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[OVERLAND EXPRESS LOGO]
Annual Report
......................................
DECEMBER 31, 1996
Asset Allocation Fund
California Tax-Free Bond Fund
California Tax-Free Money Market Fund
Money Market Fund
Municipal Income Fund
Short-Term Government-Corporate Income Fund
Short-Term Municipal Income Fund
Small Cap Strategy Fund
Strategic Growth Fund
U.S. Government Income Fund
U.S. Treasury Money Market Fund
Variable Rate Government Fund
OVERLAND EXPRESS FUNDS ARE NOT
FDIC INSURED AND ARE NOT OBLIGATIONS OF
OR GUARANTEED BY WELLS FARGO BANK.
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[LOGO]
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS......................................2
MANAGER COMMENTS
Asset Allocation Fund.....................................4
California Tax-Free Bond Fund.............................9
California Tax-Free Money Market Fund....................12
Money Market Fund........................................13
Municipal Income Fund....................................14
Short-Term Government-Corporate Income Fund..............18
Short-Term Municipal Income Fund.........................22
Small Cap Strategy Fund..................................26
Strategic Growth Fund....................................30
U.S. Government Income Fund..............................35
U.S. Treasury Money Market Fund..........................38
Variable Rate Government Fund............................39
OVERLAND EXPRESS PORTFOLIOS OF INVESTMENTS
Asset Allocation Fund....................................42
California Tax-Free Bond Fund............................59
California Tax-Free Money Market Fund....................70
Money Market Fund........................................77
Municipal Income Fund....................................79
U.S. Government Income Fund..............................84
U.S. Treasury Money Market Fund..........................88
Variable Rate Government Fund............................90
OVERLAND EXPRESS FUNDS
Statement of Assets and Liabilities......................94
Statement of Operations..................................98
Statements of Changes in Net Assets.....................102
Financial Highlights....................................108
Notes to Financial Statements...........................127
Independent Auditors' Report............................140
MASTER INVESTMENT TRUST PORTFOLIOS OF INVESTMENTS
Capital Appreciation Master Portfolio...................141
Short-Term Government-Corporate Income Master
Portfolio..............................................148
Short-Term Municipal Income Master Portfolio............150
Small Cap Master Portfolio..............................155
MASTER INVESTMENT TRUST
Statement of Assets and Liabilities.....................162
Statement of Operations.................................163
Statements of Changes in Net Assets.....................164
Notes to Financial Statements...........................166
Independent Auditors' Report............................170
LIST OF ABBREVIATIONS.....................................171
OVERLAND EXPRESS FUNDS ARE NOT FDIC INSURED, ARE NOT
OBLIGATIONS OF WELLS FARGO BANK OR ITS AFFILIATES NOR OF
BARCLAYS GLOBAL FUND ADVISORS, N.A. AND ARE NOT GUARANTEED
BY WELLS FARGO BANK OR ITS AFFILIATES, NOR BY BARCLAYS
GLOBAL FUND ADVISORS, N.A. OVERLAND EXPRESS FUNDS INVOLVE
INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
OVERLAND EXPRESS MONEY MARKET FUNDS SEEK TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE; HOWEVER, THERE
CAN BE NO ASSURANCE THAT THE FUNDS WILL MEET THIS
OBJECTIVE.
WELLS FARGO BANK PROVIDES INVESTMENT ADVISORY SERVICES,
ADMINISTRATIVE SERVICES AND CERTAIN OTHER SERVICES FOR THE
OVERLAND EXPRESS FUNDS. THE FUNDS ARE SPONSORED,
DISTRIBUTED AND CO-ADMINISTERED BY STEPHENS INC., MEMBER
NYSE/SIPC.
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OUR MESSAGE TO YOU
We appreciate the confidence that you have expressed in us by investing in the
Overland Express Funds. Thanks to the loyalty of our investors, Overland Express
has grown to a family of 14 mutual funds that includes cash management, current
income and capital growth options. Since 1988, investors have depended upon
Overland Express to deliver quality service and value. In the coming year we
will work hard to continue to meet your investment needs by providing reliable
service and effective investment options.
We encourage you to review this Annual Report. It includes commentaries from the
Funds' portfolio managers offering insights into each fund's performance and
portfolio strategies as well as the overall market environment. The Annual
Report also includes detailed financial information for each fund and a list of
the fund's portfolio holdings.
THE MARKETS
The U.S. economy sent mixed signals during 1996. Rapid growth in the second
quarter gave way to a more moderate growth rate during the second half of the
year. The overall growth rate for 1996 was in line with the economy's long-term
average and fairly typical for an expansion phase of the business cycle.
Reasonably strong profit growth during 1996 helped sustain an impressive rally
in the stock market, led by large-cap issues. The total return on S&P 500 stocks
was an impressive 23%. Together with the 38% return in 1995, this was the
market's best back-to-back performance in forty years. Bonds, on the other hand,
suffered from gyrating interest rates. The total return on the Lehman Brothers
Municipal Bond Index was less than 4% in 1996, compared to 22% in 1995.
A YEAR OF AWARENESS
The political and economic environment in 1996 left many investors with a
heightened awareness of the need for financial planning. Aging "baby boomers"
and other investors have realized the importance of retirement planning and
personal savings and, as a result, are increasingly emphasizing saving over
spending. On-going national debates over Medicare reform and Social Security
reform have led Americans in increasing numbers to realize that our future
financial security is becoming our own responsibility. By the end of 1996,
mutual fund assets in the United States totaled over $3.5 trillion, up from
about $2.8 trillion at the end of 1995.
1997, THE YEAR AHEAD
Investors look to 1997 with both optimism and anxiety. Investor optimism is
based on strength in the economy that is expected to propel consumer-led growth
during the early part of the year, with an assist from exports and housing.
Investor anxiety results from worries that higher interest rates could result
from an economic revival. The economy appears headed for another year of
moderate growth in 1997, restrained by heavy consumer-debt loads and by a lack
of "pent-up" demand. A stronger dollar also could undercut export growth by
eroding U.S. competitiveness. Higher operating rates may nudge inflation higher
during the year. But we believe the annual inflation rate will remain low, at
3.5% or less. Because labor market conditions already are tight, we believe that
the Federal
2
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Reserve probably won't wait long before raising short-term interest rates if the
economy shows signs of gaining momentum. Any interest rate increases should,
however, be restrained by historically low inflation rates and efforts to reduce
the federal government's budget deficit.
1996 FUND PERFORMANCE
The Overland Express Funds performed well overall for the year. Our capital
growth funds generally realized healthy returns. Our cash management and current
income funds posted steady performance as well.
The Overland Express Funds also marked two milestone events in 1996. In January,
the Strategic Growth Fund celebrated its third anniversary, posting strong
long-term returns as the fund's managers employed a consistent approach of
targeting growth opportunities through strategic equity investing. And in
September, we offered our newest fund, the Small Cap Strategy Fund. This Fund is
managed by the Wells Fargo Growth Equity Team, the same team that manages the
Strategic Growth Fund. Targeting the small capitalization segment of the stock
market, this fund reflects the ongoing efforts of Overland Express to meet
investors needs with smart and efficient investment options.
OUR COMMITMENT TO INVESTMENT QUALITY
We believe in a conservative, straightforward approach to investing. Working
with your financial advisor is the first step in planning an effective long-term
investment strategy. We also believe that a good understanding of your
investments is essential to making effective investment decisions. So we
encourage you to read this Annual Report. We believe that you will find it to be
useful and informative.
Just as we've done in the past, we will continue to work diligently to help you
reach your investment goals.
OVERLAND EXPRESS FUNDS, FEBRUARY 1997
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OVERLAND EXPRESS ASSET ALLOCATION FUND*
The Overland Express Asset Allocation Fund is a diversified portfolio that seeks
to earn a high level of total investment return over the long-term, consistent
with the assumption of reasonable risk. The Fund pursues an "asset allocation"
strategy and is managed in accordance with an asset allocation model. Based on
changes in market conditions, investments are allocated among three asset
classes: common stocks representative of the S&P 500 Index, U.S. Treasury bonds
representative of the Lehman Brothers 20+ Treasury Index and money market
instruments. The Fund invests in a combination of these asset classes which
offers the most attractive trade off between risk and expected return.
The strategy is based on the premise that certain asset classes from time to
time are under- or over-valued by the market relative to each other. The
under-valued asset classes represent relatively better long-term, risk-adjusted
investment opportunities. Timely, low cost shifts among common stocks, U.S.
Treasury bonds and money market instruments, as determined by their perceived
relative under- or over-valuation, can produce competitive returns with less
risk.
FUND REVIEW
1996 saw another incredible year of a continuing bull market in the U.S. equity
markets. This was one of a variety of factors that influenced the asset
allocation model during the year.
The first half of the year saw a continuing decline in the bond markets, as
measured by the Lehman Brothers 20+ Treasury Index. This was driven by various
factors in the economy such as strong jobs reports, positive comments on the
renewed strength of the U.S. economy, fears of rising inflation and
faster-than-expected growth. In February, bonds experienced a significant
correction returning -5.31%. March followed with a continuation of the bond
market correction due, in large part, to the release of the February jobs report
indicating significant employment increases. On the date of the release of the
February jobs report, the long bond fell more than three points--the largest one
day decline in over five years.
The poor performance of bonds in February and March put bonds down more than
- -7.5% in the first quarter, while stocks were up about 5.3% in the same period.
This caused bonds to be undervalued relative to stocks. Therefore, the Fund
rebalanced from 100% stocks to 80% stocks, 20% bonds. In the second quarter,
bonds continued their trend and became even more undervalued relative to stocks.
Through May, stocks had outperformed bonds by nearly 20%, which caused another
shift away from stocks in May to a mix of 70% stocks and 30% bonds.
Bonds finally snapped their year-long losing streak in June, despite
higher-than-expected May employment growth, and ended the month as the best
performing asset class with a return of 2.23% for the month. This trend
continued through September when the anticipated Federal Reserve target rate
increase didn't materialize (leaving the federal funds target rate at 5.25%) and
helped contribute to the mid-year bond market rally. The Lehman Brothers 20+
Treasury Index ended the year -1.46%.
*ON FEBRUARY 14, 1997, THE OVERLAND EXPRESS ASSET ALLOCATION FUND'S NAME WAS
CHANGED TO THE OVERLAND EXPRESS INDEX ALLOCATION FUND.
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OVERLAND EXPRESS ASSET ALLOCATION FUND*
The primary drivers of the asset allocation model's decisions are
consensus-based, value-oriented long-term return expectations of investors. For
each of the assets--stocks, bonds and cash--we use an appropriate statistical
measure of value. For stocks, a dividend discount model (DDM) quantifies the
average earnings and earnings growth expectations into a single statistical
measure similar to a yield. For bonds and cash, simple yield-to-maturity
measures are used.
As the differences (or "spreads") between each of these measures widen or
narrow, it indicates that the relative attractiveness of the assets are
changing. For example, the first half of 1996 was marked by rising bond yields
and unchanged DDM estimates. Bonds began displaying a higher expected return
(from a higher yield) while stocks' expected returns were barely changed. This
made bonds more attractive, leading to the Fund's shifts from stocks to bonds.
1997 STRATEGY
As of December 31, 1996, the asset allocation mix was 77.16% in S&P 500 stocks,
19.19% in U.S. Treasury bonds and 3.65% in money market instruments. However
significant changes in any of these markets could change the allocation at any
time during the year. The industry breakdown for the S&P 500 as of December 31,
1996 was as follows: basic industries: 7.70%, technical capital goods: 15.60%,
capital goods: 2.8%, consumer cyclicals: 8.10%, consumer growth staples: 18.5%,
consumer staples: 9.10%, credit cyclical: 4.10%, energy: 9.30%, financial:
13.20%, transportation: 1.20%, and utilities: 10.40%.
THE S&P 500 INDEX IS A TRADEMARK OF STANDARD AND POOR'S CORPORATION AND IS AN
UNMANAGED INDEX THAT TRACKS THE PERFORMANCE OF 500 INDUSTRIAL, TRANSPORTATION,
UTILITY AND FINANCIAL COMPANIES.
THE LEHMAN BROTHERS 20+ TREASURY BOND INDEX IS AN INDEX COMPRISED OF TREASURY
BONDS WITH MATURITIES AVERAGING BETWEEN 10 AND 30 YEARS.
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OVERLAND EXPRESS ASSET ALLOCATION FUND*
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS ASSET
ALLOCATION FUND COMPARED WITH VARIOUS INDICES
The chart on the next page shows the performance of the Overland Express Asset
Allocation Fund compared with the S&P 500 Index, the Lehman Brothers Treasury
Bond Index and the IBC/Donoghue Money Market Average. The chart assumes a
hypothetical $10,000 initial investment. Class A shares reflect all Fund
expenses and the maximum 4.5% initial sales charge. The Standard and Poor's 500
Index is an unmanaged index of 500 widely held common stocks, representing
industrial, financial, utility and transportation companies, listed on the New
York Stock Exchange, American Stock Exchange and the over-the-counter market.
The Lehman Brothers Treasury Bond Index is an index comprised of Treasury bonds
with maturities between 10 and 30 years. The IBC/Donoghue Money Fund Average is
comprised of the average yields of over 600 taxable money market funds.
Investors should note that the Fund is a professionally managed mutual fund,
while the indices are unmanaged, do not incur expenses and are not available
directly for investment. If Fund operating expenses had been applied to the
indices, their performance would have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum
4.5% initial sales charge for class A shares; and for class D shares, the 1%
contingent deferred sales charge (CDSC). Average annual total return represents
the average annual increase in value of the investment over the indicated
periods, assuming reinvestment of dividends and capital gains distributions at
net asset value. Your investment return and principal value will fluctuate with
market conditions, so that your shares, when redeemed, may be worth more or less
than their original cost. Past performance is not predictive of future
performance. Class A shares have been offered since April 7, 1988, and class D
shares have been offered since July 1, 1993. The average annual total return for
1-year with CDSC reflects the contingent deferred sales charge imposed on
redemptions within the first year of purchasing shares.
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OVERLAND EXPRESS ASSET ALLOCATION FUND*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND
EXPRESS LEHMAN
ASSET BROTHERS IBC/DONOGHUE
ALLOCATION 20+ TREASURY MONEY
FUND BOND MARKET
S & P 500
CLASS A INDEX INDEX AVERAGE
<S> <C> <C> <C> <C>
Inception $ 9,550 $ 10,000 $ 10,000 $ 10,000
Apr-88 9,426 9,825 10,051 10,111
May-88 9,426 9,677 10,103 10,198
Jun-88 9,779 10,084 10,158 10,666
Jul-88 9,641 9,885 10,216 10,628
Aug-88 9,497 9,927 10,277 10,265
Sep-88 9,813 10,294 10,340 10,702
Oct-88 9,899 10,607 10,405 11,000
Nov-88 9,912 10,370 10,471 10,843
Dec-88 9,989 10,503 10,542 11,033
Jan-89 10,130 10,725 10,615 11,841
Feb-89 10,130 10,502 10,690 11,546
Mar-89 10,204 10,614 10,770 11,815
Apr-89 10,324 10,884 10,852 12,428
May-89 10,424 11,284 10,935 12,931
Jun-89 10,444 11,929 11,018 12,858
Jul-89 10,691 12,211 11,096 14,019
Aug-89 10,773 11,885 11,173 14,293
Sep-89 10,814 11,920 11,249 14,235
Oct-89 10,824 12,400 11,326 13,904
Nov-89 10,918 12,513 11,402 14,188
Dec-89 11,012 12,490 11,477 14,528
Jan-90 10,907 12,041 11,551 13,553
Feb-90 10,960 12,008 11,625 13,728
Mar-90 11,055 11,957 11,899 14,091
Apr-90 11,006 11,671 11,774 13,740
May-90 11,318 12,212 11,849 15,080
Jun-90 11,371 12,493 11,925 14,978
Jul-90 11,424 12,612 12,001 14,930
Aug-90 11,238 12,080 12,076 13,580
Sep-90 11,206 12,220 12,151 12,919
Oct-90 11,315 12,500 12,226 12,864
Nov-90 11,636 13,021 12,301 13,696
Dec-90 11,791 13,279 12,375 14,077
Jan-91 12,074 13,436 12,446 14,690
Feb-91 12,303 13,495 12,513 15,741
Mar-91 12,406 13,549 12,576 16,122
Apr-91 12,518 13,721 12,637 16,160
May-91 12,657 13,708 12,696 16,858
Jun-91 12,379 13,607 12,754 16,085
Jul-91 12,681 13,810 12,812 16,835
Aug-91 13,093 14,286 12,870 17,234
Sep-91 13,257 14,736 12,925 16,946
Oct-91 13,349 14,768 12,980 17,173
Nov-91 13,147 14,851 13,031 16,481
Dec-91 14,230 15,736 13,081 18,368
Jan-92 13,839 15,242 13,126 18,024
Feb-92 13,924 15,332 13,168 18,258
Mar-92 13,723 13,163 13,209 17,903
Apr-92 13,871 15,148 13,249 18,428
May-92 14,104 15,569 13,288 18,519
Jun-92 14,124 15,795 13,326 18,243
Jul-92 14,696 16,452 13,382 18,988
Aug-92 14,609 16,566 13,396 18,599
Sep-92 14,809 16,828 13,428 18,818
Oct-92 14,708 16,474 13,460 18,883
Nov-92 15,035 16,537 13,490 19,526
Dec-92 15,288 16,990 13,522 19,768
Jan-93 15,542 17,474 13,554 19,931
Feb-93 15,943 18,058 13,585 20,202
Mar-93 16,181 18,103 13,615 20,629
Apr-93 15,911 18,242 13,645 20,130
May-93 16,208 18,302 13,675 20,669
Jun-93 16,414 19,077 13,705 20,729
Jul-93 16,442 19,384 13,735 20,646
Aug-93 17,024 20,163 13,765 21,429
Sep-93 16,883 20,234 13,796 21,265
Oct-93 17,197 20,379 13,826 21,705
Nov-93 17,020 19,858 13,857 21,498
Dec-93 17,205 19,921 13,888 21,758
Jan-94 17,755 20,399 13,920 22,488
Feb-94 17,263 19,583 13,951 21,887
Mar-94 16,582 18,704 13,968 20,933
Apr-94 16,683 18,483 14,021 21,201
May-94 16,843 18,361 14,060 21,549
Jun-94 16,477 18,187 14,102 21,021
Jul-94 16,866 18,803 14,146 21,711
Aug-94 17,485 18,664 14,193 22,601
Sep-94 17,013 18,076 14,242 22,049
Oct-94 17,174 18,013 14,294 22,544
Nov-94 16,836 18,119 14,349 21,723
Dec-94 17,087 18,398 14,408 22,045
Jan-95 17,504 18,870 14,472 22,616
Feb-95 18,096 19,405 14,537 23,497
Mar-95 18,496 19,573 14,604 24,189
Apr-95 18,948 19,922 14,672 24,901
May-95 19,820 21,450 14,739 25,894
Jun-95 20,274 21,700 14,806 26,495
Jul-95 20,907 21,354 14,872 27,374
Aug-95 20,940 21,827 14,938 27,442
Sep-95 21,782 22,229 15,003 28,600
Oct-95 21,685 22,851 15,088 28,497
Nov-95 22,596 23,422 15,134 29,747
Dec-95 23,018 24,045 15,200 30,320
Jan-96 23,721 24,045 15,263 31,351
Feb-96 23,905 22,884 15,326 31,643
Mar-96 24,114 22,428 15,387 31,946
Apr-96 24,349 22,054 15,449 32,416
May-96 24,684 21,939 15,511 33,249
Jun-96 24,861 22,406 15,573 33,375
Jul-96 24,085 22,415 15,635 31,900
Aug-96 24,237 22,135 15,697 32,573
Sep-96 25,281 22,746 15,760 34,404
Oct-96 26,044 23,640 15,823 35,353
Nov-96 27,554 24,429 15,887 38,023
Dec-96 26,941 23,831 15,950 37,270
</TABLE>
THE RETURN FOR CLASS D SHARES OF THE ASSET ALLOCATION FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURE.
................................................................................
PERFORMANCE OF THE ASSET ALLOCATION FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR 3 YR 5 YR SINCE 4/7/88 INCEPTION
<S> <C> <C> <C> <C> <C>
...............................................................................................................
With Maximum 4.5% Sales Charge 11.76% 14.36% 12.58% 11.99%
Without Sales Charge 17.04% 16.12% 13.62% 12.58%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS 1 YR 3 YR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C>
................................................................................................................
With 1.0% Contingent Deferred Sales Charge 15.38% 15.35% 14.47%
Without Contingent Deferred Sales Charge 16.37% 15.35% 14.47%
</TABLE>
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN FOR 1-YEAR
WITH CDSC REFLECTS THE CONTINGENT DEFERRED SALES CHARGE WHICH IS IMPOSED ON
REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASING SHARES.
DURING THE PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
7
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(THIS PAGE INTENTIONALLY LEFT BLANK)
8
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OVERLAND EXPRESS CALIFORNIA TAX-FREE BOND FUND
DAVID KLUG, SENIOR TAX-EXEMPT SPECIALIST/PORTFOLIO MANAGER. MR. KLUG HAS MANAGED
MUNICIPAL BOND PORTFOLIOS FOR WELLS FARGO BANK FOR OVER TEN YEARS. PRIOR TO
JOINING WELLS FARGO BANK, HE MANAGED THE MUNICIPAL BOND PORTFOLIO FOR A MAJOR
PROPERTY AND CASUALTY INSURANCE COMPANY. HIS INVESTMENT EXPERIENCE EXCEEDS 20
YEARS AND INCLUDES ALL ASPECTS OF TAX-EXEMPT FIXED-INCOME INVESTMENTS. HE HOLDS
AN M.B.A. FROM THE UNIVERSITY OF CHICAGO AND IS A MEMBER OF THE NATIONAL
FEDERATION OF MUNICIPAL ANALYSTS AND ITS CALIFORNIA CHAPTER. HE HAS MANAGED THE
FUND SINCE ITS INCEPTION.
The Overland Express California Tax-Free Bond Fund seeks to provide investors
with a high level of income exempt from federal income taxes and from California
personal income taxes, while preserving capital by investing in medium- to
long-term, investment-grade municipal securities.
FUND REVIEW
1996's rising interest-rate environment caused longer-term municipal bonds to
decline modestly in price. Throughout the year, the Fund remained competitive
with its benchmark, the Lehman Brothers Municipal Bond Index, benefiting from
the Fund's significant exposure to higher-coupon bonds. A number of these
higher-coupon bonds were pre-refunded during the year, meaning that the issuing
municipality has funds escrowed to pay off these bonds at maturity. As a result,
the securities in the portfolio experienced price gains of approximately 5% or
more. Some examples of pre-refunded bonds that were held in the portfolio are
Lincoln Unified School District with a 7.20% coupon and Menlo Park Redevelopment
Agency with a 6.70% coupon.
The Fund's investment strategy for 1996 concentrated on new purchases of bonds
that have "good structure". These are bonds that have characteristics such as
high credit quality, good call protection or are discount bonds. Bonds sold
during the year usually had short call protections.
As of December 31, 1996, the Fund had minimal exposure to the Orange County
bankruptcy. The Fund's exposure to Orange County credits was small at the time
of the bankruptcy filing and is even smaller now. The Fund does not hold any
Orange County issues that are not credit enhanced or revenue backed. Credit
enhanced issues are those that are backed by a line of credit. Revenue backed
issues are those that are backed by income from a particular project. Therefore,
it is anticipated that any remaining effects from the resolution of the
bankruptcy will have no direct impact on the Fund.
1997 STRATEGY - A FOCUS ON CREDIT QUALITY
During 1997, we will continue to emphasize high credit quality and call
protection in new purchases. In keeping with the Fund's objective to provide
investors with a high level of income exempt from both federal and California
personal income taxes while preserving capital, an emphasis on purchases of
investment-grade bonds will continue to be a focus in our investment strategy.
Investment-grade bonds are those that are rated in one of the four highest
categories by a national credit rating agency such as Moody's or Standard and
Poor's. As always, we will consider factors such as call protection on the bond
and tax or revenue backing for the issues that we purchase.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS AN UNMANAGED INDEX THAT INCLUDES
APPROXIMATELY 15,000 BONDS.
9
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OVERLAND EXPRESS CALIFORNIA TAX-FREE BOND FUND
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS CALIFORNIA
TAX-FREE BOND FUND COMPARED WITH THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
The chart on the next page shows the performance of the Overland Express
California Tax-Free Bond Fund compared with the Lehman Brothers Municipal Bond
Index. The chart assumes a hypothetical $10,000 initial investment. Class A
shares reflect all Fund expenses and the maximum 4.5% initial sales charge. The
Lehman Brothers Municipal Bond Index is an unmanaged index that includes
approximately 15,000 bonds. Investors should note that the Fund is a
professionally managed mutual fund, while the Index is unmanaged, does not incur
expenses and is not available directly for investment. If Fund operating
expenses had been applied to the Index, its performance would have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum
4.5% initial sales charge for class A shares; and for class D shares, the 1%
contingent deferred sales charge (CDSC). Average annual total return represents
the average annual increase in value of the investment over the indicated
periods, assuming reinvestment of dividends and capital gains distributions at
net asset value. Your investment return and principal value will fluctuate with
market conditions, so that your shares, when redeemed, may be worth more or less
than their original cost. Past performance is not predictive of future
performance. Class A shares have been offered since October 6, 1988, and class D
shares have been offered since July 1, 1993. The average annual total return for
1-year with CDSC reflects the contingent deferred sales charge imposed on
redemptions within the first year of purchasing shares.
10
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OVERLAND EXPRESS CALIFORNIA TAX-FREE BOND FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND EXPRESS LEHMAN BROTHERS
CALIFORNIA MUNICIPAL
TAX-FREE BOND FUND CLASS
A BOND INDEX
<S> <C> <C>
Inception $ 9,550 $ 10,000
Oct-88 9,636 10,176
Nov-88 9,549 10,082
Dec-88 9,783 10,185
Jan-89 9,929 10,396
Feb-89 9,831 10,278
Mar-89 9,832 10,253
Apr-89 10,150 10,496
May-89 10,351 10,714
Jun-89 10,491 10,860
Jul-89 10,623 11,008
Aug-89 10,470 10,900
Sep-89 10,460 10,867
Oct-89 10,604 11,000
Nov-89 10,770 11,192
Dec-89 10,832 11,284
Jan-90 10,696 11,231
Feb-90 10,864 11,331
Mar-90 10,907 11,334
Apr-90 10,758 11,253
May-90 11,025 11,498
Jun-90 11,133 11,589
Jul-90 11,328 11,770
Aug-90 11,001 11,589
Sep-90 10,990 11,606
Oct-90 11,178 11,816
Nov-90 11,444 12,053
Dec-90 11,534 12,106
Jan-91 11,725 12,269
Feb-91 11,792 12,375
Mar-91 11,815 12,380
Apr-91 11,998 12,545
May-91 12,136 12,657
Jun-91 12,098 12,644
Jul-91 12,268 12,798
Aug-91 12,417 12,967
Sep-91 12,590 13,136
Oct-91 12,692 13,254
Nov-91 12,688 13,291
Dec-91 12,874 13,577
Jan-92 12,858 13,608
Feb-92 12,938 13,612
Mar-92 12,963 13,618
Apr-92 13,100 13,739
May-92 13,243 13,901
Jun-92 13,485 14,135
Jul-92 13,927 14,559
Aug-92 13,735 14,416
Sep-92 13,806 14,510
Oct-92 13,538 14,367
Nov-92 13,875 14,625
Dec-92 14,034 14,774
Jan-93 14,197 14,945
Feb-93 14,722 15,486
Mar-93 14,608 15,322
Apr-93 14,778 15,477
May-93 14,883 15,563
Jun-93 15,163 15,823
Jul-93 15,154 15,844
Aug-93 15,530 16,173
Sep-93 15,747 16,358
Oct-93 15,778 16,389
Nov-93 15,620 16,245
Dec-93 15,856 16,587
Jan-94 16,054 16,777
Feb-94 15,739 16,342
Mar-94 15,213 15,677
Apr-94 15,189 15,810
May-94 15,348 15,948
Jun-94 15,310 15,850
Jul-94 15,570 16,140
Aug-94 15,632 16,197
Sep-94 15,449 15,959
Oct-94 15,223 15,675
Nov-94 14,961 15,391
Dec-94 15,171 15,730
Jan-95 15,592 16,180
Feb-95 15,970 16,650
Mar-95 16,109 16,842
Apr-95 15,114 16,862
May-95 16,602 17,400
Jun-95 16,375 17,247
Jul-95 16,475 17,411
Aug-95 16,689 17,632
Sep-95 16,827 17,743
Oct-95 17,132 18,002
Nov-95 17,456 18,301
Dec-95 17,658 18,476
Jan-96 17,749 18,617
Feb-96 17,590 18,490
Mar-96 17,319 18,254
Apr-96 17,244 18,202
May-96 17,257 18,195
Jun-96 17,459 18,394
Jul-96 17,651 18,559
Aug-96 17,664 18,555
Sep-96 17,935 18,815
Oct-96 18,129 19,028
Nov-96 18,480 19,378
Dec-96 18,371 19,295
</TABLE>
THE RETURN FOR CLASS D SHARES OF THE CALIFORNIA TAX-FREE BOND FUND WILL VARY
FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURE.
................................................................................
PERFORMANCE OF THE CALIFORNIA TAX-FREE BOND FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR 3 YR 5 YR SINCE 10/6/88 INCEPTION
<S> <C> <C> <C> <C> <C>
...............................................................................................................
With Maximum 4.5% Sales Charge -0.64% 3.43% 6.38% 7.65%
Without Sales Charge 4.03% 5.03% 7.37% 8.25%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS 1 YR 3 YR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C>
................................................................................................................
With 1.0% Contingent Deferred Sales Charge 2.28% 4.27% 4.79%
Without Contingent Deferred Sales Charge 3.24% 4.27% 4.79%
</TABLE>
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN FOR 1-YEAR
WITH CDSC REFLECTS THE CONTINGENT DEFERRED SALES CHARGE WHICH IS IMPOSED ON
REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASING SHARES.
DURING THE PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
11
<PAGE>
OVERLAND EXPRESS CALIFORNIA TAX-FREE MONEY MARKET FUND
The Overland Express California Tax-Free Money Market Fund seeks to provide
investors with a high level of current income exempt from federal income taxes,
a portion of which is also exempt from California personal income taxes, while
preserving capital and liquidity. The Fund invests in high-quality instruments,
primarily municipal securities.
The weekly California tax-free money market fund yields during 1996 ranged
generally between 2.40% and 3.20% on an annualized basis. The Fund's seven-day
simple yield for the period ended December 31, 1996 was 3.34%. The Fund achieved
its goal of maintaining principal stability at a $1.00 per share net asset value
while providing competitive yields.
1996 TAX EXEMPT MARKET
California tax-exempt notes had lower yields than U.S. treasuries bills during
the heavy note issuance months of July through August, but increased in value
relative to U.S. treasuries toward the end of the year because of the lack of
supply in the market. As the California note to U.S. treasuries spread widened,
the municipal money market curve remained flat. Weekly rates as measured by the
Bankers Trust Tax Exempt Note Rate Index averaged a slightly higher current
yield than California notes during the fourth quarter.
1997 STRATEGY
With a continued neutral stance in 1997, the average maturity of the Fund is
expected to be maintained between 40 and 60 days. The Fund's maturity will be
extended during the heavy note issuance months of July through August to
maximize relative value during periods of heavy supply.
ALTHOUGH THE FUND SEEKS TO MAINTAIN A $1.00 PER SHARE NET ASSET VALUE, THERE IS
NO ASSURANCE THAT IT WILL MEET THIS OBJECTIVE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY GOVERNMENT AGENCY, NOR BY WELLS FARGO BANK.
ANNUALIZED YIELD IS FOR THE SEVEN-DAY PERIOD ENDED DECEMBER 31, 1996. YIELD
REFLECTS FLUCTUATIONS IN INTEREST RATES ON PORTFOLIO INVESTMENTS AND FUND
EXPENSES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
12
<PAGE>
OVERLAND EXPRESS MONEY MARKET FUND
The Overland Express Money Market Fund seeks to provide a high level of current
income while maintaining a stable net asset value. As of December 31, 1996, the
Class A Shares had a seven-day simple yield of 4.82%. The investment return on
the Fund will fluctuate with market conditions. The Fund generated relatively
high, consistent yields throughout 1996, while providing a high degree of
quality and liquidity.
FUND REVIEW
In January 1996, the Federal Reserve lowered the federal funds target rate by
0.25% from 5.50% to 5.25%. Nevertheless, short-term rates rose throughout the
first half of the year. The Fund purchased additional securities in the 9-12
month range in July as the yield curve steepened. This turned out to be the high
in yields for the year as the economy showed signs of slowing. The Fund
generated relatively consistent yields throughout the year, while providing a
high degree of quality and liquidity.
The Fund purchased floating-rate securities in 1996. Floating-rate securities
are those securities whose interest rates are tied to an index. These securities
typically provide competitive returns and help to reduce risk related to
changing interest rates. These securities normally track a specific index, such
as Treasury bills, LIBOR or the prime rate.
1997 OUTLOOK
With the current U.S. expansion continuing and the stock market coming off
another year of strong gains, money market funds in general could see cash
inflows due to cautious investors moving money to a more stable asset class.
Several regulatory changes permitting a broader use of money market funds may
cause assets in money funds to grow in 1997.
We believe that the Federal Reserve is likely to leave the federal funds target
rate unchanged in the first quarter of 1997. We expect the next Federal Reserve
move will be a rise in the federal funds target rate. Tightness in the labor
markets and relatively high capacity utilization in the manufacturing sector
could trigger an increase in inflation. With the money market yield curve very
flat, maturities of 2-3 months offer the best value, given a neutral Federal
Reserve interest rate policy. As we begin the year, we view LIBOR-based floaters
as attractive and expect them to outperform Prime- and T-Bill-based floaters
since higher interest rates are anticipated.
ALTHOUGH THE FUND SEEKS TO MAINTAIN A $1.00 PER SHARE NET ASSET VALUE, THERE IS
NO ASSURANCE THAT IT WILL MEET THIS OBJECTIVE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY GOVERNMENT AGENCY, NOR BY WELLS FARGO BANK.
ANNUALIZED YIELD IS FOR THE SEVEN-DAY PERIOD ENDED DECEMBER 31, 1996. YIELD
REFLECTS FLUCTUATIONS IN INTEREST RATES ON PORTFOLIO INVESTMENTS AND FUND
EXPENSES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
13
<PAGE>
OVERLAND EXPRESS MUNICIPAL INCOME FUND
LAURA MILNER, TAX-EXEMPT SPECIALIST/MONEY MARKET PORTFOLIO MANAGER. MS. MILNER
JOINED WELLS FARGO BANK IN 1988. HER BACKGROUND INCLUDES OVER SEVEN YEARS OF
EXPERIENCE SPECIALIZING IN SHORT- AND LONG-TERM MUNICIPAL SECURITIES WITH
SALOMON BROTHERS. SHE IS A MEMBER OF THE NATIONAL FEDERATION OF MUNICIPAL
ANALYSTS AND ITS CALIFORNIA CHAPTER.
The Overland Express Municipal Income Fund is a diversified portfolio which
seeks to provide investors with a high level of federally tax-free income,
consistent with the preservation of capital. The Fund invests primarily in
high-quality, medium- to long-term municipal securities.
1996'S MUNICIPAL BOND MARKET
Early in the year, the ongoing concern about tax reform negatively impacted the
municipal bond market. These concerns created a market that had a lot of supply
but not very much demand, a condition commonly referred to as "oversold". In
March, interest rates rose after the first of several strong employment reports.
This did not have much impact on the municipal market because of the oversold
condition. As concerns about tax reform and rising interest rates dissipated,
the municipal market was able to gain ground in the second half of the year.
FUND REVIEW
The Fund returned 3.49% versus the Lehman Brothers Municipal Bond Index return
of 4.43% for the year ended December 31, 1996. As interest rates rose in 1996,
prices on longer-term securities fell at a faster rate than those on
shorter-term securities. Consequently, the Fund underperformed its benchmark
slightly because the securities in the portfolio maintained a longer maturity
than those in the benchmark.
Throughout much of the year, the Fund made efforts to reduce its housing bond
position and increase its position in revenue bonds that are subject to the
alternative minimum tax (AMT). These traditional revenue bonds have better call
protection compared to housing bonds. Another advantage of owning these revenue
bonds is that they are subject to the AMT. Securities that are subject to the
AMT generally provide higher yields without compromising credit quality.
EMPHASIS ON CREDIT QUALITY
In our investment strategy, we take a number of steps to minimize credit risk
and maintain high credit quality. To help protect the Fund's share price from
fluctuations that generally occur to funds that are tied to one region, we
pursue a strategy of national diversification. Additionally, all of the Fund's
holdings are AAA-rated, thus minimizing credit risk. The Fund's portfolio has a
combination of housing bonds guaranteed by the Government National Mortgage
Association, Federal National Mortgage Association, Federal Housing Authority
and the Veterans Administration.
14
<PAGE>
OVERLAND EXPRESS MUNICIPAL INCOME FUND
1997 STRATEGY
The economy continues to give mixed signals. We believe that the Federal Reserve
will remain neutral with a chance of raising the federal funds target rate
slightly in the first six months of 1997. Accordingly, we intend to maintain the
Fund in a neutral stance versus its benchmark. In keeping with the Fund's
objective to provide investors with a high level of federally tax-free income,
we intend to pursue a strategy of diversification by geography and by issuer and
will continue to focus on revenue bonds subject to the AMT.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS AN UNMANAGED INDEX THAT INCLUDES
APPROXIMATELY 15,000 BONDS.
15
<PAGE>
OVERLAND EXPRESS MUNICIPAL INCOME FUND
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS MUNICIPAL
INCOME FUND COMPARED WITH THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
The chart on the next page shows the performance of the Overland Express
Municipal Income Fund compared with the Lehman Brothers Municipal Bond Index.
The chart assumes a hypothetical $10,000 initial investment. Class A shares
reflect all Fund expenses and the maximum 3% initial sales charge. The Lehman
Brothers Municipal Bond Index is an unmanaged index that includes approximately
15,000 bonds. Investors should note that the Fund is a professionally managed
mutual fund, while the Index is unmanaged, does not incur expenses and is not
available directly for investment. If Fund operating expenses had been applied
to the Index, its performance would have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum 3%
initial sales charge for class A shares; and for class D shares, the 1%
contingent deferred sales charge (CDSC). Average annual total return represents
the average annual increase in value of the investment over the indicated
periods, assuming reinvestment of dividends and capital gains distributions at
net asset value. Your investment return and principal value will fluctuate with
market conditions, so that your shares, when redeemed, may be worth more or less
than their original cost. Past performance is not predictive of future
performance. Class A shares have been offered since July 15, 1991, and class D
shares have been offered since July 1, 1993. The average annual total return for
1-year with CDSC reflects the contingent deferred sales charge imposed on
redemptions within the first year of purchasing shares.
16
<PAGE>
OVERLAND EXPRESS MUNICIPAL INCOME FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND EXPRESS LEHMAN BROTHERS
MUNICIPAL INCOME MUNICIPAL
FUND CLASS A BOND INDEX
<S> <C> <C>
Inception $ 9,700 $ 10,000
Jul-91 9,690 10,122
Aug-91 9,789 10,256
Sep-91 9,953 10,389
Oct-91 10,049 10,482
Nov-91 10,046 10,512
Dec-91 10,264 10,738
Jan-92 10,310 10,762
Feb-92 10,354 10,766
Mar-92 10,360 10,770
Apr-92 10,468 10,866
May-92 10,586 10,994
Jun-92 10,788 11,179
Jul-92 11,145 11,514
Aug-92 10,975 11,401
Sep-92 11,064 11,475
Oct-92 10,860 11,363
Nov-92 11,152 11,568
Dec-92 11,284 11,684
Jan-93 11,419 11,820
Feb-93 11,865 12,248
Mar-93 11,742 12,118
Apr-93 11,868 12,240
May-93 11,961 12,309
Jun-93 12,183 12,514
Jul-93 12,185 12,531
Aug-93 12,453 12,791
Sep-93 12,599 12,837
Oct-93 12,669 12,962
Nov-93 12,548 12,848
Dec-93 12,764 13,119
Jan-94 12,834 13,268
Feb-94 12,513 12,925
Mar-94 11,953 12,399
Apr-94 11,896 12,504
May-94 12,057 12,613
Jun-94 11,941 12,536
Jul-94 12,209 12,765
Aug-94 12,221 12,810
Sep-94 12,009 12,622
Oct-94 11,796 12,397
Nov-94 11,558 12,173
Dec-94 11,893 12,440
Jan-95 12,229 12,796
Feb-95 12,615 13,169
Mar-95 12,720 13,320
Apr-95 12,692 13,336
May-95 13,088 13,761
Jun-95 12,904 13,640
Jul-95 12,938 13,770
Aug-95 13,061 13,945
Sep-95 13,203 14,033
Oct-95 13,403 14,237
Nov-95 13,650 14,474
Dec-95 13,850 14,613
Jan-96 13,866 14,724
Feb-96 13,766 14,624
Mar-96 13,624 14,437
Apr-96 13,594 14,396
May-96 13,673 14,390
Jun-96 13,756 14,547
Jul-96 13,924 14,678
Aug-96 13,900 14,675
Sep-96 14,036 14,881
Oct-96 14,153 15,049
Nov-96 14,376 15,324
Dec-96 14,333 15,280
</TABLE>
THE RETURN FOR CLASS D SHARES OF THE MUNICIPAL INCOME FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURE.
................................................................................
PERFORMANCE OF THE MUNICIPAL INCOME FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR 3 YR 5 YR SINCE 7/15/91 INCEPTION
<S> <C> <C> <C> <C> <C>
..............................................................................................................
With Maximum 3.0% Sales Charge 0.37% 2.89% 6.25% 6.82%
Without Sales Charge 3.49% 3.94% 6.91% 7.41%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS 1 YR 3 YR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C>
................................................................................................................
With 1.0% Contingent Deferred Sales Charge 1.93% 3.33% 4.06%
Without Contingent Deferred Sales Charge 2.90% 3.33% 4.06%
</TABLE>
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN FOR 1-YEAR
WITH CDSC REFLECTS THE CONTINGENT DEFERRED SALES CHARGE WHICH IS IMPOSED ON
REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASING SHARES.
DURING THE PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
17
<PAGE>
OVERLAND EXPRESS SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
MS. TAMYRA THOMAS, PORTFOLIO CO-MANAGER. MS. THOMAS ASSUMED RESPONSIBILITY FOR
THE DAY-TO-DAY MANAGEMENT OF THE PORTFOLIO OF THE SHORT-TERM
GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO AS OF JULY 16, 1996. MS. THOMAS IS
A SENIOR VICE-PRESIDENT AND THE CHIEF FIXED INCOME INVESTMENT OFFICER OF THE
INVESTMENT MANAGEMENT GROUP POLICY COMMITTEE. MS. THOMAS HAS MANAGED BOND
PORTFOLIOS FOR OVER A DECADE. SHE CURRENTLY MANAGES IN EXCESS OF $1 BILLION OF
LONG-TERM TAXABLE BOND PORTFOLIOS FOR VARIOUS FOUNDATIONS, DEFINED BENEFIT PLANS
AND OTHER CLIENTS. SHE HOLDS A B.S. FROM THE UNIVERSITY OF UTAH AND WAS PAST
PRESIDENT OF THE UTAH BOND CLUB. MS. THOMAS IS A CHARTERED FINANCIAL ANALYST.
MS. MADELINE GISH, PORTFOLIO CO-MANAGER. MS. GISH ALSO ASSUMED RESPONSIBILITY
FOR THE DAY-TO-DAY MANAGEMENT OF THE PORTFOLIO OF THE SHORT-TERM
GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO AS OF JULY 16, 1996. MS. GISH
JOINED WELLS FARGO BANK IN 1989 AS THE PORTFOLIO COORDINATOR FOR THE MUTUAL
FUNDS DIVISION. SINCE JOINING THE FIXED-INCOME GROUP IN 1992, MS. GISH HAS
ASSISTED IN THE RESEARCH AND TRADING FOR THE ADJUSTABLE-RATE MORTGAGE FUND AND
IS CURRENTLY MANAGING TAXABLE LIQUIDITY PORTFOLIOS. SHE HOLDS A BACHELOR OF
SCIENCE DEGREE IN BUSINESS ADMINISTRATION FROM THE UNIVERSITY OF KANSAS AND IS A
CHARTERED FINANCIAL ANALYST CANDIDATE.
MR. SCOTT SMITH ALSO ASSUMED RESPONSIBILITY AS PORTFOLIO CO-MANAGER FOR THE
DAY-TO-DAY MANAGEMENT OF THE PORTFOLIO OF THE SHORT-TERM GOVERNMENT-CORPORATE
INCOME FUND AS OF JULY 16, 1996. HE JOINED WELLS FARGO BANK IN 1988 AS A TAXABLE
MONEY MARKET PORTFOLIO SPECIALIST. HIS EXPERIENCE INCLUDES A POSITION WITH A
PRIVATE MONEY MANAGEMENT FIRM WITH MUTUAL FUND INVESTMENT OPERATIONS. MR. SMITH
HOLDS A B.A. DEGREE FROM THE UNIVERSITY OF SAN DIEGO AND IS A CHARTERED
FINANCIAL ANALYST.
The Overland Express Short-Term Government Corporate Income Fund seeks to earn
current income, while managing principal volatility, by investing primarily in
short-term U.S. government obligations and investment-grade corporate
obligations.
1996'S FIXED INCOME MARKET
The outlook at the beginning of 1996 was full of optimism for the U.S. fixed
income markets. The Federal Reserve lowered the federal funds target rate 0.25%
from 5.50% to 5.25% in January. The easing was expected to be the first of a
series and market interest rates decreased significantly. One-year Treasury
bills reached a low yield of 4.78%. The bond market rally came to an abrupt end
in mid-February as the U.S. economy showed signs of surprising strength.
Interest rates quickly increased and by mid-summer, the one-year Treasury bill
was yielding 5.96%. Although the federal funds target rate remained unchanged
for the remainder of the year, short-term interest rates fluctuated greatly and
as 1996 came to a close, the one-year Treasury bill was yielding 5.48%.
FUND REVIEW
The Overland Express Short-Term Government-Corporate Income Fund invests its
assets in short-term U.S. government obligations and investment-grade corporate
obligations. Because the securities in the Fund maintained a longer average
maturity than those of its benchmark, the Merrill Lynch 1-Year Treasury Bill
Index, the performance of the Fund was affected by the dramatic
18
<PAGE>
OVERLAND EXPRESS SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
increase in interest rates during the first half of the year compared to its
benchmark. Accordingly, the average maturity of the Fund was shortened to one
year in the second quarter. The Fund's performance in the second half of the
year remained competitive with its benchmark.
Treasury securities were an emphasis throughout a majority of 1996 due to the
asset size of the Fund. As the Fund grows in size, U.S. government agency and
corporate securities will have an increased emphasis. As of year end, 29% of the
Fund was invested in agency securities and 5% was invested in corporate
securities. Treasury securities represented 61% of the Fund with the remaining
5% in overnight repurchase agreements.
1997 STRATEGY
The U.S. economy experienced increased growth in the month of December 1996. We
believe that this strength will continue into the first quarter and interest
rates are expected to rise moderately as the Federal Reserve debates raising the
federal funds target rate. Additionally, eighteen month maturities have become
attractive as the yield spread between one- and two-year Treasuries has
increased. As 1997 begins, we intend to maintain the average maturity of the
Fund at one year.
THE SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND (THE "FEEDER") AND THE
SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO (THE "MASTER") ARE
ORGANIZED AS A "MASTER-FEEDER" STRUCTURE. INSTEAD OF INVESTING DIRECTLY IN
INDIVIDUAL PORTFOLIO SECURITIES, THE FEEDER FUND, WHICH IS OFFERED TO THE
PUBLIC, HOLDS INTERESTS IN THE MASTER FUND WHICH INVESTS IN INDIVIDUAL
SECURITIES. REFERENCES TO THE FUND ARE TO THE FEEDER OR MASTER, AS THE CONTEXT
REQUIRES. THE MASTER PORTFOLIO IS ADVISED BY WELLS FARGO BANK. INVESTORS SHOULD
NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND, WHILE THE MERRILL
LYNCH 1-YEAR TREASURY BILL INDEX IS AN UNMANAGED INDEX AND DOES NOT INCUR
EXPENSES.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY GOVERNMENT AGENCY, NOR BY WELLS FARGO BANK.
19
<PAGE>
OVERLAND EXPRESS SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND COMPARED WITH THE
MERRILL LYNCH 1-YEAR TREASURY BILL INDEX
The chart on the next page shows the performance of the Overland Express
Short-Term Government-Corporate Income Fund compared with the Merrill Lynch
1-Year Treasury Bill Index. The chart assumes a hypothetical $10,000 initial
investment. Class A shares reflect all Fund expenses and the maximum 3% initial
sales charge. Investors should note that the Fund is a professionally managed
mutual fund, while the Index is an unmanaged index and does not incur expenses.
If Fund operating expenses had been applied to the Index, its performance would
have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum 3%
initial sales charge, and represents the average annual increase in value of the
investment over the indicated periods, assuming reinvestment of dividends and
capital gains distributions at net asset value. Your investment return and
principal value will fluctuate with market conditions, so that your shares, when
redeemed, may be worth more or less than their original cost. Past performance
is not predictive of future performance. The Fund's inception was September 19,
1994.
20
<PAGE>
OVERLAND EXPRESS SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND EXPRESS
SHORT-TERM MERRILL LYNCH
ONE YEAR
GOVERNMENT-CORPORATE TREASURY
INCOME FUND BILL INDEX
<S> <C> <C>
Inception $ 9,700 $ 10,000
Sep-94 9,714 10,015
Oct-94 9,744 10,054
Nov-94 9,696 10,049
Dec-94 9,727 10,083
Jan-95 9,837 10,184
Feb-95 9,962 10,273
Mar-95 9,995 10,333
Apr-95 10,059 10,392
May-95 10,129 10,485
Jun-95 10,181 10,545
Jul-95 10,229 10,597
Aug-95 10,279 10,648
Sep-95 10,311 10,692
Oct-95 10,384 10,756
Nov-95 10,457 10,820
Dec-95 10,510 10,881
Jan-96 10,602 10,950
Feb-96 10,585 10,963
Mar-96 10,592 10,993
Apr-96 10,619 11,031
May-96 10,648 11,071
Jun-96 10,696 11,130
Jul-96 10,746 11,172
Aug-96 10,774 11,224
Sep-96 10,844 11,301
Oct-96 10,939 11,384
Nov-96 10,989 11,440
Dec-96 11,018 11,479
</TABLE>
................................................................................
PERFORMANCE OF THE SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR SINCE 9/19/94 INCEPTION
<S> <C> <C> <C>
..................................................................................................................
With Maximum 3.0% Sales Charge 1.59% 4.36%
Without Sales Charge 4.83% 5.72%
</TABLE>
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE.
DURING THE PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
21
<PAGE>
OVERLAND EXPRESS SHORT-TERM MUNICIPAL INCOME FUND
MS. LAURA L. MILNER, PORTFOLIO CO-MANAGER OF THE SHORT-TERM MUNICIPAL INCOME
FUND, JOINED WELLS FARGO BANK IN 1988. HER BACKGROUND INCLUDES OVER SEVEN YEARS
EXPERIENCE SPECIALIZING IN SHORT- AND LONG-TERM MUNICIPAL OBLIGATIONS WITH
SALOMON BROTHERS. SHE IS A MEMBER OF THE NATIONAL FEDERATION OF MUNICIPAL
ANALYSTS AND ITS CALIFORNIA CHAPTER.
MR. DAVID KLUG, PORTFOLIO CO-MANAGER FOR THE SHORT-TERM MUNICIPAL INCOME FUND,
HAS MANAGED MUNICIPAL BOND PORTFOLIOS FOR WELLS FARGO BANK FOR OVER NINE YEARS.
PRIOR TO JOINING WELLS FARGO BANK, HE MANAGED THE MUNICIPAL BOND PORTFOLIO FOR A
MAJOR PROPERTY AND CASUALTY INSURANCE COMPANY. HIS INVESTMENT EXPERIENCE EXCEEDS
20 YEARS AND INCLUDES ALL ASPECTS OF TAX-EXEMPT FIXED-INCOME INVESTMENTS. HE
HOLDS AN M.B.A. FROM THE UNIVERSITY OF CHICAGO AND IS A MEMBER OF THE NATIONAL
FEDERATION OF MUNICIPAL ANALYSTS AND ITS CALIFORNIA CHAPTER. MR. KLUG AND MS.
MILNER HAVE CO-MANAGED THE MUNICIPAL INCOME MASTER PORTFOLIO SINCE ITS INCEPTION
IN MAY 1994.
The Overland Express Short-Term Municipal Income Fund seeks to provide investors
with a high level of income exempt from federal income taxes while managing
principal volatility. The Fund invests substantially all of its assets in
investment-grade municipal securities.
FUND REVIEW
The Fund posted a return of 3.62%, slightly underperforming its benchmark, the
Lehman Brothers Municipal Bond Index. The Fund's performance resulted from
1996's rising interest-rate environment. In the first quarter, the economy
appeared to have slowed enough to warrant continued easing of federal funds
target rate by the Federal Reserve. As a result, we positioned the Fund to hold
securities with longer average maturities. By the end of the second quarter,
however, it became clear that the economy was strong enough to preclude the
Federal Reserve from easing the federal funds target rate. Because the value of
a longer-term bond falls at a faster rate than that of a shorter-term bond in a
rising interest-rate environment, we defensively shortened the average maturity
of the Fund.
SECURITY SELECTION
Although there are a number of factors we take into consideration when it comes
to security selection, we place an emphasis on credit quality. The Fund attempts
to provide investors with a diversified portfolio of AAA-rated securities.
Another consideration in security selection is yield curve analysis. Our
investment strategy involves analyzing major trends in the economy and
determining positions on the yield curve that appear to have the best aging
characteristics. The Fund also focuses on securities that have an average
maturity between 90 days and two years.
1997 STRATEGY
We believe that the Federal Reserve will maintain a neutral stance with a
possibility of raising the federal funds target rate slightly during the first
half of 1997. In the new year, credit monitoring will play a more important role
than in 1996 as recent events such as tax legislation in some states and public
utility deregulation impact certain issues.
22
<PAGE>
OVERLAND EXPRESS SHORT-TERM MUNICIPAL INCOME FUND
Should this environment continue, we will maintain a neutral strategy for 1997.
As always, credit analysis will be a focus in our strategy and the portfolio
will be positioned to maintain the highest credit quality possible.
THE SHORT-TERM MUNICIPAL INCOME FUND (THE "FEEDER") AND THE SHORT-TERM MUNICIPAL
INCOME MASTER PORTFOLIO (THE "MASTER") ARE ORGANIZED AS A "MASTER-FEEDER"
STRUCTURE. INSTEAD OF INVESTING DIRECTLY IN INDIVIDUAL PORTFOLIO SECURITIES, THE
FEEDER FUND, WHICH IS OFFERED TO THE PUBLIC, HOLDS INTERESTS IN THE MASTER WHICH
INVESTS IN INDIVIDUAL SECURITIES. REFERENCES TO THE FUND ARE TO THE FEEDER OR
MASTER, AS THE CONTEXT REQUIRES. THE MASTER PORTFOLIO IS ADVISED BY WELLS FARGO
BANK.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS AN UNMANAGED INDEX THAT INCLUDES
APPROXIMATELY 15,000 BONDS.
23
<PAGE>
OVERLAND EXPRESS SHORT-TERM MUNICIPAL INCOME FUND
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS
SHORT-TERM MUNICIPAL INCOME FUND COMPARED WITH THE LEHMAN BROTHERS MUNICIPAL
BOND INDEX
The chart on the next page shows the performance of the Overland Express
Short-Term Municipal Income Fund compared with the Lehman Brothers Municipal
Bond Index. The chart assumes a hypothetical $10,000 initial investment. Class A
shares reflect all Fund expenses and the maximum 3% initial sales charge. The
Lehman Brothers Municipal Bond Index is an unmanaged index that includes
approximately 15,000 bonds. Investors should note that the Fund is a
professionally managed mutual fund, while the Index is unmanaged, does not incur
expenses and is not available directly for investment. If Fund operating
expenses had been applied to the Index, its performance would have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum 3%
initial sales charge, and represents the average annual increase in value of the
investment over the indicated periods, assuming reinvestment of dividends and
capital gains distributions at net asset value. Your investment return and
principal value will fluctuate with market conditions, so that your shares, when
redeemed, may be worth more or less than their original cost. Past performance
is not predictive of future performance. The Fund's inception was June 3, 1994.
24
<PAGE>
OVERLAND EXPRESS SHORT-TERM MUNICIPAL INCOME FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND EXPRESS
SHORT-TERM LEHMAN BROTHERS
MUNICIPAL INCOME CLASS A MUNICIPAL BOND INDEX
<S> <C> <C>
Inception $ 9,700 $ 10,000
Jun-94 9,663 9,939
Jul-94 9,726 10,121
Aug-94 9,665 10,156
Sep-94 9,679 10,007
Oct-94 9,688 9,829
Nov-94 9,696 9,651
Dec-94 9,713 9,863
Jan-95 9,790 10,145
Feb-95 9,866 10,440
Mar-95 9,926 10,560
Apr-95 9,962 10,573
May-95 10,040 10,910
Jun-95 10,079 10,815
Jul-95 10,113 10,917
Aug-95 10,172 11,055
Sep-95 10,188 11,125
Oct-95 10,243 11,287
Nov-95 10,278 11,475
Dec-95 10,306 11,585
Jan-96 10,362 11,673
Feb-96 10,374 11,594
Mar-96 10,367 11,445
Apr-96 10,402 11,413
May-96 10,417 11,409
Jun-96 10,450 11,533
Jul-96 10,506 11,637
Aug-96 10,540 11,634
Sep-96 10,553 11,797
Oct-96 10,609 11,931
Nov-96 10,665 12,149
Dec-96 10,679 12,096
</TABLE>
................................................................................
PERFORMANCE OF THE SHORT-TERM MUNICIPAL INCOME FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR SINCE 6/3/94 INCEPTION
<S> <C> <C> <C>
.................................................................................................................
With Maximum 3.0% Sales Charge 0.59% 2.61%
Without Sales Charge 3.62% 3.79%
</TABLE>
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE.
DURING THE PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
25
<PAGE>
OVERLAND EXPRESS SMALL CAP STRATEGY FUND
JON HICKMAN, CO-PORTFOLIO MANAGER. MR. HICKMAN HAS WORKED FOR WELLS FARGO BANK
SINCE 1986. HE HAS APPROXIMATELY 15 YEARS OF EXPERIENCE IN THE INVESTMENT
MANAGEMENT FIELD AND IS A MEMBER OF WELLS FARGO BANK'S EQUITY STRATEGY
COMMITTEE. MR. HICKMAN HAS A B.A. AND AN M.B.A. IN FINANCE FROM BRIGHAM YOUNG
UNIVERSITY AND HAS CO-MANAGED THE FUND SINCE ITS INCEPTION.
STEVE ENOS, CO-PORTFOLIO MANAGER. MR. ENOS IS A MEMBER OF THE WELLS FARGO GROWTH
EQUITY TEAM. HE BEGAN HIS CAREER WITH FIRST INTERSTATE BANK, WHERE HE WAS
ASSISTANT VICE PRESIDENT AND PORTFOLIO MANAGER. FROM 1991 TO 1993 HE WAS A
PRINCIPAL AT DOLAN CAPITAL MANAGEMENT WHERE HE MANAGED BOTH PERSONAL AND PENSION
PORTFOLIOS. HE RECEIVED HIS UNDERGRADUATE DEGREE IN ECONOMICS FROM THE
UNIVERSITY OF CALIFORNIA AT DAVIS. HE IS A CHARTERED FINANCIAL ANALYST AND A
MEMBER OF THE ASSOCIATION FOR INVESTMENT MANAGEMENT AND RESEARCH.
The Overland Express Small Cap Strategy Fund seeks to attain an above-average
level of capital appreciation in order to provide investors with a rate of total
return exceeding that of the Russell 2000 Index, before fees and expenses, over
a time horizon of three to five years. The Fund seeks this objective through the
active management of a broadly diversified portfolio of growth oriented, common
stocks of smaller companies expected to experience strong growth in revenues,
earnings and assets.
A NEW FUND OFFERING
The Small Cap Strategy Fund is Overland Express' newest Fund offering. The Fund
was first offered for sale on September 16, 1996. Discussions regarding returns
and economic factors prior to this date refer to the performance of the Small
Capitalization Growth Fund for Employment Retirement Plans, an unregistered
investment collective fund, which commenced operations on November 2, 1994. The
Small Cap Master Portfolio is the successor to the assets of the Small
Capitalization Growth Fund for Employment Retirement Plans.
THE SMALL CAP MARKET
The small cap sector of the market underperformed several other major indices.
The Russell 2000 was up 16.49% versus the S&P 500 at 22.84%. This marked
underperformance of small cap issues makes the outlook for the small cap arena
more attractive than usual. The fourth quarter of 1996 was a large cap market,
with large cap issues performing better than small cap issues. The valuations on
larger cap issues have become very high, making it harder to buy into these
stocks at reasonable prices. We feel 1997 will be an exceptional year for the
smaller cap issues.
SMALL CAP INVESTING
Through small cap investing, we target smaller companies that we believe have
the potential to grow faster and are often the originators of new products and
innovative technologies. The Fund's investment strategy is based on the belief
that earnings growth drives stock prices. We look for issues with earnings
growth rates of 20% or more and a forward price/earnings ratio (P/E) that is
less than the growth rate. A distinguishing factor in our strategy is the way we
divide the Fund's portfolio between two categories: core holdings and tactical
opportunities. Stocks that fall in the core holdings category are ones that we
plan to own for a period of three to five years. This
26
<PAGE>
OVERLAND EXPRESS SMALL CAP STRATEGY FUND
comprises about 60% of the portfolio. These are companies that have strong
underlying earnings growth rates. We also maintain approximately a 40% trading
position in tactical opportunities. Tactical opportunities are those stocks that
are expected to be influenced by some type of short-term catalyst. This could be
a change in management or a product introduction.
We also practice a strict sell discipline. The average cap size of the Fund is
just over $400 million. In order to keep the Fund true to its small cap
objective, we will sell a security when the market capitalization gets close to
$2 billion. This helps to keep the Fund focused on the smaller cap issues.
Some of the Fund's holdings that did very well in 1996 include Envoy, Halo,
Applied Graphics, Paul Harris Stores and E*Trade Group. Envoy, the Fund's
largest holding, is an example of a core holding. It is presently a market
leader in health claims processing, providing electronic transaction processing
services for the healthcare industry. As more and more transactions are being
processed electronically through doctor's offices and hospitals, the demand for
this type of service is growing.
E* Trade Group Inc. is an example of an issue that we classified as a tactical
opportunity. E*Trade Group provides on-line discount brokerage services. We
classified this as a tactical opportunity because we felt that the stock would
benefit from the activity in the stock market and the increased interest in
electronic trading.
In our investment strategy we also take advantage of trends that occur in the
business environment. One trend that we recognized early was contracting: the
use of outside vendors to perform specialized functions for larger businesses.
As large corporations focus on their core businesses, the contracting out of
smaller, specialized functions becomes an efficient part of their business
plans. Recognizing a strong opportunity for growth, we built positions in
companies such as Vanstar Corporation. Vanstar Corporation provides outsourcing
services and products designed to build and manage personal computer network
infrastructures for large companies.
1997 STRATEGY
Seeking innovative and compelling growth opportunities within the small
capitalization segment of the market, our strategy and stock selection criteria
for 1997 will remain the same. We will place emphasis on the technology, health
care and oil service sectors. We will also be increasing our exposure to
bio-technology issues and concentrating on the upper end of the small cap
sector--those issues with a market capitalization of $500 million to $1 billion.
THE S&P 500 INDEX IS AN UNMANAGED INDEX THAT TRACKS THE PERFORMANCE OF 500
INDUSTRIAL, TRANSPORTATION, UTILITY AND FINANCIAL COMPANIES.
THE RUSSELL 2000 INDEX IS A SUBSET OF THE RUSSELL 3000 INDEX AND INCLUDES 2,000
OF THE SMALLEST STOCKS REPRESENTING APPROXIMATELY 11% OF THE U.S. EQUITY MARKET.
THE SMALL CAP STRATEGY FUND (THE "FEEDER") AND THE SMALL CAP MASTER PORTFOLIO
(THE "MASTER") ARE ORGANIZED AS A "MASTER-FEEDER" STRUCTURE. INSTEAD OF
INVESTING DIRECTLY IN INDIVIDUAL PORTFOLIO SECURITIES, THE FEEDER FUND, WHICH IS
OFFERED TO THE PUBLIC, HOLDS INTERESTS IN THE MASTER WHICH INVESTS IN INDIVIDUAL
SECURITIES. REFERENCES TO THE FUND ARE TO THE FEEDER OR MASTER, AS THE CONTEXT
REQUIRES. THE FUND COMMENCED OPERATIONS AND BEGAN TO INVEST IN THE MASTER ON
SEPTEMBER 16, 1996. THE MASTER IS ADVISED BY WELLS FARGO BANK.
27
<PAGE>
OVERLAND EXPRESS SMALL CAP STRATEGY FUND
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS
SMALL CAP STRATEGY FUND COMPARED WITH THE S&P 500 INDEX AND THE RUSSELL 2000
INDEX.
The chart on the next page shows the performance of the Overland Express Small
Cap Strategy Fund compared with the S&P 500 Index and the Russell 2000 Index.
The chart assumes a hypothetical $10,000 initial investment. The Standard and
Poor's 500 Index is an unmanaged index of 500 widely held common stocks,
representing industrial, financial, utility and transportation companies, listed
on the New York Stock Exchange, American Stock Exchange and the over-the-counter
market. The Russell 2000 Index is a subset of the Russell 3000 Index and
includes 2,000 of the smallest stocks representing approximately 11% of the U.S.
equity market. Investors should note that the Fund is a professionally managed
mutual fund, while the indices are unmanaged, do not incur expenses and are not
available directly for investment. If Fund operating expenses had been applied
to the indices, their performance would have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum
4.5% initial sales charge for Class A; and for class D shares, the 1% contingent
deferred sales charge (CDSC). Average annual total return represents the average
annual increase in value of the investment over the indicated periods, assuming
reinvestment of dividends and capital gains distributions at net asset value.
Your investment return and principal value will fluctuate with market
conditions, so that your shares, when redeemed, may be worth more or less than
their original cost. Past performance is not predictive of future performance.
Class A and D shares have been offered since September 16, 1996. The Small
Capitalization Growth Fund for Employment Retirement Plans commenced operations
on November 2, 1994. The Small Cap Master Portfolio is the successor to the
assets of the Small Capitalization Growth Fund for Employment Retirement Plans.
The average annual total return for 1-year with CDSC reflects the contingent
deferred sales charge imposed on redemptions within the first year of purchasing
shares.
28
<PAGE>
OVERLAND EXPRESS SMALL CAP STRATEGY FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND SMALL CAP STATEGY FUND RUSSELL 2000
CLASS A INDEX S & P 500
<S> <C> <C> <C>
Inception $9,550 $10,000 $10,000
Nov-94 $9,665 $9,578 $9,636
Dec-94 $10,075 $9,817 $9,779
Jan-95 $10,094 $9,680 $10,032
Feb-95 $10,648 $10,061 $10,423
Mar-95 $11,212 $10,226 $10,730
Apr-95 $11,517 $10,438 $11,046
May-95 $11,775 $10,598 $11,486
Jun-95 $13,007 $11,122 $11,753
Jul-95 $14,421 $11,753 $12,142
Aug-95 $14,449 $11,973 $12,172
Sep-95 $15,337 $12,172 $12,686
Oct-95 $14,860 $11,618 $12,640
Nov-95 $16,273 $12,101 $13,195
Dec-95 $16,989 $12,390 $13,450
Jan-96 $17,314 $12,367 $13,907
Feb-96 $18,317 $12,741 $14,036
Mar-96 $19,148 $12,971 $14,171
Apr-96 $21,688 $13,657 $14,379
May-96 $23,359 $14,190 $14,749
Jun-96 $21,593 $13,592 $14,805
Jul-96 $18,432 $12,392 $14,151
Aug-96 $20,389 $13,093 $14,449
Sep-96 $20,817 $13,584 $15,261
Oct-96 $19,411 $13,356 $15,683
Nov-96 $19,859 $13,888 $16,867
Dec-96 $20,471 $14,221 $16,533
</TABLE>
THE RETURN FOR CLASS D SHARES OF THE SMALL CAP STRATEGY FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURE.
................................................................................
PERFORMANCE OF THE SMALL CAP STRATEGY FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR SINCE 11/2/94 INCEPTION
<S> <C> <C> <C>
................................................................................................................
With Maximum 4.5% Sales Charge 15.06% 39.20%
Without Sales Charge 20.49% 42.18%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS 1 YR SINCE 11/2/94 INCEPTION
<S> <C> <C> <C>
................................................................................................................
With 1.0% Contingent Deferred Sales Charge 19.01% 41.09%
Without Contingent Deferred Sales Charge 19.57% 41.09%
</TABLE>
THE SMALL CAP STRATEGY FUND INVESTS ONLY IN INTERESTS OF THE MASTER INVESTMENT
TRUST SMALL CAP MASTER PORTFOLIO. THE SMALL CAP MASTER PORTFOLIO IS THE
SUCCESSOR TO THE ASSETS OF THE SMALL CAPITALIZATION GROWTH FUND FOR EMPLOYEE
RETIREMENT PLANS (THE "COLLECTIVE INVESTMENT FUND"). THE SMALL CAP STRATEGY FUND
HAS THE SAME INVESTMENT OBJECTIVES AND POLICIES AS THE COLLECTIVE INVESTMENT
FUND. THE INCEPTION DATE OF THE CLASS A AND D SHARES OF THE SMALL CAP STRATEGY
FUND WAS SEPTEMBER 16, 1996. THE INCEPTION DATE OF THE COLLECTIVE INVESTMENT
FUND WAS NOVEMBER 2, 1994. PERFORMANCE FIGURES SHOWN FOR PERIODS PRIOR TO
SEPTEMBER 16, 1996 REFLECT THE PERFORMANCE OF THE COLLECTIVE INVESTMENT FUND AND
HAVE BEEN ADJUSTED TO REFLECT, WHERE INDICATED, THE EXPENSES AND SALES CHARGES
APPLICABLE TO THE CLASS A AND D SHARES.
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN FOR 1-YEAR
WITH CDSC REFLECTS THE CONTINGENT DEFERRED SALES CHARGE WHICH IS IMPOSED ON
REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASING SHARES.
DURING THIS PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
29
<PAGE>
OVERLAND EXPRESS STRATEGIC GROWTH FUND
JON HICKMAN, CO-PORTFOLIO MANAGER. MR. HICKMAN HAS WORKED FOR WELLS FARGO BANK
SINCE 1986. HE HAS APPROXIMATELY 15 YEARS OF EXPERIENCE IN THE INVESTMENT
MANAGEMENT FIELD AND IS A MEMBER OF WELLS FARGO BANK'S EQUITY STRATEGY
COMMITTEE. MR. HICKMAN HAS A B.A. AND AN M.B.A. IN FINANCE FROM BRIGHAM YOUNG
UNIVERSITY AND HAS CO-MANAGED THE FUND SINCE ITS INCEPTION.
STEVE ENOS, CO-PORTFOLIO MANAGER. MR. ENOS IS A MEMBER OF THE WELLS FARGO GROWTH
EQUITY TEAM. HE BEGAN HIS CAREER WITH FIRST INTERSTATE BANK, WHERE HE WAS
ASSISTANT VICE PRESIDENT AND PORTFOLIO MANAGER. FROM 1991 TO 1993 HE WAS A
PRINCIPAL AT DOLAN CAPITAL MANAGEMENT WHERE HE MANAGED BOTH PERSONAL AND PENSION
PORTFOLIOS. HE RECEIVED HIS UNDERGRADUATE DEGREE IN ECONOMICS FROM THE
UNIVERSITY OF CALIFORNIA AT DAVIS. HE IS A CHARTERED FINANCIAL ANALYST AND A
MEMBER OF THE ASSOCIATION FOR INVESTMENT MANAGEMENT AND RESEARCH.
The Overland Express Strategic Growth Fund seeks to attain an above-average
level of capital appreciation through the active management of a broadly
diversified portfolio of equity securities of companies expected to experience
strong growth in revenues, earnings and assets.
FUND REVIEW
The Overland Express Strategic Growth Fund Class A shares posted a 10.32% return
for 1996 and a 22.57% return since inception, after waived expenses and without
sales charges. The Fund's performance is attributed to the Fund's strict
investment strategy based on the belief that earnings growth drives stock
prices. In following this strategy, we seek out those companies whose earnings
growth rate exceeds 15% and are selling at a price/earnings ratio ("P/E") less
than the growth rate. We also place an emphasis on the management teams of the
companies. We make every effort to meet with the management teams and assess
their ability to make a company grow.
Despite the year's rise in interest rates, 1996's overall environment created a
favorable atmosphere for the Fund. A strong economy, good earnings growth and
relatively stable interest rates helped the Fund achieve positive returns. A
continued inflow of money into equity mutual funds also contributed to this
favorable environment, causing high demand for equity stocks throughout 1996.
PORTFOLIO THEMES
During the year, the Fund paid particular attention to technology, healthcare
and oil service stocks. The larger cap technology names and the oil service
sector were generally strong performers in 1996. The healthcare sector, although
weak from October through the end of the year, helped boost Fund performance.
Within the healthcare sector, we sought out companies that demonstrated advances
in medical equipment and treatment. Anesta Corporation is one example. This is a
bio-tech company headquartered in Utah that specializes in a unique drug
delivery technique. The company uses a lollipop type product that delivers
medication through the mucosal lining of the mouth while the patient sucks on
the lollipop. We also recently added positions in a Canadian pharmaceutical
company, BioChem Pharma, Inc. This company conducts research, development and
marketing of
30
<PAGE>
OVERLAND EXPRESS STRATEGIC GROWTH FUND
high quality products for the prevention, treatment and detection of human
diseases. The purchase of BioChem Pharma is based on our confidence of a
positive outlook for its oral hepatitis drug, lamivudine.
1996's overall weakness in the technology sector provided the Fund with the
opportunity to build positions in several dominant software providers. We have
continued to hold Cisco Systems, Inc. in the Fund's portfolio. Cisco Systems
Inc. develops, markets and provides support to multi-protocol internetworking
systems, enabling customers to build large scale computer networks. Another
example where the demand for applications is great is in the area of remote
computer access. We hold positions in U.S. Robotics, a leading provider of
computer modems. This industry is in a major upgrade cycle as users move up to
56 kilobit modems. U.S. Robotics' products are software upgradeable, which we
believe gives them a major competitive advantage over other modem manufacturers.
Although security selection is not sector driven, we paid attention to the oil
service industry. After 16 years of weak demand, no capacity additions and a
very weak pricing environment, the industry enjoyed an extended period of high
demand during 1996. This increased demand for drilling has equipment rental
rates rising. We believe that these rates will continue to increase through next
year. Utilization is high and major additions to capacity will take two to three
years even if companies start adding capacity this quarter. As a result, we
believe earnings growth will be extremely strong for the next two years
throughout the industry. We like several companies in this group such as Reading
and Bates, Transocean Offshore, Ensco International and Veritas.
The Fund continues to be an active participant in initial public offerings
(IPOs). We will consider a particular IPO when the issue meets the overall
investment criteria. The Fund is a cost effective way for an individual investor
to participate in the IPO market.
1997 STRATEGY
For 1997, we will continue to invest in quality growth issues with attractive
prices. One sector that we will be focusing on is the biotechnology sector. The
opportunities in this sector are vast . We are currently adding new names and
expanding current positions within this group. As always we will continue to
look for strong management teams and issues that have a distinct franchise in
their industry as well as great prospects for future earnings growth.
THE S&P 500 INDEX IS AN UNMANAGED INDEX THAT TRACKS THE PERFORMANCE OF 500
INDUSTRIAL, TRANSPORTATION, UTILITY AND FINANCIAL COMPANIES.
THE STRATEGIC GROWTH FUND IS ORGANIZED AS A "MASTER-FEEDER" STRUCTURE. INSTEAD
OF INVESTING DIRECTLY IN INDIVIDUAL PORTFOLIO SECURITIES, THE FEEDER FUND, WHICH
IS OFFERED TO THE PUBLIC, HOLDS INTEREST IN THE CAPITAL APPRECIATION MASTER
PORTFOLIO (THE "MASTER PORTFOLIO") WHICH IN TURN, INVESTS IN INDIVIDUAL
SECURITIES. PRIOR TO FEBRUARY 20, 1996, THE FUND INVESTED DIRECTLY IN PORTFOLIO
SECURITIES. ON FEBRUARY 20, 1996, THE FUND'S ASSETS WERE TRANSFERRED TO THE
MASTER PORTFOLIO AND THE FUND AND MASTER PORTFOLIO COMMENCED OPERATIONS AS A
MASTER-FEEDER STRUCTURE. REFERENCES TO THE FUND ARE TO THE FEEDER OR MASTER, AS
THE CONTEXT REQUIRES. THE MASTER PORTFOLIO IS ADVISED BY WELLS FARGO BANK.
31
<PAGE>
OVERLAND EXPRESS STRATEGIC GROWTH FUND
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS STRATEGIC
GROWTH FUND COMPARED WITH THE S&P 500 INDEX
The chart on the next page shows the performance of the Overland Express
Strategic Growth Fund compared with the S&P 500 Index. The chart assumes a
hypothetical $10,000 initial investment. Class A shares reflect all Fund
expenses and the maximum 4.5% initial sales charge. The Standard and Poor's 500
Index is an unmanaged index of 500 widely held common stocks, representing
industrial, financial, utility and transportation companies, listed on the New
York Stock Exchange, American Stock Exchange and the over-the-counter market.
Investors should note that the Fund is a professionally managed mutual fund,
while the Index is unmanaged, does not incur expenses and is not available
directly for investment. If Fund operating expenses had been applied to the
Index, its performance would have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum
4.5% initial sales charge, and for class D shares, the 1% contingent deferred
sales charge ("CDSC"). Average annual total return represents the average annual
increase in value of the investment over the indicated periods, assuming
reinvestment of dividends and capital gains distributions at net asset value.
Your investment return and principal value will fluctuate with market
conditions, so that your shares, when redeemed, may be worth more or less than
their original cost. Past performance is not predictive of future performance.
Class A shares have been offered since January 20, 1993, and class D shares have
been offered since July 1, 1993. The average annual total return for 1-year with
CDSC reflects the contingent deferred sales charge imposed on redemptions within
the first year of purchasing shares.
32
<PAGE>
OVERLAND EXPRESS STRATEGIC GROWTH FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND EXPRESS
STRATEGIC S & P 500
GROWTH FUND CLASS A INDEX
<S> <C> <C>
Inception $ 9,550 $ 10,000
Jan-93 9,569 10,084
Feb-93 9,789 10,221
Mar-93 10,305 10,437
Apr-93 10,219 10,184
May-93 11,242 10,457
Jun-93 11,355 10,488
Jul-93 11,384 10,445
Aug-93 12,149 10,842
Sep-93 12,918 10,759
Oct-93 12,928 10,981
Nov-93 12,507 10,876
Dec-93 13,042 11,008
Jan-94 13,724 11,382
Feb-94 13,743 11,073
Mar-94 12,419 10,591
Apr-94 12,518 10,726
May-94 12,506 10,902
Jun-94 11,609 10,635
Jul-94 11,915 10,984
Aug-94 13,042 11,435
Sep-94 13,002 11,155
Oct-94 13,625 11,406
Nov-94 13,279 10,990
Dec-94 13,593 11,153
Jan-95 13,388 11,442
Feb-95 14,135 11,888
Mar-95 14,841 12,239
Apr-95 15,076 12,596
May-95 15,546 13,101
Jun-95 17,449 13,405
Jul-95 19,055 13,849
Aug-95 19,228 13,883
Sep-95 19,709 14,463
Oct-95 19,085 14,417
Nov-95 19,510 15,050
Dec-95 19,372 15,341
Jan-96 19,682 15,862
Feb-96 20,592 16,010
Mar-96 20,673 16,163
Apr-96 23,379 16,401
May-96 24,335 16,822
Jun-96 22,527 16,886
Jul-96 19,533 16,140
Aug-96 20,731 16,481
Sep-96 22,354 17,407
Oct-96 21,295 17,887
Nov-96 22,079 19,238
Dec-96 21,371 18,857
</TABLE>
THE RETURN FOR CLASS D SHARES OF THE STRATEGIC GROWTH FUND WILL VARY FROM THE
RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURE.
................................................................................
PERFORMANCE OF THE STRATEGIC GROWTH FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR 3 YR SINCE 1/20/93 INCEPTION
<S> <C> <C> <C> <C>
................................................................................................................
With Maximum 4.5% Sales Charge 5.37% 16.11% 21.15%
Without Sales Charge 10.32% 17.90% 22.57%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS 1 YR 3 YR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C>
................................................................................................................
With 1.0% Contingent Deferred Sales Charge 8.46% 17.03% 18.75%
Without Contingent Deferred Sales Charge 9.46% 17.03% 18.75%
</TABLE>
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN FOR 1-YEAR
WITH CDSC REFLECTS THE CONTINGENT DEFERRED SALES CHARGE WHICH IS IMPOSED ON
REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASING SHARES.
DURING THIS PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
33
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
34
<PAGE>
OVERLAND EXPRESS U.S. GOVERNMENT INCOME FUND
PAUL SINGLE, SENIOR TAXABLE SPECIALIST/CO-PORTFOLIO MANAGER. MR. SINGLE HAS
MANAGED TAXABLE BOND PORTFOLIOS FOR OVER A DECADE WITH SPECIFIC EXPERTISE IN
MORTGAGE-BACKED SECURITIES (MBS). PRIOR TO JOINING WELLS FARGO BANK IN 1988, HE
WAS A SENIOR PORTFOLIO MANAGER FOR BENHAM CAPITAL MANAGEMENT GROUP. MR. SINGLE
RECEIVED HIS B.S. FROM SPRINGFIELD COLLEGE. HE HAS CO-MANAGED THE FUND SINCE ITS
INCEPTION.
SCOTT SMITH, CO-PORTFOLIO MANAGER. MR. SMITH JOINED WELLS FARGO BANK IN 1988 AS
A TAXABLE MONEY MARKET PORTFOLIO SPECIALIST. HIS EXPERIENCE INCLUDES A POSITION
WITH A PRIVATE MONEY MANAGEMENT FIRM CONDUCTING MUTUAL FUND INVESTMENT
OPERATIONS. MR. SMITH HOLDS A B.A. DEGREE FROM THE UNIVERSITY OF SAN DIEGO AND
IS A CHARTERED FINANCIAL ANALYST.
The Overland Express U.S. Government Income Fund is a diversified portfolio
which seeks to provide investors with current income, while preserving capital,
by investing in a portfolio of securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities.
1996 INTEREST-RATE ENVIRONMENT
Interest-rate shifts continued to have an impact on the performance of
mortgage-backed securities during 1996. Interest rates rose gradually during the
first half of 1996. This decrease helped the performance of mortgage securities
relative to treasury securities.
FUND REVIEW
We employ a top-down approach to fixed-income investing. Criteria for security
selections are dictated by current market conditions. The Fund benefited from
its large holding of "seasoned" mortgages. We restructured the mortgage
portfolio to hold "seasoned" Government National Mortgage Association securities
which are typically higher-paying with less pre-payment risk than other mortgage
securities because they have already undergone a prepayment cycle. Issued almost
10 years ago, the values of these types of mortgages increased in 1996 relative
to more recently issued mortgages as purchases by global investors, especially
hedge funds, increased the demand for seasoned securities.
1997 STRATEGY
In keeping with the Fund's objective to provide investors with current income,
while preserving capital, we will continue to manage the Fund to take advantage
of changing market conditions. In 1997, we anticipate interest rates to move in
a relatively limited range with the U.S. economy slowing down in the second half
of the year. Given this environment, the Fund will maintain a neutral posture.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY GOVERNMENT AGENCY, NOR BY WELLS FARGO BANK.
35
<PAGE>
OVERLAND EXPRESS U.S. GOVERNMENT INCOME FUND
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS
U.S. GOVERNMENT INCOME FUND COMPARED WITH THE LEHMAN BROTHERS
LONG-TERM GOVERNMENT BOND INDEX
The chart on the next page shows the performance of the Overland Express U.S.
Government Income Fund compared with the Lehman Brothers Long-Term Government
Bond Index. The chart assumes a hypothetical $10,000 initial investment. Class A
shares reflect all Fund expenses and the maximum 4.5% initial sales charge. The
Lehman Brothers Long-Term Government Bond Index is comprised of publicly issued
long-term government debt securities and has an average maturity of 23-25 years.
Investors should note that the Fund is a professionally managed mutual fund,
while the Index is unmanaged, does not incur expenses and is not available
directly for investment. If Fund operating expenses had been applied to the
Index, its performance would have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum
4.5% initial sales charge for class A shares; and for class D shares, the 1%
contingent deferred sales charge (CDSC). Average annual total return represents
the average annual increase in value of the investment over the indicated
periods, assuming reinvestment of dividends and capital gains distributions at
net asset value. Your investment return and principal value will fluctuate with
market conditions, so that your shares, when redeemed, may be worth more or less
than their original cost. Past performance is not predictive of future
performance. Class A shares have been offered since April 7, 1988, and class D
shares have been offered since July 1, 1993. The average annual total return for
1-year with CDSC reflects the contingent deferred sales charge imposed on
redemptions within the first year of purchasing shares.
36
<PAGE>
OVERLAND EXPRESS U.S. GOVERNMENT INCOME FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND EXPRESS
US LEHMAN BROTHERS
GOVERNMENT INCOME LONG-TERM GOVERNMENT
FUND CLASS A BOND INDEX
<S> <C> <C>
Inception $ 9,550 $ 10,000
Apr-88 9,550 9,820
May-88 9,499 9,689
Jun-88 9,716 10,079
Jul-88 9,691 9,877
Aug-88 9,696 9,919
Sep-88 9,945 10,291
Oct-88 10,085 10,605
Nov-88 9,920 10,367
Dec-88 9,860 10,503
Jan-89 10,036 10,727
Feb-89 9,960 10,506
Mar-89 9,965 10,619
Apr-89 10,146 10,890
May-89 10,463 11,293
Jun-89 10,772 11,942
Jul-89 10,987 12,224
Aug-89 10,800 11,896
Sep-89 10,879 11,931
Oct-89 11,174 12,411
Nov-89 11,287 12,526
Dec-89 11,321 12,502
Jan-90 11,206 12,047
Feb-90 11,257 12,011
Mar-90 11,286 11,959
Apr-90 11,169 11,666
May-90 11,584 12,214
Jun-90 11,755 12,499
Jul-90 11,889 12,616
Aug-90 11,567 12,076
Sep-90 11,689 12,215
Oct-90 11,893 12,499
Nov-90 12,242 13,026
Dec-90 12,473 13,285
Jan-91 12,681 13,445
Feb-91 12,744 13,509
Mar-91 12,759 13,562
Apr-91 12,910 13,734
May-91 12,937 13,723
Jun-91 12,865 13,620
Jul-91 13,094 13,834
Aug-91 13,491 14,314
Sep-91 13,878 14,766
Oct-91 13,893 14,790
Nov-91 13,922 14,870
Dec-91 14,728 15,770
Jan-92 14,327 15,274
Feb-92 14,357 15,366
Mar-92 14,244 15,202
Apr-92 14,240 15,185
May-92 14,622 15,616
Jun-92 14,812 15,838
Jul-92 15,255 16,500
Aug-92 15,370 16,614
Sep-92 15,528 16,865
Oct-92 15,275 16,510
Nov-92 15,364 16,586
Dec-92 15,650 17,046
Jan-93 15,935 17,532
Feb-93 16,236 18,128
Mar-93 16,284 18,171
Apr-93 16,377 18,306
May-93 16,411 18,366
Jun-93 16,841 19,148
Jul-93 16,951 19,470
Aug-93 17,355 20,270
Sep-93 17,452 20,337
Oct-93 17,502 20,488
Nov-93 17,238 19,957
Dec-93 17,319 20,019
Jan-94 17,546 20,497
Feb-94 17,196 19,857
Mar-94 16,755 18,792
Apr-94 16,602 18,569
May-94 16,580 18,440
Jun-94 16,491 18,260
Jul-94 16,814 18,884
Aug-94 16,807 18,739
Sep-94 16,473 18,147
Oct-94 16,387 18,079
Nov-94 16,335 18,193
Dec-94 16,486 18,472
Jan-95 16,808 18,952
Feb-95 17,184 19,494
Mar-95 17,252 19,663
Apr-95 17,493 20,011
May-95 18,243 21,554
Jun-95 18,470 21,806
Jul-95 18,327 21,452
Aug-95 18,569 21,932
Sep-95 18,778 22,340
Oct-95 19,072 22,983
Nov-95 19,387 23,552
Dec-95 19,671 24,180
Jan-96 19,806 24,173
Feb-96 19,148 23,001
Mar-96 18,934 22,547
Apr-96 18,716 22,169
May-96 18,654 22,053
Jun-96 18,840 22,527
Jul-96 18,887 22,539
Aug-96 18,880 22,252
Sep-96 19,127 22,873
Oct-96 19,549 23,775
Nov-96 19,880 24,573
Dec-96 19,650 23,979
</TABLE>
THE RETURN FOR CLASS D SHARES OF THE U.S. GOVERNMENT INCOME FUND WILL VARY FROM
THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
................................................................................
PERFORMANCE OF THE U.S. GOVERNMENT INCOME FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR 3 YR 5 YR SINCE 4/7/88 INCEPTION
<S> <C> <C> <C> <C> <C>
..............................................................................................................
With Maximum 4.5% Sales Charge -4.62% 2.72% 4.96% 8.03%
Without Sales Charge -0.11% 4.30% 5.94% 8.60%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS 1 YR 3 YR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C>
................................................................................................................
With 1.0% Contingent Deferred Sales Charge -1.73% 3.60% 3.73%
Without Contingent Deferred Sales Charge -0.79% 3.60% 3.73%
</TABLE>
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN FOR 1-YEAR
WITH CDSC REFLECTS THE CONTINGENT DEFERRED SALES CHARGE WHICH IS IMPOSED ON
REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASING SHARES.
DURING THE PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
37
<PAGE>
OVERLAND EXPRESS U.S. TREASURY MONEY MARKET FUND
The Overland Express U.S. Treasury Money Market Fund seeks to provide investors
with a high level of current income while preserving capital and liquidity, by
investing in United States Treasury bonds, notes and bills with short remaining
terms.
The Fund generated relatively high, consistent yields throughout the year,
providing a high degree of quality and liquidity. The Fund's seven-day simple
yield as of December 31, 1996 was 4.32%. The Fund achieved its objective of
maintaining principal stability at a $1.00 per share net asset value while
providing competitive money market yields.
FUND REVIEW
In 1996, the Federal Reserve lowered the federal funds target rate by 0.25% in
January from 5.50% to 5.25%. Nevertheless, short-term rates rose throughout the
first half of the year. The Fund purchased securities in the 6-12 month range in
July as the yield curve steepened. This turned out to be the high in yields for
the year as the economy showed signs of slowing.
With the current U.S. economic expansion continuing and the stock market coming
off another year of strong gains, money market funds in general could see cash
inflows as a result of cautious investors moving money to a more stable asset
class. Several regulatory changes permitting a broader use of money market funds
may cause assets in money funds to grow in 1997.
1997 STRATEGY
The Federal Reserve is likely to leave federal funds target rate unchanged
through the first quarter of 1997. We expect the next Federal Reserve move will
be to raise interest rates. Tightness in the labor markets and relatively high
capacity utilization in the manufacturing sector could trigger an increase in
inflation. Given this environment, the Fund will continue to purchase securities
in the 6-12 month range.
ALTHOUGH THE FUND SEEKS TO MAINTAIN A $1.00 PER SHARE NET ASSET VALUE, THERE IS
NO ASSURANCE THAT IT WILL MEET THIS OBJECTIVE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY GOVERNMENT AGENCY, NOR BY WELLS FARGO BANK.
ANNUALIZED YIELD IS FOR THE SEVEN-DAY PERIOD ENDED DECEMBER 31, 1996. YIELD
REFLECTS FLUCTUATIONS IN INTEREST RATES ON PORTFOLIO INVESTMENTS AND FUND
EXPENSES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
38
<PAGE>
OVERLAND EXPRESS VARIABLE RATE GOVERNMENT FUND
PAUL SINGLE, SENIOR TAXABLE SPECIALIST /CO-PORTFOLIO MANAGER. MR. SINGLE HAS
MANAGED TAXABLE BOND PORTFOLIOS FOR OVER A DECADE WITH SPECIFIC EXPERTISE IN
MORTGAGE-BACKED SECURITIES. PRIOR TO JOINING WELLS FARGO BANK IN 1988, HE WAS A
SENIOR PORTFOLIO MANAGER FOR BENHAM CAPITAL MANAGEMENT GROUP. MR. SINGLE
RECEIVED HIS B.S. FROM SPRINGFIELD COLLEGE. HE HAS CO-MANAGED THE FUND SINCE ITS
INCEPTION.
SCOTT SMITH, CO-PORTFOLIO MANAGER. MR. SMITH JOINED WELLS FARGO BANK IN 1988 AS
A TAXABLE MONEY MARKET PORTFOLIO SPECIALIST. HIS EXPERIENCE INCLUDES A POSITION
WITH A PRIVATE MONEY MANAGEMENT FIRM CONDUCTING MUTUAL FUND INVESTMENT
OPERATIONS. MR. SMITH HOLDS A B.A. DEGREE FROM THE UNIVERSITY OF SAN DIEGO.
The Overland Express Variable Rate Government Fund seeks to provide investors
with a high level of current income, while reducing principal volatility, by
investing primarily in adjustable rate mortgages (ARMS ) issued or guaranteed by
the U.S. government, its agencies and instrumentalities.
1996 ARMS MARKET
Prices on ARMS fell in response to 1996's rising interest-rate environment with
many homeowners refinancing out of ARMS and into fixed-rate mortgages. As a
result, we saw an increase in pre-payments on adjustable-rate mortgages. In
response to this rising interest-rate environment and increase of pre-payments,
the Fund's Class A shares posted a 4.41% return with the net asset value (NAV)
fluctuating within a very narrow range of $9.20 to $9.40 throughout 1996.
FUND REVIEW
A number of changes were made to the Fund's portfolio throughout the course of
the year. The Fund benefited from owning "seasoned" ARMS. Seasoned ARMS hold a
lower risk of prepayment because they have already undergone a prepayment cycle.
This helped stabilize the Fund's NAV toward the end of the year. A considerably
low exposure to Cost of Funds Index (COFI) based ARMS also helped the Fund's
performance. COFI based ARMS often have limited liquidity and perform poorly in
a rising interest-rate environment.
1997 STRATEGY
In the coming year, we anticipate interest rates to move in a relatively limited
range. We believe that the U.S. economy will slow down in the second half of the
year. Consistent with our position to not take high price risk, we intend to
keep the Fund in a neutral posture.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY GOVERNMENT AGENCY, NOR BY WELLS FARGO BANK.
39
<PAGE>
OVERLAND EXPRESS VARIABLE RATE GOVERNMENT FUND
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OVERLAND EXPRESS VARIABLE RATE
GOVERNMENT FUND COMPARED WITH THE LEHMAN BROTHERS ARM INDEX
The chart on the next page shows the performance of the Overland Express
Variable Rate Government Fund compared with the Lehman Brothers U.S. Government
ARM Index. The chart assumes a hypothetical $10,000 initial investment. Class A
shares reflect all Fund expenses and the maximum 3% initial sales charge.
Investors should note that the Fund is a professionally managed mutual fund,
while the Index is unmanaged, does not incur expenses and is not available
directly for investment. If Fund operating expenses had been applied to the
Index, its performance would have been lower.
Average annual total returns for the indicated periods assume shares were
purchased at the offering price, which includes where indicated, the maximum 3%
initial sales charge for class A shares; and for class D shares, the 1%
contingent deferred sales charge (CDSC). Average annual total return represents
the average annual increase in value of the investment over the indicated
periods, assuming reinvestment of dividends and capital gains distributions at
net asset value. Your investment return and principal value will fluctuate with
market conditions, so that your shares, when redeemed, may be worth more or less
than their original cost. Past performance is not predictive of future
performance. Class A shares have been offered since November 1, 1990, and class
D shares have been offered since July 1, 1993. The average annual total return
for 1-year with CDSC reflects the contingent deferred sales charge imposed on
redemptions within the first year of purchasing shares.
40
<PAGE>
OVERLAND EXPRESS VARIABLE RATE GOVERNMENT FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERLAND EXPRESS VARIABLE LEHMAN BROTHERS US
RATE GOVERNMENT FUND CLASS
A GOVERNMENT ARM INDEX
<S> <C> <C>
Inception $ 9,700 $ 10,000
Nov-90 9,878 10,086
Dec-90 9,967 10,197
Jan-91 10,065 10,291
Feb-91 10,184 10,360
Mar-91 10,220 10,432
Apr-91 10,271 10,527
May-91 10,384 10,587
Jun-91 10,395 10,635
Jul-91 10,454 10,719
Aug-91 10,533 10,847
Sep-91 10,620 10,947
Oct-91 10,675 11,057
Nov-91 10,739 11,163
Dec-91 10,825 11,309
Jan-92 10,876 11,381
Feb-92 10,916 11,409
Mar-92 10,933 11,364
Apr-92 10,993 11,487
May-92 11,061 11,590
Jun-92 11,128 11,711
Jul-92 11,192 11,762
Aug-92 11,245 11,862
Sep-92 11,273 11,927
Oct-92 11,232 11,829
Nov-92 11,259 11,846
Dec-92 11,282 11,958
Jan-93 11,337 12,080
Feb-93 11,413 12,186
Mar-93 11,465 12,241
Apr-93 11,508 12,313
May-93 11,539 12,343
Jun-93 11,628 12,472
Jul-93 11,695 12,530
Aug-93 11,759 12,605
Sep-93 11,790 12,607
Oct-93 11,797 12,612
Nov-93 11,779 12,578
Dec-93 11,831 12,673
Jan-94 11,896 12,758
Feb-94 11,876 12,717
Mar-94 11,797 12,616
Apr-94 11,729 12,549
May-94 11,636 12,539
Jun-94 11,852 12,567
Jul-94 11,645 12,644
Aug-94 11,677 12,706
Sep-94 11,623 12,654
Oct-94 11,586 12,643
Nov-94 11,440 12,608
Dec-94 11,380 12,674
Jan-95 11,482 12,884
Feb-95 11,587 13,143
Mar-95 11,673 13,206
Apr-95 11,739 13,346
May-95 11,847 13,562
Jun-95 11,871 13,618
Jul-95 11,937 13,867
Aug-95 11,994 13,676
Sep-95 12,039 13,773
Oct-95 12,108 13,859
Nov-95 12,215 13,977
Dec-95 12,255 14,083
Jan-96 12,348 14,181
Feb-96 12,335 14,213
Mar-96 12,308 14,238
Apr-96 12,332 14,257
May-96 12,359 14,298
Jun-96 12,440 14,400
Jul-96 12,470 14,470
Aug-96 12,527 14,557
Sep-96 12,623 14,669
Oct-96 12,672 14,836
Nov-96 12,747 14,979
Dec-96 12,796 15,027
</TABLE>
THE RETURN FOR CLASS D SHARES OF THE VARIABLE RATE GOVERNMENT FUND WILL VARY
FROM THE RESULTS SHOWN DUE TO DIFFERENT EXPENSES AND LOAD STRUCTURES.
................................................................................
PERFORMANCE OF VARIABLE RATE GOVERNMENT FUND AS OF 12/31/96
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN 1 YR 3 YR 5 YR SINCE 11/1/90 INCEPTION
<S> <C> <C> <C> <C> <C>
...................................................................................................................
With Maximum 3.0% Sales Charge 1.27% 1.61% 2.78% 4.08%
Without Sales Charge 4.41% 2.65% 3.40% 4.59%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS 1 YR 3 YR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C>
..................................................................................................................
With 1.0% Contingent Deferred Sales Charge 2.97% 2.15% 2.22%
Without Contingent Deferred Sales Charge 3.95% 2.15% 2.22%
</TABLE>
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AT NAV. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURN FOR 1-YEAR
WITH CDSC REFLECTS THE CONTINGENT DEFERRED SALES CHARGE WHICH IS IMPOSED ON
REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASING SHARES.
DURING THE PERIOD, WELLS FARGO BANK HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES
OR ASSUMED RESPONSIBILITY FOR OTHER EXPENSES, WHICH HAS REDUCED OPERATING
EXPENSES FOR SHAREHOLDERS. WITHOUT THESE REDUCTIONS, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER. THE FEE WAIVER MAY BE DISCONTINUED AT ANY TIME.
41
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 77.48%
1,967 3Com Corp+ $ 104,571 $ 144,329
9,130 Abbott Laboratories 387,045 463,348
1 Acnielsen Corp 15 14
1,544 Advanced Micro Devices+ 40,150 39,758
1,799 Aetna Inc 136,883 143,920
1,238 Ahmanson (H F) & Co 29,956 40,235
1,347 Air Products & Chemicals Inc 73,694 93,111
5,943 Airtouch Communications+ 155,112 150,061
284 Alberto-Culver Co Class B 9,918 13,632
2,933 Albertson's Inc 92,383 104,488
2,630 Alcan Aluminium Ltd 77,671 88,434
1,548 Alco Standard Corp 66,388 79,916
460 Alexander & Alexander Services 9,624 7,993
2,058 Allegheny Teledyne Inc 36,622 47,334
813 Allergan Inc 24,503 28,963
3,273 Allied Signal Inc 162,184 219,291
5,196 Allstate Corp 200,610 300,719
2,242 Alltel Corp 63,978 70,343
2,006 Aluminum Co of America 97,906 127,883
950 ALZA Corp+ 22,628 24,581
1,295 Amdahl Corp+ 12,846 15,702
1,109 Amerada Hess Corp 58,891 64,183
2,037 American Brands Inc 83,460 101,086
2,203 American Electric Power Inc 81,161 90,598
5,576 American Express Corp 219,592 315,044
2,374 American General Corp 82,777 97,037
941 American Greetings Corp Class A 26,942 26,701
7,517 American Home Products Corp 335,228 440,684
5,538 American International Group Inc 465,062 599,489
1,723 American Stores Co 50,654 70,428
6,402 Ameritech Corp 309,270 388,121
3,108 Amgen Inc+ 126,944 168,998
5,778 Amoco Corp 393,560 465,129
2,536 AMP Inc 98,437 97,319
1,033 AMR Corp+ 85,008 91,033
</TABLE>
42
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
761 Andrew Corp+ $ 25,490 $ 40,381
5,891 Anheuser-Busch Inc 184,430 235,640
1,225 Aon Corp 69,093 76,103
1,490 Apple Computer Inc+ 49,262 31,104
2,070 Applied Materials Inc+ 71,648 74,391
6,342 Archer-Daniels-Midland Co 112,260 139,524
1,179 Armco Inc+ 7,091 4,863
501 Armstrong World Industries Inc 29,221 34,820
438 ASARCO Inc 12,395 10,895
740 Ashland Inc 27,847 32,468
18,976 AT & T Corp 734,388 825,456
1,836 Atlantic Richfield Corp 220,886 243,270
495 Autodesk Inc 17,503 13,860
3,447 Automatic Data Processing 119,541 147,790
1,198 Avery Dennison Corp 25,838 42,379
1,534 Avon Products Inc 58,191 87,630
1,655 Baker Hughes Inc 44,644 57,098
306 Ball Corp 9,103 7,956
1,786 Baltimore Gas & Electric Co 45,858 47,776
4,961 Banc One Corp 169,308 213,323
1,748 Bank of Boston Corp 86,889 112,309
4,605 Bank of New York Inc 105,132 155,419
4,200 BankAmerica Corp 272,026 418,950
1,001 Bankers Trust N Y Corp 72,920 86,336
628 Bard (C R) Inc 17,174 17,584
2,328 Barnett Banks Inc 68,940 95,739
4,188 Barrick Gold Corp 109,378 120,405
2,564 Battle Mountain Gold Co 21,231 17,628
633 Bausch & Lomb Inc 25,303 22,155
3,176 Baxter International Inc 106,607 130,216
2,272 Bay Networks Inc+ 92,777 47,428
1,470 Becton Dickinson & Co 42,350 63,761
5,104 Bell Atlantic Corp 299,557 330,484
11,632 BellSouth Corp 394,444 469,642
582 Bemis Co Inc 17,798 21,461
</TABLE>
43
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
595 Beneficial Corp $ 32,493 $ 37,708
1,273 Bethlehem Steel Corp+ 18,809 11,457
1,078 Beverly Enterprises+ 13,577 13,745
1,346 Biomet Inc 19,786 20,358
1,080 Black & Decker Corp 32,312 32,535
1,179 Block (H & R) Inc 44,175 34,191
1,787 Boatmen's Bancshares Inc 82,405 115,262
4,185 Boeing Co 280,813 445,179
604 Boise Cascade Corp 20,276 19,177
2,132 Boston Scientific Corp+ 83,010 127,920
320 Briggs & Stratton Corp 11,889 14,080
5,816 Bristol-Myers Squibb Co 460,540 632,490
782 Brown-Forman Corp Class B 29,473 35,777
2,481 Browning-Ferris Industries Inc 78,720 65,126
1,140 Brunswick Corp 24,514 27,360
1,802 Burlington Northern Santa Fe 122,782 155,648
1,443 Burlington Resources Inc 62,536 72,691
1,784 Cabletron Systems Inc+ 57,732 59,318
418 Caliber System Inc 15,614 8,047
2,784 Campbell Soup Co 157,466 223,416
1,745 Carolina Power & Light Co 54,706 63,693
851 Case Corp 39,771 46,380
2,289 Caterpillar Inc 137,525 172,247
322 Centex Corp 11,124 12,115
2,503 Central & South West Corp 66,978 64,139
861 Ceridian Corp+ 36,415 34,871
1,100 Champion International Corp 44,230 47,575
1,133 Charming Shoppes Inc+ 8,042 5,736
5,127 Chase Manhattan Bank 300,136 457,585
7,630 Chevron Corp 406,483 495,950
8,561 Chrysler Corp 224,613 282,513
2,014 Chubb Corp 93,084 108,253
856 CIGNA Corp 78,651 116,951
478 Cincinnati Milacron Inc 11,274 10,456
1,880 Cinergy Corp 52,427 62,745
</TABLE>
44
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,110 Circuit City Stores Inc $ 31,017 $ 33,439
7,610 Cisco Systems Inc+ 298,714 484,186
5,515 Citicorp 404,373 568,045
574 Clorox Co 41,572 57,615
1,238 Coastal Corp 43,803 60,507
29,120 Coca-Cola Co 1,026,182 1,532,440
2,032 Cognizant Corp 64,978 67,056
1,738 Colgate-Palmolive Co 131,269 160,331
665 Columbia Gas System Inc 26,520 42,311
7,899 Columbia HCA Healthcare Corp 250,079 321,884
3,788 Comcast Corp Class A 65,348 67,474
1,307 Comerica Inc 57,243 68,454
3,165 Compaq Computer Corp+ 149,241 235,001
4,302 Computer Associates International Inc 160,180 214,025
847 Computer Sciences Corp+ 55,035 69,560
2,851 ConAgra Inc 106,977 141,837
989 Conrail Inc 73,744 98,529
2,746 Consolidated Edison Co 82,112 80,321
238 Consolidated Freightway Corp 1,499 2,108
1,068 Consolidated Natural Gas Co 51,179 59,007
1,301 Cooper Industries Inc 53,936 54,805
1,001 Cooper Tire & Rubber Co 23,693 19,770
421 Coors (Adolph) Co Class B 7,684 7,999
2,591 CoreStates Financial Corp 111,885 134,408
2,657 Corning Inc 92,023 122,886
1,719 CPC International Inc 110,329 133,223
378 Crane Co 9,050 10,962
1,535 Crown Cork & Seal Co 73,080 83,466
2,499 CSX Corp 102,280 105,583
4,646 CUC International Inc+ 103,237 110,343
459 Cummins Engine Co Inc 21,322 21,114
1,199 CVS CORP 42,568 49,609
1,056 Cyprus Amax Minerals 27,504 24,684
1,238 Dana Corp 34,908 40,390
1,787 Darden Restaurants Inc 18,556 15,636
</TABLE>
45
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
407 Data General Corp+ $ 5,006 $ 5,902
2,495 Dayton-Hudson Corp 70,171 97,929
1,876 Dean Witter Discover & Co 96,360 124,285
3,047 Deere & Co 97,629 123,784
2,228 Dell Computer Corp+ 86,677 118,363
890 Delta Air Lines Inc 66,928 63,079
945 Deluxe Corp 30,627 30,949
1,814 Digital Equipment Corp+ 73,540 65,984
1,288 Dillard Department Stores Inc Class A 38,610 39,767
7,898 Disney (Walt) Co 510,756 549,898
2,157 Dominion Resources Inc 85,202 83,045
1,756 Donnelley (R R) & Sons Co 59,388 55,095
1,276 Dover Corp 51,311 64,119
2,802 Dow Chemical Co 203,447 219,607
1,181 Dow Jones & Co Inc 42,829 40,006
2,069 Dresser Industries Inc 52,994 64,139
1,411 DSC Communications Corp+ 44,251 25,222
1,669 DTE Energy Co 51,001 54,034
2,411 Duke Power Co 102,738 111,509
2,032 Dun & Bradstreet Corp 43,869 48,260
6,565 DuPont (E I) de Nemours 472,467 619,572
235 Eastern Enterprises 7,153 8,313
902 Eastman Chemical Co 50,787 49,836
3,894 Eastman Kodak Co 250,310 312,494
890 Eaton Corp 50,969 62,078
778 Echlin Inc 26,967 24,604
1,677 Echo Bay Mines Ltd 15,690 11,110
804 Ecolab Inc 22,953 30,251
5,074 Edison International 93,257 100,846
539 EG & G Inc 9,471 10,847
2,753 EMC Corp+ 65,642 91,193
2,596 Emerson Electric Co 200,839 251,163
1,704 Engelhard Corp 36,753 32,589
2,938 Enron Corp 111,625 126,701
796 Enserch Corp 14,533 18,308
</TABLE>
46
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,671 Entergy Corp $ 74,602 $ 74,120
14,514 Exxon Corp 1,110,779 1,422,372
1,325 Federal Express Corp+ 47,781 58,963
2,065 Federal Home Loan Mortgage Corp 160,425 227,408
12,837 Federal National Mortgage Assoc 349,400 478,178
2,479 Federated Department Stores Inc+ 73,030 84,596
1,275 Fifth Third Bancorp 77,983 80,086
1,544 First Bank System Inc 88,248 105,378
3,761 First Chicago NBD Corp 142,744 202,154
5,200 First Data Corp 178,335 189,800
3,286 First Union Corp 173,997 243,164
3,048 Fleet Financial Group Inc 122,991 152,019
424 Fleetwood Enterprises Inc 10,646 11,660
399 Fleming Co Inc 9,040 6,883
1,032 Fluor Corp 58,803 64,758
484 FMC Corp+ 34,234 33,941
13,929 Ford Motor Co 422,428 443,987
459 Foster Wheeler Corp 16,898 17,040
2,125 FPL Group Inc 86,381 97,750
2,271 Freeport McMoRan Copper & Gold Inc Class B 64,403 67,846
938 Fruit of the Loom Inc Class A+ 27,429 35,527
1,605 Gannett Co Inc 99,050 120,174
3,292 Gap Inc 73,744 99,172
698 General Dynamics Corp 39,596 49,209
19,300 General Electric Co 1,346,793 1,908,296
1,590 General Instrument Corp+ 41,376 34,384
1,817 General Mills Inc 97,746 115,152
8,890 General Motors Corp 444,147 495,618
948 General Re Corp 130,269 149,547
624 General Signal Corp 23,739 26,676
1,370 Genuine Parts Co 56,364 60,965
1,030 Georgia-Pacific Corp 78,355 74,160
664 Giant Food Inc Class A 20,843 22,908
368 Giddings & Lewis Inc 6,289 4,738
5,180 Gillette Co 258,691 402,745
</TABLE>
47
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
661 Golden West Financial $ 32,796 $ 41,726
678 Goodrich (B F) Co 20,764 27,459
1,832 Goodyear Tire & Rubber Co 79,838 94,119
1,445 GPU Inc 44,965 48,588
1,033 Grace W.R. & Co 54,515 53,458
650 Grainger (W W) Inc 43,716 52,163
433 Great Atlantic & Pacific Tea Co 11,723 13,802
713 Great Lakes Chemical Corp 41,956 33,333
1,665 Great Western Financial Corp 39,369 48,285
1,652 Green Tree Financial Inc 59,387 63,809
11,236 GTE Corp 426,721 511,238
853 Guidant Corp 48,089 48,621
1,433 Halliburton Co 65,959 86,338
839 Harcourt General Inc 35,596 38,699
322 Harland (John H) Co 8,007 10,626
606 Harnischfeger Industries Inc 22,027 29,164
1,219 Harrah's Entertainment Inc+ 32,913 24,228
416 Harris Corp 22,023 28,548
1,006 Hasbro Inc 35,846 39,108
4,302 Heinz (H J) Co 132,091 153,797
253 Helmerich & Payne Inc 8,956 13,188
1,242 Hercules Inc 59,267 53,717
1,784 Hershey Foods Corp 59,841 78,050
11,867 Hewlett Packard Co 453,141 596,317
1,483 HFS Inc+ 98,621 88,609
2,956 Hilton Hotels Corp 60,211 77,226
5,654 Home Depot Inc 255,286 283,407
1,622 Homestake Mining Co 27,305 23,114
1,511 Honeywell Inc 70,959 99,348
1,088 Household International Inc 68,653 100,368
2,763 Houston Industries Inc 58,734 62,513
1,900 Humana Inc+ 48,514 36,338
1,439 Illinois Tool Works Inc 84,178 114,940
2,023 Inco Ltd 58,892 64,483
1,242 Ingersoll-Rand Co 48,643 55,269
</TABLE>
48
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
578 Inland Steel Industries Inc $ 15,684 $ 11,560
9,612 Intel Corp 667,240 1,258,571
495 Intergraph Corp+ 5,426 5,074
6,077 International Business Machines Corp 641,962 917,627
1,334 International Flavors & Fragrances 61,315 60,030
3,531 International Paper Co 132,790 142,564
952 Interpublic Group Cos Inc 38,487 45,220
1,380 ITT Corp+ 64,384 59,858
1,380 ITT Hartford Group Inc 68,692 93,150
1,380 ITT Industries Inc 28,941 33,810
1,043 James River Corp 26,935 34,549
797 Jefferson-Pilot Corp 34,984 45,130
15,555 Johnson & Johnson 594,619 773,861
451 Johnson Controls Inc 31,110 37,377
437 Jostens Inc 9,106 9,232
5,748 K Mart Corp 86,285 59,636
447 Kaufman & Broad Home Corp 6,356 5,755
2,443 Kellogg Co 158,710 160,322
545 Kerr-McGee Corp 31,916 39,240
2,631 KeyCorp 93,907 132,866
3,348 Kimberly-Clark Corp 219,253 318,897
413 King World Productions+ 16,448 15,229
1,062 Knight-Ridder Inc 32,720 40,622
1,437 Kroger Co+ 47,493 66,821
3,655 Laidlaw Inc Class B 36,029 42,033
6,476 Lilly (Eli) & Co 311,685 472,748
3,160 Limited Inc 61,922 58,065
1,179 Lincoln National Corp 54,745 61,898
818 Liz Claiborne Inc 23,027 31,595
2,300 Lockheed Martin Corp 156,102 210,450
1,333 Loews Corp 86,905 125,635
237 Longs Drug Stores Corp 8,827 11,643
446 Louisiana Land & Exploration Co 21,787 23,917
1,221 Louisiana-Pacific Corp 34,616 25,794
2,070 Lowe's Co Inc 68,026 73,485
</TABLE>
49
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,550 LSI Logic Corp+ $ 53,795 $ 41,463
297 Luby's Cafeterias Inc 6,654 5,903
7,504 Lucent Technologies Inc 363,729 347,060
880 Mallinckrodt Inc 32,135 38,830
729 Manor Care Inc 13,566 19,683
1,551 Marriott International 59,783 85,693
813 Marsh & McLennan Companies Inc 71,768 84,552
1,848 Masco Corp 57,370 66,528
3,147 Mattel Inc 70,762 87,329
2,993 May Department Stores Co 116,620 139,923
1,189 Maytag Corp 20,738 23,483
504 MBIA Inc 52,112 51,030
2,639 MBNA Corp 66,748 109,519
594 McDermott International Inc 14,662 9,875
8,151 McDonald's Corp 315,960 368,833
2,462 McDonnell Douglas Corp 81,558 157,568
1,170 McGraw-Hill Inc 48,337 53,966
8,010 MCI Communications 194,631 261,827
635 Mead Corp 33,428 36,909
2,796 Medtronic Inc 128,981 190,128
1,495 Mellon Bank Corp 75,634 106,145
393 Mercantile Stores Co Inc 17,729 19,404
14,086 Merck & Co Inc 779,668 1,116,316
332 Meredith Corp 10,306 17,513
1,958 Merrill Lynch & Co Inc 110,121 159,577
659 MGIC Investment Corp 43,073 50,084
2,404 Micron Technology Inc 89,356 70,017
14,122 Microsoft Corp+ 678,739 1,166,830
464 Millipore Corp 15,929 19,198
4,890 Minnesota Mining & Manufacturing Co 308,686 405,259
4,607 Mobil Corp 470,424 563,206
6,849 Monsanto Co 150,852 266,255
1,201 Moore Corp Ltd 24,651 24,470
2,225 Morgan (J P) & Co Inc 169,599 217,216
1,836 Morgan Stanley Group 94,763 104,882
</TABLE>
50
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,640 Morton International Inc $ 55,585 $ 66,830
6,930 Motorola Inc 392,733 425,329
106 NACCO Industries Inc Class A 5,158 5,671
752 Nalco Chemical Co 27,066 27,166
2,553 National City Corp 92,646 114,566
1,621 National Semiconductor+ 35,786 39,512
545 National Service Industries Inc 15,589 20,369
3,358 NationsBank 232,996 328,245
843 Navistar International+ 13,088 7,692
1,092 New York Times Co Class A 30,878 41,496
1,902 Newell Co 48,087 59,913
1,199 Newmont Mining Corp 52,472 53,655
1,646 Niagara Mohawk Power Corp+ 24,786 16,254
543 NICOR Inc 16,130 19,412
3,420 Nike Inc Class B 104,321 204,345
1,710 NorAm Energy Corp 16,195 26,291
943 Nordstrom Inc 36,342 33,418
1,450 Norfolk Southern Corp 106,054 126,875
858 Northern States Power Co 40,027 39,361
3,059 Northern Telecom Ltd 132,306 189,276
726 Northrop Grumman Corp 46,859 60,077
4,296 Norwest Corp 144,436 186,876
4,121 Novell Inc+ 73,319 39,021
998 Nucor Corp 49,953 50,898
5,195 NYNEX Corp 225,817 250,009
3,768 Occidental Petroleum Corp 83,752 88,077
1,805 Ohio Edison Co 39,690 41,064
275 ONEOK Inc 5,881 8,250
7,661 Oracle Systems Corp+ 223,378 319,847
1,155 Oryx Energy Co+ 19,535 28,586
573 Owens Corning Fiberglass Corp 23,309 24,424
507 PACCAR Inc 28,166 34,476
1,043 Pacific Enterprises 27,881 31,681
4,848 Pacific Gas & Electric Co 134,808 101,808
4,991 Pacific Telesis Group 159,968 183,419
</TABLE>
51
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
3,480 PacifiCorp $ 68,725 $ 71,340
1,351 Pall Corp 31,478 34,451
1,823 Panenergy Corp 52,564 82,035
860 Parker Hannifin Corp 30,023 33,325
2,586 PECO Energy Co 70,568 65,297
2,718 Penney (J C) Co Inc 130,658 132,503
511 Pennzoil Co 25,724 28,872
377 Peoples Energy Corp 11,597 12,771
788 Pep Boys-Manny Moe & Jack 24,661 24,231
18,194 Pepsico Inc 444,867 532,175
558 Perkin-Elmer Corp 23,783 32,852
7,586 Pfizer Inc 431,295 628,690
5,976 Pharmacia and Upjohn Inc 216,803 236,799
781 Phelps Dodge Corp 44,195 52,718
9,567 Philip Morris Co Inc 749,271 1,077,483
3,120 Phillips Petroleum Co 115,195 138,060
930 Pioneer Hi Bred International Inc 47,700 65,100
1,711 Pitney Bowes Inc 76,749 93,250
2,785 Placer Dome Inc 67,369 60,574
3,960 PNC Bank Corp 127,317 148,995
502 Polaroid Corp 18,492 21,837
298 Potlatch Corp 12,785 12,814
1,892 PP & L Resources Inc 47,566 43,516
2,191 PPG Industries Inc 94,731 122,970
1,852 Praxair Inc 58,729 85,424
2,282 Price/Costco Inc+ 40,301 57,335
7,992 Procter & Gamble Co 645,145 859,140
1,143 Providian Corp 47,593 58,722
2,813 Public Services Enterprise Group 81,185 76,654
322 Pulte Corp 9,670 9,902
1,553 Quaker Oats Co 54,956 59,208
1,272 Ralston-Purina Group 72,495 93,333
566 Raychem Corp 34,171 45,351
2,784 Raytheon Co 111,340 133,980
644 Reebok International Ltd 22,666 27,048
</TABLE>
52
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
616 Republic New York Corp $ 40,033 $ 50,281
778 Reynolds Metals Co 41,498 43,860
1,330 Rite Aid Corp 41,754 52,868
2,577 Rockwell International Corp (New) 115,455 156,875
748 Rohm & Haas Co 47,040 61,056
1,045 Rowan Co Inc+ 13,473 23,643
6,292 Royal Dutch Petroleum Co 850,161 1,074,359
1,747 Rubbermaid Inc 49,604 39,744
408 Russell Corp 11,721 12,138
529 Ryan's Family Steak House+ 3,976 3,637
1,006 Ryder System Inc 26,091 28,294
1,515 SAFECO Corp 49,924 59,748
617 Safety-Kleen Corp 9,995 10,103
1,212 Salomon Inc 50,682 57,116
976 Santa Fe Energy Resources Inc+ 10,613 13,542
1,468 Santa Fe Pacific Gold Corp 19,572 22,571
5,704 Sara Lee Corp 175,293 212,474
7,053 SBC Communication Inc 330,114 364,993
4,288 Schering-Plough Corp 208,418 277,648
2,838 Schlumberger Ltd 213,567 283,445
882 Scientific-Atlanta Inc 16,655 13,230
2,934 Seagate Technology Inc+ 92,775 115,893
4,392 Seagram Co Ltd 139,620 170,190
4,562 Sears Roebuck & Co 162,851 210,422
2,820 Service Corp International 57,500 78,960
266 Shared Medical System Corp 9,083 13,101
1,022 Sherwin Williams Co 42,584 57,232
460 Shoney's Inc+ 5,686 3,220
547 Sigma-Aldrich Corp 25,695 34,153
2,020 Silicon Graphics Inc+ 63,420 51,510
696 Snap-On Inc 19,508 24,795
1,058 Sonat Inc 39,546 54,487
7,935 Southern Co 172,017 179,529
1,681 Southwest Airlines Co 40,338 37,192
210 Springs Industries Inc Class A 8,472 9,030
</TABLE>
53
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
5,058 Sprint Corp $ 172,038 $ 201,688
940 St Jude Medical Inc+ 31,960 40,068
960 St Paul Co Inc 47,752 56,280
1,096 Stanley Works 25,583 29,592
1,070 Stone Container Corp 18,979 15,916
528 Stride Rite Corp 6,491 5,280
813 Sun Co Inc 23,881 19,817
4,320 Sun Microsystems Inc+ 66,011 110,970
2,665 SunTrust Banks Inc 88,319 131,251
772 Supervalu Inc 22,756 21,906
2,103 Sysco Corp 64,135 68,610
1,341 Tandem Computers Inc+ 18,052 18,439
716 Tandy Corp 32,908 31,504
388 Tektronix Inc 15,762 19,885
7,688 Tele-Communication Inc Class A+ 109,937 100,425
2,071 Tellabs Inc+ 58,808 77,921
622 Temple-Inland Inc 30,027 33,666
2,536 Tenet Healthcare Corp+ 46,684 55,475
1,955 Tenneco 80,715 88,219
3,078 Texaco Inc 240,027 302,029
2,245 Texas Instruments Inc 115,586 143,119
2,644 Texas Utilities Co 101,732 107,743
971 Textron Inc 63,898 91,517
631 Thomas & Betts Corp 23,536 28,001
6,646 Time Warner Inc 265,937 249,225
1,173 Times Mirror Co Class A 34,187 58,357
354 Timken Co 13,757 16,240
909 TJX Companies Inc 24,007 43,064
790 Torchmark Corp 35,018 39,895
3,272 Toys R Us Inc+ 104,087 98,160
765 Transamerica Corp 48,623 60,435
7,478 Travelers Group Inc 212,540 339,308
725 Tribune Co 46,759 57,184
327 Trinova Corp 10,615 11,895
1,508 TRW Inc 63,076 74,646
</TABLE>
54
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
695 Tupperware Corp+ $ 26,404 $ 37,269
1,804 Tyco International Ltd 61,365 95,387
1,783 U.S. Bancorp 64,386 80,124
373 U.S. Life Corp 10,036 12,402
5,632 U.S. West Inc 151,746 181,632
7,337 U.S. West Media Group+ 131,592 135,735
2,517 Unicom Corp 68,444 68,274
1,920 Unilever NV 260,654 336,480
773 Union Camp Corp 39,044 36,911
1,528 Union Carbide Corp 49,826 62,457
1,233 Union Electric Co 47,472 47,471
2,858 Union Pacific Corp 128,024 171,837
2,958 Union Pacific Resources Group Inc 76,135 86,522
1,962 Unisys Corp+ 19,291 13,244
2,169 United Healthcare Corp 95,921 97,605
722 United States Surgical 20,341 28,429
2,814 United Technologies Corp 130,313 185,724
2,958 Unocal Corp 94,963 120,169
905 UNUM Corp 50,312 65,386
787 USAir Group Inc+ 11,041 18,396
1,398 USF & G Corp 23,623 29,183
2,182 UST Inc 65,391 70,642
3,407 USX - Marathon Group 67,675 81,342
1,045 USX - US Steel Group 33,783 32,787
700 VF Corp 40,331 47,250
4,109 Viacom Inc Class B+ 175,816 143,301
1,924 Wachovia Corp 82,411 108,706
26,900 Wal Mart Stores Inc 673,221 615,338
2,894 Walgreen Co 80,757 115,760
3,131 Warner Lambert Co 152,982 234,825
1,087 Wells Fargo & Co 182,438 293,218
1,530 Wendy's International Inc 28,277 31,365
669 Western Atlas Inc+ 36,707 47,415
5,030 Westinghouse Electric Corp 82,713 99,971
1,236 Westvaco Corp 33,778 35,535
</TABLE>
55
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,287 Weyerhaeuser Co $ 99,761 $ 108,347
845 Whirlpool Corp 44,069 39,398
1,170 Whitman Corp 22,604 26,764
641 Willamette Industries Inc 43,515 44,630
1,815 Williams Co Inc 48,408 68,063
1,747 Winn-Dixie Stores Inc 53,230 55,249
5,724 WMX Technologies Inc 171,374 186,746
1,591 Woolworth Corp+ 31,339 34,803
4,972 WorldCom Inc+ 116,504 129,583
1,076 Worthington Industries Inc 21,045 19,503
1,368 Wrigley (Wm) Jr Co 67,595 76,950
3,782 Xerox Corp 150,096 198,988
------------ ------------
TOTAL COMMON STOCKS $ 52,629,863 $ 65,867,969
</TABLE>
56
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 19.27%
$ 3,550,000 U.S. Treasury Bonds 7.50 % 11/15/24 $ 3,881,705
2,500,000 U.S. Treasury Bonds 7.63 11/15/22 2,758,595
180,000 U.S. Treasury Bonds 8.00 11/15/21 206,325
4,000,000 U.S. Treasury Bonds 8.13 05/15/21 4,640,000
1,150,000 U.S. Treasury Bonds 8.88 08/15/17 1,419,531
2,800,000 U.S. Treasury Bonds 8.88 02/15/19 3,472,000
------------
TOTAL U.S. TREASURY SECURITIES $ 16,378,156
(Cost $15,944,164)
SHORT-TERM INSTRUMENTS - 3.67%
$ 93,000 U.S. Treasury Bills 4.98 %F 01/02/97 $ 92,975
13,000 U.S. Treasury Bills 5.11 F 01/16/97 12,972
29,000 U.S. Treasury Bills 5.12 F 01/23/97 28,910
107,000 U.S. Treasury Bills 5.12 F 01/30/97 106,568
30,000 U.S. Treasury Bills 5.17 F 02/06/97 29,850
2,000 U.S. Treasury Bills 5.17 F 02/13/97 1,989
1,555,000 U.S. Treasury Bills 5.18 F 02/20/97 1,544,581
698,000 U.S. Treasury Bills 5.19 F 03/13/97 691,227
619,000 U.S. Treasury Bills 5.20 F 03/06/97 613,616
------------
TOTAL SHORT-TERM INSTRUMENTS $ 3,122,688
(Cost $3,122,460)
</TABLE>
57
<PAGE>
ASSET ALLOCATION FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $71,696,487)* (Notes 1 and 3) 100.42 % $ 85,368,813
Other Assets and Liabilities, Net (0.42 ) (361,037)
------- ------------
TOTAL NET ASSETS 100.00 % $ 85,007,776
------- ------------
------- ------------
..........................................................................................................
</TABLE>
+ NON-INCOME EARNING SECURITIES.
F YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $14,998,148
Gross Unrealized Depreciation (1,325,822)
-----------
NET UNREALIZED APPRECIATION $13,672,326
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 95.05%
$ 1,000,000 ABAG Finance Authority for Nonprofit Corp CA
State Insured 7.10 % 12/01/20 $ 1,056,910
1,000,000 ABAG Finance Authority for Nonprofit Corp
Stanford University Hospital MBIA Insured 5.25 11/01/20 945,390
1,000,000 Alameda CA USD AMBAC Insured 6.05 07/01/11 1,040,830
1,000,000 Alameda County CA Water District Revenue COP
Water System Project MBIA Insured 6.20 06/01/13 1,038,220
3,550,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/14 3,559,976
2,000,000 California State EDFA Revenue Chapman College
Refunding Pending 7.30 01/01/02 2,152,820
1,000,000 California State EDFA Revenue Claremont College
Pooled Facilities 6.38 05/01/22 1,025,290
350,000 California State EDFA Revenue Loyola Marymount
University 6.00 10/01/14 354,841
710,000 California State EDFA Revenue Loyola Marymount
University Series B 6.55 10/01/12 759,878
1,200,000 California State EDFA Revenue University of San
Diego Project 6.50 10/01/08 1,294,380
1,355,000 California State GO AMBAC Insured 5.75 03/01/15 1,367,723
450,000 California State HFA Home Mortgage Revenue AMT
Series B Multiple Credit Enhancements 8.00 08/01/29 469,773
1,340,000 California State HFA Home Mortgage Revenue AMT
Series D Multiple Credit Enhancements 7.75 08/01/10 1,419,542
305,000 California State HFA Home Mortgage Revenue AMT
Series G Multiple Credit Enhancements 8.15 08/01/19 314,760
1,535,000 California State HFA Home Mortgage Revenue
Series A Multiple Credit Enhancements 7.35 08/01/11 1,621,620
405,000 California State HFA Home Mortgage Revenue
Series B Multiple Credit Enhancements 7.25 08/01/10 425,133
</TABLE>
59
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 120,000 California State HFA Home Mortgage Revenue
Series F Multiple Credit Enhancements 7.75 % 08/01/08 $ 122,945
140,000 California State HFA Insured Housing Revenue
AMT Series C MBIA Insured 7.00 08/01/23 146,380
1,575,000 California State HFA Multi-Unit Rental Housing
Revenue Series A AMT 5.50 08/01/15 1,475,129
1,000,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.75 07/01/18 1,024,150
400,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.85 07/01/15 409,848
1,000,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.25 04/01/10 1,095,360
1,250,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.30 04/01/20 1,377,825
2,000,000 California State HFFA Revenue Catholic
Healthcare West AMBAC Insured 5.75 07/01/15 1,995,220
1,000,000 California State HFFA Revenue Insured Health
Facilities Valleycare Series State Insured 6.50 05/01/05 1,075,060
1,750,000 California State HFFA Revenue Small Insured
Health Facilities Series A 6.75 03/01/20 1,836,520
1,000,000 California State HFFA San Diego Hospital
Association MBIA Insured 6.20 08/01/12 1,040,930
1,000,000 California State Maritime Infrastructure
Authority Revenue Port of San Diego Project
AMBAC Insured 5.25 11/01/15 951,560
1,000,000 California State PCFA Resource Recovery Revenue
Waste Management AMT Series A 7.15 02/01/11 1,085,000
1,000,000 California State PCFA San Diego Gas & Electric
Co AMT 6.80 06/01/15 1,129,190
125,000 California State Public Capital Improvements FA
Revenue Joint Powers Agency Pooled Projects
Series 8.25 03/01/98 129,071
1,000,000 California State Public Works Board Lease
Revenue University Of California Project Series
A AMBAC Insured 6.30 12/01/09 1,078,840
</TABLE>
60
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,500,000 California State Public Works Board Lease
Revenue University Of California Project Series
B MBIA Insured 5.38 % 12/01/19 $ 1,443,540
1,590,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/13 1,544,431
1,500,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/14 1,455,435
1,500,000 California Statewide CDA Revenue COP Hospital
Cedars Sinai Medical Center 6.50 08/01/12 1,625,415
1,250,000 Calleguas-Las Virgines CA PFA Calleguas MUD
FGIC Insured 5.13 07/01/21 1,160,388
1,100,000 Capistrano CA Unified PFA Special Tax Revenue
AMBAC Insured 5.25 09/01/09 1,097,250
3,840,000 Cathedral City CA PFA RevenueTax Allocation
Redevelopment Projects Series A MBIA Insured 5.25 08/01/13 3,727,450
1,000,000 Cerritos CA PFA Redevelopment Los Cerritos
Redevelopment Project Revenue AMBAC Insured 5.75 11/01/22 1,008,290
570,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/11 580,009
2,000,000 Concord CA RDA Tax Allocation AMBAC Insured 5.25 07/01/19 1,893,900
1,200,000 Contra Costa County CA COP Public Facilities
Merrithew Memorial Hospital Replacement 6.60 11/01/12 1,266,576
500,000 Contra Costa County CA COP Public Facilities
Merrithew Memorial Hospital Replacement 6.63 11/01/22 525,295
270,000 Contra Costa County CA Home Mortgage Revenue
AMT Escrowed to Maturity 7.75 05/01/22 336,952
755,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A Escrowed to Maturity 6.50 03/01/09 837,990
</TABLE>
61
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 4,000,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A FGIC Insured 5.50 % 03/01/08 $ 4,097,640
3,655,000 Contra Costa County CA Water District Water
Revenue Series G MBIA Insured 5.75 10/01/14 3,728,100
1,500,000 Cupertino CA Series A AMBAC Insured 5.75 07/01/16 1,519,950
2,000,000 East Bay CA MUD Wastewater Treatment Revenue
FGIC Insured 5.00 06/01/16 1,876,740
2,000,000 East Bay CA MUD Wastewater Treatment Revenue
MBIA Insured 5.00 06/01/14 1,894,880
2,675,000 East Bay CA MUD Water System Revenue MBIA
Insured 6.00 06/01/12 2,758,487
2,000,000 East Bay CA Regional Park District Series B 5.75 09/01/13 2,009,580
500,000 Eastern Municipal Water District CA Water &
Sewer Revenue Certificates FGIC Insured 6.30 07/01/20 518,795
1,000,000 Emeryville CA PFA Housing Increment Revenue
Series A 6.35 05/01/10 1,038,100
1,725,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 5.80 09/01/09 1,797,933
2,000,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 6.00 09/01/18 2,067,340
1,410,000 Fairfield CA PFA CGIC Insured 5.20 08/01/08 1,406,954
3,000,000 Fontana CA USD Convertible Series C FGIC
Insured 5.95 F 05/01/20 2,986,170
1,800,000 Fresno CA Conference Center 5.00 04/01/13 1,709,190
1,000,000 Fresno CA COP Street Improvement Project 6.63 12/01/11 1,062,500
1,000,000 Fresno CA Sewer Revenue Series A MBIA Insured 5.00 09/01/15 945,270
2,000,000 Fresno CA USD Series A MBIA Insured 5.70 08/01/15 2,029,900
1,250,000 Fresno County CA Solid Waste Revenue American
Avenue Landfill Project MBIA Insured 5.75 05/15/14 1,266,838
1,650,000 Haywood CA Certificates Participation Civic
Center Project MBIA Insured 5.50 08/01/17 1,625,250
2,800,000 Huntington Beach CA PFA Revenue Bond 7.00 08/01/10 2,829,008
</TABLE>
62
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,000,000 Indian Wells CA Redevelopment Agency Tax
Allocation MBIA Insured 5.38 % 12/01/15 $ 982,960
500,000 Industry CA Urban Development Agency 6.70 11/01/03 539,640
1,080,000 Industry CA Urban Development Agency 6.85 11/01/04 1,169,100
500,000 Industry CA Urban Development Agency Project 3 6.60 11/01/02 539,290
1,000,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 5.80 05/01/09 1,032,420
1,500,000 Inglewood CA COP Civic Center Improvement
Project PFA 7.00 08/01/19 1,601,220
1,000,000 Long Beach CA Finance Authority Revenue AMBAC
Insured 6.00 11/01/17 1,078,360
2,900,000 Los Angeles CA Airport Revenue Series A FGIC
Insured 5.50 05/15/08 2,986,246
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 6.00 08/15/08 1,059,200
2,000,000 Los Angeles CA DW&P Electric Plant Revenue 5.38 09/01/23 1,887,980
2,775,000 Los Angeles CA Harbor Revenue Series B AMT 6.50 08/01/13 2,939,558
110,000 Los Angeles CA SFMR Series A AMT Multiple
Credit Enhancements 7.55 12/01/23 114,095
1,950,000 Los Angeles CA Unified School District
Certificates Participation Multiple Properties
Project Series A FSA Insured 5.50 10/01/16 1,920,750
3,250,000 Los Angeles CA Wastewater System Revenue Series
A 5.70 06/01/20 3,241,550
1,000,000 Los Angeles County CA Metro Transportation
Authority Sales Tax Revenue Series B
AMBACInsured 4.75 07/01/18 881,250
4,000,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A AMBAC Insured 5.50 07/01/17 3,941,760
1,000,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series B 5.75 07/01/18 987,800
480,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series B FGIC Insured 6.50 07/01/15 510,509
</TABLE>
63
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,000,000 Menlo Park CA CDA Tax Allocation Revenue MBIA
Insured 5.38 % 06/01/16 $ 977,500
2,000,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 7.00 09/01/14 2,167,260
1,835,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation MBIA Insured 5.50 08/01/13 1,830,413
1,450,000 Nevada County CA Solid Waste Revenue 6.50 10/01/06 1,557,199
345,000 Nevada County CA Solid Waste Revenue 7.00 06/01/98 350,751
345,000 Nevada County CA Solid Waste Revenue 7.10 06/01/99 353,811
1,000,000 Nevada County CA Solid Waste Revenue 7.50 06/01/21 1,022,030
1,035,000 Northridge CA Water District AMBAC Insured 5.40 02/01/11 1,036,604
1,105,000 Northridge CA Water District Revenue AMBAC
Insured 5.25 02/01/18 1,061,353
1,000,000 Nuview CA USD COP 7.25 02/01/16 1,044,100
1,500,000 Ontario CA RDFA Revenue Project One MBIA
Insured 6.00 08/01/15 1,515,045
1,000,000 Orange County CA Water District Series A 5.50 08/15/10 991,760
2,400,000 Pittsburg CA RDFA Tax Allocation Los Medanos
Community Project FGIC Insured 5.50 08/01/07 2,470,224
1,500,000 Pittsburg CA RDFA Tax Allocation Los Medanos
Community Project Series 90-1 7.40 08/15/20 1,602,405
1,000,000 Port of Oakland CA Special Facilities Revenue
Mitsui OSK Lines Limited Series A AMT LOC -
Industrial Bank of Japan Ltd 6.70 01/01/07 1,067,520
1,000,000 Rancho Cucamonga CA RDFA Tax Allocation MBIA
Insured 5.50 09/01/23 976,780
1,100,000 Richmond CA Joint Powers Financing Authority
Lease and Gas Tax Revenue Series A 5.25 05/15/13 1,037,388
1,055,000 Riverside CA Sewer Revenue FGIC Insured 5.00 08/01/10 1,027,264
1,750,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project A 6.38 06/01/09 1,839,688
</TABLE>
64
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 3,000,000 Riverside County CA COP Series A 6.88 % 11/01/09 $ 3,165,060
1,000,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/13 975,890
305,000 Riverside County CA SFMR Project A AMT GNMA
Collateralized 6.85 10/01/16 332,090
1,335,000 Roseville CA Joint USD Capital Appreciation
Series A 6.30 F 08/01/06 809,838
1,900,000 Sacramento CA Light Rail Transportation Project 6.75 07/01/07 2,063,875
3,600,000 Sacramento CA MUD Electric Revenue Series E
MBIA-IBC Insured 5.70 05/15/12 3,652,560
3,000,000 Sacramento County Main Detention Facility MBIA
Insured 5.75 06/01/15 3,043,950
1,000,000 San Bernardino CA Municipal Water Department
COP FGIC Insured 6.25 02/01/12 1,039,050
1,000,000 San Buenaventura CA Capital Improvement Project
COP 6.85 08/01/16 1,020,590
230,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/01 247,195
250,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/02 270,950
225,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/03 243,428
235,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/04 253,236
235,000 San Carlos CA RDFA Tax Allocation Series A 7.10 09/01/05 253,685
6,500,000 San Diego CA PFA Sewer Revenue FGIC Insured 5.00 05/15/15 6,111,560
1,000,000 San Diego CA Regional Building Authority Lease
Revenue San Miguel Consolidated Fire Protection
District MBIA Insured 5.65 01/01/20 1,007,680
500,000 San Diego County CA Regional Transportation
Community Sales Tax Revenue Series A Escrowed
to Maturity 6.00 04/01/08 535,240
</TABLE>
65
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 2,715,000 San Elijo Joint Powers Authority San Diego
County CA Water Pollution Control Facility FGIC
Insured 5.38 % 03/01/13 $ 2,658,284
2,250,000 San Francisco CA BART Sales Tax Revenue FGIC
Insured 5.50 07/01/15 2,244,555
1,000,000 San Francisco CA RDA Tax Allocation MBIA
Insured 5.00 08/01/15 934,360
2,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road Revenue Capital Appreciation 6.06 F 01/01/10 1,630,000
2,500,000 San Jose CA RDA Tax Allocation MBIA Insured 5.00 08/01/20 2,298,700
1,395,000 San Jose RDFA Merged Area Project MBIA Insured 5.25 08/01/16 1,350,081
1,935,000 San Mateo County CA Board of Education COP 7.10 05/01/21 2,019,095
1,700,000 Santa Clara County CA COP Multiple Facilities
Project AMBAC Insured 6.00 05/15/12 1,752,751
100,000 Santa Clara County CA COP Public Facilities
Corp 7.75 11/01/08 109,071
750,000 Santa Maria CA RDFA Town Center West Side
Parking Facilities FSA Insured 5.25 06/01/11 737,115
2,000,000 Santa Monica - Malibu CA USD Facilities
Reconstruction Projects 5.50 08/01/15 1,962,920
1,195,000 Santa Rosa CA High School District FGIC Insured 5.90 05/01/13 1,227,002
2,575,000 Santa Rosa CA Wastewater Revenue FGIC insured 4.90 09/01/11 2,439,890
1,000,000 Santa Rosa CA Wastewater Treatment Plant FGIC
Insured 4.75 09/01/16 902,580
1,530,000 Simi Valley CA USD FGIC Insured 4.75 08/01/18 1,364,592
1,500,000 Snowline CA Joint USD COP 6.40 07/01/18 1,501,005
1,000,000 South County CA Regional Wastewater Authority
Revenue Capital Improvement FGIC Insured 5.75 08/01/10 1,025,830
1,000,000 Southern California State Public Power
Authority 5.50 07/01/12 986,430
</TABLE>
66
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 860,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 % 10/01/22 $ 905,829
515,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 10/01/23 542,908
660,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 6.75 09/01/22 689,066
695,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 7.35 09/01/24 721,709
2,720,000 Stanislaus County CA COP Capital Improvement
Project Series A MBIA Insured 5.00 05/01/10 2,624,011
20,000 Stockton CA SFMR Government Agency
Collateralized 7.50 02/01/23 21,495
5,690,000 Sulphur Springs CA USD Zero Coupon Series A
MBIA Insured 9.10 F 09/01/13 2,220,978
1,465,000 Sunnyvale CA Elementary School District Series
A 5.70 09/01/20 1,472,325
1,000,000 Sunnyvale CA Financing Authority Utilities
Revenue Solid Waste Materials Series B AMT MBIA
Insured 6.00 10/01/08 1,048,420
1,000,000 Temecula CA Community Services Recreational
Center Project 7.13 10/01/12 1,090,740
1,000,000 Temecula Valley CA USD Series D FGIC Insured 6.00 09/01/14 1,028,920
1,900,000 Torrance CA COP AMBAC Insured 5.50 04/01/12 1,912,597
1,705,000 Torrance CA COP AMBAC Insured 5.75 04/01/16 1,738,776
1,000,000 Twentynine Palms CA Water District CA COP 7.00 08/01/17 1,043,980
1,000,000 University of California Housing System Revenue
Series A MBIA Insured 5.00 11/01/13 937,990
3,000,000 University of California Revenue Multiple
Purpose Project C AMBAC Insured 5.25 09/01/11 2,962,800
2,300,000 University of California Revenue Multiple
Purpose Projects Series C AMBAC Insured 5.25 09/01/12 2,234,749
1,750,000 University of California Revenue Seismic Safety
Project MBIA Insured 5.50 11/01/10 1,765,313
990,000 Upland CA HFA Revenue Issue A 7.85 07/01/20 1,027,481
</TABLE>
67
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,000,000 Vacaville CA PFA Tax Allocation Redevelopment
Project MBIA Insured 6.35 % 09/01/22 $ 1,038,000
1,100,000 Vallejo CA Revenue Water Improvement Project
FSA Insured 5.70 05/01/16 1,116,500
1,750,000 Walnut Creek CA John Muir Medical Center MBIA
Insured 5.00 02/15/16 1,613,885
1,135,000 Walnut Valley CA USD Series C FGIC Insured 5.75 08/01/15 1,148,064
5,000,000 West & Central Basin CA Financing Authority
Series A AMBAC Insured 5.00 08/01/16 4,633,950
1,500,000 West & Century Basin Finance Authority CA
Revenue West Basin Project AMBAC Insured 5.00 08/01/13 1,408,125
1,000,000 Yolo County CA HFA Mortgage Revenue AMT FHA
Collateralized 7.20 08/01/33 1,061,764
------------
TOTAL CALIFORNIA MUNICIPAL BONDS $234,014,956
(Cost $226,013,507)
SHORT-TERM INSTRUMENTS - 3.82%
CALIFORNIA MUNICIPAL VARIABLE RATE SECURITIES - 2.29%+
$ 1,500,000 Irvine Ranch CA Water District V/R LOC -
Sumitomo Bank Ltd 3.45 % 10/01/04 $ 1,500,000
900,000 Los Angeles County CA IDA Komax System Inc V/R
AMT LOC - Dai-Ichi Kangyo Bank Ltd 4.20 12/01/06 900,000
1,350,000 Los Angeles County CA IDA V/R AMT LOC -
Dai-Ichi Kangyo Bank Ltd 4.20 12/01/06 1,350,000
900,000 Los Angeles County CA V/R 4.10 12/01/05 900,000
1,000,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 3.30 08/01/15 1,000,000
------------
$ 5,650,000
</TABLE>
68
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
SHARES SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MONEY MARKET FUNDS - 1.53%
3,755,807 Arbor Fund CA Tax-Exempt Portfolio $ 3,755,807
1,019 Nuveen Institutional CA Tax-Exempt Fund 1,019
------------
$ 3,756,826
TOTAL SHORT-TERM INSTRUMENTS $ 9,406,826
(Cost $9,406,826)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $235,420,333)* (Notes 1 and 3) 98.87 % $243,421,782
Other Assets and Liabilities, Net 1.13 2,787,747
------- ------------
TOTAL NET ASSETS 100.00 % $246,209,529
------- ------------
------- ------------
..........................................................................................................
</TABLE>
F YIELD TO MATURITY.
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 8,986,608
Gross Unrealized Depreciation (985,159)
-------------
NET UNREALIZED APPRECIATION $ 8,001,449
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - 99.13%
$ 2,400,000 ABAG Finance Authority for Nonprofit Corp CA
Lucile Salter Packard Project V/R AMBAC Insured 3.25 % 08/01/23 $ 2,400,000
1,700,000 Alhambra CA IDA Sunclipse V/R LOC - Bank of
America 3.25 05/01/07 1,700,000
2,800,000 Anaheim CA Public Improvement V/R COP LOC -
Industrial Bank of Japan Ltd 3.10 08/01/19 2,800,000
17,000,000 California Health Facility Finance Authority
Revenue - Catholic Healthcare Series A MBIA
Insured 4.00 07/01/21 17,000,000
1,300,000 California Pollution Control Finance Authority
Revenue V/R 4.65 12/01/12 1,300,000
2,000,000 California Pollution Control Finance Authority
Solid Waste Disposal Revenue V/R Series A 4.70 10/01/31 2,000,000
9,055,000 California State DWR Central Valley Project
Revenue V/R 3.40 12/01/05 9,055,000
5,295,000 California State HFA Home Mortgage Revenue 3.45 08/01/15 5,295,000
1,180,000 California State HFA Revenue Sutter Health
Systems Series B 8.00 01/01/16 1,203,600
2,600,000 California State HFFA Adventist Health System
V/R LOC - Toronto Dominion Bank 3.00 08/01/21 2,600,000
4,100,000 California State HFFA Catholic Healthcare
Series C V/R 3.00 07/01/20 4,100,000
4,900,000 California State HFFA Kaiser Permanente V/R 3.00 05/01/28 4,900,000
5,000,000 California State PCFA Solid Waste Disposal
Revenue Colmac Energy Project Series B V/R AMT
LOC - Swiss Bank 3.30 12/01/16 5,000,000
3,600,000 California State PCFA Solid Waste Disposal
Revenue Taormina Industries Project Series B
V/R LOC - Sanwa Bank 3.65 08/01/14 3,600,000
500,000 California State PCFA Southern California
Edison V/R Series C 4.70 02/28/08 500,000
</TABLE>
70
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 100,000 California State PCFA Southern California
Edison V/R Series D 3.45 % 02/28/08 $ 100,000
6,000,000 California State PCFA Western Waste Industries
Project V/R LOC - Citibank 3.17 12/01/00 6,000,000
7,000,000 California State RAN 4.50 06/30/97 7,017,594
7,000,000 California State Revenue Anticipation Notes
Series C-2 4.05 06/30/97 7,000,000
13,525,000 California State School Cash Reserve Projects
Authority Series A 4.75 07/02/97 13,581,529
2,500,000 California Statewide CDA Apartment Development
Revenue Series A-6 V/R FNMA Collateralized 3.25 05/15/25 2,500,000
5,000,000 California Statewide CDA Apartment Development
Revenue V/R Series A-4 FNMA Collateralized 3.25 05/15/05 5,000,000
500,000 California Statewide CDA Apartment Revenue
Series A-7 V/R AMT FNMA Collateralized 3.35 05/15/25 500,000
300,000 California Statewide CDA COP 3.10 06/01/26 300,000
1,000,000 California Statewide CDA Solid Waste Facilities
Revenue Chevron USA Inc Project V/R AMT 6.05 12/15/24 1,000,000
4,800,000 California Statewide CDA St Joseph Health
System V/R 3.00 07/01/08 4,800,000
8,000,000 California Statewide CDA Sutter Health Group
V/R AMBAC Insured 5.00 07/01/15 8,000,000
1,910,000 California Statwide CDA Industrial Revenue Tri
H Food Multiple LOC's 3.40 08/01/11 1,910,000
1,210,000 Central Coast Water Authority California
Revenue series A AMBAC Insured 4.00 10/01/97 1,213,051
400,000 Chula Vista CA IDA Revenue Daily San Diego Gas
& Electric 3.80 07/01/21 400,000
500,000 Chula Vista CA Industrial Development Revenue
San Diego Gas & Electric Series B 4.75 12/01/21 500,000
5,100,000 Colton CA RDFA Las Palomas Associates Project
V/R LOC - Bank of America 3.20 11/01/15 5,100,000
</TABLE>
71
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 600,000 Colton CA RDFA MFHR V/R LOC - Federal Home Loan
Bank of San Francisco 3.15 % 05/01/10 $ 600,000
1,100,000 Concord CA MFHR Bel Air Apartments V/R AMT LOC
-Bank of America 3.20 12/01/16 1,100,000
3,000,000 Contra Costa County CA TRAN 4.50 07/03/97 3,008,676
2,000,000 Duarte CA RDFA COP Johnson Duarte Partners
Project V/R Series B LOC - Bank of America 3.20 12/01/14 2,000,000
8,100,000 Eagle Trust V/R Series 94 MBIA Insured 3.39 09/01/03 8,100,000
1,000,000 East Bay CA Municipal Utility District Water
Revenue 3.50 02/12/97 1,000,000
4,400,000 Escondido CA CDA V/R AMT LOC - Bank of America 3.40 10/01/16 4,400,000
3,600,000 Escondido CA MFHR Morning View Terrace V/R LOC
-Bank of America 2.90 02/15/07 3,600,000
7,200,000 Fremont CA MFHR V/R Creekside Village
Apartments LOC - National Westminster Bank Plc 3.70 09/01/07 7,200,000
3,700,000 Huntington Beach CA MFHR Seabridge Villas V/R
LOC - Bank of America 4.00 02/01/10 3,700,000
3,600,000 Irvine CA Development Revenue V/R 3.30 09/02/21 3,600,000
4,000,000 Irvine CA IDA Improvement Bond V/R LOC -
National Westminster Bank Plc 3.30 09/02/15 4,000,000
1,600,000 Irvine CA IDA Irvine East Investment Co V/R LOC
-Bank of America 3.20 12/01/05 1,600,000
14,200,000 Irvine CA Public Facilities & Infrastructure
Authority Lease Revenue V/R Capital Improvement
Project 3.60 11/01/10 14,200,000
1,100,000 Irvine Ranch CA Water District Series 85B V/R 3.00 10/01/99 1,100,000
500,000 Irvine Ranch CA Water District Series 85B V/R 3.00 10/01/09 500,000
500,000 Irvine Ranch CA Water District V/R 3.40 11/15/13 500,000
</TABLE>
72
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 500,000 Irvine Ranch CA Water District V/R Consolidated
Bonds 5.00 % 10/01/05 $ 500,000
2,000,000 Irwindale CA IDA Revenue Toys R Us Project 3.42 12/01/19 2,000,000
3,000,000 Long Beach CA Harbor Department Series A AMT 3.55 01/07/97 3,000,000
6,500,000 Long Beach CA Health Facilities Memorial Health
Services V/R 3.00 10/01/16 6,500,000
500,000 Los Angeles CA MFHR Series B V/R AMT LOC -
Federal Home Loan Bank of San Francisco 5.25 12/01/26 500,000
2,600,000 Los Angeles CA MFHR V/R AMT LOC - Federal Home
Loan Bank of San Francisco 3.75 08/01/26 2,600,000
16,000,000 Los Angeles CA TRAN Series A 4.50 06/30/97 16,046,932
1,000,000 Los Angeles County CA HFA MFHR Harbor Cove
Project V/R LOC - Citibank 3.20 10/01/06 1,000,000
1,000,000 Los Angeles County CA HFA MFHR Sand Canyon
Ranch Project V/R LOC - Citibank 3.00 11/01/06 1,000,000
12,300,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue V/R
Series A 3.00 07/01/20 12,300,000
2,000,000 Los Angeles County CA Metropolitan
Transportation Commission Sales Tax Revenue 3.50 01/07/97 2,000,000
2,235,000 Los Angeles County CA Metropolitan
Transportation Commission Sales Tax Revenue 3.55 01/10/97 2,235,000
2,700,000 Los Angeles County CA pension Obligation V/R
Series A AMBAC Insured 3.47 06/30/07 2,700,000
1,100,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue V/R FGIC Insured 3.10 07/01/12 1,100,000
2,900,000 Montebello CA V/R LOC - Bank of America 3.25 04/01/15 2,900,000
</TABLE>
73
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 1,500,000 Ontario CA MFHR Daisy Apartments V/R LOC - Bank
of America 2.90 % 11/01/04 $ 1,500,000
6,000,000 Ontario CA MFHR Park Centre Apartments V/R LOC
-Bank of New York 2.90 08/01/07 6,000,000
2,100,000 Ontario CA MFHR Vineyard Village Apartments V/R
LOC - Industrial Bank of Japan Ltd 3.20 12/01/05 2,100,000
5,000,000 Orange County CA HFA Harbor Pointe Apartment
V/R Issue D LOC - Citibank 3.10 12/01/06 5,000,000
2,000,000 Orange County CA HFA Vintage Wood Apartments
V/R LOC - Mitsubishi Bank Ltd 3.00 11/01/08 2,000,000
2,508,000 Orange County CA Improvement Bond V/R Multiple
LOC's 4.85 09/02/18 2,508,000
15,200,000 Orange County CA Sanitation District Multiple
Credit Enhancments 4.00 08/01/13 15,200,000
1,600,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 3.30 08/01/15 1,600,000
500,000 Orange County CA Sanitation District V/R
Multiple Credit Enhancements 5.90 08/01/16 500,000
2,500,000 Redlands CA Certificates Participation Water
Treatment Facilities Project FGIC Insured 4.00 09/01/15 2,500,000
1,000,000 Sacramento CA MUD Electric Development Revenue
Series R 7.13 02/01/13 1,022,970
3,000,000 Sacramento CA Municipal Utility District Series
H 3.55 02/13/97 3,000,000
200,000 Sacramento County CA MFHR Series A V/R LOC -
Dai-Ichi Kangyo Bank Ltd 3.35 04/15/07 200,000
9,150,000 Sacramento County CA Tax & Revenue Anticipation
Notes 4.50 09/30/97 9,213,087
2,780,000 Salinas CA MFHR Brentwood Gardens V/R LOC -
Bank of America 2.90 03/01/05 2,780,000
</TABLE>
74
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 5,000,000 San Bernardino CA Alta Loma Apartments V/R LOC
-Federal Home Loan Bank of Atlanta 3.20 % 02/01/23 $ 5,000,000
2,185,000 San Bernardino County CA MFHR V/R LOC - Federal
Home Loan Bank of San Francisco 3.20 05/01/17 2,185,000
2,000,000 San Diego CA MFHR Los Serano V/R LOC - Citibank 2.90 02/01/09 2,000,000
5,000,000 San Diego CA MFHR Lusk Mira Mesa Apartments V/R
LOC - Bank of America 3.10 04/01/07 5,000,000
3,400,000 San Diego County CA Water Authority 3.55 03/07/97 3,400,000
3,600,000 San Francisco CA City & County V/R LOC -
Industrial Bank of Japan Ltd 3.95 12/01/05 3,600,000
1,600,000 San Francisco CA MFHR Winterland Project V/R
LOC - Citibank 3.00 06/01/06 1,600,000
4,150,000 San Francisco CA RDFA MFHR Rincon Center V/R
LOC - Citibank 3.00 12/01/06 4,150,000
1,300,000 San Jose CA MFHR Kimberly Woods Apartments V/R
LOC - Bank of America 2.90 11/01/08 1,300,000
200,000 Santa Clara CA Electric Revenue V/R Series 85A
LOC - National Westminster Bank Plc 3.20 07/01/10 200,000
400,000 Santa Clara CA Electric Revenue V/R Series 85B
LOC - National Westminster Bank Plc 3.20 07/01/10 400,000
1,500,000 Santa Clara County CA HFA Lincoln Pajaro
Apartments Series 85A LOC - Sumitomo Bank 3.40 01/01/97 1,500,000
1,000,000 Santa Clara County CA MFHR Foxchase Apartments
V/R Series E FGIC Insured 3.00 11/01/07 1,000,000
2,575,000 Santa Clara County CA MFHR Grove Garden
Apartments V/R LOC - Citibank 3.00 03/01/17 2,575,000
6,800,000 Simi Valley CA MFHR Lincoln Wood Ranch V/R LOC
-Sumitomo Bank 3.25 06/01/10 6,800,000
1,000,000 Southern California State Public Power
Authority Palo Verde Project Series B AMBAC
Insured 3.10 07/01/09 1,000,000
</TABLE>
75
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - CONTINUED
$ 10,200,000 Southern California State Public Power
Authority Southern Transmission Project V/R LOC
-Swiss Bank 3.10 % 07/01/19 $ 10,200,000
15,975,000 Southern California Waterworks Revenue Series A
AMBAC Insured 2.95 06/01/23 15,975,000
4,300,000 State of California General Obligation 3.45 01/14/97 4,300,000
2,000,000 State of California General Obligation 3.55 01/21/97 2,000,000
2,100,000 Tracy CA MFHR Sycamore Village Apartments V/R
LOC - Bank of America 3.10 05/01/15 2,100,000
4,925,000 Turlock CA Irrigation District Revenue V/R
Series A LOC - Canadian Imperial Bank of
Commerce 3.10 01/01/14 4,925,000
2,000,000 Vacaville CA MFHR Western Properties Sycamores
Project V/R LOC - Bank of America 3.10 04/01/05 2,000,000
2,600,000 Walnut Creek CA MFHR Creekside Drive Apartments
V/R LOC - Bank of America 3.10 04/01/07 2,600,000
2,000,000 West Covina CA RDA COP V/R Barranca LOC -
Citibank 3.45 09/01/05 2,000,000
------------
TOTAL SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES $387,900,439
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $387,900,439)* (Note 1) 99.13 % $387,900,439
Other Assets and Liabilities, Net 0.87 3,386,535
------- ------------
TOTAL NET ASSETS 100.00 % $391,286,974
------- ------------
------- ------------
..........................................................................................................
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A
DEMAND FEATURE WHICH REDUCES THE REMAINING MATURITY.
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSITS - 15.99%
$ 20,000,000 Bank of Nova Scotia 5.44 % 02/10/97 $ 20,000,660
50,000,000 BNP US Finance Corp 5.37 02/24/97 50,000,740
40,000,000 Den Danske Bank 5.40 02/03/97 40,000,000
50,000,000 National Westminster Bank Plc 5.39 02/03/97 50,000,381
22,000,000 Union Bank of California 5.50 04/28/97 22,000,000
------------
TOTAL CERTIFICATES OF DEPOSITS $182,001,781
COMMERCIAL PAPER - 58.01%
$ 25,000,000 Asset Securitization Corp++ 5.30 %F 02/05/97 $ 24,871,181
26,000,000 Asset Securitization Corp++ 5.32 F 01/09/97 25,969,262
50,000,000 Bankers Trust Corp 5.34 F 08/11/97 48,353,500
35,000,000 Ciesco LP 5.32 F 01/22/97 34,891,383
45,000,000 CIT Group Holdings Inc 5.30 F 02/06/97 44,761,500
50,000,000 Ford Motor Credit Corp 5.32 F 02/03/97 49,756,167
25,000,000 General Electric Capital 5.29 F 08/08/97 24,195,479
50,000,000 Glaxo Wellcome Plc 5.32 F 01/28/97 49,800,313
50,000,000 IBM Credit Corp 5.31 F 01/21/97 49,852,500
44,000,000 Merrill Lynch Corp 5.32 F 01/29/97 43,816,911
46,360,000 Met Life Corp 5.29 F 02/13/97 46,067,069
22,000,000 Morgan Stanley Corp 5.32 F 01/17/97 21,947,982
30,000,000 Morgan Stanley Corp 5.32 F 01/27/97 29,884,733
20,000,000 New Center Asset Trust 5.31 F 02/05/97 19,896,750
21,202,000 Receivable Corp 5.39 F 01/10/97 21,173,430
23,719,000 Receivables Capital Corp 5.39 F 03/10/97 23,477,514
31,600,000 RTZ America Corp++ 5.30 F 02/27/97 31,334,823
20,500,000 RTZ America Corp++ 5.41 F 03/17/97 20,268,948
25,300,000 Sony Capital Corp 5.30 F 01/09/97 25,270,202
25,000,000 Transamerica Finance Corp 5.31 F 01/15/97 24,948,375
------------
TOTAL COMMERCIAL PAPER $660,538,022
</TABLE>
77
<PAGE>
MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
VARIABLE AND FLOATING RATE BONDS - 24.19%
$ 43,500,000 Abbey National North America 5.32 % 07/17/97 $ 43,469,985
30,000,000 Beta Finance Corp++ 5.56 01/27/97 29,988,000
35,000,000 Colorado National Bank 5.57 04/16/97 34,996,985
25,000,000 Federal Home Loan Bank 5.37 08/08/97 24,983,138
25,000,000 Household Finance Corp 5.45 05/27/97 25,000,000
44,000,000 PHH Corp 5.52 09/22/97 44,000,000
43,000,000 PNC Bank Corp 5.46 10/01/97 42,978,837
20,000,000 Sony Capital Corp++ 5.50 08/29/97 19,996,556
10,000,000 Wachovia Corp 5.36 04/25/97 9,990,020
------------
TOTAL VARIABLE AND FLOATING RATE BONDS $275,403,521
REPURCHASE AGREEMENTS - 2.06%
$ 23,500,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.58 01/02/97 $ 23,500,000
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $1,141,443,324)* (Note 1) 100.25 % $1,141,443,324
Other Assets and Liabilities, Net (0.25 ) (2,823,855)
------- ------------
TOTAL NET ASSETS 100.00 % $1,138,619,469
------- ------------
------- ------------
..........................................................................................................
</TABLE>
++ THESE SECURITIES ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933.
RULE 144A UNDER THAT ACT PERMITS THESE SECURITIES TO BE RESOLD IN
TRANSACTIONS EXEMPT FROM REGISTRATION TO QUALIFIED INSTITUTIONAL
BUYERS. THESE SECURITIES WERE DEEMED LIQUID BY THE INVESTMENT ADVISER
IN ACCORDANCE WITH PROCEDURES APPROVED BY THE FUND'S BOARD OF
DIRECTORS.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
F YIELD TO MATURITY.
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
MUNICIPAL INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 95.53%
ALABAMA - 0.31%
$ 160,000 Alabama State SFMR Series B AMT GNMA
Collateralized 7.40 % 04/01/22 $ 167,531
ALASKA - 1.01%
525,000 Alaska State Housing Finance Corporation Second
Series AMT Government Agency Collateralized 7.10 06/01/22 547,754
CALIFORNIA - 26.46%
9,750,000 Riverside County CA SFMR Series B AMT Escrowed
to Maturity 8.35 06/01/13 12,405,803
1,000,000 San Francisco CA City AMT 6.15 05/01/16 1,041,110
820,000 Southern California State SFMR Project B AMT
GNMA/FNMA Collateralized 6.90 10/01/24 861,025
DISTRICT OF COLUMBIA - 0.62%
320,000 District of Columbia SFMR AMT GNMA
Collateralized 7.10 12/01/24 336,246
FLORIDA - 0.47%
240,000 Brevard County FL HFA SFMR Refunded Series B
FSA Insured 7.00 03/01/13 252,648
HAWAII - 2.47%
725,000 Hawaii State Airports Systems Revenue AMT FGIC
Insured 7.00 07/01/20 794,781
500,000 Hawaii State Harbor Capital Improvement Revenue
AMT MBIA Insured 7.00 07/01/17 541,875
IDAHO - 2.82%
1,500,000 Idaho State HFA SFMR Series C-2 AMT 6.35 07/01/15 1,523,955
ILLINOIS - 4.76%
500,000 Chicago IL O'Hare International Airport Special
Facilities Revenue AMT LOC - Bayerische
Landesbank 7.13 05/01/18 540,885
</TABLE>
79
<PAGE>
MUNICIPAL INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
ILLINOIS - CONTINUED
$ 1,900,000 Chicago IL O'Hare International Airport Special
Facilities Revenue AMT MBIA Insured 6.75 % 01/01/18 $ 2,034,102
INDIANA - 4.69%
2,500,000 Indiana State HFA Series A-2 AMT GNMA/FNMA
Collateralized 6.45 07/01/14 2,533,675
IOWA - 3.55%
1,435,000 Iowa State HFA SFMR Series B AMT GNMA/FNMA
Collateralized 6.95 07/01/24 1,505,588
395,000 Iowa State HFA SFMR Series B AMT GNMA/FNMA
Collateralized 7.45 07/01/23 412,546
KANSAS - 0.33%
170,000 Kansas City KS Mortgage Revenue AMT GNMA
Collateralized 7.35 12/01/23 179,785
KENTUCKY - 4.13%
1,100,000 Kenton County KY Cincinnati/Northern Kentucky
International Airport Revenue AMT FSA Insured 6.30 03/01/15 1,140,348
1,060,000 Kentucky State HFA MFHR Series D AMT FHA
Collateralized 7.45 01/01/23 1,092,987
LOUISIANA - 3.18%
1,000,000 Louisiana State MFHR AMT FHA Collateralized 5.90 12/01/18 988,930
670,000 Louisiana State Public Facilities Authority
Student Loan Revenue AMT FSA Insured 6.85 01/01/09 730,320
MASSACHUSETTS - 1.96%
1,000,000 Massachusetts State HFA Residential Development
FNMA Collateralized 6.90 11/15/21 1,062,640
</TABLE>
80
<PAGE>
MUNICIPAL INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
MINNESOTA - 0.85%
$ 440,000 Minneapolis-St Paul MN Housing Finance Board
Revenue SFMR Phase IX AMT GNMA Collateralized 7.30 % 08/01/31 $ 459,835
NEVADA - 10.70%
1,020,000 Nevada State SFMR Series A-2 AMT FHA
Collateralized 6.55 10/01/15 1,056,608
1,825,000 Nevada State SFMR Series C AMT FHA
Collateralized 6.35 10/01/13 1,876,994
2,700,000 Washoe County NV Gas Facilities Sierra Pacific
Power AMT MBIA Insured 6.55 09/01/20 2,853,116
NEW JERSEY - 2.42%
1,250,000 New Jersey State MFHR FHA Collateralized 7.00 05/01/30 1,309,425
NEW MEXICO - 3.72%
2,000,000 New Mexico Mortgage Finance Authority 6.20 07/01/28 2,010,000
NEW YORK - 1.89%
1,000,000 Port Authority New York & New Jersey 5.75 09/15/12 1,022,500
OKLAHOMA - 2.54%
200,000 Pryor Creek OK Economic Development Authority
Mortgage Revenue Series A FNMA Collateralized 7.13 07/01/21 208,072
605,000 Tulsa County OK HFA Mortgage Revenue Series B
Remarket AMT GNMA Collateralized 7.10 06/01/22 636,756
500,000 Tulsa County OK HFA Mortgage Revenue Series B
Remarket AMT GNMA Collateralized 7.55 05/01/23 528,400
PENNSYLVANIA - 0.97%
500,000 Pennsylvania State Higher EDFA Student Loan
Revenue Series D AMT AMBAC Insured 7.05 10/01/16 524,885
</TABLE>
81
<PAGE>
MUNICIPAL INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
TEXAS - 0.91%
$ 465,000 Travis County TX HFC Residential Mortgage
Revenue Series A GNMA/FNMA Collateralized 7.00 % 12/01/11 $ 494,528
UTAH - 8.28%
500,000 Utah State Board of Regents Student Loan
Revenue Series F AMT AMBAC Insured 7.45 11/01/08 529,870
1,100,000 Utah State Board of Regents Student Loan
Revenue Series H AMT AMBAC Insured 6.70 11/01/15 1,139,061
2,000,000 Utah State HFA SFMR Series B-2 AMT FHA
Collateralized 6.50 07/01/15 2,042,140
750,000 Utah State HFA SFMR Series D-2 AMT FHA
Collateralized 6.45 01/01/11 766,403
WASHINGTON - 6.49%
2,000,000 Grant County WA Public Utility 5.88 01/01/16 2,007,500
1,440,000 Washington State SFMR Series D AMT GNMA/FNMA
Collateralized 7.10 07/01/22 1,501,099
------------
TOTAL MUNICIPAL BONDS $ 51,661,726
(Cost $49,283,227)
</TABLE>
82
<PAGE>
MUNICIPAL INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 4.45%
MONEY MARKET FUNDS- 4.45%
2,405,000 National Municipal Fund
$ 2,405,000
(Cost $2,405,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $51,688,227)* (Notes 1 and 3) 99.98 % $ 54,066,726
Other Assets and Liabilities, Net 0.02 12,403
------- ------------
TOTAL NET ASSETS 100.00 % $ 54,079,129
------- ------------
------- ------------
..........................................................................................................
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 2,389,569
Gross Unrealized Depreciation (11,070)
-----------
NET UNREALIZED APPRECIATION $ 2,378,499
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
83
<PAGE>
U.S. GOVERNMENT INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 62.25%
ADJUSTABLE RATE MORTGAGES - 0.38%
$ 19,258 GNMA #8109 (CMT) 6.75 % 03/20/16 $ 19,679
32,455 GNMA #8119 (CMT) 7.38 04/20/16 33,307
9,720 GNMA #8137 (CMT) 7.38 06/20/16 9,963
16,384 GNMA #8292 (CMT) 7.00 11/20/17 16,753
28,506 GNMA #8293 (CMT) 7.00 12/20/17 29,130
8,051 GNMA #8310 (CMT) 6.50 01/20/18 8,232
33,137 GNMA #8392 (CMT) 7.25 08/20/18 34,027
32,166 GNMA #8393 (CMT) 7.25 08/20/18 33,050
18,369 GNMA #8429 (CMT) 7.00 11/20/18 18,805
100,117 GNMA #8761 (CMT) 6.50 03/20/21 102,119
------------
$ 305,065
FEDERAL AGENCY - OTHER - 6.19%
$ 5,000,000 Tennessee Valley Authority 6.38 % 06/15/05 $ 4,921,100
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.98%
$ 3,960,000 FNMA #250799 7.50 % 12/01/26 $ 3,959,248
FIXED RATE MORTGAGES - 30.19%
$ 35,848 FHLMC #275825 9.50 % 08/01/16 $ 38,875
38,704 FHLMC #304114 9.00 05/01/18 41,086
123,096 FHLMC #304398 9.00 06/01/18 130,747
32,795 FHLMC #305831 10.00 08/01/18 35,905
7,621 FHLMC #307323 9.50 09/01/18 8,261
56,426 FHLMC #307637 9.50 07/01/16 60,965
42,078 FHLMC #307915 9.50 10/01/18 45,663
5,635 FHLMC #308074 9.50 10/01/18 6,115
19,160 FHLMC #360020 10.00 01/01/18 20,976
24,474 FHLMC #360045 10.00 02/01/19 26,791
28,927 FHLMC #532468 9.50 04/01/19 31,369
14,214 GNMA #150499 10.50 03/15/16 15,840
62,410 GNMA #17087 9.00 09/15/16 67,014
149,817 GNMA #173055 9.00 09/15/16 160,869
80,859 GNMA #176892 9.00 10/15/16 86,681
399,478 GNMA #190848 9.00 01/15/17 428,948
</TABLE>
84
<PAGE>
U.S. GOVERNMENT INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - CONTINUED
FIXED RATE MORTGAGES - CONTINUED
$ 159,109 GNMA #191961 9.00 % 02/15/20 $ 169,752
43,923 GNMA #202624 9.00 11/15/19 46,889
40,321 GNMA #236877 9.00 04/15/18 43,127
63,398 GNMA #285963 9.00 01/15/20 67,679
14,981 GNMA #289319 9.00 11/15/20 15,983
136,960 GNMA #303235 9.00 05/15/21 146,036
174,114 GNMA #304653 9.00 09/15/21 185,653
4,079 GNMA #314150 9.00 10/15/21 4,352
2,054,154 GNMA #319413 7.25 12/15/18 2,022,336
17,316 GNMA #33080 9.00 08/15/22 18,463
23,719 GNMA #335400 9.00 12/15/22 25,291
1,922,371 GNMA #358863 7.25 01/15/24 1,892,113
665,380 GNMA II #1124 11.00 01/20/19 756,824
354,505 GNMA II #1221 11.00 07/20/19 403,224
99,779 GNMA II #1562 10.00 02/20/21 108,611
31,980 GNMA II #194221 10.00 09/20/20 34,811
317,862 GNMA II #266120 10.00 08/20/19 346,447
5,175 GNMA II #272537 10.00 08/20/19 5,641
18,259 GNMA II #278055 10.00 07/20/19 19,904
62,251 GNMA II #289000 10.00 05/20/20 67,790
183,541 GNMA II #85 10.00 02/20/22 199,961
140,763 GNMA II #908 10.00 01/20/18 153,488
3,643,309 GNMA II #2020 8.50 06/20/25 3,775,452
3,231,197 GNMA II #2022 9.00 06/20/25 3,373,369
2,959,856 GNMA II #2068 7.50 08/20/26 2,946,034
2,469,538 GNMA II #2303 7.50 10/20/26 2,457,956
3,459,431 GNMA II #2324 8.00 11/20/26 3,517,412
------------
$ 24,010,703
</TABLE>
85
<PAGE>
U.S. GOVERNMENT INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - CONTINUED
U.S. GOVERNMENT AGENCY NOTES - 20.51%
$ 15,000,000 FHLMC 6.88 % 11/22/06 $ 14,742,600
1,700,000 FNMA Principal Strip 5.16 F 03/09/22 1,564,952
------------
$ 16,307,552
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 49,503,668
(Cost $49,353,880)
U.S. TREASURY SECURITIES - 35.56%
U.S. TREASURY BONDS - 15.85%
$ 8,000,000 U.S. Treasury Bonds 6.50 % 11/15/26 $ 7,851,280
1,000,000 U.S. Treasury Bonds 6.88 08/15/25 1,019,690
2,500,000 U.S. Treasury Bonds 12.50 08/15/14 3,736,325
------------
$ 12,607,295
U.S. TREASURY NOTES - 19.71%
$ 15,000,000 U.S. Treasury Notes 6.50 % 08/31/01 $ 15,164,100
500,000 U.S. Treasury Notes 6.63 07/31/01 507,970
------------
$ 15,672,070
TOTAL U.S. TREASURY SECURITIES $ 28,279,365
(Cost $28,429,922)
SHORT-TERM INSTRUMENTS - 1.43%
REPURCHASE AGREEMENTS - 1.43%
$ 1,142,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.58 01/02/97 $ 1,142,000
(Cost $1,142,000)
</TABLE>
86
<PAGE>
U.S. GOVERNMENT INCOME FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $78,925,802)* (Notes 1 and 3) 99.24 % $ 78,925,033
Other Assets and Liabilities, Net 0.76 604,083
------- ------------
TOTAL NET ASSETS 100.00 % $ 79,529,116
------- ------------
------- ------------
..........................................................................................................
</TABLE>
F YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED DEPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 584,426
Gross Unrealized Depreciation (585,195)
-----------
NET UNREALIZED DEPRECIATION ($ 769)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
87
<PAGE>
U.S. TREASURY MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 99.02%
U.S. TREASURY BILLS - 96.36%
$ 345,000 U.S. Treasury Bills 5.00 %F 03/20/97 $ 341,263
107,275,000 U.S. Treasury Bills 5.01 F 01/09/97 107,165,390
5,500,000 U.S. Treasury Bills 5.06 F 04/17/97 5,418,299
14,675,000 U.S. Treasury Bills 5.11 F 01/16/97 14,644,427
80,055,000 U.S. Treasury Bills 5.12 F 01/23/97 79,822,186
2,800,000 U.S. Treasury Bills 5.12 F 01/30/97 2,788,711
30,495,000 U.S. Treasury Bills 5.17 F 02/06/97 30,346,642
6,095,000 U.S. Treasury Bills 5.17 F 02/13/97 6,059,327
37,995,000 U.S. Treasury Bills 5.18 F 02/20/97 37,731,128
20,000,000 U.S. Treasury Bills 5.18 F 02/27/97 19,839,450
27,900,000 U.S. Treasury Bills 5.20 F 03/06/97 27,649,812
19,400,000 U.S. Treasury Bills 5.21 F 04/03/97 19,150,966
20,400,000 U.S. Treasury Bills 5.24 F 05/08/97 20,040,505
32,800,000 U.S. Treasury Bills 5.25 F 05/01/97 32,253,074
2,200,000 U.S. Treasury Bills 5.28 F 05/22/97 2,156,744
3,780,000 U.S. Treasury Bills 5.28 F 05/29/97 3,701,368
10,000,000 U.S. Treasury Bills 5.37 F 08/21/97 9,671,656
------------
$418,780,948
U.S. TREASURY NOTES - 2.66%
$ 11,530,000 U.S. Treasury Notes 6.63 % 03/31/97 $ 11,564,840
TOTAL U.S. TREASURY SECURITIES $430,345,788
(Cost $430,345,788)
</TABLE>
88
<PAGE>
U.S. TREASURY MONEY MARKET FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $430,345,788)* (Notes 1) 99.02 % $430,345,788
Other Assets and Liabilities, Net 0.98 4,277,763
------- ------------
TOTAL NET ASSETS 100.00 % $434,623,551
------- ------------
------- ------------
..........................................................................................................
</TABLE>
F YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES.
The accompanying notes are an integral part of these financial statements.
89
<PAGE>
VARIABLE RATE GOVERNMENT FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 90.22%
ADJUSTABLE RATE MORTGAGES - 89.35%
$ 14,708,719 FHLMC #610237 (CMT) 7.39 % 10/01/25 $ 15,099,383
6,451,145 FHLMC #755102 (CMT) 7.32 06/01/18 6,676,936
35,646 FHLMC #845410 (CMT) 7.45 07/01/23 36,560
15,834 FHLMC #845613 (CMT) 7.58 01/01/24 16,349
15,294,695 FHLMC #846150 (CMT) 7.61 04/01/21 15,963,838
10,263,410 FHLMC #846206 (CMT) 7.12 12/01/25 10,489,513
13,478,041 FHLMC #845630 7.66 01/01/24 13,899,230
3,789,238 FHLMC #845731 7.52 04/01/24 3,895,792
19,043,696 FHLMC #846111 7.62 06/01/24 19,734,030
28,604,093 FHLMC #846256 7.66 02/01/25 29,386,129
9,584,563 FHLMC #846288 7.38 05/01/24 9,824,178
16,634,712 FHLMC #846299 7.70 06/01/25 17,099,985
12,053,872 FNMA #190591 7.86 01/01/24 12,490,825
11,854,544 FNMA #303990 7.58 01/01/25 12,202,831
16,569,969 FNMA #313100 6.06 10/01/26 16,992,503
5,366,736 FNMA #333938 (CMT) 7.93 12/01/25 5,581,406
8,605,453 FNMA #136014 (COFI) 6.14 05/01/18 8,973,508
17,415,043 FNMA #313242 5.96 11/01/26 17,853,902
25,454,668 FNMA #331477 7.56 03/01/25 26,186,490
11,579,060 FNMA #334439 7.62 04/01/24 11,948,200
10,369,186 FNMA #347213 5.25 06/01/26 10,563,608
13,079,912 FNMA #348290 7.65 01/01/25 13,480,419
7,516,209 FNMA #57733 6.09 02/01/17 7,445,782
3,276,631 FNMA #57775 6.07 05/01/18 3,252,056
10,759,645 FNMA #66397 6.17 03/01/18 10,658,827
26,096,581 GNMA II #8793 7.00 01/20/26 26,704,109
12,620,958 GNMA II #8705 (CMT) 7.13 09/20/25 12,906,949
9,180,135 GNMA II #8443 (CMT) 7.13 06/20/24 9,378,059
8,051,925 GNMA II #8358 (CMT) 6.50 01/20/24 8,196,618
------------
$356,938,015
</TABLE>
90
<PAGE>
VARIABLE RATE GOVERNMENT FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - CONTINUED
REAL ESTATE MORTGAGE INVESTMENT CONDUITS - 0.87%
$ 3,295,848 FHLMC #1534 7.09 % 06/15/23 $ 3,462,683
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $360,400,698
(Cost $358,695,661)
U.S. TREASURY SECURITIES - 4.99%
U.S. TREASURY NOTES - 4.99%
$ 20,000,000 U.S. Treasury Notes 5.63 % 11/30/98 $ 19,907,600
(Cost $19,931,955)
SHORT-TERM INSTRUMENTS - 3.17%
REPURCHASE AGREEMENTS - 3.17%
$ 673,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.58 01/02/97 $ 673,000
12,000,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.37 01/02/97 12,000,000
------------
TOTAL SHORT-TERM INSTRUMENTS $ 12,673,000
(Cost $12,673,000)
</TABLE>
91
<PAGE>
VARIABLE RATE GOVERNMENT FUND - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $391,300,616)* (Notes 1 and 3) 98.38 % $392,981,298
Other Assets and Liabilities, Net 1.62 6,482,572
------- ------------
TOTAL NET ASSETS 100.00 % $399,463,870
------- ------------
------- ------------
..........................................................................................................
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 2,110,445
Gross Unrealized Depreciation (429,763)
-------------
NET UNREALIZED APPRECIATION $ 1,680,682
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
92
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
93
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSET CALIFORNIA
ALLOCATION TAX-FREE
FUND BOND FUND
<S> <C> <C>
.........................................................................
ASSETS
INVESTMENTS:
In securities, at market value (See
cost below) $85,368,813 $243,421,782
Cash 8,141 1,391
Receivables:
Dividends and Interest 351,955 4,011,608
Fund shares sold 22,315 61,649
Investment securities sold 0 0
Due from administrator (Note 2) 0 0
Organizational expenses, net of
amortization 6,686 1,294
Prepaid expenses 0 184,517
TOTAL ASSETS 85,757,910 247,682,241
LIABILITIES
Payables:
Investment securities purchased 13,167 0
Distribution to shareholders 442,989 1,034,894
Fund shares redeemed 2,968 279,190
Due to sponsor and distributor (Note
2) 105,032 33,708
Due to advisor (Note 2) 50,902 106,384
Other 135,076 18,536
TOTAL LIABILITIES 750,134 1,472,712
TOTAL NET ASSETS
$85,007,776 $246,209,529
NET ASSETS CONSIST OF:
Paid-in capital - Class A(1) $46,990,292 $230,531,720
Paid-in capital - Class D or I 22,987,136 7,382,100
Undistributed (overdistributed) net
investment income 0 0
Undistributed net realized gain (loss)
on investments 1,358,022 294,260
Net unrealized appreciation
(depreciation) of investments 13,672,326 8,001,449
TOTAL NET ASSETS $85,007,776 $246,209,529
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A(1) $60,352,650 $239,703,322
Shares outstanding - Class A(1) 4,312,765 22,844,914
Net asset value per share - Class A(1) $13.99 $10.49
Maximum offering price per share - Class
A(1) $14.65(2) $10.98(2)
Net assets - Class D or I $24,655,126 $ 6,506,207
Shares outstanding - Class D or I 1,415,178 474,921
Net asset value and offering price per
share - Class D or I $17.42 $13.70
INVESTMENT AT COST (NOTE 3) $71,696,487 $235,420,333
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(4) INVESTMENT IN MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
94
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA SHORT-TERM
TAX-FREE MUNICIPAL GOVERNMENT-
MONEY MARKET MONEY MARKET INCOME CORPORATE
FUND FUND FUND INCOME FUND
<S> <C> <C> <C> <C>
............................................................................................................
ASSETS
INVESTMENTS:
In securities, at market value (See
cost below) $387,900,439 $1,141,443,324 $54,066,726 $14,013,091(4)
Cash 2,038,373 301,525 1,923 0
Receivables:
Dividends and Interest 2,970,358 2,734,100 855,846 68,452
Fund shares sold 0 0 0 0
Investment securities sold 0 0 0 0
Due from administrator (Note 2) 0 0 0 7,397
Organizational expenses, net of
amortization 0 30,279 5,867 55,656
Prepaid expenses 634 49,573 0 0
TOTAL ASSETS 392,909,804 1,144,558,801 54,930,362 14,144,596
LIABILITIES
Payables:
Investment securities purchased 0 0 0 0
Distribution to shareholders 939,444 5,189,750 244,481 63,822
Fund shares redeemed 0 0 431,071 0
Due to sponsor and distributor (Note
2) 444,393 410,284 55,410 10,970
Due to advisor (Note 2) 118,068 305,944 13,864 0
Other 120,925 33,354 106,407 47,179
TOTAL LIABILITIES 1,622,830 5,939,332 851,233 121,971
TOTAL NET ASSETS
$391,286,974 $1,138,619,469 $54,079,129 $14,022,625
NET ASSETS CONSIST OF:
Paid-in capital - Class A(1) $391,345,891 $ 384,607,576 $44,922,766 $14,079,827
Paid-in capital - Class D or I N/A 754,090,154 10,781,895 N/A
Undistributed (overdistributed) net
investment income 0 0 0 0
Undistributed net realized gain (loss)
on investments (58,917) (78,261) (4,004,031) (59,839)
Net unrealized appreciation
(depreciation) of investments 0 0 2,378,499 2,637
TOTAL NET ASSETS $391,286,974 $1,138,619,469 $54,079,129 $14,022,625
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A(1) $391,286,974 $ 384,527,005 $44,326,308 $14,022,625
Shares outstanding - Class A(1) 391,345,199 384,605,312 4,134,833 2,815,117
Net asset value per share - Class A(1) $1.00 $1.00 $10.72 $4.98
Maximum offering price per share - Class
A(1) $1.00 $1.00 $11.05(3) $5.13(3)
Net assets - Class D or I N/A $ 754,092,464 $ 9,752,821 N/A
Shares outstanding - Class D or I N/A 754,092,376 671,800 N/A
Net asset value and offering price per
share - Class D or I N/A $1.00 $14.52 N/A
INVESTMENT AT COST (NOTE 3) $387,900,439 $1,141,443,324 $51,688,227 N/A
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(4) INVESTMENT IN MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
95
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT- TERM
MUNICIPAL SMALL CAP
INCOME STRATEGY
FUND FUND
<S> <C> <C>
.......................................................................
ASSETS
INVESTMENTS:
In securities, at market value (See
cost below) $26,708,324(4) $4,612,947(4)
Cash 0 0
Receivables:
Dividends and Interest 97,511 945
Fund shares sold 0 0
Investment securities sold 0 0
Due from administrator (Note 2) 7,553 10,690
Organizational expenses, net of
amortization 49,132 79,489
Prepaid expenses 0 0
TOTAL ASSETS 26,862,520 4,704,071
LIABILITIES
Payables:
Investment securities purchased 0 0
Distribution to shareholders 88,090 0
Fund shares redeemed 0 24,545
Due to sponsor and distributor (Note
2) 25,749 87,152
Due to advisor (Note 2) 0 0
Other 35,178 30,398
TOTAL LIABILITIES 149,017 142,095
TOTAL NET ASSETS
$26,713,503 $4,561,976
NET ASSETS CONSIST OF:
Paid-in capital - Class A(1) $26,659,818 $2,910,925
Paid-in capital - Class D or I N/A 1,599,620
Undistributed (overdistributed) net
investment income 0 0
Undistributed net realized gain (loss)
on investments 4,513 (88,195)
Net unrealized appreciation
(depreciation) of investments 49,172 139,626
TOTAL NET ASSETS $26,713,503 $4,561,976
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A(1) $26,713,503 $2,935,101
Shares outstanding - Class A(1) 5,372,650 292,342
Net asset value per share - Class A(1) $4.97 $10.04
Maximum offering price per share - Class
A(1) $5.12(3) $10.51(2)
Net assets - Class D or I N/A $1,626,875
Shares outstanding - Class D or I N/A 162,448
Net asset value and offering price per
share - Class D or I N/A $10.01
INVESTMENT AT COST (NOTE 3) N/A N/A
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(4) INVESTMENT IN MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
96
<PAGE>
<TABLE>
<CAPTION>
U.S. U.S.
STRATEGIC GOVERNMENT TREASURY VARIABLE RATE
GROWTH INCOME MONEY MARKET GOVERNMENT
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
............................................................................................................
ASSETS
INVESTMENTS:
In securities, at market value (See
cost below) $186,959,089(4) $78,925,033 $430,345,788 $ 392,981,298
Cash 0 1,666 6,178,453 504,345
Receivables:
Dividends and Interest 0 934,938 195,163 2,976,107
Fund shares sold 12,621 0 0 0
Investment securities sold 0 8,061,029 0 5,516,975
Due from administrator (Note 2) 0 0 0 0
Organizational expenses, net of
amortization 20,725 5,821 12,726 7,934
Prepaid expenses 27,378 6,058 9,603 16,850
TOTAL ASSETS 187,019,813 87,934,545 436,741,733 402,003,509
LIABILITIES
Payables:
Investment securities purchased 0 7,877,500 0 0
Distribution to shareholders 0 399,929 1,659,825 1,973,895
Fund shares redeemed 224,250 400 0 45,989
Due to sponsor and distributor (Note
2) 226,228 10,028 207,411 333,171
Due to advisor (Note 2) 13,709 7,810 102,155 148,517
Other 265,930 109,762 148,791 38,067
TOTAL LIABILITIES 730,117 8,405,429 2,118,182 2,539,639
TOTAL NET ASSETS
$186,289,696 $79,529,116 $434,623,551 $ 399,463,870
NET ASSETS CONSIST OF:
Paid-in capital - Class A(1) $117,318,177 $78,754,184 $277,803,925 $ 537,104,950
Paid-in capital - Class D or I 48,668,091 3,224,424 156,779,902 6,515,392
Undistributed (overdistributed) net
investment income 0 0 0 0
Undistributed net realized gain (loss)
on investments 13,580,859 (2,448,723) 39,724 (145,837,154)
Net unrealized appreciation
(depreciation) of investments 6,722,569 (769) 0 1,680,682
TOTAL NET ASSETS $186,289,696 $79,529,116 $434,623,551 $ 399,463,870
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE PER SHARE
Net assets - Class A(1) $131,226,263 $77,239,280 $277,815,962 $ 393,948,015
Shares outstanding - Class A(1) 7,124,331 7,630,851 277,807,288 42,589,355
Net asset value per share - Class A(1) $18.42 $10.12 $1.00 $9.25
Maximum offering price per share - Class
A(1) $19.29(2) $10.60(2) $1.00 $9.54(3)
Net assets - Class D or I $ 55,063,433 $ 2,289,836 $156,807,589 $ 5,515,855
Shares outstanding - Class D or I 2,437,482 165,503 156,779,902 398,932
Net asset value and offering price per
share - Class D or I $22.59 $13.84 $1.00 $13.83
INVESTMENT AT COST (NOTE 3) N/A $78,925,802 $430,345,788 $ 391,300,616
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/95.5 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(3) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
(4) INVESTMENT IN MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
97
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSET CALIFORNIA
ALLOCATION TAX-FREE
FUND BOND FUND
........... ...........
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 1,242,394 $ 0
Interest 1,290,357 14,893,768
Expenses allocated from Master Series N/A N/A
TOTAL INVESTMENT INCOME 2,532,751 14,893,768
EXPENSES (NOTE 2)
Advisory fees 526,417 1,276,667
Administration fees 75,203 357,423
Custody fees 0 45,448
Shareholder servicing fees 50,525 16,686
Portfolio accounting fees 0 112,934
Transfer agency fees 83,000 252,000
Distribution fees 289,056 33,376
Amortization of organization expenses 4,220 1,171
Legal and audit fees 66,285 16,689
Registration fees 55,000 1,998
Directors' fees 4,885 5,000
Shareholder reports 75,000 21,242
Other 6,794 20,345
TOTAL EXPENSES 1,236,385 2,160,979
Less:
Waived fees and reimbursed expenses (106,058) (275,934)
NET EXPENSES 1,130,327 1,885,045
NET INVESTMENT INCOME 1,402,424 13,008,723
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 10,067,335 3,630,526
Net change in unrealized appreciation
(depreciation) of investments 460,902 (6,951,220)
NET GAIN (LOSS) ON INVESTMENTS 10,528,237 (3,320,694)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $11,930,661 $ 9,688,029
</TABLE>
................................................................................
(1) ALLOCATED FROM THE MASTER PORTFOLIO.
(2) SEE NOTE 6.
The accompanying notes are an integral part of these financial statements.
98
<PAGE>
<TABLE>
<CAPTION>
SHORT-TER
CALIFORNIA GOVERNMENT-
TAX-FREE CORPORATE
MONEY MONEY MUNICIPAL INCOME
MARKET FUND MARKET FUND INCOME FUND FUND
........... ........... ........... ........
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 0 $ 0 $ 0 $ 0
Interest 11,930,401 56,188,687 3,897,301 654,198
Expenses allocated from Master Series N/A N/A N/A 0
TOTAL INVESTMENT INCOME 11,930,401 56,188,687 3,897,301 654,198(2)
EXPENSES (NOTE 2)
Advisory fees 1,571,509 2,580,811 309,847 0
Administration fees 275,344 1,032,674 63,028 16,631
Custody fees 64,347 177,958 11,726 0
Shareholder servicing fees 0 0 27,580 0
Portfolio accounting fees 131,377 267,331 59,396 0
Transfer agency fees 49,000 44,001 100,470 0
Distribution fees 0 1,048,153 133,155 27,719
Amortization of organization expenses 0 4,940 16,084 15,655
Legal and audit fees 36,069 89,817 31,385 30,208
Registration fees 4,426 30,579 44,495 10,017
Directors' fees 5,549 4,929 5,000 5,005
Shareholder reports 0 30,712 40,384 10,017
Other 50,512 4,989 17,715 2,038
TOTAL EXPENSES 2,188,133 5,316,894 860,265 117,290
Less:
Waived fees and reimbursed expenses (463) (143,994) (290,298) (76,752)
NET EXPENSES 2,187,670 5,172,900 569,967 40,538
NET INVESTMENT INCOME 9,742,731 51,015,787 3,327,334 613,660
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 13,211 115,019 (245,237) (63,690)(1)
Net change in unrealized appreciation
(depreciation) of investments 0 0 (1,169,068) (11,931)(1)
NET GAIN (LOSS) ON INVESTMENTS 13,211 115,019 (1,414,305) (75,621)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 9,755,942 $51,130,806 $ 1,913,029 $538,039
</TABLE>
................................................................................
(1) ALLOCATED FROM THE MASTER PORTFOLIO.
(2) SEE NOTE 6.
The accompanying notes are an integral part of these financial statements.
99
<PAGE>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT-
TERM SMALL
MUNICIPAL CAP
INCOME STRATEGY
FUND FUND(1)
........ ........
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 0 $ 2,081
Interest 946,275 7,442
Expenses allocated from Master Series 0 (8,578)
TOTAL INVESTMENT INCOME 946,275(3) 945(3)
EXPENSES (NOTE 2)
Advisory fees 0 0
Administration fees 32,565 907
Custody fees 0 0
Shareholder servicing fees 0 754
Portfolio accounting fees 0 0
Transfer agency fees 0 635
Distribution fees 54,276 3,808
Amortization of organization expenses 15,082 2,883
Legal and audit fees 30,071 18,825
Registration fees 10,000 8,688
Directors' fees 5,000 1,448
Shareholder reports 15,000 5,791
Other 2,359 2,072
TOTAL EXPENSES 164,353 45,811
Less:
Waived fees and reimbursed expenses (77,512) (38,860)
NET EXPENSES 86,841 6,951
NET INVESTMENT INCOME 859,434 (6,006)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 4,708(2) (88,195)(2)
Net change in unrealized appreciation
(depreciation) of investments (81,904)(2) 139,626(2)
NET GAIN (LOSS) ON INVESTMENTS (77,196) 51,431
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $782,238 $ 45,425
</TABLE>
................................................................................
(1) THE FUND COMMENCED OPERATIONS ON SEPTEMBER16, 1996.
(2) ALLOCATED FROM THE MASTER PORTFOLIO.
(3) SEE NOTE 6.
The accompanying notes are an integral part of these financial statements.
100
<PAGE>
<TABLE>
<CAPTION>
U.S. VARIABLE
U.S. TREASURY RATE
STRATEGIC GOVERNMENT MONEY GOVERNMENT
GROWTH FUND INCOME FUND MARKET FUND FUND
........... ........... ........... ...........
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 152,020 $ 0 $ 0 $ 0
Interest 409,487 3,021,001 20,555,308 33,620,695
Expenses allocated from Master Series (739,377) N/A N/A N/A
TOTAL INVESTMENT INCOME (177,870)(3) 3,021,001 20,555,308 33,620,695
EXPENSES (NOTE 2)
Advisory fees 59,742 213,617 1,004,407 2,696,450
Administration fees 211,420 42,724 401,763 639,292
Custody fees 3,539 16,191 73,106 109,092
Shareholder servicing fees 110,673 6,135 0 17,944
Portfolio accounting fees 10,685 52,009 141,897 169,398
Transfer agency fees 166,001 64,114 37,000 104,175
Distribution fees 551,656 11,986 696,968 1,366,200
Amortization of organization expenses 14,851 3,506 10,856 5,060
Legal and audit fees 33,781 33,103 44,548 110,701
Registration fees 52,787 65,129 35,000 40,050
Directors' fees 3,000 5,009 3,500 5,009
Shareholder reports 88,525 50,091 16,999 23,243
Other 5,508 28,333 10,050 53,269
TOTAL EXPENSES 1,312,168 591,947 2,476,094 5,339,883
Less:
Waived fees and reimbursed expenses (39,153) (187,373) (213,585) (558,042)
NET EXPENSES 1,273,015 404,574 2,262,509 4,781,841
NET INVESTMENT INCOME (1,450,885) 2,616,427 18,292,799 28,838,854
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 12,997,935(2) (499,201) 89,127 (4,577,544)
Net change in unrealized appreciation
(depreciation) of investments (4,523,410)(2) (979,155) 0 (1,951,636)
NET GAIN (LOSS) ON INVESTMENTS 8,474,525 (1,478,356) 89,127 (6,529,180)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 7,023,640 $ 1,138,071 $18,381,926 $22,309,674
</TABLE>
................................................................................
(2) ALLOCATED FROM THE MASTER PORTFOLIO.
(3) SEE NOTE 6.
The accompanying notes are an integral part of these financial statements.
101
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
...........................
For the For the
Year Ended Year Ended
Dec. 31, Dec. 31,
1996 1995
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 1,402,424 $ 1,158,174
Net realized gain (loss) on sale of
investments 10,067,335 2,440,725
Net change in unrealized appreciation
(depreciation) of investments 460,902 14,291,076
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 11,930,661 17,889,975
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (1,128,185) (996,012)
Class D or I (274,239) (162,162)
In excess of net investment income
Class A 0 0
Class D or I 0 0
From net realized gain on sales of
investments
Class A (6,814,078) (1,201,148)
Class D or I (2,767,279) (367,533)
In excess of realized gain on sales of
investments
Class A 0 0
Class D or I 0 0
From tax return of capital
Class A 0 0
Class D or I 0 0
CAPITAL SHARES TRANSACTIONS:
Proceeds from shares sold - Class A
(1) 9,154,800 4,025,824
Reinvestment of dividends - Class A
(1) 6,367,210 5,040,708
Cost of shares redeemed - Class A (1) (8,048,045) (9,469,024)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (1) 7,473,965 (402,492)
Proceeds from shares sold - Class D or
I 9,098,246 5,176,687
Reinvestment of dividends - Class D or
I 1,942,667 1,070,410
Cost of shares redeemed - Class D or I (2,535,609) (3,031,687)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I 8,505,304 3,215,410
INCREASE (DECREASE) IN NET ASSETS 16,926,149 17,976,038
NET ASSETS:
Beginning net assets 68,081,627 50,105,589
ENDING NET ASSETS $85,007,776 $68,081,627
SHARES ISSUED AND REDEEMED:
Shares sold - Class A (1) 626,835 324,722
Shares issued in reinvestment of
dividends - Class A (1) 455,598 441,179
Shares redeemed - Class A (1) (547,890) (766,534)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (1) 534,543 (633)
Shares sold - Class D or I 501,829 328,419
Shares issued in reinvestment of
dividends - Class D or I 112,003 75,254
Shares redeemed - Class D or I (138,443) (202,929)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR I 475,389 200,744
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
102
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND CALIFORNIA TAX-FREE MONEY
............................. MARKET FUND
For the For the ...............................
Year Ended Year Ended For the For the
Dec. 31, Dec. 31, Year Ended Year Ended
1996 1995 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 13,008,723 $ 15,823,355 $ 9,742,731 $ 9,525,192
Net realized gain (loss) on sale of
investments 3,630,526 11,707,680 13,211 8,582
Net change in unrealized appreciation
(depreciation) of investments (6,951,220) 15,517,216 0 0
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 9,688,029 43,048,251 9,755,942 9,533,774
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (12,719,724) (15,466,590) (9,742,731) (9,525,192)
Class D or I (288,999) (356,764) N/A N/A
In excess of net investment income
Class A 0 0 0 0
Class D or I 0 0 N/A N/A
From net realized gain on sales of
investments
Class A (3,536,604) (9,468,118) 0 0
Class D or I (93,922) (245,016) N/A N/A
In excess of realized gain on sales of
investments
Class A (1,650,016) 0 0 0
Class D or I (50,270) 0 N/A N/A
From tax return of capital
Class A 0 0 0 0
Class D or I 0 0 N/A N/A
CAPITAL SHARES TRANSACTIONS:
Proceeds from shares sold - Class A
(1) 11,398,703 13,066,837 989,271,782 659,698,172
Reinvestment of dividends - Class A
(1) 9,865,419 17,283,285 3,431,592 2,986,292
Cost of shares redeemed - Class A (1) (41,495,204) (52,153,705) (957,297,444) (595,234,606)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (1) (20,231,082) (21,803,583) 35,405,930 67,449,858
Proceeds from shares sold - Class D or
I 1,595,401 1,423,486 N/A N/A
Reinvestment of dividends - Class D or
I 209,559 397,321 N/A N/A
Cost of shares redeemed - Class D or I (2,127,643) (2,565,176) N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I (322,683) (744,369) N/A N/A
INCREASE (DECREASE) IN NET ASSETS (29,205,271) (5,036,189) 35,419,141 67,458,440
NET ASSETS:
Beginning net assets 275,414,800 280,450,989 355,867,833 288,409,393
ENDING NET ASSETS $246,209,529 $275,414,800 $ 391,286,974 $ 355,867,833
SHARES ISSUED AND REDEEMED:
Shares sold - Class A (1) 1,083,239 1,213,665 989,271,083 659,698,172
Shares issued in reinvestment of
dividends - Class A (1) 935,506 1,620,338 3,431,592 2,986,292
Shares redeemed - Class A (1) (3,923,454) (4,864,665) (957,297,441) (595,234,606)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (1) (1,904,709) (2,030,662) 35,405,234 67,449,858
Shares sold - Class D or I 115,559 102,025 N/A N/A
Shares issued in reinvestment of
dividends - Class D or I 15,218 28,596 N/A N/A
Shares redeemed - Class D or I (154,787) (183,326) N/A N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR I (24,010) (52,705) N/A N/A
<CAPTION>
MONEY MARKET FUND
...................................
For the For the
Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 51,015,787 $ 26,438,943
Net realized gain (loss) on sale of
investments 115,019 (155,089)
Net change in unrealized appreciation
(depreciation) of investments 0 0
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 51,130,806 26,283,854
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (20,095,416) (18,371,046)
Class D or I (30,920,371) (8,067,897)
In excess of net investment income
Class A 0 0
Class D or I 0 0
From net realized gain on sales of
investments
Class A 0 0
Class D or I 0 0
In excess of realized gain on sales of
investments
Class A 0 0
Class D or I 0 0
From tax return of capital
Class A 0 0
Class D or I 0 0
CAPITAL SHARES TRANSACTIONS:
Proceeds from shares sold - Class A
(1) 2,266,030,281 1,969,443,796
Reinvestment of dividends - Class A
(1) 8,654,713 8,012,050
Cost of shares redeemed - Class A (1) (2,265,443,706) (1,910,005,001)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (1) 9,241,288 67,450,845
Proceeds from shares sold - Class D or
I 2,542,261,944 918,045,967
Reinvestment of dividends - Class D or
I 26,404,912 6,132,104
Cost of shares redeemed - Class D or I (2,138,796,870) (611,195,414)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I 429,869,986 312,982,657
INCREASE (DECREASE) IN NET ASSETS 439,226,293 380,278,413
NET ASSETS:
Beginning net assets 699,393,176 319,114,763
ENDING NET ASSETS $ 1,138,619,469 $ 699,393,176
SHARES ISSUED AND REDEEMED:
Shares sold - Class A (1) 2,266,030,281 1,969,427,483
Shares issued in reinvestment of
dividends - Class A (1) 8,654,713 8,012,052
Shares redeemed - Class A (1) (2,265,443,706) (1,909,990,912)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (1) 9,241,288 67,448,623
Shares sold - Class D or I 2,542,261,944 918,035,650
Shares issued in reinvestment of
dividends - Class D or I 26,404,912 6,132,104
Shares redeemed - Class D or I (2,138,796,870) (611,182,876)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR I 429,869,986 312,984,878
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
103
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND
.............................
For the For the
Year Ended Year Ended
Dec. 31, Dec. 31,
1996 1995
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 3,327,334 $ 4,411,872
Net realized gain (loss) on sale of
investments (245,237) (157,864)
Net change in unrealized appreciation
(depreciation) of investments (1,169,068) 8,364,389
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 1,913,029 12,618,397
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (2,799,470) (3,711,863)
Class D or I (527,864) (700,009)
In excess of net investment income
Class A 0 0
Class D or I 0 0
From net realized gain on sales of
investments
Class A 0 0
Class D or I 0 0
In excess of realized gain on sales of
investments
Class A 0 0
Class D or I 0 0
From tax return of capital
Class A 0 0
Class D or I 0 0
CAPITAL SHARES TRANSACTIONS:
Proceeds from shares sold - Class A
(1) 1,939,494 2,879,523
Reinvestment of dividends - Class A
(1) 1,286,152 1,817,939
Cost of shares redeemed - Class A (1) (16,163,244) (26,842,190)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (1) (12,937,598) (22,144,728)
Proceeds from shares sold - Class D or
I 828,882 444,177
Reinvestment of dividends - Class D or
I 175,875 263,711
Cost of shares redeemed - Class D or I (3,284,233) (5,395,020)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I (2,279,476) (4,687,132)
INCREASE (DECREASE) IN NET ASSETS (16,631,379) (18,625,335)
NET ASSETS:
Beginning net assets 70,710,508 89,335,843
ENDING NET ASSETS $ 54,079,129 $ 70,710,508
SHARES ISSUED AND REDEEMED:
Shares sold - Class A (1) 181,822 276,270
Shares issued in reinvestment of
dividends - Class A (1) 120,347 174,511
Shares redeemed - Class A (1) (1,514,411) (2,549,296)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (1) (1,212,242) (2,098,515)
Shares sold - Class D or I 57,300 31,359
Shares issued in reinvestment of
dividends - Class D or I 12,152 18,704
Shares redeemed - Class D or I (226,734) (379,181)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR I (157,282) (329,118)
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
104
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP
STRATEGY
FUND
SHORT-TERM ..........
GOVERNMENT-CORPORATE INCOME SHORT-TERM MUNICPAL INCOME From Sept.
FUND FUND 16, 1996
........................... ............................ (commencement
of
For the For the For the For the operations)
Year Ended Year Ended Year Ended Year Ended to
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1996 1995 1996
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 613,660 $ 143,733 $ 859,434 $ 569,000 $ (6,006)
Net realized gain (loss) on sale of
investments (63,690) 3,975 4,708 19,197 (88,195)
Net change in unrealized appreciation
(depreciation) of investments (11,931) 15,944 (81,904) 159,456 139,626
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 538,039 163,652 782,238 747,653 45,425
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (613,660) (143,733) (859,434) (569,000) 0
Class D or I N/A N/A N/A N/A 0
In excess of net investment income
Class A 0 0 0 0 0
Class D or I N/A N/A N/A N/A 0
From net realized gain on sales of
investments
Class A 0 (123) 0 (18,317) 0
Class D or I N/A N/A N/A N/A 0
In excess of realized gain on sales of
investments
Class A 0 0 0 0 0
Class D or I N/A N/A N/A N/A 0
From tax return of capital
Class A 0 0 0 0 0
Class D or I N/A N/A N/A N/A 0
CAPITAL SHARES TRANSACTIONS:
Proceeds from shares sold - Class A
(1) 23,550,292 6,608,129 20,946,410 13,131,189 3,117,624
Reinvestment of dividends - Class A
(1) 368,319 62,845 780,444 559,579 0
Cost of shares redeemed - Class A (1) (15,774,832) (832,585) (11,422,620) (9,142,984) (204,264)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (1) 8,143,779 5,838,389 10,304,234 4,547,784 2,913,360
Proceeds from shares sold - Class D or
I N/A N/A N/A N/A 1,812,007
Reinvestment of dividends - Class D or
I N/A N/A N/A N/A 0
Cost of shares redeemed - Class D or I N/A N/A N/A N/A (208,816)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I N/A N/A N/A N/A 1,603,191
INCREASE (DECREASE) IN NET ASSETS 8,068,158 5,858,185 10,227,038 4,708,120 4,561,976
NET ASSETS:
Beginning net assets 5,954,467 96,282 16,486,465 11,778,345 0
ENDING NET ASSETS $ 14,022,625 $5,954,467 $ 26,713,503 $16,486,465 $4,561,976
SHARES ISSUED AND REDEEMED:
Shares sold - Class A (1) 4,726,783 1,319,177 4,213,144 2,632,568 313,258
Shares issued in reinvestment of
dividends - Class A (1) 73,914 12,545 156,919 112,388 0
Shares redeemed - Class A (1) (3,170,650) (166,185) (2,299,217) (1,834,871) (20,916)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (1) 1,630,047 1,165,537 2,070,846 910,085 292,342
Shares sold - Class D or I N/A N/A N/A N/A 184,164
Shares issued in reinvestment of
dividends - Class D or I N/A N/A N/A N/A 0
Shares redeemed - Class D or I N/A N/A N/A N/A (21,716)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR I N/A N/A N/A N/A 162,448
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
105
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND
.............................
For the For the
Year Ended Year Ended
Dec. 31, Dec. 31,
1996(2) 1995
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ (1,450,885) $ (606,322)
Net realized gain (loss) on sale of
investments 12,997,935 10,895,873
Net change in unrealized appreciation
(depreciation) of investments (4,523,410) 8,601,611
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 7,023,640 18,891,162
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A 0 0
Class D or I 0 0
In excess of net investment income
Class A 0 0
Class D or I 0 0
From net realized gain on sales of
investments
Class A (941,378) (6,182,997)
Class D or I (415,927) (2,772,646)
In excess of realized gain on sales of
investments
Class A 0 0
Class D or I 0 0
From tax return of capital
Class A 0 0
Class D or I 0 0
CAPITAL SHARES TRANSACTIONS:
Proceeds from shares sold - Class A
(1) 154,071,907 36,545,391
Reinvestment of dividends - Class A
(1) 728,971 4,705,176
Cost of shares redeemed - Class A (1) (86,486,498) (15,571,514)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (1) 68,314,380 25,679,053
Proceeds from shares sold - Class D or
I 110,701,166 11,752,195
Reinvestment of dividends - Class D or
I 176,740 1,754,560
Cost of shares redeemed - Class D or I (83,911,395) (5,858,015)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I 26,966,511 7,648,740
INCREASE (DECREASE) IN NET ASSETS 100,947,226 43,263,312
NET ASSETS:
Beginning net assets 85,342,470 42,079,158
ENDING NET ASSETS $186,289,696 $ 85,342,470
SHARES ISSUED AND REDEEMED:
Shares sold - Class A (1) 8,224,812 2,168,399
Shares issued in reinvestment of
dividends - Class A (1) 38,619 292,301
Shares redeemed - Class A (1) (4,647,225) (965,246)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (1) 3,616,206 1,495,454
Shares sold - Class D or I 4,803,786 552,068
Shares issued in reinvestment of
dividends - Class D or I 7,629 88,848
Shares redeemed - Class D or I (3,640,411) (301,590)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR I 1,171,004 339,326
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) SEE NOTE 5.
The accompanying notes are an integral part of these financial statements.
106
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
RATE
U.S. GOVERNMENT INCOME FUND GOVERNMENT
U.S. TREASURY MONEY MARKET FUND FUND
............................. ................................. ............
For the For the For the
Year Ended Year Ended For the For the Year Ended
Dec. 31, Dec. 31, Year Ended Year Ended Dec. 31,
1996 1995 Dec. 31, 1996 Dec. 31, 1995 1996
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 2,616,427 $ 2,535,336 $ 18,292,799 $ 11,533,065 $ 28,838,854
Net realized gain (loss) on sale of
investments (499,201) (736,709) 89,127 (13,382) (4,577,544)
Net change in unrealized appreciation
(depreciation) of investments (979,155) 4,863,922 0 0 (1,951,636)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 1,138,071 6,662,549 18,381,926 11,519,683 22,309,674
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (2,481,512) (2,334,261) (12,422,629) (9,781,347) (26,355,616)
Class D or I (134,915) (201,075) (5,870,170) (1,751,718) (327,816)
In excess of net investment income
Class A 0 0 0 0 0
Class D or I 0 0 0 0 0
From net realized gain on sales of
investments
Class A 0 0 (15,959) 0 0
Class D or I 0 0 (7,621) 0 0
In excess of realized gain on sales of
investments
Class A 0 0 0 0 0
Class D or I 0 0 0 0 0
From tax return of capital
Class A 0 0 0 0 (2,128,910)
Class D or I 0 0 0 0 (26,512)
CAPITAL SHARES TRANSACTIONS:
Proceeds from shares sold - Class A
(1) 60,822,363 4,782,569 2,168,619,387 746,154,757 13,360,648
Reinvestment of dividends - Class A
(1) 1,102,521 620,986 3,858,257 4,323,454 6,013,951
Cost of shares redeemed - Class A (1) (13,841,571) (14,528,380) (2,093,456,183) (746,737,367) (272,864,909)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (1) 48,083,313 (9,124,825) 79,021,461 3,740,844 (253,490,310)
Proceeds from shares sold - Class D or
I 357,679 190,856 515,834,680 496,751,048 82,466,303
Reinvestment of dividends - Class D or
I 73,898 116,849 5,208,358 1,309,335 184,258
Cost of shares redeemed - Class D or I (771,274) (1,606,274) (427,392,856) (438,830,786) (84,794,106)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I (339,697) (1,298,569) 93,650,182 59,229,597 (2,143,545)
INCREASE (DECREASE) IN NET ASSETS 46,265,260 (6,296,181) 172,737,190 62,957,059 (262,163,035)
NET ASSETS:
Beginning net assets 33,263,856 39,560,037 261,886,361 198,929,302 661,626,905
ENDING NET ASSETS $ 79,529,116 $ 33,263,856 $ 434,623,551 $ 261,886,361 $399,463,870
SHARES ISSUED AND REDEEMED:
Shares sold - Class A (1) 6,055,576 472,576 2,168,619,388 746,154,757 1,440,106
Shares issued in reinvestment of
dividends - Class A (1) 107,850 60,905 3,858,257 4,323,454 648,270
Shares redeemed - Class A (1) (1,358,313) (1,418,306) (2,093,452,821) (746,737,367) (29,451,100)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (1) 4,805,113 (884,825) 79,024,824 3,740,844 (27,362,724)
Shares sold - Class D or I 25,817 13,647 515,834,680 496,751,048 5,964,908
Shares issued in reinvestment of
dividends - Class D or I 5,293 8,425 5,208,358 1,309,335 13,296
Shares redeemed - Class D or I (55,042) (114,517) (427,392,856) (438,830,787) (6,132,463)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR I (23,932) (92,445) 93,650,182 59,229,596 (154,259)
<CAPTION>
For the
Year Ended
Dec. 31, 1995
<S> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 46,797,498
Net realized gain (loss) on sale of
investments (7,586,997)
Net change in unrealized appreciation
(depreciation) of investments 23,216,208
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 62,426,709
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (46,275,296)
Class D or I (522,203)
In excess of net investment income
Class A 0
Class D or I 0
From net realized gain on sales of
investments
Class A 0
Class D or I 0
In excess of realized gain on sales of
investments
Class A 0
Class D or I 0
From tax return of capital
Class A 0
Class D or I 0
CAPITAL SHARES TRANSACTIONS:
Proceeds from shares sold - Class A
(1) 12,727,285
Reinvestment of dividends - Class A
(1) 10,963,115
Cost of shares redeemed - Class A (1) (600,782,109)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A (1) (577,091,709)
Proceeds from shares sold - Class D or
I 282,762
Reinvestment of dividends - Class D or
I 231,329
Cost of shares redeemed - Class D or I (5,190,680)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR I (4,676,589)
INCREASE (DECREASE) IN NET ASSETS (566,139,088)
NET ASSETS:
Beginning net assets 1,227,765,993
ENDING NET ASSETS $ 661,626,905
SHARES ISSUED AND REDEEMED:
Shares sold - Class A (1) 1,367,861
Shares issued in reinvestment of
dividends - Class A (1) 1,180,210
Shares redeemed - Class A (1) (64,851,613)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A (1) (62,303,542)
Shares sold - Class D or I 20,310
Shares issued in reinvestment of
dividends - Class D or I 16,653
Shares redeemed - Class D or I (373,247)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR I (336,284)
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
107
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
.................................................
CLASS A
.................................................
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.76 $10.67 $11.90
------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.29 0.28 0.31
Net realized and unrealized gain
(loss) on investments 2.02 3.42 (0.39)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.31 3.70 (0.08)
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.29) (0.28) (0.31)
Distributions from net realized
gain (1.79) (0.33) (0.84)
Tax return of capital 0 0 0
------ ------ ------
TOTAL FROM DISTRIBUTIONS (2.08) (0.61) (1.15)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $13.99 $13.76 $10.67
------------- ------------- -------------
------------- ------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 17.04% 34.71% 0.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $60,353 $52,007 $40,308
Number of shares outstanding, end
of period (000) 4,313 3,778 3,779
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 1.31% 1.30% 1.30%
Ratio of net investment income to
average net assets(2) 2.06% 2.07% 2.41%
Portfolio turnover 67% 47% 50%
Average commission rate paid(3) $0.0227 N/A N/A
........................................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 1.44% 1.35% 1.38%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: 1.93% 2.02% 2.33%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
108
<PAGE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND (CONT.)
.....................................................................................
CLASS A (CONT.) CLASS D(4)
............................... .................................................
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.45 $11.95 $17.10 $13.26 $14.75
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.30 0.47 0.22 0.20 0.25
Net realized and
unrealized gain (loss)
on investments 1.12 0.36 2.54 4.24 (0.45)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 1.42 0.83 2.76 4.44 (0.20)
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.30) (0.63) (0.22) (0.20) (0.25)
Distributions from net
realized gain (0.67) (0.70) (2.22) (0.40) (1.04)
Tax return of capital 0 0 0 0 0
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.97) (1.33) (2.44) (0.60) (1.29)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $11.90 $11.45 $17.42 $17.10 $13.26
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 12.54% 7.44% 16.37% 33.72% (1.38)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $53,124 $41,165 $24,655 $16,075 $9,798
Number of shares
outstanding, end of
period (000) 4,465 3,596 1,415 940 739
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.36% 1.25% 2.05% 2.05% 2.01%
Ratio of net investment
income to average net
assets(2) 2.64% 4.08% 1.35% 1.30% 1.75%
Portfolio turnover 53% 38% 67% 47% 50%
Average commission rate
paid(3) N/A N/A $0.0227 N/A N/A
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.47% 1.71% 2.20% 2.17% 2.20%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 2.53% 3.62% 1.20% 1.18% 1.56%
<CAPTION>
Period Ended
Dec. 31, 1993
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $15.00
-------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.07
Net realized and
unrealized gain (loss)
on investments 0.61
------
TOTAL FROM INVESTMENT
OPERATIONS 0.68
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.10)
Distributions from net
realized gain (0.83)
Tax return of capital 0
------
TOTAL FROM DISTRIBUTIONS (0.93)
-------------
NET ASSET VALUE, END OF
PERIOD $14.75
-------------
-------------
TOTAL RETURN (NOT
ANNUALIZED)* 4.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $8,996
Number of shares
outstanding, end of
period (000) 610
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.96%
Ratio of net investment
income to average net
assets(2) 0.53%
Portfolio turnover 53%
Average commission rate
paid(3) N/A
............................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.12%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 0.37%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
109
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
.................................................
CLASS A
.................................................
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.84 $10.20 $11.47
------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.54 0.60 0.64
Net realized and unrealized gain
(loss) on investments (0.12) 1.03 (1.13)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.42 1.63 (0.49)
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.54) (0.60) (0.64)
Distributions from net realized
gain (0.23) (0.39) (0.14)
Tax return of capital 0 0 0
------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.77) (0.99) (0.78)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $10.49 $10.84 $10.20
------------- ------------- -------------
------------- ------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 4.03% 16.38% (4.32)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $239,703 $268,352 $273,105
Number of shares outstanding, end
of period (000) 22,845 24,750 26,780
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 0.71% 0.58% 0.50%
Ratio of net investment income to
average net assets(2) 5.08% 5.59% 5.87%
Portfolio turnover 19% 38% 4%
Average commission rate paid(3) N/A N/A N/A
........................................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 0.82% 0.78% 0.95%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: 4.97% 5.39% 5.42%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
110
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND (CONT.)
.....................................................................................
CLASS A (CONT.) CLASS D(4)
............................... .................................................
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.92 $10.73 $14.16 $13.32 $14.98
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.63 0.68 0.60 0.68 0.73
Net realized and
unrealized gain (loss)
on investments 0.75 0.26 (0.16) 1.35 (1.47)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 1.38 0.94 0.44 2.03 (0.74)
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.63) (0.68) (0.60) (0.68) (0.73)
Distributions from net
realized gain (0.20) (0.07) (0.30) (0.51) (0.19)
Tax return of capital 0 0 0 0 0
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.83) (0.75) (0.90) (1.19) (0.92)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $11.47 $10.92 $13.70 $14.16 $13.32
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 12.98% 9.01% 3.24% 15.58% 5.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $361,779 $375,376 $6,506 $7,063 $7,346
Number of shares
outstanding, end of
period (000) 31,529 34,376 475 499 552
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.69% 0.50% 1.46% 1.30% 1.20%
Ratio of net investment
income to average net
assets(2) 5.54% 6.24% 4.33% 4.87% 5.15%
Portfolio turnover 10% 24% 19% 38% 4%
Average commission rate
paid(3) N/A N/A N/A N/A N/A
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 0.85% 0.85% 1.59% 1.57% 1.82%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 5.38% 5.89% 4.20% 4.60% 4.53%
<CAPTION>
Period Ended
Dec. 31, 1993
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $15.00
-------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.34
Net realized and
unrealized gain (loss)
on investments 0.24
------
TOTAL FROM INVESTMENT
OPERATIONS 0.58
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.34)
Distributions from net
realized gain (0.26)
Tax return of capital 0
------
TOTAL FROM DISTRIBUTIONS (0.60)
-------------
NET ASSET VALUE, END OF
PERIOD $14.98
-------------
-------------
TOTAL RETURN (NOT
ANNUALIZED)* 3.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $7,641
Number of shares
outstanding, end of
period (000) 510
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.32%
Ratio of net investment
income to average net
assets(2) 4.50%
Portfolio turnover 10%
Average commission rate
paid(3) N/A
............................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.61%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 4.21%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
111
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY MARKET FUND
.................................................
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.03 0.03 0.02
Net realized and unrealized gain
(loss) on investments 0 0 0
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.03 0.03 0.02
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.03) (0.03) (0.02)
Distributions from net realized
gain 0 0 0
Tax return of capital 0 0 0
----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.03) (0.03) (0.02)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
------ ------ ------
TOTAL RETURN (NOT ANNUALIZED) 2.81% 3.25% 2.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $391,287 $355,868 $288,409
Number of shares outstanding, end
of period (000) 391,345 355,940 288,409
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 0.63% 0.68% 0.68%
Ratio of net investment income to
average net assets(2) 2.79% 3.20% 2.17%
Portfolio turnover N/A N/A N/A
Average commission rate paid(3) N/A N/A N/A
........................................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 0.63% 0.68% 0.70%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: 2.79% 3.20% 2.15%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
The accompanying notes are an integral part of these financial statements.
112
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
CALIFORNIA TAX-FREE MONEY .................................................
MARKET FUND (CONT.) CLASS A
............................... .................................................
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.02 0.03 0.05 0.05 0.04
Net realized and
unrealized gain (loss)
on investments 0 0 0 0 0
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.02 0.03 0.05 0.05 0.04
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.02) (0.03) (0.05) (0.05) (0.04)
Distributions from net
realized gain 0 0 0 0 0
Tax return of capital 0 0 0 0 0
----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.02) (0.03) (0.05) (0.05) (0.04)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 1.84% 2.54% 4.89% 5.44% 3.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $397,712 $363,067 $384,527 $375,218 $307,878
Number of shares
outstanding, end of
period (000) 397,717 363,069 384,605 375,364 307,915
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.66% 0.66% 0.65% 0.65% 0.68%
Ratio of net investment
income to average net
assets(2) 1.82% 2.50% 4.79% 5.43% 3.71%
Portfolio turnover N/A N/A N/A N/A N/A
Average commission rate
paid(3) N/A N/A N/A N/A N/A
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 0.70% 0.69% 0.66% 0.69% 0.72%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 1.78% 2.47% 4.78% 5.39% 3.67%
<CAPTION>
Year Ended Year Ended
Dec. 31, 1993 Dec. 31, 1992
<S> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00
------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.03 0.03
Net realized and
unrealized gain (loss)
on investments 0 0
----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.03 0.03
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03) (0.03)
Distributions from net
realized gain 0 0
Tax return of capital 0 0
----- -----
TOTAL FROM DISTRIBUTIONS (0.03) (0.03)
------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00
------ ------
------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 2.57% 3.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $228,084 $268,424
Number of shares
outstanding, end of
period (000) 228,085 268,434
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.74% 0.75%
Ratio of net investment
income to average net
assets(2) 2.54% 3.17%
Portfolio turnover N/A N/A
Average commission rate
paid(3) N/A N/A
............................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 0.74% 0.75%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 2.54% 3.17%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
The accompanying notes are an integral part of these financial statements.
113
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
MONEY MARKET FUND (CONT.)
.................................................
CLASS I(5)
.................................................
Year Ended Year Ended Period Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 0.06 0.02
Net realized and unrealized gain
(loss) on investments 0 0 0
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.06 0.02
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.05) (0.06) (0.02)
Distributions from net realized
gain 0 0 0
Tax return of capital 0 0 0
----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.05) (0.06) (0.02)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
------ ------ ------
TOTAL RETURN (NOT ANNUALIZED)* 5.15% 5.71% 1.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $754,092 $324,175 $11,237
Number of shares outstanding, end
of period (000) 754,092 324,222 11,238
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 0.40% 0.39% 0.38%
Ratio of net investment income to
average net assets(2) 5.04% 5.70% 5.05%
Portfolio turnover N/A N/A N/A
Average commission rate paid(3) N/A N/A N/A
........................................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 0.41% 0.45% 0.55%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: 5.03% 5.64% 4.88%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS CLASS COMMENCED OPERATIONS ON AUGUST 18, 1994.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
114
<PAGE>
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND
.....................................................................................
CLASS A
.....................................................................................
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.93 $9.91 $11.27 $10.56 $10.25
------------- ------ ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.57 0.57 0.60 0.64 0.66
Net realized and
unrealized gain (loss)
on investments (0.21) 1.02 (1.36) 0.71 0.32
------ ----- ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 0.36 1.59 (0.76) 1.35 0.98
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.57) (0.57) (0.60) (0.64) (0.66)
Distributions from net
realized gain 0 0 0 0 (0.01)
Tax return of capital 0 0 0 0 0
------ ----- ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.57) (0.57) (0.60) (0.64) (0.67)
------------- ------ ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $10.72 $10.93 $9.91 $11.27 $10.56
------------- ------ ------------- ------------- -------------
------------- ------ ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 3.49% 16.45% (6.82)% 13.11% 9.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $44,326 $58,440 $73,791 $104,701 $52,553
Number of shares
outstanding, end of
period (000) 4,135 5,347 7,446 9,294 4,976
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.80% 0.71% 0.43% 0.39% 0.23%
Ratio of net investment
income to average net
assets(2) 5.39% 5.49% 5.77% 5.56% 6.05%
Portfolio turnover 16% 14% 32% 15% 67%
Average commission rate
paid(3) N/A N/A N/A N/A N/A
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.25% 1.09% 0.98% 1.09% 1.20%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 4.94% 5.11% 5.22% 4.86% 5.08%
<CAPTION>
CLASS D(4)
...............................
Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.80 $13.42
------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.69 0.69
Net realized and
unrealized gain (loss)
on investments (0.28) 1.38
------ ------
TOTAL FROM INVESTMENT
OPERATIONS 0.41 2.07
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.69) (0.69)
Distributions from net
realized gain 0 0
Tax return of capital 0 0
------ ------
TOTAL FROM DISTRIBUTIONS (0.69) (0.69)
------------- -------------
NET ASSET VALUE, END OF
PERIOD $14.52 $14.80
------------- -------------
------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 2.90% 15.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $9,753 $12,271
Number of shares
outstanding, end of
period (000) 672 829
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.40% 1.32%
Ratio of net investment
income to average net
assets(2) 4.79% 4.88%
Portfolio turnover 16% 14%
Average commission rate
paid(3) N/A N/A
............................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.92% 1.78%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 4.27% 4.42%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS CLASS COMMENCED OPERATIONS ON AUGUST 18, 1994.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
115
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND (CONT.)
...............................
CLASS D(4) (CONT.)
...............................
Year Ended Period Ended
Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $15.26 $15.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.73 0.36
Net realized and unrealized gain
(loss) on investments (1.84) 0.26
------ ------
TOTAL FROM INVESTMENT OPERATIONS (1.11) 0.62
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.73) (0.36)
Distributions from net realized
gain 0 0
Tax return of capital 0 0
------ ------
TOTAL FROM DISTRIBUTIONS (0.73) (0.36)
------------- -------------
NET ASSET VALUE, END OF PERIOD $13.42 $15.26
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* (7.37)% 4.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $15,545 $14,771
Number of shares outstanding, end
of period (000) 1,158 968
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 1.02% 1.13%
Ratio of net investment income to
average net assets(2) 5.17% 4.14%
Portfolio turnover 32% 15%
Average commission rate paid(3) N/A N/A
......................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 1.74% 1.84%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: 4.45% 3.43%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
116
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND SHORT-TERM MUNICIPAL INCOME
FUND
................................................. ...............................
From Sept.
19, 1994
(inception)
Year Ended Year Ended to Dec. 31, Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 1994 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $5.02 $4.93 $5.00 $4.99 $4.92
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.28 0.30 0.08 0.20 0.22
Net realized and
unrealized gain (loss)
on investments (0.04) 0.09 (0.07) (0.02) 0.07
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.24 0.39 0.01 0.18 0.29
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.28) (0.30) (0.08) (0.20) (0.22)
Distributions from net
realized gain 0 0 0 0 0
Tax return of capital 0 0 0 0 0
----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.28) (0.30) (0.08) (0.20) (0.22)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $4.98 $5.02 $4.93 $4.97 $4.99
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 4.83% 8.05% 0.28% 3.62% 6.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $14,023 $5,954 $96 $26,714 $16,486
Number of shares
outstanding, end of
period (000) 2,815 1,185 20 5,373 3,302
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.36%(5) 0.30%(5) 0.30%(5) 0.40%(5) 0.38%(5)
Ratio of net investment
income to average net
assets(2) 5.47%(5) 6.01%(5) 5.77%(5) 3.95%(5) 4.39%(5)
Portfolio turnover N/A N/A N/A N/A N/A
Average commission rate
paid(3) N/A N/A N/A N/A N/A
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.85%(5) 6.79%(5) 67.89%(5) 1.43%(5) 1.97%(5)
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 3.98%(5) (0.48)%(5) (61.82)%(5) 2.92%(5) 2.80%(5)
<CAPTION>
From June 3,
1994
(inception)
to Dec. 31,
1994
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $5.00
------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.09
Net realized and
unrealized gain (loss)
on investments (0.08)
-----
TOTAL FROM INVESTMENT
OPERATIONS 0.01
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.09)
Distributions from net
realized gain 0
Tax return of capital 0
-----
TOTAL FROM DISTRIBUTIONS (0.09)
------
NET ASSET VALUE, END OF
PERIOD $4.92
------
------
TOTAL RETURN (NOT
ANNUALIZED)* 0.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $11,778
Number of shares
outstanding, end of
period (000) 2,392
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.27%(5)
Ratio of net investment
income to average net
assets(2) 3.67%(5)
Portfolio turnover N/A
Average commission rate
paid(3) N/A
............................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.98%(5)
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 1.96%(5)
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
117
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
SMALL CAP STRATEGY FUND(8)
...............................
CLASS A CLASS D
............. .............
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.00 $10.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.01) (0.02)
Net realized and unrealized gain
(loss) on investments 0.05 0.03
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.04 0.01
LESS DISTRIBUTIONS:
Dividends from net investment
income 0 0
Distributions from net realized
gain 0 0
Tax return of capital 0 0
------ ------
TOTAL FROM DISTRIBUTIONS 0 0
------------- -------------
NET ASSET VALUE, END OF PERIOD $10.04 $10.01
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 0.40% 0.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $2,935 $1,627
Number of shares outstanding, end
of period (000) 292 162
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 1.41%(5) 2.16%(5)
Ratio of net investment income to
average net assets(2) (0.40)%(5) (1.12)%(5)
Portfolio turnover N/A N/A
Average commission rate paid(3) N/A N/A
......................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 5.57%(5) 6.30%(5)
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: (4.56)%(5) (5.26)%(5)
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(6) THIS CLASS COMMENCED OPERATIONS ON JANUARY 20, 1993.
(7) THIS RATIO REFLECTS ACTIVITY FOR THE STAND-ALONE PERIOD ONLY. SEE NOTE
5.
(8) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 16, 1996.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
118
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND
.....................................................................................
CLASS A(6) CLASS D(4)
................................................................... .............
Year Ended Year Ended Year Ended Period Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $16.82 $13.29 $13.20 $10.00 $20.79
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) (0.03) (0.04) (0.11) (0.03) (0.08)
Net realized and
unrealized gain (loss)
on investments 1.77 5.66 0.67 3.68 2.05
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 1.74 5.62 0.56 3.65 1.97
LESS DISTRIBUTIONS:
Dividends from net
investment income 0 0 0 (0.03) 0
Distributions from net
realized gain (0.14) (2.09) (0.33) (0.41) (0.17)
Tax return of capital 0 0 (0.14) (0.01) 0
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.14) (2.09) (0.47) (0.45) (0.17)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $18.42 $16.82 $13.29 $13.20 $22.59
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 10.32% 42.51% 4.23% 36.56% 9.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $131,226 $59,016 $26,744 $25,413 $55,063
Number of shares
outstanding, end of
period (000) 7,124 3,508 2,013 1,926 2,437
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.24%(5) 1.28% 1.20% 0.66% 2.00%(5)
Ratio of net investment
income to average net
assets(2) (0.82)%(5) (0.76)% (0.81)% (0.01)% (1.58)%(5)
Portfolio turnover 10%(7) 171% 149% 182% 10%(7)
Average commission rate
paid(3) $0.0760(7) N/A N/A N/A $0.0760(7)
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.27%(5) 1.38% 1.55% 1.64% 2.02%(5)
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: (0.85)%(5) (0.86)% (1.16)% (0.99)% (1.60)%(5)
<CAPTION>
Year Ended
Dec. 31, 1995
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $16.54
-------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) (0.16)
Net realized and
unrealized gain (loss)
on investments 6.99
------
TOTAL FROM INVESTMENT
OPERATIONS 6.83
LESS DISTRIBUTIONS:
Dividends from net
investment income 0
Distributions from net
realized gain (2.58)
Tax return of capital 0
------
TOTAL FROM DISTRIBUTIONS (2.58)
-------------
NET ASSET VALUE, END OF
PERIOD $20.79
-------------
-------------
TOTAL RETURN (NOT
ANNUALIZED)* 41.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $26,326
Number of shares
outstanding, end of
period (000) 1,266
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 2.02%
Ratio of net investment
income to average net
assets(2) (1.49)%
Portfolio turnover 171%
Average commission rate
paid(3) N/A
............................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 2.09%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: (1.56)%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS RATIO INCLUDES INCOME AND EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(6) THIS CLASS COMMENCED OPERATIONS ON JANUARY 20, 1993.
(7) THIS RATIO REFLECTS ACTIVITY FOR THE STAND-ALONE PERIOD ONLY. SEE NOTE
5.
(8) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 16, 1996.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
119
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
STRATEGIC GROWTH FUND (CONT.)
...............................
CLASS D(4) (CONT.)
...............................
Year Ended Period Ended
Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $16.55 $15.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.24) (0.43)
Net realized and unrealized gain
(loss) on investments 0.81 2.51
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.57 2.08
LESS DISTRIBUTIONS:
Dividends from net investment
income 0 0
Distributions from net realized
gain (0.40) (0.53)
Tax return of capital (0.18) 0
------ ------
TOTAL FROM DISTRIBUTIONS (0.58) (0.53)
------------- -------------
NET ASSET VALUE, END OF PERIOD $16.54 $16.55
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 3.46% 13.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $15,335 $11,932
Number of shares outstanding, end
of period (000) 927 721
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 1.95% 0.61%
Ratio of net investment income to
average net assets(2) (1.56)% (1.00)%
Portfolio turnover 149% 182%
Average commission rate paid(3) N/A N/A
......................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 2.23% 2.14%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: (1.84)% (2.53)%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
120
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
.....................................................................................
CLASS A
.....................................................................................
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.78 $9.66 $10.87 $10.56 $10.97
------------- ------ ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.63 0.69 0.70 0.74 0.79
Net realized and
unrealized gain (loss)
on investments (0.66) 1.12 (1.21) 0.36 (0.14)
------ ----- ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (0.03) 1.81 (0.51) 1.10 0.65
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.63) (0.69) (0.70) (0.74) (0.79)
Distributions from net
realized gain 0 0 0 (0.05) (0.27)
Tax return of capital 0 0 0 0 0
------ ----- ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.63) (0.69) (0.70) (0.79) (1.06)
------------- ------ ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $10.12 $10.78 $9.66 $10.87 $10.56
------------- ------ ------------- ------------- -------------
------------- ------ ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* (0.11)% 19.32% (4.81)% 10.67% 6.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $77,239 $30,471 $35,838 $50,301 $40,883
Number of shares
outstanding, end of
period (000) 7,631 2,826 3,711 4,628 3,871
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.89% 0.88% 0.76% 0.53% 0.47%
Ratio of net investment
income to average net
assets(2) 6.07% 6.79% 6.84% 6.79% 6.26%
Portfolio turnover 240% 95% 50% 115% 128%
Average commission rate
paid(3) N/A N/A N/A N/A N/A
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.24% 1.24% 1.08% 1.01% 1.13%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 5.72% 6.44% 6.52% 6.31% 5.60%
<CAPTION>
CLASS D(4)
...............................
Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.74 $13.20
------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.77 0.85
Net realized and
unrealized gain (loss)
on investments (0.90) 1.54
------ ------
TOTAL FROM INVESTMENT
OPERATIONS (0.13) 2.39
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.77) (0.85)
Distributions from net
realized gain 0 0
Tax return of capital 0 0
------ ------
TOTAL FROM DISTRIBUTIONS (0.77) (0.85)
------------- -------------
NET ASSET VALUE, END OF
PERIOD $13.84 $14.74
------------- -------------
------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* (0.79)% 18.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $2,290 $2,793
Number of shares
outstanding, end of
period (000) 166 189
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.62% 1.62%
Ratio of net investment
income to average net
assets(2) 5.50% 6.07%
Portfolio turnover 240% 95%
Average commission rate
paid(3) N/A N/A
............................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 3.39% 2.29%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 3.73% 5.40%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
121
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
(CONT.)
...............................
CLASS D(4) (CONT.)
...............................
Year Ended Period Ended
Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $14.85 $15.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.86 0.42
Net realized and unrealized gain
(loss) on investments (1.65) (0.08)
------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.79) 0.34
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.86) (0.42)
Distributions from net realized
gain 0 (0.07)
Tax return of capital 0 0
------ ------
TOTAL FROM DISTRIBUTIONS (0.86) (0.49)
------------- -------------
NET ASSET VALUE, END OF PERIOD $13.20 $14.85
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* (5.45)% 2.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $3,722 $9,594
Number of shares outstanding, end
of period (000) 282 646
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 1.37% 0.90%
Ratio of net investment income to
average net assets(2) 6.14% 5.90%
Portfolio turnover 50% 115%
Average commission rate paid(3) N/A N/A
......................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 1.87% 2.03%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: 5.64% 4.77%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS CLASS COMMENCED OPERATIONS ON MAY 12, 1992.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
122
<PAGE>
<TABLE>
<CAPTION>
U.S. TREASURY MONEY MARKET FUND
.....................................................................................
CLASS A(5)
.....................................................................................
Year Ended Year Ended Year Ended Year Ended Period Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.05 0.05 0.03 0.03 0.02
Net realized and
unrealized gain (loss)
on investments 0 0 0 0 0
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.05 0.05 0.03 0.03 0.02
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.05) (0.05) (0.03) (0.03) (0.02)
Distributions from net
realized gain 0 0 0 0 0
Tax return of capital 0 0 0 0 0
----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.05) (0.05) (0.03) (0.03) (0.02)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 4.60% 5.09% 3.44% 2.56% 1.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $277,816 $198,753 $195,031 $118,169 $137,412
Number of shares
outstanding, end of
period (000) 277,807 198,782 195,042 118,169 137,416
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.65% 0.65% 0.63% 0.52% 0.27%
Ratio of net investment
income to average net
assets(2) 4.60% 4.97% 3.47% 2.55% 3.12%
Portfolio turnover N/A N/A N/A N/A N/A
Average commission rate
paid(3) N/A N/A N/A N/A N/A
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 0.71% 0.73% 0.80% 0.77% 0.79%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 4.54% 4.89% 3.30% 2.30% 2.60%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS CLASS COMMENCED OPERATIONS ON MAY 12, 1992.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
123
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. TREASURY MONEY MARKET FUND (CONT.)
.................................................
CLASS I(5)
.................................................
Year Ended Year Ended Period Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.05 0.05 0.02
Net realized and unrealized gain
(loss) on investments 0 0 0
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.02
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.05) (0.05) (0.02)
Distributions from net realized
gain 0 0 0
Tax return of capital 0 0 0
----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.05) (0.05) (0.02)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
------ ------ ------
TOTAL RETURN (NOT ANNUALIZED)* 4.86% 5.35% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $156,808 $63,134 $3,898
Number of shares outstanding, end
of period (000) 156,780 63,130 3,900
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 0.40% 0.39% 0.23%
Ratio of net investment income to
average net assets(2) 4.79% 5.16% 4.42%
Portfolio turnover N/A N/A N/A
Average commission rate paid(3) N/A N/A N/A
........................................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 0.45% 0.49% 0.57%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: 4.74% 5.06% 4.08%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS CLASS COMMENCED OPERATIONS ON JUNE 20, 1994.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
124
<PAGE>
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND
.....................................................................................
CLASS A
.....................................................................................
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $9.35 $9.19 $9.99 $9.95 $10.13
------ ------ ------ ------ -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.50 0.53 0.43 0.44 0.59
Net realized and
unrealized gain (loss)
on investments (0.10) 0.16 (0.80) 0.04 (0.18)
----- ----- ----- ----- ------
TOTAL FROM INVESTMENT
OPERATIONS 0.40 0.69 (0.37) 0.48 0.41
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.46) (0.53) (0.43) (0.44) (0.59)
Distributions from net
realized gain 0 0 0 0 0
Tax return of capital (0.04) 0 0 0 0
----- ----- ----- ----- ------
TOTAL FROM DISTRIBUTIONS (0.50) (0.53) (0.43) (0.44) (0.59)
------ ------ ------ ------ -------------
NET ASSET VALUE, END OF
PERIOD $9.25 $9.35 $9.19 $9.99 $9.95
------ ------ ------ ------ -------------
------ ------ ------ ------ -------------
TOTAL RETURN (NOT
ANNUALIZED)* 4.41% 7.69% (3.81)% 4.87% 4.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $393,948 $653,897 $1,215,546 $1,949,031 $2,559,363
Number of shares
outstanding, end of
period (000) 42,589 69,952 132,256 195,132 257,238
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 0.88% 0.84% 0.79% 0.76% 0.75%
Ratio of net investment
income to average net
assets(2) 5.36% 5.71% 4.40% 4.37% 5.62%
Portfolio turnover 277% 317% 164% 201% 197%
Average commission rate
paid(3) N/A N/A N/A N/A N/A
.....................................................................................................................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 0.98% 0.96% 0.94% 0.95% 0.94%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 5.26% 5.59% 4.25% 4.18% 5.43%
<CAPTION>
CLASS D(4)
.............
Year Ended
Dec. 31, 1996
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.97
-------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.68
Net realized and
unrealized gain (loss)
on investments (0.14)
------
TOTAL FROM INVESTMENT
OPERATIONS 0.54
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.63)
Distributions from net
realized gain 0
Tax return of capital (0.05)
------
TOTAL FROM DISTRIBUTIONS (0.68)
-------------
NET ASSET VALUE, END OF
PERIOD $13.83
-------------
-------------
TOTAL RETURN (NOT
ANNUALIZED)* 3.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $5,516
Number of shares
outstanding, end of
period (000) 399
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets(1) 1.38%
Ratio of net investment
income to average net
assets(2) 4.85%
Portfolio turnover 277%
Average commission rate
paid(3) N/A
............................
(1) Ratio of expenses to
average net assets prior
to waived fees and
reimbursed expenses: 1.67%
(2) Ratio of net investment
income to average net
assets prior to waived
fees and reimbursed
expenses: 4.56%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
(5) THIS CLASS COMMENCED OPERATIONS ON JUNE 20, 1994.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
125
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND (CONT.)
.................................................
CLASS D(4) (CONT.)
.................................................
Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.74 $14.93 $15.00
------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.73 0.57 0.27
Net realized and unrealized gain
(loss) on investments 0.23 (1.19) (0.07)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.96 (0.62) 0.20
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.73) (0.57) (0.27)
Distributions from net realized
gain 0 0 0
Tax return of capital 0 0 0
------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.73) (0.57) (0.27)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $13.97 $13.74 $14.93
------------- ------------- -------------
------------- ------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 7.08% (4.25)% 1.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $7,730 $12,220 $11,319
Number of shares outstanding, end
of period (000) 553 889 758
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets(1) 1.35% 1.29% 1.26%
Ratio of net investment income to
average net assets(2) 5.23% 3.94% 3.41%
Portfolio turnover 317% 164% 201%
Average commission rate paid(3) N/A N/A N/A
........................................................................................
(1) Ratio of expenses to average
net assets prior to waived fees
and reimbursed expenses: 1.64% 1.55% 1.75%
(2) Ratio of net investment income
to average net assets prior to
waived fees and reimbursed
expenses: 4.95% 3.68% 2.92%
</TABLE>
................................................................................
(3) FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS
REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR
SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY
FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES
EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
(4) THIS CLASS COMMENCED OPERATIONS ON JULY 1, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
126
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Overland Express Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company. The Company commenced operations on April 7, 1988
and includes twelve separate diversified funds: the Asset Allocation, Money
Market, Municipal Income, National Tax-Free Institutional Money Market, Overland
Sweep, Short-Term Government-Corporate Income, Short-Term Municipal Income,
Small Cap Strategy, Strategic Growth, U.S. Government Income, U.S. Treasury
Money Market and Variable Rate Government Funds, and two non-diversified funds:
the California Tax-Free Bond and California Tax-Free Money Market Funds. The
financial statements and notes for the Overland Sweep and the National Tax-Free
Institutional Money Market Funds are presented separately.
The Asset Allocation, California Tax-Free Bond, Municipal Income, Small Cap
Strategy, Strategic Growth, U.S. Government Income and Variable Rate Government
Funds each offer Class A and Class D shares. The Money Market and U.S. Treasury
Money Market Funds each offer Class A and Institutional Class shares. The
California Tax-Free Money Market, Short-Term Government-Corporate Income and
Short-Term Municipal Income Funds each offer a single class of shares. The three
classes of shares differ principally in their respective sales charges (if any),
service fees, and distribution fees. Shareholders of each class also bear
certain expenses that pertain to that particular class. All shareholders bear
the common expenses of the Fund and earn income from the portfolio, pro rata
based on the average daily net assets of each class, without distinction between
share classes. Dividends are determined separately for each class based on
income and expenses allocable to each class. Gains are allocated to each class
pro rata based upon net assets of each class on the date of distribution. No
class has preferential dividend rights. Differences in per share dividend rates
generally result from the relative weightings of pro rata income and gain
allocations and from differences in separate class expenses, including
distribution and service fees.
The following significant accounting policies are consistently followed by the
Company in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
Investments in securities for which the primary market is a national securities
exchange or the NASDAQ National Market System are valued at the last reported
sales price on the day of valuation. U.S. Government obligations are valued at
the mean between the last reported bid and ask prices. In
127
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
the absence of any sale of such securities on the valuation date and in the case
of other securities, excluding debt securities maturing in 60 days or less, the
valuations are based on latest quoted bid prices. Debt securities maturing in 60
days or less are valued at amortized cost. Debt securities other than those
maturing in 60 days or less and other than U.S. Government obligations are
valued at the latest quoted bid price. Securities for which quotations are not
readily available are valued at fair value as determined by procedures approved
by the Board of Directors.
The California Tax-Free Money Market, Money Market and U.S. Treasury Money
Market Funds use the amortized cost method to value their portfolio securities
and seek to maintain constant net asset values of $1.00 per share. There is no
assurance these Funds will meet this objective. The amortized cost method
involves valuing a security at its cost, plus accretion of discount or minus
amortization of premium over the period until maturity, which approximates
market value.
The California Tax-Free Money Market, Money Market, and U.S. Treasury Money
Market Funds invest in securities with remaining maturities not exceeding 397
days (thirteen months), including obligations of the U.S. Government, bankers
acceptances, commercial paper and certain floating-and variable-rate
instruments. Certain of these floating- and variable-rate instruments may carry
a demand feature that would permit the holder to tender them back to the issuer
at par value prior to maturity.
The Short-Term Government-Corporate Income, Short-Term Municipal Income, Small
Cap Strategy and Strategic Growth Funds invest only in interests ("Interests")
of the Short-Term Government-Corporate Income Master Portfolio, Short-Term
Municipal Income Master Portfolio, Small Cap Master Portfolio and Capital
Appreciation Master Portfolio (the "Master Portfolios"), respectively, of Master
Investment Trust (the "Trust"). Each Master Portfolio has the same investment
objective as the Fund bearing the corresponding name. The value of each Fund's
investment in its corresponding Master Portfolio reflects that Fund's interest
in the net assets of that Master Portfolio. As of December 31, 1996, the
Short-Term Government-Corporate Income, Short-Term Municipal Income, Small Cap
Strategy and Strategic Growth Funds owned approximately 99.99%, 99.99%, 12.80%
and 79.39% of the outstanding Interests of the Short-Term Government-Corporate
Income Master Portfolio, Short-Term Municipal Income Master Portfolio, Small Cap
Master Portfolio and Capital Appreciation Master Portfolio, respectively. The
Master Portfolios' investments include equities, fixed-, variable-, and
floating-rate instruments. Certain of these floating- and variable-rate
instruments may carry a demand feature that would permit the holder to tender
them back to the issuer at par value prior to maturity. Except for debt
obligations with remaining maturities of 60 days or less, which are valued at
amortized cost, assets are valued at current market prices, or if such prices
are not readily available, at fair value as determined by procedures approved by
the Trust's Board of Trustees.
Cash equivalents relating to firm commitment purchase agreements are segregated
by the custodian and may not be sold without appropriate replacement while any
firm commitment purchase agreement is outstanding.
128
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Dividend income is recognized on the ex-dividend date, and
interest income is accrued daily. Realized gains or losses are reported on the
basis of identified cost of securities delivered. Bond discounts are accreted
and premiums are amortized as required by the Internal Revenue Code.
TBA PURCHASE COMMITMENTS
The Variable Rate Government Fund enters into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a future date beyond
customary settlement time. Although the unit price of a TBA has been
established; the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2% from the principal amount. The
Fund holds, and maintains until the settlement date, cash or high-quality debt
obligations in an amount sufficient to meet the purchase price. TBA purchase
commitments may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in the value of
the Fund's other assets. Unsettled TBA purchase commitments are valued at the
current market value of the underlying securities, generally according to the
procedures described under "Security Valuation" above.
Although the Fund generally enters into TBA purchase commitments with the
intention of acquiring securities for its portfolio, the Fund may dispose of a
commitment prior to settlement if the Fund's adviser deems it appropriate to do
so.
The Fund did not hold any TBA purchase commitments at December 31, 1996.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell such
securities ("repurchase agreements") are treated as collateralized financing
transactions and are recorded at their contracted resale amounts. These
repurchase agreements, if any, are detailed in each Fund's or Master Portfolio's
Portfolio of Investments. The Funds' and Master Portfolios' adviser pools the
cash and invests in repurchase agreements entered into by the Funds and Master
Portfolios. The repurchase agreements must be fully collateralized based on
values that are marked to market daily. The collateral may be held by an agent
bank under a tri-party agreement. It is the adviser's responsibility to value
collateral daily and to obtain additional collateral as necessary to maintain
market value equal to or greater than the resale price. The repurchase
agreements held in the Funds and Master Portfolios at December 31, 1996 are
collateralized by U.S. Treasury or federal agency obligations. The repurchase
agreements were entered into on December 31, 1996.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Asset Allocation
Fund, if any, are declared and distributed quarterly. Dividends to shareholders
from net investment income of the Small Cap Strategy and Strategic Growth Fund,
if any, are declared and distributed annually.
129
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
Dividends to shareholders from net investment income are declared daily and
distributed monthly for the California Tax-Free Bond, California Tax-Free Money
Market, Money Market, Municipal Income, Short-Term Government-Corporate Income,
Short-Term Municipal Income, U.S. Government Income, U.S. Treasury Money Market
and Variable Rate Government Funds. Any distributions to shareholders from net
realized capital gain are declared and distributed annually.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) were recorded by
the portfolio. The differences between the income or gains distributed on a book
versus tax basis are shown as excess distributions of net investment income and
net realized gain on sales of investments in the accompanying Statements of
Changes in Net Assets. The amount of distributions from net investment income
and net realized capital gains are determined in accordance with federal income
tax regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent that these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassifications.
FEDERAL INCOME TAXES
The Company's policy with respect to each Fund is to comply with the
requirements of the Internal Revenue Code that are applicable to regulated
investment companies and to distribute substantially all of each Fund's net
investment income and any net realized capital gains to its shareholders.
Therefore, no federal or state income tax provision is required. The following
funds had capital loss carryforwards at December 31, 1996:
<TABLE>
<CAPTION>
YEAR CAPITAL LOSS
FUND EXPIRES CARRYFORWARD
<S> <C> <C>
................................................................................................................
California Tax-Free Money Market Fund 2002 $ 58,917
Money Market Fund 2003 78,261
Municipal Income Fund 2002 3,600,930
2003 157,863
2004 245,237
Small Cap Strategy Fund 2004 88,195
Short-Term Government-Corporate Income Fund 2004 63,690
U.S. Government Income Fund 2002 1,212,813
2003 725,379
2004 510,531
Variable Rate Government Fund 1999 978,190
2000 15,382,954
2001 2,818,401
2002 119,628,012
2003 4,546,666
2004 2,482,930
</TABLE>
130
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
The Board of Directors intends to offset net capital gains with each capital
loss carryforward until each carryforward has been fully utilized or expires. No
capital gain distribution shall be made until each capital loss carryforward has
been fully utilized or expires.
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Funds' administrator, sponsor and distributor,
has incurred expenses in connection with the organization and initial
registration of the various funds and their classes. These expenses were charged
to the individual Funds and are being amortized by the Funds or their classes on
a straightline basis over 60 months from the date the Funds or classes commenced
operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into separate advisory contracts on behalf of the Funds,
other than the Short-Term Government-Corporate Income, Short-Term Municipal
Income, Small Cap Strategy and Strategic Growth Funds, with Wells Fargo Bank,
N.A. ("WFB"). Pursuant to the contracts, WFB has agreed to provide the Funds
with investment guidance and policy direction in connection with daily portfolio
management. Under the contract with the Asset Allocation Fund, WFB is entitled
to be paid a monthly advisory fee at the annual rate of 0.70% of the Fund's
average daily net assets up to $500 million and 0.60% of the remaining average
daily net assets. Under the contracts with the California Tax-Free Bond,
Municipal Income, U.S. Government Income and Variable Rate Government Funds, WFB
is entitled to be paid a monthly advisory fee at the annual rate of 0.50% of the
average daily net assets of each Fund. Under the contract with the California
Tax-Free Money Market Fund, WFB is entitled to be paid a monthly advisory fee at
the annual rate of 0.45% of the Fund's average daily net assets. Under the
contracts with the Money Market and U.S. Treasury Money Market Funds, WFB is
entitled to be paid a monthly advisory fee at the annual rate of 0.25% of each
Fund's average daily net assets.
The Company has entered into contracts on behalf of each Fund, other than the
Asset Allocation Fund, with WFB whereby WFB is responsible for providing custody
and portfolio accounting services for the Funds. For these Funds, WFB is
entitled to an annual fee for custody services at the annual rate of 0.0167% of
the average daily net assets of each Fund. For portfolio accounting services,
WFB is entitled to a monthly base fee from each Fund of $2,000 plus an annual
fee of 0.07% of the first $50 million, 0.045% of the next $50 million and 0.02%
of the average daily net assets in excess of $100 million.
Barclays Global Fund Advisors ("BGFA") currently acts as sub-adviser to the
Asset Allocation Fund. BGFA is entitled to receive from WFB as compensation for
its sub-advisory services, an annual fee of $60,000 and monthly fees at the
annual rate of 0.20% of the Fund's average daily net assets. BGFA is an indirect
subsidiary of Barclays Bank PLC and is located at 45 Fremont Street, San
Francisco, California 94105. BGFA was formed by the reorganization of Wells
Fargo Nikko Investment Advisors ("WFNIA"), a former affiliate of Wells Fargo &
Company. Prior to January 1, 1996, WFNIA acted as sub-adviser to the Fund and
was entitled to receive the same fees as currently received by BGFA.
131
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
Barclays Global Investors, N.A. ("BGI") currently acts as custodian to the Asset
Allocation Fund. BGI is a wholly owned subsidiary of Barclays Global Investors
Holdings Inc. BGI will not be entitled to receive compensation for its services
to the Fund so long as BGFA is entitled to receive fees for providing investment
sub-advisory services to the Fund. Prior to January 1, 1996, BGI was known as
Wells Fargo Institutional Trust Company N.A. ("WFITC") and was an affiliate of
WFB.
The Company has entered into a contract on behalf of the Funds with WFB whereby
WFB provides transfer agent services for the Funds. Under the transfer agency
agreement, WFB is paid a per account fee and other related costs with a minimum
monthly fee of $3,000 per fund, unless net assets of a fund are under $20
million. Effective February 1, 1997, WFB will be entitled to receive transfer
agency fees at an annual rate of 0.14% of the average daily net assets of the
Class A shares of the Asset Allocation, California Tax-Free Bond, Municipal
Income, Short-Term Government-Corporate Income, Short-Term Municipal Income,
Small Cap Strategy, Strategic Growth, U.S. Government Income and Variable Rate
Government Funds, 0.10% of the average daily net assets of the California
Tax-Free Money Market Fund and Class A shares of the Money Market and U.S.
Treasury Money Market Funds and 0.02% of the average daily net assets of the
Institutional Class shares of the Money Market and U.S. Treasury Money Market
Funds.
The Funds, except the California Tax-Free Money Market, Money Market, Short-Term
Government-Corporate Income, Short-Term Municipal Income and U.S. Treasury Money
Market Funds (which do not offer Class D shares), may enter into service
agreements with one or more servicing agents on behalf of Class D shares of the
Funds. Under such agreements, servicing agents have agreed to provide
shareholder liaison services, including responding to customer inquiries and
providing information on their investments, and to provide such other related
services as the Fund or a Class D shareholder may reasonably request. For these
services, a servicing agent receives a fee, on an annualized basis for the
Fund's then-current fiscal year, not to exceed 0.25% of the average daily net
assets of the Class D shares of the Fund. Service fees paid on behalf of Class D
shares for the year ended December 31, 1996 are described below:
<TABLE>
<CAPTION>
SERVICING FEES
FUND CLASS D
<S> <C>
.................................................................................................................
Asset Allocation Fund $ 50,525
California Tax-Free Bond Fund 16,686
Municipal Income Fund 27,580
Small Cap Strategy Fund (1) 754
Strategic Growth Fund 110,673
U.S. Government Income Fund 6,135
Variable Rate Government Fund 17,944
.................................................................................................................
</TABLE>
(1)FOR THE PERIOD FROM SEPTEMBER 16, 1996 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1996.
The Company has entered into administration and distribution agreements on
behalf of the Funds with Stephens. Under the agreements, Stephens has agreed to
provide supervisory, administrative and distribution services to the Funds. For
providing supervisory and administrative services, the
132
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
California Tax-Free Bond, Short-Term Government-Corporate Income, Short-Term
Municipal Income, Strategic Growth and Variable Rate Government Funds have each
agreed to pay Stephens a monthly fee at the annual rate of 0.15% of each Fund's
average daily net assets up to $200 million and 0.10% of the average daily net
assets in excess of $200 million. For the Asset Allocation, California Tax-Free
Money Market, U.S. Government Income and U.S. Treasury Money Market Funds,
Stephens is entitled to be compensated for administrative services monthly at
the annual rate of 0.10% of the average daily net assets of such Fund up to $200
million and 0.05% of the average daily net assets in excess of $200 million. The
Money Market, Municipal Income and Small Cap Strategy Funds have each agreed to
pay Stephens a monthly administrative fee at the annual rate of 0.10% of each
Fund's average daily net assets.
The Funds' Board of Directors has approved a change in fund administrative
duties. Effective May 1, 1997, WFB will become administrator to the Funds and
Stephens will become Co-Administrator to the Funds. WFB and Stephens will be
entitled to receive monthly fees at the annual rates of 0.04% and 0.02%,
respectively, of the average daily net assets of each Fund.
The Company has adopted separate Distribution Plans for Class A and Class D
shares pursuant to Rule 12b-1 under the 1940 Act (each, a "Distribution Plan").
The Class A Distribution Plans for the California Tax-Free Bond, California
Tax-Free Money Market and U.S. Government Income Funds provide that each Fund
may defray all or part of the cost of preparing, printing and distributing
prospectuses and other promotional materials by paying on an annual basis up to
the greater of $100,000 or 0.05% of the Class A shares of a Fund's average daily
net assets for costs incurred. Each Fund may participate in joint distribution
activities with the other Funds, in which event expenses reimbursed out of the
assets of one of the Funds may be attributable, in part, to the distribution-
related activities of another Fund. Generally, the expenses of joint
distribution activities are allocated among the Funds in proportion to their
relative net asset sizes.
The Company also has adopted separate distribution plans pursuant to Rule 12b-1
under the 1940 Act, whereby on behalf of Class A shares of the Asset Allocation,
Money Market, Municipal Income, Small Cap Strategy, Strategic Growth, U.S.
Treasury Money Market and Variable Rate Government Funds and shares of the
Short-Term Government-Corporate and Short-Term Municipal Income Funds, a Fund
may pay Stephens, as compensation for distribution-related services, a monthly
fee at an annual rate of up to 0.25% of the average daily net assets
attributable to the Fund's Class A shares. Payments under the Distribution Plan
for the Class A shares of the Municipal Income Fund currently are capped by WFB
and Stephens at the annual rate of 0.15% of the average daily net assets of the
Class A shares. The Class D Distribution Plan of the Asset Allocation Fund,
Small Cap Strategy and Strategic Growth Funds provides that a Fund may pay the
Distributor a monthly fee at an annual rate of up to 0.75% of each such Fund's
average daily net assets attributable to Class D shares. The Class D
Distribution Plan for the California Tax-Free Bond, Municipal Income, U.S.
Government Income and Variable Rate Government Funds may pay Stephens, as
compensation for distribution-
133
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
related services, a monthly fee at annual rates of up to 0.50% of the average
daily net assets attributable to the Fund's Class D shares. Distribution fees
paid for the year ended December 31, 1996 are described below:
<TABLE>
<CAPTION>
DISTRIBUTION FEES DISTRIBUTION FEES
FUND CLASS A CLASS D
<S> <C> <C>
..................................................................................................
Asset Allocation Fund $ 137,481 $ 151,575
California Tax-Free Bond Fund 0 33,376
Money Market Fund 0 1,048,153
Municipal Income Fund 77,995 55,160
Small Cap Strategy Fund (1) 1,498 2,310
Strategic Growth Fund 219,637 332,019
U.S. Government Income Fund 0 11,986
Variable Rate Government Fund 1,330,313 35,887
..................................................................................................
</TABLE>
(1)FOR THE PERIOD FROM SEPTEMBER 16, 1996 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1996.
The Company's Board of Directors has adopted a Shareholder Administrative
Servicing Plan (the "Administrative Servicing Plan") on behalf of the Class A
shares of the Asset Allocation, Money Market, Municipal Income, Small Cap
Strategy, Strategic Growth, U.S. Treasury Money Market and Variable Rate
Government Funds. Pursuant to the Administrative Servicing Plan, the Funds may
enter into administrative servicing agreements with administrative servicing
agents who are dealers/holders of record, or that otherwise have a servicing
relationship with the beneficial owners of the Funds' Class A shares.
Administrative servicing agents are entitled to receive a fee which will not
exceed 0.25%, on an annualized basis, of the average daily net assets of the
Class A shares. In no case will a shareholder be charged both 12b-1 and
Administrative Servicing fees.
134
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FEES WAIVED AND EXPENSES REIMBURSED
The following fees/expenses were waived/reimbursed for the year ended December
31, 1996:
<TABLE>
<CAPTION>
EXPENSES
FEES WAIVED FEES WAIVED REIMBURSED BY
FUND BY WFB BY STEPHENS STEPHENS TOTAL
<S> <C> <C> <C> <C>
................................................................................................
Asset Allocation $ 84,324 $ 21,734 $ 0 $ 106,058
California Tax-Free Bond 121,933 154,001 0 275,934
California Tax-Free Money Market 463 0 0 463
Money Market 143,994 0 0 143,994
Municipal Income 270,995 19,303 0 290,298
Short-Term Government-Corporate Income 0 6,558 70,194 76,752
Short-Term Municipal Income 0 12,624 64,889 77,513
Small Cap Strategy (1) 1,389 0 37,471 38,860
Strategic Growth 0 39,153 0 39,153
U.S. Government Income 178,415 8,958 0 187,373
U.S. Treasury Money Market 213,585 0 0 213,585
Variable Rate Government 319,366 238,676 0 558,042
................................................................................................
</TABLE>
(1)FOR THE PERIOD FROM SEPTEMBER 16, 1996 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1996.
Fees waived and expenses reimbursed continue at the discretion of WFB and
Stephens.
All of the officers and one of the directors of the Company are also officers of
Stephens. As of December 31, 1996, Stephens owned 213,319 shares of the Asset
Allocation Fund, 1,864 shares of the California Tax-Free Bond Fund, 47,461
shares of the California Tax-Free Money Market Fund, 1,416,900 shares of the
Money Market Fund, 13,783 shares of the Municipal Income Fund and 2,220 shares
of the Short-Term Government-Corporate Income Fund, 6,074 shares of the
Strategic Growth Fund, 3,050 shares of the U.S. Government Income Fund, 130,184
shares of the U.S. Treasury Money Market Fund, 14,251 shares of the Variable
Rate Government Fund.
Stephens has retained $1,754,215 as sales charges from the proceeds of Class A
shares sold and $23,770 as proceeds from Class D shares redeemed by the Company
for the year ended December 31, 1996. Wells Fargo Securities Inc., a subsidiary
of WFB, received $235,561 as sales charges from the proceeds of Class A shares
sold and $19,586 as proceeds from Class D shares redeemed by the Company for the
year ended December 31, 1996.
135
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for each
Fund for the year ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
ASSET CALIFORNIA
AGGREGATE PURCHASES ALLOCATION TAX-FREE BOND MUNICIPAL INCOME
AND SALES OF: FUND FUND FUND
<S> <C> <C> <C>
..............................................................................................................
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $ 35,913,671 $ 0 $ 0
Sales proceeds 16,607,653 0 0
OTHER SECURITIES:
Purchases at cost 23,256,258 45,935,896 9,952,710
Sales proceeds 31,995,959 72,733,107 24,144,898
</TABLE>
<TABLE>
<CAPTION>
U.S.
AGGREGATE PURCHASES STRATEGIC GOVERNMENT VARIABLE RATE
AND SALES OF: GROWTH FUND(1) INCOME FUND GOVERNMENT FUND
<S> <C> <C> <C>
..............................................................................................................
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $ 0 $ 90,118,907 $ 304,665,875
Sales proceeds 0 72,308,984 362,487,555
OTHER SECURITIES:
Purchases at cost 155,315,937 61,753,901 886,678,846
Sales proceeds 114,213,453 33,269,954 1,153,684,653
..............................................................................................................
</TABLE>
(1) THE REPORTED PERIOD IS FROM JANUARY 1, 1996 TO FEBRUARY 19, 1996, BEFORE THE
FUND WAS CONVERTED TO A "MASTER/FEEDER" STRUCTURE. SEE NOTE 5.
All Funds not reflected in this schedule traded exclusively in short-term
securities or were feeder funds that invest all their assets in a corresponding
Master Portfolio.
4. CAPITAL SHARE TRANSACTIONS
As of December 31, 1996, there were 20 billion shares of $.001 par value capital
stock authorized by the Company. As of December 31, 1996, each Fund was
authorized to issue 100 million shares of $.001 par value capital stock for each
class of shares, except the California Tax-Free Money Market,
136
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
Money Market, Short-Term Government-Corporate Income, Short-Term Municipal
Income, U.S. Treasury Money Market and Variable Rate Government Funds which are
authorized to issue shares as follows:
<TABLE>
<CAPTION>
SHARES
FUND AUTHORIZED
<S> <C>
.................................................................................................................
California Tax-Free Money Market Fund 3 billion
Money Market Fund 2 billion
Short-Term Government-Corporate Income Fund 300 million
Short-Term Municipal Income Fund 300 million
U.S. Treasury Money Market Fund 2 billion
Variable Rate Government Fund 1 billion
</TABLE>
Transactions in capital shares for the periods ended December 31, 1996 and the
year ended December 31, 1995 are disclosed in detail in the Statements of
Changes in Net Assets.
The following Funds have shareholders who own greater than 5% of the outstanding
shares of the Fund. This concentration of ownership may increase the Fund's
exposure to the risks associated with significant redemptions.
<TABLE>
<CAPTION>
NUMBER OF
SHAREHOLDERS WITH GREATER
FUND THAN 5% OWNERSHIP
<S> <C>
.................................................................................................................
Asset Allocation Fund 3
California Tax-Free Bond Fund 2
California Tax-Free Money Market Fund 2
Money Market Fund 7
Municipal Income Fund 5
Short-Term Government-Corporate Income Fund 5
Short-Term Municipal Income Fund 5
Small Cap Strategy Fund 6
Strategic Growth Fund 4
U.S. Government Income Fund 4
U.S. Treasury Money Market Fund 5
Variable Rate Government Fund 7
</TABLE>
5. REORGANIZATION OF THE STRATEGIC GROWTH FUND INTO A
MASTER/FEEDER STRUCTURE
At a special meeting of the shareholders held on December 5, 1995, shareholders
of the Strategic Growth Fund approved a reorganization of the Fund into a
"master-feeder" structure, whereby the existing Fund invests all of its assets
in a corresponding Master Portfolio of the Master Investment Trust, an open-end
series management investment company. On the conversion date the Fund
transferred all of its investments to the corresponding Master Portfolio. The
Fund then became a "feeder" fund. This reorganization was effective on February
20, 1996.
137
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
6. INCOME ALLOCATIONS
For the period from February 20, 1996 (commencement of operations as a feeder
fund) to December 31, 1996, the Strategic Growth Fund received allocations of
income and expenses from its corresponding Master Portfolio. The detail of the
income for the stand-alone period of the Fund and the allocations of income and
expenses for the feeder period of the fund is as follows:
<TABLE>
<CAPTION>
1/1/96 to 2/19/96 2/20/96 to 12/31/96
(Stand-alone Period) (Feeder Period)
....................... ....................................
FUND INTEREST DIVIDENDS INTEREST DIVIDENDS EXPENSES
<S> <C> <C> <C> <C> <C>
..........................................................................................................
Strategic Growth $ 18,833 $ 15,870 $ 390,654 $ 136,150 $ (739,377)
</TABLE>
The Short-Term Government-Corporate Income, Short-Term Municipal Income, and
Small Cap Strategy Funds are each allocated net investment income from their
corresponding Master Portfolio. The detail of allocated net investment income
for the year ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
NET
INVESTMENT
FUND INTEREST DIVIDENDS EXPENSES WAIVED FEES INCOME
<S> <C> <C> <C> <C> <C>
...........................................................................................................
Short-Term Government-Corporate Income $ 654,198 $ 0 $ 90,508 $ (90,508) $ 654,198
Short-Term Municipal Income 946,275 0 146,323 (146,323) 946,275
Small Cap Strategy (1) 7,442 2,081 8,578 (0) 945
...........................................................................................................
</TABLE>
(1) FOR THE PERIOD FROM SEPTEMBER 16, 1996 (COMMENCEMENT OF OPERATIONS) TO
DECEMBER 31, 1996.
7. SMALL CAP STRATEGY FUND
The Small Cap Strategy Fund is a new fund which commenced operations on
September 16, 1996. The Small Cap Strategy Fund invests only in interests of the
Small Cap Master Portfolio. The Small Cap Master Portfolio is the successor to
the assets of the Small Capitalization Growth Fund for Employee Retirement
Plans, a collective investment fund (the "Collective Investment Fund"). The
Collective Investment Fund was a private, non-registered investment fund
previously managed by WFB. Immediately prior to the commencement of the Small
Cap Strategy Fund's operations, the assets of the Collective Investment Fund
were purchased by the Small Cap Master Portfolio and the Collective Investment
Fund redeemed all of its outstanding interests and ceased operations. The Small
Cap Master Portfolio manages its investments in a manner identical in all
material respects to the operation of the Collective Investment Fund.
8. VARIABLE RATE GOVERNMENT FUND LITIGATION
Certain shareholders of the Variable Rate Government Fund have filed a class
action lawsuit in the United States District Court for the Southern District of
California against the Overland Express Variable Rate Government Fund (the "VRG
Fund"), WFB, Wells Fargo & Company and Stephens. The
138
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
lawsuit seeks to assert claims under federal and California securities law and
the common law relating to alleged misstatements and omissions in the
prospectus, reports and marketing materials pertaining to the VRG Fund and
derivative claims on behalf of the VRG Fund against WFB, Wells Fargo & Company
and Stephens. The plaintiffs and defendants have agreed to a settlement of all
claims that, if approved by the Court, will provide for distribution of a
settlement fund to members of the class, as well as prospective reductions in
fees charged by WFB and/or Stephens to the VRG Fund. The VRG Fund will not be
required to contribute to the settlement fund under the terms of the proposed
settlement agreement.
139
<PAGE>
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OVERLAND EXPRESS FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Asset Allocation Fund, California Tax-Free
Bond Fund, California Tax-Free Money Market Fund, Money Market Fund, Municipal
Income Fund, U.S. Government Income Fund, U.S. Treasury Money Market Fund and
Variable Rate Government Fund and the statements of assets and liabilities of
the Small Cap Strategy Fund, Short-Term Government-Corporate Income Fund, Short-
Term Municipal Income Fund and Strategic Growth Fund (twelve of the funds
comprising Overland Express Funds, Inc.) as of December 31, 1996, and the
related statement of operations for the year then ended, except for Small Cap
Strategy Fund which is for the period from September 16, 1996 (commencement of
operations) to December 31, 1996, the statements of changes in net assets for
each of the two years in the period then ended, except for Small Cap Strategy
Fund which is for the period from September 16, 1996 to December 31, 1996, and
financial highlights for the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds of Overland Express Funds, Inc. as of December 31,
1996, the results of their operations, the changes in their net assets and their
financial highlights for the periods indicated herein in conformity with
generally accepted accounting principles.
[KPMG SIG.]
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1997
140
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 88.34%
ADVERTISING - 0.98%
84,375 HA-LO Industries inc+ $ 940,000 $ 2,320,313
BASIC INDUSTRIES - 0.71%
60,000 Gibraltar Steel Corp+ $ 1,121,875 $ 1,575,000
120,000 Quadrax Corp+ 290,184 90,000
------------ ------------
$ 1,412,059 $ 1,665,000
BIOTECHNOLOGY - 3.56%
110,000 Cardiovascular Dynamics Inc+ $ 1,416,006 $ 1,430,000
135,000 General Surgical Innovations Inc+ 1,826,250 1,122,188
115,000 Genzyme Corp - General Division+ 3,054,313 2,501,250
70,000 Liposome Co Inc+ 1,097,353 1,338,750
90,000 Neurex Corp+ 1,509,000 1,530,000
70,000 Palomar Medical Tech Inc+ 790,970 455,000
------------ ------------
$ 9,693,892 $ 8,377,188
CAPITAL GOODS - 5.54%
100,000 3-D Labs Inc+ $ 1,516,363 $ 2,300,000
98,000 Amati Communications Corp+ 2,157,990 1,286,250
60,000 Ascend Communication Inc+ 4,179,915 3,727,500
70,000 Bitstream Inc+ 404,420 455,000
30,000 Integrated Circuit Systems+ 382,813 408,750
95,000 Medic Computer Systems Inc+ 3,020,898 3,829,688
50,000 Panavision Inc+ 1,033,973 1,037,500
------------ ------------
$ 12,696,372 $ 13,044,688
COMMERCIAL SERVICES - 1.23%
85,000 AccuStaff Inc+ $ 1,715,425 $ 1,795,625
150,000 AMRE Inc+ 2,103,468 243,750
75,000 Stericycle Inc+ 693,542 862,500
------------ ------------
$ 4,512,435 $ 2,901,875
</TABLE>
141
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
COMPUTER SOFTWARE - 10.52%
55,000 Claremont Technology Group Inc+ $ 1,483,765 $ 1,443,750
117,334 First Data Corp 4,023,615 4,282,691
110,000 IKOS Systems Inc+ 1,647,140 2,200,000
175,000 Inference Corp Class A+ 3,187,250 1,268,750
30,000 LifeRate Systems Inc+ 253,542 97,500
40,000 Microsoft Corp+ 1,943,203 3,305,000
84,500 Oracle Systems Corp+ 2,734,845 3,527,875
96,115 Pure Atria Corp+ 3,020,565 2,378,846
27,500 Versant Object Technology Corp+ 528,753 512,188
65,000 Viasoft Inc+ 3,229,972 3,071,250
95,000 Xylan Corp+ 3,912,686 2,683,750
------------ ------------
$ 25,965,336 $ 24,771,600
COMPUTER SYSTEMS - 6.15%
110,000 Adaptec Inc+ $ 4,182,310 $ 4,400,000
70,000 Cisco Systems Inc+ 4,515,000 4,453,750
145,000 Komag Inc+ 3,393,713 3,933,125
35,000 RadiSys Corp+ 1,681,251 1,706,250
------------ ------------
$ 13,772,274 $ 14,493,125
CONSUMER - BASIC - 0.91%
87,500 Tri-Point Medical Corp+ $ 891,127 $ 1,290,625
125,000 Uroquest Medical Corp+ 784,722 843,750
------------ ------------
$ 1,675,849 $ 2,134,375
CONSUMER-DISCRETIONARY - 2.64%
85,000 Homegate Hospitality Inc+ $ 863,750 $ 711,875
50,000 Just For Feet Inc+ 1,233,760 1,312,500
75,000 Mirage Resorts Inc+ 1,410,860 1,621,875
82,000 North Cranberries Inc 1,896,648 1,886,000
95,000 V-One Corp+ 489,867 688,750
------------ ------------
$ 5,894,885 $ 6,221,000
</TABLE>
142
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
ELECTRICAL EQUIPMENT - 5.28%
65,000 Interlink Electronics Inc+ $ 344,375 $ 390,000
85,000 Macromedia Inc+ 2,572,843 1,530,000
70,000 Nokia Corp ADR Class A 3,031,549 4,025,000
55,000 U.S. Robotics Corp+ 3,929,373 3,960,000
75,000 Analog Devices Inc+ 2,555,227 2,540,625
------------ ------------
$ 12,433,367 $ 12,445,625
ENERGY & RELATED - 7.15%
112,500 Comstock Resources Inc+ $ 1,350,439 $ 1,462,500
95,000 Ensco International Inc+ 3,115,580 4,607,500
96,000 Global Industries Ltd+ 874,788 1,788,000
75,000 Reading & Bates Corp+ 1,841,000 1,987,500
95,000 Smedvig ASA - Sponsored ADR Class B+ 2,005,680 1,911,875
45,000 Transocean Offshore Inc 2,228,876 2,818,125
75,000 Veritas Digicon Inc+ 1,139,591 1,387,500
90,000 Parker Drilling Co+ 775,200 866,250
------------ ------------
$ 13,331,154 $ 16,829,250
ENTERTAINMENT & LEISURE - 3.60%
50,000 Family Golf Centers Inc+ $ 883,458 $ 1,506,250
45,000 HFS Inc+ 2,858,768 2,688,750
30,000 Mikohn Gaming Corp+ 280,580 157,500
54,000 Platinum Entertainment Inc+ 692,500 432,000
120,000 Regal Cinemas Inc+ 3,515,433 3,690,000
------------ ------------
$ 8,230,739 $ 8,474,500
ENVIRONMENTAL CONTROL - 0.92%
77,000 Molten Metal Technology Inc+ $ 1,548,073 $ 904,750
40,000 U.S.A. Waste Services Inc+ 922,640 1,275,000
------------ ------------
$ 2,470,713 $ 2,179,750
FINANCE & RELATED - 5.65%
125,000 Capital One Financial Corp $ 3,604,657 $ 4,500,000
</TABLE>
143
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
FINANCE & RELATED - CONTINUED
150,000 Envoy Corp (New)+ $ 5,623,750 $ 5,625,000
5,000 Guidant Corp 264,150 285,000
105,000 Money Store Inc 2,503,234 2,900,625
------------ ------------
$ 11,995,791 $ 13,310,625
FOOD & RELATED - 1.22%
80,000 NuCo2 Inc+ $ 1,301,863 $ 1,065,000
80,000 Whole Foods Market Inc+ 1,904,557 1,800,000
------------ ------------
$ 3,206,420 $ 2,865,000
GENERAL BUSINESS & RELATED - 5.06%
20,000 ACI Telecentrics Inc+ $ 100,000 $ 122,500
40,000 Anchor Gaming+ 1,909,021 1,610,000
110,000 Lightbridge Inc+ 1,176,569 941,875
155,000 Proxim Inc+ 3,500,963 3,565,000
120,000 Quadramed Corp+ 1,522,222 1,380,000
35,000 Scopus Technology Inc+ 1,385,626 1,627,500
60,000 Snyder Communications Inc+ 1,297,923 1,620,000
85,000 Staffmark Inc+ 1,213,532 1,062,500
------------ ------------
$ 12,105,856 $ 11,929,375
HEALTHCARE - 5.56%
156,620 Genesis Health Ventures Inc+ $ 3,685,129 $ 4,874,798
130,000 Healthsouth Corp+ 3,775,604 5,021,250
125,000 Renal Treatment Centers+ 2,199,750 3,187,500
------------ ------------
$ 9,660,483 $ 13,083,548
FOOTWEAR - 0.63%
25,000 Nike Inc Class B $ 1,424,838 $ 1,493,750
MANUFACTURING PROCESSING - 5.10%
10,000 Biochem Pharma Inc+ $ 501,250 $ 502,500
110,000 Cognos Inc+ 3,726,641 3,093,750
</TABLE>
144
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
MANUFACTURING PROCESSING - CONTINUED
115,000 Eagle Hardware & Garden+ $ 2,573,184 $ 2,386,250
115,000 Nitinol Medical Technologies Inc+ 1,280,625 1,437,500
40,000 Pairgain Technologies Inc+ 1,265,000 1,217,500
70,000 Tetra Technologies Inc+ 1,683,999 1,767,500
31,000 United Meridian Corp+ 1,371,480 1,604,250
------------ ------------
$ 12,402,179 $ 12,009,250
MATERIAL MANUFACTURING - 0.24%
73,000 Landec Corp+ $ 973,813 $ 556,625
MEDICAL EQUIPMENT & SUPPLIES - 2.53%
115,000 Endosonics Corp+ $ 1,415,547 $ 1,753,750
100,000 Life Med Sciences Inc+ 652,969 662,500
152,000 Ultrafem Inc+ 2,734,665 2,660,000
55,000 Urologix Inc+ 817,159 893,750
------------ ------------
$ 5,620,340 $ 5,970,000
PHARMACEUTICALS - 1.11%
100,000 Anesta Corp+ $ 1,392,104 $ 1,925,000
67,500 Aronex Pharmaceuticals Inc+ 805,034 632,813
60,000 Seragen Inc+ 414,940 60,000
------------ ------------
$ 2,612,078 $ 2,617,813
RETAIL & RELATED - 3.03%
125,000 Corporate Express Inc+ $ 3,788,854 $ 3,679,688
74,000 North Face Inc+ 1,480,935 1,424,500
172,000 Micro Warehouse Inc+ 3,914,688 2,021,000
------------ ------------
$ 9,184,477 $ 7,125,188
SEMICONDUCTORS - 1.45%
20,000 Intel Corp $ 2,575,000 $ 2,618,750
55,000 OnTrak Systems Inc+ 1,168,385 804,375
------------ ------------
$ 3,743,385 $ 3,423,125
</TABLE>
145
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
TELECOMMUNICATIONS - 4.70%
20,000 Cascade Communications Corp+ $ 1,507,978 $ 1,102,500
110,000 Farallon Communications+ 1,537,695 701,250
20,000 Intermedia Communications Inc+ 571,313 515,000
190,000 LCI International Inc+ 3,348,174 4,085,000
128,000 NEXTEL Communications Class A+ 2,296,875 1,672,000
195,000 Paging Network Inc+ 3,707,562 2,973,750
------------ ------------
$ 12,969,597 $ 11,049,500
TRANSPORTATION - 2.87%
70,000 Atlas Air Inc+ $ 3,343,552 $ 3,342,500
150,000 Mesa Air Group+ 1,750,374 1,012,500
50,000 Trico Marine Services Inc+ 1,274,867 2,399,997
------------ ------------
$ 6,368,793 $ 6,754,997
TOTAL COMMON STOCKS $205,297,125 $208,047,085
<CAPTION>
MATURITY
SHARES SECURITY NAME DATE VALUE
<C> <S> <C> <C> <C> <C>
WARRANTS - 3.29%
84,000 Intel Corp expires 3/14/1998+ 03/14/98 $ 7,749,000
(Cost $1,992,313)
</TABLE>
146
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 0.18%
CONVERTIBLE CORPORATE BONDS - 0.18%
$ 240,000 First Financial Management Corp 5.00 % 12/15/99 $ 413,700
(Cost $240,000)
SHORT-TERM INSTRUMENTS - 8.20%
REPURCHASE AGREEMENTS - 8.20%
$ 4,659,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.58 01/02/97 $ 4,659,000
5,000,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.00 01/02/97 5,000,000
9,648,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.37 01/02/97 9,648,000
------------
TOTAL SHORT-TERM INSTRUMENTS $ 19,307,000
(Cost $19,307,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $226,836,438)* (Notes 1 and 3) 100.01 % $235,516,785
Other Assets and Liabilities, Net (0.01 ) (15,858)
------- ------------
TOTAL NET ASSETS 100.00 % $235,500,927
------- ------------
------- ------------
..........................................................................................................
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 32,242,575
Gross Unrealized Depreciation (23,562,228)
-------------
NET UNREALIZED APPRECIATION $ 8,680,347
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
147
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER
PORTFOLIO - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 4.69%
MISCELLANEOUS BONDS - 4.69%
$ 630,000 Ford Capital BV 9.00 % 08/15/98 $ 657,563
(Cost $659,799)
U.S. GOVERNMENT AGENCY SECURITIES - 28.50%
FEDERAL AGENCY - OTHER - 14.28%
$ 2,000,000 Student Loan Marketing Association Note 5.80 % 10/01/97 $ 2,000,640
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 14.22%
$ 2,000,000 FNMA 5.42 % 12/16/97 $ 1,993,440
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 3,994,080
(Cost $3,998,647)
U.S. TREASURY SECURITIES - 61.73%
U.S. TREASURY NOTES - 61.73%
$ 5,000,000 U.S. Treasury Notes 5.25 % 12/31/97 $ 4,982,800
3,650,000 U.S. Treasury Notes 6.13 03/31/98 3,667,666
------------
TOTAL U.S. TREASURY SECURITIES $ 8,650,466
(Cost $8,640,748)
SHORT-TERM INSTRUMENTS - 4.84%
REPURCHASE AGREEMENTS - 4.84%
$ 378,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.58 01/02/97 $ 378,000
300,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.37 01/02/97 300,000
------------
TOTAL SHORT-TERM INSTRUMENTS $ 678,000
(Cost $678,000)
</TABLE>
148
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM GOVERNMENT- CORPORATE INCOME MASTER
PORTFOLIO - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $13,977,194)* (Notes 1 and 3) 99.76 % $ 13,980,109
Other Assets and Liabilities, Net 0.24 33,265
------- ------------
TOTAL NET ASSETS 100.00 % $ 14,013,374
------- ------------
------- ------------
..........................................................................................................
</TABLE>
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 10,580
Gross Unrealized Depreciation (7,665)
-----------
NET UNREALIZED APPRECIATION $ 2,915
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
149
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 90.98%
ARIZONA - 2.83%
$ 700,000 Arizona State Transportation Board Tax Revenue
Maricopa County Regional Area Road Fund MBIA
Insured 7.00 % 07/01/00 $ 756,007
CALIFORNIA - 5.01%
420,000 California State Maritime Infrastructure
Authority Port of San Diego Revenue AMBAC
Insured 4.20 11/01/98 420,269
900,000 Northern California State Public Power Revenue
Series B AMBAC Insured 5.00 07/01/99 919,125
COLORADO - 3.35%
900,000 Colorado State Student Obligation Bond
Authority Series C 4.35 09/01/99 894,393
DELAWARE - 1.52%
400,000 Delaware State GO Series C 4.70 07/01/98 405,036
HAWAII - 1.88%
500,000 Honolulu HI Improvement Board Series B 4.50 10/01/98 503,290
ILLINOIS - 4.52%
200,000 Chicago IL AMBAC Insured 6.00 01/01/98 203,634
480,000 Chicago IL O'Hare International Airport Revenue
Series A AMBAC Insured 4.70 01/01/98 483,859
500,000 Illinois State Sales Tax Revenue Series E
Prerefunded 8.10 06/15/10 519,925
MINNESOTA - 4.69%
200,000 Minneapolis MN Special School District No. One
COP Prerefunded 7.38 02/01/15 207,628
1,000,000 Minnesota State Refunded State Trunk Highway 6.90 08/01/01 1,045,000
MISSOURI - 0.76%
200,000 Branson MO Tax Allocation Revenue Street
Improvement Project CGIC Insured 4.95 10/01/97 201,656
</TABLE>
150
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
NEVADA - 1.98%
$ 500,000 Clark County NV USD Series A 7.30 % 03/01/99 $ 527,630
NEW JERSEY - 1.93%
500,000 Mercer County NJ Solid Waste Site Project
Prerefunded 7.90 04/01/13 515,105
NEW MEXICO - 3.76%
1,000,000 Albuquerque NM Gross Receipts Tax MBIA Insured 4.50 07/01/98 1,005,000
NEW YORK - 7.74%
900,000 New York City General Obligation V/R Demand
Obligation Series B-2 5.00 08/15/03 900,000
250,000 New York State Mortgage Agency Revenue
Homeowner Mortgage Series 44 AMT FHA
Collateralized 6.00 04/01/99 253,515
900,000 New York/New Jersey Port Authority Consolidated
Revenue MBIA Insured 5.00 09/01/98 914,202
NORTH CAROLINA - 1.89%
500,000 North Carolina State Municipal Power Agency
Catawba No 1 Electrical Revenue FGIC Insured 5.10 01/01/99 505,540
NORTH DAKOTA - 2.82%
750,000 North Dakota State Financing Agency Series D 4.15 10/02/97 751,838
OHIO - 6.05%
600,000 Ohio Air Quality Authority - Cleveland Electric 4.70 12/01/15 600,000
1,000,000 Ohio State Public Facility Commission Higher
Education Capital Facility Series II-B FSA
Insured 5.00 11/01/98 1,016,250
</TABLE>
151
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
OREGON - 1.14%
$ 300,000 Lane County OR School District No. 52 FGIC
Insured 5.20 % 12/01/97 $ 303,831
PENNSYLVANIA - 6.67%
500,000 Bethel Park PA USD Series B AMBAC Insured 6.05 02/01/98 512,190
1,000,000 Montgomery County PA Higher Education & Health
Authority Hospital Revenue 8.25 11/01/03 1,056,130
200,000 Montgomery County PA Higher Education & Health
Authority Hospital Revenue Bryn Manor Hospital
Project Prerefunded 9.38 12/01/19 214,028
PUERTO RICO - 1.88%
500,000 Commonwealth of Puerto Rico Aquaduct and Sewer
Authority Revenue 4.50 07/01/99 501,395
SOUTH DAKOTA - 3.81%
1,000,000 South Dakota Student Loan Finance Corp Student
Loan Revenue Series A - GTD STD LN Insured 5.50 08/01/98 1,017,500
TEXAS - 11.68%
240,000 Brazos TX Higher Education Authority AMT Series
C-1 6.00 11/01/99 246,026
1,000,000 Brazos TX Higher Education Authority Inc 5.30 12/01/97 1,008,360
275,000 Dallas TX Waterworks & Sewer System Revenue
Series A 9.00 10/01/97 285,274
500,000 Northside TX Independent School District PSFG
Insured 8.60 08/01/97 514,310
275,000 Port of Houston Authority TX AMT 8.50 10/01/98 294,762
315,000 Texas State Department Housing & Community MBIA
Insured 4.20 03/01/98 315,000
455,000 Texas State Department Housing & Community
Mortgage Series E MBIA Insured 4.20 09/01/98 454,431
</TABLE>
152
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE+ VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
VIRGINIA - 6.66%
$ 1,000,000 Richmond VA Public Utilities Revenue Series A 7.80 % 01/15/06 $ 1,060,630
700,000 Virginia State Public School Authority Series A 7.00 01/01/98 718,802
WASHINGTON - 6.55%
200,000 Southern Columbia Basin WA Irrigation District 5.50 12/01/98 203,818
500,000 Thurstin County WA Olympia USD No 111 FGIC
Insured 5.25 12/01/98 510,400
1,000,000 Washington State Series A 6.50 07/01/98 1,035,000
WEST VIRGINIA - 1.86%
500,000 West Virginia State HFFA Charleston Area
Medical Center Series A MBIA Insured 4.30 09/01/99 497,745
------------
TOTAL MUNICIPAL BONDS $ 24,298,534
(Cost $24,247,719)
SHORT-TERM INSTRUMENTS - 7.73%
MONEY MARKET FUND - 3.99%
1,066,000# National Municipal Fund $ 1,066,000
FLORIDA - 3.74%
1,000,000 Jacksonville FL Electric Authority 3.60 % 01/16/97 997,500
------------
TOTAL SHORT-TERM INSTRUMENTS $ 2,063,500
(Cost $2,066,000)
</TABLE>
153
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $26,313,719)* (Notes 1 and 3) 98.71 % $ 26,362,034
Other Assets and Liabilities, Net 1.29 345,443
------- ------------
TOTAL NET ASSETS 100.00 % $ 26,707,477
------- ------------
------- ------------
..........................................................................................................
</TABLE>
+ SECURITIES WITH MATURITIES IN EXCESS OF 397 DAYS ARE SUBJECT TO A
DEMAND FEATURE WHICH REDUCES THE REMAINING MATURITY.
# AMOUNT REPRESENTS SHARES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 74,636
Gross Unrealized Depreciation (26,321)
-----------
NET UNREALIZED APPRECIATION $ 48,315
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
154
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 82.45%
ADVERTISING - 2.85%
28,125 HA-LO Industries inc+ $ 646,875 $ 773,437
9,000 Outdoor Systems Inc+ 250,500 253,125
------------ ------------
$ 897,375 $ 1,026,562
BASIC INDUSTRIES - 1.09%
15,000 Gibraltar Steel Corp+ $ 331,875 $ 393,750
BIOTECHNOLOGY - 2.68%
25,000 Cardiovascular Dynamics Inc+ $ 387,500 $ 325,000
30,000 Neurex Corp+ 507,500 510,000
20,000 Palomar Medical Tech Inc+ 173,750 130,000
------------ ------------
$ 1,068,750 $ 965,000
CAPITAL GOODS - 11.82%
25,000 ATC Communication Group Inc+ $ 491,125 $ 331,250
8,500 Bell & Howell Company+ 256,063 201,875
20,000 Bitstream Inc+ 115,420 130,000
10,000 Connect Inc+ 78,750 61,250
20,000 Cylink Corp+ 287,500 260,000
20,000 ESS Technology Inc+ 336,250 562,500
20,000 Integrated Circuit Systems+ 270,626 272,500
30,000 Inter-Tel Inc+ 594,375 570,000
10,000 Larscom Inc Class A+ 120,000 113,750
15,000 Level 8 Systems Inc+ 165,000 232,500
20,000 Planning Sciences Int-SP ADR+ 285,938 240,000
20,000 Talx Corp+ 187,500 165,000
10,000 Ultrak Inc+ 277,483 305,000
20,000 Vanstar Corp+ 420,000 490,000
20,000 Xcellenet Inc+ 354,371 322,500
------------ ------------
$ 4,240,401 $ 4,258,125
COMMERCIAL SERVICES - 0.64%
20,000 Stericycle Inc+ $ 187,500 $ 230,000
</TABLE>
155
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
COMPUTER SOFTWARE - 2.18%
20,000 E*Trade Group Inc+ $ 194,165 $ 230,000
25,000 Inference Corp Class A+ 421,250 181,250
25,000 Optika Imaging Systems Inc+ 192,188 125,391
10,023 Pure Atria Corp+ 324,795 248,069
------------ ------------
$ 1,132,398 $ 784,710
COMPUTER SYSTEMS - 0.57%
15,000 Sync Research Inc+ $ 264,840 $ 206,250
CONSUMER - BASIC - 4.22%
10,000 Medicis Pharmaceutical Corp+ $ 450,000 $ 440,000
30,000 Orthodontic Centers of America Inc+ 637,500 480,000
10,000 Pathogenesis Corp+ 199,643 217,500
15,000 Renal Treatment Centers+ 493,125 382,500
------------ ------------
$ 1,780,268 $ 1,520,000
CONSUMER-DISCRETIONARY - 6.47%
10,000 Act Networks Inc+ $ 327,750 $ 365,000
15,000 Equity Corp International+ 320,000 300,000
2,000 Information Mgmt Resources+ 28,000 42,250
25,000 Innkeepers USA Trust 271,875 346,875
30,000 Paul Harris Stores Inc+ 244,063 532,500
100,000 Quadrax Corp+ 146,875 75,000
2,000 Seachange International Inc+ 30,000 51,000
14,000 UOL Publishing Inc+ 182,000 185,500
20,000 V-One Corp+ 100,000 145,000
20,000 Viisage Technology+ 217,813 290,000
------------ ------------
$ 1,868,376 $ 2,333,125
ELECTRICAL EQUIPMENT - 0.53%
31,500 Interlink Electronics Inc+ $ 216,563 $ 189,000
ENERGY & RELATED - 4.01%
24,000 American Exploration Co+ $ 311,320 $ 384,000
</TABLE>
156
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
ENERGY & RELATED - CONTINUED
20,000 Marine Drilling Co Inc+ $ 187,500 $ 393,750
20,000 Pride Petroleum Services Inc+ 301,250 465,000
10,000 Smedvig ASA - Sponsored ADR Class B+ 212,500 201,250
------------ ------------
$ 1,012,570 $ 1,444,000
ENTERTAINMENT & LEISURE - 3.24%
20,000 Family Golf Centers Inc+ $ 670,000 $ 602,500
20,000 Mikohn Gaming Corp+ 180,000 105,000
15,000 Regal Cinemas Inc+ 380,000 461,250
------------ ------------
$ 1,230,000 $ 1,168,750
FINANCE & RELATED - 7.75%
35,000 Applied Graphics Technologies+ $ 599,375 $ 1,019,375
2,000 Delta Financial Corp+ 33,000 36,000
20,000 Envoy Corp (New)+ 675,000 750,000
6,000 IMC Mortgage Co+ 204,000 201,000
15,000 Medallion Financial Corp 195,000 228,750
15,000 Redwood Trust Inc 477,500 558,750
------------ ------------
$ 2,183,875 $ 2,793,875
FOOD & RELATED - 0.55%
15,000 NuCo2 Inc+ $ 326,250 $ 199,688
GENERAL BUSINESS & RELATED - 12.34%
15,000 American Residential Services+ $ 250,635 $ 406,875
9,000 Carriage Services Inc+ 168,750 201,375
20,000 Education Management Corp+ 300,000 420,000
35,000 Intelligroup Inc+ 381,816 385,000
11,400 NCO Group+ 148,200 192,375
25,000 NHP Inc+ 475,000 387,500
24,000 P-Com Inc+ 570,469 711,000
22,000 Renter's Choice Inc+ 407,000 319,000
</TABLE>
157
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
GENERAL BUSINESS & RELATED - CONTINUED
17,500 Scopus Technology Inc+ $ 656,250 $ 813,750
30,000 Superior Telecom Inc+ 490,175 611,250
------------ ------------
$ 3,848,295 $ 4,448,125
HEALTHCARE - 2.16%
25,000 Genesis Health Ventures Inc+ $ 667,275 $ 778,125
MANUFACTURING PROCESSING - 8.56%
20,000 3-D Geophysical Inc+ $ 167,500 $ 180,000
30,000 Cima Labs Inc+ 213,750 183,750
20,000 Control Data Systems Inc+ 515,625 440,000
30,000 Costilla Energy Inc+ 376,250 408,750
6,680 Fresenius Medical Care - ADR+ 151,682 187,875
25,000 Imperial Credit Industries+ 402,750 525,000
20,000 Mobile Telecommunication Technologies Corp+ 287,500 170,000
10,000 Nitinol Medical Technologies Inc+ 110,000 125,000
35,000 Nuerobiological Technologies+ 196,875 131,250
25,000 Philip Environmental Inc+ 242,625 362,500
8,000 Production Operators Corp+ 296,000 372,000
------------ ------------
$ 2,960,557 $ 3,086,125
MEDICAL EQUIPMENT & SUPPLIES - 1.06%
25,000 Endosonics Corp+ $ 346,275 $ 381,250
MISCELLANEOUS STOCKS - 3.24%
20,000 Mail Boxes Etc+ $ 385,000 $ 450,000
10,000 Meyer (Fred) Inc+ 346,763 355,000
10,000 Williams-Sonoma Inc+ 310,000 363,750
------------ ------------
$ 1,041,763 $ 1,168,750
</TABLE>
158
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
PHARMACEUTICALS - 0.79%
10,000 Anesta Corp+ $ 135,000 $ 192,500
10,000 Aronex Pharmaceuticals Inc+ 103,750 93,750
------------ ------------
$ 238,750 $ 286,250
SHELTER & RELATED - 0.63%
10,000 American Homestar Corp+ $ 240,000 $ 227,500
TELECOMMUNICATIONS - 3.15%
15,000 Farallon Communications+ $ 150,000 $ 95,625
20,000 Intermedia Communications Inc+ 614,653 515,000
25,000 Winstar Communications Inc+ 471,250 525,000
------------ ------------
$ 1,235,903 $ 1,135,625
TRANSPORTATION - 0.93%
7,000 Atlas Air Inc+ $ 292,750 $ 334,250
UTILITIES - 0.99%
10,000 KCS Energy $ 335,000 $ 357,500
TOTAL COMMON STOCKS $ 27,947,609 $ 29,716,335
</TABLE>
159
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - DECEMBER 31, 1996
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 16.77%
U.S. TREASURY BILLS - 7.83%
$ 2,850,000 U.S. Treasury Bills 5.00 %F 03/20/97 $ 2,819,704
REPURCHASE AGREEMENTS - 8.94%
$ 1,223,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.58 01/02/97 $ 1,223,000
1,200,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.00 01/02/97 1,200,000
800,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 6.38 01/02/97 800,000
------------
$ 3,223,000
TOTAL SHORT-TERM INSTRUMENTS $ 6,042,704
(Cost $6,041,792)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $33,989,401)* (Notes 1 and 3) 99.22 % $ 35,759,039
Other Assets and Liabilities, Net 0.78 280,825
------- ------------
TOTAL NET ASSETS 100.00 % $ 36,039,864
------- ------------
------- ------------
..........................................................................................................
</TABLE>
+ NON-INCOME EARNING SECURITIES.
F YIELD TO MATURITY.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 4,091,970
Gross Unrealized Depreciation (2,322,332)
-----------
NET UNREALIZED APPRECIATION $ 1,769,638
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
160
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
161
<PAGE>
MASTER INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT- SHORT- TERM
CAPITAL CORPORATE MUNICIPAL
APPRECIATION INCOME INCOME SMALL CAP
MASTER MASTER MASTER MASTER
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
........................................................................................................
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below) $235,516,785 $13,980,109 $26,362,034 $35,759,039
Cash 0 1,659 1,110 33,510
Receivables:
Dividends and Interest 6,300 113,557 461,938 15,490
Investment securities sold 0 0 0 276,691
Due from administrator (Note 2) 0 2,778 2,753 0
Organizational expenses, net of
amortization 2,887 2,055 1,882 0
Prepaid and other expenses 213,144 73 74 0
TOTAL ASSETS 235,739,116 14,100,231 26,829,791 36,084,730
LIABILITIES
Cash overdraft due to custodian 91,144 0 0 0
Payables:
Investment securities purchased 16,406 0 0 0
Distribution to shareholders 0 68,452 97,511 2,599
Due to sponsor and distributor (Note
2) 3,462 0 0 0
Due to advisor (Note 2) 110,111 0 0 20,341
Other 17,066 18,405 24,803 21,926
TOTAL LIABILITIES 238,189 86,857 122,314 44,866
TOTAL NET ASSETS
$235,500,927 $14,013,374 $26,707,477 $36,039,864
INVESTMENT AT COST (NOTE 3) $226,836,438 $13,977,194 $26,313,719 $33,989,401
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
162
<PAGE>
MASTER INVESTMENT TRUST
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SHORT-TER
CAPITAL GOVERNMENT- SHORT-
APPRECIATION TERM SMALL CAP
MASTER CORPORATE MUNICIPAL MASTER
PORTFOLIO INCOME INCOME PORTFOLIO
........... MASTER MASTER ...........
PORTFOLIO PORTFOLIO
From Feb. ........ ......... From Sept.
20, 1996 16, 1996
(commencement For the For the (commencement
of Year Year of
operations) Ended Ended operations)
to Dec. 31, Dec. 31, Dec. 31, to Dec. 31,
1996 1996 1996 1996
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 163,862 $ 0 $ 0 $ 19,028
Interest 470,167 654,198 946,275 68,029
TOTAL INVESTMENT INCOME 634,029 654,198 946,275 87,057
EXPENSES (NOTE 2)
Advisory fees 739,300 55,285 104,623 52,849
Custody fees 34,449 1,847 3,620 2,933
Amortization of organization expenses 575 687 205 0
Portfolio accounting 85,901 0 0 6,750
Legal and audit fees 8,634 30,659 33,376 19,003
Other 21,010 2,030 4,499 2,923
TOTAL EXPENSES 889,869 90,508 146,323 84,458
Less:
Waived fees and reimbursed expenses 0 (90,508) (146,323) 0
NET EXPENSES 889,869 0 0 84,458
NET INVESTMENT INCOME (LOSS) (255,840) 654,198 946,275 2,599
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on sale of
investments 10,162,551 (63,690) 4,708 (1,405,188)
Net change in unrealized appreciation
(depreciation) of investments 8,680,346 (11,676) (80,537) 1,769,638
NET GAIN (LOSS) ON INVESTMENTS 18,842,897 (75,366) (75,829) 364,450
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $18,587,057 $578,832 $ 870,446 $ 367,049
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
163
<PAGE>
MASTER INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAPITAL
APPRECIATION
MASTER
PORTFOLIO
............
From Feb.
20, 1996
(commencement
of
operations)
to Dec. 31,
1996
<S> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ (255,840)
Net realized gain (loss) on sale of
investments 10,162,551
Net change in unrealized appreciation
(depreciation) of investments 8,680,346
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 18,587,057
Net increase in net assets resulting
from beneficial interest transactions 216,913,870
INCREASE IN NET ASSETS 235,500,927
NET ASSETS:
Beginning net assets 0
ENDING NET ASSETS $235,500,927
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
164
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP
MASTER
SHORT-TERM GOVERNMENT- PORTFOLIO
CORPORATE INCOME MASTER SHORT-TERM MUNICIPAL INCOME ...........
PORTFOLIO MASTER PORTFOLIO From Sept.
.......................... ........................... 16, 1996
(commencement
For the For the For the For the of
Year Ended Year Ended Year Ended Year Ended operations)
Dec. 31, Dec. 31, Dec. 31, Dec. 31, to Dec. 31,
1996 1995 1996 1995 1996
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 654,198 $ 150,854 $ 946,275 $ 617,988 $ 2,599
Net realized gain (loss) on sale of
investments (63,690) 3,975 4,708 19,197 (1,405,188)
Net change in unrealized appreciation
(depreciation) of investments (11,676) 16,126 (80,537) 157,711 1,769,638
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 578,832 170,955 870,446 794,896 367,049
Net increase in net assets resulting
from beneficial interest transactions 7,511,920 5,655,489 9,390,327 3,872,671 35,672,815
INCREASE IN NET ASSETS 8,090,752 5,826,444 10,260,773 4,667,567 36,039,864
NET ASSETS:
Beginning net assets 5,922,622 96,178 16,446,704 11,779,137 0
ENDING NET ASSETS $14,013,374 $5,922,622 $26,707,477 $16,446,704 $36,039,864
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
165
<PAGE>
MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Capital Appreciation Master Portfolio, Short-Term Government-Corporate
Income Master Portfolio, Short-Term Municipal Income Master Portfolio and Small
Cap Master Portfolios (the "Master Portfolios") are four series of Master
Investment Trust (the "Trust"), a business trust organized under the laws of
Delaware on August 14, 1991. The Trust is registered as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Declaration of Trust permits the issuance of beneficial interests ("interests").
The Trust currently issues nine series of interests: the Asset Allocation,
Capital Appreciation, Cash Investment Trust, Corporate Stock, Tax-Free Money
Market, Short-Term Government-Corporate Income, Short-Term Municipal Income,
Small Cap and U.S. Government Allocation Master Portfolios. These Master
Portfolios invest in a range of securities, generally including money market
instruments, equities and U.S. government securities.
The following significant accounting policies are consistently followed by the
Trust in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies. These financial statements represent only the Capital Appreciation,
Short-Term Government-Corporate Income, Short-Term Municipal Income and Small
Cap Master Portfolios.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
Each Master Portfolio's investments include equities, fixed-, variable- and
floating-rate instruments. Investments in securities for which the primary
market is a national securities exchange or the NASDAQ National Market System
are valued at the last reported sales price on the day of valuation. U.S.
government obligations are valued at the stated mean between the last reported
bid and ask prices. Securities not listed on an exchange or national securities
market, or securities in which there were no transactions, excluding debt
securities maturing in 60 days or less, are valued at the most recent bid
prices, or if such prices are not readily available, at fair value as determined
in accordance with procedures adopted by the Board of Trustees. Debt securities
maturing in 60 days or less are valued at amortized cost, which approximates
market value. Except during temporary defensive periods, the Short-Term
Government-Corporate Income and Short-Term Municipal Income Master Portfolios
each seek to maintain an average weighted maturity ranging from 90 days to 2
years.
166
<PAGE>
MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Dividend income is recognized on the ex-dividend date,
interest income is accrued daily. Realized gains and losses are reported on the
basis of identified cost of securities delivered. Bond discounts are accreted
and premiums are amortized as required by the Internal Revenue Code.
FEDERAL INCOME TAXES
Each Master Portfolio intends to qualify for federal income tax purposes as a
partnership. Management of each Master Portfolio therefore believes that each
Master Portfolio will not be subject to any federal or state income tax on its
income and net capital gains (if any). However, each investor in a Master
Portfolio will be taxed on its distributive share of the partnership's income
for purposes of determining its federal and state income tax liabilities. The
determination of such share will be made in accordance with the Internal Revenue
Code of 1986, as amended ("Code"), and the regulations promulgated thereunder.
It is intended that the Master Portfolios' assets, income, gain/loss and
allocations will be managed in such a way that a regulated investment company
investing in the Master Portfolio will be able to satisfy the requirements of
Subchapter M of the Code, assuming that the regulated investment company invests
all of its assets in the Master Portfolio.
ORGANIZATION EXPENSES
Costs incurred in connection with organization and initial registration as an
investment company under the 1940 Act were advanced by Stephens Inc.
("Stephens"). Organization expenses of each series are being amortized on a
straight line basis over 60 months from the date the series of the Trust
commenced operation.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into separate advisory contracts with WFB on behalf of
each Master Portfolio. Pursuant to the contracts, WFB furnishes investment
guidance and policy direction in connection with daily portfolio management of
each Master Portfolio. Under the contract with Capital Appreciation, Short-Term
Municipal Income and Short-Term Government-Corporate Income Master Portfolios,
WFB is entitled to receive a monthly advisory fee at an annual rate of 0.50% of
the average daily net assets. WFB is also entitled to receive from the Small Cap
Master Portfolio a monthly advisory fee at an annual rate of 0.60% of average
daily net assets.
The Trust has also entered into a contract with WFB whereby WFB has agreed to
provide custody services for each Master Portfolio. For providing these
services, WFB is entitled to be compensated for custody services based on a rate
of 0.0167% of the average daily net assets of each Master Portfolio. For
portfolio accounting services, WFB is entitled to a monthly base fee of $2,000
plus 0.07% of the first $50 million of each Master Portfolio's average daily net
assets, 0.045% of the next $50 million, and 0.02% of the average daily net
assets in excess of $100 million.
167
<PAGE>
MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
FEES WAIVED AND EXPENSES REIMBURSED
Fees waived and expenses reimbursed for the year ended December 31, 1996, were
as follows:
<TABLE>
<CAPTION>
EXPENSES
FEES WAIVED REIMBURSED BY
MASTER PORTFOLIO BY WFB STEPHENS TOTAL
<S> <C> <C> <C>
...............................................................................................................
Short-Term Government-Corporate Income 57,132 33,376 90,508
Short-Term Municipal Income 108,243 38,080 146,323
</TABLE>
Fees waived and expenses reimbursed continue at the discretion of WFB and
Stephens.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of securities with maturities of
one year or less at purchase date, for the Capital Appreciation Master
Portfolio, Short-Term Government-Corporate Income Master Portfolio, Short-Term
Municipal Income Master Portfolio and Small Cap Master Portfolio, respectively,
for the year ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
CAPITAL SHORT-TERM SHORT-TERM
APPRECIATION GOVERNMENT- MUNICIPAL SMALL CAP
AGGREGATE PURCHASES MASTER CORPORATE INCOME INCOME MASTER MASTER
AND SALES OF: PORTFOLIO(1) MASTER PORTFOLIO PORTFOLIO PORTFOLIO(2)
<S> <C> <C> <C> <C>
.............................................................................................................
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $ 0 $ 28,095,340 $ 0 $ 0
Sales proceeds 0 25,160,156 0 0
OTHER LONG-TERM SECURITIES:
Purchases at cost 421,676,235 659,799 16,680,216 36,842,024
Sales proceeds 224,298,500 152,351 7,563,991 7,488,850
.............................................................................................................
</TABLE>
(1) THE PERIOD REPORTED IS FROM COMMENCEMENT OF OPERATIONS, FEBRUARY 20, 1996,
TO DECEMBER 31, 1996.
(2) THE PERIOD REPORTED IS FROM COMMENCEMENT OF OPERATIONS, SEPTEMBER 16, 1996,
TO DECEMBER 31, 1996.
168
<PAGE>
MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
4. FINANCIAL HIGHLIGHTS
The portfolio turnover rates, excluding securities with maturities of one year
or less at purchase date, and average commission rate paid for Master Portfolios
investing in equity securities for the periods indicated are as follows:
<TABLE>
<CAPTION>
CAPITAL SHORT-TERM GOVERNMENT-CORPORATE INCOME
APPRECIATION MASTER PORTFOLIO
MASTER ...........................................
PORTFOLIO From
............... Sept. 19,
From 1994,
Feb. 20, 1996 Year Year (Inception)
(Inception) to Ended Ended to
Dec. 31, 1996 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C> <C>
.............................................................................................................
PORTFOLIO TURNOVER 137% 247% 227% 0%
AVERAGE COMMISSION RATE PAID $ 0.0781 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP
MASTER
SHORT-TERM MUNICIPAL INCOME PORTFOLIO
MASTER PORTFOLIO .............
............................................. From
From Sept. 16,
June 3, 1994 1996
Year Year (Inception) (Inception)
Ended Ended to to
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1996
<S> <C> <C> <C> <C>
.............................................................................................................
PORTFOLIO TURNOVER 47% 46% 8% 28%
AVERAGE COMMISSION RATE PAID N/A N/A N/A $ 0.0775
</TABLE>
169
<PAGE>
TO THE UNITHOLDERS AND BOARD OF TRUSTEES
MASTER INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Capital Appreciation Master Portfolio,
Short-Term Government-Corporate Income Master Portfolio, Short-Term Municipal
Income Master Portfolio, and Small Cap Master Portfolio (four of the master
portfolios comprising Master Investment Trust) as of December 31, 1996, and the
related statement of operations for the year then ended, except Capital
Appreciation Master Portfolio which is for the period from February 20, 1996
(commencement of operations) to December 31, 1996, and Small Cap Master
Portfolio which is for the period from September 16, 1996 (commencement of
operations) to December 31, 1996, the statements of changes in net assets for
each of the two years in the period then ended, except Capital Appreciation
Master Portfolio which is for the period from February 20, 1996 to December 31,
1996, and Small Cap Master Portfolio which is for the period from September 16,
1996 to December 31, 1996, and financial highlights for the periods indicated
herein. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned master portfolios of Master Investment Trust as of
December 31, 1996, the results of their operations, the changes in their net
assets, and their financial highlights for the periods indicated herein in
conformity with generally accepted accounting principles.
[KPMG SIG.]
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1997
170
<PAGE>
LIST OF ABBREVIATIONS
<TABLE>
<S> <C> <C>
ABAG -- Association of Bay Area Governments
ADR -- American Depository Receipts
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
ARM -- Adjustable Rate Mortgages
BART -- Bay Area Rapid Transit
CDA -- Community Development Authority
CDSC -- Contingent Deferred Sales Charge
CGIC -- Capital Guaranty Insurance Company
CGY -- Capital Guaranty Corporation
CMT -- Constant Maturity Treasury
COFI -- Cost of Funds Index
CONNIE LEE -- Connie Lee Insurance Company
COP -- Certificate of Participation
CP -- Commercial Paper
DW&P -- Department of Water & Power
DWR -- Department of Water Resources
EDFA -- Education Finance Authority
FGIC -- Financial Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance, Incorporated
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
HFFA -- Health Facilities Financing Authority
IDA -- Industrial Development Authority
LIBOR -- London Interbank Offered Rate
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
MFHR -- Multi-Family Housing Revenue
MUD -- Municipal Utility District
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Public School Fund Guaranty
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Authority
RDFA -- Redevelopment Finance Authority
R&D -- Research & Development
SFMR -- Single Family Mortgage Revenue
TBA -- To Be Announced
TRAN -- Tax Revenue Anticipation Notes
USD -- Unified School District
V/R -- Variable Rate
</TABLE>
171
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
[LOGO]
OVERLAND EXPRESS FUNDS
Asset Allocation Fund
California Tax-Free Bond Fund
California Tax-Free Money Market Fund
Money Market Fund
Municipal Income Fund
Short-Term Government-Corporate Income Fund
Short-Term Municipal Income Fund
Small Cap Strategy Fund
Strategic Growth Fund
U.S. Government Income Fund
U.S. Treasury Money Market Fund
Variable Rate Government Fund
INVESTMENT ADVISER & TRANSFER AGENT
Wells Fargo Bank
P.O. Box 63084
San Francisco, CA 94163
SPONSOR & DISTRIBUTOR
Stephens Inc.
111 Center Street
Little Rock, AR 72201
FOR MORE INFORMATION
ABOUT OVERLAND EXPRESS FUNDS
CALL 1.800.552.9612
OR WRITE:
Overland Express Funds
P.O. Box 63084
San Francisco, CA 94163
<PAGE>
Overland Express Funds 1996 Annual Report
