shares) 25 1,124 1,213 38
12b-1 fees (Class B Shares) 75 3,373 3,640 113
Distribution fees -- -- -- 13,127
Professional fees 25,748 70,174 51,585 23,854
Custodian fees 51,896 108,427 123,816 17,398
Transfer and dividend disbursing agent fees 44,752 21,790 12,748 14,364
Amortization of deferred organization costs 13,885 1,321 11,355 3,031
Registration, filing fees and other expenses 35,085 95,100 111,708 62,476
Less: Expense reimbursement (160,438) (273,829) (267,210) (45,685)
----------- ----------- ----------- ----------
NET EXPENSES 278,145 1,608,846 2,240,837 447,206
----------- ----------- ----------- ----------
NET INVESTMENT INCOME 1,588,432 13,312,581 18,092,497 2,575,994
----------- ----------- ----------- ----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gains (losses) on:
Investment transactions 36,924 2,185,933 2,576,883 (90,124)
Foreign currency transactions 218,171 -- -- --
Net change in unrealized appreciation (depreciation) on:
Investment securities 2,046,682 (3,444,888) (5,510,989) (530,540)
Assets and liabilities denominated in foreign
currencies and financial futures (1,395,357) -- -- --
----------- ----------- ----------- ----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 906,420 (1,258,955) (2,934,106) (620,664)
----------- ----------- ----------- ----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,494,852 $12,053,626 $15,158,391 $1,955,330
=========== =========== =========== ==========
<FN>
* Net of foreign taxes withheld of $52,567.
See Notes to Financial Statements.
</TABLE>
47
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Assets Conservative Fund
-------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 2,249,353 $ 2,375,663
Net realized gains (losses) on investments and foreign
currency transactions 7,593,376 (324,052)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency translation (3,598,969) 9,391,499
----------- -----------
Net increase in net assets from operations 6,243,760 11,443,110
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (2,065,593) (2,441,590)
Class B Shares (116,907) (31,089)
Class I Shares (47,887) (36,073)
----------- -----------
Total dividends from net investment income (2,230,387) (2,508,752)
----------- -----------
From realized gains
Class A Shares (503,438) (108,059)
Class B Shares (40,850) (4,560)
Class I Shares (11,015) (2,720)
----------- -----------
Total distributions from realized gains (555,303) (115,339)
----------- -----------
Total distributions (2,785,690) (2,624,091)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 25,295,850 9,561,625
Proceeds from shares issued in connection with merger -- --
Net asset value of shares issued in reinvestment of
distributions to shareholders 2,188,938 2,415,006
----------- -----------
27,484,788 11,976,631
Less payments for shares redeemed (9,869,811) (9,697,497)
----------- -----------
Net increase in net assets from capital share
transactions 17,614,977 2,279,134
----------- -----------
NET INCREASE IN NET ASSETS 21,073,047 11,098,153
NET ASSETS:
Beginning of period 55,465,327 44,367,174
----------- -----------
End of period $76,538,374 $55,465,327
=========== ===========
<PAGE>
<CAPTION>
Managed Assets Balanced Fund Managed Assets Growth Fund
------------------------------------- --------------------------
Year Ended Year Ended Period Ended
December 31, 1996 December 31, 1995 December 31, 1996(1)
----------------- ----------------- --------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 3,706,735 $ 2,515,594 $ (42)
Net realized gains (losses) on investments and foreign
currency transactions 8,885,279 1,548,275 --
Net change in unrealized appreciation (depreciation) on
investments and foreign currency translation 1,454,970 11,071,176 7,546
------------ ------------ --------
Net increase in net assets from operations 14,046,984 15,135,045 7,504
------------ ------------ --------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (425,768) (296,957) --
Class B Shares (9,258) -- --
Class I Shares (3,244,172) (2,227,365) --
------------ ------------ --------
Total dividends from net investment income (3,679,198) (2,524,322) --
------------ ------------ --------
From realized gains
Class A Shares (821,598) (105,080) --
Class B Shares (21,678) -- --
Class I Shares (5,862,553) (882,854) --
------------ ------------ --------
Total distributions from realized gains (6,705,829) (987,934) --
------------ ------------ --------
Total distributions (10,385,027) (3,512,256) --
------------ ------------ --------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 58,464,843 47,232,261 678,805
Proceeds from shares issued in connection with merger 10,706,448 -- --
Net asset value of shares issued in reinvestment of
distributions to shareholders 8,112,803 3,343,276 --
------------ ------------ --------
77,284,094 50,575,537 678,805
Less payments for shares redeemed (44,309,100) (22,741,717) --
------------ ------------ --------
Net increase in net assets from capital share
transactions 32,974,994 27,833,820 678,805
------------ ------------ --------
NET INCREASE IN NET ASSETS 36,636,951 39,456,609 686,309
NET ASSETS:
Beginning of period 93,623,801 54,167,192 --
------------ ------------ --------
End of period $130,260,752 $ 93,623,801 $686,309
============ ============ ========
<FN>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period February 1, 1995 through December 31, 1995.
(4) For the period March 1, 1995 through December 31, 1995.
See Notes to Financial Statements.
</TABLE>
48
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity Income Fund Growth Fund
---------------------------------------- ----------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, 1996 December 31, 1995(2) December 31, 1996 December 31, 1995(2)
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 10,953,219 $ 9,024,081 $ 2,845,987 $ 3,827,071
Net realized gains on investments and
foreign currency transactions 28,916,705 12,993,377 39,693,748 26,140,162
Net change in unrealized appreciation
on investments and foreign currency
translation 16,384,426 41,597,759 37,068,731 45,732,866
------------ ------------ ------------ ------------
Net increase in net assets from
operations 56,254,350 63,615,217 79,608,466 75,700,099
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (182,781) (36,341) (43,133) (20,056)
Class B Shares (30,522) (4,665) -- (128)
Class I Shares (10,366,056) (8,991,662) (2,792,205) (3,803,209)
Total dividends from net investment
income (10,579,359) (9,032,668) (2,835,338) (3,823,393)
From realized gains
Class A Shares (620,108) (76,484) (978,254) (297,846)
Class B Shares (111,649) (15,958) (102,183) (18,522)
Class I Shares (19,435,888) (7,635,585) (35,960,890) (20,574,490)
------------ ------------ ------------ ------------
Total distributions from realized
gains (20,167,645) (7,728,027) (37,041,327) (20,890,858)
------------ ------------ ------------ ------------
Total distributions (30,747,004) (16,760,695) (39,876,665) (24,714,251)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 57,483,345 258,157,716 55,586,208 300,831,887
Proceeds from shares issued in
connection with merger -- -- 228,354,666 --
Net asset value of shares issued in
reinvestment of distributions to
shareholders 407,197 6,638,209 28,365,633 15,027,099
------------ ------------ ------------ ------------
57,890,542 264,795,925 312,306,507 315,858,986
Less payments for shares redeemed (41,301,635) (24,256,920) (92,806,272) (68,303,488)
------------ ------------ ------------ ------------
Net increase in net assets from
capital share transactions 16,588,907 240,539,005 219,500,235 247,555,498
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS 42,096,253 287,393,527 259,232,036 298,541,346
NET ASSETS:
Beginning of period 287,393,527 -- 298,541,346 --
------------ ------------ ------------ ------------
End of period $329,489,780 $287,393,527 $557,773,382 $298,541,346
============ ============ ============ ============
<PAGE>
<CAPTION>
Mid-Cap Opportunity Fund
-------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,595,621 $ 2,185,244
Net realized gains on investments and foreign currency
transactions 57,875,884 33,998,949
Net change in unrealized appreciation on investments and
foreign currency translation 97,381,421 70,828,164
------------- -------------
Net increase in net assets from operations 156,852,926 107,012,357
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (104,348) (272,573)
Class B Shares (58) --
Class I Shares (1,491,567) (2,111,317)
------------- -------------
Total dividends from net investment income (1,595,973) (2,383,890)
------------- -------------
From realized gains
Class A Shares (6,210,266) (3,428,083)
Class B Shares (10,839) --
Class I Shares (45,814,909) (27,874,263)
------------- -------------
Total distributions from realized gains (52,036,014) (31,302,346)
------------- -------------
Total distributions (53,631,987) (33,686,236)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 196,266,003 138,422,625
Proceeds from shares issued in connection with merger -- --
Net asset value of shares issued in reinvestment of
distributions to shareholders 1,278,484 32,652,833
------------- -------------
197,544,487 171,075,458
Less payments for shares redeemed (182,439,666) (118,448,431)
------------- -------------
Net increase in net assets from capital share transactions 15,104,821 52,627,027
------------- -------------
NET INCREASE IN NET ASSETS 118,325,760 125,953,148
NET ASSETS:
Beginning of period 650,952,268 524,999,120
------------- -------------
End of period $ 769,278,028 $ 650,952,268
============= =============
<FN>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period February 1, 1995 through December 31, 1995.
(4) For the period March 1, 1995 through December 31, 1995.
See Notes to Financial Statements.
</TABLE>
49
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small Cap Opportunity Fund Intrinsic Value Fund
---------------------------------------- -------------------------------------
Year Ended Period Ended Year Ended Year Ended
December 31, 1996 December 31, 1995(2) December 31, 1996 December 31, 1995
----------------- -------------------- ----------------- -----------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) $ (32,509) $ 412,673 $ 6,855,556 $ 6,011,616
Net realized gains on investments and
foreign currency transactions 17,881,429 1,749,697 16,465,095 18,391,186
Net change in unrealized appreciation on
investments and foreign currency
translation 7,930,344 15,460,102 43,380,316 28,180,120
------------ ------------ ------------ ------------
Net increase in net assets from operations 25,779,264 17,622,472 66,700,967 52,582,922
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (10) (807) (425,708) (439,469)
Class B Shares -- -- (689) --
Class I Shares (3,928) (407,928) (6,481,315) (5,807,728)
------------ ------------ ------------ ------------
Total dividends from net investment income (3,938) (408,735) (6,907,712) (6,247,197)
------------ ------------ ------------ ------------
From realized gains
Class A Shares (556,174) (13,273) (1,071,739) (1,155,716)
Class B Shares (8,638) (308) (6,170) --
Class I Shares (12,459,929) (1,849,182) (16,413,883) (15,316,254)
------------ ------------ ------------ ------------
Total distributions from realized gains (13,024,741) (1,862,763) (17,491,792) (16,471,970)
------------ ------------ ------------ ------------
Total distributions (13,028,679) (2,271,498) (24,399,504) (22,719,167)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 33,354,228 89,942,654 144,922,924 39,975,498
Net asset value of shares issued in
reinvestment of distributions to
shareholders 7,971,106 1,194,408 5,191,098 21,049,306
------------ ------------ ------------ ------------
41,325,334 91,137,062 150,114,022 61,024,804
Less payments for shares redeemed (15,040,778) (12,875,093) (68,388,827) (55,031,796)
------------ ------------ ------------ ------------
Net increase in net assets from capital
share transactions 26,284,556 78,261,969 81,725,195 5,993,008
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS 39,035,141 93,612,943 124,026,658 35,856,763
NET ASSETS:
Beginning of period 93,612,943 -- 255,884,859 220,028,096
------------ ------------ ------------ ------------
End of period $132,648,084 $ 93,612,943 $379,911,517 $255,884,859
============ ============ ============ ============
<PAGE>
<CAPTION>
Growth and Value Fund
-------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 9,665,824 $ 11,355,754
Net realized gains on investments and foreign
currency transactions 87.410,523 21,032,338
Net change in unrealized appreciation on
investments and foreign currency translation 36,502,219 130,722,828
------------- -------------
Net increase in net assets from operations 133,578,566 163,110,920
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (611,802) (844,877)
Class B Shares (600) --
Class I Shares (8,481,780) (11,083,739)
------------- -------------
Total dividends from net investment income (9,094,182) (11,928,616)
------------- -------------
From realized gains
Class A Shares (5,430,328) (984,229)
Class B Shares (15,316) --
Class I Shares (66,935,481) (13,232,229)
------------- -------------
Total distributions from realized gains (72,381,125) (14,216,458)
------------- -------------
Total distributions (81,475,307) (26,145,074)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 203,968,799 129,170,938
Net asset value of shares issued in reinvestment of
distributions to shareholders 6,414,873 22,736,385
------------- -------------
210,383,672 151,907,323
Less payments for shares redeemed (206,812,138) (123,076,813)
------------- -------------
Net increase in net assets from capital share
transactions 3,571,534 28,830,510
------------- -------------
NET INCREASE IN NET ASSETS 55,674,793 165,796,356
NET ASSETS:
Beginning of period 737,167,067 571,370,711
------------- -------------
End of period $ 792,841,860 $ 737,167,067
============= =============
<FN>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period February 1, 1995 through December 31, 1995.
(4) For the period March 1, 1995 through December 31, 1995.
See Notes to Financial Statements.
</TABLE>
50
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity Index Fund International Equity Fund
------------------------------------- -------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 14,823,298 $ 9,843,900 $ 2,474,079 $ 1,001,636
Net realized gains (losses) on investments
and foreign currency transactions 16,222,665 4,873,484 (1,496,221) (148,064)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translation 119,756,862 113,244,299 17,747,087 7,529,463
------------- ------------ ------------ ------------
Net increase in net assets from operations 150,802,825 127,961,683 18,724,945 8,383,035
------------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (232,541) (94,786) (29,678) (15,475)
Class B Shares (467) -- (3,888) --
Class I Shares (14,255,449) (10,046,140) (2,296,031) (1,017,696)
------------- ------------ ------------ ------------
Total dividends from net investment income (14,488,457) (10,140,926) (2,329,597) (1,033,171)
------------- ------------ ------------ ------------
From realized gains
Class A Shares (524,957) (69,893) -- --
Class B Shares (1,276) -- -- --
Class I Shares (12,759,806) (4,803,591) -- --
------------- ------------ ------------ ------------
Total distributions from realized gains (13,286,039) (4,873,484) -- --
------------- ------------ ------------ ------------
In excess of realized gains
Class A Shares -- (1,300) -- (39)
Class B Shares -- -- -- --
Class I Shares -- (89,375) -- (3,216)
------------- ------------ ------------ ------------
Total distributions in excess of realized
gains -- (90,675) -- (3,255)
------------- ------------ ------------ ------------
Total distributions (27,774,496) (15,105,085) (2,329,597) (1,036,426)
------------- ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 443,667,634 142,012,075 161,993,251 74,411,073
Proceeds from shares issued in connection
with merger -- -- 144,968,119 --
Net asset value of shares issued in
reinvestment of distributions to
shareholders 12,236,347 13,655,168 1,196,154 720,012
------------- ------------ ------------ ------------
455,903,981 155,667,243 308,157,524 75,131,085
Less payments for shares redeemed (237,318,573) (81,128,978) (29,876,945) (11,734,863)
------------- ------------ ------------ ------------
Net increase (decrease) in net assets from
capital share transactions 218,585,408 74,538,265 278,280,579 63,396,222
------------- ------------ ------------ ------------
NET INCREASE IN NET ASSETS 341,613,737 187,394,863 294,675,927 70,742,831
NET ASSETS:
Beginning of period 528,202,913 340,808,050 107,288,301 36,545,470
------------- ------------ ------------ ------------
End of period $ 869,816,650 $528,202,913 $401,964,228 $107,288,301
============= ============ ============ ============
<PAGE>
<CAPTION>
Intermediate Bond Fund
-------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 24,856,790 $ 24,249,471
Net realized gains (losses) on investments and foreign
currency transactions 1,800,673 (4,126,208)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency translation (4,413,650) 52,637,906
------------- -------------
Net increase in net assets from operations 22,243,813 72,761,169
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (767,604) (740,769)
Class B Shares (1,022) --
Class I Shares (24,369,891) (23,524,281)
------------- -------------
Total dividends from net investment income (25,138,517) (24,265,050)
------------- -------------
From realized gains
Class A Shares -- --
Class B Shares -- --
Class I Shares -- --
------------- -------------
Total distributions from realized gains -- --
------------- -------------
In excess of realized gains
Class A Shares -- --
Class B Shares -- --
Class I Shares -- --
------------- -------------
Total distributions in excess of realized gains -- --
------------- -------------
Total distributions (25,138,517) (24,265,050)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 118,511,852 47,268,989
Proceeds from shares issued in connection with merger -- --
Net asset value of shares issued in reinvestment of
distributions to shareholders 19,192,374 19,077,115
------------- -------------
137,704,226 66,346,104
Less payments for shares redeemed (126,568,756) (102,551,452)
------------- -------------
Net increase (decrease) in net assets from capital
share transactions 11,135,470 (36,205,348)
------------- -------------
NET INCREASE IN NET ASSETS 8,240,766 12,290,771
NET ASSETS:
Beginning of period 405,309,939 393,019,168
------------- -------------
End of period $ 413,550,705 $ 405,309,939
============= =============
<FN>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period February 1, 1995 through December 31, 1995.
(4) For the period March 1, 1995 through December 31, 1995.
See Notes to Financial Statements.
</TABLE>
51
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bond Fund Short Bond Fund
------------------------------------- -------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 40,606,005 $ 30,487,886 $ 9,102,945 $ 5,750,588
Net realized gains (losses) on
investments and foreign currency
transactions 4,524,736 (1,566,826) 480,231 97,446
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translation (10,189,588) 72,514,668 (2,046,522) 3,290,608
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
from operations 34,941,153 101,435,728 7,536,654 9,138,642
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (2,223,311) (2,049,832) (43,710) (34,801)
Class B Shares (5,666) -- (375) --
Class I Shares (38,376,142) (29,021,873) (9,042,643) (5,662,654)
------------ ------------ ------------ ------------
Total dividends from net investment
income (40,605,119) (31,071,705) (9,086,728) (5,697,455)
------------ ------------ ------------ ------------
From realized gains
Class A Shares -- -- (2,475) (120)
Class B Shares -- -- (119) --
Class I Shares -- -- (402,873) (25,397)
------------ ------------ ------------ ------------
Total distributions from realized
gains -- -- (405,467) (25,517)
------------ ------------ ------------ ------------
Total distributions (40,605,119) (31,071,705) (9,492,195) (5,722,972)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 228,866,516 81,776,844 41,372,785 114,313,557
Proceeds from shares issued in
connection with merger 130,865,901 -- -- --
Net asset value of shares issued in
reinvestment of distributions to
shareholders 29,585,134 24,963,507 3,635,168 3,924,968
------------ ------------ ------------ ------------
389,317,551 106,740,351 45,007,953 118,238,525
Less payments for shares redeemed (96,335,513) (86,707,190) (33,873,236) (22,556,503)
------------ ------------ ------------ ------------
Net increase in net assets from
capital share transactions 292,982,038 20,033,161 11,134,717 95,682,022
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 287,318,072 90,397,184 9,179,176 99,097,692
NET ASSETS:
Beginning of period 517,565,579 427,168,395 163,336,855 64,239,163
------------ ------------ ------------ ------------
End of period $804,883,651 $517,565,579 $172,516,031 $163,336,855
============ ============ ============ ============
<PAGE>
<CAPTION>
Income Fund
-----------------------------------------------------------
Year Ended Period Ended Year Ended
December 31, 1996 December 31, 1995(3) January 31, 1995
----------------- -------------------- ----------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 12,243,298 $ 9,688,284 $ 346,925
Net realized gains (losses) on investments and
foreign currency transactions (21,631) 7,844,775 (63,605)
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translation (5,355,005) 7,312,968 (304,664)
------------ ------------ -----------
Net increase (decrease) in net assets from
operations 6,866,662 24,846,027 (21,344)
------------ ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (430,827) (137,077) (4,217)
Class B Shares (22,400) (3,518) (99)
Class I Shares (11,703,117) (9,547,689) (342,609)
------------ ------------ -----------
Total dividends from net investment income (12,156,344) (9,688,284) (346,925)
------------ ------------ -----------
From realized gains
Class A Shares (92,572) (157,731) (16)
Class B Shares (5,831) (6,773) (1)
Class I Shares (2,526,588) (5,006,911) (1,196)
------------ ------------ -----------
Total distributions from realized gains (2,624,991) (5,171,415) (1,213)
------------ ------------ -----------
Total distributions (14,781,335) (14,859,699) (348,138)
------------ ------------ -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 63,866,681 200,868,057 7,682,912
Proceeds from shares issued in connection with
merger -- -- --
Net asset value of shares issued in reinvestment of
distributions to shareholders 605,194 4,026,532 9,789
------------ ------------ -----------
64,471,875 204,894,589 7,692,701
Less payments for shares redeemed (58,429,130) (23,767,145) (5,345,718)
------------ ------------ -----------
Net increase in net assets from capital share
transactions 6,042,745 181,127,444 2,346,983
------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS (1,871,928) 191,113,772 1,977,501
NET ASSETS:
Beginning of period 198,283,671 7,169,899 5,192,398
------------ ------------ -----------
End of period $196,411,743 $198,283,671 $ 7,169,899
============ ============ ===========
<FN>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period February 1, 1995 through December 31, 1995.
(4) For the period March 1, 1995 through December 31, 1995.
See Notes to Financial Statements.
</TABLE>
52
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Bond Fund
----------------------------------------
Year Ended Period Ended
December 31, 1996 December 31, 1995(2)
----------------- --------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,588,432 $ 611,812
Net realized gains (losses) on investments and
foreign currency transactions 255,095 1,050,665
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translation 651,325 571,896
----------- -----------
Net increase in net assets from operations 2,494,852 2,234,373
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (48,371) (13,458)
Class B Shares (540) (173)
Class I Shares (1,719,814) (612,038)
----------- -----------
Total dividends from net investment income (1,768,725) (625,669)
----------- -----------
From realized gains
Class A Shares -- (33,914)
Class B Shares -- (311)
Class I Shares -- (1,053,821)
----------- -----------
Total distributions from realized gains -- (1,088,046)
----------- -----------
In excess of realized gains
Class A Shares -- --
Class B Shares -- --
Class I Shares -- --
----------- -----------
Total distributions in excess of realized gains -- --
----------- -----------
Total distributions (1,768,725) (1,713,715)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 42,220,702 15,584,504
Proceeds from shares issued in connection with
merger -- --
Net asset value of shares issued in reinvestment of
distributions to shareholders 843,217 380,496
----------- -----------
43,063,919 15,965,000
Less payments for shares redeemed (2,888,294) (1,490,370)
----------- -----------
Net increase in net assets from capital share
transactions 40,175,625 14,474,630
----------- -----------
NET INCREASE IN NET ASSETS 40,901,752 14,995,288
NET ASSETS:
Beginning of period 14,995,288 --
----------- -----------
End of period $55,897,040 $14,995,288
=========== ===========
<PAGE>
<CAPTION>
Municipal Bond Fund
------------------------------------------------------------
Year Ended Period Ended Year Ended
December 31, 1996 December 31, 1995(4) February 28, 1995
----------------- -------------------- -----------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 13,312,581 $ 10,231,899 $ 930,044
Net realized gains (losses) on investments and
foreign currency transactions 2,185,933 5,020,578 (260,986)
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translation (3,444,888) 11,041,965 2,624,847
------------ ------------ ------------
Net increase in net assets from operations 12,053,626 26,294,442 3,293,905
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (535,878) (268,916) (409,080)
Class B Shares (15,695) (2,833) (67)
Class I Shares (11,706,220) (9,960,150) (520,897)
------------ ------------ ------------
Total dividends from net investment income (12,257,793) (10,231,899) (930,044)
------------ ------------ ------------
From realized gains
Class A Shares (6,075) (135,418) --
Class B Shares (394) (4,334) --
Class I Shares (201,402) (4,405,351) --
------------ ------------ ------------
Total distributions from realized gains (207,871) (4,545,103) --
------------ ------------ ------------
In excess of realized gains
Class A Shares (101,301) -- --
Class B Shares (6,561) -- --
Class I Shares (3,358,322) -- --
------------ ------------ ------------
Total distributions in excess of realized gains (3,466,184) -- --
------------ ------------ ------------
Total distributions (15,931,848) (14,777,002) (930,044)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 58,114,399 34,482,785 222,400,536
Proceeds from shares issued in connection with
merger 102,578,100 -- --
Net asset value of shares issued in reinvestment of
distributions to shareholders 1,161,950 3,928,330 323,826
------------ ------------ ------------
161,854,449 38,411,115 222,724,362
Less payments for shares redeemed (37,670,935) (29,087,608) (7,342,155)
------------ ------------ ------------
Net increase in net assets from capital share
transactions 124,183,514 9,323,507 215,382,207
------------ ------------ ------------
NET INCREASE IN NET ASSETS 120,305,292 20,840,947 217,746,068
------------ ------------ ------------
NET ASSETS:
Beginning of period 247,823,150 226,982,203 9,236,135
------------ ------------ ------------
End of period $368,128,442 $247,823,150 $226,982,203
============ ============ ============
<FN>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period February 1, 1995 through December 31, 1995.
(4) For the period March 1, 1995 through December 31, 1995.
See Notes to Financial Statements.
</TABLE>
53
<PAGE>
Pegasus Funds
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate Municipal Bond Fund
------------------------------------------------------------
Year Ended Period Ended Year Ended
December 31, 1996 December 31, 1995(4) February 28, 1995
----------------- -------------------- -----------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 18,092,497 $ 14,827,033 $ 1,985,164
Net realized gains (losses) on investments and
foreign currency transactions 2,576,883 3,839,621 (757,908)
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translation (5,510,989) 13,694,976 2,898,764
------------ ------------ ------------
Net increase in net assets from operations 15,158,391 32,361,630 4,126,020
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (761,652) (619,417) (1,214,913)
Class B Shares (16,784) (3,609) (17)
Class I Shares (16,723,347) (14,204,008) (770,234)
------------ ------------ ------------
Total dividends from net investment income (17,501,783) (14,827,034) (1,985,164)
------------ ------------ ------------
From realized gains
Class A Shares (112,133) (143,000) (62,814)
Class B Shares (3,569) (2,501) (284)
Class I Shares (2,341,621) (3,007,029) --
------------ ------------ ------------
Total distributions from realized gains (2,457,323) (3,152,530) (63,098)
------------ ------------ ------------
Total distributions (19,959,106) (17,979,564) (2,048,262)
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 66,990,329 48,746,625 367,446,983
Net asset value of shares issued in reinvestment of
distributions to shareholders 730,366 2,914,315 851,803
------------ ------------ ------------
67,720,695 51,660,940 368,298,786
Less payments for shares redeemed (61,160,676) (57,221,370) (16,165,822)
------------ ------------ ------------
Net increase (decrease) in net assets from capital
share transactions 6,560,019 (5,560,430) 352,132,964
------------ ------------ ------------
NET INCREASE IN NET ASSETS 1,759,304 8,821,636 354,210,722
NET ASSETS:
Beginning of period 391,870,717 383,049,081 28,838,359
------------ ------------ ------------
End of period $393,630,021 $391,870,717 $383,049,081
============ ============ ============
<PAGE>
<CAPTION>
Michigan Municipal Bond Fund
-------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 2,575,994 $ 2,357,562
Net realized gains (losses) on investments and
foreign currency transactions (90,124) 95,495
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translation (530,540) 5,119,573
------------ ------------
Net increase in net assets from operations 1,955,330 7,572,630
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares (868,350) (989,679)
Class B Shares (702) --
Class I Shares (1,615,892) (1,368,861)
------------ ------------
Total dividends from net investment income (2,484,944) (2,358,540)
------------ ------------
From realized gains
Class A Shares -- --
Class B Shares -- --
Class I Shares -- --
------------ ------------
Total distributions from realized gains -- --
------------ ------------
Total distributions (2,484,944) (2,358,540)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 17,373,469 12,994,627
Net asset value of shares issued in reinvestment of
distributions to shareholders 854,735 927,746
------------ ------------
18,228,204 13,922,373
Less payments for shares redeemed (10,558,076) (10,946,362)
------------ ------------
Net increase (decrease) in net assets from capital
share transactions 7,670,128 2,976,011
------------ ------------
NET INCREASE IN NET ASSETS 7,140,514 8,190,101
NET ASSETS:
Beginning of period 53,453,160 45,263,059
------------ ------------
End of period $ 60,593,674 $ 53,453,160
============ ============
<FN>
(1) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period February 1, 1995 through December 31, 1995.
(4) For the period March 1, 1995 through December 31, 1995.
See Notes to Financial Statements.
</TABLE>
54
<PAGE>
Pegasus Managed Assets Conservative Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 10.13%
Salomon Brothers, Revolving Repurchase Agreement, 6.90%,
1/2/97 (secured by various U.S. Treasury Strips with
maturities ranging from 11/15/04 through 5/15/06, all
held at Chase Bank) ...................................... $7,584,363 $ 7,584,363
-----------
(Cost $7,584,363)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 28.59%
U.S. Treasury Securities -- 27.35%
Principal Strips from U.S. Treasury Securities due:
2/15/14 ................................................ 2,000,000 628,220
2/15/19 ................................................ 2,000,000 441,760
U.S. Treasury Bonds:
10.750%, 8/15/05 ....................................... 1,000,000 1,282,970
12.750%, 11/15/10 ...................................... 1,260,000 1,783,492
U.S. Treasury Notes:
8.500%, 5/15/97 ........................................ 100,000 101,125
8.125%, 2/15/98 ........................................ 500,000 512,970
6.000%, 5/31/98 ........................................ 5,000,000 5,015,600
7.125%, 2/29/00 ........................................ 700,000 720,671
6.250%, 5/31/00 ........................................ 1,050,000 1,054,263
6.250%, 4/30/01 ........................................ 2,800,000 2,806,132
8.000%, 5/15/01 ........................................ 500,000 534,295
6.250%, 6/30/01 ........................................ 5,500,000 5,588,495
-----------
(Cost $20,218,268) 20,469,993
-----------
Agency Obligations -- 1.24%
Federal National Mortgage Assn. Debentures:
1987 Series B, 7.600%, 1/10/97 ......................... 400,000 400,196
1989, 8.350%, 11/10/99 ................................. 500,000 528,763
-----------
(Cost $900,240) 928,959
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS ................. 21,398,952
-----------
(Cost $21,118,508)
CORPORATE BONDS AND NOTES -- 16.42%
Finance -- 7.74%
Barclays American Corp., Senior Note, 9.125%, 12/1/97 .... 750,000 769,624
Chase Manhattan Subordinated Note, 7.625%, 1/15/03 ....... 500,000 519,867
Citicicorp Note, 8.625%, 12/1/02 ......................... 350,000 381,229
Citicorp Subordinated Capital Notes, 9.750%, 8/1/99 ...... 250,000 269,778
Discover Credit Corp., Medium Term Note #TR 00071, 8.370%,
4/28/99 ................................................ 250,000 260,871
General Motors Acceptance Corp., 7.000%, 3/1/00 .......... 500,000 506,676
General Motors Acceptance Corp., 7.750%, 4/15/97 ......... 250,000 251,385
International Lease Finance Debenture, 8.350%, 10/1/98 ... 500,000 517,822
KFW International Finance Inc., 8.850%, 6/15/99 .......... 250,000 264,724
NationsBank Corp. Subordinated Debenture, 8.125%, 6/15/02 350,000 371,514
Progressive Corp. Ohio, 6.600%, 1/15/04 .................. 500,000 488,627
55
<PAGE>
Salomon Inc., 7.500%, 2/1/03 ............................. 500,000 506,559
Wells Fargo & Co., Subordinated Note, 8.375%, 5/15/02 .... 400,000 428,456
West Financial Asset Backed Ctf., Series 1996-C, Class A4,
6.800%, 12/20/03 ....................................... 250,000 253,720
----------
(Cost $5,689,296) 5,790,852
----------
Industrial -- 6.15%
Burlington Resources Inc., 8.500%, 10/1/01 ............... 250,000 267,759
Grand Metro Investment Corp., 9.000%, 8/15/11 ............ 250,000 291,856
Hertz Corp., 6.625%, 7/15/00 ............................. 500,000 499,424
May Department Stores, 9.450%, 2/2/99 .................... 250,000 265,535
Nabisco Inc., 8.300%, 4/15/99 ............................ 750,000 779,051
Occidental Petroleum Corp., 11.125%, 8/1/10 .............. 400,000 525,214
Phillip Morris Comp. Inc., 7.125%, 10/1/04 ............... 250,000 249,843
Phillip Morris Comp. Inc., 8.625%, 3/1/99 ................ 500,000 520,180
RJR Nabisco Inc., 8.625%, 12/1/02 ........................ 700,000 706,740
USX Corp., 6.375%, 7/15/98 ............................... 500,000 500,518
----------
(Cost $4,482,566) 4,606,120
----------
Public Utility -- 1.82%
Coastal Corp., 10.250%, 10/15/04 ......................... 500,000 593,393
Commonwealth Edison First Mortgage, 8.625%, 2/1/22 ....... 250,000 260,788
Pacific Bell, 7.000%, 7/15/04 ............................ 500,000 506,056
----------
(Cost $1,338,417) 1,360,237
----------
Foreign -- 0.71%
Shell Canada Ltd., 7.375%, 6/1/99 ........................ 250,000 256,495
Westpac Banking, 9.125%, 8/15/01 ......................... 250,000 274,119
----------
(Cost $501,548) 530,614
----------
TOTAL CORPORATE BONDS AND NOTES .............................. 12,287,823
----------
(Cost $12,011,827)
CONVERTIBLE BONDS -- 0.39%
Multicare Co. Convertible Euro-Dollar Subordinated Debenture
Series 144A, 7.000%, 3/15/03 ............................. 250,000 294,375
----------
(Cost $251,539)
</TABLE>
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
COMMON STOCKS -- 11.53%
Banks -- 2.90%
Bank of Boston Corp. ..................................... 8,000 514,000
Citicorp. ................................................ 4,718 485,954
First Union Corp. ........................................ 5,000 370,000
National City Corp. ...................................... 7,000 314,125
NationsBank Corp. ........................................ 5,000 488,750
----------
2,172,829
----------
Business Machines -- 0.46%
Electronic Data System Corp. ............................. 8,000 346,000
----------
56
<PAGE>
Drugs and Medicine -- 2.67%
Bristol-Myers Squibb Co. ................................. 6,000 652,500
Johnson & Johnson ........................................ 8,000 398,000
Pfizer, Inc. ............................................. 6,000 497,250
Warner Lambert Co. ....................................... 6,000 450,000
-----------
1,997,750
-----------
International Oil -- 1.61%
British Petroleum PLC .................................... 5,080 718,173
Texaco, Inc. ............................................. 5,000 490,625
-----------
1,208,798
-----------
Motor Vehicles -- 0.52%
General Motors Corp. ..................................... 7,000 390,250
-----------
Producer Goods -- 0.58%
Hubbell, Inc. Class B .................................... 10,000 432,500
-----------
Soaps and Cosmetics -- 0.47%
Unilever N.V. ............................................ 2,000 350,500
-----------
Telephone -- 0.69%
Sprint Corp. ............................................. 13,000 518,375
-----------
Tobacco -- 0.75%
Phillip Morris Companies, Inc. ........................... 5,000 563,125
-----------
Utilities -- 0.87%
DTE Energy, Inc. ......................................... 15,000 485,625
United Illuminating Co. .................................. 5,300 166,288
-----------
651,913
-----------
TOTAL COMMON STOCK ........................................... 8,632,040
-----------
(Cost $4,745,620)
MUTUAL FUNDS -- 32.94%
Pegasus Bond Fund ........................................ 835,763 8,583,285
Pegasus Growth Fund ...................................... 249,246 3,147,980
Pegasus International Equity Fund ........................ 384,094 4,528,463
Pegasus Intrinsic Value Fund ............................. 327,460 4,489,473
Pegasus Mid-Cap Opportunity Fund ......................... 147,118 2,590,754
Pegasus Small Cap Opportunity Fund ....................... 95,028 1,311,387
-----------
TOTAL MUTUAL FUNDS ........................................... 24,651,342
-----------
(Cost $24,468,000)
TOTAL INVESTMENTS ............................................ $74,848,895
===========
(Cost $70,179,857)
<FN>
* Non-income producing security.
See Notes to Financial Statements.
</TABLE>
57
<PAGE>
Pegasus Managed Assets Balanced Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 3.60%
Salomon Brothers, Revolving Repurchase Agreement, 6.90%,
1/2/97 (secured by various U.S. Treasury Strips with
maturities ranging from 11/15/04 through 5/15/06, all
held at Chase Bank) ...................................... $4,661,821 $ 4,661,821
------------
(Cost $4,661,821)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 37.97%
U.S. Treasury Securities -- 22.46%
Principal Strips from U.S. Treasury Securities due:
5/15/17 ................................................ 915,000 228,915
8/15/17 ................................................ 3,455,000 848,824
Strips from U.S. Treasury Securities due:
5/15/98 ................................................ 200,000 185,106
8/15/98 ................................................ 500,000 455,495
2/15/99 ................................................ 100,000 88,396
8/15/99 ................................................ 3,500,000 2,996,735
2/15/01 ................................................ 450,000 350,064
2/15/11 ................................................ 600,000 234,678
5/15/11 ................................................ 1,083,000 416,381
2/15/12 ................................................ 280,000 101,800
8/15/12 ................................................ 750,000 262,717
5/15/13 ................................................ 760,000 252,176
2/15/14 ................................................ 3,935,000 1,236,023
U.S. Treasury Bonds:
12.750%, 11/15/10 ...................................... 1,145,000 1,620,713
10.375%, 11/15/12 ...................................... 685,000 882,150
12.500%, 8/15/14 ....................................... 120,000 179,344
8.750%, 5/15/17 ........................................ 600,000 732,096
U.S. Treasury Notes:
8.625%, 8/15/97 ........................................ 850,000 866,074
8.750%, 10/15/97 ....................................... 200,000 204,782
8.875%, 11/15/97 ....................................... 800,000 821,496
7.875%, 1/15/98 ........................................ 3,030,000 3,097,236
7.875%, 4/15/98 ........................................ 3,870,000 3,970,968
7.00%, 4/15/99 ......................................... 500,000 511,170
6.875%, 7/31/99 ........................................ 200,000 204,062
7.75%, 11/30/99 ........................................ 2,005,000 2,094,904
6.25%, 5/31/00 ......................................... 950,000 953,857
6.625%, 7/31/01 ........................................ 1,000,000 1,015,940
7.50%, 11/15/01 ........................................ 700,000 736,862
6.375%, 8/15/02 ........................................ 850,000 855,576
6.25%, 2/15/03 ......................................... 400,000 399,500
7.25%, 5/15/04 ......................................... 2,150,000 2,262,208
------------
(Cost $28,521,279) 29,066,248
------------
Agency Obligations -- 15.51%
Federal Home Loan Mortgage Corp. Participation Ctf.
#555238, 12.000%, 7/1/19 ............................... 139,225 156,580
Federal Home Loan Mortgage Corp. Gtd. Multi-Class
Mortgage Participation Ctfs.:
Series 11 Class D, 9.500%, 7/15/19 ................... 200,000 218,281
58
<PAGE>
Series 21 Class SD, IF, 8/25/22 ...................... 200,000 178,750
Series 22 Class C, 9.500%, 4/15/20 ................... 138,109 152,097
Series 84 Class F, 9.200%, 10/15/20 .................. 300,000 319,916
Series 99 Class Z, 9.500%, 1/15/21 ................... 85,830 91,257
Series 109 Class I, 9.100%, 1/15/21 .................. 500,000 540,380
Series 1051 Class D, 7.000%, 11/15/19 ................ 125,890 126,964
Series 1065 Class J, 9.000%, 4/15/21 ................. 100,000 106,594
Series 1084 Class F, IF, 5/15/21 ..................... 250,000 255,470
Series 1084 Class S, IF, 5/15/21 ..................... 175,000 218,653
Series 1144 Class KB, 8.500%, 9/15/21 ................ 250,000 259,842
Series 1295 Class JB, 4.500%, 3/15/07 ................ 300,000 266,541
Series 1297 Class H, 7.500%, 1/15/20 ................. 140,872 140,949
Series 1370 Class F, 6.750%, 3/15/19 ................. 260,000 259,202
Series 1378 Class H, 10.000%, 1/15/21 ................ 100,000 112,637
Series 1378 Class JZ, 7.500%, 11/15/21 ............... 682,755 664,508
Series 1465 Class SA, IO, IF, 2/15/08 ................ 1,150,971 56,783
Series 1483 Class E, 6.500%, 2/15/20 ................. 367,500 360,984
Series 1489 Class L, 5.500%, 4/15/08 ................. 151,440 147,751
Series 1491 Class F, 5.000%, 8/15/19 ................. 400,000 371,312
Series 1531 Class K, 6.000%, 4/15/08 ................. 346,816 331,233
Series 1554 Class KA, PO, 8/15/08 .................... 73,394 53,691
Series 1575 Class FB, 7.000%, 8/15/08 ................ 298,345 296,600
Series 1575 Class SB, 3.000%, 8/15/08 ................ 99,448 61,130
Series 1583 Class NS, IF, 9/15/23 .................... 115,888 75,614
Series 1585 Class NB, IF, 9/15/23 .................... 144,995 120,346
Series 1586 Class A, 6.000%, 9/15/08 ................. 159,561 150,492
Series 1595 Class S, IO, IF, 10/15/13 ................ 1,333,457 62,486
Series 1602 Class O, 6.000%, 10/15/23 ................ 300,000 274,964
Series 1604 Class SE, IF, 11/15/08 ................... 187,033 148,827
Series 1606 Class LC, IF, 5/15/08 .................... 1,279,358 1,281,096
Series 1606 Class LD, IF, 5/15/08 .................... 393,649 293,705
Series 1647 Class SB, IF, 12/15/08 ................... 44,426 39,928
Series 1681 Class K, 7.000%, 8/15/23 ................. 418,514 406,428
Series 1686 Class A, 5.000%, 2/15/24 ................. 92,449 78,264
Series 1686 Class SL, IF, 2/15/24 .................... 231,122 190,169
Series 1689 Class SD, IF, 10/15/23 ................... 100,000 86,250
Series 1706 Class LA, 7.000%, 3/15/24 ................ 357,979 350,129
Series 1796-A Class S, IF, 2/15/09 ................... 100,000 79,562
Series 1825 Class C, 5.799%, 12/15/23 ................ 400,000 357,476
Series 1854 Class C, 4/15/08 ......................... 400,000 250,000
Federal Housing Administration Merrill Lynch Project Pool
170 Pass thru Ctf., 7.430%, 8/1/20 ..................... 223,793 230,731
Federal Housing Administration
Project #07335307, 7.430%, 1/1/22 ...................... 225,322 231,969
Federal Housing Administration
Greystone 1996-2 Pool, 7.430%, 11/1/22 ................. 246,819 253,730
Federal National Mortgage Assn. Pass Thru Securities:
Pool #116612, IF, 3/1/19 ............................... 100,275 104,003
Pool #303532, IF, 3/1/29 ............................... 83,363 83,160
59
<PAGE>
Federal National Mortgage Assn. Pass Thru Securities
Guaranteed Remic Trust:
1989 Class 34-D, 9.850%, 7/25/13 ..................... 3,539 3,526
1989 Class 78-H, 9.400%, 11/25/19 .................... 250,000 272,874
1990 Class 1-D, 8.800%, 1/25/20 ...................... 143,800 150,465
1990 Class 120-H, 9.000%, 10/25/20 ................... 500,000 540,947
1990 Class 140-K, HB, 652.145%, 12/25/20 ............. 1,336 39,614
1990 Class 143-J, 8.750%, 12/25/20 ................... 125,000 130,542
1991 Class 144-PZ, 8.500%, 6/25/21 ................... 232,352 240,932
1991 Class 161-H, 7.500%, 2/25/21 .................... 127,405 128,739
1992-G Class 15-Z, 7.000%, 1/25/22 ................... 210,184 197,655
1992-G Class 42-Z, 7.000%, 7/25/22 ................... 680,533 649,249
1992-G Class 59-C, 6.000%, 12/25/21 .................. 600,000 572,334
1992 Class 204-B, 6.000%, 10/25/20 ................... 250,000 236,932
1993 Class 13-G, 6.000%, 6/25/20 ..................... 200,000 191,556
1993 Class 19-G, 5.000%, 5/25/19 ..................... 250,000 230,239
1993-G Class 19-K, 6.500%, 6/25/19 ................... 254,799 247,094
1993 Class 32-K, 6.000%, 3/25/23 ..................... 327,921 306,755
1993 Class 38-S, 5.255%, 11/25/22 .................... 812,930 22,290
1993 Class 44-S, IO, IF, 4/25/23 ..................... 401,114 20,394
1993 Class 58-J, 5.500%, 4/25/23 ..................... 136,803 130,231
1993 Class 94-K, 6.750%, 5/25/23 ..................... 115,618 111,070
1993 Class 139-SG, IF, 8/25/23 ....................... 242,431 156,338
1993 Class 155-LA, 6.500%, 5/25/23 ................... 310,151 303,430
1993 Class 155-SB, IO, IF, 9/25/23 ................... 765,977 47,229
1993 Class 207-SC, IF, 11/25/23 ...................... 284,327 189,974
1993 Class 209-KB, 5.659%, 8/25/08 ................... 373,990 347,919
1993 Class 214-L, 6.000%, 12/25/08 ................... 146,233 140,629
1993 Class 220-SD, IF, 11/25/13 ...................... 49,707 35,705
1993 Class 223-FB, IF, 12/25/23 ...................... 371,360 359,755
1993 Class 223-SB, IF, 12/25/23 ...................... 165,265 132,212
1994-G Class 13-ZB, 7.000%, 11/17/24 ................. 115,651 107,104
1994 Class 19-C, 5.000%, 1/25/24 ..................... 341,483 318,279
1994 Class 30-LA, 6.500%, 2/25/09 .................... 77,863 75,547
1994 Class 39-F, IF, 3/25/24 ......................... 220,840 218,292
1994 Class 39-S, IF, 3/25/24 ......................... 84,938 74,571
1994 Class 82-SA, IO, IF, 5/25/23 .................... 1,716,413 60,105
1995 Class 13-B, 6.500%, 3/25/09 ..................... 554,847 536,038
1996 Class 7-C, 6.500%, 12/25/10 ..................... 200,000 186,981
1996 Class 20-L, 9/25/08 ............................. 165,000 95,774
1996 Class 24-B, PO, 10/25/08 ........................ 150,000 78,719
1996 Class 24-K, PO, 2/25/08 ......................... 250,000 172,900
1996 Class 46-A, 5.000%, 2/25/09 ..................... 500,000 469,526
Government National Mortgage Assn. Pass Thru Securities
Guaranteed Remic Trust:
1994 Class 4-SA, IO, IF, 10/16/22 .................... 565,241 34,198
60
<PAGE>
Government National Mortgage Assn. Pass Thru:
Pool #297628, 8.000%, 9/15/22 .......................... 166,002 170,805
Pool #313110, 7.500%, 11/15/22 ......................... 435,309 438,238
----------
(Cost $19,256,535) 20,071,140
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS ................. 49,137,388
----------
(Cost $47,777,814)
CORPORATE BONDS AND NOTES -- 3.36%
Finance -- 2.81%
Associates Corp. of North America:
9.125%, 4/1/00 ......................................... 85,000 91,561
8.150%, 8/1/09 ......................................... 200,000 215,834
Case Equipment Loan Trust Asset Backed Ctf.
Series 1996-A, Class A2, 5.500%, 2/15/03 ............... 360,375 359,233
Ford Credit Grantor Trust Asset Backed Ctf.
Series 1994-A, Class A, 6.350%, 5/15/99 ................ 127,788 128,683
Green Tree Financial Corp. Asset Backed Ctf.
Series 1996-A, Class A, 5.700%, 2/15/26 ................ 74,488 74,537
Merrill Lynch Home Equity Loan Asset Backed Ctf.
Series 1992-1, Class A, IF, 7/15/22 .................... 140,907 141,203
Merrill Lynch MBS Project Pass Thru Ctf.
Series 144-S, 7.43%, 7/25/24 ........................... 363,125 363,125
Merrill Lynch Trust 43-E, CMO
Series 43, Class E, 6.500%, 8/27/15 .................... 200,000 194,329
NationsBank Auto Grantor Trust Asset Backed Ctf.
Series 1995-A, Class A, 5.850%, 6/15/02 ................ 55,697 55,839
Navistar Financial Corp. Owner Trust Asset Backed Ctf.
Series 1995-A, Class A2, 6.550%, 11/20/01 .............. 208,415 209,718
Olympic Automobile Receivables Trust Asset Backed Pass
Thru Ctf.
Series 1996-C, Class A5, 7.000%, 12/15/01 .............. 200,000 204,004
Onyx Acceptance Grantor Trust Auto Loan Pass Thru Ctf.
Series 1996-1, Class A, 5.400%, 5/15/01 ................ 197,509 195,781
Superior Wholesale Inventory Trust Asset Backed Ctf.
Series 1996-A, Class A, IF, 3/15/01 .................... 200,000 200,124
Western Financial Asset Backed Pass Thru Ctf.
Series 1996-C, Class A4, 6.800%, 12/20/03 .............. 250,000 253,720
World Omni Automobile Trust Asset Backed Ctf.
Series 1995-A, Class A, 6.050%, 11/25/01 ............... 945,102 946,284
----------
(Cost $3,587,935) 3,633,975
----------
Industrial -- 0.28%
Boeing Co., 7.950%, 8/15/24 .............................. 110,000 119,636
Proctor & Gamble Co., 8.000%, 10/26/29 ................... 220,000 240,599
----------
(Cost $360,051) 360,235
----------
61
<PAGE>
Public Utility -- 0.27%
New England Telephone & Telegraph Co., 7.875%, 11/15/29 .. 250,000 268,530
Nippon Telegraph & Telephone Corp., 9.500%, 7/27/98 ...... 80,000 84,078
-----------
(Cost $348,311) 352,608
-----------
TOTAL CORPORATE BONDS AND NOTES .............................. 4,346,818
-----------
(Cost $4,296,297)
CONVERTIBLE BONDS -- 0.69%
Chubb Capital Corp., 6.000%, 5/15/98 ....................... 125,000 157,188
Consolidated Natural Gas Co., 7.250%, 12/15/15 ............. 175,800 185,689
Leucadia National Corp., 5.250%, 2/1/03 .................... 271,500 284,396
NAC RE Corp., 5.250%, 12/15/02 ............................. 273,000 262,762
-----------
(Cost $870,414) 890,035
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
COMMON STOCKS -- 48.88%
Aerospace -- 1.05%
Boeing Co. ............................................... 9,000 957,375
Lockheed Martin Corp. .................................... 4,370 399,855
-----------
1,357,230
-----------
Air Transport -- 0.25%
Air Express International Corp. .......................... 4,025 129,806
Flightsafety International, Inc. ......................... 4,100 196,288
-----------
326,094
-----------
Apparel -- 1.25%
Nine West Group, Inc.* ................................... 2,950 136,806
Payless Shoesource, Inc.* ................................ 10,610 397,875
Russell Corp. ............................................ 22,000 654,500
Unifi, Inc. .............................................. 9,070 291,374
V.F. Corp. ............................................... 1,960 132,300
-----------
1,612,855
-----------
Banks -- 3.19%
Bancorp Hawaii, Inc. ..................................... 7,750 325,500
BankAmerica Corp. ........................................ 8,000 798,000
Barnett Banks, Inc. ...................................... 11,000 452,375
Charter One Financial, Inc. .............................. 4,425 185,850
First Tennessee National Corp. ........................... 5,000 187,500
First Union Corp. ........................................ 1,860 137,640
Fleet Financial Group, Inc. .............................. 12,000 598,500
Mercantile Bankshares Corp. .............................. 4,520 144,640
Norwest Corp. ............................................ 21,000 913,500
State Street Boston Corp. ................................ 2,600 167,700
TCF Financial Corp. ...................................... 5,100 221,850
-----------
4,133,055
-----------
62
<PAGE>
Business Machines -- 1.37%
Diebold, Inc. ............................................ 2,269 142,663
Electronic Data Systems Corp. ............................ 22,500 973,125
Microsoft Corp.* ......................................... 4,000 330,500
Silicon Graphics* ........................................ 7,000 178,500
Xilinx, Inc.* ............................................ 3,950 145,409
-----------
1,770,197
-----------
Business Services -- 2.58%
American Management Services, Inc.* ...................... 3,350 82,075
Automatic Data Processing, Inc. .......................... 3,600 154,350
CDI Corp.* ............................................... 2,400 68,100
Computer Associates International, Inc. .................. 4,000 199,000
Deluxe Corp. ............................................. 26,000 851,500
DST Systems, Inc.* ....................................... 3,500 109,813
Dun & Bradstreet Corp. ................................... 11,000 261,250
G & K Services, Inc. Class A ............................. 3,800 143,450
Grey Advertising, Inc. ................................... 530 134,090
Interpublic Group of Companies, Inc. ..................... 3,000 142,500
National Service Industries, Inc. ........................ 7,360 275,080
Omnicom Group, Inc. ...................................... 3,280 150,060
SunGard Data Systems, Inc.* .............................. 3,800 150,100
WMX Technologies, Inc. ................................... 19,000 619,875
-----------
3,341,243
-----------
Chemicals -- 1.49%
Great Lakes Chemical Corp. ............................... 8,000 374,000
NCH Corp. ................................................ 5,860 353,065
Praxair, Inc. ............................................ 5,000 230,625
RPM, Inc. ................................................ 5,365 91,205
Sigma-Aldrich Corp. ...................................... 14,000 874,125
-----------
1,923,020
-----------
Construction -- 1.91%
Crane Co. ................................................ 9,456 274,224
Fluor Corp. .............................................. 3,100 194,525
Masco Corp. .............................................. 20,000 720,000
York International Corp. ................................. 23,000 1,285,125
-----------
2,473,874
-----------
Consumer Durables -- 1.02%
Durakon Industries, Inc.* ................................ 4,308 54,927
Hillenbrand Industries, Inc. ............................. 4,160 150,800
Invacare Corp. ........................................... 300 8,250
Leggett & Platt, Inc. .................................... 6,040 209,135
National Presto Industries, Inc. ......................... 3,840 143,520
Newell Co. ............................................... 5,300 166,950
Rubbermaid, Inc. ......................................... 26,000 591,500
-----------
1,325,082
-----------
63
<PAGE>
Containers -- 0.89%
AptarGroup, Inc. ......................................... 4,300 151,575
Crown Cork & Seal Co., Inc. .............................. 18,300 995,063
-----------
1,146,638
-----------
Domestic Oil -- 0.45% ......................................
Atlantic Richfield Co. ................................... 1,060 140,450
MAPCO, Inc. .............................................. 13,160 447,440
-----------
587,890
-----------
Drugs and Medicine -- 3.87%
Abbott Laboratories Corp. ................................ 13,000 659,750
Amgen, Inc.* ............................................. 2,500 135,938
Block Drug, Inc. Class A ................................. 2,880 136,454
Bristol-Myers Squibb Co. ................................. 9,300 1,011,375
Columbia/HCA Healthcare Corp. ............................ 5,250 213,937
Health Care & Retirement Corp.* .......................... 3,991 114,242
Johnson & Johnson ........................................ 4,000 199,000
Medtronic, Inc. .......................................... 1,400 95,200
Mylan Laboratories, Inc. ................................. 7,000 117,250
Pall Corp. ............................................... 5,800 147,900
Pfizer, Inc. ............................................. 2,200 182,325
Quorum Health Group, Inc.* ............................... 5,000 148,750
Schering-Plough Corp. .................................... 15,000 971,250
Smithkline Beecham PLC ADR ............................... 3,300 224,400
Stryker Corp. ............................................ 4,400 131,450
Sybron International Corp.* .............................. 5,800 191,400
United HealthCare Corp. .................................. 4,400 198,000
Vivra, Inc.* ............................................. 4,500 124,313
-----------
5,002,934
-----------
Electronics -- 2.60%
AMP, Inc. ................................................ 3,500 134,312
Belden, Inc. ............................................. 8,100 299,700
Dynatech Corp.* .......................................... 3,400 150,450
Hewlett Packard Co. ...................................... 17,000 854,250
Intel Corp. .............................................. 2,400 314,250
Kemet Corp.* ............................................. 4,400 102,300
Lucent Technologies, Inc. ................................ 8,500 393,125
Microchip Technology, Inc.* .............................. 3,600 183,150
Molex, Inc. Class A Non-Voting ........................... 3,450 122,906
Motorola, Inc. ........................................... 11,000 675,125
Teradyne, Inc.* .......................................... 5,700 138,938
-----------
3,368,506
-----------
Energy and Utilities -- 3.03%
AES Corp.* ............................................... 3,500 162,750
Enron Corp. .............................................. 18,500 797,813
Equitable Resources, Inc. ................................ 4,760 141,610
FPL Group, Inc. .......................................... 18,000 828,000
MCN Corp. ................................................ 23,000 664,125
64
<PAGE>
Pinnacle West Capital Co. ................................ 26,000 825,500
Sierra Pacific Resources ................................. 11,320 325,450
Washington Water Power Co. ............................... 9,290 173,026
-----------
3,918,274
-----------
Energy Raw Materials -- 1.66%
Apache Corp. ............................................. 7,076 250,313
Ashland Coal, Inc. ....................................... 6,450 178,988
Noble Affiliates, Inc. ................................... 4,200 201,075
Schlumberger Ltd. ........................................ 12,000 1,198,500
Southwestern Energy Co. .................................. 8,976 135,762
Western Atlas, Inc.* ..................................... 2,500 177,188
-----------
2,141,826
-----------
Food and Agriculture -- 2.82%
ConAgra, Inc. ............................................ 16,000 796,000
CPC International, Inc. .................................. 11,000 852,500
Farmer Brothers Co. ...................................... 1,260 191,520
PepsiCo, Inc. ............................................ 36,000 1,053,000
Sysco Corp. .............................................. 23,000 750,375
-----------
3,643,395
-----------
Insurance -- 3.91% .........................................
AFLAC, Inc. .............................................. 6,000 256,500
Allmerica Property & Casualty Co. ........................ 5,020 152,482
AMBAC, Inc. .............................................. 3,970 263,509
American International Group, Inc. ....................... 5,500 595,375
Capital Re Corp. ......................................... 4,300 200,487
CapMac Holdings, Inc. .................................... 2,800 92,750
Chubb Corp. .............................................. 20,000 1,075,000
Citizens Corp. ........................................... 10,780 242,550
Financial Security Assurance Holdings .................... 7,700 253,138
Home Beneficial Corp. Class B ............................ 11,890 450,334
Mid Ocean Ltd. ........................................... 6,530 342,825
Old Republic International Corp. ......................... 16,500 441,375
Safeco Corp. ............................................. 7,760 306,035
Transatlantic Holdings, Inc. ............................. 2,554 205,597
Unum Corp. ............................................... 2,500 180,625
-----------
5,058,582
-----------
International Oil -- 0.55%
Amoco Corp. .............................................. 1,770 142,485
British Petroleum PLC ADR ................................ 4,044 571,651
-----------
714,136
Liquor -- 0.62%
Anheuser Busch Companies, Inc. ........................... 20,000 800,000
-----------
65
<PAGE>
Media -- 1.61%
Banta Corp. .............................................. 6,435 147,201
Gannett Co., Inc. ........................................ 12,380 926,952
Washington Post Co. Class B .............................. 3,000 1,005,375
----------
2,079,528
----------
Miscellaneous and Conglomerates -- 1.46%
ABC Rail Products Corp.* ................................. 3,300 65,587
Cognizant Corp. .......................................... 11,000 363,000
Culligan Water Technologies, Inc.* ....................... 3,000 121,500
Dentsply International, Inc. ............................. 3,700 175,750
Elan PLC ADR* ............................................ 6,000 199,500
Greenfield Industries, Inc. .............................. 6,700 205,187
Guinness PLC ADR ......................................... 8,650 338,612
Health Management Associates, Inc. Class A* .............. 2,293 51,593
Littelfuse, Inc.* ........................................ 4,000 194,000
Wolverine Tube, Inc.* .................................... 4,850 170,963
----------
1,885,692
----------
Miscellaneous Finance -- 2.11%
CMAC Investment Corp. .................................... 5,800 213,150
Edwards (A.G.), Inc. ..................................... 6,555 220,412
Everest Reinsurance Holdings, Inc. ....................... 7,600 218,500
Executive Risk, Inc. ..................................... 3,200 118,400
Federal National Mortgage Association .................... 12,030 448,117
FINOVA Group, Inc. ....................................... 4,435 284,949
First Financial Corp. .................................... 4,250 104,125
Fund American Enterprises Holdings, Inc.* ................ 5,490 525,667
Idex Corp. ............................................... 4,372 174,314
PMI Group, Inc. .......................................... 3,600 199,350
Salomon, Inc. ............................................ 2,840 133,835
Scotsman Industries, Inc. ................................ 3,700 87,412
----------
2,728,231
----------
Motor Vehicles -- 0.51%
Borg Warner Automotive, Inc. ............................. 5,000 192,500
Excel Industries, Inc. ................................... 3,000 49,875
Ford Motor Co. ........................................... 3,880 123,675
Harley-Davidson, Inc. .................................... 3,526 165,722
Myers Industries, Inc. ................................... 4,920 83,025
Superior Industries International ........................ 1,938 44,816
----------
659,613
----------
66
<PAGE>
Non-Durables and Entertainment -- 1.36%
Cracker Barrel Old Country Store, Inc. ................... 27,000 685,125
Hasbro, Inc. ............................................. 4,660 181,158
Lancaster Colony Corp. ................................... 2,364 108,744
Luby's Cafeterias, Inc. .................................. 7,190 142,901
Oracle Systems Corp.* .................................... 2,000 83,500
Sbarro, Inc. ............................................. 12,800 326,400
Service Corp. International .............................. 8,100 226,800
----------
1,754,628
----------
Non-Ferrous Metals -- 0.15%
DT Industries, Inc. ...................................... 5,700 199,500
----------
Producer Goods -- 1.02%
Emerson Electric Co. ..................................... 1,000 96,750
Federal Signal Corp. ..................................... 3,900 100,912
General Electric Co. ..................................... 3,000 296,625
Hubbell, Inc. Class B .................................... 5,002 216,336
Illinois Tool Works, Inc. ................................ 2,100 167,738
Juno Lighting, Inc. ...................................... 9,139 146,224
Teleflex, Inc. ........................................... 2,390 124,579
Tennant Co. .............................................. 1,200 33,000
Trimas Corp. ............................................. 6,035 144,086
----------
1,326,250
----------
Railroads and Shipping -- 0.30%
Alexander & Baldwin, Inc. ................................ 12,160 304,000
Illinois Central Corp. ................................... 2,640 84,480
----------
388,480
----------
Retail -- 1.84%
Albertsons, Inc. ......................................... 3,200 114,000
Cato Corp. Class A ....................................... 14,118 70,590
Home Depot, Inc. ......................................... 4,000 200,500
Kohls Corp.* ............................................. 1,864 73,162
Nordstrom, Inc. .......................................... 19,000 673,312
Proffitts, Inc.* ......................................... 4,900 180,688
Stanhome, Inc. Voting .................................... 7,030 186,295
Talbots, Inc. ............................................ 4,349 124,490
Toys R Us* ............................................... 17,000 510,000
Walgreen Co. ............................................. 3,000 120,000
Zale Corp.* .............................................. 6,600 126,225
----------
2,379,262
----------
Soaps and Cosmetics -- 0.27%
Procter & Gamble Co. ..................................... 1,400 150,500
Unilever N. V. ........................................... 1,160 203,290
----------
353,790
----------
67
<PAGE>
Telephone -- 2.11%
AT&T Corp. ............................................... 17,000 739,500
AirTouch Communications, Inc.* ........................... 5,000 126,250
Century Telephone Enterprises, Inc. ...................... 19,000 586,625
MCI Communications Corp. ................................. 39,000 1,274,813
------------
2,727,188
------------
Tires and Rubber Goods -- 0.27%
Bandag, Inc. Class A ..................................... 7,600 347,700
------------
Tobacco -- 0.83%
Loews Corp. .............................................. 5,040 475,020
Philip Morris Companies, Inc. ............................ 4,340 488,793
UST, Inc. ................................................ 3,500 113,312
------------
1,077,125
------------
Travel and Recreation -- 0.53%
Callaway Golf Co. ........................................ 5,600 161,000
Carnival Corp. Class A ................................... 6,000 198,000
Disney (Walt) Co. ........................................ 2,900 201,912
Gaylord Entertainment Co. Class A ........................ 5,715 130,731
------------
691,643
------------
TOTAL COMMON STOCKS .......................................... 63,243,462
------------
(Cost $52,518,825)
MUTUAL FUNDS -- 5.50%
Pegasus International Equity Fund .......................... 516,796 6,093,022
Pegasus Small Cap Opportunity Fund ......................... 74,294 1,025,260
------------
TOTAL MUTUAL FUNDS ........................................... 7,118,282
------------
(Cost $7,000,000)
TOTAL INVESTMENTS ............................................ $129,397,806
============
(Cost $117,125,171)
<FN>
* Non-income producing security.
See Notes to Financial Statements.
</TABLE>
68
<PAGE>
Pegasus Managed Assets Balanced Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
Notes to Portfolio of Investments
The Fund invests in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Some of these securities are collateralized
mortgage obligations (CMOs). CMOs are debt securities issued by U.S.
government agencies or by financial institutions and other mortgage lenders
which are collateralized by a pool of mortgages held under an indenture.
Adjustable Rate (AR)
Inverse Floaters (IF) represent securities that pay interest at a rate that
increases (decreases) with a decline (increase) in a specified index.
Interest Only (IO) represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. The face amount shown
represents the par value on the underlying pool. The yields on these
securities are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that the initial investment will not be fully
recouped. These securities are subject to accelerated principal paydowns as a
result of prepayments or refinancing of the underlying pool of mortgage
instruments. As a result, interest income may be reduced considerably.
High Coupon Bonds (HB) (a.k.a. "IOettes") represent the right to receive
interest payments on an underlying pool of mortgages with similar risks as
those associated with IO securities. Unlike IO's the owner also has a right
to receive a very small portion of principal. The high interest rate results
from taking interest payments from other classes in the REMIC Trust and
allocating them to the small principal of the HB class.
Principal Only (PO) represents the right to receive the principal portion
only on an underlying pool of mortgage loans. The market value of these
securities is extremely volatile in response to changes in market interest
rates. As prepayments on the underlying mortgages of these securities
increase, the yield on these securities increases.
See Notes to Financial Statements.
69
<PAGE>
Pegasus Managed Assets Growth Fund
PPORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 17.95%
Salomon Brothers, Revolving Repurchase Agreement,
6.90%, 1/2/97 (secured by various U.S. Treasury
Strips with maturities ranging from 11/15/04
through 5/15/06, all held at Chase Bank) ....... $ 118,935 $118,935
--------
(Cost $118,935)
</TABLE>
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
MUTUAL FUNDS -- 82.05%
Pegasus Bond Fund ............................... 11,686 120,016
Pegasus Growth Fund ............................. 4,026 50,854
Pegasus Growth and Value Fund ................... 10,853 153,246
Pegasus International Bond Fund ................. 1,230 13,351
Pegasus International Equity Fund ............... 6,059 71,441
Pegasus Intrinsic Value Fund .................... 5,254 72,031
Pegasus Mid-Cap Opportunity Fund ................ 2,374 41,814
Pegasus Small Cap Opportunity Fund .............. 1,507 20,793
--------
TOTAL MUTUAL FUNDS .................................. 543,546
--------
(Cost $536,000)
TOTAL INVESTMENTS ................................... $662,481
========
(Cost $654,935)
</TABLE>
See Notes to Financial Statements.
70
<PAGE>
Pegasus Equity Income Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 6.96%
Salomon Brothers, Revolving Repurchase Agreement,
6.90%, 1/2/97 (secured by various U.S. Treasury
Strips with maturities ranging from 11/15/04
through 5/15/06, all held at Chase Bank) ....... $22,890,366 $ 22,890,366
-------------
(Cost $22,890,366)
CONVERTIBLE BONDS -- 0.53%
RLI Corp., 6.00%, 7/15/03 ....................... 1,350,000 1,751,625
-------------
(Cost $1,399,624)
</TABLE>
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
NON-CONVERTIBLE PREFERRED STOCKS -- 3.05%
Finance -- 3.05%
Salomon, Inc., 7.625% ........................... 324,400 10,015,850
-------------
(Cost $8,705,900)
COMMON STOCKS -- 89.46%
Aerospace -- 1.67%
Lockheed Martin Corp. ........................... 60,000 5,490,000
-------------
Banks -- 5.75%
Bancorp Hawaii, Inc. ............................ 50,000 2,100,000
Bank of New York Co, Inc. ....................... 97,000 3,273,750
Bankers Trust N.Y. Corp. ........................ 90,000 7,762,500
Mercantile Bankshares Corp. ..................... 180,000 5,760,000
-------------
18,896,250
-------------
Business Services -- 1.39%
Deluxe Corp. .................................... 140,000 4,585,000
-------------
Chemicals -- 8.78%
ARCO Chemical Co. ............................... 155,000 7,595,000
Dow Chemical Co. ................................ 100,000 7,837,500
Du Pont (E.I.) De Nemours & Co., Inc. ........... 71,000 6,700,625
NCH Corp. ....................................... 111,900 6,741,975
-------------
28,875,100
-------------
Consumer Durables -- 0.28%
National Presto Industries, Inc. ................ 24,200 904,475
-------------
Domestic Oil -- 3.02%
Atlantic Richfield Co. .......................... 55,000 7,287,500
MAPCO, Inc. ..................................... 77,800 2,645,200
-------------
9,932,700
-------------
Electronics -- 1.48%
Thomas & Betts Corp. ............................ 110,000 4,881,250
-------------
Energy And Utilities -- 7.57%
CINergy Corp. ................................... 130,000 4,338,750
Connecticut Energy Corp. ........................ 52,100 1,107,125
DTE Energy, Inc. ................................ 196,173 6,351,101
El Paso Natural Gas Co. ......................... 9 454
National Fuel Gas Co. ........................... 115,000 4,743,750
Sierra Pacific Resources ........................ 75,000 2,156,250
71
<PAGE>
SJW Corp. ....................................... 10,000 468,750
Texas Utilities Co. ............................. 113,000 4,604,750
United Illuminating Co. ......................... 35,200 1,104,400
-------------
24,875,330
-------------
Insurance -- 14.57%
American National Insurance Co. ................. 98,375 7,255,156
AON Corp. ....................................... 70,000 4,348,750
Home Beneficial Corp., Class B .................. 68,100 2,579,288
Lincoln National Corp. .......................... 100,000 5,250,000
Mid Ocean LTD ................................... 197,950 10,392,375
Ohio Casualty Corp. ............................. 191,600 6,801,800
Old Republic International Corp. ................ 328,650 8,791,388
SAFECO Corp. .................................... 63,000 2,484,562
-------------
47,903,319
-------------
International Oil -- 11.72%
Amoco Corp. ..................................... 155,000 12,477,500
British Petroleum PLC ADR ....................... 24,122 3,410,185
Mobil Corp. ..................................... 105,000 12,836,250
Texaco, Inc. .................................... 100,000 9,812,500
-------------
38,536,435
-------------
Miscellaneous and Conglomerates -- 2.67%
Guinness PLC ADR ................................ 223,900 8,764,767
-------------
Micellaneous Finance -- 3.42%
Federal National Mortgage Association ........... 302,000 11,249,500
-------------
Motor Vehicles -- 2.42%
Ford Motor Co. .................................. 249,597 7,955,904
-------------
Non-Durables and Entertainment -- 2.53%
Luby's Cafeterias, Inc. ......................... 240,900 4,787,888
Sbarro, Inc. .................................... 138,000 3,519,000
-------------
8,306,888
-------------
Non-Ferrous Metals -- 1.23%
Phelps Dodge Corp. .............................. 60,000 4,050,000
-------------
Paper and Forest Products -- 1.37%
Weyerhaeuser Co. ................................ 95,000 4,500,625
-------------
Producer Goods -- 1.78%
Tenneco, Inc. ................................... 130,000 5,866,250
-------------
Railroads and Shipping -- 0.99%
Alexander & Baldwin, Inc. ....................... 130,500 3,262,500
-------------
Real Property -- 4.25%
Amli Residential Properties Trust ............... 140,000 3,272,500
Equity Residential Properties Trust ............. 100,000 4,125,000
National Health Investors, Inc. ................. 174,000 6,590,250
-------------
13,987,750
-------------
72
<PAGE>
Retail -- 0.48%
Stanhome, Inc. VTG .............................. 60,000 1,590,000
-------------
Soaps and Cosmetics -- 3.00%
Clorox Co. ...................................... 46,000 4,617,250
Unilever N V Netherlands ........................ 30,000 5,257,500
-------------
9,874,750
-------------
Telephone -- 4.33%
GTE Corp. ....................................... 210,000 9,555,000
Sprint Corp. .................................... 117,500 4,685,313
-------------
14,240,313
-------------
Tires and Rubber Goods -- 1.47%
Bandag, Inc., Class A ........................... 105,400 4,822,050
-------------
Tobacco -- 3.29%
Philip Morris Companies, Inc. ................... 50,841 5,725,968
UST, Inc. ....................................... 157,500 5,099,062
-------------
10,825,030
-------------
TOTAL COMMON STOCKS ................................. 294,176,186
-------------
(Cost $237,855,952)
TOTAL INVESTMENTS ................................... $ 328,834,027
=============
(Cost $270,851,842)
</TABLE>
73
<PAGE>
Pegasus Growth Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 0.61%
Salomon Brothers, Revolving Repurchase Agreement,
6.90%, 1/2/97, (secured by various U.S. Treasury
Strips with maturities ranging from 11/15/04
through 5/15/06, all held at Chase Bank) ........ $3,364,658 $ 3,364,658
------------
(Cost $3,364,658)
</TABLE>
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
COMMON STOCKS -- 99.39%
Banks -- 3.76%
Norwest Corp. ................................... 317,000 13,789,500
State Street Boston Corp. ....................... 110,000 7,095,000
------------
20,884,500
------------
Business Machines -- 6.80%
Electronic Data System Corp. .................... 175,000 7,568,750
Microsoft Corp. * ............................... 240,000 19,830,000
Silicon Graphics * .............................. 405,000 10,327,500
------------
37,726,250
------------
Business Services -- 5.55%
Automatic Data Processing, Inc. ................. 286,000 12,262,250
Computer Associates International, Inc. ......... 210,000 10,447,500
Interpublic Group of Companies, Inc. ............ 170,000 8,075,000
------------
30,784,750
------------
Chemicals -- 1.83%
Praxair, Inc. ................................... 220,000 10,147,500
------------
Construction -- 4.64%
Fluor Corp. ..................................... 173,000 10,855,750
York International Corp. ........................ 267,000 14,918,625
------------
25,774,375
------------
Consumer Durables -- 1.69%
Newell Co. ...................................... 298,000 9,387,000
------------
Containers -- 2.09%
Crown Cork & Seal Co., Inc. ..................... 213,000 11,581,875
------------
Drugs and Medicine -- 17.38%
American Home Products Corp. .................... 100,000 5,862,500
Amgen, Inc. * ................................... 190,000 10,331,250
Columbia/HCA Healthcare Corp. ................... 369,000 15,036,750
Johnson & Johnson ............................... 260,000 12,935,000
Medtronic, Inc. ................................. 42,000 2,856,000
Mylan Laboratories, Inc. ........................ 430,000 7,202,500
Pall Corp. ...................................... 275,000 7,012,500
Pfizer, Inc. .................................... 100,000 8,287,500
Smithkline Beecham PLC ADR ...................... 200,000 13,600,000
Stryker Corp. ................................... 181,400 5,419,325
United Healthcare Corp. ......................... 176,000 7,920,000
------------
96,463,325
------------
74
<PAGE>
Electronics -- 8.49%
AMP, Inc. ....................................... 250,000 9,593,750
Hewlett Packard Co. ............................. 200,000 10,050,000
Intel Corp. ..................................... 160,000 20,950,000
Lucent Technologies, Inc. ....................... 141,600 6,549,000
------------
47,142,750
------------
Energy And Utilities -- 3.42%
AES Corp. * ..................................... 134,800 6,268,200
Enron Corp. ..................................... 295,000 12,721,875
------------
18,990,075
------------
Energy Raw Materials -- 3.24%
Schlumberger,Ltd. ............................... 45,000 4,494,375
Western Atlas, Inc. * ........................... 190,000 13,466,250
------------
17,960,625
------------
Food and Agriculture -- 1.42%
PepsiCo, Inc. ................................... 270,000 7,897,500
------------
Insurance -- 6.93%
AFLAC, Inc. ..................................... 200,000 8,550,000
American International Group, Inc. .............. 100,000 10,825,000
Chubb Corp. ..................................... 100,000 5,375,000
Unum Corp. ...................................... 190,000 13,727,500
------------
38,477,500
------------
Miscellaneous & Conglomerates -- 2.16%
Elan PLC ADR * .................................. 360,000 11,970,000
------------
Non-Durables and Entertainment -- 5.94%
Kimberly-Clark Corp. ............................ 110,000 10,477,500
Oracle Systems Corp. * .......................... 190,000 7,932,500
Service Corp. International ..................... 520,000 14,560,000
------------
32,970,000
------------
Producer Goods -- 3.03%
Emerson Electric Co. ............................ 70,000 6,772,500
Illinois Tool Works, Inc. ....................... 126,000 10,064,250
------------
16,836,750
------------
Retail -- 5.36%
Albertsons, Inc. ................................ 244,300 8,703,188
Home Depot, Inc. ................................ 260,000 13,032,500
Walgreen Co. .................................... 200,000 8,000,000
------------
29,735,688
------------
Soaps and Cosmetics -- 1.94%
Procter & Gamble Co. ............................ 100,000 10,750,000
------------
75
<PAGE>
Telephone -- 4.44%
AirTouch Communications, Inc. * ................. 425,000 10,731,250
MCI Communications Corp. ........................ 425,000 13,892,188
------------
24,623,438
------------
Tobacco -- 4.44%
Philip Morris Companies, Inc. ................... 150,000 16,893,750
UST, Inc. ....................................... 240,000 7,770,000
------------
24,663,750
------------
Travel and Recreation -- 4.85%
Carnival Corp. Class A .......................... 395,000 13,035,000
Disney (Walt) Co. ............................... 85,000 5,918,125
Gaylord Entertainment Co. Class A ............... 349,550 7,995,956
------------
26,949,081
------------
TOTAL COMMON STOCKS ................................. 551,716,731
------------
(Cost $425,165,644)
TOTAL INVESTMENTS ................................... $555,081,389
============
(Cost $428,530,302)
<FN>
* Non-income producing security
See Notes to Financial Statements.
</TABLE>
76
<PAGE>
Pegasus Mid-Cap Opportunity Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 1.64%
Salomon Brothers, Revolving Repurchase Agreement,
6.90%, 1/2/97 (secured by various U.S. Treasury
Strips with maturities ranging from 11/15/04
through 5/15/06, all held at Chase Bank) ........ $12,577,198 $ 12,577,198
------------
(Cost $12,577,198)
</TABLE>
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
COMMON STOCKS -- 98.36%
Air Transport -- 1.21%
Air Express International Corp. ................. 287,600 9,275,100
------------
Apparel -- 1.29%
Nine West Group, Inc.* .......................... 212,850 9,870,919
------------
Banks -- 5.60%
Charter One Financial, Inc. ..................... 319,000 13,398,000
First Tennessee National Corp. .................. 365,000 13,687,500
TCF Financial Corp. ............................. 361,400 15,720,900
------------
42,806,400
------------
Business Machines -- 2.70%
Diebold, Inc. ................................... 161,575 10,159,028
Xilinx, Inc.* ................................... 284,100 10,458,431
------------
20,617,459
------------
Business Services -- 6.57%
American Management Systems, Inc.* .............. 232,950 5,707,275
CDI Corp.* ...................................... 181,000 5,135,875
DST Systems, Inc.* .............................. 251,100 7,878,263
G & K Services, Inc. Class A .................... 270,000 10,192,500
Omnicom Group, Inc. ............................. 239,220 10,944,315
SunGard Data Systems, Inc.* ..................... 263,900 10,424,050
------------
50,282,278
------------
Chemicals -- 0.87%
RPM, Inc. ....................................... 390,272 6,634,624
------------
Construction -- 2.61%
Crane Co. ....................................... 687,219 19,929,351
------------
Consumer Durables -- 2.70%
Durakon Industries, Inc.* ....................... 314,892 4,014,873
Invacare Corp. .................................. 42,800 1,177,000
Leggett & Platt, Inc. ........................... 445,910 15,439,634
------------
20,631,507
------------
Containers -- 1.45%
AptarGroup, Inc. ................................ 314,400 11,082,600
------------
Drugs and Medicine -- 5.44%
Health Care & Retirement Corp.* ................. 284,334 8,139,061
Quorum Health Group, Inc.* ...................... 362,800 10,793,300
Sybron International Corp.* ..................... 413,300 13,638,900
Vivra, Inc.* .................................... 326,400 9,016,800
------------
41,588,061
------------
77
<PAGE>
Electronics -- 9.52%
Belden, Inc. .................................... 585,000 21,645,000
Dynatech Corp.* ................................. 252,700 11,181,975
KEMET Corp.* .................................... 326,500 7,591,125
Microchip Technology, Inc.* ..................... 260,900 13,273,288
Molex, Inc. Class A Non-Voting .................. 246,607 8,785,374
Teradyne, Inc.* ................................. 424,200 10,339,875
------------
72,816,637
------------
Energy Raw Materials -- 5.61%
Apache Corp. .................................... 502,374 17,771,480
Noble Affiliates, Inc. .......................... 316,400 15,147,650
Southwestern Energy Co. ......................... 658,074 9,953,369
------------
42,872,499
------------
Insurance -- 4.65%
Capital Re Corp. ................................ 310,000 14,453,750
CapMac Holdings, Inc ............................ 180,500 5,979,063
Transatlantic Holdings, Inc. .................... 188,246 15,153,803
------------
35,586,616
------------
Media -- 1.39%
Banta Corp. ..................................... 466,415 10,669,243
------------
Miscellaneous and Conglomerates -- 9.30%
ABC Rail Products Corp.* ........................ 240,800 4,785,900
Culligan Water Technologies, Inc.* .............. 213,000 8,626,500
DENTSPLY International, Inc. .................... 274,200 13,024,500
Greenfield Industries, Inc. ..................... 476,300 14,586,687
Health Management Associates, Inc. Class A* ..... 171,062 3,848,895
Littelfuse, Inc.* ............................... 279,600 13,560,600
Wolverine Tube, Inc.* ........................... 360,000 12,690,000
------------
71,123,082
------------
Miscellaneous Finance -- 15.44%
CMAC Investment Corp. ........................... 420,400 15,449,700
Edwards (A.G.), Inc. ............................ 476,580 16,025,003
Everest Reinsurance Holdings, Inc. .............. 543,800 15,634,250
Executive Risk, Inc. ............................ 248,600 9,198,200
FINOVA Group, Inc. .............................. 326,665 20,988,226
First Financial Corp. ........................... 286,750 7,025,375
Idex Corp. ...................................... 322,229 12,848,861
PMI Group, Inc. ................................. 262,300 14,524,863
Scotsman Industries, Inc. ....................... 272,000 6,426,000
------------
118,120,478
------------
78
<PAGE>
Motor Vehicles -- 4.96%
Borg Warner Automotive .......................... 352,000 13,552,000
Excel Industries, Inc. .......................... 220,800 3,670,800
Harley-Davidson, Inc. ........................... 243,774 11,457,378
Myers Industries, Inc. .......................... 358,120 6,043,275
Superior Industries International ............... 138,844 3,210,767
------------
37,934,220
------------
Non-Durables and Entertainment -- 1.02%
Lancaster Colony Corp. .......................... 169,296 7,787,616
------------
Non-Ferrous Metals -- 1.96%
DT Industries, Inc. ............................. 428,500 14,997,500
------------
Producer Goods -- 7.08%
Federal Signal Corp. ............................ 300,000 7,762,500
Hubbell, Inc. Class B ........................... 365,326 15,800,350
Juno Lighting, Inc. ............................. 669,711 10,715,376
Teleflex, Inc. .................................. 180,260 9,396,052
TriMas Corp. .................................... 439,465 10,492,227
------------
54,166,505
------------
Retail -- 5.41%
Cato Corp. Class A .............................. 1,019,082 5,095,410
Kohls Corp.* .................................... 136,236 5,347,263
Proffitts, Inc.* ................................ 350,000 12,906,250
Talbots, Inc. ................................... 316,001 9,045,529
Zale Corp.* ..................................... 471,100 9,009,787
------------
41,404,239
------------
Travel and Recreation -- 1.58%
Callaway Golf Co. ............................... 420,400 12,086,500
------------
TOTAL COMMON STOCKS ................................. 752,283,434
------------
(Cost $556,056,662)
TOTAL INVESTMENTS ................................... $764,860,632
============
(Cost $568,633,860)
<FN>
* Non-income producing security.
See Notes to Financial Statements.
</TABLE>
79
<PAGE>
Pegasus Small Cap Opportunity Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 3.00%
Salomon Brothers, Revolving Repurchase Agreement,
6.90%, 1/2/97, (secured by various U.S. Treasury
Strips with maturities ranging from 11/15/04
through 5/15/06, all held at Chase Bank) ........ $3,968,591 $ 3,968,591
------------
(Cost $3,968,591)
</TABLE>
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
COMMON STOCKS -- 97.00%
Business Machines -- 6.15%
Boole & Babbage, Inc. ........................... 45,450 1,136,250
Cort Business Services Corp.* ................... 156,400 3,225,750
Perceptron, Inc.* ............................... 110,000 3,767,500
------------
8,129,500
------------
Business Services -- 6.32%
Education Management Corp. ...................... 100,700 2,114,700
G & K Services, Inc., Class A ................... 50,000 1,887,500
National Processing, Inc.* ...................... 58,700 939,200
Patterson Dental Co.* ........................... 60,000 1,695,000
Remedytemp, Inc., Class A* ...................... 100,000 1,725,000
------------
8,361,400
------------
Chemicals -- 1.86%
Brady (W.H.) Co., Class A ....................... 100,000 2,462,50
------------
Containers -- 1.44%
Aptargroup, Inc. ................................ 54,200 1,910,550
------------
Drugs & Medicine -- 8.70%
American Medical Response, Inc.* ................ 30,000 975,000
Amerisource Health Corp., Class A* .............. 60,000 2,895,000
EmCare Holdings, Inc.* .......................... 85,000 1,976,250
Health Care & Retirement Corp. .................. 47,500 1,359,688
Meridian Diagnostics, Inc.* ..................... 80,000 1,040,000
Multicare Companies, Inc.* ...................... 55,000 1,113,750
Universal Health Services, Inc., Class B ........ 75,000 2,146,875
------------
11,506,563
------------
Electronics -- 9.69%
Belden, Inc. .................................... 95,000 3,515,000
Holphane Corp.* ................................. 140,000 2,660,000
Methode Electronics, Inc., Class A .............. 120,000 2,430,000
Microchip Technology, Inc.* ..................... 40,000 2,035,000
Wyle Electronics ................................ 55,000 2,172,500
------------
12,812,500
------------
Energy & Utilities -- 1.50%
Charter Power Systems, Inc. ..................... 65,000 1,982,500
------------
Energy Raw Materials -- 4.50%
Noble Affiliates, Inc. .......................... 44,500 2,130,438
Smith International, Inc. ....................... 35,000 1,570,625
Swift Energy Co.* ............................... 75,000 2,240,625
------------
5,941,688
------------
80
<PAGE>
Insurance -- 6.52%
Capital RE Corp. ................................ 75,000 3,496,875
CapMac Holdings, Inc. ........................... 85,000 2,815,625
Western National Corp. .......................... 120,000 2,310,000
------------
8,622,500
------------
Media -- 3.18%
Metro Networks, Inc.* ........................... 50,000 1,262,500
Oak Industries, Inc. ............................ 55,000 1,265,000
Spss, Inc.* ..................................... 60,000 1,672,500
------------
4,200,000
------------
Miscellaneous & Conglomerates -- 15.23%
ABC Rail Products Corp.* ........................ 115,000 2,285,625
Greenfield Industries, Inc. ..................... 95,000 2,909,375
IHOP Corp.* ..................................... 80,000 1,890,000
Littelfuse, Inc.* ............................... 60,000 2,910,000
Panavision, Inc. ................................ 100,000 2,075,000
Prime Service, Inc. ............................. 45,000 1,237,500
Rural Metro Corp.* .............................. 60,000 2,160,000
Stewart Enterprises, Inc., Class A .............. 65,000 2,210,000
Wolverine Tube, Inc.* ........................... 70,000 2,467,500
------------
20,145,000
------------
Miscellaneous Finance -- 10.12%
BA Merchant Services, Inc. ...................... 75,000 1,340,625
CMAC Investment Corp. ........................... 76,400 2,807,700
Delta Financial Corp. ........................... 75,000 1,350,000
Executive Risk, Inc. ............................ 42,400 1,568,800
First Financial Corp. ........................... 77,750 1,904,875
Idex Corp. ...................................... 60,000 2,392,500
Southern Pacific Funding Corp.* ................. 65,000 2,023,125
------------
13,387,625
------------
Motor Vehicles -- 7.37%
Borg Warner Automotive, Inc. .................... 75,000 2,887,500
Control Devices, Inc. ........................... 165,900 2,156,700
Dura Automotive Systems, Inc. ................... 100,000 2,250,000
Excel Industries, Inc. .......................... 85,000 1,413,125
Superior Industries International ............... 45,000 1,040,625
------------
9,747,950
------------
Non-Ferous Metals -- 1.98%
DT Industries, Inc. ............................. 75,000 2,625,000
------------
Paper & Forest Products -- 0.99%
Rock Tenn Co., Class A .......................... 66,000 1,303,500
------------
Producer Goods -- 1.75%
Watsco, Inc. .................................... 80,000 2,310,000
------------
81
<PAGE>
Retail -- 7.31%
Mens Warehouse, Inc. ............................ 115,000 2,817,500
99 Cents Only Stores* ........................... 190,000 3,111,250
Proffitts, Inc.* ................................ 70,000 2,581,250
Tommy Hilfiger Corp.* ........................... 24,100 1,156,800
------------
9,666,800
------------
Soaps & Cosmetics -- 1.25%
Alberto Culver Co., Class A ..................... 40,000 1,650,000
------------
Trucking & Freight -- 1.14%
US Freightways Corp. ............................ 55,000 1,509,062
------------
TOTAL COMMON STOCKS ................................. 128,274,638
------------
(Cost $104,884,192)
TOTAL INVESTMENTS ................................... $132,243,229
============
(Cost $108,852,783)
<FN>
* Non-income producing security
</TABLE>
Notes to Portfolio of Investments
(a) Transactions in Securities of Affiliated Issuers
Affiliated issuers, as defined under the Investment Company Act of
1940, are those in which the Fund's holding of an issuer represents 5% or
more of the outstanding voting securities of the issuer. A summary of the
Funds' transactions in the securities of these issuers during the year ended
December 31, 1996, is set forth below:
<TABLE>
<CAPTION>
Acquisitions
-------------------------
Ending
Beginning Share Share Ending
Affiliate Amount Share Amount Cost Amount Value
--------- --------------- ------------ ---- ------ ------
<S> <C> <C> <C> <C> <C>
Control Devices, Inc. ............................... 0 165,900 $1,548,635 165,900 $2,156,700
</TABLE>
See Notes to Financial Statements.
82
<PAGE>
Pegasus Intrinsic Value Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 5.14%
Salomon Brothers, Revolving Repurchase Agreement,
6.90%, 1/2/97, (secured by various U.S. Treasury
Strips with maturities ranging from 11/15/04
through 5/15/06, all held at Chase Bank) ........ $19,640,247 $19,640,247
-----------
(Cost $19,640,247)
CONVERTIBLE BONDS -- 7.55%
Chubb Capital Corp., 6.00%, 5/15/98 ............... 3,330,000 4,187,475
Consolidated Natural Gas Co., 7.25%, 12/15/15 ..... 4,549,700 4,805,621
Leucadia National Corp., 5.25% 2/1/03 ............. 9,370,500 9,815,599
Nac Re Corp., 5.25%, 12/15/02 ..................... 10,427,000 10,035,987
-----------
(Cost $27,893,253) ................................ 28,844,682
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
NON-CONVERTIBLE PREFERRED -- 0.48%
Finance -- 0.48%
Salomon, Inc., 7.625% Preferred ................. 60,000 1,852,500
-----------
(Cost $1,683,750)
COMMON STOCKS -- 86.83%
Aerospace -- 2.97%
Lockheed Martin Corp. ........................... 124,200 11,364,300
-----------
Air Transport -- 1.66%
Flightsafety International, Inc. ................ 132,300 6,333,862
-----------
Apparel -- 6.81%
Payless Shoesource, Inc.* ....................... 325,005 12,187,688
Unifi, Inc. ..................................... 294,200 9,451,175
V. F. Corp. ..................................... 65,100 4,394,250
-----------
26,033,113
-----------
Banks -- 4.35%
Bancorp Hawaii, Inc. ............................ 206,400 8,668,800
First Union Corp. ............................... 50,750 3,755,500
Mercantile Bankshares Corp. ..................... 131,400 4,204,800
-----------
16,629,100
-----------
Business Services -- 2.40%
Grey Advertising, Inc. .......................... 8,550 2,163,150
National Service Industries, Inc. ............... 187,300 7,000,338
-----------
9,163,488
-----------
Chemicals -- 2.57%
NCH Corp. ....................................... 163,100 9,826,775
-----------
Consumer Durables -- 2.20%
Hillenbrand Industries, Inc. .................... 122,665 4,446,606
National Presto Industries, Inc. ................ 106,200 3,969,225
-----------
8,415,831
-----------
83
<PAGE>
Domestic Oil -- 4.12%
Atlantic Richfield Co. .......................... 28,300 3,749,750
MAPCO, Inc. ..................................... 352,200 11,974,800
-----------
15,724,550
-----------
Drugs and Medicine -- 1.92%
Block Drug, Inc., Class A ....................... 77,685 3,680,715
Bristol-Myers Squibb Co. ........................ 33,500 3,643,125
-----------
7,323,840
-----------
Energy and Utilities -- 4.54%
Equitable Resources, Inc. ....................... 128,200 3,813,950
Sierra Pacific Resources ........................ 303,600 8,728,500
Washington Water Power Co. ...................... 258,100 4,807,11
-----------
17,349,562
-----------
Energy Raw Materials -- 1.38%
Ashland Coal, Inc. .............................. 190,400 5,283,600
-----------
Food and Agriculture -- 1.33%
Farmer Brothers Co. ............................. 33,385 5,074,520
-----------
Insurance -- 18.27%
Allmerica Property & Casualty Co. ............... 165,700 5,033,138
AMBAC, Inc. ..................................... 109,500 7,268,062
Citizens Corp. .................................. 313,000 7,042,500
Financial Security Assurance Holdings ........... 206,500 6,788,687
Home Beneficial Corp. Class B ................... 337,600 12,786,600
Mid Ocean Ltd. .................................. 216,000 11,340,000
Old Republic International Corp. ................ 430,800 11,523,900
Safeco Corp. .................................... 203,400 8,021,588
-----------
69,804,475
-----------
International Oil -- 0.97%
Amoco Corp. ..................................... 46,100 3,711,050
-----------
Media -- 0.81%
Gannett Co., Inc. ............................... 41,200 3,084,850
-----------
Miscellaneous and Conglomerates -- 2.53%
Guiness Plc Adr ................................. 246,800 9,661,208
-----------
Miscellaneous Finance -- 8.08%
Federal National Mortgage Association ........... 322,700 12,020,575
Fund American Enterprises Holdings, Inc. ........ 160,440 15,362,130
Salomon, Inc. ................................... 74,300 3,501,388
-----------
30,884,093
-----------
Motor Vehicles -- 0.83%
Ford Motor Co. .................................. 99,498 3,171,499
-----------
Non-Durables and Entertainment -- 5.16%
Hasbro, Inc. .................................... 131,300 5,104,287
Lubys Cafeterias, Inc. .......................... 313,500 6,230,813
Sbarro, Inc. .................................... 327,900 8,361,450
-----------
19,696,550
-----------
84
<PAGE>
Producer Goods -- 0.24%
Tennant Co. ..................................... 33,200 913,000
------------
Railroads and Shipping -- 2.75%
Alexander & Baldwin, Inc. ....................... 331,200 8,280,000
Illinois Central Corp. Series A ................. 69,150 2,212,800
------------
10,492,800
------------
Retail -- 1.56%
Stanhome, Inc., Voting .......................... 225,100 5,965,150
------------
Soaps and Cosmetics -- 1.51%
Unilever N.V. ................................... 32,900 5,765,725
------------
Tires and Rubber Goods -- 2.64%
Bandag, Inc. Class A ............................ 220,900 10,106,175
------------
Tobacco -- 5.23%
Loews Corp. ..................................... 149,300 14,071,525
Philip Morris Companies, Inc. ................... 52,400 5,901,550
------------
19,973,075
------------
TOTAL COMMON STOCKS ................................. $331,752,191
------------
(Cost $262,688,616)
TOTAL INVESTMENTS ................................... $382,089,620
============
(Cost $311,905,866)
<FN>
* Non-income producing security.
See Notes to Financial Statements.
</TABLE>
85
<PAGE>
Pegasus Growth and Value Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT-1.62%
Salomon Brothers, Revolving Repurchase Agreement,
6.90%, 1/2/97 (secured by various U.S. Treasury
Strips with maturities ranging from 11/15/04
through 5/15/06, all held at Chase Bank) ........ $12,748,583 $ 12,748,583
------------
(Cost $12,748,583)
Shares
------
COMMON STOCKS -- 98.38%
Aerospace -- 2.91%
Boeing Co. ...................................... 215,000 22,870,625
------------
Apparel -- 2.04%
Russell Corp. ................................... 539,000 16,035,250
------------
Banks -- 7.94%
BankAmerica Corp. ............................... 192,000 19,152,000
Barnett Banks, Inc. ............................. 273,000 11,227,125
Fleet Financial Group, Inc. ..................... 286,000 14,264,250
Norwest Corp. ................................... 410,000 17,835,000
------------
62,478,375
------------
Business Machines -- 2.59%
Electronic Data Systems Corp. ................... 472,000 20,414,000
------------
Business Services -- 5.32%
Deluxe Corp. .................................... 624,000 20,436,000
Dun & Bradstreet Corp. .......................... 274,000 6,507,500
WMX Technologies, Inc. .......................... 456,000 14,877,000
------------
41,820,500
------------
Chemicals -- 3.84%
Great Lakes Chemical Corp. ...................... 191,000 8,929,250
Sigma-Aldrich Corp. ............................. 341,000 21,291,187
------------
30,220,437
------------
Construction -- 5.40%
Masco Corp. ..................................... 471,000 16,956,000
York International Corp. ........................ 457,000 25,534,875
------------
42,490,875
------------
Consumer Durables -- 1.78%
Rubbermaid, Inc. ................................ 615,000 13,991,250
------------
Containers -- 2.48%
Crown Cork & Seal Co., Inc. ..................... 359,000 19,520,625
------------
Drugs and Medicine -- 7.94%
Abbott Laboratories Corp. ....................... 324,000 16,443,000
Bristol-Myers Squibb Co. ........................ 202,000 21,967,500
Schering-Plough Corp. ........................... 371,000 24,022,250
------------
62,432,750
------------
86
<PAGE>
Electronics -- 4.88%
Hewlett Packard Co. ............................. 289,000 14,522,250
Lucent Technologies, Inc. ....................... 161,000 7,446,250
Motorola, Inc. .................................. 268,000 16,448,500
------------
38,417,000
------------
Energy and Utilities -- 9.18%
Enron Corp. ..................................... 385,000 16,603,125
FPL Group, Inc. ................................. 431,000 19,826,000
MCN Corp. ....................................... 545,000 15,736,875
Pinnacle West Capital Corp. ..................... 631,000 20,034,250
------------
72,200,250
------------
Energy Raw Materials -- 3.38%
Schlumberger Ltd. ............................... 266,000 26,566,750
------------
Food and Agriculture -- 9.68%
ConAgra, Inc. ................................... 375,000 18,656,250
CPC International, Inc. ......................... 261,000 20,227,500
PepsiCo, Inc. ................................... 659,000 19,275,750
Sysco Corp. ..................................... 551,000 17,976,375
------------
76,135,875
------------
Insurance -- 4.48%
American International Group, Inc. .............. 105,000 11,366,250
Chubb Corp. ..................................... 444,000 23,865,000
------------
35,231,250
------------
International Oil -- 1.69%
British Petroleum PLC ADR ....................... 94,001 13,289,378
------------
Liquor -- 2.50%
Anheuser-Busch Companies, Inc. .................. 491,000 19,640,000
------------
Media -- 5.01%
Gannett Co., Inc. ............................... 253,000 18,943,375
Washington Post Co. Class B ..................... 61,000 20,442,625
------------
39,386,000
------------
Miscellaneous & Conglomerates -- 1.15%
Cognizant Corp. ................................. 274,000 9,042,000
------------
Non-Durables and Entertainment -- 2.06%
Cracker Barrel Old Country Store, Inc. .......... 638,000 16,189,250
------------
Producer Goods -- 1.05%
General Electric Co. ............................ 84,000 8,305,500
------------
Retail -- 3.68%
Nordstrom, Inc. ................................. 468,000 16,584,750
Toys R Us* ...................................... 412,000 12,360,000
------------
28,944,750
------------
87
<PAGE>
Telephone -- 7.40%
AT&T Corp. ...................................... 418,000 18,183,000
Century Telephone Enterprises, Inc. ............. 468,000 14,449,500
MCI Communications Corp. ........................ 782,000 25,561,625
------------
58,194,125
------------
TOTAL COMMON STOCKS ................................. 773,816,815
------------
(Cost $597,354,700)
TOTAL INVESTMENTS ................................... $786,565,398
============
(Cost $610,103,283)
<FN>
* Non-income producing security.
See Notes to Financial Statements.
</TABLE>
88
<PAGE>
Pegasus Equity Index Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Shares Market Value
----------- ------ ------------
<S> <C> <C>
COMMON STOCKS -- 100.00%
Aerospace -- 2.40%
Boeing Co. ...................................... 54,587 $ 5,806,692
General Dynamics Corp. .......................... 12,556 885,198
Lockheed Martin Corp. ........................... 29,509 2,700,074
McDonnell Douglas Corp. ......................... 35,202 2,252,928
Northrop Grumman Corp. .......................... 7,872 651,408
Raytheon Co. .................................... 35,548 1,710,748
Rockwell International Corp. .................... 31,629 1,925,415
Textron, Inc. ................................... 12,533 1,181,235
TRW, Inc. ....................................... 22,140 1,095,930
United Technologies Corp. ....................... 39,532 2,609,112
------------
20,818,740
------------
Air Transport -- 0.42%
AMR Corp. * ..................................... 12,704 1,119,540
Delta Air Lines, Inc. ........................... 12,409 879,488
Federal Express Corp. * ......................... 15,012 668,034
Southwest Airlines Co. .......................... 29,100 643,838
USAir Group, Inc. * ............................. 15,100 352,962
------------
3,663,862
------------
Apparel -- 0.58%
Fruit of the Loom, Inc., Class A * .............. 11,800 446,925
Liz Claiborne, Inc. ............................. 7,712 297,876
Nike, Inc. Class B .............................. 42,624 2,546,784
Reebok International Ltd. ....................... 8,600 361,200
Russell Corp. ................................... 11,900 354,025
Stride Rite Corp. ............................... 43,800 438,000
V.F. Corp. ...................................... 8,648 583,740
------------
5,028,550
------------
Banks -- 8.13%
Banc One Corp. .................................. 64,687 2,781,541
Bank of Boston Corp. ............................ 23,326 1,498,696
Bank of New York Co., Inc. ...................... 56,680 1,912,950
BankAmerica Corp. ............................... 55,332 5,519,367
Bankers Trust New York Corp. .................... 11,194 965,483
Barnett Banks, Inc. ............................. 35,208 1,447,929
Boatmens Bancshares, Inc. ....................... 25,566 1,649,007
Chase Manhattan Corp. ........................... 67,085 5,987,336
Citicorp ........................................ 74,242 7,646,926
Comerica, Inc. .................................. 18,600 974,175
CoreStates Financial Corp. ...................... 32,965 1,710,059
Dean Witter, Discover & Co. ..................... 25,407 1,683,214
Fifth Third Bancorp ............................. 14,500 910,781
First Bank System, Inc. ......................... 20,560 1,403,220
First Chicago NBD Corp. ......................... 47,916 2,575,485
First Union Corp. ............................... 43,090 3,188,660
Fleet Financial Group, Inc. ..................... 39,095 1,949,863
KeyCorp ......................................... 34,500 1,742,250
89
<PAGE>
MBNA Corp. ...................................... 33,882 1,406,103
Mellon Bank Corp. ............................... 20,554 1,459,334
Morgan (J.P.) & Co., Inc. ....................... 28,022 2,735,648
National City Corp. ............................. 38,200 1,714,225
NationsBank Corp. ............................... 44,150 4,315,662
Norwest Corp. ................................... 54,326 2,363,181
PNC Bank Corp. .................................. 52,665 1,981,521
Republic NY Corp. ............................... 9,292 758,460
Suntrust Banks, Inc. ............................ 37,904 1,866,772
U.S. Bancorp .................................... 25,467 1,144,423
Wachovia Corp. .................................. 25,073 1,416,624
Wells Fargo & Co. ............................... 14,513 3,914,882
------------
70,623,777
------------
Business Machines -- 5.89%
Amdahl Corp. * .................................. 25,100 304,337
Apple Computer, Inc. * .......................... 18,306 382,138
Bay Networks, Inc. * ............................ 25,600 534,400
Ceridian Corp. * ................................ 10,200 413,100
Cisco System, Inc. * ............................ 100,100 6,368,863
Compaq Computer Corp. * ......................... 42,139 3,128,821
Dell Computer Corp. * ........................... 28,000 1,487,500
Digital Equipment Corp. * ....................... 22,747 827,422
Honeywell, Inc. ................................. 19,577 1,287,188
Intergraph Corp. * .............................. 33,000 338,250
International Business Machines Corp. ........... 81,437 12,296,986
Microsoft Corp. * ............................... 187,000 15,450,875
Novell, Inc. * .................................. 44,679 423,052
Pitney Bowes, Inc. .............................. 25,621 1,396,344
Seagate Technology * ............................ 38,700 1,528,650
Silicon Graphics* ............................... 21,845 557,048
Sun Microsystems, Inc. * ........................ 54,536 1,400,893
Tandem Computers, Inc. * ........................ 25,900 356,125
Xerox Corp. ..................................... 50,464 2,655,668
------------
51,137,660
------------
Business Services -- 1.76%
Allergan, Inc. .................................. 10,600 377,625
Automatic Data Processing, Inc. ................. 44,136 1,892,331
Block (H.& R.), Inc. ............................ 11,190 324,510
Browning-Ferris Industries, Inc. ................ 30,048 788,760
Computer Associates International, Inc. ......... 56,806 2,826,098
Computer Sciences Corp. * ....................... 10,660 875,453
Deluxe Corp. .................................... 11,409 373,645
Dun & Bradstreet Corp. .......................... 25,231 599,236
Ecolab, Inc. .................................... 15,546 584,918
Harland (John H.) Co. ........................... 17,200 567,600
Interpublic Group of Companies, Inc. ............ 11,232 533,520
Laidlaw Inc., Class B ........................... 47,242 543,283
Moore Corp. Ltd. ................................ 23,228 473,271
90
<PAGE>
National Service Industries, Inc. ............... 8,000 299,000
U.S. West Media Group * ......................... 96,031 1,776,574
WMX Technologies, Inc. .......................... 74,554 2,432,324
------------
15,268,148
------------
Chemicals -- 2.76%
Air Products & Chemicals, Inc. .................. 15,263 1,055,055
Dow Chemical Co. ................................ 37,945 2,973,939
DuPont (E I) de Nemours & Co., Inc. ............. 87,346 8,243,278
Grace (W.R.) & Co. .............................. 16,311 844,094
Great Lakes Chemical Corp. ...................... 11,868 554,829
Hercules, Inc. .................................. 19,874 859,551
Monsanto Co. .................................... 88,485 3,439,854
Morton International, Inc. ...................... 18,937 771,683
Nalco Chemical Co. .............................. 6,364 229,900
PPG Industries, Inc. ............................ 31,304 1,756,937
Praxair, Inc. ................................... 23,614 1,089,196
Rohm & Haas Co. ................................. 8,529 696,180
Sigma-Aldrich Corp. ............................. 9,100 568,181
Union Carbide Corp. ............................. 22,284 910,858
------------
23,993,535
------------
Construction -- 0.48%
Armstrong World Industries, Inc. ................ 6,327 439,727
Centex Corp. (with warrants to purchase interest
in CDC L.P. Class B units and shares of 3333
Holdings Corp) ................................ 9,183 345,510
Fluor Corp. ..................................... 11,763 738,128
Kaufman & Broad Home Corp. ...................... 28,100 361,787
Masco Corp. ..................................... 20,411 734,796
Owens-Corning Fiberglass Corp. .................. 11,289 481,194
Pulte Corp. ..................................... 6,200 190,650
Sherwin Williams Co. ............................ 10,704 599,424
Stanley Works ................................... 9,884 266,868
------------
4,158,084
------------
Consumer Durables -- 0.32%
Black & Decker Corp. ............................ 15,178 457,237
Jostens, Inc. ................................... 16,200 342,225
Maytag Corp. .................................... 9,270 183,082
Newell Co. ...................................... 22,440 706,860
Rubbermaid, Inc. ................................ 22,834 519,474
Whirlpool Corp. ................................. 11,603 540,990
------------
2,749,868
------------
Containers -- 0.17%
Ball Corp. ...................................... 4,800 124,800
Crown Cork & Seal Co., Inc. ..................... 18,235 991,528
Stone Container Corp. ........................... 24,382 362,682
------------
1,479,010
------------
91
<PAGE>
Domestic Oil -- 1.33%
Amerada Hess Corp. .............................. 11,888 688,018
Ashland Oil, Inc. ............................... 6,582 288,785
Atlantic Richfield Co. .......................... 24,276 3,216,570
Kerr-McGee Corp. ................................ 6,121 440,712
Oryx Energy Co. * ............................... 19,000 470,250
Pennzoil Co. .................................... 9,808 554,152
Phillips Petroleum Co. .......................... 40,653 1,798,895
Sun Co., Inc. ................................... 14,400 351,000
Union Pacific Resources Group ................... 33,341 975,224
Unocal Corp. .................................... 41,656 1,692,275
USX-Marathon Group .............................. 43,963 1,049,617
------------
11,525,498
------------
Drugs and Medicine -- 10.12%
Abbott Laboratories ............................. 120,274 6,103,905
ALZA Corp. * .................................... 15,156 392,162
American Home Products Corp. .................... 97,372 5,708,433
Amgen, Inc. * ................................... 39,988 2,174,347
Bausch & Lomb, Inc. ............................. 9,300 325,500
Baxter International, Inc. ...................... 43,589 1,787,149
Becton Dickinson & Co. .......................... 19,946 865,158
Biomet, Inc. .................................... 21,700 328,213
Bristol-Myers Squibb Co. ........................ 78,342 8,519,693
Columbia/HCA Healthcare Corp. ................... 108,099 4,405,034
Guidant Corp. ................................... 11,400 649,800
Humana, Inc. * .................................. 23,800 455,175
Johnson & Johnson ............................... 205,160 10,206,710
Lilly (Eli) & Co. ............................... 85,814 6,264,422
Mallinckrodt Group, Inc. ........................ 10,469 461,945
Manor Care, Inc. ................................ 13,200 356,400
Medtronic, Inc. ................................. 37,432 2,545,376
Merck & Co., Inc. ............................... 185,476 14,698,973
Pall Corp. ...................................... 16,845 429,548
Pfizer, Inc. .................................... 99,564 8,251,366
Pharmacia & Upjohn Co. .......................... 82,925 3,285,903
St. Jude Medical, Inc. * ........................ 11,300 481,663
Schering-Plough Corp. ........................... 57,506 3,723,513
Tenet Healthcare Corp. * ........................ 38,002 831,294
United Healthcare Corp. ......................... 26,700 1,201,500
United States Surgical Co. ...................... 9,300 366,187
Warner Lambert Co. .............................. 41,336 3,100,200
------------
87,919,569
------------
Electronics -- 6.21%
3Com Corp. * .................................... 25,400 1,863,725
Advanced Micro Devices, Inc. * .................. 22,252 572,989
AMP, Inc. ....................................... 32,276 1,238,591
Andrew Corp. * .................................. 8,975 476,236
Boston Scientific Corp. * ....................... 27,035 1,622,100
92
<PAGE>
EMC Corp.* ...................................... 38,800 1,285,250
First Data Corp. ................................ 67,400 2,460,100
General Instrument Corp. * ...................... 15,500 335,188
General Signal Corp. ............................ 8,300 354,825
Harris Corp. .................................... 7,507 515,168
Hewlett-Packard Co. ............................. 159,100 7,994,775
Intel Corp. ..................................... 128,324 16,802,424
Johnson Controls, Inc. .......................... 6,808 564,213
LSI Logic Corp. * ............................... 22,200 593,850
Lucent Technologies, Inc. ....................... 99,183 4,587,214
Micron Technology, Inc. ......................... 28,400 827,150
Motorola, Inc. .................................. 91,110 5,591,876
National Semiconductor Corp. * .................. 21,016 512,265
Northern Telecom Ltd. ........................... 39,405 2,438,184
Perkin Elmer Corp. .............................. 4,400 259,050
Raychem Corp. ................................... 7,781 623,453
Tektronix, Inc. ................................. 6,900 353,625
Texas Instruments, Inc. ......................... 27,628 1,761,285
Thomas & Betts Corp. ............................ 8,200 363,875
------------
53,997,411
------------
Energy and Utilities -- 3.81%
American Electric Power Co., Inc. ............... 28,165 1,158,286
Baltimore Gas & Electric Co. .................... 24,531 656,204
Carolina Power & Light Co. ...................... 23,219 847,494
Central & SouthWest Corp. ....................... 28,184 722,215
CINergy Corp. ................................... 21,342 712,289
Coastal Corp. ................................... 14,683 717,632
Columbia Gas System, Inc. ....................... 11,100 706,238
Consolidated Edison Co. of New York, Inc. ....... 37,328 1,091,844
Consolidated Natural Gas Co. .................... 13,336 736,814
Dominion Resources, Inc. ........................ 28,359 1,091,821
DTE Energy, Inc. ................................ 21,626 700,142
Duke Power Co. .................................. 30,009 1,387,916
Edison International ............................ 65,871 1,309,186
El Paso Natural Gas Co. ......................... 2.8902 146
Enron Corp. ..................................... 38,308 1,652,032
Enserch Corp. ................................... 13,100 301,300
Entergy Corp. ................................... 41,560 1,153,290
FPL Group, Inc. ................................. 29,555 1,359,530
General Public Utilities Corp. .................. 18,943 636,958
Houston Industries, Inc. ........................ 45,696 1,033,872
Niagara Mohawk Power Corp. * .................... 37,600 371,300
Nicor, Inc. ..................................... 11,900 425,425
Noram Energy, Inc. .............................. 22,600 347,475
Northern States Power Co. ....................... 10,348 474,714
ONEOK, Inc. ..................................... 1,400 42,000
Ohio Edison Co. ................................. 22,903 521,043
PP&L Resources, Inc. ............................ 30,200 694,600
Pacific Enterprises ............................. 8,168 248,103
93
<PAGE>
Pacific Gas & Electric Co. ...................... 72,430 1,521,030
PacifiCorp ...................................... 44,277 907,679
Panhandle Eastern Corp. ......................... 23,380 1,052,100
PECO Energy Co. ................................. 33,067 834,942
Peoples Energy Corp. ............................ 1,500 50,813
Public Service Enterprise Group, Inc. ........... 32,772 893,037
Sonat, Inc. ..................................... 14,848 764,672
Southern Co. .................................... 99,746 2,256,753
Texas Utilities Co. ............................. 34,094 1,389,330
Unicom Corp. .................................... 31,976 867,349
Union Electric Co. .............................. 17,806 685,531
Williams Companies, Inc. ........................ 21,141 792,788
------------
33,115,893
------------
Energy Raw Materials -- 1.41%
Baker Hughes, Inc. .............................. 21,457 740,267
Barricks Gold Corp. ............................. 53,102 1,526,682
Burlington Resources, Inc. ...................... 16,352 823,732
Dresser Industries, Inc. ........................ 27,030 837,930
Halliburton Co. ................................. 19,518 1,175,959
Helmerich & Payne, Inc. ......................... 11,300 589,013
Louisiana Land & Exploration Co. ................ 6,400 343,200
Occidental Petroleum Corp. ...................... 44,471 1,039,510
Rowan Companies, Inc. * ......................... 21,600 488,700
Santa Fe Energy Resources, Inc. * ............... 25,600 355,200
Schlumberger Ltd. ............................... 38,175 3,812,728
Western Atlas, Inc. * ........................... 7,954 563,740
------------
12,296,661
------------
Food and Agriculture -- 5.84%
Archer Daniels Midland Co. ...................... 86,025 1,892,550
Campbell Soup Co. ............................... 36,100 2,897,025
Coca-Cola Co. ................................... 382,496 20,128,852
ConAgra, Inc. ................................... 36,219 1,801,895
CPC International, Inc. ......................... 21,687 1,680,742
Darden Restaurants, Inc. ........................ 52,167 456,461
General Mills, Inc. ............................. 23,667 1,499,896
Heinz (H.J.) Co. ................................ 53,743 1,921,312
Hershey Foods Corp. ............................. 23,412 1,024,275
Kellogg Co. ..................................... 32,737 2,148,366
PepsiCo, Inc. ................................... 244,360 7,147,530
Pioneer Hi-Bred International, Inc. ............. 13,526 946,820
Quaker Oats Co. ................................. 19,166 730,704
Ralston-Ralston Purina Group .................... 18,300 1,342,763
Sara Lee Corp. .................................. 71,955 2,680,324
Sysco Corp. ..................................... 33,527 1,093,818
Whitman Corp. ................................... 20,500 468,938
Wrigley (Wm.) Jr Co. ............................ 16,335 918,844
------------
50,781,115
------------
94
<PAGE>
Gold -- 0.20%
Battle Mountain Gold Co. ........................ 32,600 224,125
Homestake Mining Co. ............................ 20,389 290,543
Placer Dome, Inc. ............................... 38,855 845,097
Santa Fe Pacific Gold Corp. ..................... 24,998 384,344
------------
1,744,109
------------
Insurance -- 3.24%
Alexander & Alexander Services, Inc. ............ 20,000 347,500
Allstate Corp. .................................. 69,040 3,995,690
American General Corp. .......................... 28,763 1,175,688
American International Group, Inc. .............. 72,548 7,853,321
AON Corp. ....................................... 14,000 869,750
Chubb Corp. ..................................... 24,074 1,293,977
CIGNA Corp. ..................................... 10,855 1,483,064
General Re Corp. ................................ 13,603 2,145,873
ITT Hartford Group, Inc. ........................ 16,669 1,125,157
Jefferson-Pilot Corp. ........................... 8,975 508,209
Lincoln National Corp. .......................... 15,969 838,373
Marsh & McLennan Companies, Inc. ................ 9,532 991,328
Providian Corp. ................................. 15,597 801,296
SAFECO Corp. .................................... 17,292 681,953
St. Paul Companies .............................. 15,500 908,688
Torchmark Corp. ................................. 13,095 661,298
Transamerica Corp. .............................. 9,465 747,735
UNUM Corp. ...................................... 13,400 968,150
USF&G Corp. ..................................... 18,900 394,538
USLife Corp. .................................... 11,000 365,750
------------
28,157,338
------------
International Oil -- 6.58%
Amoco Corp. ..................................... 76,418 6,151,649
Chevron Corp. ................................... 100,014 6,500,910
Exxon Corp. ..................................... 191,841 18,800,417
Mobil Corp. ..................................... 62,376 7,625,466
Royal Dutch Petroleum Co., N.Y. Registry ........ 82,454 14,079,021
Texaco, Inc. .................................... 41,233 4,045,988
------------
57,203,451
------------
Liquor -- 0.67%
Anheuser-Busch Companies, Inc. .................. 75,322 3,012,880
Brown Forman Corp. Class B ...................... 14,954 684,146
Coors (Adolph) Co. Class B ...................... 400 7,600
Seagram Co. Ltd. ................................ 54,759 2,121,911
------------
5,826,537
------------
Media -- 1.72%
Cabletron System, Inc. * ........................ 23,340 776,055
Comcast Corp. Class A Special ................... 44,700 796,219
Donnelley (R.R.) & Sons Co. ..................... 19,945 625,774
Dow Jones & Co., Inc. ........................... 14,654 496,404
95
<PAGE>
Gannett Co., Inc. ............................... 24,639 1,844,845
Knight-Ridder, Inc. ............................. 17,442 667,157
McGraw Hill Companies, Inc. ..................... 13,764 634,865
Meredith Corp. .................................. 7,200 379,800
New York Times Co. Class A ...................... 19,326 734,388
Tele-Communications, Inc. Class A ............... 97,029 1,267,441
Time Warner, Inc. ............................... 88,873 3,332,737
Times Mirror Co. Class A ........................ 15,209 756,648
Tribune Co. ..................................... 8,657 682,821
Viacom, Inc. Class B Non-Voting * ............... 55,034 1,919,311
------------
14,914,465
------------
Miscellaneous and Conglomerates -- 1.22%
Case Corp. ...................................... 8,700 474,150
Cognizant Corp. ................................. 25,231 832,623
Corning, Inc. ................................... 39,042 1,805,693
Eastman Chemical Co. ............................ 11,460 633,165
ITT Industries, Inc. ............................ 23,869 584,790
ITT Corp Common (New) * ......................... 16,469 714,343
Minnesota Mining & Manufacturing Co. ............ 62,728 5,198,583
Newport News Shipbuilding * ..................... 0.400 6
Tupperware Corp. ................................ 7,324 392,750
------------
10,636,103
------------
Miscellaneous Finance -- 3.41%
Aetna, Inc. Common .............................. 22,655 1,812,400
Ahmanson (H.F.) & Co. ........................... 11,433 371,573
American Express Co. ............................ 75,168 4,246,992
Beneficial Corp. ................................ 9,940 629,948
Federal Home Loan Mortgage Corp. ................ 27,000 2,973,375
Federal National Mortgage Association ........... 167,188 6,227,753
Golden West Financial Corp. ..................... 9,215 581,697
Great Western Financial Corp. ................... 20,728 601,112
Greentree Financial Corp. ....................... 20,400 787,950
Household International, Inc. ................... 14,549 1,342,145
MBIA, Inc. ...................................... 7,000 708,750
Merrill Lynch & Co., Inc. ....................... 24,757 2,017,695
MGIC Investment Corp. ........................... 8,600 653,600
Morgan Stanley Group, Inc. ...................... 24,000 1,371,000
Salomon, Inc. ................................... 16,626 783,500
Travelers, Inc. ................................. 99,770 4,527,064
------------
29,636,554
------------
Motor Vehicles -- 2.17%
Chrysler Corp. .................................. 112,228 3,703,524
Cummins Engine Co., Inc. ........................ 7,700 354,200
Dana Corp. ...................................... 16,524 539,096
Eaton Corp. ..................................... 11,534 804,497
96
<PAGE>
Echlin, Inc. .................................... 11,869 375,357
Ford Motor Co. .................................. 183,828 5,859,517
General Motors Corp. ............................ 115,670 6,448,602
Genuine Parts Co. ............................... 16,819 748,446
------------
18,833,239
------------
Non-Durables and Entertainment -- 2.16%
American Greetings Corp. Class A ................ 11,700 331,987
CUC International, Inc. * ....................... 61,625 1,463,594
Harcourt General, Inc. .......................... 9,876 455,531
Hasbro, Inc. .................................... 10,658 414,330
Kimberly-Clark Corp. ............................ 43,817 4,173,569
Mattel, Inc. .................................... 39,591 1,098,650
McDonalds Corp. ................................. 107,782 4,877,135
Oracle Systems Corp. * .......................... 105,539 4,406,253
Ryan's Family Steak House * ..................... 8,300 57,063
Service Corp. International ..................... 31,372 878,416
Shoneys, Inc. * ................................. 33,700 235,900
TCI Satellite Entertainment, Class A * .......... 0.900 9
Wendy's International, Inc. ..................... 17,490 358,545
------------
18,750,982
------------
Non-Ferrous Metals -- 0.95%
Alcan Aluminum Ltd. ............................. 30,807 1,035,885
Allegheny Teledyne, Inc. ........................ 26,165 601,795
Aluminum Co. of America ......................... 26,344 1,679,430
Asarco, Inc. .................................... 14,000 348,250
Cyprus Amax Minerals Co. ........................ 18,163 424,560
Engelhard Corp. ................................. 24,986 477,857
Freeport McMoran Copper Class B ................. 33,200 991,850
Inco Ltd. ....................................... 25,774 821,546
Newmont Mining Corp. ............................ 15,382 688,345
Phelps Dodge Corp. .............................. 9,358 631,665
Reynolds Metals Co. ............................. 9,944 560,593
------------
8,261,776
------------
Optical Photographic Equipment -- 0.50%
Eastman Kodak Co. ............................... 53,641 4,304,690
------------
Paper and Forest Products -- 0.99%
Bemis, Inc. ..................................... 5,800 213,875
Champion International Corp. .................... 14,955 646,804
Georgia-Pacific Corp. ........................... 14,426 1,038,672
International Paper Co. ......................... 44,970 1,815,664
James River Corp. of Virginia ................... 13,338 441,821
Louisiana Pacific Corp. ......................... 10,925 230,790
97
<PAGE>
Mead Corp. ...................................... 10,888 632,865
Temple-Inland, Inc. ............................. 10,725 580,491
Union Camp Corp. ................................ 9,171 437,915
Westvaco Corp. .................................. 16,541 475,554
Weyerhaeuser Co. ................................ 30,266 1,433,852
Willamette Industries, Inc. ..................... 9,700 675,362
------------
8,623,665
------------
Producer Goods -- 5.68%
Alco Standard Corp. ............................. 22,766 1,175,295
Allied Signal, Inc. ............................. 42,048 2,817,216
Applied Materials Co.* .......................... 24,780 890,531
Avery Dennison Corp. ............................ 11,540 408,228
Briggs & Stratton Corp. ......................... 11,100 488,400
Caterpillar, Inc. ............................... 29,680 2,233,420
Cincinnati Milacron, Inc. ....................... 17,600 385,000
Cooper Industries, Inc. ......................... 17,359 731,248
Deere & Co. ..................................... 40,423 1,642,184
Dover Corp. ..................................... 16,762 842,291
Emerson Electric Co. ............................ 33,342 3,225,839
FMC Corp. * ..................................... 5,203 364,860
General Electric Co. ............................ 252,942 25,009,640
Grainger (W.W.), Inc. ........................... 6,712 538,638
Harnischfeger Industries, Inc. .................. 7,800 375,375
Illinois Tool Works, Inc. ....................... 17,658 1,410,433
Ingersoll-Rand Co. .............................. 14,462 643,559
Millipore Corp. ................................. 8,600 355,825
Navistar International * ........................ 39,600 361,350
Parker-Hannifin Corp. ........................... 12,015 465,581
Snap-On, Inc. ................................... 10,050 358,031
Tenneco, Inc. ................................... 25,842 1,166,120
Timken Co. ...................................... 10,500 481,688
Trinova Corp. ................................... 14,000 509,250
Tyco International Ltd. ......................... 24,188 1,278,940
Westinghouse Electric Corp. ..................... 62,070 1,233,641
------------
49,392,583
------------
Railroads and Shipping -- 1.00%
Burlington Northern Santa Fe .................... 24,525 2,118,347
Conrail, Inc. ................................... 12,495 1,244,814
CSX Corp. ....................................... 32,140 1,357,915
Norfolk Southern Corp. .......................... 18,576 1,625,400
Union Pacific Corp. ............................. 39,367 2,366,941
------------
8,713,417
------------
Retail -- 4.30%
Albertsons, Inc. ................................ 37,469 1,334,833
American Stores Co. ............................. 22,564 922,303
Circuit City Stores, Inc. ....................... 20,264 610,453
Dayton Hudson Corp. ............................. 29,832 1,170,906
Dillard Department Stores Class A ............... 15,130 467,139
98
<PAGE>
Federated Department Stores, Inc. * ............. 28,200 962,325
Gap, Inc. ....................................... 48,412 1,458,411
Giant Food, Inc. Class A ........................ 10,400 358,800
Home Depot, Inc. ................................ 74,065 3,712,508
Kmart Corp. * ................................... 82,488 855,813
Kroger Co. * .................................... 19,345 899,543
Limited, Inc. ................................... 42,388 778,880
Longs Drug Stores Corp. ......................... 7,500 368,438
Lowes Companies, Inc. ........................... 28,784 1,021,832
May Department Stores Co. ....................... 38,470 1,798,472
Melville Corp. .................................. 18,812 778,346
Nordstrom, Inc. ................................. 10,393 368,302
Penney (J.C.) & Co., Inc. ....................... 33,388 1,627,665
Pep Boys Manny Moe & Jack ....................... 7,700 236,775
Price/Costco, Inc. * ............................ 35,313 887,239
Rite-Aid Corp. .................................. 18,956 753,501
Sears, Roebuck & Co. ............................ 58,209 2,684,890
Tandy Corp. ..................................... 9,138 402,072
TJX Companies, Inc. ............................. 11,900 563,763
Toys R Us * ..................................... 39,667 1,190,010
Wal Mart Stores, Inc. ........................... 353,495 8,086,198
Walgreen Co. .................................... 43,086 1,723,440
Winn-Dixie Stores, Inc. ......................... 25,374 802,453
Woolworth Corp. * ............................... 25,664 561,400
-----------
37,386,710
-----------
Soaps and Cosmetics -- 3.02%
Avon Products, Inc. ............................. 23,880 1,364,145
Clorox Co. ...................................... 6,647 667,193
Colgate-Palmolive Co. ........................... 22,827 2,105,791
Gillette Co. .................................... 68,618 5,335,050
International Flavors & Fragrances, Inc. ........ 14,843 667,935
Procter & Gamble Co. ............................ 107,287 11,533,351
Unilever N.V. ................................... 25,914 4,541,428
-----------
26,214,893
-----------
Steel -- 0.20%
Armco, Inc. * ................................... 118,500 488,812
Bethlehem Steel Corp. * ......................... 23,638 212,742
Nucor Corp. ..................................... 11,359 579,309
USX-U.S. Steel Group ............................ 7,828 245,604
Worthington Industries, Inc. .................... 12,685 229,916
-----------
1,756,383
-----------
Telephone -- 6.69%
AT&T Corp. ...................................... 250,500 10,896,750
AirTouch Communications, Inc. * ................. 77,810 1,964,703
ALLTEL Corp. .................................... 34,605 1,085,732
Ameritech Corp. ................................. 85,512 5,184,165
Bell Atlantic Corp. ............................. 67,890 4,395,878
Bellsouth Corp. ................................. 151,350 6,110,756
99
<PAGE>
GTE Corp. ....................................... 148,373 6,750,971
MCI Communications Corp. ........................ 102,759 3,358,935
NYNEX Corp. ..................................... 67,710 3,258,544
Pacific Telesis Group ........................... 70,110 2,576,542
SBC Communications, Inc. ........................ 93,776 4,852,908
Sprint Corp. .................................... 69,365 2,765,929
Tellabs, Inc. * ................................. 27,896 1,049,587
US WEST Communications Group * .................. 70,531 2,274,625
Worldcom, Inc. * ................................ 63,200 1,647,150
------------
58,173,175
------------
Tires and Rubber Goods -- 0.18%
Cooper Tire & Rubber Co. ........................ 17,642 348,429
Goodyear Tire & Rubber Co. ...................... 23,042 1,183,783
------------
1,532,212
------------
Tobacco -- 2.09%
American Brands, Inc. ........................... 24,902 1,235,762
Loews Corp. ..................................... 19,020 1,792,635
Philip Morris Companies, Inc. ................... 125,823 14,170,815
UST, Inc. ....................................... 30,015 971,736
------------
18,170,948
------------
Travel and Recreation -- 1.29%
Brunswick Corp. ................................. 25,113 602,712
Disney (Walt) Co. ............................... 105,987 7,379,345
HFS, Inc. * ..................................... 18,500 1,105,375
Hilton Hotels Corp. ............................. 40,032 1,045,836
Marriott International, Inc. .................... 19,037 1,051,794
------------
11,185,062
------------
Trucking and Freight -- 0.11%
Caliber System, Inc. ............................ 16,600 319,550
PACCAR, Inc. .................................... 4,292 291,856
Ryder System, Inc. .............................. 10,999 309,347
------------
920,753
------------
TOTAL COMMON STOCKS ................................. 868,896,426
------------
(Cost $615,603,554)
TOTAL INVESTMENTS ................................... $868,896,426
============
(Cost $615,603,554)
<FN>
* Non-income producing security
See Notes to Financial Statements.
</TABLE>
100
<PAGE>
Pegasus International Equity Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 4.86%
Salomon Brothers, Revolving Repurchase Agreement,
6.90%, 1/2/97 (secured by various U.S. Treasury
Strips with maturities ranging from 11/15/04
through 5/15/06, all held at Chase Bank) ........ $19,720,372 $19,720,372
-----------
(Cost $19,720,372)
Shares
------
COMMON STOCKS -- 93.88%
Argentina -- 1.87%
Banks
Bco Frances Rio Pl ............................ 36,915 345,216
Bco De Galicia Bue 'B' ........................ 70,924 426,328
Construction
Astra Cia Argentin ............................ 133,756 255,519
Ciadea Sa* .................................... 24,420 116,015
Perez Companc Sa 'B' .......................... 192,863 1,356,066
Ypf Sa Class 'D' .............................. 87,800 2,217,340
Food & Agriculture
Molinos Rio Plata 'B' ......................... 45,042 160,378
Liquor & Tobacco
Ba Embotelladora 'B' .......................... 150 28,505
Miscellaneous
Comercial Del Plata ........................... 87,590 224,270
Non-Ferrous Metals
Siderca Sa .................................... 455,400 831,251
Siderar Sa 'A' ................................ 18,216 52,471
Telephone
Telefonica De Argentina Class 'B' ............. 610,300 1,599,267
-----------
7,612,626
-----------
Australia -- 1.73%
Banks
National Australia Bank ....................... 75,012 881,764
Westpac Bank Corp ............................. 100,910 573,861
Chemicals
Ici Australia ................................. 18,853 204,396
Construction
Boral Limited ................................. 45,546 129,507
CSR Limited ................................... 50,166 175,316
Pioneer International ......................... 60,480 180,137
Energy Raw Material
Broken Hill Pty ............................... 87,463 1,244,865
Santos Limited ................................ 54,203 219,560
Food & Agriculture
Amcor Limited ................................. 38,213 245,538
Goodman Fielder Limited ....................... 54,116 67,052
Gold
Highlands Gold Ltd ............................ 4,846 2,848
101
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Liquor & Tobacco
Coca-Cola Amatil .............................. 24,348 260,103
Fosters Brewing Gr ............................ 71,247 144,300
Southcorp Holdings ............................ 23,951 76,093
Media
News Corporation (Aust Listing) ............... 87,767 462,870
News Corporation Preferred Limited Voting
Shares ...................................... 60,648 269,752
Multi-Industry & Conglomerates
Pacific Dunlop Limited ........................ 73,167 185,962
Non-Ferrous Metals
Aberfoyle ..................................... 2,400 6,138
CRA Limited ................................... 26,587 417,058
Mim Holdings Limited .......................... 64,470 90,122
North Limited ................................. 17,540 51,267
WMC Limited ................................... 64,922 408,907
Railroad & Shipping
Brambles Inds Limited ......................... 13,527 263,762
Real Property
Gen Property Tst Units (Aust Listing) ......... 55,200 107,415
Lend Lease Corp ............................... 6,136 118,915
Westfield Trust Units ......................... 23,700 44,801
Westfield Trust New Units* .................... 1,038 1,913
Retail
Coles Myer Limited ............................ 46,111 189,712
-----------
7,023,934
-----------
Belgium -- 2.98%
Banks
Generale De Banque ............................ 4,583 1,641,191
Generale De Banque NNPR Strip* ................ 353 200
Kredietbank ................................... 3,200 1,047,710
Chemicals
Solvay ........................................ 2,075 1,268,928
Energy & Utilities
Electrabel .................................... 10,725 2,535,684
Tractebel Inv Int'l Cap ....................... 2,875 1,337,283
Insurance
Fortis Ag ..................................... 8,842 1,416,858
Fortis Ag VVPR Strip .......................... 172 87
International Oil
Petrofina Sa .................................. 4,480 1,424,483
Non-Ferrous Metals
Union Miniere* ................................ 4,970 336,397
Other Energy Sources
Gpe Bruxelles Lam ............................. 6,500 835,917
Producer Goods
Bekaert Sa .................................... 400 253,742
-----------
12,098,480
-----------
102
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Denmark -- 2.40%
Banks
Den Danske Bank ............................... 14,118 1,136,829
Unidanmark 'A' (Regd) ......................... 9,735 503,343
Business Machine
ISS International Series 'B' .................. 5,500 144,518
Sophus Berendsen 'B' .......................... 4,996 641,978
Drugs & Medicine
Novo-Nordisk AS 'B' ........................... 8,097 1,523,616
Food & Agriculture
Danisco ....................................... 14,081 854,565
Liquor & Tobacco
Carlsberg 'A' ................................. 7,300 492,532
Carlsberg 'B' ................................. 6,705 452,387
Railroad & Shipping
D/S 1912 'B' .................................. 45 1,155,723
D/S Svendborg 'B' ............................. 33 1,236,331
Telephone
Tele Danmark AS Series 'B' .................... 29,516 1,626,183
-----------
9,768,005
-----------
Finland -- 4.00%
Banks
Merita Ltd 'A' * .............................. 386,000 1,197,611
Construction
Metro AB 'A' .................................. 8,600 483,271
Electronics
Nokia (AB) Oy Series 'K' ...................... 51,200 2,954,908
Nokia (AB) Oy Series 'A' ...................... 83,000 4,804,589
Food & Agriculture
Cultor Oy Series 2 ............................ 5,800 298,242
Cultor Oy Series 1 ............................ 9,200 499,023
Insurance
Pohjola Series 'B' ............................ 11,500 258,244
Sampo 'A' ..................................... 6,900 543,436
Non-Ferrous Metals
Outokumpo Oy 'A' .............................. 58,100 989,551
Paper & Forest Products
UPM-'Kymmene Oy * ............................. 129,000 2,700,905
Producer Goods
Kone Corp 'B' ................................. 3,800 418,832
Retail
Kesko ......................................... 42,000 591,407
Stockmann Oy 'A' .............................. 5,000 303,753
Travel & Recreation
Amer Group 'A' ................................ 11,000 226,730
-----------
16,270,502
-----------
103
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France -- 5.30%
Banks
Banque National Paris ......................... 10,336 399,226
Cie De Suez ................................... 7,927 336,369
Cie Fin Paribas 'A' ........................... 6,021 406,400
Societe Generale .............................. 6,019 649,515
Chemicals
Air Liquide ('L') ............................. 4,999 778,880
Air Liquide ('L') (Regd) ...................... 1,095 170,609
Rhone Poulenc Sa 'A' .......................... 17,463 594,222
Construction
Cie De St Gobain .............................. 5,008 707,070
Imetal ........................................ 1,100 162,078
Lafarge Coppee (Br) ........................... 5,119 306,525
Consumer Durables
BIC ........................................... 2,100 314,269
Printemps (Av) ................................ 1,250 494,832
Drugs & Medicine
L'Oreal ....................................... 3,828 1,438,982
Sanofi ........................................ 6,945 689,325
Electronics
Alcatel Alsthom (CGE) ......................... 8,524 683,397
CSF (Thomson) ................................. 6,965 225,480
Legrand ....................................... 1,950 331,581
Schneider SA (X-SB) ........................... 8,816 406,822
Energy & Utilities
Eaux (Cie Generale) ........................... 8,469 1,047,479
Lyonnaise Des Eaux ............................ 3,306 307,088
Food & Agriculture
Danone (Ex Bsn) ............................... 5,713 794,520
Eridania Beghin-SA ............................ 1,611 258,752
Saint Louis ................................... 700 173,965
Insurance
AXA ........................................... 10,412 660,922
UAP(Cie UAP) .................................. 20,000 498,198
International Oil
ELF Aquitaine (Soc Nat) ....................... 14,066 1,277,882
Total B ....................................... 12,139 985,366
Liquor & Tobacco
LVMH Moet-Hennessy ............................ 5,050 1,407,544
Pernod-Ricard ................................. 3,864 213,315
Media
Canal Plus .................................... 1,550 341,679
Havas ......................................... 2,850 199,548
Motor Vehicles
Peugeot SA .................................... 3,843 431,703
Miscellaneous Finance
CIE Bancaire .................................. 1,610 190,150
104
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Non-Ferrous Metals
Usinor Sacilor ................................ 15,950 231,638
Producer Goods
Michelin (CGDE) Class 'B' ..................... 7,589 408,884
Valeo ......................................... 3,450 212,359
Real Property
Sefimeg (Regd) ................................ 3,836 277,440
Retail
Carrefour ..................................... 2,579 1,674,773
Casino Guichard-Perrachon ..................... 4,250 197,510
Promodes ...................................... 1,133 319,279
Travel & Recreation
Accor ......................................... 2,351 297,112
-----------
21,502,688
-----------
Germany -- 8.08%
Air Transport
Lufthansa AG .................................. 28,070 378,490
Banks
Bayer Vereinsbk ............................... 11,340 459,160
Deutsche Bank ................................. 22,640 1,054,794
Dresdner Bank ................................. 30,190 901,130
Bonds
Germany (Fed Rep) 7%, 12/22/97 ................ 20,000,000 13,442,268
Chemicals
BASF (Var) .................................... 21,260 813,920
Bayer (Var) ................................... 40,250 1,631,041
Schering AG ................................... 3,300 278,157
Construction
Hochtief AG ................................... 7,570 297,179
Drugs and Medicine
Beiersdorf AG Ser 'A B C' ..................... 6,200 306,961
Electronics
Siemens AG .................................... 25,940 1,202,144
SAP AG ........................................ 1,900 259,521
SAP AG N/V Pref ............................... 2,200 302,354
Energy & Utilities
Deutsche Telekom* ............................. 83,000 1,728,820
RWE AG ........................................ 16,160 675,296
RWE AG N/V Pref ............................... 6,200 207,188
Veba AG ....................................... 21,250 1,220,306
Insurance
Allianz (Regd) ................................ 1,000 1,797,407
Munchener Ruckvers Reg Vink ................... 395 957,314
Miscellaneous
Metro AG* ..................................... 6,358 497,135
Motor Vehicles
Daimler-Benz AG* .............................. 21,240 1,454,031
Volkswagen AG (Var) ........................... 906 374,779
105
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Producer Goods
Linde ......................................... 556 337,329
Mannesmann (Var) .............................. 1,896 814,693
Man AG Non Vtg Pref(Var) ...................... 950 190,973
Steel
Preussag Br (Var) ............................. 2,174 490,914
Thyssen ....................................... 1,416 250,746
Viag (Var) .................................... 1,019 398,380
Viag (RFD 1/1/96)* ............................ 204 77,835
-----------
32,800,265
-----------
Hong Kong -- 2.33%
Air Transport
Cathay Pacific Airways ........................ 127,000 200,310
Banks
Bk of East Asia ............................... 7,264 32,305
Hang Seng Bank ................................ 97,000 1,178,798
Energy & Utilities
China Light & Power ........................... 88,700 394,477
Hong Kong Electric ............................ 20,000 66,451
Hong Kong & China Gas ......................... 205,760 397,688
Hong Kong & China Gas Wts, 9/30/97* ........... 8,480 4,714
Multi-Industry & Conglomerates
Hutchinson Whampoa ............................ 180,000 1,413,705
Miscellaneous Finance
Swire Pacific 'A' ............................. 85,000 810,440
Wharf (Holdings) .............................. 92,000 459,108
Wing Lung Bank ................................ 44,617 302,830
Real Property
Cheung Kong (Holdings) ........................ 123,000 1,093,246
Hopewell Holdings ............................. 217,000 140,272
Hysan Development ............................. 60,000 238,914
New World Development Co. ..................... 75,089 507,227
Sun Hung Kai Prop. . .......................... 107,700 1,319,273
Telephone
Hong Kong Telecomm ............................ 569,896 917,286
-----------
9,477,044
-----------
Ireland -- 3.36%
Banks
Allied Irish Banks ............................ 327,441 2,172,458
Bank of Ireland (Dublin Listing) .............. 126,904 1,149,109
Construction
CRH ........................................... 303,219 3,130,535
Food & Agriculture
Greencore Group ............................... 192,403 1,221,168
Kerry Group 'A' ............................... 136,647 1,387,662
Insurance
Irish Life .................................... 237,969 1,103,579
106
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Media
Independent News (Dublin Listing) ............. 204,200 1,019,557
Paper & Forest Products
Smurfit(Jefferson) (Dublin Listing) ........... 832,587 2,451,948
-----------
13,636,016
-----------
Japan -- 20.18%
Air Transport
Japan Airlines Co* ............................ 110,000 582,838
Bank
Asahi Bank .................................... 114,000 1,011,631
Bank of Tokyo MITS ............................ 142,000 2,630,309
Dai-Ichi Kangyo Bank .......................... 155,000 2,230,120
Fuji Bank ..................................... 144,000 2,096,666
Industrial Bank of Japan ...................... 106,160 1,838,387
Joyo Bank ..................................... 57,000 342,776
Joyo Bank New (RFD 10/12/96)* ................. 5,700 33,688
Sakura Bank ................................... 127,000 905,971
Sumitomo Bank ................................. 150,000 2,158,180
Tokai Bank .................................... 97,000 1,011,200
Business Machine
Canon Inc ..................................... 45,000 992,504
Fujitsu ....................................... 118,000 1,097,958
Ricoh ......................................... 75,000 859,395
Chemicals
Asahi Chemical Ind. . ......................... 140,000 791,247
Dainippon Ink & Chem. ......................... 82,000 303,076
Mitsubishi Gas Chem. .......................... 34,000 122,150
Sekisui Chemical .............................. 40,000 403,205
Shin-Etsu Chemical ............................ 32,000 581,718
Showa Denko Kk* ............................... 131,000 300,215
Sumitomo Chemical ............................. 135,000 533,859
Toray Industries Inc .......................... 147,000 905,531
Construction
Chichibu Onoda Cem. . ......................... 67,000 284,578
Daiwa House Industry* ......................... 60,000 770,225
Fujita Corp ................................... 35,000 100,414
Haseko Corp* .................................. 136,000 363,229
Kajima Corp ................................... 36,000 256,811
Nihon Cement Co ............................... 34,000 173,120
Obayashi Corp ................................. 35,000 235,806
Sato Kogyo Co ................................. 65,000 226,243
Sekisui House ................................. 106,000 1,077,626
Shimizu Corp .................................. 56,000 417,334
Taisei Corp ................................... 73,000 377,358
Toto .......................................... 37,000 420,781
Consumer Durables
Matsushita Electric Ind. ...................... 146,000 2,377,358
Sanyo Electric Co ............................. 154,000 636,857
Sharp Corp .................................... 63,000 895,580
107
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Drugs & Medicine
Daiichi Pharm Co .............................. 45,000 721,117
Sankyo Co ..................................... 46,000 1,299,905
Takeda Chemical Inds. ......................... 78,000 1,632,980
Electronics
Hitachi ....................................... 201,000 1,870,251
Kyocera ....................................... 17,000 1,057,465
Mitsubishi Electric Corp. ..................... 125,000 743,086
Omron Corp. ................................... 36,000 676,144
Sony .......................................... 35,200 2,301,783
Energy & Utilities
Kansai Electric Power ......................... 59,100 1,222,021
Osaka Gas Co .................................. 241,000 658,198
Tokyo Electric Power .......................... 95,500 2,089,859
Tokyo Gas Co .................................. 137,000 370,621
Food & Agriculture
Ajinomoto Co., Inc. ........................... 74,000 752,305
Yamazaki Baking Co ............................ 20,000 318,773
International Oil
Japan Energy Corp. ............................ 138,000 374,515
Nippon Oil Co ................................. 120,000 615,146
Media
Dai Nippon Printing ........................... 59,000 1,031,877
Multi-Industry
Itochu Corp ................................... 167,000 894,925
Marubeni Corp ................................. 208,000 892,427
Mitsubishi .................................... 78,000 806,410
Sumitomo Corp ................................. 74,000 582,080
Miscellaneous Finance
Daiwa Securities .............................. 149,000 1,322,219
Mitsubishi Trust & Banking .................... 50,000 667,701
Nomura Securities ............................. 127,000 1,903,851
Yamaichi Securities ........................... 141,000 625,614
Motor Vehicles
Honda Motor Co ................................ 60,000 1,711,036
Nissan Motor Co ............................... 131,000 758,439
Toyota Motor Corp ............................. 182,000 5,221,504
Non-Ferrous Metals
Mitsubishi Steel* ............................. 17,000 73,378
Tostem Corp ................................... 19,000 523,822
Paper & Forest Products
Daishowa Paper Mfg. ........................... 13,000 56,337
Oji Paper Co .................................. 48,333 305,230
Producer Goods
Bridgestone Corp .............................. 53,000 1,004,566
Komatsu ....................................... 70,000 572,930
Kubota Corp ................................... 136,000 654,984
Mitsubishi Heavy Ind. ......................... 247,000 1,957,784
Denso Corp .................................... 52,000 1,249,935
108
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Sumitomo Heavy Ind. ........................... 83,000 251,710
Toyo Seikan Kaisha ............................ 14,000 336,521
Toyoda Auto Loom .............................. 20,000 373,912
Railroad & Shipping
East Japan Railway ............................ 38 170,569
Hankyu Corp ................................... 89,000 440,898
Hitachi Zosen Corp ............................ 12,000 46,524
Mitsui Osk Lines* ............................. 94,000 224,330
Nagoya Railroad Co ............................ 98,000 375,722
Tokyu Corp .................................... 148,000 839,011
Real Property
Mitsubishi Estate ............................. 153,000 1,568,622
Retail
Ito-Yokado Co ................................. 32,000 1,389,506
Mycal Corp .................................... 78,000 1,128,974
Seven-Eleven Japan Npv ........................ 28,000 1,635,565
Steel
Kawasaki Steel Corp ........................... 131,000 375,834
Kobe Steel* ................................... 142,000 298,510
Nippon Steel Corp ............................. 341,000 1,004,756
NKK Corp* ..................................... 139,000 312,561
Sumitomo Metal Ind. ........................... 262,000 643,319
Travel & Recreation
Fuji Photo Film ............................... 14,000 460,756
Nikon ......................................... 13,000 161,282
-----------
81,906,044
-----------
Malaysia -- 1.95%
Air Transport
Malaysian Airline Sys. ........................ 42,000 108,929
Banks
Ammb Holdings Bhd. ............................ 66,000 554,028
Commerce Asset Holding ........................ 9,000 67,709
Dcb Holdings Berhad ........................... 84,000 287,705
Malayan Bkg Berhad ............................ 55,000 609,779
Public Bank Berhad ............................ 14,000 19,402
Public Bank Berhad (Alien Market) ............. 206,000 436,388
Construction
Hume Inds (M) Bhd. ............................ 39,000 245,535
United Engineers Bhd. ......................... 54,000 487,506
Consumer Durables
Tech Res Inds Bhd. ............................ 115,000 226,766
Energy & Utilities
Tenaga Nasional ............................... 141,000 675,548
Food & Agriculture
Golden Hope Plants ............................ 159,000 270,718
Nestle Malay Bhd .............................. 19,000 152,722
Liquor & Tobacco
Rothmans Pall Mall ............................ 17,000 178,380
109
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Miscellaneous
Malayan Utd Inds .............................. 394,000 293,296
Motor Vehicles
Edaran Otomobil ............................... 39,000 389,922
Multi-Industry & Comglomerates
Sime Darby Bhd ................................ 138,200 544,481
Producer Goods
Leader Univ Holdings .......................... 71,333 149,699
Railroad & Shipping
Malaysia Int Ship (Alien Market) .............. 22,000 65,333
Real Property
Hong Leong Properties ......................... 212,000 280,372
Telephone
Telekom Malaysia .............................. 106,000 944,365
Travel & Recreation
Landmarks Berhad .............................. 108,000 143,686
Magnum Corp Berhad ............................ 234,250 454,493
Resorts World Berhad .......................... 69,000 314,193
-----------
7,900,955
-----------
Mexico -- 3.45%
Banks
Gpo Financiero Banamex-Ac Series 'B' .......... 184,000 384,734
Gpo Financiero Banamex-Ac Series 'L' .......... 109,017 207,176
Gpo Financiero Inbursa Ser 'B' ................ 558 1,907
Construction
Cemex Sa Ser 'A' .............................. 264,137 947,897
Food & Agriculture
Grupo Ind Bimbo Series 'A' .................... 114,800 656,248
Gpo Nideki Sa de C Ser 'C' (Mexican)* ......... 178,300 1,026,037
Liquor & Tobacco
Empresas La Modern 'A' ........................ 109,600 533,936
Media
Fomento Economico Mexico Series 'B' ........... 111,200 378,576
Grupo Televisa Ptg Certs Repr 1 A,L,D Shs* .... 49,100 630,589
Miscellaneous
Carso Global Telec Ser 'A1'* .................. 16,000 36,585
Miscellaneous Finance
Gpo Financiero Bancomer Series 'B'* ........... 1,056,800 422,880
Gpo Financiero Bancomer Series 'L'* ........... 2,037 665
Grupo Carso Series 'A1' ....................... 172,400 897,914
Multi-Industry
Apasco Sa (Mexican) ........................... 59,400 407,468
Desc Sa De Cv Ser 'B'* ........................ 109,100 595,946
Gpo Mexico Ser 'B' (Mexican)* ................. 174,900 559,891
Multi-Industry & Comglomerates
Alfa Sa Series 'A' (Cpo) ...................... 194,401 893,965
Non-Ferrous Metals
Industrias Penoles ............................ 164,000 581,248
110
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Paper & Forest Products
Kimberly Clark Mexico 'A' ..................... 71,500 1,387,851
Retail
Cifra Sa De Cv 'B'* ........................... 626,800 765,980
Telephone
Telefonos De Mexico Series 'L' (Ltd Vtg) ...... 1,636,300 2,693,899
-----------
14,011,392
-----------
Netherlands -- 4.44%
Air Transport
KLM ........................................... 6,716 188,698
Bank
ABN Amro Holding Nv ........................... 23,964 1,557,204
Chemicals
Akzo Nobel Nv ................................. 7,042 960,789
Electronics
Philips Electronic ............................ 23,823 964,083
Food & Agriculture
Ahold (kon) Nv ................................ 10,938 682,939
Unilever Nv Cva ............................... 10,808 1,909,495
Insurance
ING Groep Nv Cva .............................. 53,329 1,917,669
International OIL
Royal Dutch Petroleum (Br) .................... 35,841 6,276,237
Liquor & Tobacco
Heineken Nv ................................... 3,181 562,369
Media
Elsevier Nv ................................... 52,791 891,174
Wolters Kluwer Cva ............................ 4,473 593,474
Paper & Forest Products
KNP BT (Kon) Nv ............................... 7,455 162,483
Steel
Kon Hoogovens Nv Cva .......................... 2,415 100,524
Telephone
Kon Ptt Nederland ............................. 32,498 1,238,118
-----------
18,005,256
-----------
Norway -- 3.95%
Air Transport
Helicopter Service* ........................... 6,000 77,991
Banks
Den Norske Bank ............................... 25,000 95,531
Chemicals
Dyno Industrier ............................... 18,150 460,474
Drugs & Medicine
Nycomed Series 'A' * .......................... 33,610 513,200
Nycomed Series 'B' * .......................... 24,068 369,385
Energy & Utilities
Hafslund Ser 'A' .............................. 43,007 316,556
Hafslund Ser 'B' .............................. 30,219 206,812
111
<PAGE>
Food & Agriculture
Orkla AS 'A' .................................. 21,657 1,509,286
Orkla AS 'B' .................................. 6,050 383,728
Insurance
Storebrand Asa 'A' * .......................... 155,146 898,992
International Oil
Norsk Hydro AS ................................ 117,470 6,346,867
Motor Vehicles
Petroleum Geo Svs ............................. 13,682 533,534
Non-Ferrous Metals
Elkem Asa ..................................... 26,148 432,020
Paper & Forest Products
Norske Skogsindust 'A' ........................ 14,400 480,347
Producer Goods
Aker ASA Ser 'A' .............................. 21,200 471,452
Kvaerner AS Series 'A' ........................ 17,850 867,987
Kvaerner AS Series 'B' ........................ 7,900 342,705
Railroad & Shipping
Bergesen Dy AS 'A' ............................ 33,400 815,989
Bergesen Dy AS 'B' Non-Voting ................. 15,150 360,636
Leif Hoegh & Co ............................... 18,447 390,007
Unitor AS ..................................... 11,600 148,965
-----------
16,022,464
-----------
Singapore -- 3.71%
Air Transport
Singapore Airlines (Alien Market) ............. 212,000 1,924,767
Bank
Dev Bank Singapore (Alien Market) ............. 110,250 1,489,632
Overseas Chinese Bank (Alien Market) .......... 166,416 2,070,059
United Overseas Bank (Alien Market) ........... 148,404 1,655,041
Consumer Durables
Amcol Hldgs ................................... 29,000 54,317
Energy & Utilities
Singapore Telecom ............................. 1,034,000 2,439,343
Liquor & Tobacco
Fraser & Neave ................................ 67,400 693,842
Straits Trading Co ............................ 87,000 211,464
Media
Singapore Press Hd (Alien Market) ............. 51,800 1,022,062
Motor Vehicles
Cycle & Carriage .............................. 52,000 635,679
Miscellaneous
Singapore Tech Ind ............................ 100,000 250,211
Multi-Industry & Comglomerates
Straits Steamship ............................. 84,000 269,027
Producer Goods
Jurong Shipyard (Nl) .......................... 24,000 120,959
Keppel Corp ................................... 134,000 1,044,167
112
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Real Property
City Developments ............................. 131,600 1,185,400
Hong Kong Land Hldgs (Sing Quote) ............. 410 1,140
-----------
15,067,110
-----------
Spain -- 4.56%
Banks
Argentaria Corp Bc ............................ 20,033 894,805
Bco Bilbao Vizcaya (Regd) ..................... 35,071 1,890,045
Bco Central Hispan (Regd) ..................... 26,486 679,076
Bco Santander (Regd) .......................... 24,291 1,551,860
Construction
Fomento Const Y Contra ........................ 3,214 298,977
Energy & Utilities
Empresa Nac Electricid ........................ 38,767 2,753,850
Gas Natural Sdg Sa ............................ 5,482 1,272,776
Iberdrola Sa .................................. 116,836 1,652,725
Union Elec Fenosa ............................. 57,573 617,446
Insurance
Corporation Mapfre ............................ 6,452 392,353
International Oil
Repsol Sa ..................................... 45,961 1,759,644
Liquor & Tobacco
Tabacalera Sa Series 'A' (Regd) ............... 5,381 231,250
Non-Ferrous Metals
Acerinox Sa (Regd) ............................ 2,227 321,188
Producer Goods
Zardoya-Otis .................................. 2,987 346,751
Railroad & Shipping
Autopistas Cesa ............................... 35,635 490,384
Real Property
Vallehermoso Sa ............................... 6,954 150,494
Telephone
Telefonica De Espana .......................... 138,332 3,206,388
-----------
18,510,012
-----------
Switzerland -- 3.49%
Banks
Credit Suisse Group (Regd) .................... 9,034 925,118
Schweiz Bangesellsch (Br) ..................... 1,026 896,313
Schweiz Bangesellsch (Regd) ................... 1,052 184,510
Schweiz Bankverein (Regd) ..................... 4,100 777,116
Construction
Holderbank Fn Glarus (Br) ..................... 558 397,289
Consumer Durables
Smh Ag Neuenburg (Regd) ....................... 725 103,130
Smh Ag Neuenburg (Br) ......................... 165 101,380
Drugs & Medicine
Roche Holdings Genusscheine Npv ............... 329 2,551,934
Roche Holdings (Br) ........................... 80 899,666
113
<PAGE>
Novartis Ag (Regd) ............................ 2,010 2,295,218
Novartis Ag (Br) .............................. 971 1,107,498
Electronics
Abb (Br) ...................................... 410 508,408
Adeccp Sa (Br) ................................ 135 33,782
Sgs Holding (Br) .............................. 79 193,570
Food & Agriculture
Nestle Sa (Regd) .............................. 1,764 1,887,859
Valora Holding Ag ............................. 80 15,253
Insurance
Zurich Versicherun (Regd) ..................... 3,950 1,094,345
Non-Ferrous Metals
Alusuisse-Lonza Holdings (Regd) ............... 218 173,235
Producer Goods
Sulzer Ag Ptg ................................. 13 6,932
-----------
14,152,556
-----------
Thailand -- 1.53%
Banks
Bk of Ayudhya (Alien Mkt) ..................... 89,000 210,004
Bangkok Bank (Fr) ............................. 113,100 1,093,945
Ind Fin Corp Thail ............................ 55,100 147,205
Ind Fin Corp Thail (Alien Mkt) ................ 104,000 281,903
Siam Commercial Bank (Fr) ..................... 67,500 489,664
Thai Farmers Bank (Alien Mkt) ................. 121,400 757,565
Construction
Land & House (Alien Mkt) ...................... 26,300 191,813
Siam Cement (Fr) .............................. 23,600 740,030
Tipco Asphalt ................................. 26,500 161,232
TPI Polene .................................... 40,600 75,214
Energy Raw Materials
PTT Explortn & Prd (Alien Mkt) ................ 44,200 637,831
International Oil
Banpu Co ...................................... 13,000 244,383
Media
Shinawatra C & Comms .......................... 21,900 264,781
Miscellaneous Finance
Dhana Siam Fin & Sec (Alien Mkt) .............. 14,000 33,307
Finance One (Alien Mkt) ....................... 79,800 161,841
Phatra Thanakit Co (Alien Mkt) ................ 127,400 362,722
Telephone
Thai Tel & Telecom* ........................... 60,000 49,727
Utd Commns Indust ............................. 42,900 291,131
-----------
6,194,298
-----------
United Kingdom -- 14.57%
Air Transport
British Airways ............................... 71,777 743,748
Aerospace
British Aerospace ............................. 12,474 273,239
114
<PAGE>
Banks
Abbey National ................................ 71,613 937,518
Barclays ...................................... 114,464 1,959,802
HSBC Holdings (UK Regd) ....................... 55,060 1,198,532
HSBC Holdings (UK Regd) ....................... 119,165 2,663,288
LLoyds TSB Group .............................. 326,179 2,403,009
Chemicals
BOC Group ..................................... 39,831 595,402
Imperial Chemical Industries .................. 77,314 1,016,783
Construction
English China Clay ............................ 41,909 138,059
RMC Group ..................................... 26,670 455,263
Redland ....................................... 110,297 691,773
Taylor Woodrow ................................ 107,986 284,587
Drugs & Medicine
Glaxo Holdings ................................ 188,875 3,064,143
Smithkline Beecham ............................ 160,959 2,229,761
Zeneca Group .................................. 52,438 1,478,420
Electronics
General Electric Co ........................... 163,908 1,071,494
Energy & Utilities
British Gas ................................... 254,516 977,817
National Power ................................ 78,850 659,837
Scottish Power ................................ 2,356 14,192
Thames Water .................................. 49,544 519,306
Food & Agriculture
Associated British Foods ...................... 66,299 549,702
Cadbury Schweppes ............................. 54,993 463,489
Kingfisher .................................... 48,396 523,009
Sainsbury (J) ................................. 101,209 672,012
Tesco ......................................... 135,902 824,458
Unilever ...................................... 42,626 1,033,278
Insurance
Prudential Corp ............................... 139,603 1,174,207
Royal & Sun Alliance .......................... 106,535 810,383
International Oil
British Petroleum ............................. 356,481 4,273,372
Liquor & Tobacco
BAT Industries ................................ 181,710 1,506,603
Bass .......................................... 69,324 973,987
Grand Metropolitan ............................ 136,899 1,075,324
Guinness ...................................... 171,719 1,344,422
Imperial Tobacco* ............................. 31,370 202,387
Safeway ....................................... 122,458 846,632
Media
British Sky Broadcasting ...................... 94,124 840,808
Carlton Communications ........................ 36,450 320,929
Reed International ............................ 20,000 376,999
Reuters Holdings .............................. 103,339 1,328,983
115
<PAGE>
Multi-Industry
Inchcape ...................................... 14,451 67,389
Multi-Industry & Comglomerates
Hanson ........................................ 313,700 437,520
Producer Goods
BTR ........................................... 246,938 1,200,142
Rolls Royce ................................... 122,412 539,420
RTZ Corp. (Regd) .............................. 82,149 1,316,547
Smiths Industries ............................. 42,710 585,448
Real Property
MEPC .......................................... 76,343 565,696
Retail
Argos ......................................... 30,245 397,762
Boots Co ...................................... 62,274 642,081
Great Univ Stores ............................. 55,187 577,982
Marks & Spencer ............................... 185,891 1,561,946
Sears ......................................... 175,691 285,627
Steel
British Steel ................................. 232,983 639,920
Telephone
British Telecom ............................... 367,698 2,482,359
Cable & Wireless .............................. 146,170 1,214,433
Vodafone Group ................................ 260,601 1,099,308
Travel & Recreation
EMI Group ..................................... 28,368 669,930
Granada Gp .................................... 79,494 1,171,968
Ladbroke Group ................................ 196,242 775,765
Rank Group .................................... 37,924 282,637
Thorn* ........................................ 28,368 122,093
------------
59,152,930
------------
TOTAL COMMON STOCKS ................................. 381,112,577
------------
(Cost $351,224,326)
BONDS -- 1.26%
U.S. Treasury Bill, 1/9/97 ........................ 2,000,000 1,997,971
U.S. Treasury Bill, 3/6/97 ........................ 1,130,000 1,119,627
U.S. Treasury Note 6.125%, 5/31/97 ................ 2,000,000 2,003,752
------------
TOTAL BONDS ......................................... 5,121,350
------------
(Cost $5,118,828)
TOTAL INVESTMENTS ................................... $405,954,299
============
(Cost $376,063,526)
<FN>
* Non Income producing security
See Notes to Financial Statements.
</TABLE>
116<PAGE>
Pegasus International Equity Fund
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1996
Notes to Portfolio of Investments
(a) Forward Foreign Currency Contracts
As of December 31, 1996, the International Equity Fund had entered into
six forward foreign currency exchange contracts that obligate the Fund to
deliver currencies at specified future dates.
Outstanding contracts as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Unrealized
U.S. Dollar U.S. Dollar Appreciation
Currency To Value As Of Currency To Value As Of (Depreciation)
Settlement Date Be Delivered Dec. 31, 1996 Be Received Dec. 31, 1996 at 12/31/96
--------------- ------------ ------------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Jan. 2, 1997 ......... 982,806 $ 982,806 2,482,862 $ 983,115 $ 309
U.S. Dollars Malaysian Ringgit
Jan. 2, 1997 ......... 1,001,404 1,001,404 1,556,682 1,010,105 8,701
U.S. Dollars Deutsche Mark
Jan. 6, 1997 ......... 2,757,222 2,757,222 1,628,601 2,787,025 29,803
U.S. Dollars Pound Sterling
Jan. 8, 1997 ......... 1,023,886 1,023,886 32,682,435 1,028,898 5,012
U.S. Dollars Belgian Franc
Jan. 8, 1997 ......... 1,278,835 1,278,835 755,822 1,279,239 404
U.S. Dollars Irish Punt
Jan. 16, 1997 ........ 155,961 155,961 393,864 155,954 (7)
U.S. Dollars ---------- Malaysian Ringgit ---------- -------
$7,200,114 $7,244,336 $44,222
========== ========== =======
</TABLE>
(b) Financial Futures Contracts
Outstanding contracts as of December 31, 1996 as follows:
<TABLE>
<CAPTION>
Market Value Unrealized
Number Covered by Depreciation
Type of Contracts Expiration Date Contracts at 12/31/96
---- ------------ --------------- --------- -----------
<S> <C> <C> <C> <C>
Financial Futures purchased long:
Japanese Yen -- TOPIX (1) ......................... 131 March 13, 1997 $16,613,422 $(712,156)
=========== =========
<FN>
(1) Exchange traded local currency denominated futures contracts.
Intermediate Bond Fund
</TABLE>
See Notes to Financial Statements.
117
<PAGE>
Pegasus Intermediate Bond Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 3.21%
Salomon Brothers, Revolving Repurchase Agreement, 6.90%, 1/2/97,
(secured by various U.S. Treasury Strips with maturities ranging
from 11/15/04 through 5/15/06, all held at Chase Bank) ............ $13,123,659 $13,123,659
-----------
(Cost $13,123,659)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 81.52%
U.S. Treasury Securities -- 47.62%
Strips from U.S. Treasury Securities due:
5/15/98 ....................................................... 6,600,000 6,108,498
11/15/98 ...................................................... 7,600,000 6,825,408
2/15/99 ....................................................... 9,660,000 8,539,054
2/15/01 ....................................................... 3,300,000 2,567,136
5/15/05 ....................................................... 5,660,000 3,311,440
8/15/08 ....................................................... 5,350,000 2,501,660
11/15/10 ...................................................... 5,000,000 1,991,400
U.S. Treasury Bonds:
12.750%, 11/15/10 ............................................. 7,081,000 10,022,943
10.375%, 11/15/12 ............................................. 7,765,000 9,999,845
12.500%, 8/15/14 .............................................. 1,000,000 1,494,530
U.S. Treasury Notes:
8.500%, 4/15/97 ............................................... 3,640,000 3,671,850
6.875%, 4/30/97 ............................................... 5,000,000 5,025,000
8.500%, 5/15/97 ............................................... 5,000,000 5,056,250
6.750%, 5/31/97 ............................................... 2,000,000 2,010,320
5.875%, 7/31/97 ............................................... 5,000,000 5,012,500
8.625%, 8/15/97 ............................................... 3,000,000 3,056,730
8.750%, 10/15/97 .............................................. 9,950,000 10,187,905
5.250%, 12/31/97 .............................................. 19,140,000 19,074,158
7.875%, 1/15/98 ............................................... 13,710,000 14,014,224
8.125%, 2/15/98 ............................................... 8,300,000 8,515,302
7.875%, 4/15/98 ............................................... 10,425,000 10,696,988
5.125%, 4/30/98 ............................................... 3,320,000 3,294,569
7.000%, 4/15/99 ............................................... 1,000,000 1,022,340
9.125%, 5/15/99 ............................................... 8,700,000 9,296,733
6.875%, 7/31/99 ............................................... 8,000,000 8,162,480
7.750%, 11/30/99 .............................................. 17,080,000 17,845,867
7.125%, 2/29/00 ............................................... 13,700,000 14,104,561
7.250%, 5/15/04 ............................................... 1,000,000 1,052,190
------------
(Cost $194,414,539) 194,461,881
------------
Agency Obligations -- 33.90%
Federal Home Loan Mortgage Corp. Participation Ctf.:
#170269, 12.000%, 8/1/15 ...................................... 1,185,747 1,332,881
#252600, 7.500%, 9/1/08 ....................................... 226,992 230,107
#252601, 8.000%, 6/1/01 ....................................... 304,340 310,759
#555238, 12.000%, 7/1/19 ...................................... 528,347 594,210
Federal Home Loan Mortgage Corp. Gtd. Multi-Class
Mortgage Participation Ctfs.:
Series 10 Class D, 10.000%, 7/15/18 ........................... 1,018,283 1,036,207
Series 11 Class D, 9.500%, 7/15/19 ............................ 1,300,000 1,418,828
118
<PAGE>
Series 18 Class A, 9.000%, 11/15/19 ........................... 50,661 50,930
Series G-21 Class SD, IF, 8/25/22 ............................. 2,100,000 1,876,873
Series 23 Class E, 9.400%, 8/15/19 ............................ 351,316 359,153
Series G-29 Class SD, IF, 4/25/24 ............................. 11,413,570 419,939
Series 30 Class C, 9.500%, 5/15/18 ............................ 306,474 309,715
Series 32 Class B, 9.500%, 8/15/19 ............................ 1,124,568 1,134,761
Series 38 Class C, 9.500%, 1/15/19 ............................ 184,308 186,653
Series 39 Class E, 10.000%, 10/15/19 .......................... 393,304 399,230
Series 41 Class I, HB, 84.000%, 5/15/20 ....................... 81,799 272,712
Series 47 Class F, 10.000%, 6/15/20 ........................... 500,000 550,523
Series 63 Class F, 9.350%, 10/15/19 ........................... 24,171 24,123
Series 99 Class Z, 9.500%, 1/15/21 ............................ 1,716,608 1,825,139
Series 129 Class E, 8.850%, 6/15/09 ........................... 1,016,643 1,016,459
Series 204 Class E, HB, IF, 5/15/23 ........................... 7,008 167,159
Series 1072 Class A, HB, 1008.500%, 5/15/06 ................... 17,975 418,376
Series 1079 Class S, IF, 5/15/21 .............................. 806,605 881,223
Series 1084 Class F, AR, 5/15/21 .............................. 500,000 510,940
Series 1084 Class S, IF, 5/15/21 .............................. 350,000 437,306
Series 1098 Class M, HB, 1008.000%, 6/15/06 ................... 2,697 59,125
Series 1144 Class KB, 8.500%, 9/15/21 ......................... 2,000,000 2,078,738
Series 1172 Class L, HB, 1167.776%, 11/15/21 .................. 16,199 500,970
Series 1196 Class B, HB, IF, 1/15/22 .......................... 47,679 584,690
Series 1295 Class JB, 4.500%, 3/15/07 ......................... 1,500,000 1,332,705
Series 1298 Class L, HB, 981.86%, 6/15/07 ..................... 6,000 228,194
Series 1329 Class S, IO, IF, 8/15/99 .......................... 3,434,879 173,698
Series 1378 Class H, 10.000%, 1/15/21 ......................... 1,500,000 1,689,552
Series 1389 Class SA, IF, 10/15/07 ............................ 403,027 305,704
Series 1418 Class B, 6.500%, 11/15/19 ......................... 1,250,000 1,221,109
Series 1465 Class SA, IO, IF, 2/15/08 ......................... 19,520,460 963,042
Series 1470 Class F, AR, 2/15/23 .............................. 1,054,922 1,038,585
Series 1489 Class L, 5.500%, 4/15/08 .......................... 1,266,039 1,235,198
Series 1506 Class F, AR, 5/15/08 .............................. 1,974,461 1,958,042
Series 1506 Class SD, IO, IF, 5/15/08 ......................... 11,284,449 588,676
Series 1506 Class S, IF, 5/15/08 .............................. 337,261 301,653
Series 1531 Class K, 6.000%, 4/15/08 .......................... 1,040,448 993,700
Series 1583 Class NS, IF, 9/15/23 ............................. 982,727 641,204
Series 1585 Class NB, IF, 9/15/23 ............................. 2,513,255 2,086,002
Series 1586 Class A, 6.000%, 9/15/08 .......................... 1,308,400 1,234,031
Series 1595 Class S, IO, IF, 10/15/13 ......................... 17,668,305 827,937
Series 1628 Class S, IF, 12/15/23 ............................. 2,500,000 1,521,875
Series 1640 Class A, 5.500%, 10/15/07 ......................... 1,692,098 1,636,865
Series 1647 Class FB, AR, 12/15/08 ............................ 666,396 651,085
Series 1647 Class SB, IF, 12/15/08 ............................ 1,243,939 1,117,990
Series 1655 Class F, AR, 12/15/08 ............................. 970,128 962,843
Series 1655 Class SA, IF, 12/15/08 ............................ 223,945 170,190
Series 1689 Class SD, IF, 10/15/23 ............................ 1,500,000 1,293,750
Series 1694 Class SE, IF, 5/15/23 ............................. 1,038,856 859,396
Series 1706 Class LA, 7.000%, 3/15/24 ......................... 2,863,832 2,801,029
Series 1796-A, Class S, IF, 2/15/09 ........................... 1,391,843 1,107,378
119
<PAGE>
Series 1807, Class G, 9.000%, 1/1/06 .......................... 1,179,437 1,247,230
Series 1854, Class SE, IO, IF, 12/15/23 ....................... 2,500,000 765,625
Federal Housing Administration Project #07335307,
7.430%, 1/1/22 ................................................ 990,343 1,019,558
Federal Housing Administration Greystone 1996-2,
7.430 %, 11/1/22 .............................................. 1,974,552 2,029,839
Federal National Mortgage Assn. Mortgage Backed Securities
Stripped Trust 50, Class 2, IO, 10.500%, 3/25/19 ................ 230,253 71,013
Federal National Mortgage Assn. Pass Thru Securities:
Guaranteed Remic Trust:
1988 Class 7-Z, 9.250%, 4/25/18 ............................... 643,880 679,351
1988 Class 17-B, 9.400%, 10/25/17 ............................. 76,552 78,169
1989 Class 26-D, 10.000%, 5/25/04 ............................. 760,139 795,030
1989 Class 27-D, 10.000%, 1/25/16 ............................. 772,627 787,990
1989 Class 34-D, 9.850%, 7/25/13 .............................. 26,426 26,326
1989 Class 70-G, 8.000%, 10/25/19 ............................. 2,000,000 2,050,256
1989 Class 73-C, PO, 10/25/19 ................................. 275,805 218,230
1989 Class 78-H, 9.400%, 11/25/19 ............................. 1,750,000 1,910,118
1990 Class 1-D, 8.800%, 1/25/20 ............................... 910,736 952,943
1990 Class 60-K, 5.500%, 6/25/20 .............................. 1,250,000 1,175,413
1990 Class 63-H, 9.500%, 6/25/20 .............................. 755,000 823,864
1990 Class 93-G, 5.500%, 8/25/20 .............................. 1,250,000 1,173,375
1990 Class 94-H, HB, 505.000%, 8/25/20 ........................ 18,835 286,844
1990 Class 95-J, HB, 1118.040%, 8/25/20 ....................... 8,450 346,130
1990 Class 102-J, 6.500%, 8/25/20 ............................. 4,539,514 4,424,265
1990 Class 120-H, 9.000%, 10/25/20 ............................ 900,000 973,704
1990 Class 134-SC, IF, 11/25/20 ............................... 565,444 628,342
1990 Class 140-K, HB, 652.145%, 12/25/20 ...................... 15,940 462,174
1991 Class 4-N, HB, 758.750%, 1/25/06 ......................... 2,942 50,739
1991 Class 7-K, HB, 908.500%, 2/25/21 ......................... 1,529 36,139
1991 Class 20-M, HB, 908.750%, 3/25/06 ........................ 1,559 31,161
1991 Class 33-J, HB, 1008.250%, 4/25/06 ....................... 3,665 87,353
1991 Class 22-G, 6.000%, 12/25/16 ............................. 1,500,000 1,428,840
1991 Class 55-G, HB, 1148.550%, 2/25/05 ....................... 199 205
1991 Class 161-H, 7.500%, 2/25/21 ............................. 509,619 514,957
1992 Class 13-S, HB, IF, 1/25/99 .............................. 8,210 62,564
1992 Class 27-SQ, HB, IF, 5/25/22 ............................. 3,080 538,955
1992 Class 137-BA, 3.500%, 1/25/17 ............................ 1,495,370 1,423,842
1992 Class 199-S, IO, IF, 11/25/99 ............................ 7,535,120 329,029
1992 Class 204-B, 6.000%, 10/25/20 ............................ 2,000,000 1,895,460
1992 Class 215-PM, 7.875%, 11/25/21 ........................... 1,200,000 1,248,728
1993 Class 8-SB, IO, IF, 8/25/06 .............................. 11,109,112 506,009
1993 Class 12-S, IO, IF, 2/25/23 .............................. 3,922,869 263,499
1993 Class 12-SB, HB, IF, 2/25/23 ............................. 43,267 423,954
1993 Class 19-G, 5.000%, 5/25/19 .............................. 3,530,000 3,250,973
1993 Class 38-S, IO, IF, 5.250%, 11/25/22 ..................... 21,712,330 595,330
1993 Class 58-J, 5.500%, 4/25/23 .............................. 1,231,231 1,172,076
1993 Class 94-K, 6.750%, 5/25/23 .............................. 770,789 740,466
1993 Class 113-S, IO, IF, 7/25/23 ............................. 6,874,091 446,170
120
<PAGE>
1993 Class 139-SG, IF, 8/25/23 ................................ 2,597,473 1,675,053
1993 Class 152-D, PO, 8/25/23 ................................. 700,000 577,472
1993 Class 155-LA, 6.500%, 5/25/23 ............................ 1,550,753 1,517,149
1993 Class 155-SB, IO, IF, 9/25/23 ............................ 6,893,795 425,064
1993 Class 156-SD, IF, 10/25/19 ............................... 1,000,000 707,099
1993 Class 187-FE, AR, 11/25/16 ............................... 1,130,000 1,103,420
1993 Class 207-SC, IF, 11/25/23 ............................... 2,350,434 1,570,452
1993 Class 209-KB, 5.659%, 8/25/08 ............................ 3,599,652 3,348,720
1993 Class 214-L, 6.000%, 12/25/08 ............................ 1,462,327 1,406,291
1993 Class 220-SD, IF, 11/25/13 ............................... 1,242,669 892,615
1993 Class 223-FB, AR, 12/25/23 ............................... 721,333 698,792
1993 Class 223-SB, IF, 12/25/23 ............................... 651,339 521,071
1993 Class X225-C, FP, AR, 10/25/22 ........................... 1,100,000 1,061,943
1993 Class X225-C, VO, IF, 12/25/22 ........................... 2,000,000 1,802,500
1994 Class 19-C, 5.000%, 1/25/24 .............................. 2,082,214 1,940,727
1994 Class 26-G, PO, 2/25/24 .................................. 2,199,391 1,380,118
1994 Class 30-LA, 6.500%, 2/25/09 ............................. 1,946,576 1,888,677
1994 Class 36-SG, IO, IF, 8/25/23 ............................. 3,480,275 292,841
1994 Class 39-F, AR, 3/25/24 .................................. 993,778 982,315
1994 Class 39-S, IF, 3/25/24 .................................. 382,222 335,571
1994 Class 82-SA, IO, IF, 5/25/23 ............................. 18,253,713 639,209
1995 Class 13-B, 6.500%, 3/25/09 .............................. 2,404,339 2,322,832
1995 Class X-GIC C, 8.800%, 1/25/25 ........................... 1,000,000 1,094,734
1996 Class 20-L, PO, 9/25/08 .................................. 1,655,000 960,643
1996 Class 24-K, PO, 2/25/08 .................................. 1,500,000 1,037,400
1996 Class 46-A, 5.000%, 2/25/09 .............................. 2,053,734 1,928,563
1992-G Class 42-Z, 7.000%, 7/25/22 ............................ 680,533 649,249
1993-G Class 8-PG, 6.500%, 7/25/18 ............................ 1,000,000 982,860
1993-G Class 13-G, 6.000%, 6/25/20 ............................ 1,000,000 957,780
1993-G Class 19-K, 6.500%, 6/25/19 ............................ 1,613,728 1,564,928
1993-G Class 27-SE, IF, 8/25/23 ............................... 1,535,674 815,285
1994-G Class 13-ZB, 7.000%, 11/17/24 .......................... 2,544,329 2,356,293
1996-G Class 3-B, 9.000%, 9/20/20 ............................. 1,500,000 1,571,700
Federal National Mortgage Assn. Pass Thru Pool:
#111366, Adjustable Rate, 8/1/19 .............................. 452,440 474,569
#116612, Adjustable Rate, 3/1/19 .............................. 1,363,734 1,414,445
#160330, 6.345%, 3/1/99 ....................................... 2,354,486 2,350,789
#303306, 12.500%, 1/1/16 ...................................... 1,113,057 1,295,742
#303532, Adjustable Rate, 3/1/29 .............................. 2,250,811 2,245,316
Government National Mortgage Assn. Pass Thru Pool:
#297628, 8.000%, 9/15/22 ...................................... 1,992,029 2,049,657
#313110, 7.500%, 11/15/22 ..................................... 1,674,264 1,685,530
(Cost $134,069,606) 138,426,814
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS .......................... 332,888,695
-----------
(Cost $328,484,145)
121
<PAGE>
<CAPTION>
CORPORATE BONDS AND NOTES -- 13.62%
Finance -- 13.62%
<S> <C> <C>
American Express Credit Corp., 8.500%, 6/15/99 .................... 300,000 314,913
Associates Corp. of North America:
9.125%, 4/1/00 ................................................ 1,675,000 1,804,283
8.150%, 8/1/09 ................................................ 3,625,000 3,911,991
Case Equipment Loan Trust Asset Backed Ctf. :
1994 Series A, Class A2, 4.650%, 8/15/99 ...................... 475,971 474,177
1994 Series C, Class A2, 8.100%, 6/15/01 ...................... 1,862,128 1,902,108
1996 Series A, Class A2, 5.500%, 2/15/03 ...................... 8,405,960 8,379,313
Chase Manhattan Grantor Trust Automobile Loan Pass Thru Ctfs.
Series 1995-B, Class A, 5.900%, 11/15/01 ...................... 879,978 882,618
Collateralized Mortgage Obligation Trust CMO:
Series 12, Class D, 9.500%, 2/1/17 ............................ 351,779 363,652
Series 16, Class Q, IF, 3/20/18 ............................... 214,071 233,872
Collateralized Mortgage Securities Corp. CMO,
Series 88-2 Class B, 8.800%, 4/20/19 .......................... 451,199 467,726
First USA Credit Card Master Trust Asset Backed Pass Thru Ctf.,
Series 1995-1, Class A, AR, 10/15/01 .......................... 2,000,000 2,004,780
General Motors Acceptance Corp. Medium Term Note,
7.550%, 1/14/97 ............................................... 4,735,000 4,737,035
Green Tree Financial Corp. Loan Trust Asset Backed Ctf.
Series 1996-A, Class A, 5.700%, 2/15/26 ....................... 794,537 795,061
Merrill Lynch Home Equity Loan Asset Backed Pass Thru Ctf.
Series 1992-1, Class A, AR, 7/15/22 ........................... 1,690,890 1,694,441
Merrill Lynch MBS Inc. Project Pass Thru Ctf.
Series 144-S, 7.43%, 7/25/24 .................................. 544,688 544,688
Merrill Lynch Trust 43-E CMO, Series 43, Class E,
6.500%, 8/27/15 ............................................... 1,500,000 1,457,471
Morgan Stanley Mortgage Trust, CMO:
Series 35-2, HB, IF, 4/20/21 .................................. 3,144 490,400
Series 37-2, HB, IF, 7/20/21 .................................. 3,156 481,311
Series 39-3, PO, 12/20/21 ..................................... 593,044 449,017
Navistar Financial Corp. Owner Trust Asset Backed Pass Thru Ctf.
Series 1995-A, Class A2, 6.550%, 11/20/01 ..................... 2,084,153 2,097,179
Olympic Automobile Receivables Trust Asset Backed Pass Thru Ctf.
Series 1996-C, Class A5, 7.000%, 12/15/01 ..................... 2,650,000 2,703,053
Onyx Acceptance Grantor Trust Auto Loan Pass Thru Ctf.
Series 1996-1, Class A, 5.400%, 5/15/01 ....................... 987,547 978,906
Rural Housing Trust 1987-1, Senior Mortgage Pass Thru Ctf.
Sub Class 3-B, 7.330%, 4/1/26 ................................. 449,236 455,775
Standard Credit Card Master Trust Asset Backed Ctf.:
Series 1995-10, Class A, 5.900%, 2/7/01 ....................... 2,520,000 2,511,179
Series 1995-2, Class A, 8.625%, 1/7/02 ........................ 1,300,000 1,302,392
Superior Wholesale Inventory Fing Trust Asset Backed Ctf.
Series 1996-A, Class A, AR, 3/15/01 ........................... 2,000,000 2,001,240
122
<PAGE>
Toyota Auto Receivables Grantor Trust Asset Backed Ctf.
Series 1995-A, Class A, 5.850%, 3/15/01 ....................... 675,706 675,490
Western Financial Owner Trust Asset Backed Pass Thru Ctf.
Series 1996-C, Class A4, 6.800%, 12/20/03 ..................... 6,000,000 6,089,280
World Omni Automobile Lse Sec Trust Asset Backed Ctf.
Series 1995-A, Class A, 6.050%, 11/25/01 ...................... 5,387,084 5,393,818
----------
TOTAL CORPORATE BONDS AND NOTES ....................................... 55,597,169
----------
(Cost $55,040,869)
<CAPTION>
FOREIGN -- 1.65%
<S> <C> <C>
African Development Bank Note, 9.300%, 7/1/00 ....................... 983,000 1,065,778
Metropolis of Tokyo, 8.700%, 10/5/99 ................................ 1,500,000 1,596,264
National Australia Bank Ltd., 9.700%, 10/15/98 ...................... 400,000 423,908
Province of Ontario, 7.375%, 1/27/03 ................................ 3,500,000 3,647,487
------------
(Cost $6,815,978) ................................................... 6,733,437
------------
TOTAL INVESTMENTS ..................................................... $408,342,960
============
(Cost $403,464,651)
</TABLE>
See Notes to Financial Statements.
123
<PAGE>
Pegasus Intermediate Bond Fund
PORTFOLIO OF INVESTMENTS -- (Continued)
December 31, 1996
Notes to Portfolio of Investments
(a) The Fund invests in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Some of these securities are
collateralized mortgage obligations (CMOs). CMOs are debt securities
issued by U.S. government agencies or by financial institutions and other
mortgage lenders which are collateralized by a pool of mortgages held
under an indenture. Descriptions of certain collateralized mortgage
obligations are as follows:
Adjustable Rate (AR)
Inverse Floaters (IF) represent securities that pay interest at a rate
that increases (decreases) with a decline (increase) in a specified
index.
Interest Only (IO) represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. The face amount shown
represents the par value on the underlying pool. The yields on these
securities are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not
be fully recouped. These securities are subject to accelerated principal
paydowns as a result of prepayments or refinancing of the underlying pool
of mortgage instruments. As a result, interest income may be reduced
considerably.
High Coupon Bonds (HB) (a.k.a. "IOettes") represent the right to receive
interest payments on an underlying pool of mortgages with similar risks
as those associated with IO securities. Unlike IO's, the owner also has a
right to receive a very small portion of principal. The high interest
rate results from taking interest payments from other classes in the
REMIC Trust and allocating them to the small principal of the HB class.
Principal Only (PO) represents the right to receive the principal portion
only on an underlying pool of mortgage loans. The market value of these
securities is extremely volatile in response to changes in market
interest rates. As prepayments on the underlying mortgages of these
securities increase, the yield on these securities increases.
(b) Based upon estimated future cash flows, income is currently not being
recognized on certain IO, HB, and CMO securities with an aggregate market
value of $811,787. The book cost of certain IO and HB securities includes
a write down in the amount of $2,639,653 taken during 1993 to properly
state the net realizable value of the securities. The write down results
in a lower cost of investments than the tax cost disclosed in Note 4 in
Notes to Financial Statements.
See Notes to Financial Statements.
124
<PAGE>
Pegasus Bond Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
TEMPORARY CASH INVESTMENTS -- 7.53%
<S> <C> <C>
Salomon Brothers, Revolving Repurchase Agreement, 6.90%,
1/2/97 (secured by various U.S. Treasury Strips with
maturities ranging from 11/15/04 through 5/15/06, all
held at Chase Bank) .................................... $14,951,841 $ 14,951,841
Daiwa Securities America, Inc., Revolving Repurchase
Agreement, 5.50%, 7/1/96 (secured by U.S. Treasury Bills
due 10/16/97, all held at the Bank of New York) .......... 25,000,000 25,000,000
Nomura Agency, Revolving Repurchase Agreement, 7.00%,
1/2/97, (secured by U.S. Treasury Obligations with
maturities ranging from 7/24/00 through 5/11/15 at
various interest rates ranging from 0.00% to 7.65%,
all held at the Bank of New York) ...................... 20,000,000 20,000,000
----------
(Cost $59,951,841) 59,951,841
==========
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 77.63%
U.S. Treasury Securities -- 43.36%
Principal Strips from U.S. Treasury Securities due:
5/15/17 ................................................ 10,420,000 2,606,876
8/15/17 ................................................ 31,915,000 7,840,877
Strips from U.S. Treasury Securities due:
5/15/98 ................................................ 1,800,000 1,665,954
8/15/98 ................................................ 1,500,000 1,366,485
11/15/98 ............................................... 1,700,000 1,526,736
2/15/99 ................................................ 10,805,000 9,551,188
8/15/99 ................................................ 5,000,000 4,281,050
2/15/01 ................................................ 2,450,000 1,905,904
5/15/05 ................................................ 3,950,000 2,310,987
2/15/11 ................................................ 5,525,000 2,160,993
5/15/11 ................................................ 9,338,000 3,590,181
2/15/12 ................................................ 4,555,000 1,656,061
2/15/13 ................................................ 10,700,000 3,615,851
5/15/13 ................................................ 10,594,000 3,515,195
8/15/13 ................................................ 3,500,000 1,139,950
2/15/14 ................................................ 18,400,000 5,779,624
2/15/15 ................................................ 2,000,000 585,580
5/15/18 ................................................ 15,620,000 3,639,460
11/15/18 ............................................... 49,840,000 11,223,470
U.S. Treasury Bonds:
10.750%, 5/15/03 ....................................... 1,000,000 1,230,310
11.125%, 8/15/03 ....................................... 3,500,000 4,399,045
11.625%, 11/15/04 ...................................... 5,000,000 6,601,550
12.750%, 11/15/10 ...................................... 14,300,000 20,241,221
10.375%, 11/15/12 ...................................... 15,965,000 20,559,887
12.500%, 8/15/14 ....................................... 1,300,000 1,942,889
9.875%, 11/15/15 ....................................... 1,000,000 1,335,780
7.500%, 11/15/16 ....................................... 5,395,000 5,840,087
8.750%, 5/15/17 ........................................ 9,445,000 11,524,411
7.875%, 2/15/21 ........................................ 2,500,000 2,825,775
U.S. Treasury Notes:
4.750%, 2/15/97 ........................................ 4,500,000 4,495,095
8.500%, 4/15/97 ........................................ 1,270,000 1,281,113
125
<PAGE>
8.500%, 5/15/97 ........................................ 3,130,000 3,165,212
6.750%, 5/31/97 ........................................ 1,000,000 1,005,160
5.875%, 7/31/97 ........................................ 2,100,000 2,105,250
8.625%, 8/15/97 ........................................ 18,900,000 19,257,399
8.750%, 10/15/97 ....................................... 6,150,000 6,297,047
5.250%, 12/31/97 ....................................... 8,410,000 8,381,070
7.875%, 1/15/98 ........................................ 8,292,000 8,475,999
8.125%, 2/15/98 ........................................ 3,000,000 3,077,820
7.875%, 4/15/98 ........................................ 21,125,000 21,676,151
5.000%, 1/31/99 ........................................ 6,450,000 6,338,157
7.000%, 4/15/99 ........................................ 6,600,000 6,747,444
9.125%, 5/15/99 ........................................ 2,400,000 2,564,616
6.875%, 7/31/99 ........................................ 7,410,000 7,560,497
7.750%, 11/30/99 ....................................... 36,815,000 38,465,785
7.125%, 2/29/00 ........................................ 22,800,000 23,473,284
6.750%, 4/30/00 ........................................ 6,200,000 6,317,242
6.125%, 7/31/00 ........................................ 4,000,000 4,000,000
7.750%, 2/15/01 ........................................ 2,000,000 2,113,440
7.500%, 11/15/01 ....................................... 6,800,000 7,158,088
5.750%, 8/15/03 ........................................ 1,250,000 1,212,500
7.250%, 5/15/04 ........................................ 9,000,000 9,469,710
6.500%, 8/15/05 ........................................ 4,000,000 4,025,640
-----------
(Cost $338,234,972) 345,127,096
-----------
Agency Obligations -- 34.27%
Federal Home Loan Mortgage Corp. Participation Ctfs.:
#170269, 12.000%, 8/1/15 ............................... 1,499,221 1,685,252
#200070, 7.500%, 4/1/02 ................................ 230,491 233,321
#274081, 7.500%, 7/1/16 ................................ 82,221 82,590
#289711, 7.500%, 4/1/17 ................................ 121,517 121,992
#555238, 12.000%, 7/1/19 ............................... 696,124 782,902
Federal Home Loan Mortgage Corp. Gtd. Multi-Class Mortgage
Participation Ctfs.:
Series 10 Class D, 10.000%, 7/15/18 .................. 640,064 651,330
Series 11 Class D, 9.500%, 7/15/19 ................... 3,000,000 3,274,218
Series 13 Class SA, IF, 4/25/23 ...................... 1,851,307 1,574,050
Series G-21 Class SD, IF, 8/25/22 .................... 3,300,000 2,949,372
Series 22 Class C, 9.500%, 4/15/20 ................... 1,104,876 1,216,772
Series 23 Class E, 9.400%, 8/15/19 ................... 526,974 538,730
Series 23 Class F, 9.600%, 4/15/20 ................... 1,575,000 1,728,786
Series G-29 Class SD, IO, IF, 4/25/24 ................ 19,659,874 723,346
Series 32 Class B, 9.500%, 8/15/19 ................... 413,841 417,592
Series 38 Class C, 9.500%, 1/15/19 ................... 276,462 279,980
Series 41 Class I, HB, 84.000%, 5/15/20 .............. 109,065 363,616
Series 47 Class F, 10.000%, 6/15/20 .................. 500,000 550,523
Series 99 Class Z, 9.500%, 1/15/21 ................... 1,716,608 1,825,139
Series 129 Class E, 8.850%, 6/15/09 .................. 1,317,871 1,317,632
Series 134 Class B, IO, 9.000%, 8/15/22 .............. 939,900 279,620
Series 204 Class E, HB, IF, 5/15/23 .................. 21,745 518,671
Series 1045 Class G, HB, 1066.2085%, 2/15/21 ......... 4,011 117,522
126
<PAGE>
Series 1051 Class D, 7.000%, 11/15/19 ................ 923,197 931,071
Series 1065 Class J, 9.000%, 4/15/21 ................. 2,000,000 2,131,872
Series 1072 Class A, HB, 1008.500%, 5/15/06 .......... 27,056 629,739
Series 1079 Class S, IF, 5/15/21 ..................... 1,075,473 1,174,964
Series 1084 Class F, AR, 5/15/21 ..................... 2,000,000 2,043,758
Series 1084 Class S, IF, 5/15/21 ..................... 1,400,000 1,749,224
Series 1089 Class C, IO, IF, 6/15/21 ................. 69,388 972,627
Series 1098 Class M, HB, 10.080%, 6/15/06 ............ 12,137 266,065
Series 1144 Class KB, 8.500%, 9/15/21 ................ 2,000,000 2,078,738
Series 1172 Class L, HB, 1167.776%, 11/15/21 ......... 18,757 580,070
Series 1196 Class B, HB, IF, 1/15/22 ................. 71,273 874,025
Series 1295 Class JB, 4.500%, 3/15/07 ................ 2,400,000 2,132,328
Series 1297 Class H, 7.500%, 1/15/20 ................. 1,831,334 1,832,341
Series 1298 Class L, HB, 981.8667%, 6/15/07 .......... 9,000 342,291
Series 1329 Class S, IO, IF, 8/15/99 ................. 4,007,886 202,675
Series 1370 Class F, 6.750%, 3/15/19 ................. 600,000 598,158
Series 1378 Class H, 10.000%, 1/15/21 ................ 3,800,000 4,280,198
Series 1378 Class JZ, 7.500%, 11/15/21 ............... 2,457,917 2,392,229
Series 1389 Class SA, IF, 10/15/07 ................... 1,249,383 947,681
Series 1414 Class LA, AR, 11/15/07 ................... 2,002,047 1,928,417
Series 1418 Class B, 6.500%, 11/15/19 ................ 2,250,000 2,197,997
Series 1465 Class SA, IO, IF, 2/15/08 ................ 21,177,857 1,044,810
Series 1470 Class F, AR, 2/15/23 ..................... 2,109,844 2,077,171
Series 1483 Class E, 6.500%, 2/15/20 ................. 3,150,000 3,094,151
Series 1489 Class L, 5.500%, 4/15/08 ................. 1,514,401 1,477,510
Series 1506 Class F, AR, 5/15/08 ..................... 2,446,626 2,426,280
Series 1506 Class S, IF, 5/15/08 ..................... 505,891 452,480
Series 1506 Class SD, IO, IF, 5/15/08 ................ 20,482,697 1,068,521
Series 1531 Class K, 6.000%, 4/15/08 ................. 1,127,152 1,076,509
Series 1554 Class KA, PO, 8/15/08 .................... 807,336 590,596
Series 1561 Class SC, IF, 8/15/08 .................... 1,575,139 1,397,935
Series 1575 Class FB, AR, 8/15/08 .................... 2,685,107 2,669,396
Series 1575 Class SB, IF, 8/15/08 .................... 895,036 550,167
Series 1583 Class NS, IF, 9/15/23 .................... 1,270,128 828,726
Series 1585 Class NB, IF, 9/15/23 .................... 2,271,596 1,885,425
Series 1586 Class A, 6.000%, 9/15/08 ................. 1,404,137 1,324,326
Series 1595 Class S, IO, IF, 10/15/13 ................ 12,534,496 587,366
Series 1602 Class O, 6.000%, 10/15/23 ................ 2,463,000 2,257,450
Series 1604 Class SE, IF, 11/15/08 ................... 701,374 558,102
Series 1606 Class LC, AR, 5/15/08 .................... 492,061 492,729
Series 1628 Class S, IF, 12/15/23 .................... 2,550,000 1,552,313
Series 1633 Class SE, IF, 12/15/23 ................... 1,278,652 1,285,045
Series 1640 Class A, 5.500%, 10/15/07 ................ 936,054 905,500
Series 1647 Class FB, AR, 12/15/08 ................... 746,606 729,452
Series 1647 Class SB, IF, 12/15/08 ................... 1,474,956 1,325,617
Series 1655 Class F, AR, 12/15/08 .................... 1,494,755 1,483,531
Series 1655 Class SA, IF, 12/15/08 ................... 344,875 262,093
Series 1681 Class K, 7.000%, 8/15/23 ................. 1,046,286 1,016,069
Series 1686 Class SH, IF, 2/15/24 .................... 1,535,892 1,092,403
127
<PAGE>
Series 1686 Class SL, IF, 2/15/24 .................... 1,201,836 988,878
Series 1689 Class SD, IF, 10/15/23 ................... 1,725,000 1,487,813
Series 1694 Class SE, IF, 5/15/23 .................... 1,355,933 1,121,698
Series 1706 Class LA, 7.000%, 3/15/24 ................ 4,403,142 4,306,581
Series 1796-A, Class S, IF, 2/15/09 .................. 1,000,000 795,620
Series 1807 Class G, 9.000%, 1/1/06 .................. 2,280,244 2,411,311
Series 1825 Class C, 5.7999%, 12/15/23 ............... 2,000,000 1,787,378
Series 1854 Class C, PO, 4/15/08 ..................... 2,250,000 1,406,250
Series 1854 Class SE, IO, IF, 12/15/23 ............... 9,886,816 3,027,837
Federal Housing Adminstration Merrill Lynch Project Pass
Thru Ctfs., 7.430%, 8/1/20 ............................. 1,341,095 1,382,669
Federal Housing Administration Project #07335307, 7.430%,
1/1/22 ................................................. 1,782,617 1,835,204
Federal Housing Administration Greystone, 7.430%, 11/1/22 2,615,379 2,688,609
Federal National Mortgage Assn. Mortgage Backed
Securities, Stripped Trust:
23, Class 2, IO, 10.000%, 9/1/17 ..................... 1,119,333 342,721
50, Class 2, IO, 10.500%, 3/25/19 .................... 145,423 44,851
Federal National Mortgage Assn. Pass Thru Securities:
Pool #44699, 7.000%, 4/1/17 ............................ 283,866 280,899
Pool #50966, 7.000%, 1/1/24 ............................ 1,881,627 1,851,575
Pool #70226, Adjustable Rate, 1/1/19 ................... 531,654 525,009
Pool #116612, Adjustable Rate, 3/1/19 .................. 2,125,821 2,204,869
Pool #160330, 6.345%, 3/1/99 ........................... 2,354,486 2,350,789
Pool #303306, 12.500%, 1/1/16 .......................... 1,686,450 1,963,245
Pool #303532, Adjustable Rate, 3/1/29 .................. 6,043,843 6,029,090
Federal National Mortgage Assn. Pass Thru Securities
Guaranteed Remic Trust:
1988 Class 7-Z, 9.250%, 4/25/18 ...................... 657,878 694,120
1988 Class 17-B, 9.400%, 10/25/17 .................... 440,479 449,786
1989 Class 27-D, 10.000%, 1/25/16 .................... 423,357 431,775
1989 Class 34-E, 9.850%, 8/25/14 ..................... 1,000,000 1,023,293
1989 Class 70-G, 8.000%, 10/25/19 .................... 2,000,000 2,050,256
1989 Class 73-C, PO, 10/25/19 ........................ 1,299,464 1,028,201
1989 Class 78-H, 9.400%, 11/25/19 .................... 1,250,000 1,364,370
1990 Class 1-D, 8.800%, 1/25/20 ...................... 3,067,742 3,209,914
1990 Class 60-K, 5.500%, 6/25/20 ..................... 750,000 705,248
1990 Class 63-H, 9.500%, 6/25/20 ..................... 900,000 982,089
1990 Class 93-G, 5.500%, 8/25/20 ..................... 1,500,000 1,408,050
1990 Class 94-H, HB, 505.000%, 8/25/20 ............... 31,798 484,280
1990 Class 95-J, HB, 1118.040%, 8/25/20 .............. 16,900 692,258
1990 Class 102-J, 6.500%, 8/25/20 .................... 3,947,403 3,847,187
1990 Class 120-H, 9.000%, 10/25/20 ................... 2,500,000 2,704,733
1990 Class 134-SC, IF, 11/25/20 ...................... 951,276 1,057,093
1990 Class 140-K, HB, 652.1454%, 12/25/20 ............ 17,079 495,190
1991 Class 4-N, HB, 758.750%, 1/25/06 ................ 8,336 143,775
1991 Class 7-K, HB, 908.500%, 2/25/21 ................ 6,114 144,555
1991 Class 24-Z, 5.000%, 3/25/21 ..................... 1,332,295 1,132,517
1991 Class 33-J, HB, 1008.250%, 4/25/06 .............. 7,854 187,183
1991 Class 55-G, HB, 1148.550%, 2/25/05 .............. 160 164
128
<PAGE>
1991 Class 144-PZ, 8.500%, 6/25/21 ................... 2,323,521 2,409,324
1992 Class 13-S, HB, IF, 1/25/99 ..................... 27,726 211,296
1992 Class 27-SQ, HB, IF, 5/25/22 .................... 6,098 1,067,134
1992 Class 135-LC, 7.500%, 9/25/07 ................... 1,000,000 1,021,073
1992 Class 137-BA, 3.500%, 1/25/17 ................... 1,744,599 1,661,149
1992 Class 186-M, 6.000%, 9/25/07 .................... 1,166,147 1,088,271
1992 Class 199-S, IO, IF, 11/25/99 ................... 10,813,974 472,203
1992 Class 201-SB, IF, 10/25/22 ...................... 500,000 438,815
1992 Class 204-B, 6.000%, 10/25/20 ................... 4,300,000 4,075,239
1992 Class 215-PM, 7.875%, 11/25/21 .................. 1,600,000 1,664,971
1993 Class 8-SB, IO, IF, 8/25/06 ..................... 11,553,477 526,249
1993 Class 12-S, IO, IF, 2/25/23 ..................... 6,201,594 416,561
1993 Class 12-SB, HB, IF, 2/25/23 .................... 49,036 480,481
1993 Class 13-G, 6.000%, 6/25/20 ..................... 2,000,000 1,915,560
1993 Class 19-G, 5.000%, 5/25/19 ..................... 3,265,000 3,006,921
1993 Class 19-K, 6.500%, 6/25/19 ..................... 2,208,259 2,141,481
1993 Class 27-SE, IF, 8/25/23 ........................ 1,343,715 713,374
1993 Class 32-K, 6.000%, 3/25/23 ..................... 1,553,308 1,453,048
1993 Class 38-S, IO, IF, 11/25/22 .................... 23,123,344 634,019
1993 Class 44-S, IO, IF, 4/25/23 ..................... 10,726,793 545,393
1993 Class 58-J, 5.500%, 4/25/23 ..................... 1,641,642 1,562,768
1993 Class 94-K, 6.750%, 5/25/23 ..................... 1,156,184 1,110,699
1993 Class 113-S, IO, IF, 7/25/23 .................... 7,676,565 498,255
1993 Class 139-SG, IF, 8/25/23 ....................... 3,450,311 2,225,029
1993 Class 152-D, PO, 8/25/23 ........................ 1,000,000 824,960
1993 Class 155-LA, 6.500%, 5/25/23 ................... 3,721,808 3,641,156
1993 Class 155-SB, IO, IF, 9/25/23 ................... 9,574,715 590,367
1993 Class 156-SD, IF, 10/25/19 ...................... 1,250,000 883,874
1993 Class 175-FE, AR, 9/25/08 ....................... 1,000,000 966,676
1993 Class 187-SA, IF, 9/25/23 ....................... 987,304 955,217
1993 Class X-188A, IO, 8/25/06 ....................... 6,745,833 708,967
1993 Class 206-SD, IF, 11/25/23 ...................... 1,250,000 1,022,531
1993 Class 207-SC, IF, 11/25/23 ...................... 3,411,920 2,279,688
1993 Class 209-KB, 5.659%, 8/25/08 ................... 6,063,310 5,640,637
1993 Class 214-L, 6.000%, 12/25/08 ................... 731,164 703,145
1993 Class 220-SD, IF, 11/25/13 ...................... 2,087,684 1,499,594
1993 Class 223-FB, AR, 12/25/23 ...................... 5,732,752 5,553,604
1993 Class 223-SB, IF, 12/25/23 ...................... 2,901,860 2,321,488
1993 Class X-225C-FP, AR, 12/25/22 ................... 900,000 868,863
1993 Class X-225C-VO, IF, 12/25/22 ................... 1,600,000 1,442,000
1993 Class XG23A-A, PO, 7/25/20 ...................... 6,700,000 5,619,625
1994 Class 13-ZB, 7.000%, 11/17/24 ................... 2,544,329 2,356,293
1994 Class 19-C, 5.000%, 1/25/24 ..................... 2,519,478 2,348,280
1994 Class 26-G, PO, 2/25/24 ......................... 2,278,569 1,429,802
1994 Class 30-LA, 6.500%, 2/25/09 .................... 1,790,850 1,737,583
1994 Class 36-SG, IO, IF, 8/25/23 .................... 7,651,123 643,788
1994 Class 39-F, AR, 3/25/24 ......................... 1,104,198 1,091,461
1994 Class 39-S, IF, 3/25/24 ......................... 424,691 372,856
1994 Class 82-SA, IO, IF, 5/25/23 .................... 37,031,620 1,296,773
129
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1995 Class 13-B, 6.500%, 3/25/09 ..................... 3,329,084 3,216,228
1995 Class XG1C C, 8.800%, 1/25/25 ................... 1,000,000 1,094,734
1996 Class 7-C 6.500%, 12/25/10 ...................... 1,000,000 934,903
1996-20, Class L, PO, 9/25/08 ........................ 3,165,000 1,837,121
1996 Class 24-K, PO, 2/25/08 ......................... 3,500,000 2,420,600
1996 Class 24-B, PO, 10/25/08 ........................ 3,800,000 1,994,225
1996 Class 46-A, 5.000%, 2/25/09 ..................... 5,000,000 4,695,260
1992-G Class 15-Z, 7.000%, 1/25/22 ................... 1,751,537 1,647,126
1992-G Class 35-G, HB, IF, 7/25/22 ................... 41,702 1,324,161
1992-G Class 42-Z, 7.000%, 7/25/22 ................... 1,769,386 1,688,048
1992-G Class 59-C, 6.000%, 12/25/21 .................. 3,050,000 2,909,365
1992-G Class 59-F, AR, 10/25/22 ...................... 1,849,741 1,796,817
1992-G Class 61-Z, 7.000%, 10/25/22 .................. 1,045,328 919,587
1996-G Class 3-B, 9.000%, 9/20/20 .................... 4,500,000 4,715,100
Government National Mortgage Assn. Pass Thru Securities
Guaranteed Remic Trust:
1994 Class 4-SA, IO, IF, 10/16/22 .................... 7,253,929 438,877
1996 Class 15-OB, 9.000%, 11/20/21 ................... 4,528,250 4,812,669
1996 Class 26-S, IO, IF, 12/16/20 .................... 25,459,000 1,567,256
Government National Mortgage Assn. Pass Thru Pool:
#023594, 8.500%, 7/15/08 ............................... 424,480 449,592
#190923, 9.000%, 12/15/16 .............................. 381,630 409,981
#297628, 8.000%, 9/15/22 ............................... 2,988,044 3,074,485
#313110, 7.500%, 11/15/22 .............................. 1,808,205 1,820,372
#345288, 7.500%, 3/15/23 ............................... 770,229 774,565
-----------
(Cost $262,086,518) 272,779,645
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS ................. 617,906,741
-----------
(Cost $600,321,490)
CORPORATE BONDS AND NOTES -- 12.50%
Finance -- 11.16%
ABN Amro Bank NV, 7.250%, 5/31/05 ........................ 2,000,000 2,034,126
Associates Corp. of North America:
9.125%, 4/1/00 ......................................... 2,350,000 2,531,382
8.150%, 8/1/09 ......................................... 3,085,000 3,329,239
Case Equipment Loan Trust Asset Backed Ctf.:
5.500%, 2/15/03 ........................................ 9,168,615 9,139,551
7.300%, 3/15/02 ........................................ 2,964,287 3,012,546
Chase Manhattan Grantor Trust, Series 95-B, 5.900%,
11/15/01 ............................................... 1,026,641 1,029,721
Chase Manhattan Corp., Subordinated Note, 9.750%, 11/1/01 2,000,000 2,250,272
Chevy Chase Automobile Recievable Trust Asset Backed
Pass Thru Ctf.:
Series 1995-2, Class A, 5.800%, 6/15/02 .............. 1,292,097 1,293,854
Collateralized Mortgage Obligation Trust CMO:
Trust 12-D, 9.500%, 2/1/17 ............................. 703,557 727,305
Trust 16-Q, IF, 3/20/18 ................................ 379,558 414,667
Dayton Hudson Credit Card Master Trust Asset Backed Ctf.
Series A, 6.100%, 2/25/02 .............................. 1,500,000 1,505,910
First USA Credit Card Master Trust, VR, 10/15/01 ......... 4,100,000 4,109,799
130
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Ford Credit Grantor Trust, Series 94-A, 6.350%, 5/15/99 .. 958,410 965,119
General Motors Acceptance Corp. Medium Term Note, 7.550%,
1/14/97 ................................................ 2,500,000 2,501,075
Government National Mortgage Assn. Backed Trust I CMO,
Class A, Zero Coupon, PO, 5/20/17 ...................... 272,407 210,512
Green Tree Financial Corp. Loan Trust Asset Backed Ctf.:
Series 1995-A, Class A6, 7.300%, 7/15/25 ............... 3,000,000 3,006,360
Series 1996-A, Class A, 5.700%, 2/15/26 ................ 1,042,830 1,043,518
Merrill Lynch Trust Series 43 Class E CMO, 6.500%, 8/27/15 4,000,000 3,886,588
Merrill Lynch Home Equity Loan, 1992-1, Class A, Variable
Rate, 7/15/22 .......................................... 2,113,612 2,118,051
Merril Lynch MBS 144-S, 7.430%, 7/25/24 .................. 4,720,627 4,720,627
Morgan Stanley Mortgage Trust CMO:
Series 35-2, HB, IF, 4/20/21 ........................... 4,126 643,629
Series 37-2, HB, IF, 7/20/21 ........................... 4,655 709,907
Series 39-3, PO, 12/20/21 .............................. 762,485 577,307
Navistar, Class A-2, 6.550%, 11/20/01 .................... 2,679,625 2,696,372
Olympic Automobile Receivables Trust Asset Backed Pass
Thru Ctf. Series 1996-C, Class A5, 7.000%, 12/15/01 .... 3,500,000 3,570,070
ONYX Acceptance CMO Trust, 5.400%, 2/15/01 ............... 987,547 978,906
PaineWebber CMO Trust:
Series H-4, 8.750%, 4/1/18 ............................. 779,121 808,194
Series P-4, 8.500%, 8/1/19 ............................. 2,698,510 2,789,050
Rural Housing Trust 1987-1 Sr. Mortgage Pass Thru Ctf.,
Class 3-B, 7.330%, 4/1/26 .............................. 1,004,039 1,018,657
Salomon Inc. Note, 6.700%, 12/1/98 ....................... 2,500,000 2,512,773
Sears Credit Account Master Trust Asset Backed Ctf. Series
1995-3, Class A, 7.000%, 10/15/04 ...................... 1,600,000 1,638,640
Standard Credit Card Master Trust Asset Backed Ctf.:
Series 1994-2, Class A, 7.250%, 4/7/08 ............... 1,800,000 1,852,020
Series 1995-2, Class A, 8.625%, 1/7/02 ............... 4,000,000 4,007,360
Superior Wholesale, 1996-A, Adjustable Rate, 3/15/01 ..... 2,700,000 2,701,674
Toyota Auto Receivables Grantor Trust, Series 95-A Class
A, 5.850%, 3/15/01 ..................................... 677,181 676,964
Western Financial Asset Backed Pass Thru Ctf. Series
1996-C, Class A4, 6.800%, 12/20/03 ..................... 4,150,000 4,211,752
World Omni Automobile LSE SEC Trust, Series 95-5 Class A,
6.050%, 11/25/01 ....................................... 7,560,820 7,570,271
----------
(Cost $86,911,053) 88,793,768
----------
Industrial -- 1.04%
Boeing Co., 7.950%, 8/15/24 .............................. 1,730,000 1,881,548
Dayton Hudson Co., 7.875%, 6/15/23 ....................... 1,800,000 1,770,696
General Motors Corp., 8.800%, 3/1/21 ..................... 2,695,000 3,071,788
Monsanto Co., 8.200%, 4/15/25 ............................ 1,500,000 1,544,613
----------
(Cost $7,671,709) 8,268,645
----------
131
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Public Utility -- 0.30%
Nippon Telegraph & Telephone Corp., 9.500%, 7/27/98 ...... 1,355,000 1,424,078
West Texas Utilities, 6.375%, 10/1/05 .................... 1,000,000 964,163
----------
(Cost $2,406,372) 2,388,241
----------
TOTAL CORPORATE BONDS AND NOTES .............................. 99,450,654
----------
(Cost $96,989,134)
FOREIGN -- 2.34%
African Development Bank Note, 9.300%, 7/1/00 .............. 1,572,000 1,704,378
Kingdom of Belgium Put Euro Dollar, 9.200%, 6/28/00 ........ 2,000,000 2,405,000
Metropolis of Tokyo, 8.700%, 10/5/99 ....................... 2,250,000 2,394,396
National Australia Bank Ltd, 9.700%, 10/15/98 .............. 800,000 847,816
Province of Ontario, 15.750%, 3/15/12 ...................... 1,415,000 1,532,953
Province of Ontario Eurobond, 7.375%, 1/27/03 .............. 4,400,000 4,585,412
Province of Quebec, 9.125%, 8/22/01 ........................ 2,515,000 2,761,784
Quebec Province of Canada, 6.500%, 1/17/06 ................. 2,500,000 2,412,100
(Cost $18,551,330) 18,643,839
------------
TOTAL INVESTMENTS ............................................ $795,953,075
(Cost $775,813,795) ============
<FN>
See Notes to Financial Statements.
</TABLE>
132
<PAGE>
Pegasus Bond Fund
PORTFOLIO OF INVESTMENTS -- (Continued)
December 31, 1996
Notes to Portfolio of Investments
(a) The Fund invests in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Some of these securities are
collateralized mortgage obligations (CMOs). CMOs are debt securities
issued by U.S. government agencies or by financial institutions and other
mortgage lenders which are collateralized by a pool of mortgages held
under an indenture. Descriptions of certain collateralized mortgage
obligations are as follows:
Adjustable Rate (AR)
Inverse Floaters (IF) represent securities that pay interest at a rate
that increases (decreases) with a decline (increase) in a specified
index.
Interest Only (IO) represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. The face amount shown
represents the par value on the underlying pool. The yields on these
securities are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not
be fully recouped. These securities are subject to accelerated principal
paydowns as a result of prepayments or refinancing of the underlying pool
of mortgage instruments. As a result, interest income may be reduced
considerably.
High Coupon Bonds (HB) (a.k.a. "IOettes") represent the right to receive
interest payments on an underlying pool of mortgages with similar risks
as those associated with IO securities. Unlike IO's, the owner also has a
right to receive a very small portion of principal. The high interest
rate results from taking interest payments from other classes in the
REMIC Trust and allocating them to the small principal of the HB class.
Principal Only (PO) represents the right to receive the principal portion
only on an underlying pool of mortgage loans. The market value of these
securities is extremely volatile in response to changes in market
interest rates. As prepayments on the underlying mortgages of these
securities increase, the yield on these securities increases.
(b) Based upon estimated future cash flows, income is currently not being
recognized on certain IO, HB, and CMO securities with an aggregate market
value of $3,003,503. The book cost of certain IO and HB securities
includes a write down in the amount of $6,056,100 taken during 1993 to
properly state the net realizable value of the securities. The write down
results in a lower cost of investments than the tax cost disclosed in
Note 4 in Notes to Financial Statements. Short Bond Fund
See Notes to Financial Statements.
133
<PAGE>
Pegasus Short Bond Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 0.18%
Salomon Brothers, Revolving Repurchase Agreement, 6.90%,1/2/97
(secured by various U.S. Treasury Strips with maturities ranging
from 11/15/04 through 5/15/06, all held at Chase Bank) ............ $ 310,972 $ 310,972
(Cost $ 310,972)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 80.90%
U.S. Treasury Securities -- 64.37%
Strip from U.S. Treasury Note Principal due:
8/15/98 ....................................................... 500,000 455,495
U.S. Treasury Notes:
7.375%, 11/15/97 .............................................. 20,373,000 20,665,759
7.875%, 1/15/98 ............................................... 3,665,000 3,746,326
5.625%, 1/31/98 ............................................... 1,450,000 1,449,319
7.875%, 4/15/98 ............................................... 9,200,000 9,440,028
5.125%, 4/30/98 ............................................... 1,000,000 992,340
6.125%, 5/15/98 ............................................... 8,000,000 8,038,720
9.000%, 5/15/98 ............................................... 4,500,000 4,689,855
5.375%, 5/31/98 ............................................... 1,100,000 1,094,324
6.000%, 5/31/98 ............................................... 700,000 702,184
5.250%, 7/31/98 ............................................... 3,000,000 2,975,160
6.250%, 7/31/98 ............................................... 5,300,000 5,333,973
6.125%, 8/31/98 ............................................... 4,040,000 4,057,655
5.500%, 11/15/98 .............................................. 5,000,000 4,966,400
5.125%, 11/30/98 .............................................. 3,000,000 2,960,160
8.875%, 2/15/99 ............................................... 1,000,000 1,057,970
5.875%, 3/31/99 ............................................... 1,000,000 999,060
7.000%, 4/15/99 ............................................... 1,000,000 1,022,340
6.500%, 4/30/99 ............................................... 3,000,000 3,036,570
6.750%, 5/31/99 ............................................... 2,200,000 2,237,466
6.875%, 7/31/99 ............................................... 1,315,000 1,341,708
6.875%, 8/31/99 ............................................... 2,000,000 2,041,880
7.125%, 9/30/99 ............................................... 1,000,000 1,027,660
7.500%, 10/31/99 .............................................. 4,035,000 4,185,062
7.875%, 11/15/99 .............................................. 1,000,000 1,047,660
7.750%, 11/30/99 .............................................. 4,250,000 4,440,570
7.750%, 12/31/99 .............................................. 1,000,000 1,045,940
7.750%, 1/31/00 ............................................... 9,100,000 9,522,331
7.125%, 2/29/00 ............................................... 2,000,000 2,059,060
6.875%, 3/31/00 ............................................... 500,000 511,250
6.750%, 4/30/00 ............................................... 1,700,000 1,732,147
6.375%, 8/15/02 ............................................... 500,000 503,280
-----------
(Cost $109,357,889) 109,379,652
-----------
Agency Obligations -- 16.53%
Federal Home Loan Mortgage Corp. Gtd. Multi-Class
Mortgage Participation Ctfs.:
Series 2 Class Z, 9.300%, 3/15/19 ............................. 1,094,530 1,154,085
Series 10 Class D, 10.000%, 7/15/18 ........................... 145,469 148,030
Series 11 Class C, 9.500%, 4/15/19 ............................ 402,461 412,634
Series 26 Class F, 9.500%, 2/15/20 ............................ 1,455,435 1,547,167
134
<PAGE>
Series 81 Class A, 8.125%, 11/15/20 ........................... 374,579 380,198
Series 85 Class C, 8.600%, 1/15/21 ............................ 839,993 869,397
Series 99 Class Z, 9.500%, 1/15/21 ............................ 858,304 912,569
Series 192 Class H, 9.000%, 7/15/21 ........................... 296,526 302,388
Series 1045 Class G, HB, 1066.208%, 2/15/21 ................... 2,006 58,762
Series 1096 Class D, 7.000%, 6/15/20 .......................... 616,659 620,026
Series 1477 Class F, 6.650%, 5/15/18 .......................... 300,000 301,242
Series 1541 Class EA, 4.000%, 12/15/16 ........................ 1,000,000 946,320
Series 1559 Class VF, 6.250%, 2/15/20 ......................... 500,000 493,470
Series 1570 Class D, P/O, 7/15/20 ............................. 303,141 272,465
Series 1578 Class C, 5.500%, 11/15/12 ......................... 616,010 615,283
Series 1614 Class G, 5.800%, 2/15/19 .......................... 800,000 788,032
Series 1623 Class PC, 5.000%, 11/15/07 ........................ 440,000 438,429
Series 1669 Class C, 5.100%, 8/15/12 .......................... 740,000 736,973
Series 1671 Class D, 5.750%, 11/15/16 ......................... 250,000 248,638
Series 1698 Class PE, 6.000%, 11/15/05 ........................ 250,000 247,510
Series 1722 Class PB, 6.500%, 2/15/09 ......................... 162,044 162,100
Series 1727 Class E, 6.500%, 4/15/18 .......................... 1,000,000 1,001,630
Series 1807 Class G, 9.000%, 1/1/06 ........................... 786,291 831,486
Federal National Mortgage Assn. Medium Term Note
4.920%, 9/28/98 ............................................... 220,000 216,528
Federal National Mortgage Assn. Mortgage Backed Securities
Stripped Trust 268, Class 2, IO, 9.000%, 12/25/21 ............. 225,240 67,457
Federal National Mortgage Assn. Pass Thru Securities:
Pool #070226, AR, 1/1/19 ...................................... 318,993 315,006
Pool #111366, AR, 8/1/19 ...................................... 365,432 383,306
Pool #116612, AR, 3/1/19 ...................................... 762,087 790,425
Federal National Mortgage Assn. Pass Thru Securities
Gtd. Remic Trust:
1988 Class 7-Z, 9.250%, 4/25/18 ............................... 699,870 738,425
1988 Class 15-A, 9.000%, 6/25/18 .............................. 147,405 154,144
1988 Class 16-B, 9.500%, 6/25/18 .............................. 895,072 951,793
1988 Class 17-B, 9.400%, 10/25/17 ............................. 38,276 39,085
1989 Class 27-D, 10.000%, 1/25/16 ............................. 105,839 107,944
1989 Class 31-D, 9.150%, 8/25/18 .............................. 206,395 210,448
1989 Class 73-C, PO, 10/25/19 ................................. 212,157 167,869
1990 Class 77-C, 9.000%, 7/25/19 .............................. 257,225 264,260
1990 Class 94-C, 8.000%, 1/25/19 .............................. 73,841 74,312
1991 Class 16-G, 8.000%, 3/25/04 .............................. 608,990 610,938
1991 Class 41-O, 9.000%, 8/25/06 .............................. 375,000 385,411
1991 Class 56-K, 8.600%, 2/25/20 .............................. 864,783 880,576
1992 Class 13-S, HB, IF, 1/25/99 .............................. 3,489 26,591
1992 Class 137-BA, 3.500%, 1/25/17 ............................ 249,228 237,307
1993 Class 35-C, 5.500%, 10/25/01 ............................. 50,440 50,327
1993 Class 85-PD, 5.500%, 7/25/03 ............................. 300,000 298,659
1993 Class 86-E, 6.000%, 1/25/07 .............................. 1,425,000 1,414,369
1993 Class 103-PC, 5.300%, 11/25/11 ........................... 272,981 272,231
1993 Class 107-D, 6.500%, 12/25/06 ............................ 900,000 897,507
1993 Class 252-C, 5.400%, 1/25/12 ............................. 239,080 238,355
135
<PAGE>
1994 Class 17-E, 6.000%, 2/25/07 .............................. 425,000 420,032
1994 Class 32-PB, 5.500%, 3/25/03 ............................. 3,000,000 2,990,040
1994-G Class 8-B, 6.650%, 8/17/07 ............................. 422,506 422,839
Federal National Mortgage Assn. Debenture, 4.700%, 9/10/98 ............ 1,000,000 980,004
-----------
(Cost $28,284,715) .................................................. 28,095,022
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS .......................... 137,474,674
-----------
(Cost $137,642,604)
CORPORATE BONDS AND NOTES -- 18.92%
Finance -- 17.53%
Associates Corp. of North America:
9.700%, 5/1/97 ................................................ 765,000 774,486
6.800%, 12/15/97 .............................................. 800,000 807,285
5.250%, 9/1/98 ................................................ 340,000 335,630
8.500%, 1/10/00 ............................................... 500,000 529,498
9.125%, 4/1/00 ................................................ 215,000 231,595
7.550%, 8/23/01 ............................................... 250,000 259,787
Associates Corp. of North America Medium Term Note
Tranche #SR 00455, 7.480%, 7/27/02 ............................ 300,000 311,647
Beneficial Finance Corp. Medium Term Note:
9.125%, 2/15/98 ............................................... 1,326,000 1,369,440
8.900%, 7/27/98 ............................................... 500,000 521,171
Tranche #00490, 7.200%, 2/21/97 ............................... 400,000 400,939
Tranche #00659, 7.340%, 11/26/99 .............................. 200,000 205,247
Citicorp Mortgage Securities, Inc. Remic Pass Thru Ctf.,
Series 89-16, Class A-1, AR, 4/1/19 ........................... 274,963 271,869
Collateralized Mortgage Obligations Trust CMO,
Trust 12, Class D, 9.500%, 2/1/17 ............................. 175,889 181,826
Ford Credit Grantor Trust Asset Backed Ctf.,
Series 1994-B, Class A, 7.300%, 10/15/99 ...................... 294,937 299,042
Ford Holdings Inc.:
9.250%, 3/1/00 ................................................ 2,308,000 2,484,384
9.250%, 7/15/97 ............................................... 2,493,000 2,537,660
Ford Motor Credit Co.:
7.250%, 5/15/99 ............................................... 784,000 800,205
9.500%, 4/15/00 ............................................... 730,000 793,412
Ford Motor Credit Co. Medium Term Note:
Tranche #TR 00493, 6.450%, 7/21/97 ............................ 300,000 301,342
Tranche #00281, 7.470%, 7/29/99 ............................... 1,000,000 1,026,750
Tranche #00442, 7.590%, 4/6/00 ................................ 300,000 309,900
General Motors Acceptance Corp. Medium Term Note
Tranche #00162, 7.750%, 2/20/97 ............................... 250,000 250,725
MBNA Master Credit Card Trust Asset Backed Ctf.:
Trust 91-1, Series 1991-1A, 7.750%, 10/15/98 .................. 583,333 584,611
Trust 92-1, Series 1992-1A, 7.250%, 6/15/99 ................... 750,000 755,160
Trust 93-3, Series 1993-3A, 5.400%, 9/15/00 ................... 500,000 495,170
136
<PAGE>
Merrill Lynch Home Equity Loan Asset Backed Pass Thru Ctf.,
Series 1992-1, Class A, IF, 7/15/22 ........................... 704,537 706,017
Morgan Stanley Mortgage Trust, CMO, Series 38-4,
PO, 11/20/21 .................................................. 55,767 42,002
Navistar Financial Corp. Owner Trust Asset Backed Pass Thru Ctf.,
Series 1995-A, Class A2, 6.550%, 11/20/01 ..................... 1,720,915 1,731,670
Olympic Automobile Rec. Trust Asset Backed Pass Thru Ctf.,
Series 1996-C Class A5, 7.000%, 12/15/01 ...................... 1,000,000 1,020,020
Ryland Acceptance Corp. Four, CMO, Series 78,
Class 78-B, 9.550%, 3/1/16 .................................... 384,295 392,401
Standard Credit Card Master Trust Asset Backed Ctf.,
Series 1995-2, Class A, 8.625%, 1/7/02 ........................ 2,000,000 2,003,680
Standard Credit Card Trust, Series 1991-3, Participation Ctf.,
Class A, 8.875%, 9/7/99 ....................................... 425,000 442,346
Western Financial Asset Backed Pass Thru Ctf.,
Series 1996-C, Class A4, 6.800%, 12/20/03 ..................... 4,000,000 4,059,520
Western Financial Grantor Trust Auto Receivable P/T Ctf:
1993-4, Class A1, 4.600%, 4/1/99 .............................. 302,975 301,748
1993-3, Class A, 6.650%, 12/1/99 .............................. 343,869 347,352
World Omni Automobile Lease Sec Trust Asset Backed Ctf.,
Series 1995-A, Class A, 6.050%, 11/25/01 ...................... 1,890,205 1,892,568
----------
(Cost $29,384,286) 29,778,105
----------
Industrial -- 1.39%
Texaco Capital, Inc.:
8.650%, 1/30/98 ............................................... 2,000,000 2,055,650
9.000%, 11/15/97 .............................................. 300,000 308,051
------------
(Cost $2,351,939) 2,363,701
------------
TOTAL CORPORATE BONDS AND NOTES ....................................... 32,141,806
------------
(Cost $31,736,225)
TOTAL INVESTMENTS ..................................................... $169,927,452
============
(Cost $169,689,801)
<FN>
See Notes to Financial Statements.
</TABLE>
137
<PAGE>
Pegasus Short Bond Fund
PORTFOLIO OF INVESTMENTS -- (Continued)
December 31, 1996
Notes to Portfolio of Investments
The Fund invests in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Some of these securities are collateralized
mortgage obligations (CMOs). CMOs are debt securities issued by U.S.
government agencies or by financial institutions and other mortgage lenders
which are collateralized by a pool of mortgages held under an indenture.
Adjustable Rate (AR)
Inverse Floaters (IF) represent securities that pay interest at a rate that
increases (decreases) with a decline (increase) in a specified index.
Interest Only (IO) represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. The face amount shown
represents the par value on the underlying pool. The yields on these
securities are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that the initial investment will not be fully
recouped. These securities are subject to accelerated principal paydowns as a
result of prepayments or refinancing of the underlying pool of mortgage
instruments. As a result, interest income may be reduced considerably.
High Coupon Bonds (HB) (a.k.a. "IOettes") represent the right to receive
interest payments on an underlying pool of mortgages with similar risks as
those associated with IO securities. Unlike IO's the owner also has a right
to receive a very small portion of principal. The high interest rate results
from taking interest payments from other classes in the REMIC Trust and
allocating them to the small principal of the HB class.
Principal Only (PO) represents the right to receive the principal portion only
on an underlying pool of mortgage loans. The market value of these securities
is extremely volatile in response to changes in market interest rates. As
prepayments on the underlying mortgages of these securities increase, the yield
on these securities increases.
See Notes to Financial Statement
138
<PAGE>
Pegasus Income Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 0.35%
Salomon Brothers, Revolving Repurchase Agreement, 6.90%, 1/2/97,
(secured by various U.S. Treasury Strips with maturities ranging
from 11/15/04 through 5/15/06, all held at Chase Bank) ............$ 678,084 $ 678,084
(Cost $678,084)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 52.92%
U.S. Treasury Securities -- 47.11%
U.S. Treasury Bonds:
12.750%, 11/15/10 ............................................. 6,900,000 9,766,743
10.375%, 11/15/12 ............................................. 5,000,000 6,439,050
7.500%, 11/15/16 .............................................. 4,865,000 5,266,363
8.750%, 5/15/17 ............................................... 750,000 915,120
8.125%, 8/15/19 ............................................... 1,000,000 1,156,720
7.875%, 2/15/21 ............................................... 6,675,000 7,544,819
8.125%, 5/15/21 ............................................... 4,395,000 5,099,562
6.750%, 8/15/26 ............................................... 4,340,000 4,372,550
U.S. Treasury Notes:
8.875%, 11/15/98 .............................................. 2,650,000 2,788,303
6.875%, 8/31/99 ............................................... 1,585,000 1,618,190
7.875%, 11/15/99 .............................................. 990,000 1,037,183
7.750%, 11/30/99 .............................................. 2,440,000 2,549,410
7.750%, 1/31/00 ............................................... 6,450,000 6,749,345
8.500%, 2/15/00 ............................................... 830,000 886,415
6.875%, 3/31/00 ............................................... 800,000 818,000
6.750%, 4/30/00 ............................................... 8,000,000 8,151,280
6.125%, 7/31/00 ............................................... 5,000,000 5,000,000
8.750%, 8/15/00 ............................................... 1,870,000 2,026,613
6.250%, 8/31/00 ............................................... 3,000,000 3,011,250
6.375%, 3/31/01 ............................................... 1,100,000 1,107,392
7.500%, 11/15/01 .............................................. 11,950,000 12,579,287
7.500%, 5/15/02 ............................................... 150,000 158,601
7.250%, 5/15/04 ............................................... 1,500,000 1,578,285
7.250%, 8/15/04 ............................................... 1,000,000 1,052,500
-----------
(Cost $91,184,678) 91,672,981
-----------
Agency Obligations -- 5.81%
Federal Home Loan Bank, Series EG01, 5.940%, 1/30/01 .............. 3,000,000 2,943,570
Federal Home Loan Mortgage Corp. Debentures, 7.350%, 3/22/05 ...... 8,000,000 8,365,560
-----------
(Cost $11,105,252) 11,309,130
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS .......................... 102,982,111
-----------
(Cost $102,289,930)
CORPORATE BONDS AND NOTES -- 43.77%
Finance -- 34.69%
ABN AMRO Bank N.V., 7.250%, 5/31/05 ............................... 4,800,000 4,881,902
Advanta Mortgage Loan Trust Asset Backed Ctf.,
Series 1994-3, Class A2, 7.600%, 7/25/10 ...................... 3,731,408 3,778,834
Chase Manhattan Corp., Subordinated Note,
9.750%, 11/1/01 ............................................... 3,000,000 3,375,408
139
<PAGE>
Chemical Master Credit Card Trust 1 Asset Backed Ctf.,
Series 1995-3, Class A, 6.230%, 8/15/02 ......................... 2,500,000 2,468,950
Chevy Chase Auto Receivables Trust Asset Backed Pass Thru Ctf.,
Series 1995-2, Class A, 5.800%, 6/15/02 ......................... 1,938,146 1,940,782
Dayton Hudson Credit Card Master Trust Assest Backed Ctf.,
Series 1995-1, Class A, 6.100%, 2/25/02 ......................... 2,500,000 2,509,850
Ford Motor Credit Co., 9.250%, 6/15/98 ............................ 470,000 490,115
General Electric Capital Corp., 8.850%, 4/1/05 .................... 3,500,000 3,940,199
Goldman Sachs Group, Note 144A, 6.100%, 4/15/98 ................... 3,000,000 2,992,767
Grand Metro Investment Corp. Guaranteed Note,
7.450%, 4/15/35 ................................................. 4,500,000 4,793,328
Green Tree Financial Corp. Asset Backed Pass Thru Ctf.,
Series 1994-B1, Class A1, 7.150%, 7/15/14 ....................... 704,345 718,235
Lehman Brothers Holdings Inc., Medium Term Note
Tranche #TR 00079, 8.875%, 2/15/00 .............................. 6,825,000 7,241,291
MBNA Master Credit Card Trust Asset Backed Pass Thru Ctf.,
Series 1994-C, Class A, Adjustable Rate, 3/15/04 ................ 1,655,000 1,665,890
Mellon Financial Corp., 7.625%, 11/15/99 .......................... 2,310,000 2,384,842
National Rural Utilities Coop Financial Corp., 6.750%, 9/1/01 ..... 4,290,000 4,329,850
Norwest Corp., Senior Medium Term Note, 7.750%, 3/1/02 ............ 1,500,000 1,579,661
Olympic Automobile Receivables Trust Asset Backed Pass Thru Ctf.:
Series 1995-D, Class A5, 6.150%, 7/15/01 ........................ 2,300,000 2,302,323
Series 1996-C, Class A5, 7.000%, 12/15/01 ....................... 3,000,000 3,060,060
Salomon Inc., 6.700%, 12/1/98 ..................................... 3,700,000 3,718,903
Security Pacific Acceptance Corp. Asset Backed Pass Thru Ctf.,
Series 1995-1, Class A3, 7.250%, 4/10/20 ........................ 2,000,000 2,042,980
Standard Credit Card Trust Participation Ctf.,
Series 1991-3, Class A, 8.875%, 9/7/99 .......................... 3,100,000 3,226,523
Western Financial Asset Backed Pass Thru Ctf.,
Series 1996-C, Class A4, 6.800%, 12/20/03 ....................... 4,000,000 4,059,520
----------
(Cost $66,733,533) 67,502,213
----------
Industrial -- 6.12%
Beckman Instruments, 7.050%, 6/1/26 ............................... 3,000,000 3,057,453
Columbia HCA Healthcare Corp., Medium Term Note,
6.870%, 9/15/03 ................................................. 4,250,000 4,270,863
Ford Motor Credit Co., 9.375%, 12/15/97 ........................... 4,450,000 4,587,554
----------
(Cost $11,835,731) .................................................. 11,915,870
----------
Public Utility -- 2.96%
Bell Telephone Co. Pennsylvania, 8.350%, 12/15/30 ................. 4,000,000 4,792,680
West Texas Utilities Co. First Mortgage, 6.375%, 10/1/05 .......... 1,000,000 964,163
----------
(Cost $5,478,810) 5,756,843
----------
TOTAL CORPORATE BONDS AND NOTES ....................................... 85,174,926
----------
(Cost $84,048,074)
140
<PAGE>
FOREIGN -- 2.96%
SNCB Belgium Railroad Notes 144A Private Placement,
8.875%, 12/1/24 ................................................... 5,000,000 5,759,380
------------
(Cost $5,716,020)
TOTAL INVESTMENTS ..................................................... $194,594,501
============
(Cost $192,732,108)
<FN>
See Notes to Financial Statements.
</TABLE>
141
<PAGE>
Pegasus International Bond Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT --5.25%
Salomon Brothers, Revolving Repurchase Agreement, 6.90%, 1/2/97
(secured by various U.S. Treasury Strips with maturities ranging
from 11/15/04 through 5/15/06, all held at Chase Bank) ............ $ 2,838,379 $2,838,379
----------
(Cost $2,838,379)
Par
(In foreign
currencies)
-----------
FOREIGN BONDS--94.75%
Australia--4.04%
Australia (Commonwealth), 9.00%, 9/15/04 ............................ 2,500,000 2,182,751
----------
Austria--2.03%
Republic of Austria, 6.00%, 4/1/98 .................................. 600,000 401,399
Republic of Austria, 7.00%, 1/20/03 ................................. 7,000,000 698,738
----------
1,100,137
----------
Belgium -- 3.44%
Belgium Government, Series 19, 6.50%, 3/31/05 ....................... 56,000,000 1,858,527
----------
Canada--4.60%
Canadian Government, 9.75%, 10/1/97 ................................. 200,000 152,847
Canadian Government, 10.75%, 3/15/98 ................................ 500,000 395,031
Canadian Government, 6.50%, 6/1/04 .................................. 2,600,000 1,940,763
----------
2,488,641
----------
Denmark--2.28%
Kingdom of Denmark, 9.00%, 11/15/98 ................................. 2,000,000 369,221
Kingdom of Denmark, 7.00%, 11/15/07 ................................. 5,000,000 861,600
----------
1,230,821
----------
Finland--4.34%
Republic of Finland, 5.50%, 2/9/01 .................................. 2,000,000 1,337,998
Republic of Finland, 6.00%, 1/29/02 ................................. 30,000,000 309,835
Republic of Finland, 7.25%, 4/18/06 ................................. 3,000,000 698,275
----------
2,346,108
----------
France --9.76%
Government of France, 8.50%, 6/25/97 ................................ 2,800,000 551,411
Government of France, 5.75%, 3/12/01 ................................ 5,000,000 1,010,630
Government of France, 5.50%, 4/25/04 ................................ 16,100,000 3,123,230
Government of France, 6.50%, 4/25/11 ................................ 3,000,000 595,068
----------
5,280,339
----------
Germany-- 9.64%
Deutsche Bundespost, 5.75%, 4/2/01 .................................. 3,000,000 2,024,321
Deutsche Bundespost, 7.50%, 8/2/04 .................................. 600,000 431,300
Bundesrepublic, 9.00%, 10/20/00 ..................................... 600,000 451,039
Bundesrepublic, 6.00%, 1/5/06 ....................................... 3,500,000 2,306,294
----------
5,212,954
----------
142
<PAGE>
International--13.49%
Asian Development Bank, 3.125%, 6/29/05 ........... 200,000,000 1,787,714
Asian Development Bank, 5.00%, 2/5/03 ............. 40,000,000 400,620
(Council of Europe) 6.875%, 3/5/01 ................ 30,000,000 313,065
European Investment Bank, 7.50%, 11/4/02 .......... 600,000 430,599
European Investment Bank, 8.00%, 6/10/03 .......... 1,300,000 2,277,527
Inter-American Development Bank, 2.25%, 2/5/02 .... 200,000,000 1,725,252
Inter-American Development Bank, 7.25%, 5/15/00 ... 35,000,000 360,343
-----------
7,295,120
-----------
Italy--9.28%
Italian Government, 8.50%, 1/1/99 ................. 3,500,000,000 2,396,251
Italian Government, 9.50%, 2/1/06 ................. 3,500,000,000 2,624,137
-----------
5,020,388
-----------
Japan --9.46%
Export-Import Bank of Japan, 4.375%, 10/1/03 ...... 30,000,000 292,065
Export-Import Bank of Japan, 2.875%, 7/28/05 ...... 200,000,000 1,755,406
International Bank of Reconstruction & Development,
5.25%, 3/20/02 .................................. 30,000,000 302,242
International Bank of Reconstruction & Development,
4.75%, 12/20/04 ................................. 200,000,000 2,007,409
Japan Development Bank, 6.50%, 9/20/01 ............ 35,000,000 366,562
Government of Japan, 4.50%, 12/20/04 .............. 40,000,000 393,969
-----------
5,117,653
-----------
Netherlands --5.94%
Netherland Government, 5.75%, 1/15/04 ............. 5,000,000 2,954,206
Unilever NV, 9.875%, 9/4/97 ....................... 1,300,000 260,376
-----------
3,214,582
-----------
New Zealand--2.73%
New Zealand Government, 8.00%, 4/15/04 ............ 2,000,000 1,475,671
-----------
Spain--3.39%
Spanish Government, 8.00%, 5/30/04 ................ 220,000,000 1,834,756
-----------
Sweden--2.66%
Swedish Government, 8.00%, 8/15/07 ................ 9,000,000 1,439,270
-----------
United Kingdom--7.67%
Barclays Bank, 10.25%, 12/10/97 ................... 120,000 211,363
United Kingdom Exchequer, 12.25%, 3/26/99 ......... 250,000 473,683
United Kingdom Treasury, 7.00%, Stock 2001 ........ 1,000,000 1,693,118
United Kingdom Treasury, 8.00%, Stock 2013 ........ 1,000,000 1,765,847
-----------
4,144,011
-----------
TOTAL FOREIGN BONDS ................................. 51,241,729
-----------
(Cost $50,001,282)
TOTAL INVESTMENTS ................................... $54,080,108
===========
(Cost $52,839,661)
<FN>
See Notes to Financial Statements.
</TABLE>
143
<PAGE>
Pegasus Municipal Bond Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS -- 98.63%
Alabama -- 2.21%
Courtland Industrial Development Board Solid Waste Disposal Revenue,
Series A, 6.50%, 9/1/25 ........................................... $ 5,000,000 $ 5,059,600
Huntsville General Obligation Unlimited Tax Warrants Series A,
5.50%, 2/1/20 ..................................................... 3,000,000 2,970,840
----------
8,030,440
----------
Alaska -- 0.95%
Alaska Student Loan Revenue State Assisted Series A (AMBAC Insured),
6.125%, 7/1/05 .................................................... 800,000 840,264
Fairbanks North Star Boro Refunding Series S (MBIA Insured),
5.45%, 3/1/06 ..................................................... 2,500,000 2,593,825
3,434,089
Arizona -- 2.20%
Maricopa County General Obligation Unlimited Tax School District No.
28 Series B (FGIC Insured), 6.00%, 7/1/14 ......................... 2,500,000 2,598,525
Salt River Project Agricultural Improvement Power District Revenue,
Electric System Series D, 6.00%, 1/1/08 ........................... 625,000 679,875
Salt River Project Agricultural Refunding Series B, 5.25%, 1/1/19 ... 5,000,000 4,722,900
----------
8,001,300
----------
California -- 9.00%
Los Angeles Wastewater System Revenue Series D (MBIA Insured),
6.70%, 12/1/21 .................................................... 10,000,000 11,085,600
Northern California Public Power Agency Revenue Refunding Geothermal
Project A (AMBAC Insured):
5.60%, 7/1/06 ................................................... 3,500,000 3,707,515
5.65%, 7/1/07 ................................................... 4,800,000 5,086,704
Orange Co. Recovery CTFS PRTN CA Series A (MBIA Insured),
5.80%, 7/1/16 ..................................................... 5,315,000 5,392,971
Sacramento Cogeneration Authority Revenue:
7.00%, 7/1/05 ..................................................... 1,500,000 1,650,075
6.20%, 7/1/06 ..................................................... 2,500,000 2,616,850
Sacramento, California M.U.D. (MBIA Insured) 5.75%, 1/1/10 .......... 3,000,000 3,109,770
----------
32,649,485
----------
Colorado -- 5.27%
Denver City & Co. Airport Revenue:
Series B, 7.25%, 11/15/05 ......................................... 3,000,000 3,290,310
Series C, 6.50%, 11/15/06 ......................................... 2,000,000 2,072,620
Series D, 7.75%, 11/15/13 ......................................... 6,925,000 8,352,589
Series A, 8.50%, 11/15/23 ......................................... 2,500,000 2,854,700
Series A, 8.00%, 11/15/25 ......................................... 2,295,000 2,564,181
----------
19,134,400
----------
Florida -- 6.71%
Broward County Educational Facilities Authority Revenue, 5.70%,
4/1/05 ............................................................ 1,440,000 1,502,395
Lakeland Electric & Water Revenue Refunding Series B
(FGIC Insured), 6.00%, 10/1/11 .................................... 4,000,000 4,324,240
144
<PAGE>
Lee County Transportation Facilities Revenue (MBIA Insured),
5.75%, 10/1/27 .................................................... 9,640,000 9,758,572
Florida Ports Fing Community Revenue (MBIA Insured), 5.375%, 6/1/16 . 2,000,000 1,938,980
Florida State Board of Education Capital Outlay General Obligation
Unlimited Tax Refunding Series E, 4.75%, 6/1/22 ................... 6,000,000 5,323,860
Florida State Pollution Control Series Y, 6.40%, 7/1/08 ............. 1,400,000 1,508,458
----------
24,356,505
----------
Georgia -- 8.86%
Fulton County School District General Obligation Unlimited Tax
Refunding, 6.375%, 5/1/10 ......................................... 5,000,000 5,572,300
Gainesville Water & Sewer Revenue Series B (FGIC Insured),
6.00%, 11/15/12 ................................................... 3,950,000 4,255,019
Georgia General Obligation Unlimited Tax:
7.10%, 9/1/09 ..................................................... 8,500,000 10,071,990
6.75%, 9/1/11 ..................................................... 10,000,000 11,581,500
Georgia State Housing and Finance Authority Revenue Series B, 6.10%,
12/1/12 ........................................................... 650,000 669,142
----------
32,149,951
----------
Hawaii -- 1.19%
Hawaii Airport Systems Revenue Refunding Third Series (AMBAC
Insured), 5.75%, 7/1/09 ........................................... 4,200,000 4,323,858
Illinois -- 9.97%
Chicago Metropolitan Water Capital Improvement, 5.50%, 12/1/12 ...... 1,000,000 1,015,350
Chicago O'Hare International Airport Revenue Refunding Second Lien
Series C (MBIA Insured), 5.75%, 1/1/09 ............................ 2,490,000 2,612,259
Chicago O'Hare International Airport Revenue Series A
(AMBAC Insured):
5.625%, 1/1/13 .................................................. 5,000,000 5,014,250
5.625%, 1/1/14 .................................................. 5,000,000 5,014,250
Cook County Community College Participation Ctfs. District #508
Series C (MBIA Insured), 7.70%, 12/1/04 ........................... 5,000,000 5,961,750
DuPage Co. Forest Preservation District Refunding, 6.00%, 11/1/03 ... 1,750,000 1,891,820
Evanston General Obligation Unlimited Tax, 6.10%, 12/1/09 ........... 1,000,000 1,053,860
Illinois Health Facilities Authority Revenue Northwestern Memorial
Hospital Series A, 5.60%, 8/15/06 ................................. 1,000,000 1,042,220
Illinois Health Facilities Authority Revenue Refunding (FGIC
Insured), 6.00%, 8/15/05 .......................................... 1,000,000 1,072,900
Illinois Housing Development Series A, 5.95%, 7/1/21 ................ 2,000,000 2,015,520
Illinois State Sales Tax Revenue Refunding Series Q, 5.75%, 6/15/06 . 5,000,000 5,320,350
Winnebago & Boone Counties General Obligation Unlimited Tax 7.35%,
2/1/04 ............................................................ 3,600,000 4,184,244
----------
36,198,773
----------
145
<PAGE>
Indiana -- 1.74%
Ball State University Revenue Student Fee Series G (FGIC Insured),
6.125%, 7/1/09 .................................................... 400,000 420,964
Fort Wayne Sewer Works Improvement Revenue Indiana (FGIC Insured),
5.75%, 8/1/10 ..................................................... 1,100,000 1,120,141
Indiana State Vocational Technology Revenue Series D, 5.90%, 7/1/06 . 1,000,000 1,068,180
Indiana Transportation Finance Authority, Series A
6.25%, 11/1/16 .................................................... 1,500,000 1,621,455
North Adams Community Schools Participation Ctfs., 5.75%, 7/15/12 ... 1,000,000 1,017,390
St. Joseph Co. Hospital Authority Facilities Revenue (MBIA Insured),
Memorial Hospital South Bend Project, 6.25%, 8/15/12 .............. 1,000,000 1,060,950
----------
6,309,080
----------
Maryland -- 0.28%
Maryland State Community Development Administration Dept. Housing &
Community Development, First Series, 5.80%, 4/1/07 ................ 1,000,000 1,032,030
----------
Massachusetts -- 5.35%
Massachusetts General Obligation Unlimited Tax Refunding
Series A, 6.25%, 7/1/02 ........................................... 12,000,000 12,979,200
Massachusetts State Housing Finance Agency Revenue Single Family
Series 47 (AMBAC Insured), 6.00%, 12/1/15 ......................... 4,000,000 4,076,760
Massachusetts State Industrial Finance Agency Revenue (MBIA Insured),
6.00%, 1/1/15 ..................................................... 2,265,000 2,368,012
----------
19,423,972
----------
Michigan -- 3.51%
Caledonia Community Schools General Obligation Unlimited Tax (MBIA
Insured), 5.85%, 5/1/22 ........................................... 1,500,000 1,531,935
Grand Rapids Water Supply System Revenue (FGIC Insured),
6.30%, 1/1/04 ..................................................... 250,000 268,633
Michigan State Building Authority Revenue Series I, 6.40%, 10/1/04 .. 600,000 651,870
Michigan State Housing Development Authority Revenue:
Series C, 6.375%, 12/1/11 ......................................... 1,450,000 1,506,579
Series D, 5.95%, 12/1/16 ........................................ 5,000,000 5,037,900
Rochester Community School District School Building & Site Unlimited
Tax, 6.50%, 5/1/06 ................................................ 250,000 273,182
Royal Oak Hospital Finance Authority Revenue, William Beaumont
Hospital:
Series C, 7.20%, 1/1/05 ......................................... 250,000 269,618
Series G, 5.60%, 11/15/11 ....................................... 850,000 845,274
Saranac Community School District, 6.00%, 5/1/13 .................... 250,000 256,983
Wyandotte Electric Revenue Refunding (MBIA Insured), 6.25%, 10/1/17 . 2,000,000 2,109,540
----------
12,751,514
----------
Minnesota -- 1.88%
Minnesota State Housing Finance Agency Series D (MBIA Insured) 5.90%,
8/1/15 ............................................................ 6,735,000 6,842,019
----------
146
<PAGE>
Missouri -- 2.38%
Missouri Health & Educational Facilities Authority Revenue Refunding
Series A (FGIC Insured):
6.80%, 2/15/06 .................................................. 2,150,000 2,377,105
6.875%, 2/15/21 ................................................. 2,000,000 2,216,860
Sikeston Electric Revenue Refunding (MBIA Insured), 6.00%, 6/1/05 ... 3,710,000 4,032,510
----------
8,626,475
----------
Nevada -- 1.28%
Clark County Industrial Development Revenue Project C Refunding
(AMBAC Insured), 7.20%, 10/1/22 ................................... 4,115,000 4,649,497
----------
New Jersey -- 0.12%
Gloucester Co. Improvement Authority Gtd. Revenue, Solid Waste
Landfill Project Series AA, 6.20%, 9/1/07 ......................... 400,000 424,312
----------
New Mexico -- 0.96%
New Mexico Mortgage Finance Authority Revenue, 5.90%, 7/1/16 ........ 3,445,000 3,472,284
----------
New York -- 5.33%
New York City General Obligation Unlimited Tax Refunding Series A,
6.25%, 8/1/08 ..................................................... 5,000,000 5,221,900
New York State Dormitory Authority Revenue, 5.875%, 7/1/08 .......... 5,000,000 5,081,500
New York State Location Assistance Corp. Refunding Series E, 5.00%,
4/1/21 ............................................................ 9,500,000 8,765,745
Tri-Borough Bridge & Tunnel Authority Revenue General Purpose Series
X, 6.625%, 1/1/12 ................................................. 250,000 284,402
----------
19,353,547
----------
North Carolina -- 2.62%
North Carolina Housing Finance Agency Single Family Revenue:
Series BB, 6.50%, 9/1/26 ........................................ 4,315,000 4,420,890
Series FF, 6.25%, 3/1/28 ........................................ 5,000,000 5,079,800
----------
9,500,690
----------
Ohio -- 3.32%
Columbus School District Private Placement, Installment Lease
Agreement, 9.39%, 5/1/97 .......................................... 375,742 383,256
Franklin Co. Hospital Revenue, Children's Hospital Series A, 6.50%,
5/1/07 ............................................................ 950,000 1,034,740
Montgomery County Hospital Revenue Refunding (MBIA Insured), 5.625%,
4/1/16 ............................................................ 4,500,000 4,483,845
Ohio General Obligation State of Public & Sewer Imports Unlimited
Tax, 6.00%, 8/1/07 ................................................ 1,000,000 1,092,800
Ohio Housing Financial Agency Mortgage Revenue Residential GNMA
Series A-1, 6.20%, 9/1/14 ......................................... 1,670,000 1,727,081
Ohio State Building Authority Revenue, State Facilities Adult
Correctional Building Fund Series A, 6.125%, 10/1/09 .............. 250,000 266,520
Ohio State Community Turnpike Revenue Series A (MBIA Insured), 5.70%,
2/15/17 ........................................................... 3,000,000 3,045,480
----------
12,033,722
----------
147
<PAGE>
Pennsylvania -- 0.56%
Pennsylvania State Higher Educational Facilities Authority Revenue
(MBIA Insured), 5.625%, 5/1/14 .................................... 2,000,000 2,015,700
----------
Rhode Island -- 1.41%
Rhode Island Depositors Economic Protection Series A (MBIA Insured),
6.30%, 8/1/05 ..................................................... 4,640,000 5,112,677
----------
South Carolina -- 0.55%
Greenville Hospital System Facilities Revenue SC Health Hospital
Nursing Home Improvements Series A, 5.60%, 5/1/10 ................. 2,000,000 2,013,180
----------
South Dakota -- 2.03%
Heartland Consumers Power District Electric Revenue Refunding
Electric Light & Power Improvements, 6.00%, 1/1/17 ................ 2,500,000 2,677,300
South Dakota Housing Development Authority Series A, 5.70%, 5/1/08 .. 2,300,000 2,329,693
South Dakota Housing Development Authority Revenue Series C, 6.25%,
5/1/15 ............................................................ 1,000,000 1,027,470
South Dakota State Building Authority Lease Revenue (AMBAC Insured),
6.625%, 9/1/12 .................................................... 1,200,000 1,320,984
----------
7,355,447
----------
Tennessee -- 1.55%
Knox County Health, Educational, & Housing Facilities Revenue (MBIA
Insured), 7.25%, 1/1/09 ........................................... 1,360,000 1,601,645
Memphis General Obligation Unlimited Tax, 5.25%, 7/1/13 ............. 3,775,000 3,719,734
Metropolitan Government Nashville/Davis County Revenue Refunding,
7.00%, 1/1/14 ..................................................... 295,000 298,658
----------
5,620,037
----------
Texas -- 9.54%
Austin Utility System Revenue (AMBAC Insured), 6.50%, 5/15/11 ....... 250,000 274,845
Harris Co. Flood Control District Refunding General Obligation
Limited, 6.25%,10/1/05 ............................................ 250,000 265,485
Houston General Obligation Refunding Series C, 6.00%, 3/1/05 ........ 400,000 418,448
Richardson Hospital Authority, 6.50%, 12/1/12 ....................... 3,925,000 4,006,365
San Antonio Hotel Occupancy Tax Revenue (FGIC Insured), 5.70%,
8/15/26 ........................................................... 10,000,000 9,992,100
San Antonio Water Revenue Refunding (MBIA Insured), 6.50%, 5/15/10 .. 250,000 272,717
Tarrant Co. Water Control & Improvement District #1 Revenue Refunding
Series A, 6.10%, 3/1/05 ........................................... 400,000 419,320
Texas College Student Loan, 6.50%, 8/1/07 ........................... 4,000,000 4,212,400
Texas General Obligation Unlimited Tax:
Series A, 8.00%, 10/1/99 .......................................... 3,930,000 4,322,764
7.70%, 8/1/06 ..................................................... 1,305,000 1,371,424
Series B, 5.625%, 10/1/12 ......................................... 5,000,000 5,108,650
148
<PAGE>
Texas General Obligation Refunding Series A Unlimited Tax, 6.00%,
10/1/05 ........................................................... 1,000,000 1,088,930
Texas Turnpike Austin Dallas Northway RV (FGIC Insured) President
George Bush Turnpike Highway Improvements, 5.25%, 1/1/23 .......... 3,000,000 2,874,900
----------
34,628,348
----------
Virginia -- 3.19%
Virginia State Housing Development Authority Revenue, 5.60%, 11/1/10 1,500,000 1,500,900
Virginia State Housing Development Commonwealth Series H, 6.20%,
1/1/08 ............................................................ 1,000,000 1,030,800
Virginia State Public School Authority Revenue Series A, 6.25%,
1/1/11 ............................................................ 500,000 517,740
Virginia State Transportation Board Contract Revenue:
#58 Corridor Series B, 5.125%, 5/15/17 ............................ 6,320,000 6,004,632
#58 Corridor, 6.00%, 5/15/19 ...................................... 2,500,000 2,526,600
----------
11,580,672
----------
Washington -- 2.37%
Kent General Obligation Unlimited Tax (AMBAC Insured), 5.40%, 12/1/06 1,300,000 1,351,038
King Co. General Obligation Series A, 7.00%, 12/1/07 ................ 550,000 602,256
Washington General Obligation Unlimited Tax Refunding, 5.75%, 9/1/09 2,000,000 2,124,860
Washington State Public Power Supply Nuclear Project No. 2 Revenue
Refunding Series C, 7.625%, 7/1/10 ................................ 4,000,000 4,519,120
----------
8,597,274
----------
West Virginia -- 1.24%
Braxton Co. Solid Waste Disposal Revenue, 6.125%, 4/1/26 ............ 4,475,000 4,493,169
----------
Wisconsin -- 0.84%
Wisconsin Housing & Economic Development Authority Revenue Series A,
6.15%, 9/1/17 ..................................................... 1,500,000 1,528,215
Wisconsin State Health & Educational Facilities Authority Revenue,
Lutheran Hospital Benevolent Development Fund
Series A, 5.60%, 2/15/09 ........................................ 450,000 459,086
Wisconsin State Transportation Revenue Series B, 5.75%, 7/1/12 ...... 1,000,000 1,060,560
----------
3,047,861
----------
Wyoming -- 0.22%
Wyoming Community Development Authority Series D, 7.60%, 6/1/17 ..... 800,000 812,208
----------
TOTAL MUNICIPAL BONDS ................................................. 357,974,516
------------
(Cost $346,147,347)
TEMPORARY CASH INVESTMENT -- 1.37%
Pegasus Municipal Money Market Fund ................................. 4,972,246 4,972,246
------------
(Cost $4,972,246)
TOTAL INVESTMENTS ..................................................... $362,946,762
============
(Cost $351,119,593)
<FN>
See Notes to Financial Statements.
</TABLE>
149
<PAGE>
Pegasus Intermediate Municipal Bond Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS -- 99.45%
Alabama -- 0.91%
Courtland Industrial Development Board Solid Waste Disposal Revenue,
Series A, 6.50%, 9/1/25 ........................................... $ 3,500,000 $ 3,541,720
------------
Alaska -- 0.67%
Alaska Student Loan Revenue State Assisted Series A, 5.50%, 7/1/04 .. 1,000,000 1,007,600
North Slope Boro General Obligation Unlimited Tax Refunding Series G,
8.35%, 6/30/98 .................................................... 1,500,000 1,596,885
------------
2,604,485
------------
Arizona -- 0.57%
Maricopa Co. General Obligation School District No. 41 Series C (FGIC
Insured), 6.10%, 7/1/14 ........................................... 2,000,000 2,192,340
------------
California -- 7.08%
Los Angeles Wastewater System Revenue Series A (MBIA Insured), 8.50%,
6/1/00 ............................................................ 1,360,000 1,538,704
MSR Public Power Agency San Juan Project Revenue Refunding Series F
(AMBAC Insured), 5.55%, 7/1/02 .................................... 1,615,000 1,701,144
Northern California Power Agency Refunding Series B-1, 8.00%, 7/1/24 3,000,000 3,185,430
Orange Co. Recovery CTFS PRTN CA Series A (MBIA Insured), 5.70%,
7/1/10 ............................................................ 4,000,000 4,122,560
Sacramento Cogeneration Authority Revenue:
5.60%, 7/1/99 ..................................................... 3,300,000 3,356,826
5.80%, 7/1/01 ..................................................... 1,300,000 1,340,924
5.90%, 7/1/02 ..................................................... 1,000,000 1,036,010
South Coast Air Quality Management District Building Revenue
Series B (AMBAC Insured), 7.125%, 8/1/14 .......................... 3,650,000 3,993,793
University of California Revenues Refunding Multiple Purpose (MBIA
Insured), 6.20%, 9/1/01 ........................................... 6,675,000 7,192,446
------------
27,467,837
------------
Colorado -- 7.75%
Adams Co. Single Family Mortgage Revenue Series A, 8.875%, 8/1/03 ... 1,230,000 1,522,998
Denver City & Co. Airport Revenue:
Series D, 7.30%, 11/15/00 ......................................... 2,900,000 3,144,673
Series C, 6.55%, 11/15/03 ......................................... 1,145,000 1,227,131
Series B, 7.25%, 11/15/05 ......................................... 2,000,000 2,193,540
Series A (MBIA Insured), 8.50%, 11/15/07 .......................... 2,000,000 2,300,600
Series A, 8.00%, 11/15/25 ......................................... 1,360,000 1,522,234
Denver City & Co. General Obligation Refunding Water Unlimited Tax,
7.00%, 10/1/99 .................................................... 8,665,000 9,307,943
Denver Met Major League Baseball Stadium Revenue Refunding Sales Tax
(FGIC Insured), 4.60%, 10/1/05 .................................... 1,000,000 982,210
Jefferson Co. School District No. R-001 General Obligation (AMBAC
Insured), 5.90%, 12/15/05 ......................................... 3,500,000 3,722,740
Poudre Valley Hospital Revenue (AMBAC Insured), 6.625%, 12/1/11 ..... 3,750,000 4,131,412
------------
30,055,481
------------
150
<PAGE>
District of Columbia -- 2.45%
District of Columbia General Obligation Unlimited Tax Refunding:
Series B-1 (AMBAC Insured), 5.10%, 6/1/03 ......................... 3,000,000 3,039,330
Series B-3 (MBIA Insured), 5.20%, 6/1/04 .......................... 2,000,000 2,028,160
District of Columbia General Obligation Unlimited Tax Series A (AMBAC
Insured), 7.25%, 6/1/00 ........................................... 1,125,000 1,246,343
District of Columbia Hospital Revenue Series A, 8.75%, 1/1/15 ....... 2,750,000 3,200,807
------------
9,514,640
------------
Florida -- 5.44%
Dade County Water & Sewer System Revenue (FGIC Insured), 5.50%,
10/1/25 ........................................................... 10,500,000 10,342,395
Florida State Board of Education Capital Outlay General Obligation
Unlimited Tax Prerefunded Series A, 7.25%, 6/1/00 ................. 4,620,000 5,133,929
Lakeland Electric & Water Revenue Series B (FGIC Insured),
6.00%, 10/1/10 .................................................... 5,170,000 5,596,060
------------
21,072,384
------------
Georgia -- 5.92%
Georgia General Obligation Unlimited Tax:
7.25%, 9/1/04 ..................................................... 9,440,000 11,030,074
7.25%, 9/1/05 ..................................................... 10,130,000 11,938,813
------------
22,968,887
------------
Hawaii -- 1.27%
Hawaii General Obligation Unlimited Tax Series BZ, 5.90%, 10/1/06 ... 2,600,000 2,813,018
Hawaii State Department of Budget & Finance Revenue, 5.60%, 7/1/02 .. 2,065,000 2,119,950
------------
4,932,968
------------
Illinois -- 7.10%
Chicago Metropolitan Water General Obligation Unlimited Tax
Refunding, 5.00%, 12/1/02 ......................................... 4,500,000 4,605,255
Chicago O'Hare International Airport Revenue Series A (AMBAC
Insured), 5.625%, 1/1/13 .......................................... 5,000,000 5,014,250
Metropolitan Pier & Exposition Authority Dedicated State Tax Revenue:
6.40%, 6/1/03 ................................................... 10,495,000 11,364,931
6.50%, 6/1/05 ................................................... 2,960,000 3,244,811
Regional Transit Authority (AMBAC Insured), Series A, 8.00%, 6/1/03 . 2,785,000 3,282,290
------------
27,511,537
------------
Indiana -- 1.82%
Indiana Bond Bank Revenue, 6.00%, 2/1/04 ............................ 3,670,000 3,920,294
Indiana State Office Building Commission Revenue Limited Tax, 6.50%,
7/1/99 ............................................................ 3,000,000 3,136,770
------------
7,057,064
------------
Iowa -- 0.79%
Iowa Student Loan Liquidity Corp. Revenue Series A, 6.00%, 3/1/98 ... 3,000,000 3,066,270
------------
151
<PAGE>
Maryland -- 4.45%
Maryland State Community Development Administration Department
Revenue Fifth Series, 5.95%, 4/1/16 ............................... 3,000,000 3,036,480
Montgomery County General Obligation Unlimited Tax Series A:
5.125%, 4/1/08 .................................................... 5,500,000 5,574,250
5.25%, 4/1/09 ..................................................... 5,000,000 5,069,600
Northeast Waste Disposal Authority (MBIA Insured), 5.80%, 7/1/04 .... 3,375,000 3,587,659
------------
17,267,989
------------
Massachusetts -- 5.24%
Massachusetts Bay Transit Authority Series A, 7.00%, 3/1/22 ......... 3,500,000 3,904,670
Massachusetts General Obligation Limited Tax Series D, Series D,
5.125%, 11/1/08 ................................................... 9,205,000 9,233,996
Massachusetts General Obligation Unlimited Tax:
Series B, 9.25%, 7/1/00 ........................................... 2,000,000 2,312,900
Series A, 6.25%, 7/1/02 ........................................... 4,500,000 4,867,200
------------
20,318,766
------------
Minnesota -- 5.56%
Minnesota General Obligation Unlimited Tax, 5.50%, 5/1/04 ........... 2,000,000 2,112,740
Minnesota Housing Finance Agency Revenue:
Series D, 5.90%, 8/1/15 ........................................... 2,750,000 2,793,697
Series G, 6.25%, 7/1/26 ........................................... 3,475,000 3,527,438
Series L, 6.25%, 7/1/27 ........................................... 12,910,000 13,130,632
------------
21,564,507
------------
Nevada -- 3.07%
Clark County General Obligation Limited Tax, 7.00%, 9/1/00 .......... 6,705,000 7,297,119
Las Vegas General Obligation Refunding Limited Tax, 6.40%, 10/1/03 .. 2,250,000 2,466,607
Nevada General Obligation Limited Tax:
Series C, 5.90%, 4/1/01 ........................................... 1,000,000 1,056,100
------------
Series A, 6.00%, 5/1/02 ........................................... 1,000,000 1,065,740
11,885,566
------------
New York -- 9.70%
New York City General Obligation Unlimited Tax Refunding Series I,
5.75%, 3/15/07 .................................................... 6,500,000 6,564,350
New York City General Obligation Unlimited Tax Series A, 6.00%,
8/1/06 ............................................................ 5,000,000 5,176,500
New York City York General Obligation Unlimited Tax Series F (MBIA
Insured), 3.00%, 11/15/00 ......................................... 3,000,000 2,861,640
New York City Municipal Water Authority Series C, (FGIC Insured),
7.00%, 6/15/16 .................................................... 3,805,000 4,252,354
New York State Dormitory Authority Revenue Series A, 5.20%, 5/15/05 . 4,300,000 4,250,937
New York State Location Assistance Corp. Series B, 7.50%, 4/1/20 .... 4,255,000 4,839,552
Tri-Borough Bridge & Tunnel Authority Revenue General Purpose Series
Y, 5.90%, 1/1/08 .................................................. 9,000,000 9,660,870
------------
37,606,203
------------
152
<PAGE>
North Carolina -- 0.76%
North Carolina Municipal Power Agency (MBIA Insured), 7.25%, 1/1/07 . 2,500,000 2,952,500
------------
Pennsylvania -- 10.26%
Geisinger Authority Health System Revenue Series A, 5.50%, 7/1/03 ... 2,895,000 3,002,115
Pennsylvania Intergovernmental Coop Authority Special Tax Revenue
(FGIC Insured):
6.00%, 6/15/00 .................................................. 7,000,000 7,379,330
6.80%, 6/15/22 .................................................. 9,375,000 10,410,469
Philadelphia Gas Works Revenue Fourteenth Series (CAPMAC Insured),
7.00%, 7/1/02 ..................................................... 12,090,000 13,475,998
Pittsburgh Water & Sewer System Authority Revenue Refunding Series A
(FGIC Insured), 6.50%, 9/1/14 ..................................... 5,000,000 5,516,500
------------
39,784,412
------------
South Carolina -- 2.04%
Beaufort County School District General Obligation Unlimited Tax
Series B (MBIA Insured), 4.75%, 3/1/03 ............................ 2,800,000 2,829,960
South Carolina State Public Service Authority Revenue Refunding
Series A, 5.00%, 7/1/01 ........................................... 5,000,000 5,094,700
------------
7,924,660
------------
Tennessee -- 1.89%
Chattanooga-Hamilton County Hospital Authority Revenue, 5.625%,
10/1/09 ........................................................... 5,000,000 5,202,950
Memphis-Shelby County Airport Authority Revenue Refunding, 6.75%,
9/1/12 ............................................................ 2,000,000 2,136,900
------------
7,339,850
------------
Texas -- 3.83%
Dallas Independent School District General Obligation Unlimited Tax,
8.70%, 8/1/00 ..................................................... 1,000,000 1,143,940
Humble Independent School District General Obligation Unlimited Tax
Refunding, 6.00%, 2/15/04 ......................................... 2,035,000 2,175,883
Texas A & M University Permanent Fund Revenue, 5.60%, 7/1/05 ........ 5,000,000 5,314,150
Texas State General Obligation Unlimited Tax Series A, 8.00%, 10/1/99 1,000,000 1,099,940
Texas State General Obligation Unlimited Tax Refunding Series B,
5.625%, 10/1/11 ................................................... 5,000,000 5,127,800
------------
14,861,713
------------
Virginia -- 0.30%
Virginia Beach General Obligation Unlimited Tax Series A, 6.85%,
5/1/99 ............................................................ 1,100,000 1,159,180
------------
Washington -- 3.02%
Seattle General Obligation Limited Tax Series A, 5.75%, 1/15/17 ..... 10,000,000 10,151,000
Washington State Public Power Supply Nuclear Project No. 1 Revenue
Prerefunded Series A (MBIA Insured), 7.50%, 7/1/15 ................ 1,420,000 1,554,829
------------
11,705,829
------------
153
<PAGE>
West Virginia -- 1.63%
Pleasants County Pollution Control Revenue Refunding Series B,
6.875%, 4/1/98 .................................................... 6,105,000 6,312,631
------------
Wisconsin -- 5.93%
Wisconsin Clean Water Revenue Series 2, 6.00%, 6/1/07 ............... 2,500,000 2,710,475
Wisconsin General Obligation Unlimited Tax Series B:
7.00%, 5/1/01 ..................................................... 3,950,000 4,345,118
7.00%, 5/1/02 ..................................................... 4,155,000 4,637,769
7.00%, 5/1/03 ..................................................... 4,625,000 5,233,372
Wisconsin State Health & Educational Facilities Authority Revenue:
(MBIA Insured), 5.10%, 8/15/05 .................................... 3,000,000 3,031,110
(MBIA Insured), 5.20%, 8/15/06 .................................... 3,000,000 3,033,060
------------
22,990,904
------------
TOTAL MUNICIPAL BONDS ................................................. 385,660,323
------------
(Cost $374,366,081)
TEMPORARY CASH INVESTMENT -- 0.55%
Pegasus Municipal Money Market Fund ................................. 2,117,349 2,117,349
------------
(Cost $2,117,349)
TOTAL INVESTMENTS ..................................................... $387,777,672
============
(Cost $376,483,430)
<FN>
See Notes to Financial Statements.
</TABLE>
154
<PAGE>
Pegasus Michigan Municipal Bond Fund
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS -- 94.92%
Michigan -- 94.92%
Allegan Public School District General Obligation (AMBAC Insured),
Unlimited Tax, 5.75%, 5/1/12 ...................................... $ 200,000 $ 205,774
Dearborn Economic Division Oakwood Obligation Group Series, 5.60%,
11/15/08 .......................................................... 1,690,000 1,750,468
Detroit Sewer Disposal Revenue (FGIC Insured):
6.00%, 7/1/00 ..................................................... 1,225,000 1,292,204
Series A, Sewer Improvement, 5.30%, 7/1/06 ........................ 455,000 467,371
Dexter Community Schools, 5.80%, 5/1/19 ............................. 2,000,000 2,001,780
Dickinson Co. Economic Development Corporation Pollution Control
Revenue, 5.85%, 10/1/18 ........................................... 3,000,000 2,957,940
East China Township School District School Building & Site, Unlimited
Tax, 6.00%, 5/1/03 ................................................ 400,000 426,896
Eastern Michigan University General Sinking Fund, 6.375%, 6/1/14 .... 1,000,000 1,063,580
Ferndale School District, 5.50%, 5/1/11 ............................. 1,000,000 1,014,130
Grand Haven Electric Revenue, 5.25%, 7/1/13 ......................... 1,315,000 1,272,039
Grand Traverse Co. Hospital Finance Authority Revenue (AMBAC
Insured), Munson Healthcare Series A, 5.90%, 7/1/04 ............... 1,000,000 1,068,030
Hartland Consolidated School District General Obligation (AMBAC
Insured), Unlimited Tax, 6.00%, 5/1/11 ............................ 650,000 678,717
Kalamazoo Hospital Finance Authority Revenue, 5.25%, 6/1/17 ......... 1,000,000 950,110
Lansing Building Authority (AMBAC Insured), 6.00%, 6/1/05 ........... 1,000,000 1,087,650
Livingston Co. General Obligation Bldg. Authority Limited Tax, 5.80%,
7/1/08 ............................................................ 1,330,000 1,398,894
Marysville Public School District, 5.60%, 5/1/09 .................... 620,000 637,875
Michigan State Hospital Finance Authority Revenue, 5.75%, 9/1/17 .... 750,000 752,925
Michigan Municipal Bond Authority Revenue, 5.70%, 8/1/07 ............ 1,145,000 1,192,678
Michigan State Comprehensive Transportation Revenue, 5.75%, 5/15/11 . 2,140,000 2,145,222
Michigan State Hospital Finance Authority Revenue (AMBAC Insured),
5.375%, 8/15/16 ................................................... 1,000,000 971,610
Michigan State Hospital Finance Authority Revenue, 5.25%, 11/1/15 ... 1,000,000 964,580
Michigan State Hospital Finance Authority Revenue, 5.375%, 7/1/12 ... 2,500,000 2,452,375
Michigan State Housing Development Authority Revenue, 6.375%, 12/1/11 750,000 779,265
Michigan State Housing Development Authority Revenue, 6.00%, 12/1/15 4,750,000 4,824,290
Michigan State Housing Development Authority Revenue, 6.20%, 4/1/03 . 1,000,000 1,045,090
Michigan General Obligation Environmental Protection Program,
6.25%, 11/1/08 .................................................... 450,000 496,139
Michigan State Hospital Finance Authority Revenue (AMBAC Insured),
6.00%, 9/1/11 ..................................................... 1,250,000 1,296,075
Michigan State Hospital Finance Authority Revenue (AMBAC Insured),
5.00%, 8/15/06 .................................................... 1,000,000 999,940
Michigan State Hospital Finance Authority Revenue, 6.25%, 5/15/11 ... 500,000 518,125
Michigan State University Revenues, 6.25%, 8/15/15 .................. 2,000,000 2,082,840
155
<PAGE>
Newaygo Public Schools General Obligation Unlimited Tax, 6.00%,
5/1/12 ............................................................ 300,000 311,952
Norway Vulcan Area Schools, 5.75%, 5/1/13 ........................... 250,000 251,045
Novi Community Schools, 6.125%, 5/1/13 .............................. 750,000 790,928
Oak Park School District (AMBAC Insured),
6.00%, 6/1/09 ..................................................... 250,000 264,133
Ottawa Co. General Obligation Water Supply System, 6.00%, 8/1/08 .... 1,950,000 2,042,684
Perry Public Schools General Obligation Unlimited Tax, 6.00%, 5/1/12 250,000 259,005
Rockford Public Schools, 5.875%, 5/1/12 ............................. 500,000 511,600
Royal Oak Hospital Finance Authority Revenue:
William Beaumont Hospital -- G, 5.25%, 11/15/19 ................... 2,000,000 1,879,560
William Beaumont Hospital -- G, 5.60%, 11/15/11 ................... 2,000,000 1,988,880
Saranac Community School District, 6.00%, 5/1/13 .................... 250,000 256,983
Traverse City Area Public School District, Series I, 5.70%, 5/1/12 .. 2,400,000 2,464,872
Troy City School District, School Improvements, 6.40%, 5/1/12 ....... 400,000 425,984
University of Michigan Revenue Student Fee Series A, 5.25%, 4/1/15 .. 1,000,000 966,320
University of Michigan University Revenues, 5.50%, 12/1/21 .......... 450,000 435,461
University of Michigan Revenue, 6.20%, 12/1/03 ...................... 1,000,000 1,086,420
University of Michigan Revenue, 5.75%, 12/1/12 ...................... 850,000 855,585
Wayne State University (AMBAC Insured):
5.50%, 11/15/07 ................................................... 1,000,000 1,031,820
5.65%, 11/15/15 ................................................... 800,000 789,440
Wayne Westland Community Schools (FGIC Insured), Unlimited Tax,
5.75%, 5/1/11 ..................................................... 350,000 356,776
Webberville Community School, 5.60%, 5/1/11 ......................... 500,000 505,765
Western University Revenue (FGIC Insured), 6.25%, 11/15/12 .......... 250,000 264,530
Wyoming Public School, 5.875%, 5/1/13 ............................... 350,000 359,002
-----------
56,893,357
-----------
Puerto Rico -- 1.85%
Puerto Rico Commonwealth GO (MBIA Insured) Unlimited Tax Public
Improvements, 6.25%, 7/1/12 ....................................... 1,000,000 1,107,980
-----------
TOTAL MUNICIPAL BONDS ................................................. 58,001,337
-----------
(Cost $56,972,474)
TEMPORARY CASH INVESTMENT -- 3.23%
Pegasus Michigan Municipal Money Market Fund ........................ 1,939,147 1,939,147
-----------
(Cost $1,939,147)
TOTAL INVESTMENTS ..................................................... $59,940,484
===========
(Cost $58,911,621)
<FN>
See Notes to Financial Statements.
</TABLE>
156
<PAGE>
Pegasus Funds
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Commencement of Operations
The Pegasus Funds (Pegasus), formerly "The Woodward Funds", was
organized as a Massachusetts business trust on April 21, 1987, and registered
under the Investment Company Act of 1940, as amended, as an open-end
investment company. As of December 31, 1996, the Trust consisted of
twenty-six separate series of which there were nineteen asset allocation,
equity and bond funds, as described below.
<TABLE>
<CAPTION>
Commencement
Date
------------
<S> <C>
ASSET ALLOCATION FUNDS
Managed Assets Conservative Fund 1/23/86
Managed Assets Balanced Fund 1/1/94
Managed Assets Growth Fund 12/17/96
EQUITY FUNDS
Equity Income Fund 1/27/95
Growth Fund 1/27/95
Mid-Cap Opportunity Fund 6/1/91
Small Cap Opportunity Fund 1/27/95
Intrinsic Value Fund 6/1/91
Growth and Value Fund 6/1/91
Equity Index Fund 7/10/92
International Equity Fund 12/3/94
BOND FUNDS
Intermediate Bond Fund 6/1/91
Bond Fund 6/1/91
Short Bond Fund 9/17/94
Income Fund 3/5/93
International Bond Fund 1/27/95
MUNICIPAL BOND FUNDS
Municipal Bond Fund 3/1/88
Intermediate Municipal Bond Fund 3/1/88
Michigan Municipal Bond Fund 2/1/93
</TABLE>
During the period August 23, 1996 through September 23, 1996, various
portfolios of Pegasus and the Prairie Funds reorganized pursuant to an
Agreement and Plan of Reorganization (the "Plan"). Shareholders of each
reorganizing portfolio approved the Plan as required which called for the
transfer of the assets, subject to the liabilities, of each Prairie portfolio
to the corresponding Pegasus Fund. The Plan also called for the issuance of
shares by the Pegasus Fund to the shareholders of the corresponding Prairie
Fund, such shares being equal in value to the net assets so transferred.
In accordance with generally accepted accounting principles, the
historical cost of investment securities were carried forward to the
surviving fund (the Prairie or Pegasus Fund which is the accounting survivor
for performance measurement purposes as noted in the table that follows) and
the results of operations for pre-combination periods for the surviving fund
were not restated. The financial statements do not reflect the expenses of
the reorganization. The combination of the funds was treated as a tax free
business combination and accordingly was accounted for by a method of
accounting for tax free mergers of investment companies (sometimes referred
to as the pooling without restatement method).
157
<PAGE>
The following table sets forth the date on which such reorganizations
occurred and the name of the surviving fund (for the number of shares issued
in connection with the various mergers and net assets transferred, see Note
6):
<TABLE>
<CAPTION>
Former Current
Woodward Former Prairie Pegasus Date of Merger
Fund Fund Fund /Name Change
-------- -------------- ------- --------------
<S> <C> <C> <C>
-- * Managed Assets Income Managed Assets Conservative September 21, 1996
* Balanced Managed Assets Managed Assets Balanced August 26, 1996
-- * Equity Income Equity Income September 21, 1996
Capital Growth * Growth Growth August 26, 1996
* Opportunity -- Mid-Cap Opportunity September 23, 1996
-- * Special Opportunities Small Cap Opportunity September 21, 1996
* Intrinsic Value -- Intrinsic Value September 23, 1996
* Growth/Value -- Growth and Value September 23, 1996
* Equity Index -- Equity Index September 23, 1996
* International Equity International Equity International Equity August 26, 1996
* Intermediate Bond -- Intermediate Bond September 23, 1996
* Bond Bond Bond August 26, 1996
* Short Bond -- Short Bond September 23, 1996
-- * Intermediate Bond Income September 21, 1996
-- * International Bond International Bond September 21, 1996
Municipal Bond * Municipal Bond Municipal Bond September 14, 1996
-- * Intermediate Municipal Bond Intermediate Municipal Bond September 21, 1996
* Michigan Municipal Bond -- Michigan Municipal Bond September 23, 1996
<CAPTION>
* Surviving fund for accounting and performance measurement purposes.
</TABLE>
On the date of reorganization, unrealized appreciation (depreciation)
transferred from the non-surviving funds amounted to $1,342,149, $43,749,490,
$3,808,550, $(796,831), and $1,597,784 for the Prairie Managed Assets,
Woodward Capital Growth, Prairie International Equity, Prairie Bond, and
Woodward Municipal Bond Funds, respectively. The Woodward Municipal Bond Fund
also had a capital loss of $1,078,301 which was transferred into the
surviving fund on the reorganization date.
The number of shares redeemed in connection with the reorganization
totaled 877,085, 16,316,879, 13,340,453, 13,043,015 and 9,810,385 for the
Prairie Managed Assets, Woodward Capital Growth, Prairie International
Equity, Prairie Bond, and Woodward Municipal Bond Funds, respectively.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed
by Pegasus in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies. Following generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Investments
The Funds value investment securities at market value which is
determined by a pricing service based upon quoted market prices or dealer
quotes at the close of the respective domestic and foreign securities
exchange. Securities for which market prices or dealer quotes are not readily
available are valued by the investment advisor, First Chicago NBD Investment
Management Company (FCNIMCO) in accordance with procedures approved by the
Board of Trustees. Fixed income securities with maturities less than 60 days
are carried at amortized cost, which approximates market value. Shares of
open-end management investment companies (mutual funds) in which the Funds
invest are valued at their respective net asset values as determined under
the 1940 Act. Such mutual funds value securities in their portfolios for
which market quotations are readily available at their current market value
(generally the last reported sale price) and all other securities and assets
at fair value pursuant to methods established in good faith by the Board of
Trustees or Directors of the underlying mutual fund. Money market funds in
which the funds also invest generally value securities in their portfolios on
an amortized cost basis, which approximates market.
Investment security purchases and sales are accounted for on the day
after trade date.
158
<PAGE>
Pegasus invests in securities subject to repurchase agreements. Such
transactions are entered into only with institutions included on the Federal
Reserve System's list of institutions with whom the Federal Reserve Open
Market Desk will do business. FCNIMCO, acting under the supervision of the
Board of Trustees, has established the following additional policies and
procedures relating to Pegasus' investments in securities subject to
repurchase agreements: 1) the value of the underlying collateral is required
to equal or exceed 102% of the funds advanced under the repurchase agreement
including accrued interest; 2) collateral is marked to market daily by
FCNIMCO to assure its value remains at least equal to 102% of the repurchase
agreement amount; and 3) funds are not disbursed by Pegasus or its agent
unless collateral is presented or acknowledged by the collateral custodian.
Investment Income
Interest income is recorded daily on the accrual basis adjusted for
amortization of premium and accretion of discount on debt instruments. Bond
premiums and discounts are amortized/accreted as required by the Internal
Revenue Code. Premiums and discounts on mortgage-backed securities are
amortized/accreted using the effective interest rate method. As prepayments
on the underlying mortgages increase or decrease the expected life, the yield
is adjusted to amortize/accrete the security to its new expected life.
Dividends are recorded on the ex-dividend date.
For the International Equity Fund dividends are recorded on the
ex-dividend date or upon receipt of ex-dividend notification in the case of
certain foreign securities. For the International Equity Fund and the
International Bond Fund investment income is recorded net of foreign taxes
withheld where recovery of such taxes is uncertain.
Forward Foreign Currency Contracts
The International Equity Fund and the International Bond Fund may
enter into a forward foreign currency contract which is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the contract will fluctuate with changes in currency exchange
rates. The contract is "marked-to-market" daily using the prevailing exchange
rate and the change in market value is recorded as an unrealized gain or
loss. When the contract is closed, a realized gain or loss is recorded equal
to the difference between the value of the contract at the time it was
entered into and the value at the time it was closed.
The International Equity Fund and the International Bond Fund may enter
into forward foreign currency contracts with the objective of minimizing its
risk from adverse changes in the relationship between currencies or to
enhance income. The International Equity Fund and the International Bond Fund
may also enter into a forward contract in a foreign currency of dividend or
interest payments in order to "lock in" the U.S. dollar price of a security
or the U.S. dollar equivalent of such dividend or interest payments.
These contracts involve market risk in excess of the amounts reflected
in the International Equity Fund's and the International Bond Fund's
Statement of Assets and Liabilities. The face or contract amount in U.S.
dollars, as reflected in the notes to the Portfolio of Investments of the
International Equity Fund, reflects the total exposure the fund has in that
particular currency contract. Losses may arise due to changes in the value of
the foreign currency or if the counterparty does not perform under the
contract.
Futures Contracts
The International Equity Fund may engage in futures contracts for
the purpose of hedging against changes in the value of its portfolio
securities and in the value of securities it intends to purchase. Upon
entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin". Subsequent
payments ("variation margin") are made or received by the Fund each day,
depending on the daily fluctuation of the value of the contract. The daily
changes in the value of the contract are recorded as unrealized gains or
losses. The International Equity Fund recognizes, when the contract is
closed, a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the time it was closed. Futures
contracts open at December 31, 1996 and their related unrealized market
appreciation (depreciation) are set forth in the notes to the Portfolio of
Investments of the International Equity Fund.
There are several risks in connection with the use of futures contracts
as a hedging device. The change in
159
<PAGE>
value of futures contracts primarily corresponds with the value of their
underlying instruments or indices, which may not correlate with the change in
value of the hedged investments. In addition, there is the risk that the Fund
may not be able to enter into a closing transaction because of an illiquid
secondary market.
Foreign Currency Translations
The accounting records of the International Equity Fund and the
International Bond Fund are maintained in U.S. dollars. Foreign
currency-denominated assets and liabilities are "marked-to-market" daily
using the prevailing exchange rate and the change in value is recorded as an
unrealized gain or loss. Upon receipt or payment, a realized gain or loss is
recorded equal to the difference between the original value and the
settlement value of the asset or liability. Purchases and sales of
securities, income, and expenses are translated into U.S. dollars at
prevailing exchange rates on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent gains and losses from sales and maturities of forward foreign
currency contracts, disposition of foreign currencies and currency gains and
losses realized between trade and settlement dates on securities transactions
and between the ex, pay and settlement dates on dividend income. Exchange
rate fluctuations on investments are not segregated in the statement of
operations from changes arising in market price movements. The effects of
changes in foreign currency exchange rates on investments in securities are
included within the net realized gain or loss on securities sold and net
unrealized appreciation or depreciation on investment securities held.
Federal Income Taxes
It is Pegasus' policy to comply with the requirements of Subchapter
M of the Internal Revenue Code, as amended, applicable to regulated
investment companies and to distribute net investment income and realized
gains to its shareholders. Therefore, no federal income tax provision is
required in the accompanying financial statements.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily due to differing treatments
for foreign currency transactions, wash sales and post October 31 capital
losses. Also, due to the timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that the net
investment income or realized gains (losses) were recorded by the Fund.
Certain book-to-tax timing differences for the Funds are reflected as excess
distributions in the Statement of Changes in Net Assets. These distributions
do not constitute a tax return of capital.
As of December 31, 1996, the following Pegasus Funds had capital loss
carryforwards and related expiration dates as follows:
<TABLE>
<CAPTION>
Fund 2002 2003 2004 Total
---- ---- ---- ---- -----
<S> <C> <C> <C> <C>
Bond $15,659,343 $1,041,792 $ -- $16,701,135
Intermediate Bond 3,916,956 2,190,497 168,406 6,275,859
Income -- -- 30,819 30,819
Municipal Bond 96,878 333,098 1,928,844 2,358,820
Michigan Municipal Bond 29,400 -- 94,571 123,971
International Equity -- 97,147 1,083,369 1,180,516
</TABLE>
Shareholder Dividends
Dividends from net investment income are declared and paid
quarterly by the Equity Funds (with the exception of the Managed Assets
Conservative and Equity Income Funds which pay dividends monthly) and monthly
by the Bond Funds. Net realized capital gains are distributed annually.
Distributions from net investment income and net realized gains are made
during each year to avoid the 4% excise tax imposed on regulated investment
companies by the Internal Revenue Code. However, to the extent that net
realized capital gains of a Fund can be reduced by capital loss carryovers,
if any, such gains will not be distributed.
Deferred Organization Costs
Organization costs are being amortized on a straight-line basis
over the five year period beginning with the commencement of operations of
each Series.
Concentration of Risk
Investing in securities of foreign issuers and currency
transactions may involve certain considerations and risks not typically
associated with investing in U.S. companies and U.S. government securities.
These risks
160
<PAGE>
include revaluation of currencies, adverse fluctuations in foreign currency
values and possible adverse political, social and economic developments,
including those particular to a specific industry, country or region, which
could cause the securities and their markets to be less liquid and price more
volatile than those of comparable U.S. companies and U.S. government
securities.
Although the Intermediate Municipal Bond Fund has a diversified
investment portfolio, it currently has investments in excess of 10% of its
total investments in the state of Pennsylvania. The Michigan Municipal Bond
Fund does not have a diversified portfolio since 95% of its investments are
within the State of Michigan. Such concentrations within a particular state
may subject the funds more significantly to economic changes occuring within
those states.
Expenses
Expenses directly attributable to a Fund are charged to that Fund's
operations; expenses which are applicable to all Funds are allocated among
them on the basis of relative average daily net assets. Fund expenses directly
attributable to a class of shares are charged to that class; expenses which are
applicable to all classes are allocated among them.
Pegasus monitors the rate at which expenses are charged to ensure that
a proper amount of expense is charged to income each year. This percentage is
subject to revision if there is a change in the estimate of the future net
assets of Pegasus or a change in expectations as to the level of actual
expenses.
When Issued/To Be Announced (TBA) Securities
The Bond Funds may purchase securities on a "when issued" basis.
These securities have been registered by a municipality or government agency,
but have not yet been issued to the public. These transactions involve a
commitment by the Funds to purchase particular securities, with payment and
delivery taking place at a future date, for which all specific information,
such as the face amount and maturity date of such investment security, is not
known at the time of the trade. These transactions are subject to market
fluctuations and the risk that the value at delivery may be more or less than
the purchase price at which the transactions were entered. The current value
of these securities is determined in the same manner as that of other
portfolio securities. Although the Bond Funds generally purchase these
securities with the intention of acquisition, such securities may be sold
before the settlement date.
Multiple Classes of Capital Shares of Beneficial Interest
The Fund offers Class A, Class B and Class I shares. Each class of
shares has equal rights as to earnings, assets and voting privileges except
that each class bears different distribution and shareholder service
expenses. Each class of shares has exclusive voting rights with respect to
matters that effect just that class. Income, expenses (other than expenses
attributable to a specific class) and realized and unrealized gains or losses
on investments are allocated to each class of shares based on relative net
assets. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses. Class B shares
automatically convert to Class A shares at the beginning of the eighth year
(the third year in the case of the Short Bond Fund and the seventh year in
the case of the Equity Index, Income, Intermediate Bond and Intermediate
Municipal Bond Funds) after the date of purchase.
(3) Investment Advisory Fee, Administration Fee and Other Transactions With
Affiliates
FCNIMCO is the investment advisor pursuant to the Advisory
Agreement whereby FCNIMCO has agreed to provide the day-to-day managment of
each of the Fund's investments. For its advisory services to Pegasus, FCNIMCO
is entitled to a fee, computed daily and payable monthly.
The Trust has a Co-Administration Agreement with NBD Bank, FCNIMCO and
BISYS Fund Services (collectively, the "Co-Administrators") pursuant to which
the Co-Administrators have agreed to assist in all aspects of the Funds'
operations for an administration fee, at an annual rate of 0.15% of each
Fund's average daily net assets.
BISYS Fund Services (BISYS) serves as the Trust's principal underwriter
and distributor of the Funds' shares. Prior to the reorganization, First of
Michigan Corporation (FoM) and Essex National Securities, Inc. (Essex) acted
as sponsors and co-distributors of the former Woodward funds. Pursuant to
their distribution
161
<PAGE>
agreement with Woodward, FoM was entitled to receive a fee
at the annual rate of .005% of the Funds' average net assets and Essex was
entitled to receive a fee at the annual rate of .10% of the aggregate average
net assets of Woodward's investment portfolios attributable to
investments by clients of Essex.
NBD Bank, an affiliate of FCNIMCO, is also compensated for its services
as Pegasus' custodian and is reimbursed for certain out of pocket expenses
incurred on behalf of Pegasus.
See Note 5 for a summary of fee rates and expenses pursuant to these
agreements.
Pegasus maintains an unfunded, nonqualified deferred compensation plan.
This plan allows for an individual trustee to elect to defer receipt of all
or a percentage of fees which otherwise would be payable for services
performed.
(4) Investment Securities Transactions
The following summarizes the securities transactions entered into by
the Funds, excluding short-term investments, for the year ended December 31,
1996:
<TABLE>
<CAPTION>
Federal Tax
Purchases Sales Cost
--------- ----- -----------
<S> <C> <C> <C>
Managed Assets Conservative ......................... $ 34,301,399 $ 33,787,412 $ 70,179,857
Managed Assets Balanced ............................. 79,037,270 51,003,443 117,305,096
Managed Assets Growth ............................... 654,935 -- 654,935
Equity Income ....................................... 173,997,214 181,326,189 270,851,842
Growth .............................................. 385,340,369 239,388,649 428,562,588
Mid-Cap Opportunity ................................. 238,291,353 275,454,181 569,438,819
Small Cap Opportunity ............................... 97,344,064 102,785,331 108,853,077
Intrinsic Value ..................................... 158,441,131 97,252,386 311,905,866
Growth and Value .................................... 318,271,256 382,025,377 610,249,050
Equity Index ........................................ 293,814,230 87,736,380 619,453,953
International Equity ................................ 280,763,282 11,130,798 376,069,182
Intermediate Bond ................................... 151,823,257 125,023,757 406,171,885
Bond ................................................ 383,270,324 148,020,339 782,523,276
Short Bond .......................................... 190,801,580 180,180,239 169,689,801
Income .............................................. 222,790,916 198,055,232 192,735,733
International Bond .................................. 80,294,619 25,835,179 52,839,661
Municipal Bond ...................................... 293,201,622 175,797,879 351,119,593
Intermediate Municipal Bond ......................... 205,031,725 208,806,424 376,483,430
Michigan Municipal Bond ............................. 20,062,253 13,452,707 58,911,621
</TABLE>
At December 31, 1996, accumulated net unrealized appreciation
(depreciation) on investments based on federal tax cost was as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation/
Appreciation Depreciation (Depreciation)
------------ ------------ --------------
<S> <C> <C> <C>
Managed Assets Conservative ......................... $ 4,783,187 $ (114,149) $ 4,669,038
Managed Assets Balanced ............................. 13,852,908 (1,760,198) 12,092,710
Managed Assets Growth ............................... 8,180 (634) 7,546
Equity Income ....................................... 59,023,468 (1,041,283) 57,982,185
Growth .............................................. 134,784,909 (8,266,108) 126,518,801
Mid-Cap Opportunity ................................. 211,350,192 (15,928,379) 195,421,813
Small Cap Opportunity ............................... 25,757,488 (2,367,336) 23,390,152
Intrinsic Value ..................................... 72,257,091 (2,073,337) 70,183,754
Growth and Value .................................... 184,569,823 (8,253,475) 176,316,348
Equity Index ........................................ 262,828,110 (13,385,637) 249,442,473
International Equity* ............................... 50,608,640 (20,723,523) 29,885,117
Intermediate Bond ................................... 10,149,901 (7,978,826) 2,171,075
Bond ................................................ 26,627,816 (13,198,017) 13,429,799
Short Bond .......................................... 600,377 (362,726) 237,651
Income .............................................. 2,955,087 (1,096,319) 1,858,768
International Bond* ................................. 2,066,377 (825,930) 1,240,447
Municipal Bond ...................................... 11,944,851 (117,682) 11,827,169
Intermediate Municipal Bond ......................... 11,311,861 (17,619) 11,294,242
Michigan Municipal Bond ............................. 1,202,602 (173,739) 1,028,863
<FN>
* For the International Equity and International Bond Funds, the gross
unrealized appreciation and depreciation is inclusive of foreign exchange
gain and loss on foreign bond holdings.
</TABLE>
162
<PAGE>
(5) Expenses
Following is a summary of total expense rates charged for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
Managed Assets Managed Assets Managed Assets
Effective Date Conservative Balanced Growth
- -------------- -------------- -------------- --------------
<S> <C> <C> <C>
CLASS A SHARES
Expense Rates:
January 1 1.05% 0.93% N/A
March 18 1.05% 0.95% N/A
July 21 1.05% 1.20% N/A
August 26 1.22% 1.21% N/A
December 17 1.22% 1.21% 1.20%
CLASS B SHARES
Expense Rates:
January 1 1.80% N/A N/A
August 26 1.97% 1.96% N/A
December 17 1.97% 1.96% 1.95%
CLASS I SHARES
Expense Rates:
January 1 0.80% 0.93% N/A
March 18 0.80% 0.95% N/A
August 26 0.97% 0.96% N/A
December 17 0.97% 0.96% 0.95%
</TABLE>
For the year ended December 31, 1996, FCNIMCO voluntarily agreed to
reimburse a portion of the operating expenses of the Funds to the extent that
the Funds' expenses exceeded the following amounts (as a percentage of each
Fund's daily average net assets):
<TABLE>
<CAPTION>
Managed Assets Managed Assets Managed Assets
Conservative Balanced Growth
-------------- -------------- --------------
<S> <C> <C> <C>
Class A Shares 1.25% 1.25% 1.25%
Class B Shares 2.00% 2.00% 2.00%
Class I Shares 0.97% 0.96% 0.95%
</TABLE>
Following is a summary of advisory fee rates payable to FCNIMCO and
amounts paid to FCNIMCO, FoM, Essex, and BISYS pursuant to the agreements
described in Note 3 for the year ended December 31, 1996. The rates are
stated as a percentage of each Fund's average net assets.
<TABLE>
<CAPTION>
Managed Assets Managed Assets Managed Assets
Effective Date Conservative Balanced Growth
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
FCNIMCO Advisory Fee:
January 1 0.65% 0.75% N/A
August 26 0.65% 0.65% N/A
December 17 0.65% 0.65% 0.65%
FCNIMCO Administration Fee:
January 1 0.15% N/A N/A
August 26 0.15% 0.15% N/A
December 17 0.15% 0.15% 0.15%
Amounts Paid:
Advisory Fees to FCNIMCO $411,918 $815,815 $ 161
Administration Fees to FCNIMCO and BISYS 95,058 66,113 37
Distribution Fees to FoM and Essex -- 9,251 --
Other Fees to FCNIMCO 6,880 94,875 670
Expense Reimbursements by FCNIMCO (95,432) (74,462) (5,664)
</TABLE>
163
<PAGE>
Following is a summary of total expense rates charged for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
Equity Mid-Cap Small Cap
Effective Date Income Growth Opportunity Opportunity
- -------------- ------ ------ ----------- -----------
<S> <C> <C> <C> <C>
CLASS A SHARES
Expense Rates:
January 1 0.90% 1.05% 0.86% 1.10%
March 18 0.90% 1.05% 0.80% 1.10%
July 21 0.90% 1.05% 1.05% 1.10%
August 26 0.95% 1.04% 1.06% 1.20%
CLASS B SHARES
Expense Rates:
January 1 1.65% 1.80% N/A 1.85%
August 26 1.70% 1.79% N/A 1.95%
September 23 1.70% 1.79% 1.81% 1.95%
CLASS I SHARES
Expense Rates:
January 1 0.65% 0.80% 0.86% 0.85%
March 18 0.65% 0.80% 0.80% 0.85%
August 26 0.70% 0.79% 0.81% 0.95%
</TABLE>
For the year ended December 31, 1996, FCNIMCO voluntarily agreed to
reimburse a portion of the operating expenses of the Funds to the extent that
the Funds' expenses exceeded the following amounts (as a percentage of each
Fund's daily average net assets):
<TABLE>
<CAPTION>
Equity Mid-Cap Small Cap
Income Growth Opportunity Opportunity
------ ------ ----------- -----------
<S> <C> <C> <C> <C>
Class A Shares 1.14% 1.34% 1.36% 1.75%
Class B Shares 1.89% 2.09% 2.11% 2.50%
Class I Shares 1.01% 0.98% 0.92% 1.10%
</TABLE>
Following is a summary of advisory fee rates payable to FCNIMCO and
amounts paid to FCNIMCO, FoM, Essex, and BISYS pursuant to the agreements
described in Note 3 for the year ended December 31, 1996. The rates are
stated as a percentage of each Fund's average daily average net assets.
<TABLE>
<CAPTION>
Equity Mid-Cap Small Cap
Effective Date Income Growth Opportunity Opportunity
-------------- ------ ------ ----------- -----------
<S> <C> <C> <C> <C>
FCNIMCO Advisory Fee:
January 1 0.50% 0.65% 0.75% 0.70%
August 26 0.50% 0.60% 0.60% 0.70%
FCNIMCO Administration Fee:
January 1 0.15% 0.15% N/A 0.15%
August 26 0.15% 0.15% 0.15% 0.15%
Amounts Paid:
Advisory Fees to FCNIMCO $1,543,034 $2,424,551 $4,865,124 $ 752,396
Administration Fees to FCNIMCO and BISYS 462,910 578,449 366,806 161,228
Distribution Fees to FoM and Essex -- -- 60,324 --
Other Fees to FCNIMCO 19,111 28,496 178,835 11,244
Expense Reimbursements by FCNIMCO (233,127) (245,346) -- (147,469)
</TABLE>
164
<PAGE>
Following is a summary of total expense rates charged for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
Intrinsic Growth and Equity International
Effective Date Value Value Index Equity
- -------------- --------- ---------- ------ -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Expense Rates:
January 1 0.88% 0.82% 0.16% 1.17%
March 18 0.85% 0.80% 0.16% 1.16%
May 21 0.83% 0.80% 0.16% 1.15%
July 21 1.08% 1.05% 0.41% 1.40%
August 26 1.06% 1.05% 0.54% 1.30%
CLASS B SHARES
Expense Rates:
August 26 N/A N/A N/A 2.05%
September 23 1.81% 1.80% 1.29% 2.05%
CLASS I SHARES
Expense Rates:
January 1 0.88% 0.82% 0.16% 1.17%
March 18 0.85% 0.80% 0.16% 1.16%
May 21 0.83% 0.80% 0.16% 1.15%
August 26 0.81% 0.80% 0.29% 1.05%
</TABLE>
For the year ended December 31, 1996, FCNIMCO voluntarily agreed to
reimburse a portion of the operating expenses of the Funds to the extent that
the Funds' expenses exceeded the following amounts (as a percentage of each
Fund's average daily net assets):
<TABLE>
<CAPTION>
Intrinsic Growth and Equity International
Value Value Index Equity
--------- ---------- ------ -------------
<S> <C> <C> <C> <C>
Class A Shares 1.27% 1.27% 0.60% 1.71%
Class B Shares 2.02% 2.02% 1.36% 2.46%
Class I Shares 1.01% 1.01% 0.37% 1.18%
</TABLE>
Following is a summary of advisory fee rates payable to FCNIMCO and
amounts paid to FCNIMCO, FoM, Essex, and BISYS pursuant to the agreements
described in Note 3 for the year ended December 31, 1996. The rates are
stated as a percentage of each Fund's average daily net assets.
<TABLE>
<CAPTION>
Intrinsic Growth and Equity International
Value Value Index Equity
--------- ---------- ------ -------------
<S> <C> <C> <C> <C>
FCNIMCO Advisory Fee:
January 1 0.75% 0.75% 0.10% 0.75%
August 26 0.60% 0.60% 0.10% 0.80%
FCNIMCO Administration Fee:
August 26 0.15% 0.15% 0.15% 0.15%
Amounts Paid:
Advisory Fees to FCNIMCO $2,073,576 $5,250,198 $725,120 $1,801,653
Administration Fees to FCNIMCO and BISYS 172,884 382,992 420,590 207,599
Distribution Fees to FoM and Essex 19,349 52,916 25,320 5,735
Other Fees to FCNIMCO 75,808 152,418 137,774 428,979
</TABLE>
165
<PAGE>
Following is a summary of total expense rates charged for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
Intermediate Short
Effective Date Bond Bond Bond Income
- -------------- ------------ ---- ----- ------
<S> <C> <C> <C> <C>
CLASS A SHARES
Expense Rates:
January 1 0.72% 0.73% 0.77% 0.80%
March 18 0.72% 0.72% 0.78% 0.80%
May 21 0.71% 0.71% 0.78% 0.80%
July 21 0.96% 0.96% 1.03% 0.80%
August 26 0.85% 0.84% 0.82% 0.87%
September 23 0.85% 0.84% 0.82% 0.87%
CLASS B SHARES
Expense Rates:
January 1 N/A N/A N/A 1.55%
August 26 N/A N/A N/A 1.62%
September 23 1.60% 1.59% 1.57% 1.62%
CLASS I SHARES
Expense Rates:
January 1 0.72% 0.73% 0.77% 0.55%
March 18 0.72% 0.72% 0.78% 0.55%
May 21 0.71% 0.71% 0.78% 0.55%
August 26 0.60% 0.59% 0.57% 0.62%
</TABLE>
For the year ended December 31, 1996, FCNIMCO voluntarily agreed to
reimburse a portion of the operating expenses of the Funds to the extent that
the Funds' expenses exceeded the following amounts (as a percentage of each
Fund's average daily net assets):
<TABLE>
<CAPTION>
Intermediate Short
Bond Bond Bond Income
------------ ---- ----- ------
<S> <C> <C> <C> <C>
Class A Shares 1.05% 1.09% 0.86% 1.09%
Class B Shares 1.80% 1.84% 1.61% 1.84%
Class I Shares 0.61% 0.93% 0.65% 0.93%
</TABLE>
Following is a summary of advisory fee rates payable to FCNIMCO and
amounts paid to FCNIMCO, FoM, Essex, and BISYS pursuant to the agreements
described in Note 3 for the year ended December 31, 1996. The rates are
stated as a percentage of each Fund's average daily net assets.
<TABLE>
<CAPTION>
Intermediate Short
Effective Date Bond Bond Bond Income
-------------- ------------ ---- ---- ------
<S> <C> <C> <C> <C>
FCNIMCO Advisory Fee:
January 1 0.65% 0.65% 0.65% 0.40%
August 26 0.40% 0.40% 0.35% 0.40%
FCNIMCO Administration Fee:
January 1 N/A N/A N/A 0.15%
August 26 0.15% 0.15% 0.15% 0.15%
Amounts Paid:
Advisory Fees to FCNIMCO $2,214,927 $3,163,598 $909,166 $ 820,574
Administration Fees to FCNIMCO and BISYS 200,629 400,303 85,917 307,715
Distribution Fees to FoM and Essex 19,598 38,482 6,119 --
Other Fees to FCNIMCO 86,539 123,860 41,039 11,409
Expense Reimbursements by FCNIMCO -- -- -- (183,139)
</TABLE>
166
<PAGE>
Following is a summary of total expense rates charged for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
International Municipal Intermediate Michigan
Effective Date Bond Bond Municipal Bond Municipal Bond
- -------------- ------------- --------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Expense Rates:
January 1 1.20% 0.80% 0.80% 0.82%
July 21 1.20% 0.80% 0.80% 1.07%
August 26 1.09% 0.85% 0.85% 0.94%
CLASS B SHARES
Expense Rates:
January 1 1.95% 1.55% 1.55% N/A
August 26 1.84% 1.60% 1.60% 1.69%
CLASS I SHARES
Expense Rates:
January 1 0.95% 0.55% 0.55% 0.82%
August 26 0.84% 0.60% 0.60% 0.69%
</TABLE>
For the year ended December 31, 1996, FCNIMCO voluntarily agreed to
reimburse a portion of the operating expenses of the Funds to the extent that
the Funds' expenses exceeded the following amounts (as a percentage of each
Fund's average daily net assets):
<TABLE>
<CAPTION>
International Municipal Intermediate Michigan
Bond Bond Municipal Bond Municipal Bond
------------- --------- -------------- --------------
<S> <C> <C> <C> <C>
Class A Shares 1.48% 0.97% 0.99% 0.94%
Class B Shares 2.23% 1.72% 1.74% 1.69%
Class I Shares 0.84% 0.70% 0.75% 0.85%
</TABLE>
Following is a summary of advisory fee rates payable to FCNIMCO and
amounts paid to FCNIMCO, FoM, Essex, and BISYS pursuant to the agreements
described in Note 3 for the year ended December 31, 1996. The rates are
stated as a percentage of each Fund's average daily net assets.
<TABLE>
<CAPTION>
International Municipal Intermediate Michigan
Effective Date Bond Bond Municipal Bond Municipal Bond
-------------- ------------- --------- -------------- --------------
<S> <C> <C> <C> <C>
FCNIMCO Advisory Fee:
January 1 0.70% 0.40% 0.40% 0.65%
September 16 0.70% 0.40% 0.40% 0.40%
FCNIMCO Administration Fee:
January 1 0.15% 0.15% 0.15% N/A
August 26 0.15% 0.15% 0.15% 0.15%
Amounts Paid:
Advisory Fees to FCNIMCO $ 218,366 $1,101,456 $1,561,163 $308,496
Administration Fees to FCNIMCO and BISYS 46,583 413,046 585,436 28,964
Distribution Fees to FoM and Essex -- -- -- 13,127
Other Fees to FCNIMCO 28,746 40,094 16,794 27,834
Expense Reimbursements by FCNIMCO (160,438) (273,829) (267,210) (45,685)
</TABLE>
167
<PAGE>
The Funds' Class A shares and Class B shares have a Shareholder
Services Plan (the "Plan") pursuant to which the Funds pay BISYS Fund
Services (the "Distributor") a fee, at an annual rate of 0.25% of the average
daily net assets of the outstanding Class A shares and Class B shares.
Pursuant to the terms of the Plan, the Distributor has agreed to provide
certain shareholder services to the holders of these shares. Additionally,
under the terms of the Plan, the Distributor may make payments to other
shareholder service agents which may include FCNIMCO, and its affiliates. For
the year ended December 31, 1996, the Funds paid the following amounts under
the Plan to BISYS:
<TABLE>
<CAPTION>
Amounts Paid
------------
<S> <C>
Managed Assets Conservative $155,584
Managed Assets Balanced 26,992
Managed Assets Growth 15
Equity Income 17,711
Growth 25,699
Mid-Cap Opportunity 91,977
Small Cap Opportunity 5,779
Intrinsic Value 22,374
Growth and Value 62,205
Equity Index 18,789
International Equity 10,553
Intermediate Bond 14,377
Bond 41,836
Short Bond 968
Income 18,898
International Bond 2,193
Municipal Bond 67,988
Intermediate Municipal Bond 46,596
Michigan Municipal Bond 21,068
</TABLE>
The Funds' Class B shares have a Distribution Plan adopted pursuant to
Rule 12b-1 under the Act (the "12b-1 Plan") pursuant to which the Funds have
agreed to pay the Distributor for advertising, marketing and distributing
Class B Shares of the Funds at an annual rate of 0.75% of the average daily
net assets of the Funds' outstanding Class B Shares. Under the terms of the
12b-1 Plan, the Distributor may make payments to FCNIMCO, and its affiliates
in respect of these services. A contingent deferred sales charge (CDSC)
payable to the Distributor is imposed on redemptions of Class B shares
depending on the number of years such shares were held by the investor. For
the year ended December 31, 1996, the Funds made the following payments under
the 12b-1 Plan, all of which was retained by the Distributor:
<TABLE>
<CAPTION>
12b-1 Fees Paid CDSC Paid
--------------- ---------
<S> <C> <C>
Managed Assets Conservative $31,429 $66,779
Managed Assets Balanced 3,706 45,434
Managed Assets Growth 5 743
Equity Income 9,850 14,130
Growth 5,606 6,229
Mid-Cap Opportunity 113 5,403
Small Cap Opportunity 347 2,146
Intrinsic Value 140 7,954
Growth and Value 119 7,916
Equity Index 87 2,033
International Equity 2,796 9,463
Intermediate Bond 123 3,380
Bond 516 9,468
Short Bond 51 551
Income 3,233 1,878
International Bond 75 1,666
Municipal Bond 3,373 7,524
Intermediate Municipal Bond 3,640 2,657
Michigan Municipal Bond 113 4,401
</TABLE>
168
<PAGE>
Pegasus Funds
NOTES TO FINANCIAL STATEMENTS
(6) Capital Share Transactions
Transactions in shares of the Funds are summarized below:
<TABLE>
<CAPTION>
Managed Assets Conservative Fund
--------------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
Amount Shares Amount Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued $21,035,492 1,395,287 $ 6,191,735 463,615
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 2,064,528 138,061 2,369,623 177,490
Shares Redeemed (8,804,666) (591,724) (9,494,631) (723,267)
----------- --------- ----------- --------
Net Increase (Decrease) $14,295,354 941,624 $ (933,273) (82,162)
=========== ========= =========== ========
Class B Shares:
Shares Issued $ 3,341,366 234,768 $ 2,007,221 146,972
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 118,027 7,867 33,593 2,392
Shares Redeemed (280,570) (18,618) -- --
----------- --------- ----------- --------
Net Increase $ 3,178,823 224,017 $ 2,040,814 149,364
=========== ========= =========== ========
Class I Shares:
Shares Issued $ 918,992 59,611 $ 1,362,669 103,183
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 6,383 428 11,790 865
Shares Redeemed (784,575) (51,259) (202,866) (15,263)
Net Increase $ 140,800 8,780 $ 1,171,593 88,785
----------- --------- ----------- --------
Net Increase in Fund $17,614,977 1,174,421 $ 2,279,134 155,987
=========== ========= =========== ========
<PAGE>
<CAPTION>
Managed Assets Balanced Fund Managed Assets Growth Fund
------------------------------------------------- --------------------------
Year Ended Year Ended December 17, 1996
December 31, 1996 December 31, 1995 to December 31, 1996
-------------------- -------------------- ---------------------
Amount Shares Amount Shares Amount Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 8,426,899 711,227 $ 1,628,998 157,290 $ 75,494 7,476
Shares Issued in Connection with Merger 9,463,276 852,362 -- -- -- --
Dividends Reinvested 817,537 72,314 396,289 36,543 -- --
Shares Redeemed (2,536,126) (221,289) (1,670,686) (163,014) -- --
------------ --------- ------------ ---------- -------- -------
Net Increase (Decrease) $ 16,171,586 1,414,614 $ 354,601 30,819 $ 75,494 7,476
============ ========= ============ ========== ======== =======
Class B Shares:
Shares Issued $ 1,032,698 80,980 $ -- -- $ 16,600 1,659
Shares Issued in Connection with Merger 807,188 66,363 -- -- -- --
Dividends Reinvested 9,168 716 -- -- -- --
Shares Redeemed (6,339) (515) -- -- -- --
------------ --------- ------------ ---------- -------- -------
Net Increase $ 1,842,715 147,544 $ -- -- $ 16,600 1,659
============ ========= ============ ========== ======== =======
Class I Shares:
Shares Issued $ 49,005,246 4,288,634 $ 45,603,263 4,338,626 $586,711 58,671
Shares Issued in Connection with Merger 435,984 39,271 -- -- -- --
Dividends Reinvested 7,286,098 648,042 2,946,987 270,294 -- --
Shares Redeemed (41,766,635) (3,653,436) (21,071,031) (1,997,722) -- --
Net Increase $ 14,960,693 1,322,511 $ 27,479,219 2,611,198 $586,711 58,671
------------ --------- ------------ ---------- -------- -------
Net Increase in Fund $ 32,974,994 2,884,669 $ 27,833,820 2,642,017 $678,805 67,806
============ ========= ============ ========== ======== =======
</TABLE>
170
<PAGE>
<TABLE>
<CAPTION>
Equity Income Fund Growth Fund
-------------------------------------------------- --------------------------------------------------
Year Ended January 27, 1995 Year Ended January 27, 1995
December 31, 1996 through December 31, 1995 December 31, 1996 through December 31, 1995
-------------------- ------------------------- -------------------- -------------------------
Amount Shares Amount Shares Amount Shares Amount Shares
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 11,093,531 852,135 $ 3,147,813 274,126 $ 13,444,141 1,080,205 $ 4,175,044 365,857
Shares Issued in
Connection
with Merger -- -- -- -- 5,930,465 512,787 -- --
Dividends
Reinvested 160,285 12,297 96,740 8,056 841,743 72,662 284,304 24,056
Shares Redeemed (1,604,818) (124,553) (548,876) (47,021) (2,311,238) (186,293) (339,951) (28,244)
------------ --------- ------------ ---------- ------------ ---------- ------------ ----------
Net Increase
(Decrease) $ 9,648,998 739,879 $ 2,695,677 235,161 $ 17,905,111 1,479,361 $ 4,119,397 361,669
============ ========= ============ ========== ============ ========== ============ ==========
Class B Shares:
Shares Issued $ 1,308,057 102,562 $ 549,799 47,321 $ 782,000 62,854 $ 246,223 21,032
Dividends
Reinvested 28,902 2,231 20,644 1,708 94,605 8,218 18,650 1,584
Shares Redeemed (152,379) (11,467) (5,669) (479) (79,233) (6,367) (2,126) (178)
------------ --------- ------------ ---------- ------------ ---------- ------------ ----------
Net Increase $ 1,184,580 93,326 $ 564,774 48,550 $ 797,372 64,705 $ 262,747 22,438
============ ========= ============ ========== ============ ========== ============ ==========
Class I Shares:
Shares Issued $ 45,081,757 3,527,231 $254,460,104 24,853,530 $ 41,360,067 3,369,088 $296,410,620 29,238,077
Shares Issued in
Connection
with Merger -- -- -- -- 222,424,201 19,236,854 -- --
Dividends
Reinvested 218,010 16,975 6,520,825 538,073 27,429,285 2,372,057 14,724,145 1,243,736
Shares Redeemed (39,544,438) (3,063,638) (23,702,375) (2,132,230) (90,415,801) (7,318,686) (67,961,411) (5,922,360)
Net Increase $ 5,755,329 480,568 $237,278,554 23,259,373 $200,797,752 17,659,313 $243,173,354 24,559,453
============= ========= ============ ========== ============ ========== ============ ==========
Net Increase in
Fund $ 16,588,907 1,313,773 $240,539,005 23,543,084 $219,500,235 19,203,379 $247,555,498 24,943,560
============= ========= ============ ========== ============ ========== ============ ==========
<PAGE>
<CAPTION>
Mid-Cap Opportunity Fund
--------------------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
Amount Shares Amount Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 23,692,655 1,355,358 $ 8,240,315 555,210
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 108,810 6,534 3,673,280 247,482
Shares Redeemed (15,056,564) (907,440) (12,918,696) (882,359)
------------- ---------- ------------- ----------
Net Increase (Decrease) $ 8,744,901 454,452 $ (1,005,101) (79,667)
============= ========== ============= ==========
Class B Shares:
Shares Issued $ 162,993 16,148 $ -- --
Dividends Reinvested 86 9 -- --
Shares Redeemed -- -- -- --
------------- ---------- ------------- ----------
Net Increase $ 163,079 16,157 $ -- --
============= ========== ============= ==========
Class I Shares:
Shares Issued $ 172,410,355 10,192,078 $ 130,182,310 8,819,773
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 1,169,588 69,096 28,979,553 1,952,439
Shares Redeemed (167,383,102) (10,003,854) (105,529,735) (7,087,228)
------------- ----------- ------------- ----------
Net Increase $ 6,196,841 257,320 $ 53,632,128 3,684,984
============= ========== ============= ==========
Net Increase in Fund $ 15,104,821 727,929 $ 52,627,027 3,605,317
============= ========== ============= ==========
</TABLE>
170
<PAGE>
<TABLE>
<CAPTION>
Small Cap Opportunity Fund Intrinsic Value Fund
-------------------------------------------------- ------------------------------------------------
Year Ended January 27, 1995 Year Ended Year Ended
December 31, 1996 through December 31, 1995 December 31, 1996 December 31, 1995
----------------- ------------------------- ----------------- -----------------
Amount Shares Amount Shares Amount Shares Amount Shares
------ ------ ------ -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 6,588,789 492,296 $ 621,648 57,254 $ 4,813,365 337,213 $ 1,139,659 98,352
Dividends
Reinvested 548,267 40,137 13,920 1,177 392,449 30,190 1,572,467 132,870
Shares Redeemed (1,261,317) (98,737) (38,190) (3,361) (3,069,127) (237,189) (2,698,165) (230,496)
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Net Increase
(Decrease) $ 5,875,739 433,696 $ 597,378 55,070 $ 2,136,687 130,214 $ 13,961 726
============ ========== ============ ========== ============= ========== ============ ==========
Class B Shares:
Shares Issued $ 88,109 6,603 $ 13,756 1,248 $ 181,790 17,729 $ -- --
Dividends
Reinvested 8,638 638 308 26 690 68 -- --
Shares Redeemed (5,113) (378) (52) (5) -- -- -- --
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Net Increase $ 91,634 6,863 $ 14,012 1,269 $ 182,480 17,797 $ -- --
============ ========== ============ ========== ============ ========== ============ ==========
Class I Shares:
Shares Issued $ 26,677,330 1,999,204 $ 89,307,250 8,700,086 $139,927,769 10,692,276 $ 38,835,839 3,333,727
Dividends
Reinvested 7,414,201 538,441 1,180,180 99,691 4,797,959 367,462 19,476,839 1,645,078
Shares Redeemed (13,774,348) (1,044,928) (12,836,851) (1,176,741) (65,319,700) (5,010,787) (52,333,631) (4,457,286)
------------ ---------- ------------ ---------- ------------ ---------- ------------ ----------
Net Increase
(Decrease) $ 20,317,183 1,492,717 $ 77,650,579 7,623,036 $ 79,406,028 6,048,951 $ 5,979,047 521,519
============ ========== ============ ========== ============ ========== ============ ==========
Net Increase in
Fund $ 26,284,556 1,933,276 $ 78,261,969 7,679,375 $ 81,725,195 6,196,962 $ 5,993,008 522,245
============ ========== ============ ========== ============ ========== ============ ==========
<PAGE>
<CAPTION>
Growth and Value Fund
--------------------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
Amount Shares Amount Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 16,028,372 1,124,155 $ 4,588,262 387,194
Dividends Reinvested 560,494 39,583 1,789,636 141,424
Shares Redeemed (10,821,842) (772,283) (8,285,386) (701,305)
------------- ----------- ------------- ----------
Net Increase (Decrease) $ 5,767,024 391,455 $ (1,907,488) (172,687)
============= =========== ============= ==========
Class B Shares:
Shares Issued $ 196,222 19,580 $ -- --
Dividends Reinvested 601 64 -- --
Shares Redeemed -- -- -- --
------------- ----------- ------------- ----------
Net Increase $ 196,823 19,644 $ -- --
============= =========== ============= ==========
Class I Shares:
Shares Issued $ 187,744,205 13,228,960 $ 124,582,676 10,535,473
Dividends Reinvested 5,853,778 413,067 20,946,749 1,647,279
Shares Redeemed (195,990,296) (13,908,643) (114,791,427) (9,550,199)
------------- ----------- ------------- ----------
Net Increase (Decrease) $ (2,392,313) (266,616) $ 30,737,998 2,632,553
============= =========== ============= ==========
Net Increase in Fund $ 3,571,534 144,483 $ 28,830,510 2,459,866
============= =========== ============= ==========
</TABLE>
171
<PAGE>
<TABLE>
<CAPTION>
Equity Index Fund
-------------------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
Amount Shares Amount Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 31,801,287 1,957,460 $ 2,292,061 177,084
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 206,905 12,734 165,692 12,063
Shares Redeemed (2,209,647) (143,624) (215,783) (18,276)
------------- ----------- ------------ ----------
Net Increase (Decrease) $ 29,798,545 1,826,570 $ 2,241,970 170,871
============= =========== ============ ==========
Class B Shares:
Shares Issued $ 111,829 10,652 $ -- --
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 466 44 -- --
Shares Redeemed -- -- -- --
------------- ----------- ------------ ----------
Net Increase $ 112,295 10,696 $ -- --
============= =========== ============ ==========
Class I Shares:
Shares Issued $ 411,754,518 27,064,141 $ 139,720,014 10,679,298
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 12,028,976 766,473 13,489,476 1,010,078
Shares Redeemed (235,108,926) (15,057,677) (80,913,195) (6,521,501)
------------- ----------- ------------ ----------
Net Increase (Decrease) $ 188,674,568 12,772,937 $ 72,296,295 5,167,875
============= =========== ============ ==========
Net Increase (Decrease) in Fund $ 218,585,408 14,610,203 $ 74,538,265 5,338,746
============= =========== ============ ==========
<CAPTION>
International Equity Fund
------------------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
Amount Shares Amount Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 5,469,113 471,883 $ 963,073 92,983
Shares Issued in Connection with Merger 5,000,559 437,253 -- --
Dividends Reinvested 25,480 2,217 5,367 487
Shares Redeemed (925,372) (80,361) (43,012) (4,008)
------------ ---------- ------------ ----------
Net Increase (Decrease) $ 9,569,780 830,992 $ 925,428 89,462
============ ========== ============ ==========
Class B Shares:
Shares Issued $ 207,457 19,628 $ -- --
Shares Issued in Connection with Merger 902,000 83,241 -- --
Dividends Reinvested 3,879 363 -- --
Shares Redeemed (12,832) (1,174) -- --
------------ ---------- ------------ ----------
Net Increase $ 1,100,504 102,058 $ -- --
============ ========== ============ ==========
Class I Shares:
Shares Issued $156,316,681 13,690,888 $ 73,448,000 7,009,674
Shares Issued in Connection with Merger 139,065,560 12,158,206 -- --
Dividends Reinvested 1,166,795 101,789 714,645 64,727
Shares Redeemed (28,938,741) (2,506,907) (11,691,851) (1,103,671)
------------ ---------- ------------ ----------
Net Increase (Decrease) $267,610,295 23,443,976 $ 62,470,794 5,970,730
============ ========== ============ ==========
Net Increase (Decrease) in Fund $278,280,579 24,377,026 $ 63,396,222 6,060,192
============ ========== ============ ==========
<PAGE>
<CAPTION>
Intermediate Bond Fund
------------------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
Amount Shares Amount Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 8,796,002 850,551 $ 792,825 85,495
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 608,725 59,665 631,473 63,899
Shares Redeemed (2,595,255) (254,168) (3,106,268) (326,901)
------------ ----------- ------------ -----------
Net Increase (Decrease) $ 6,809,472 656,048 $ (1,681,970) (177,507)
============ =========== ============ ===========
Class B Shares:
Shares Issued $ 120,890 11,847 $ -- --
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 726 71 -- --
Shares Redeemed -- -- -- --
------------ ----------- ------------ -----------
Net Increase $ 121,616 11,918 $ -- --
============ =========== ============ ===========
Class I Shares:
Shares Issued $109,594,960 10,695,590 $ 46,476,164 4,732,883
Shares Issued in Connection with Merger -- -- -- --
Dividends Reinvested 18,582,923 1,823,614 18,445,642 1,858,926
Shares Redeemed (123,973,501) (12,103,697) (99,445,184) (10,008,285)
------------ ----------- ------------ -----------
Net Increase (Decrease) $ 4,204,382 415,507 $(34,523,378) (3,416,476)
============ =========== ============ ===========
Net Increase (Decrease) in Fund $ 11,135,470 1,083,473 $(36,205,348) (3,593,983)
============ ========== ============ ===========
</TABLE>
172
<PAGE>
<TABLE>
<CAPTION>
Bond Fund Short Bond Fund
--------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995
-------------------- -------------------- -------------------- --------------------
Amount Shares Amount Shares Amount Shares Amount Shares
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 18,025,833 1,759,192 $ 1,992,427 209,090 $ 486,197 47,796 $ 432,750 42,985
Shares Issued in
Connection
with Merger 3,578,204 354,183 -- -- -- -- -- --
Dividends
Reinvested 1,569,989 154,343 1,397,240 141,574 35,923 3,549 32,895 3,253
Shares Redeemed (7,420,659) (728,002) (8,511,937) (875,178) (244,422) (24,031) (26,838) (2,673)
------------ ---------- ------------ ----------- ------------ ---------- ------------ ----------
Net Increase
(Decrease) $ 15,753,367 1,539,716 $ (5,122,270) (524,514) $ 277,698 27,314 $ 438,807 43,565
============ ========== ============ =========== ============ ========== ============ ==========
Class B Shares:
Shares Issued $ 158,728 15,396 $ -- -- $ 55,979 5,552 $ -- --
Shares Issued in
Connection
with Merger 119,311 11,877 -- -- -- -- -- --
Dividends
Reinvested 3,723 365 -- -- 375 38 -- --
Shares Redeemed (4,168) (416) -- -- -- -- -- --
------------ ---------- ------------ ----------- ------------ ---------- ------------ ----------
Net Increase
(Decrease) $ 277,594 27,222 $ -- -- $ 56,354 5,590 $ -- --
============ ========== ============ =========== ============ ========== ============ ==========
Class I Shares:
Shares Issued $210,681,955 20,613,883 $ 79,784,417 8,146,897 $ 40,830,609 4,022,313 $113,880,807 11,241,708
Shares Issued in
Connection
with Merger 127,168,386 12,587,564 -- -- -- -- -- --
Dividends
Reinvested 28,011,422 2,757,955 23,566,267 2,384,296 3,598,870 355,518 3,892,073 385,415
Shares Redeemed (88,910,686) (8,695,219) (78,195,253) (7,915,240) (33,628,814) (3,310,328) (22,529,665) (2,234,135)
------------ ---------- ------------ ----------- ------------ ---------- ------------ ----------
Net Increase $276,951,077 27,264,183 $ 25,155,431 2,615,953 $ 10,800,665 1,067,503 $ 95,243,215 9,392,988
============ ========== ============ =========== ============ ========== ============ ==========
Net Increase in
Fund $292,982,038 28,831,121 $ 20,033,161 2,091,439 $ 11,134,717 1,100,407 $ 95,682,022 9,436,553
============ ========== ============ =========== ============ ========== ============ ==========
</TABLE>
173
<PAGE>
<TABLE>
<CAPTION>
Income Fund
---------------------------------------------------------------------------
Year Ended February 1, 1995 Year Ended
December 31, 1996 through December 31, 1995 January 31, 1995
----------------- ------------------------- ----------------
Amount Shares Amount Shares Amount Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 6,282,665 802,997 $ 7,282,071 895,627 $ 19,449 2,527
Dividends Reinvested 325,086 41,392 288,362 35,401 4,153 533
Shares Redeemed (3,419,713) (467,477) (1,588,172) (194,954) (15,285) (1,997)
------------ ---------- ------------ ---------- ----------- ---------
Net Increase (Decrease) $ 3,188,038 376,912 $ 5,982,261 736,074 $ 8,317 1,063
============ ========== ============ ========== =========== =========
Class B Shares:
Shares Issued $ 352,863 42,575 $ 303,451 37,048 $ 2,000 245
Dividends Reinvested 12,777 1,628 7,835 961 99 13
Shares Redeemed (93,950) (11,916) (50,817) (6,308) (2,099) (258)
------------ ---------- ------------ ---------- ----------- ---------
Net Increase (Decrease) $ 271,690 32,287 $ 260,469 31,701 $ -- --
============ ========== ============ ========== =========== =========
Class I Shares:
Shares Issued $ 57,231,153 7,271,595 $193,282,535 24,813,641 $ 7,661,463 1,001,211
Dividends Reinvested 267,331 33,983 3,730,335 459,341 5,537 710
Shares Redeemed (54,915,467) (6,929,097) (22,128,156) (2,742,147) (5,328,334) (698,958)
------------ ---------- ------------ ---------- ----------- ---------
Net Increase $ 2,583,017 376,481 $174,884,714 22,530,835 $ 2,338,666 302,963
============ ========== ============ ========== =========== =========
Net Increase in Fund $ 6,042,745 785,680 $181,127,444 23,298,610 $ 2,346,983 304,026
============ ========== ============ ========== =========== =========
<CAPTION>
International Bond Fund
------------------------------------------------
Year Ended January 27, 1995
December 31, 1996 through December 31, 1995
----------------- -------------------------
Amount Shares Amount Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 1,566,208 146,224 $ 480,966 42,767
Dividends Reinvested 47,338 4,420 47,097 4,274
Shares Redeemed (107,494) (10,002) (19,999) (1,752)
----------- --------- ----------- ---------
Net Increase (Decrease) $ 1,506,052 140,642 $ 508,064 45,289
=========== ========= =========== =========
Class B Shares:
Shares Issued $ 41,186 3,768 $ 3,704 370
Dividends Reinvested 541 50 484 44
Shares Redeemed -- -- -- --
----------- --------- ----------- ---------
Net Increase (Decrease) $ 41,727 3,818 $ 4,188 414
=========== ========= =========== =========
Class I Shares:
Shares Issued $40,613,308 3,806,690 $15,099,834 1,442,838
Dividends Reinvested 795,338 73,443 332,915 29,708
Shares Redeemed (2,780,800) (259,630) (1,470,371) (130,514)
----------- --------- ----------- ---------
Net Increase $38,627,846 3,620,503 $13,962,378 1,342,032
=========== ========= =========== =========
Net Increase in Fund $40,175,625 3,764,963 $14,474,630 1,387,735
=========== ========= =========== =========
</TABLE>
174
<PAGE>
<TABLE>
<CAPTION>
Municipal Bond Fund
----------------------------------------------------------------------------
Year Ended March 1, 1995 Year Ended
December 31, 1996 through December 31, 1995 February 28, 1995
----------------- ------------------------- -----------------
Amount Shares Amount Shares Amount Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 13,282,083 1,066,331 $ 1,295,558 103,426 $ 301,216 25,507
Shares Issued in Connection with Merger 11,575,160 947,394 -- -- -- --
Dividends Reinvested 457,891 37,159 346,338 27,700 319,837 27,236
Shares Redeemed (3,271,199) (264,538) (1,377,127) (110,562) (2,895,171) (246,815)
------------ ---------- ------------ ------- ------------ ----------
Net Increase (Decrease) $ 22,043,935 1,786,346 $ 264,769 20,564 $ (2,274,118) (194,072)
============ ========== ============ ======= ============ ==========
Class B Shares:
Shares Issued $ 435,395 34,380 $ 228,602 18,257 $ -- --
Dividends Reinvested 14,804 1,201 6,838 543 66 6
Shares Redeemed -- -- (39) (3) (2,071) (168)
------------ ---------- ------------ ------- ------------ ----------
Net Increase (Decrease) $ 450,199 35,581 $ 235,401 18,797 $ (2,005) (162)
============ ========== ============ ======= ============ ==========
Class I Shares:
Shares Issued $ 44,396,921 3,630,551 $ 32,958,625 2,685,708 $222,099,320 18,631,505
Shares Issued in Connection with Merger 91,002,940 7,456,140 -- -- -- --
Dividends Reinvested 689,255 56,095 3,575,154 285,358 3,923 325
Shares Redeemed (34,399,736) (2,790,753) (27,710,442) (2,219,888) (4,444,913) (371,925)
------------ ---------- ------------ ------- ------------ ----------
Net Increase (Decrease) $101,689,380 8,352,033 $ 8,823,337 751,178 $217,658,330 18,259,905
============ ========== ============ ======= ============ ==========
Net Increase (Decrease) in Fund $124,183,514 10,173,960 $ 9,323,507 790,539 $215,382,207 18,065,671
============ ========== ============ ======= ============ ==========
<CAPTION>
Intermediate Municipal Bond Fund
---------------------------------------------------------------------------------
Year Ended March 1, 1995 Year Ended
December 31, 1996 through December 31, 1995 February 28, 1995
----------------- ------------------------- -----------------
Amount Shares Amount Shares Amount Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 5,404,061 366,796 $ 2,036,319 167,138 $ 920,191 78,527
Shares Issued in Connection with Merger -- -- -- -- -- --
Dividends Reinvested 524,344 43,521 579,220 47,958 829,334 70,747
Shares Redeemed (3,525,775) (287,987) (2,724,405) (225,316) (12,219,977) (1,053,197)
------------ ------- ------------ -------- ------------ ----------
Net Increase (Decrease) $ 2,402,630 122,330 $ (108,866) (10,220) $(10,470,452) (903,923)
============ ======= ============ ======== ============ ==========
Class B Shares:
Shares Issued $ 306,006 24,466 $ 348,000 28,626 $ 115,550 9,750
Dividends Reinvested 10,793 886 4,876 399 1,971 169
Shares Redeemed (31,817) (2,637) (20,212) (1,672) (123,958) (10,419)
------------ ------- ------------ -------- ------------ ----------
Net Increase (Decrease) $ 284,982 22,715 $ 332,664 27,353 $ (6,437) (500)
============ ======= ============ ======== ============ ==========
Class I Shares:
Shares Issued $ 61,280,262 5,150,519 $ 46,362,306 3,850,432 $366,411,242 31,318,358
Shares Issued in Connection with Merger -- -- -- -- -- --
Dividends Reinvested 195,229 16,192 2,330,219 191,337 20,498 1,737
Shares Redeemed (57,603,084) (4,790,142) (54,476,753) (4,527,302) (3,821,887) (325,102)
------------ ------- ------------ -------- ------------ ----------
Net Increase (Decrease) $ 3,872,407 376,569 $ (5,784,228) (485,533) $362,609,853 30,994,993
============ ======= ============ ======== ============ ==========
Net Increase (Decrease) in Fund $ 6,560,019 521,614 $ (5,560,430) (468,400) $352,132,964 30,090,570
============ ======= ============ ======== ============ ==========
</TABLE>
175
<PAGE>
<TABLE>
<CAPTION>
Michigan Municipal Bond Fund
------------------------------------------------
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
Amount Shares Amount Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued $ 911,973 79,044 $ 1,969,315 191,147
Dividends Reinvested 657,970 63,485 749,723 73,306
Shares Redeemed (3,759,125) (354,815) (5,025,471) (493,749)
----------- --------- ----------- ---------
Net Increase (Decrease) $(2,189,182) (212,286) $(2,306,433) (229,296)
=========== ========= =========== ========
Class B Shares:
Shares Issued $ 110,019 10,827 -- --
Dividends Reinvested 63 6 -- --
----------- --------- ----------- ---------
Net Increase $ 110,082 10,833 $ -- --
=========== ========= =========== ========
Class I Shares:
Shares Issued $16,351,477 1,572,801 $11,025,312 1,099,298
Dividends Reinvested 196,702 18,959 178,023 17,347
Shares Redeemed (6,798,951) (652,256) (5,920,891) (591,939)
----------- --------- ----------- ---------
Net Increase $ 9,749,228 939,504 $ 5,282,444 524,706
=========== ========= =========== ========
Net Increase in Fund $ 7,670,128 738,051 $ 2,976,011 295,410
=========== ========= =========== ========
</TABLE>
176
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of how the Funds' net
assets values have changed during the periods presented. Additional
quantitative measures expressed in ratio form analyze important relationships
between certain items presented in the financial statements. These financial
highlights have been derived from the financial statements of the Funds and
other information for the periods presented.
Pegasus Managed Assets Conservative Fund
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.54 $ 12.13 $ 13.11 $ 12.68 $ 12.56
Income (loss) from investment operations:
Net investment income 0.56 0.64 0.73 0.72 0.79
Net realized and unrealized gains (losses) on
investments 0.89 2.48 (0.98) 0.61 0.26
------- ------- ------- ------- -------
Total from investment operations 1.45 3.12 (0.25) 1.33 1.05
------- ------- ------- ------- -------
Less distributions:
From net investment income (0.56) (0.68) (0.72) (0.72) (0.77)
From realized gains (0.09) (0.03) (0.01) (0.18) (0.16)
------- ------- ------- ------- -------
Total distributions (0.65) (0.71) (0.73) (0.90) (0.93)
------- ------- ------- ------- -------
Net change in net asset value 0.80 2.41 (0.98) 0.43 0.12
Conversion to Class A Shares(3) -- -- -- -- --
------- ------- ------- ------- -------
Net asset value, end of period $ 15.34 $ 14.54 $ 12.13 $ 13.11 $ 12.68
======= ======= ======= ======= =======
Total Return (c) 10.11% 26.40% (1.92%) 10.70% 8.68%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $69,301 $51,997 $44,367 $51,586 $34,262
Ratios to average net assets:
Expenses 1.18% 1.17% 0.63% 0.39% 0.02%
Net investment income 3.64% 4.88% 5.77% 5.54% 6.24%
Expenses without fee waivers/reimbursed expenses 1.33% 1.54% 1.67% 1.65% 1.88%
Net investment income without fee
waivers/reimbursed expenses 3.49% 4.51% 4.73% 4.28% 4.38%
Portfolio turnover rate 63.41% 8.23% 28.69% 16.40% 22.14%
Average commission rate $ 0.05
<PAGE>
<CAPTION>
Pegasus Managed Assets Conservative Fund - (Continued)
Class B Shares Class I Shares
----------------------------------------- -------------------------
Year Ended Period Ended Period Ended Year Ended Period Ended
Dec. 31, Dec. 31, Dec. 2, Dec. 31, Dec. 31,
1996 1995(2) 1994(1) 1996 1995(4)
---------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.56 $12.42 $ 13.05 $14.57 $12.42
Income (loss) from investment operations:
Net investment income 0.44 0.45 0.51 0.60 0.57
Net realized and unrealized gains (losses) on
investments 0.89 2.17 (0.91) 0.89 2.18
------ ------ ------- ------ ------
Total from investment operations 1.33 2.62 (0.40) 1.49 2.75
Less distributions:
From net investment income (0.44) (0.45) (0.54) (0.59) (0.57)
From realized gains (0.09) (0.03) (0.01) (0.09) (0.03)
------ ------ ------- ------ ------
Total distributions (0.53) (0.48) (0.55) (0.68) (0.60)
------ ------ ------- ------ ------
Net change in net asset value 0.80 2.14 (0.95) 0.81 2.15
Conversion to Class A Shares(3) -- -- (12.10) -- --
------ ------ ------- ------ ------
Net asset value, end of period $15.36 $14.56 $ -- $15.38 $14.57
====== ====== ======= ====== ======
Total Return (c) 9.26% 21.42%(b) (3.13)% 10.43% 22.55%(b)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $5,736 $2,175 $ -- $1,501 $1,294
Ratios to average net assets:
Expenses 1.93% 1.92%(a) 1.21%(a) 0.93% 0.77%(a)
Net investment income 2.89% 3.89%(a) 4.10%(a) 3.89% 5.12%(a)
Expenses without fee waivers/reimbursed expenses 2.07% 2.12%(a) 2.17%(a) 1.19% 1.22%(a)
Net investment income without fee
waivers/reimbursed expenses 2.75% 3.70%(a) 3.14%(a) 3.63% 4.66%(a)
Portfolio turnover rate 63.41% 8.23%(b) 28.69%(b) 63.41% 8.23%(b)
Average commission rate $ 0.05 $ 0.05
<FN>
- ---------
(1) For the period February 8, 1994 (initial offering date of Class B Shares)
through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of Class B Shares under the then-current sales load schedule and
such shares converted to Class A Shares.
(2) For the period March 3, 1995 (re-offering date of Class B Shares) through
December 31, 1995.
(3) On December 2, 1994, the Fund terminated its offering of Class B Shares
under the then-current sales load schedule and such shares converted to
Class A Shares.
(4) For the period March 3, 1995 (initial offering date of Class I Shares)
through December 31, 1995.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
177
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PEGASUS MANAGED ASSETS BALANCED FUND
Class A Shares Class B Shares Class I Shares
------------------------------------- -------------- -------------------------------------
Year Ended Year Ended Year Ended Period Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1996(1) 1996 1995 1994
---------- ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.24 $ 9.53 $10.00 $12.16 $ 11.24 $ 9.53 $ 10.00
Income (loss) from investment
operations:
Net investment income 0.35 0.35 0.28 0.08 0.39 0.35 0.28
Net realized and unrealized gains
(losses) on investments 1.06 1.83 (0.48) 0.81 1.02 1.83 (0.48)
------- ------ ------ ------ -------- ------- -------
Total from investment
operations 1.41 2.18 (0.20) 0.89 1.41 2.18 (0.20)
------- ------ ------ ------ -------- ------- -------
Less distributions:
From net investment income (0.34) (0.35) (0.27) (0.07) (0.38) (0.35) (0.27)
From realized gains (0.68) (0.12) -- (0.17) (0.68) (0.12) --
------- ------ ------ ------ -------- ------- -------
Total distributions (1.02) (0.47) (0.27) (0.24) (1.06) (0.47) (0.27)
------- ------ ------ ------ -------- ------- -------
Net change in net asset value 0.39 1.71 (0.47) 0.65 0.35 1.71 (0.47)
------- ------ ------ ------ -------- ------- -------
Net asset value, end of period $ 11.63 $11.24 $ 9.53 $12.81 $ 11.59 $ 11.24 $ 9.53
======= ====== ====== ====== ======== ======= =======
Total Return (c) 12.99% 23.18% (1.95)% 7.30%(b) 13.04% 23.18% (1.95)%
Ratios/Supplemental Data
Net assets, end of period (in
000's) $26,775 $9,986 $8,168 $1,890 $101,596 $83,638 $45,999
Ratios to average net assets:
Expenses 1.09% 0.91% 0.85% 1.96%(a) 0.94% 0.91% 0.85%
Net investment income 3.13% 3.40% 3.41% 1.35%(a) 3.28% 3.40% 3.41%
Expenses without fee waivers/
reimbursed expenses 1.16% 1.09% 1.56% 2.03%(a) 1.01% 1.09% 1.56%
Net investment income without
fee waivers/reimbursed
expenses 3.06% 3.22% 2.70% 1.28%(a) 3.21% 3.22% 2.70%
Portfolio turnover rate 50.50% 31.76% 37.49% 50.50% 50.50% 31.76% 37.49%
Average commission rate $ 0.07 $ 0.07(a) $ 0.07
<PAGE>
<CAPTION>
PEGASUS MANAGED ASSETS GROWTH FUND
Class A Shares Class B Shares Class I Shares
-------------- -------------- --------------
Period Ended Period Ended Period Ended
Dec. 31, Dec. 31, Dec. 31,
1996(2) 1996(2) 1996(2)
------------ ------------ -----------
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income -- -- --
Net realized and unrealized gains (losses) on
investments 0.08 (0.01) 0.13
------ ------ ------
Total from investment operations 0.08 (0.01) 0.13
------ ------ ------
Less distributions:
From net investment income -- -- --
------ ------ ------
From realized gains -- -- --
------ ------ ------
Total distributions -- -- --
Net change in net asset value 0.08 (0.01) 0.13
------ ------ ------
Net asset value, end of period $10.08 $ 9.99 $10.13
====== ====== ======
Total Return (c) 0.80%(b) (0.10)%(b) 1.30%(b)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $ 75 $ 17 $ 594
Ratios to average net assets:
Expenses 1.20%(a) 1.95%(a) 0.95%(a)
Net investment income (0.45)%(a) (1.20)%(a) 0.20%(a)
Expenses without fee waivers/ reimbursed expenses (3.50)%(a) (4.25)%(a) (3.25)%(a)
Net investment income without fee
waivers/reimbursed expenses (2.75)%(a) (3.50)%(a) (2.50)%(a)
Portfolio turnover rate 0.00% 0.00% 0.00%
Average commission rate $ 0.00 $ 0.00 $ 0.00
<FN>
(1) For the period August 24, 1996 (initial offering date of Class B shares)
through December 31, 1996.
(2) For the period December 17, 1996 (commencement of operations) through
December 31, 1996.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
178
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Equity Income Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class I Shares
------------------------ ------------------------ -------------------------
Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995(1) 1996 1995(1) 1996 1995(1)
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 12.22 $10.00 $12.22 $10.00 $ 12.21 $ 10.00
Income from investment operations:
Net investment income 0.39 0.36 0.30 0.29 0.45 0.42
Net realized and unrealized gains
on investments 1.90 2.57 1.88 2.56 1.87 2.55
------ ------ ------ ------ -------- --------
Total from investment operations 2.29 2.93 2.18 2.85 2.32 2.97
------ ------ ------ ------ -------- --------
Less distributions:
From net investment income (0.38) (0.36) (0.28) (0.29) (0.44) (0.42)
In excess of net investment income -- (0.01) -- -- -- --
From realized gains (0.84) (0.34) (0.84) (0.34) (0.84) (0.34)
------ ------ ------ ------ -------- --------
Total distributions (1.22) (0.71) (1.12) (0.63) (1.28) (0.76)
------ ------ ------ ------ -------- --------
Net change in net asset value 1.07 2.22 1.06 2.22 1.04 2.21
------ ------ ------ ------ -------- --------
Net asset value, end of period $ 13.29 $12.22 $13.28 $12.22 $ 13.25 $ 12.21
======= ====== ====== ====== ======== ========
Total Return (c) 19.29% 29.78%(b) 18.28% 28.97%(b) 19.58% 30.27%(b)
Ratios/Supplemental Data
Net assets, end of period (in
000's) $12,956 $2,873 $1,885 $ 593 $314,649 $283,927
Ratios to average net assets:
Expenses 0.91% 1.11%(a) 1.66% 1.90%(a) 0.66% 0.65%(a)
Net investment income 3.29% 3.33%(a) 2.54% 2.65%(a) 3.54% 4.08%(a)
Expenses without fee waivers/
reimbursed expenses 0.95% 1.44%(a) 1.81% 2.65%(a) 0.74% 0.77%(a)
Net investment income without fee
waivers/reimbursed expenses 3.25% 2.99%(a) 2.39% 1.90%(a) 3.46% 3.96%(a)
Portfolio turnover rate 61.41% 44.07%(b) 61.41% 44.07%(b) 61.41% 44.07%(b)
Average commission rate $ 0.04 $ 0.04 $ 0.04
<FN>
- ---------
(1) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
179
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Growth Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class I Shares
------------------------- ------------------------ -------------------------
Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995(1) 1996 1995(1) 1996 1995(1)
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.97 $ 10.00 $11.95 $ 10.00 $ 11.97 $ 10.00
Income from investment operations:
Net investment income 0.05 0.11 (0.02) 0.06 0.09 0.15
Net realized and unrealized gains
on investments 1.04 2.86 0.99 2.84 1.02 2.86
------- ------- ------ ------- -------- --------
Total from investment operations 1.09 2.97 0.97 2.90 1.11 3.01
------- ------- ------ ------- -------- --------
Less distributions:
From net investment income (0.06) (0.11) -- (0.06) (0.09) (0.15)
From realized gains (0.36) (0.89) (0.36) (0.89) (0.36) (0.89)
------- ------- ------ ------- -------- --------
Total distributions (0.42) (1.00) (0.36) (0.95) (0.45) (1.04)
------- ------- ------ ------- -------- --------
Net change in net asset value 0.67 1.97 0.61 1.95 0.66 1.97
------- ------- ------ ------- -------- --------
Net asset value, end of period $ 12.64 $ 11.97 $12.56 $ 11.95 $ 12.63 $ 11.97
======= ======= ====== ======= ======== ========
Total Return (c) 20.10% 29.98%(b) 19.04% 29.15%(b) 20.36% 30.38%(b)
Ratios/Supplemental Data
Net assets, end of period (in
000's) $23,273 $ 4,329 $1,094 $ 268 $533,406 $293,944
Ratios to average net assets:
Expenses 1.04% 1.21%(a) 1.79% 2.04%(a) 0.79% 0.80%(a)
Net investment income 0.43% 0.86%(a) (0.32)% 0.02%(a) 0.68% 1.46%(a)
Expenses without fee waivers/
reimbursed expenses 1.07% 1.39%(a) 1.89% 2.60%(a) 0.85% 0.92%(a)
Net investment income without fee
waivers/reimbursed expenses 0.40% 0.68%(a) (0.42)% (0.54)%(a) 0.62% 1.34%(a)
Portfolio turnover rate 61.95% 106.02%(b) 61.95% 106.02%(b) 61.95% 106.02%(b)
Average commission rate $ 0.02 $ 0.02 $ 0.02
<FN>
- ---------
(1) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
180
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Mid-Cap Opportunity Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------------------------- --------------
Year Year Year Year Period
Ended Ended Ended Ended Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992(2) 1996(1)
------- ------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.15 $ 13.34 $ 14.49 $ 12.37 $10.95 $10.00
Income (loss) from investment operations:
Net investment income 0.02 0.06 0.07 0.10 0.08 --
Net realized and unrealized gains (losses) on
investments 3.74 2.57 (0.54) 2.87 1.88 0.79
------- ------- ------- ------- ------- ------
Total from investment operations 3.76 2.63 (0.47) 2.97 1.96 0.79
Less distributions:
From net investment income (0.02) (0.06) (0.07) (0.10) (0.08) (0.01)
From realized gains (1.28) (0.76) (0.49) (0.75) (0.46) (1.21)
In excess of realized gains -- -- (0.02) -- -- --
Tax return of capital -- -- (0.10) -- -- --
------- ------- ------- ------- ------- ------
Total distributions (1.30) (0.82) (0.68) (0.85) (0.54) (1.22)
------- ------- ------- ------- ------- ------
Net change in net asset value 2.46 1.81 (1.15) 2.12 1.42 (0.43)
------- ------- ------- ------- ------- ------
Net asset value, end of period $ 17.61 $ 15.15 $ 13.34 $ 14.49 $12.37 $ 9.57
======= ======= ======= ======= ====== ======
Total Return(c) 24.91% 19.88% (3.27)% 24.01% 27.93% 7.94%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $91,516 $71,858 $64,326 $53,977 $5,111 $ 154
Ratios to average net assets:
Expenses 0.93% 0.89% 0.90% 0.86% 0.85%(a) 1.81%(a)
Net investment income 0.12% 0.37% 0.53% 0.71% 1.05%(a) (0.59)%(a)
Portfolio turnover rate 34.87% 53.55% 37.51% 33.99% 34.44%(a) 34.87%
Average commission rate $ 0.04 $ 0.04
<PAGE>
<CAPTION>
Class I Shares
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.15 $ 13.34 $ 14.49 $ 12.37 $ 10.40
Income (loss) from investment operations:
Net investment income 0.04 0.06 0.07 0.10 0.11
Net realized and unrealized gains (losses) on
investments 3.74 2.57 (0.54) 2.87 2.43
-------- -------- -------- -------- --------
Total from investment operations 3.78 2.63 (0.47) 2.97 2.54
-------- -------- -------- -------- --------
Less distributions:
From net investment income (0.04) (0.06) (0.07) (0.10) (0.11)
From realized gains (1.28) (0.76) (0.49) (0.75) (0.46)
In excess of realized gains -- -- (0.02) -- --
Tax return of capital -- -- (0.10) -- --
-------- -------- -------- -------- --------
Total distributions (1.32) (0.82) (0.68) (0.85) (0.57)
-------- -------- -------- -------- --------
Net change in net asset value 2.46 1.81 (1.15) 2.12 1.97
-------- -------- -------- -------- --------
Net asset value, end of period $ 17.61 $ 15.15 $ 13.34 $ 14.49 $ 12.37
======== ======== ======== ======== ========
Total Return(c) 25.03% 19.88% (3.27)% 24.01% 24.56%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $677,608 $579,094 $460,673 $311,688 $161,312
Ratios to average net assets:
Expenses 0.81% 0.89% 0.90% 0.86% 0.84%
Net investment income 0.24% 0.37% 0.53% 0.71% 1.09%
Portfolio turnover rate 34.87% 53.55% 37.51% 33.99% 34.44%
Average commission rate $ 0.04
<FN>
- ---------
(1) For the period September 23, 1996 (initial offering date of Class B
shares) through December 31, 1996.
(2) For the period May 1, 1992 (initial offering date of Class A shares)
through December 31, 1992.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
181
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Small Cap Opportunity Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class I Shares
-------------------------- ------------------------- -------------------------
Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995(1) 1996 1995(1) 1996 1995(1)
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $12.20 $10.00 $12.12 $10.00 $ 12.19 $ 10.00
Income (loss) from investment
operations:
Net investment income (0.02) 0.02 (0.04) (0.03) (0.01) 0.06
Net realized and unrealized gains
on investments 3.02 2.45 3.00 2.40 3.13 2.44
------ ------ ------ ------ -------- -------
Total from investment operations 3.00 2.47 2.96 2.37 3.12 2.50
------ ------ ------ ------ -------- -------
Less distributions:
From net investment income -- (0.02) -- -- -- (0.06)
From realized gains (1.50) (0.25) (1.50) (0.25) (1.50) (0.25)
In excess of net investment income -- -- -- -- (0.01) --
------ ------ ------ ------ -------- -------
Total distributions (1.50) (0.27) (1.50) (0.25) (1.51) (0.31)
------ ------ ------ ------ -------- -------
Net change in net asset value 1.50 2.20 1.46 2.12 1.61 2.19
------ ------ ------ ------ -------- -------
Net asset value, end of period $13.70 $12.20 $13.58 $12.12 $ 13.80 $ 12.19
====== ====== ====== ====== ======== =======
Total Return (c) 24.59% 24.80%(b) 24.42% 23.76%(b) 25.63% 25.08%(b)
Ratios/Supplemental Data
Net assets, end of period (in
000's) $6,697 $ 672 $ 110 $ 15 $125,840 $92,926
Ratios to average net assets:
Expenses 1.13% 1.25%(a) 1.88% 2.00%(a) 0.88% 0.85%(a)
Net investment income (0.29)% 0.19%(a) (1.04)% (0.51)% (0.04)% 0.59%(a)
Expenses without fee waivers/
reimbursed expenses 1.24% 2.56%(c) 3.04% 9.52%(a) 1.02% 1.09%(a)
Net investment income without fee
waivers/reimbursed expenses (0.40)% (1.12)%(a) (2.20)% (8.04)%(a) (0.18)% 0.36%(a)
Portfolio turnover rate 93.82% 38.89%(b) 93.82% 38.89%(b) 93.82% 38.89%(b)
Average commission rate $ 0.05 $ 0.05 $ 0.05
<FN>
- ---------
(1) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
182
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Intrinsic Value Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------------- --------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992(2) 1996(1)
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.89 $ 10.48 $ 11.05 $ 10.40 $10.70 $10.00
Income (loss) from investment operations:
Net investment income 0.28 0.29 0.31 0.29 0.22 0.04
Net realized and unrealized gains (losses) on
investments 2.50 2.24 (0.38) 1.23 0.33 0.79
------- ------- ------- ------- ------ ------
Total from investment operations 2.78 2.53 (0.07) 1.52 0.55 0.83
------- ------- ------- ------- ------ ------
Less distributions:
From net investment income (0.28) (0.30) (0.30) (0.28) (0.21) (0.06)
From realized gains (0.69) (0.82) (0.20) (0.59) (0.64) (0.59)
------- ------- ------- ------- ------ ------
Total distributions (0.97) (1.12) (0.50) (0.87) (0.85) (0.65)
------- ------- ------- ------- ------ ------
Net change in net asset value 1.81 1.41 (0.57) 0.65 (0.30) 0.18
------- ------- ------- ------- ------ ------
Net asset value, end of period $ 13.70 $ 11.89 $ 10.48 $ 11.05 $10.40 $10.18
======= ======= ======= ======= ====== ======
Total Return (c) 23.79% 24.38% (0.60)% 14.71% 6.82% 8.31%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $22,370 $17,858 $15,730 $14,098 $4,729 $ 182
Ratios to average net assets:
Expenses 0.94% 0.91% 0.91% 0.86% 0.85%(a) 1.81%(a)
Net investment income 2.16% 2.49% 2.92% 2.67% 3.12%(a) 0.25%(a)
Portfolio turnover rate 34.24% 45.55% 58.62% 63.90% 48.52%(a) 34.24%(a)
Average commission rate $ 0.04 $ 0.04
<PAGE>
<CAPTION>
Class I Shares
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.89 $ 10.48 $ 11.05 $ 10.40 $ 9.89
Income (loss) from investment operations:
Net investment income 0.29 0.29 0.31 0.29 0.29
Net realized and unrealized gains (losses) on
investments 2.51 2.24 (0.38) 1.23 1.14
-------- -------- -------- -------- --------
Total from investment operations 2.80 2.53 (0.07) 1.52 1.43
-------- -------- -------- -------- --------
Less distributions:
From net investment income (0.29) (0.30) (0.30) (0.28) (0.28)
From realized gains (0.69) (0.82) (0.20) (0.59) (0.64)
-------- -------- -------- -------- --------
Total distributions (0.98) (1.12) (0.50) (0.87) (0.92)
-------- -------- -------- -------- --------
Net change in net asset value 1.82 1.41 (0.57) 0.65 0.51
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.71 $ 11.89 $ 10.48 $ 11.05 $ 10.40
======== ======== ======== ======== ========
Total Return (c) 23.99% 24.38% (0.60)% 14.71% 14.56%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $357,360 $238,027 $204,298 $178,457 $102,532
Ratios to average net assets:
Expenses 0.83% 0.91% 0.91% 0.86% 0.84%
Net investment income 2.27% 2.49% 2.92% 2.67% 2.78%
Portfolio turnover rate 34.24% 45.55% 58.62% 63.90% 48.52%
Average commission rate $ 0.04
<FN>
- ---------
(1) For the period September 23, 1996 (initial offering date of Class B
shares) through December 31, 1996.
(2) For the period May 1, 1992 (initial offering date of Class A shares)
through December 31, 1992.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
183
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Growth and Value Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------------- --------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992(2) 1996(1)
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.16 $ 10.67 $ 11.16 $ 10.51 $10.16 $10.00
Income from investment operations:
Net investment income 0.16 0.21 0.23 0.20 0.17 0.01
Net realized and unrealized gains (losses) on
investments 2.37 2.76 (0.17) 1.24 0.45 0.62
------- ------- ------- ------- ------ ------
Total from investment operations 2.53 2.97 0.06 1.44 0.62 0.63
------- ------- ------- ------- ------ ------
Less distributions:
From net investment income (0.16) (0.22) (0.21) (0.20) (0.17) (0.03)
From realized gains (1.41) (0.26) (0.30) (0.59) (0.10) (1.28)
In excess of realized gains -- -- (0.01) -- -- --
Tax return of capital -- -- (0.03) -- -- --
Total distributions (1.57) (0.48) (0.55) (0.79) (0.27) (1.31)
------- ------- ------- ------- ------ ------
Net change in net asset value 0.96 2.49 (0.49) 0.65 0.35 (0.68)
------- ------- ------- ------- ------ ------
Net asset value, end of period $ 14.12 $ 13.16 $ 10.67 $ 11.16 $10.51 $ 9.32
======= ======= ======= ======= ====== ======
Total Return (c) 19.24% 28.04% 0.55% 13.79% 8.19% 6.10%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $59,027 $49,872 $42,274 $29,467 $4,338 $ 183
Ratios to average net assets:
Expenses 0.91% 0.84% 0.84% 0.83% 0.83%(a) 1.80%(a)
Net investment income 1.17% 1.73% 2.07% 1.84% 2.49%(a) 0.25%(a)
Portfolio turnover rate 43.21% 26.80% 28.04% 42.31% 16.28%(a) 43.21%(a)
Average commission rate $ 0.04 $ 0.04
<PAGE>
<CAPTION>
Class I Shares
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.16 $ 10.67 $ 11.16 $ 10.51 $ 9.86
Income from investment operations:
Net investment income 0.18 0.21 0.23 0.20 0.22
Net realized and unrealized gains (losses) on
investments 2.36 2.76 (0.17) 1.24 0.75
-------- -------- -------- -------- --------
Total from investment operations 2.54 2.97 0.06 1.44 0.97
-------- -------- -------- -------- --------
Less distributions:
From net investment income (0.17) (0.22) (0.21) (0.20) (0.22)
From realized gains (1.41) (0.26) (0.30) (0.59) (0.10)
In excess of realized gains -- -- (0.01) -- --
Tax return of capital -- -- (0.03) -- --
-------- -------- -------- -------- --------
Total distributions (1.58) (0.48) (0.55) (0.79) (0.32)
-------- -------- -------- -------- --------
Net change in net asset value 0.96 2.49 (0.49) 0.65 0.65
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.12 $ 13.16 $ 10.67 $ 11.16 $ 10.51
======== ======== ======== ======== ========
Total Return (c) 19.35% 28.04% 0.55% 13.79% 9.87%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $733,632 $687,295 $529,097 $400,168 $283,007
Ratios to average net assets:
Expenses 0.80% 0.84% 0.84% 0.83% 0.83%
Net investment income 1.28% 1.73% 2.07% 1.84% 2.20%
Portfolio turnover rate 43.21% 26.80% 28.04% 42.31% 16.28%
Average commission rate $ 0.04
<FN>
- ---------
(1) For the period September 23, 1996 (initial offering date of Class B
shares) through December 31, 1996.
(2) For the period May 1, 1992 (initial offering date of Class A shares)
through December 31, 1992.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
184
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Equity Index Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------------- --------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
` 1996 1995 1994 1993 1992(2) 1996(1)
------ ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.15 $10.65 $11.15 $10.52 $10.00 $10.00
Income from investment operations:
Net investment income 0.30 0.30 0.31 0.28 0.12 0.05
Net realized and unrealized gains (losses) on
investments 2.85 3.65 (0.20) 0.75 0.52 0.76
------- ------ ------ ------ ------ ------
Total from investment operations 3.15 3.95 0.11 1.03 0.64 0.81
------- ------ ------ ------ ------ ------
Less distributions:
From net investment income (0.29) (0.31) (0.30) (0.27) (0.12) (0.06)
From realized gains (0.26) (0.14) (0.23) (0.13) -- (0.25)
In excess of realized gains -- (0.00) (0.08) -- -- --
------- ------ ------ ------ ------ ------
Total distributions (0.55) (0.45) (0.61) (0.40) (0.12) (0.31)
------- ------ ------ ------ ------ ------
Net change in net asset value 2.60 3.50 (0.50) 0.63 0.52 0.50
------- ------ ------ ------ ------ ------
Net asset value, end of period $ 16.75 $14.15 $10.65 $11.15 $10.52 $10.50
======= ====== ====== ====== ====== ======
Total Return (c) 22.49% 37.35% 1.02% 9.77% 13.61%(a) 8.09%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $35,336 $4,007 $1,197 $ 960 $ 151 $ 113
Ratios to average net assets:
Expenses 0.37% 0.15% 0.17% 0.20% 0.22%(a) 1.29%(a)
Net investment income 1.89% 2.39% 2.71% 2.59% 2.71%(a) 0.57%(a)
Portfolio turnover rate 12.25% 10.66% 24.15% 16.01% 0.50%(b) 12.25%(a)
Average commission rate $ 0.03 $ 0.03
<PAGE>
<CAPTION>
Class I Shares
--------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992(2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.15 $ 10.65 $ 11.15 $ 10.52 $ 10.00
Income from investment operations:
Net investment income 0.31 0.30 0.31 0.28 0.12
Net realized and unrealized gains (losses) on
investments 2.85 3.65 (0.20) 0.75 0.52
-------- -------- -------- -------- --------
Total from investment operations 3.16 3.95 0.11 1.03 0.64
-------- -------- -------- -------- --------
Less distributions:
From net investment income (0.30) (0.31) (0.30) (0.27) (0.12)
From realized gains (0.26) (0.14) (0.23) (0.13) --
In excess of realized gains -- (0.00) (0.08) -- --
-------- -------- -------- -------- --------
Total distributions (0.56) (0.45) (0.61) (0.40) (0.12)
-------- -------- -------- -------- --------
Net change in net asset value 2.60 3.50 (0.50) 0.63 0.52
-------- -------- -------- -------- --------
Net asset value, end of period $ 16.75 $ 14.15 $ 10.65 $ 11.15 $ 10.52
======== ======== ======== ======== ========
Total Return (c) 22.58% 37.35% 1.02% 9.77% 13.61%(a)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $834,368 $524,195 $339,611 $324,369 $241,907
Ratios to average net assets:
Expenses 0.21% 0.15% 0.17% 0.20% 0.22%(a)
Net investment income 2.05% 2.39% 2.71% 2.59% 2.71%(a)
Portfolio turnover rate 12.25% 10.66% 24.15% 16.01% 0.50%(b)
Average commission rate $ 0.03
<FN>
- ---------
(1) For the period September 23, 1996 (initial offering date of Class B
shares) through December 31, 1996.
(2) For the period July 10, 1992 (inception) through December 31, 1996.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
185
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus International Equity Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class I Shares
----------------------- ---------------- --------------------------------------
Year Ended Year Ended Period Ended Year Ended Year Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1996(1) 1996 1995 1994(2)
---------- ---------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.05 $10.01 $10.84 $ 11.05 $ 10.01 $ 10.00
Income from investment operations:
Net investment income 0.10 0.10 0.04 0.11 0.10 0.01
Net realized and unrealized gains
(losses) on investments 0.72 1.05 0.24 0.74 1.05 --
Total from investment operations 0.82 1.15 0.28 0.85 1.15 0.01
------- ------ ------ -------- -------- -------
Less distributions:
From net investment income (0.10) (0.11) (0.04) (0.11) (0.11) --
------- ------ ------ -------- -------- -------
Total distributions (0.10) (0.11) (0.04) (0.11) (0.11) --
Net change in net asset value 0.72 1.04 0.24 0.74 1.04 0.01
------- ------ ------ -------- -------- -------
Net asset value, end of period $ 11.77 $11.05 $11.08 $ 11.79 $ 11.05 $ 10.01
======= ====== ====== ======== ======== =======
Total Return (c) 7.50% 11.47% 2.62%(b) 7.79% 11.47% 1.26%(a)
Ratios/Supplemental Data
Net assets, end of period (in
000's) $10,836 $ 988 $1,131 $389,997 $106,300 $36,545
Ratios to average net assets:
Expenses 1.23% 1.16% 2.05%(a) 1.10% 1.16% 1.15%(a)
Net investment income 0.88% 1.43% 0.75%(a) 1.01% 1.43% 1.18%(a)
Expenses without fee waivers/
reimbursed expenses 1.23% 1.24% 2.05%(a) 1.10% 1.24% 1.92%(a)
Net investment income without fee
waivers/reimbursed expenses 0.88% 1.35% 0.75%(a) 1.01% 1.35% 0.41%(a)
Portfolio turnover rate 6.37% 2.09% 6.37%(a) 6.37% 2.09% 0.30%(b)
Average commission rate $ 0.07 $ 0.07 $ 0.07
<FN>
- ---------
(1) For the period August 24, 1996 (initial offering date of Class B shares)
through December 31, 1996.
(2) For the period December 3, 1994 (commencement of operations) through
December 31, 1994.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
186
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Intermediate Bond Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------------- --------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992(2) 1996(1)
------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.37 $ 9.21 $ 10.41 $ 10.28 $10.32 $10.00
Income (loss) from investment operations:
Net investment income 0.64 0.59 0.56 0.59 0.49 0.15
Net realized and unrealized gains (losses) on
investments (0.07) 1.16 (1.20) 0.26 0.13 0.20
Total from investment operations 0.57 1.75 (0.64) 0.85 0.62 0.35
------- ------- ------- ------- ------ ------
Less distributions:
From net investment income (0.65) (0.59) (0.55) (0.59) (0.49) (0.15)
From realized gains -- -- (0.01) (0.13) (0.17) --
------- ------- ------- ------- ------ ------
Total distributions (0.65) (0.59) (0.56) (0.72) (0.66) (0.15)
------- ------- ------- ------- ------ ------
Net change in net asset value (0.08) 1.16 (1.20) 0.13 (0.04) 0.20
------- ------- ------- ------- ------ ------
Net asset value, end of period $ 10.29 $ 10.37 $ 9.21 $ 10.41 $10.28 $10.20
======= ======= ======= ======= ====== ======
Total Return (c) 5.65% 19.48% (6.31)% 8.41% 11.17%(a) 3.50%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $18,324 $11,654 $11,983 $16,491 $4,509 $ 122
Ratios to average net assets:
Expenses 0.79% 0.73% 0.74% 0.74% 0.75%(a) 1.60%(a)
Net investment income 6.17% 5.98% 5.73% 5.44% 7.04%(a) 1.52%(a)
Portfolio turnover rate 31.62% 36.47% 54.60% 92.80% 56.30%(a) 31.62%(a)
<PAGE>
<CAPTION>
Class I Shares
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.37 $ 9.21 $ 10.41 $ 10.28 $ 10.55
Income (loss) from investment operations:
Net investment income 0.64 0.59 0.56 0.59 0.71
Net realized and unrealized gains (losses) on
investments (0.07) 1.16 (1.20) 0.26 (0.10)
-------- -------- -------- -------- --------
Total from investment operations 0.57 1.75 (0.64) 0.85 0.61
-------- -------- -------- -------- --------
Less distributions:
From net investment income (0.65) (0.59) (0.55) (0.59) (0.71)
From realized gains -- -- (0.01) (0.13) (0.17)
-------- -------- -------- -------- --------
Total distributions (0.65) (0.59) (0.56) (0.72) (0.88)
-------- -------- -------- -------- --------
Net change in net asset value (0.08) 1.16 (1.20) 0.13 (0.27)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.29 $ 10.37 $ 9.21 $ 10.41 $ 10.28
======== ======== ======== ======== ========
Total Return (c) 5.78% 19.48% (6.31)% 8.41% 6.00%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $395,105 $393,656 $381,036 $413,299 $215,923
Ratios to average net assets:
Expenses 0.67% 0.73% 0.74% 0.74% 0.74%
Net investment income 6.29% 5.98% 5.73% 5.44% 6.91%
Portfolio turnover rate 31.62% 36.47% 54.60% 92.80% 56.30%
<FN>
- ---------
(1) For the period September 23, 1996 (initial offering date of Class B
shares) through December 31, 1996.
(2) For the period May 1, 1992 (initial offering date of Class A shares)
through December 31, 1992.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
187
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Bond Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------------- --------------
Year Year Year Year Period Period
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992(2) 1996(1)
------- ------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.45 $ 9.01 $ 10.32 $ 10.25 $10.23 $10.00
Income (loss) from investment operations:
Net investment income 0.67 0.63 0.61 0.76 0.56 0.21
Net realized and unrealized gains (losses) on
investments (0.18) 1.45 (1.31) 0.38 0.15 0.27
------- ------- ------- ------- ------ ------
Total from investment operations 0.49 2.08 (0.70) 1.14 0.71 0.48
------- ------- ------- ------- ------ ------
Less distributions:
From net investment income (0.67) (0.64) (0.59) (0.76) (0.56) (0.21)
From realized gains -- -- (0.02) (0.31) (0.13) --
------- ------- ------- ------- ------ ------
Total distributions (0.67) (0.64) (0.61) (1.07) (0.69) (0.21)
------- ------- ------- ------- ------ ------
Net change in net asset value (0.18) 1.44 (1.31) 0.07 0.02 0.27
------- ------- ------- ------- ------ ------
Net asset value, end of period $ 10.27 $ 10.45 $ 9.01 $ 10.32 $10.25 $10.27
======= ======= ======= ======= ====== ======
Total Return (c) 4.98% 23.75% (6.99)% 11.39% 9.59%(a) 4.81%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $46,977 $31,714 $32,053 $45,410 $9,392 $ 280
Ratios to average net assets:
Expenses 0.78% 0.74% 0.74% 0.73% 0.74%(a) 1.59%(a)
Net investment income 6.59% 6.39% 6.36% 7.20% 8.12%(a) 3.01%(a)
Portfolio turnover rate 24.92% 41.91% 75.67% 111.52% 90.45%(a) 24.92%(a)
<PAGE>
<CAPTION>
Class I Shares
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.45 $ 9.01 $ 10.32 $ 10.25 $ 10.55
Income (loss) from investment operations:
Net investment income 0.68 0.63 0.61 0.76 0.83
Net realized and unrealized gains (losses) on
investments (0.18) 1.45 (1.31) 0.38 (0.17)
-------- -------- -------- -------- --------
Total from investment operations 0.50 2.08 (0.70) 1.14 0.66
-------- -------- -------- -------- --------
Less distributions:
From net investment income (0.68) (0.64) (0.59) (0.76) (0.83)
From realized gains -- -- (0.02) (0.31) (0.13)
-------- -------- -------- -------- --------
Total distributions (0.68) (0.64) (0.61) (1.07) (0.96)
-------- -------- -------- -------- --------
Net change in net asset value (0.18) 1.44 (1.31) 0.07 (0.30)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.27 $ 10.45 $ 9.01 $ 10.32 $ 10.25
======== ======== ======== ======== ========
Total Return (c) 5.08% 23.75% (6.99)% 11.39% 6.56%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $757,627 $485,851 $395,116 $455,786 $312,366
Ratios to average net assets:
Expenses 0.66% 0.74% 0.74% 0.73% 0.73%
Net investment income 6.71% 6.39% 6.36% 7.20% 8.08%
Portfolio turnover rate 24.92% 41.91% 75.67% 111.52% 90.45%
<FN>
- ---------
(1) For the period August 24, 1996 (initial offering date of Class B shares)
through December 31, 1996.
(2) For the period May 1, 1992 (initial offering date of Class A shares)
through December 31, 1992.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
See Notes to Financial Statements.
188
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Short Bond Fund
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class I Shares
-------------------------------------- -------------- --------------------------------------
Year Ended Year Ended Period Ended Period Ended Year Ended Year Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994(2) 1996(1) 1996 1995 1994(2)
---------- ---------- ------------ ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.23 $ 9.84 $10.00 $ 10.00 $ 10.23 $ 9.84 $ 10.00
Income from investment
operations:
Net investment income 0.55 0.58 0.17 0.12 0.55 0.58 0.17
Net realized and
unrealized gains
(losses) on investments (0.10) 0.39 (0.16) 0.04 (0.10) 0.39 (0.16)
------- ------ ------ ------- -------- -------- -------
Total from investment
operations 0.45 0.97 0.01 0.16 0.45 0.97 0.01
------- ------ ------ ------- -------- -------- -------
Less distributions:
From net investment income (0.55) (0.58) (0.17) (0.12) (0.55) (0.58) (0.17)
In excess of net
investment income -- (0.00) -- -- -- (0.00) --
From realized gains (0.02) -- -- (0.02) (0.02) -- --
------- ------ ------ ------- -------- -------- -------
Total distributions (0.57) (0.58) (0.17) (0.14) (0.57) (0.58) (0.17)
------- ------ ------ ------- -------- -------- -------
Net change in net asset
value (0.12) 0.39 (0.16) 0.02 (0.12) 0.39 (0.16)
------- ------ ------ ------- -------- -------- -------
Net asset value, end of
period $ 10.11 $10.23 $ 9.84 $ 10.02 $ 10.11 $ 10.23 $ 9.84
======= ====== ====== ======= ======== ======== =======
Total Return (c) 4.45% 10.07% 0.21%(a) 2.04%(b) 4.56% 10.07% 0.21%(a)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $ 1,033 $ 766 $ 308 $ 56 $171,427 $162,571 $63,931
Ratios to average net
assets:
Expenses 0.80% 0.75% 0.75%(a) 1.57%(a) 0.70% 0.75% 0.75%(a)
Net investment income 5.35% 5.74% 5.92%(a) 1.47%(a) 5.45% 5.74% 5.92%(a)
Expenses without fee
waivers/ reimbursed
expenses 0.82% 0.81% 0.93%(a) 1.59%(a) 0.72% 0.81% 0.93%(a)
Net investment income
without fee
waivers/reimbursed
expenses 5.33% 5.68% 5.74%(a) 1.45%(a) 5.43% 5.68% 5.74%(a)
Portfolio turnover rate 109.58% 30.94% 10.20%(b) 109.58%(a) 109.58% 30.94% 10.20%(b)
<FN>
- ---------
(1) For the period September 23, 1996 (initial offering date of Class B
shares) through December 31, 1996.
(2) For the period September 17, 1994 (commencement of operations) through
December 31, 1994.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
189
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Income Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares
----------------------------------------- ----------------------------
Year Period Year Period Year Period Period
Ended Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Jan. 31, Jan. 31, Dec. 31, Dec. 31, Dec. 2,
1996 1995(1) 1995 1994(2) 1996 1995(3) 1994(4)
-------- ------- -------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 8.18 $ 7.68 $ 8.25 $ 8.36 $ 8.18 $ 8.13 $ 8.16
Income (loss) from investment
operations:
Net investment income 0.41 0.44 0.52 0.47 0.45 0.24 0.40
Net realized and unrealized gains
(losses) on investments (0.25) 0.72 (0.57) (0.09) (0.23) 0.27 (0.55)
------- ------- ------ ------- ------- ------- ------
Total from investment operations 0.16 1.16 (0.05) 0.38 0.22 0.51 (0.15)
------- ------- ------ ------- ------- ------- ------
Less distributions:
From net investment income (0.40) (0.44) (0.52) (0.47) (0.45) (0.24) (0.40)
From realized gains (0.10) (0.22) -- (0.02) (0.10) (0.22) --
------- ------- ------ ------- ------- ------- ------
Total distributions (0.50) (0.66) (0.52) (0.49) (0.55) (0.46) (0.40)
------- ------- ------ ------- ------- ------- ------
Net change in net asset value (0.34) 0.50 (0.57) (0.11) (0.33) 0.05 (0.55)
------- ------- ------ ------- ------- ------- ------
Conversion to Class A Shares (5) -- -- -- -- -- -- (7.61)
------- ------- ------ ------- ------- ------- ------
Net asset value, end of period $ 7.84 $ 8.18 $ 7.68 $ 8.25 $ 7.85 $ 8.18 $ --
======= ======= ====== ======= ======= ======= ======
Total Return (c) 2.75% 15.55%(b) (0.45)% 5.16%(a) 2.09% 6.41%(b) (1.82)%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $ 8,798 $ 6,095 $ 69 $ 65 $ 502 $ 259 $ --
Ratios to average net assets:
Expenses 0.84% 0.94%(a) 0.04% 0.00% 1.58% 1.60%(a) 0.00%
Net investment income 5.75% 5.72%(a) 6.70% 5.96%(a) 5.01% 5.00%(a) 6.48%(a)
Expenses without fee waivers/
reimbursed expenses 0.90% 1.15%(a) 2.78% 3.67%(a) 1.67% 1.78%(a) 2.58%(a)
Net investment income without fee
waivers/reimbursed expenses 5.69% 5.51%(a) 3.96% 2.29%(a) 4.92% 4.83%(a) 3.90%(a)
Portfolio turnover rate 103.93% 173.26%(b) 71.65% 26.54%(b) 103.93% 173.26%(b) 71.65%(b)
<PAGE>
<CAPTION>
Class I Shares
--------------------------------------
Year Period Year Period
Ended Ended Ended Ended
Dec. 31, Dec. 31, Jan. 31, Jan. 31,
1996 1995(1) 1995 1994(2)
-------- --------- ------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.18 $ 7.68 $ 8.25 $ 8.36
Income (loss) from investment operations:
Net investment income 0.46 0.47 0.52 0.47
Net realized and unrealized gains (losses) on
investments (0.24) 0.72 (0.57) (0.09)
-------- -------- ------ -------
Total from investment operations 0.22 1.19 (0.05) 0.38
-------- -------- ------ -------
Less distributions:
From net investment income (0.45) (0.47) (0.52) (0.47)
From realized gains (0.10) (0.22) -- (0.02)
-------- -------- ------ -------
Total distributions (0.55) (0.69) (0.52) (0.49)
-------- -------- ------ -------
Net change in net asset value (0.33) 0.50 (0.57) (0.11)
-------- -------- ------ -------
Conversion to Class A Shares (5) -- -- -- --
-------- -------- ------ -------
Net asset value, end of period $ 7.85 $ 8.18 $ 7.68 $ 8.25
======== ======== ====== =======
Total Return (c) 3.14% 15.90%(b) (0.48)% 5.16%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $187,112 $191,930 $7,101 $ 5,128
Ratios to average net assets:
Expenses 0.57% 0.55%(a) 0.04% 0.00%
Net investment income 6.02% 6.34%(a) 6.70% 6.21%(a)
Expenses without fee waivers/ reimbursed expenses 0.66% 0.67%(a) 2.78% 2.64%(a)
Net investment income without fee
waivers/reimbursed expenses 5.93% 6.22%(a) 3.96% 3.57%(a)
Portfolio turnover rate 103.93% 173.26%(b) 71.65% 26.54%(b)
<FN>
- ---------
(1) For the period February 1, 1995 through December 31, 1995. Effective
February 1, 1995, the Fund changed its fiscal year end from January 31 to
December 31.
(2) For the period March 5, 1993 (commencement of operations) through January
31, 1994.
(3) For the period May 31, 1995 (re-offering date of Class B Shares) through
December 31, 1995. Effective February 1, 1995, the Fund changed its
fiscal year end from January 31, to December 31.
(4) For the period February 8, 1994 (initial offering date of Class B Shares)
through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of Class B Shares and such shares converted to Class A shares.
(5) On December 2, 1994, the Fund terminated the offering of Class B Shares
under the then-current sales load schedule and such shares converted to
Class A Shares.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
190
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus International Bond Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class I Shares
------------------------- ------------------------- -------------------------
Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995(1) 1996 1995(1) 1996 1995(1)
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $10.75 $10.00 $10.81 $ 10.00 $ 10.81 $ 10.00
Income from investment operations:
Net investment income 0.54 0.98 0.47 0.91 0.59 1.02
Net realized and unrealized gains
(losses) on investments 0.04 1.10 0.06 1.16 0.04 1.16
------ ------ ------ ------- ------- -------
Total from investment operations 0.58 2.08 0.53 2.07 0.63 2.18
------ ------ ------ ------- ------- -------
Less distributions:
From net investment income (0.54) (0.98) (0.47) (0.91) (0.59) (1.02)
In excess of net investment income -- (0.01) -- (0.01) -- (0.01)
From realized gains -- (0.34) -- (0.34) -- (0.34)
------ ------ ------ ------- ------- -------
Total distributions (0.54) (1.33) (0.47) (1.26) (0.59) (1.37)
------ ------ ------ ------- ------- -------
Net change in net asset value 0.04 0.75 0.06 0.81 0.04 0.81
------ ------ ------ ------- ------- -------
Net asset value, end of period $10.79 $10.75 $10.87 $ 10.81 $ 10.85 $ 10.81
====== ====== ====== ======= ======= =======
Total Return (C) 5.62% 21.10%(b) 5.01% 20.90%(b) 5.99% 22.13%(b)
Ratios/Supplemental Data
Net assets, end of period (in
000's) $2,006 $ 487 $ 46 $ 4 $53,845 $14,504
Ratios to average net assets:
Expenses 1.15% 1.33%(a) 1.90% 2.03%(a) 0.90% 0.95%(a)
Net investment income 4.74% 4.91%(a) 3.99% 4.39%(a) 4.99% 5.71%(a)
Expenses without fee
waivers/reimbursed expenses 1.94% 3.65%(a) 4.08% 8.69%(a) 1.40% 1.93%(a)
Net investment income without fee
waivers/reimbursed expenses 3.95% 2.59%(a) 1.81% (2.28)%(a) 4.49% 4.73%(a)
Portfolio turnover rate 97.82% 48.03%(b) 97.82% 48.03%(b) 97.82% 48.03%(b)
<FN>
- ---------
(1) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
191
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------------------------------
Year Ended Period Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, Dec. 31, Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1996 1995(1) 1995 1994 1993 1992
---------- ----------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.64 $12.06 $12.13 $ 13.25 $ 12.49 $12.10
Income from investment operations:
Net investment income 0.59 0.48 0.60 0.63 0.70 0.76
Net realized and unrealized gains
(losses) on investments (0.18) 0.82 (0.07) (0.15) 1.01 0.47
------- ------ ------ ------- ------- ------
Total from investment operations 0.41 1.30 0.53 0.48 1.71 1.23
------- ------ ------ ------- ------- ------
Less distributions:
From net investment income (0.58) (0.48) (0.60) (0.63) (0.70) (0.76)
From realized gains (0.01) (0.24) -- (0.96) (0.25) (0.08)
In excess of realized gains (0.10) -- -- (0.01) -- --
Total distributions (0.69) (0.72) (0.60) (1.60) (0.95) (0.84)
------- ------ ------ ------- ------- ------
Net change in net asset value (0.28) 0.58 (0.07) (1.12) 0.76 0.39
------- ------ ------ ------- ------- ------
Net asset value, end of period $ 12.36 $12.64 $12.06 $ 12.13 $ 13.25 $12.49
======= ====== ====== ======= ======= ======
Total Return (c) 3.36% 10.95%(b) 4.45% 3.70% 14.37% 10.50%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $29,352 $7,426 $6,840 $ 9,234 $11,290 $6,591
Ratios to average net assets:
Expenses 0.83% 0.89%(a) 1.98% 0.00% 0.00% 0.00%
Net investment income 4.54% 4.57%(a) 5.09% 4.85% 5.49% 5.99%
Expenses without fee waivers/
reimbursed expenses 0.89% 1.04%(a) 3.89% 1.44% 1.59% 2.75%
Net investment income without fee
waivers/reimbursed expenses 4.48% 4.43%(a) 3.18% 3.41% 3.90% 3.24%
Portfolio turnover rate 64.51% 69.31%(b) 60.78% 175.06% 88.53% 66.28%
<FN>
- ---------
(1) For the period March 1, 1995 through December 31, 1995. Effective March
1, 1995, the Fund changed its fiscal year end from February 28 to
December 31.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
192
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Municipal Bond Fund -- (Continued)
<TABLE>
<CAPTION>
Class B Shares Class I Shares
------------------------------------------------------- ---------------------------------------
Year Ended Period Ended Period Ended Period Ended Year Ended Period Ended Period Ended
Dec. 31, Dec. 31, Dec. 2, Feb. 28, Dec. 31, Dec. 31, Feb. 28,
1996 1995(2) 1994(3) 1994(4) 1996 1995(1) 1995(5)
---------- ----------- ------------ ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $12.65 $12.17 $ 12.14 $ 12.37 $ 12.63 $ 12.06 $ 12.06
Income (loss) from
investment
operations:
Net investment income 0.52 0.34 0.41 0.03 0.65 0.52 0.05
Net realized and
unrealized gains
(losses) on investments (0.21) 0.72 (0.70) (0.23) (0.20) 0.81 --
------ ------ ------- ------- -------- -------- --------
Total from investment
operations 0.31 1.06 (0.29) (0.20) 0.45 1.33 0.05
------ ------ ------- ------- -------- -------- --------
Less distributions:
From net investment income (0.49) (0.34) (0.41) (0.03) (0.61) (0.52) (0.05)
From realized gains (0.01) (0.24) -- -- (0.01) (0.24) --
In excess of realized
gains (0.10) -- -- -- (0.10) -- --
Total distributions (0.60) (0.58) (0.41) (0.03) (0.72) (0.76) (0.05)
------ ------ ------- ------- -------- -------- --------
Net change in net asset
value (0.29) 0.48 (0.70) (0.23) (0.27) 0.57 --
------ ------ ------- ------- -------- -------- --------
Conversion to Class A
Shares (6) -- -- (11.44)(6) -- -- -- --
------ ------ ------- ------- -------- -------- --------
Net asset value, end of
period $12.36 $12.65 $ -- $ 12.14 $ 12.36 $ 12.63 $ 12.06
====== ====== ======= ======= ======== ======== ========
Total Return (c) 2.56% 8.81%(b) (4.30)%(b) (1.64)%(b) 3.76% 11.20%(b)
0.39%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $ 672 $ 238 $ -- $ 2 $338,104 $240,160 $220,143
Ratios to average net
assets:
Expenses 1.58% 1.66%(a) 3.18%(a) 0.50%(a) 0.58% 0.54%(a) 0.65%(a)
Net investment income 3.79% 3.61%(a) 4.51%(a) 4.10%(a) 4.79% 4.95%(a) 5.45%(a)
Expenses without fee
waivers/ reimbursed
expenses 1.70% 2.04%(a) 5.85%(a) 2.91%(a) 0.68% 0.67%(a) 0.79%(a)
Net investment income
without fee
waivers/reimbursed
expenses 3.67% 3.23%(a) 1.84%(a) 1.69%(a) 4.69% 4.81%(a) 5.31%(a)
Portfolio turnover rate 64.51% 69.31%(b) 60.78%(b) 175.06%(b) 64.51% 69.31%(b) 60.78%(b)
<FN>
- ---------
(1) For the period March 1, 1995 through December 31, 1995. Effective March
1, 1995, the Fund changed its fiscal year end from February 28 to
December 31.
(2) For the period April 4, 1995 (re-offering date of Class B Shares) through
December 31, 1995. Effective March 1, 1995, the Fund changed its fiscal
year end from February 28 to December 31.
(3) For the period March 1, 1994 through December 2, 1994. On December 2,
1994, the Fund terminated its offering of Class B Shares and such shares
converted to Class A Shares.
(4) For the period February 8, 1994 (initial offering date of Class B Shares)
through February 28, 1994.
(5) For the period February 1, 1995 (initial offering date of Class I Shares)
through February 28, 1995.
(6) On December 2, 1994, the Fund terminated its offering of Class B Shares
under the then-current sales load schedule and such shares converted to
Class A Shares.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges.
</TABLE>
See Notes to Financial Statements.
193
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------------------
Year Period Year Year Year Year
Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1996 1995(1) 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.25 $ 11.79 $ 12.18 $ 12.79 $ 12.25 $ 11.95
Income (loss) from investment
operations:
Net investment income 0.53 0.44 0.55 0.61 0.64 0.76
Net realized and unrealized gains
(losses) on investments (0.09) 0.56 (0.36) 0.01 0.68 0.37
------- ------- ------- ------- ------- -------
Total from investment operations 0.44 1.00 0.19 0.62 1.32 1.13
------- ------- ------- ------- ------- -------
Less distributions:
From net investment income (0.51) (0.44) (0.55) (0.61) (0.64) (0.76)
From realized gains (0.08) (0.10) (0.03) (0.62) (0.14) (0.07)
------- ------- ------- ------- ------- -------
Total distributions (0.59) (0.54) (0.58) (1.23) (0.78) (0.83)
------- ------- ------- ------- ------- -------
Net change in net asset value (0.15) 0.46 (0.39) (0.61) 0.54 0.30
------- ------- ------- ------- ------- -------
Conversion to Class A shares (3) -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 12.10 $ 12.25 $ 11.79 $ 12.18 $ 12.79 $ 12.25
======= ======= ======= ======= ======= =======
Total Return (c) 3.69% 8.58%(b) 1.64% 4.94% 11.26% 9.78%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $19,049 $17,777 $17,243 $28,826 $27,885 $18,310
Ratios to average net assets:
Expenses 0.83% 0.83%(a) 0.29% 0.06% -- --
Net investment income 4.37% 4.30%(a) 4.73% 4.78% 5.16% 6.15%
Expenses without fee waivers/
reimbursed expenses 0.88% 0.97%(a) 1.38% 1.27% 1.31% 1.72%
Net investment income without fee
waivers/reimbursed expenses 4.32% 4.16%(a) 3.64% 3.57% 3.85% 4.43%
Portfolio turnover rate 52.95% 44.75%(b) 128.02% 167.95% 63.67% 86.91%
<PAGE>
<CAPTION>
Class B Shares
-------------------------------------------------------
Year Period Period Period Period
Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Feb. 28, Dec. 2, Feb. 28,
1996 1995(1) 1995(2) 1994(3) 1994(4)
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.25 $ 11.80 $ 11.57 $ 12.18 $ 12.32
Income (loss) from investment
operations:
Net investment income 0.44 0.37 0.04 0.37 0.03
Net realized and unrealized gains
(losses) on investments (0.09) 0.55 0.23 (0.72) (0.14)
------ ------- ------- ------- -------
Total from investment operations 0.35 0.92 0.27 (0.35) (0.11)
------ ------- ------- ------- -------
Less distributions:
From net investment income (0.42) (0.37) (0.04) (0.37) (0.03)
From realized gains (0.08) (0.10) -- (0.03) --
------ ------- ------- ------- -------
Total distributions (0.50) (0.47) (0.04) (0.40) (0.03)
------ ------- ------- ------- -------
Net change in net asset value (0.15) 0.45 0.23 (0.75) (0.14)
------ ------- ------- ------- -------
Conversion to Class A shares (3) -- -- -- (11.43) --
------ ------- ------- ------- -------
Net asset value, end of period $12.10 $ 12.25 $ 11.80 $ -- $ 12.18
====== ======= ======= ======= =======
Total Return (c) 2.90% 7.75%(b) 2.30%(b) (2.98)%(b) (0.93)%(b)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $ 611 $ 341 $ 6 $ -- $ 12
Ratios to average net assets:
Expenses 1.58% 1.71%(a) 1.36%(a) 0.76%(a) 0.75%(a)
Net investment income 3.62% 3.36%(a) 3.72%(a) 4.03%(a) 1.68%(a)
Expenses without fee waivers/
reimbursed expenses 1.68% 2.01%(a) 1.64%(a) 2.00%(a) 3.00%(a)
Net investment income without fee
waivers/reimbursed expenses 3.52% 3.06%(a) 3.44%(a) 2.79%(a) (0.57)%(a)
Portfolio turnover rate 52.95% 44.75%(b) 128.02%(b) 128.02%(b) 167.95%(b)
<FN>
(1) For the period March 1, 1995 through December 31, 1995. Effective March
1, 1995, the Fund changed its fiscal year end from February 28 to
December 31.
(2) For the period January 30, 1995 (re-offering date of Class B Shares)
through February 28, 1995.
(3) For the period March 1, 1994 through December 2, 1994. On December 2,
1994, the Fund terminated its offering of Class B Shares and such shares
converted to Class A Shares.
(4) For the period February 8, 1994 (initial offering date of Class B Shares)
through February 28, 1994.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sale load or
redemption charges.
See Notes to Financial Statements.
</TABLE>
194
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Intermediate Municipal Bond Fund -- (Continued)
<TABLE>
<CAPTION>
Class I Shares
--------------------------------------
Year Ended Period Ended Year Ended
Dec. 31, Dec. 31, Feb. 28,
1996 1995(1) 1995(2)
---------- ------------ ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.25 $ 11.80 $ 11.57
Income from investment operations:
Net investment income 0.56 0.47 0.04
Net realized and unrealized gains (losses) on
investments (0.08) 0.55 0.23
-------- -------- --------
Total from investment operations 0.48 1.02 0.27
-------- -------- --------
Less distributions:
From net investment income (0.54) (0.47) (0.04)
-------- -------- --------
From realized gains (0.08) (0.10) --
-------- -------- --------
Total distributions (0.62) (0.57) (0.04)
-------- -------- --------
Net change in net asset value (0.14) 0.45 0.23
-------- -------- --------
Net asset value, end of period $ 12.11 $ 12.25 $ 11.80
======== ======== ========
Total Return (c) 4.05% 8.76%(b) 2.37%(b)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $373,970 $373,753 $365,801
Ratios to average net assets:
Expenses 0.58% 0.55%(a) 0.50%(a)
Net investment income 4.62% 4.78%(a) 4.79%(a)
Expenses without fee waivers/ reimbursed expenses 0.64% 0.68%(a) 0.60%(a)
Net investment income without fee
waivers/reimbursed expenses 4.56% 4.65%(a) 4.69%(a)
Portfolio turnover rate 52.95% 44.75%(b) 128.02%(b)
<FN>
(1) For the period March 1, 1995 through December 31, 1995. Effective March
1, 1995, the Fund changed its fiscal year end from February 28 to
December 31.
(2) For the period February 1, 1995 (initial offering date of Class I Shares)
through February 28, 1995.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sale load or
redemption charges.
See Notes to Financial Statements.
</TABLE>
195
<PAGE>
Pegasus Funds
FINANCIAL HIGHLIGHTS
Pegasus Michigan Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class I Shares
-----------------------------------------------------------------------------------------------------
Year Year Year Period Period Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993(1) 1996(2) 1996 1995 1994 1993(1)
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 10.60 $ 9.54 $ 10.60 $ 10.00 $10.00 $ 10.60 $ 9.54 $ 10.60 $ 10.00
Income (loss) from
investment
operations:
Net investment
income 0.48 0.48 0.50 0.44 0.07 0.49 0.48 0.50 0.44
Net realized and
unrealized gains
(losses) on
investments (0.14) 1.06 (1.06) 0.59 0.17 (0.14) 1.06 (1.06) 0.59
------- ------- ------- ------- ------ ------- ------- ------- -------
Total from
investment
operations 0.34 1.54 (0.56) 1.03 0.24 0.35 1.54 (0.56) 1.03
------- ------- ------- ------- ------ ------- ------- ------- -------
Less distributions:
From net investment
income (0.46) (0.48) (0.50) (0.43) (0.06) (0.47) (0.48) (0.50) (0.43)
------- ------- ------- ------- ------ ------- ------- ------- -------
Total
distributions (0.46) (0.48) (0.50) (0.43) (0.06) (0.47) (0.48) (0.50) (0.43)
------- ------- ------- ------- ------ ------- ------- ------- -------
Net change in net
asset value (0.12) 1.06 (1.06) 0.60 0.18 (0.12) 1.06 (1.06) 0.60
------- ------- ------- ------- ------ ------- ------- ------- -------
Net asset value,
end of period $ 10.48 $ 10.60 $ 9.54 $ 10.60 $10.18 $ 10.48 $ 10.60 $ 9.54 $ 10.60
======= ======= ======= ======= ====== ======= ======= ======= =======
Total Return (c) 3.32% 16.49% (5.42)% 11.50%(a) 2.45%(b) 3.44% 16.49% (5.42)% 11.50%(a)
Ratios/Supplemental
Data
Net assets, end of
period
(in 000's) $18,575 $21,034 $21,106 $26,342 $ 110 $41,909 $32,419 $24,157 $15,772
Ratios to average
net assets:
Expenses 0.88% 0.79% 0.53% 0.19%(a) 1.69%(a) 0.77% 0.79% 0.53% 0.19%(a)
Net investment
income 4.57% 4.71% 5.01% 5.12%(a) 2.01%(a) 4.68% 4.71% 5.01% 5.12%(a)
Expenses without
fee waivers/
reimbursed
expenses 0.96% 1.04% 1.05% 1.21%(a) 1.77%(a) 0.85% 1.04% 1.05% 1.21%(a)
Net investment
income without
fee
waivers/reimbursed
expenses 4.49% 4.46% 4.49% 4.10%(a) 1.93%(a) 4.60% 4.46% 4.49% 4.10%(a)
Portfolio turnover
rate 24.49% 26.97% 25.93% 41.70%(b) 24.49%(a) 24.49% 26.97% 25.93% 41.70%(b)
<FN>
(1) For the period February 1, 1993 (commencement of operations) through
December 31, 1993.
(2) For the period September 23, 1996 (initial offering date of Class B
shares) through December 31, 1996.
(a) Annualized.
(b) Not annualized.
(c) Total returns as presented do not include any applicable sales load or
redemption charges or redemption charges.
See Notes to Financial Statements.
</TABLE>
196
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
the Pegasus Funds:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the PEGASUS FUNDS (comprising, as
indicated in Note 1, the Managed Assets Conservative, Managed Assets
Balanced, Managed Assets Growth, Equity Income, Growth, Mid-Cap Opportunity,
Small Cap Opportunity, Intrinsic Value, Growth and Value, Equity Index,
International Equity, Intermediate Bond, Bond, Short Bond, Income,
International Bond, Municipal Bond, Intermediate Municipal Bond and the
Michigan Municipal Bond Funds), as of December 31, 1996, and the related
statements of operations, changes in net assets and financial highlights for
the year then ended. We have also audited the statements of changes in net
assets for the year ended December 31, 1995, and the financial highlights for
each of the periods from inception (as indicated in Note 1) through December
31, 1995 for the Managed Assets Balanced, Mid-Cap Opportunity, Intrinsic
Value, Growth and Value, Equity Index, International Equity, Intermediate
Bond, Bond, Short Bond and Michigan Municipal Bond Funds (formerly known as
the Equity and Bond Funds of the Woodward Funds). These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The statements of changes in net
assets of the Managed Assets Conservative, Equity Income, Growth, Small Cap
Opportunity, Income, International Bond, Municipal Bond and the Intermediate
Municipal Bond Funds (formerly known as the Asset Allocation, Equity, Bond
and Municipal Bond Funds of the Prairie Funds) for the year ended December
31, 1995, and the financial highlights for each of the periods from inception
(as indicated in Note 1) through December 31, 1995, were audited by other
auditors whose report dated February 23, 1996, expressed an unqualified
opinion on those statements.
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 physical counts and
confirmation of securities owned as of December 31, 1996, by inspection and
correspondence with custodians, banks 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 1996 financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective funds constituting the Pegasus Funds as of
December 31, 1996, the results of their operations, the changes in their net
assets and the financial highlights for the year then ended in conformity
with generally accepted accounting principles. The 1995 financial statements
and financial highlights for the Managed Assets Balanced, Mid-Cap
Opportunity, Intrinsic Value, Growth and Value, Equity Index, International
Equity, Intermediate Bond, Bond, Short Bond and the Michigan Municipal Bond
Funds (formerly known as the Equity and Bond Funds of the Woodward Funds)
present fairly, in all material respects, the changes in their net assets for
the year ended December 31, 1995, and the financial highlights for each of
the periods from inception (as indicated in Note 1) through December 31,
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 24, 1997.
197
<PAGE>
RESULTS OF SPECIAL SHAREHOLDER MEETING (Unaudited)
On July 10, 1996, July 31, 1996, and August 14, 1996 special meetings
of the shareholders of the Pegasus Growth and Value, Mid-Cap Opportunity,
Intrinsic Value, Managed Assets Balanced, International Equity, Equity Index,
Bond, Intermediate Bond, Short Bond, Municipal, and Michigan Municipal Funds
and the Woodward Capital Growth were held to approve the following proposals.
The shareholders approved these proposals with respect to Pegasus
Growth and Value, Mid-Cap Opportunity, Intrinsic Value, Managed Assets
Balanced Funds, International Equity, Equity Index, Bond, Intermediate, Short
Bond, Municipal, and Michigan Municipal Funds and the Woodward Capital Growth
are as follows:
1. To approve a new investment advisory agreement ("New Advisory Agreement")
between each Trust, NBD Bank ("NBD") and First Chicago Investment Management
Company ("FCIMCO")
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,697,375.108 569,461.717 428,342.013
Opportunity 29,002,795.415 239,823.146 189,058.837
Intrinsic Value 14,485,532.163 254,925.088 71,876.526
Capital Growth 8,987,121.528 322,943.598 69,443.120
Balanced 7,876,687.721 16,097.329 9,040.511
International Equity 9,126,519.368 137,907.768 18,593.984
Equity Index 34,417,695.128 63,069.751 14,393.793
Bond Fund 25,307,211.375 318,154.139 328,809.499
Intermediate Bond 22,944,773.308 1,432,426.897 257,485.237
Short Bond 10,433,399.184 10,526.302 90,755.620
Municipal 5,263,616.915 54,710.756 53,915.719
Michigan Municipal 3,104,687.396 51,897.900 141,228.555
</TABLE>
2. To approve a change to the fundamental investment limitations of each Fund
of the Trust with regard to the following:
a) investment in commodities
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 37,714,498.955 895,808.045 832,712.838
Opportunity 28,007,923.975 821,674.891 340,716.532
Intrinsic Value 14,242,959.536 379,208.020 91,019.221
Capital Growth 8,761,346.280 508,381.571 96,114.395
Balanced 7,853,765.509 35,605.998 12,454.054
International Equity 9,008,745.100 241,192.304 33,083.716
Equity Index 33,503,852.290 126,796.386 864,509.996
Bond Fund 24,907,043.588 524,065.731 446,863.694
Intermediate Bond 22,710,386.794 1,493,601.048 362,712.600
Short Bond 10,294,683.875 104,488.063 113,532.168
Municipal 5,003,336.149 208,220.641 85,478.600
Michigan Municipal 2,876,994.005 250,066.886 136,458.960
</TABLE>
b) expanded power to borrow
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 37,808,221.643 850,023.261 784,774.934
Opportunity 28,041,208.887 832,447.816 296,658.695
Intrinsic Value 14,237,759.299 392,511.147 82,916.331
Capital Growth 8,781,777.849 489,751.365 94,313.032
Balanced 7,849,899.720 29,627.946 22,297.895
International Equity 9,007,444.430 248,907.119 26,669.571
Equity Index 33,487,142.647 144,746.540 863,269.485
Bond Fund 24,887,424.769 579,395.271 411,152.973
Intermediate Bond 22,706,601.878 1,549,366.977 310,731.587
Short Bond 10,314,370.301 90,236.598 108,097.207
Municipal 4,957,872.616 227,516.886 111,645.888
Michigan Municipal 2,961,040.035 147,333.619 155,146.197
</TABLE>
198
<PAGE>
c) issuing senior securities
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 37,860,869.332 777,283.057 804,867.449
Opportunity 28,128,015.850 686,609.712 355,689.836
Intrinsic Value 14,273,227.662 326,855.969 113,103.146
Capital Growth 8,799,493.215 463,111.024 103,238.007
Balanced 7,853,795.461 26,094.966 21,935.134
International Equity 9,014,825.615 226,112.025 42,083.480
Equity Index 33,495,858.592 111,208.705 888,091.375
Bond Fund 25,015,352.077 437,271.214 425,349.722
Intermediate Bond 22,704,780.507 1,462,351.333 399,568.602
Short Bond 10,367,475.356 22,453.776 122,774.974
Municipal 5,033,294.958 164,206.258 99,534.174
Michigan Municipal 3,044,629.330 77,656.327 141,234.194
</TABLE>
3. To approve a change to the fundamental investment policies and limitations
of certain Funds of the Trust as follows:
a) to approve a change of the diversification policy of the International
Equity and Municipal Bond Funds from a diversified to a non-diversified
policy
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
International Equity 9,014,021.540 232,693.694 36,305.886
Municipal 5,054,157.328 83,564.036 159,314.026
</TABLE>
c) to approve a change to the fundamental investment limitation concerning
concentration of investments in a particular industry with respect to the
Funds
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,190,362.372 743,968.203 508,689.263
Opportunity 28,257,950.420 658,048.321 254,316.657
Intrinsic Value 14,310,207.453 313,409.003 89,570.321
Capital Growth 8,842,837.920 445,620.866 77,383.460
Balanced 7,861,861.566 18,105.917 21,858.078
International Equity 9,035,260.093 210,111.755 37,649.272
Equity Index 34,319,473.399 133,179.183 42,506.090
Bond Fund 25,012,877.274 436,057.624 429,038.115
Intermediate Bond 22,840,260.522 1,441,641.495 284,798.425
Short Bond 10,366,391.971 54,576.629 91,735.506
Municipal 5,087,970.000 62,993.685 146,071.705
Michigan Municipal 2,991,355.818 103,035.019 169,129.014
</TABLE>
4. To approve a change of the following fundamental policies and limitations
to non-fundamental policies and limitations:
a) limitation prohibiting investing, with respect to 50% of its total
assets, more than 5% of its assets in the securities of any one issuer
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Michigan Municipal 3,053,469.396 69,578.895 140,471.560
</TABLE>
b) limitation on investment in other investment companies
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,066,818.873 825,096.611 551,104.354
Opportunity 28,250,504.833 617,701.973 302,108.592
Intrinsic Value 14,303,918.162 330,470.069 78,798.546
Capital Growth 8,820,530.496 450,430.595 94,881.155
Balanced 7,867,137.459 15,625.134 19,062.968
International Equity 9,033,904.938 215,700.561 33,415.621
Equity Index 34,341,054.125 110,609.104 43,495.443
Bond Fund 25,045,699.159 425,366.192 406,907.662
Intermediate Bond 22,854,609.963 1,420,937.147 291,153.332
Short Bond 10,377,966.417 25,662.718 109,074.971
Municipal 5,084,746.681 94,580.455 117,708.254
Michigan Municipal 3,001,967.456 125,664.845 135,887.550
</TABLE>
199
<PAGE>
c) limitation on illiquid securities
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,025,425.989 844,852.007 572,741.842
Opportunity 28,202,459.565 657,059.546 310,796.287
Intrinsic Value 14,263,943.771 356,029.500 93,213.506
Capital Growth 8,765,508.741 498,507.470 101,826.035
Balanced 7,866,803.714 13,025.930 21,995.917
International Equity 9,030,678.918 218,607.391 33,734.811
Equity Index 34,331,152.906 120,339.654 43,666.112
Bond Fund 24,980,768.023 430,468.509 466,736.481
Intermediate Bond 22,802,881.441 1,453,967.354 309,851.647
Short Bond 10,343,453.187 60,175.948 109,074.971
Municipal 5,100,147.516 103,934.541 92,953.333
Michigan Municipal 3,039,205.823 93,085.312 131,228.716
</TABLE>
d) limitation on purchasing securities on margin
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,030,798.331 851,788.806 560,432.701
Opportunity 28,176,388.181 691,235.944 302,691.273
Intrinsic Value 14,264,733.243 361,080.498 87,373.036
Capital Growth 8,852,552.229 411,546.147 101,743.870
Balanced 7,868,320.053 11,884.108 21,621.400
International Equity 9,013,199.606 235,383.903 34,437.611
Equity Index 34,381,212.589 72,095.370 41,850.713
Bond Fund 25,038,543.953 422,092.541 417,336.519
Intermediate Bond 22,781,701.176 1,463,123.514 321,875.752
Short Bond 10,376,781.728 26,847.407 109,074.971
Municipal 5,062,732.924 111,188.929 123,113.537
Michigan Municipal 3,056,357.552 76,237.998 130,924.301
</TABLE>
e) limitation on purchasing securities of companies for the purpose of
exercising control
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,037,340.136 843,099.119 562,580.583
Opportunity 28,199,207.541 669,563.630 301,544.227
Intrinsic Value 14,271,641.790 354,527.969 87,017.018
Capital Growth 8,858,369.467 412,785.772 94,687.007
Balanced 7,857,247.828 23,386.776 21,190.957
International Equity 9,033,905.957 217,621.822 31,493.341
Equity Index 33,586,096.416 866,282.991 42,779.265
Bond Fund 25,026,946.501 426,973.063 424,053.449
Intermediate Bond 22,811,628.089 1,450,797.329 304,275.024
Short Bond 10,378,176.680 25,452.456 109,074.970
Municipal 5,098,123.712 105,066.752 93,844.926
Michigan Municipal 3,031,995.629 109,222.432 122,301.790
</TABLE>
f) limitation on writing or selling put options, call options, straddles,
spreads, or any combinations thereof
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
<S> <C> <C> <C>
Growth/Value 38,042,540.909 836,142.669 564,336.260
Opportunity 28,190,886.666 670,389.134 309,039.598
Intrinsic Value 14,266,607.386 366,739.429 79,839.962
Capital Growth 8,864,326.993 399,603.088 101,912.165
Balanced 7,862,705.753 16,908.649 22,211.159
International Equity 9,033,277.928 219,098.401 30,644.791
Equity Index 34,340,309.591 111,924.816 42,924.265
Bond Fund 25,053,258.585 393,787.324 430,927.104
Short Bond 10,339,635.071 63,994.065 109,074.970
Municipal 5,018,571.003 172,826.343 105,638.044
Michigan Municipal 3,072,261.025 68,957.036 122,301.790
</TABLE>
200
<PAGE>
5. To approve certain changes to fundamental investment objectives.
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,176,969.576 712,619.137 553,431.125
Opportunity 28,264,577.866 615,516.774 290,220.758
Capital Growth 8,901,322.257 389,056.769 75,463.220
International Equity 9,044,735.806 208,414.729 29,870.585
</TABLE>
6. To ratify the appointment of two Trustees to the Board of Trustees of each
Trust.
Elected Trustees Current Trustees
Ms. Marilyn McCoy Mr. Will M. Caldwell * Mr. Julius L. Pallone * Mr.
Mr. John P. Gould Donald L. Tuttle
Dr. Nicholas J. DeGrazia * Mr. Donald B. Sutherland
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,615,486.919 615,153.663 464,538.256
Opportunity 28,966,936.504 240,565.099 224,175.795
Intrinsic Value 14,488,742.021 239,325.593 84,266.163
Capital Growth 9,012,944.926 294,979.929 71,583.391
Balanced 7,897,014.024 10,057.404 17,477.133
International Equity 9,131,820.552 127,803.514 31,238.054
Equity Index 34,547,392.060 24,423.921 15,656.691
Bond Fund 25,286,806.469 274,474.859 392,893.685
Intermediate Bond 22,977,680.012 1,372,752.155 284,253.315
Short Bond 10,424,050.724 19,343.290 91,287.092
Municipal 5,289,174.601 7,953.418 75,115.371
Michigan Municipal 3,116,022.959 43,973.575 137,817.317
</TABLE>
7. To approve amendments to the Amended and Restated Declaration of Trust of
the Trust.
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,215,003.824 766,803.929 461,212.085
Opportunity 28,664,222.192 266,248.897 239,844.309
Intrinsic Value 14,358,649.285 275,225.484 79,312.008
Capital Growth 8,944,338.436 332,715.816 88,787.994
Balanced Fund 7,857,439.852 18,996.666 25,389.043
International Equity 9,114,161.333 133,498.445 35,361.342
Equity Index 34,412,698.927 66,044.834 16,414.911
Bond Funds 25,097,517.842 348,006.864 432,448.307
Intermediate Bond 22,892,930.367 1,395,329.721 278,442.354
Short Bond 10,380,424.290 16,265.847 137,990.969
Municipal 5,010,583.464 198,118.597 88,333.329
Michigan Municipal 3,461,981.270 86,932.809 163,829.213
</TABLE>
8. To transact such other business as may properly come before the Meetings or
any adjournment thereof.
<TABLE>
<CAPTION>
Fund Affirmative Against Abstain
---- ----------- ------- -------
<S> <C> <C> <C>
Growth/Value 38,587,151.288 570,898.842 537,128.708
Opportunity 28,701,598.882 383,407.629 346,670.887
Intrinsic Value 14,488,044.400 228,099.160 96,190.217
Capital Growth 8,862,036.696 440,186.116 77,285.434
Balanced Fund 7,892,907.143 13,250.898 18,390.520
International Equity 9,109,780.714 129,051.277 52,030.129
Equity Index 34,530,401.727 33,164.862 23,906.083
Bond Fund 25,289,548.134 218,371.943 446,254.936
Intermediate Bond 22,993,450.447 1,349,962.977 291,272.018
Short Bond 10,380,424.290 16,265.847 137,990.969
Municipal 5,267,301.655 37,135.864 67,805.871
Michigan Municipal 3,139,579.493 22,433.856 135,800.502
</TABLE>
201
<PAGE>
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