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[OVERLAND EXPRESS LOGO]
Semi - Annual Report
......................................
JUNE 30, 1997
California Tax-Free Bond Fund
California Tax-Free Money Market Fund
Index Allocation 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
California Tax-Free Bond Fund.............................4
California Tax-Free Money Market Fund.....................6
Index Allocation Fund.....................................8
Money Market Fund........................................10
Municipal Income Fund....................................11
Short-Term Government-Corporate Income Fund..............13
Short-Term Municipal Income Fund.........................15
Small Cap Strategy Fund..................................17
Strategic Growth Fund....................................19
U.S. Government Income Fund..............................21
U.S. Treasury Money Market Fund..........................23
Variable Rate Government Fund............................24
OVERLAND EXPRESS PORTFOLIOS OF INVESTMENTS
California Tax-Free Bond Fund............................26
California Tax-Free Money Market Fund....................37
Index Allocation Fund....................................45
Money Market Fund........................................62
Municipal Income Fund....................................65
U.S. Government Income Fund..............................70
U.S. Treasury Money Market Fund..........................74
Variable Rate Government Fund............................76
OVERLAND EXPRESS FUNDS
Statement of Assets and Liabilities......................79
Statement of Operations..................................83
Statements of Changes in Net Assets......................87
Financial Highlights.....................................94
Notes to Financial Statements...........................119
MASTER INVESTMENT TRUST PORTFOLIOS OF INVESTMENTS
Capital Appreciation Master Portfolio...................131
Short-Term Government-Corporate Income Master
Portfolio..............................................137
Short-Term Municipal Income Master Portfolio............139
Small Cap Master Portfolio..............................143
MASTER INVESTMENT TRUST
Statement of Assets and Liabilities.....................149
Statement of Operations.................................150
Statements of Changes in Net Assets.....................151
Notes to Financial Statements...........................153
LIST OF ABBREVIATIONS.....................................158
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.
1
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TO OUR SHAREHOLDERS:
WELCOME TO THE 1997 OVERLAND EXPRESS FUNDS
SEMI-ANNUAL REPORT.
Short-term market volatility reinforces the benefit of a long-term perspective.
Markets have ups and downs. They sometimes behave in very unpredictable ways,
but, over the long haul, history has shown the financial markets have delivered
growth. 1997 has been an example of short-term setbacks attracting more
attention than generally solid overall performance.
For the bond markets, the recently completed reporting period saw market
volatility and the long-expected increase in the federal funds target rate.
After months of debate on the rate of economic growth and the potential for
increased rates of inflation, the Federal Reserve acted in March to raise the
federal funds target rate by 0.25%. The bond market had begun to slide in
February in anticipation of a potential increase and did not begin to recover
until the beginning of May. Bonds rallied somewhat in June and showed a modest
2.09% gain at the halfway point in 1997, as measured by the Lehman Brothers
20+Year Treasury Index.
Equity market volatility was even more pronounced. After climbing steadily from
January into late March, the stock market fell precipitously until near the end
of April. Stocks rallied again, however, and, as measured by the Standard &
Poor's 500 Index, enjoyed a 1997 year-to-date return as of June 30 of 20.61%.
Of course, equity issues do not rise and fall in unison. Large company stocks
have fared well recently as investors sought greater security and shunned
volatility. In contrast to recent years, various sectors such as technology and
financial services have fluctuated in recent months.
It is all too easy to be confused by such a variety of returns and apparently
conflicting information. That's why it is so important to truly understand the
investment philosophies and long-range goals that govern your Fund. We have
always felt that the more you understand your investment, the less likely you
are to be unduly concerned with short-term developments.
The following pages contain discussions about some of the relevant market
conditions and other factors that affected the performance of the Overland
Express Funds during the reporting period. These commentaries were written for
you--our shareholders--as part of the Overland Express Funds' commitment to
education, information and service, as we help you meet your financial goals.
We are pleased to tell you that, pending shareholder approval, we plan to bring
together the strengths of Overland Express and Stagecoach Funds, another family
of mutual funds advised by Wells Fargo Bank. We plan to consolidate Overland
Express Funds into similar corresponding Stagecoach Funds, in some instances
into new Stagecoach Funds created expressly for this purpose. The Stagecoach
Funds have several additional Funds with
2
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investment objectives that complement the Overland Express product line. The
result will be a Fund Family with over thirty Funds and over $20 billion in
assets. You will find full details of this proposed merger in proxy materials
that will be sent to you separately.
OVERLAND EXPRESS FUNDS, AUGUST 1997
THE S&P 500 INDEX IS AN UNMANAGED INDEX OF 500 WIDELY HELD COMMON STOCKS
REPRESENTING, AMONG OTHERS, INDUSTRIAL, FINANCIAL, UTILITY AND TRANSPORTATION
COMPANIES LISTED OR TRADED ON NATIONAL EXCHANGES OR OVER-THE-COUNTER MARKETS.
THE LEHMAN BROTHERS 20+YEAR TREASURY INDEX IS AN UNMANAGED INDEX COMPOSED OF
U.S. TREASURY ISSUES WITH 20-YEAR OR LONGER MATURITIES.
3
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OVERLAND EXPRESS CALIFORNIA TAX-FREE BOND FUND
Q. HOW DID THE CALIFORNIA TAX-FREE BOND FUND PERFORM FOR THE SIX-MONTH PERIOD
ENDING JUNE 30, 1997?
A. The Fund posted a 3.02% (Class A shares) and 2.56% (Class D shares) total
return. Return figures exclude sales charges and reflect waived expenses.
Q. WHAT WERE SOME OF THE FACTORS THAT AFFECTED THE FUND'S PERFORMANCE?
A. The number one factor that affected the Fund's performance was market
movement in interest rates. Interest rates moved lower early in the year,
resulting in higher bond prices. In March, the Federal Reserve increased the
federal funds target rate, which reversed the trend. Interest rates peaked for
the period in early April. In addition to interest rate moves, the Fund's
performance was affected by issuer advanced-refunding of a number of existing
bond issues. The advanced refunding helped improve the credit quality and
increase the value of certain bond issues in the Fund's portfolio.
Q. DID THE UNCERTAINTY REGARDING INTEREST RATES AFFECT THE FUND?
A. Yes. The Federal Reserve raised the federal funds target rate in March after
many months of speculation. The speculation itself can cause market rates to
increase, affecting prices in advance of an announcement. When interest rates
increase, the resale value of bonds in the Fund's portfolio decreases, causing
Fund shares to lose value. Because the market had declined in anticipation of a
Fed announcement, the actual federal funds target rate increase did not cause a
dramatic slide--but continued concerns about inflation quickening, and thus
potentially inviting a further Fed rate hike, caused additional declines.
Q. NOW THAT THE FED HAS RAISED THE TARGET RATE, WHAT IS YOUR OUTLOOK?
A. Our outlook is for interest rates to range from 6.5% to 7.25%. The Fund has
taken a neutral stance by maintaining its average maturity close to the Lehman
Brothers Municipal Bond Index. We do not expect a prolonged rise in interest
rates or the Federal Reserve to tighten as aggressively as it did in 1994.
Overall, we believe inflation should remain under 3.5%, but late business cycle
cost pressures will dominate the bond market's focus.
Q. WHAT WAS THE WEIGHTED AVERAGE MATURITY DURING THE REPORTING PERIOD?
A. Weighted average maturity is a measure of the average length of time before
the securities in a portfolio mature on a dollar for dollar basis. Typically, a
longer weighted average maturity means the Fund is more sensitive to interest
rate changes. The Fund's weighted average maturity has recently been a little
over 15 years. Adjusted for call features, which are the issuers' right to repay
certain bonds before maturity, the Fund's weighted average maturity drops to
about 10 years. These figures are close to the figures for the Fund's benchmark,
the Lehman Brothers Municipal Bond Index. Over time, we expect the Fund's
average maturity, not adjusted for calls, to decline slightly.
Q. HOW DOES WELLS FARGO BANK'S BIAS TOWARDS CREDIT QUALITY BENEFIT INVESTORS?
A. Bias towards credit quality means that we only buy investment-grade bonds and
we only buy bonds at the lower end of the investment grade spectrum when we
expect to be rewarded with a higher yield. Recently, credit spreads have been
very tight (meaning investors are not being rewarded for buying lower-rated
bonds) so the Fund has focused on highly rated bonds. We tend to
4
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OVERLAND EXPRESS CALIFORNIA TAX-FREE BOND FUND
purchase issues that we believe are above average in credit quality and to avoid
new commitments to market sectors that are under stress. This approach helps the
Fund maintain a portfolio high in credit quality, which we believe benefits
investors.
Q. THE STATE'S ECONOMY APPEARS TO BE STRONG, YET POLITICAL EVENTS SEEM TO
THREATEN LOCAL GOVERNMENTS' ABILITY TO RAISE REVENUE. WHAT CONCERNS DOES THE
MUNICIPAL MARKET HAVE?
A. The recent passage of California Proposition 218 has reduced the flexibility
of local governments to raise revenue. To date, this Proposition has had only a
minor impact on local credit quality. However, the situation is a developing one
and we will be monitoring the effects of Proposition 218 on local credits on an
ongoing basis. In recent months, the Fund sold several issues that we think may
be negatively impacted by Proposition 218. The deregulation of the electricity
marketplace is also a concern of the municipal bond market. Several California
municipal utility issuers were downgraded in 1996 and remain under close
scrutiny.
Q. THE FUND CAN INVEST IN BONDS WITH INTERMEDIATE TO LONG MATURITIES. WHAT
ADVANTAGES DOES THIS RANGE AFFORD INVESTORS?
A. The flexibility allows the Fund's manager to choose maturities with the best
relative value at a particular point in time. When interest rates are expected
to drop, the Fund can extend maturity and boost total return. During periods
when tightening is expected, the Fund can shorten the average maturity of its
portfolio in order to reduce its sensitivity to changes in interest rates while
seeking adequate income.
................................................................................
PERFORMANCE OF THE CALIFORNIA TAX-FREE BOND FUND AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR 5 YEAR SINCE 10/6/88 INCEPTION
<S> <C> <C> <C> <C> <C>
.....................................................................................................
With Maximum 4.50% Sales Charge -1.58% 3.54% 5.68% 6.04% 7.56%
Without Sales Charge 3.02% 8.40% 7.32% 7.01% 8.13%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C> <C>
.....................................................................................................
With 1.00% Contingent Deferred Sales Charge 1.56% 6.49% 6.52% 4.84%
Without Contingent Deferred Sales Charge 2.56% 7.49% 6.52% 4.84%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS AN UNMANAGED INDEX THAT INCLUDES
APPROXIMATELY 15,000 INVESTMENT GRADE TAX-EXEMPT BONDS.
5
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OVERLAND EXPRESS CALIFORNIA TAX-FREE MONEY MARKET FUND
Q. WHAT WAS THE SEVEN-DAY YIELD AS OF JUNE 30, 1997?
A. The seven-day yield for the Fund as of June 30, 1997 was 3.39%. The yield as
of December 31, 1996 was 3.34%.
Q. WHY WAS THE YIELD ALMOST THE SAME IN JUNE AS IT WAS IN DECEMBER IF THE
FEDERAL RESERVE INCREASED RATES IN MARCH?
A. The general trend in interest rates was an increase in yields, even if it is
not fully reflected in the difference between June and December's month end
figures. Yields change daily as notes are sold on the open market. It is
important to watch the general trend in yields rather than draw conclusions
based on a single day "snapshot" of current yields. The Wall Street Journal's
Market Diary section, for example, publishes a useful graph tracking interest
rates for investors interested in following this type of information. The graph
indicates that there are frequent spikes and valleys in interest rates--and
therefore in money market fund returns--based on market pressures even without
Fed action.
Q. WHAT ARE SOME OF THE MARKET PRESSURES THAT AFFECT YIELDS?
A. There are a number of influences. If the economy is expected to grow rapidly,
interest rates usually move higher in anticipation of a federal funds target
rate hike. Investor activity, in the form of cash flows into and out of money
market mutual funds are another important factor. The dynamics of supply and
demand as managers invest shareholders' cash can drive yields higher or drag
them lower, particularly for variable rate securities, which tend to play a
substantial role in the portfolios of all tax-free money market funds. There are
also the effects of cycles during the year; for example the June-July "note
season" usually provides the short-term municipal marketplace with the heaviest
supply of the year. We expect that the bulk of note buying for the Fund will be
completed during this period.
Q. WHAT DOES "WEIGHTED AVERAGE MATURITY" TELL US ABOUT THE FUND? HOW HAS IT
CHANGED DURING THE PERIOD?
A. Weighted average maturity is a measure of the average length of time before
securities in a portfolio mature on a dollar for dollar basis. It is one of the
measures of a fund's sensitivity to interest rate changes. Funds with longer
maturities are generally more sensitive to interest rate changes. Typically, for
a money market mutual fund, managers will increase maturity to lock in higher
rates or shorten maturity if they anticipate higher rates being available soon.
Market forces may also make one range relatively more attractive than another.
For the most part, the weighted average maturity for the Fund has been fairly
steady and in the short-to-intermediate range of 45 to 60 days.
6
<PAGE>
OVERLAND EXPRESS CALIFORNIA TAX-FREE MONEY MARKET FUND
Q. SINCE THE FEDERAL RESERVE RAISED THE FEDERAL FUNDS TARGET RATE IN MARCH, DO
YOU EXPECT FURTHER ACTION?
A. The Federal Reserve has rarely effected a single increase when changing
monetary policy, so additional increases seem likely. However, the federal funds
target rate is relatively high compared to the Consumer Price Index (the prime
measure of inflation), so we believe that substantial increases are unlikely.
Recent comments by Federal Reserve Chairman Alan Greenspan, however, have
increased optimism that we may finish the year without seeing another increase.
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.
THE SEVEN-DAY YIELD IS FOR THE SEVEN-DAY PERIOD ENDED JUNE 30, 1997. YIELD
REFLECTS FLUCTUATIONS IN INTEREST RATES ON PORTFOLIO INVESTMENTS AND FUND
EXPENSES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
7
<PAGE>
OVERLAND EXPRESS INDEX ALLOCATION FUND
Q. HOW DID THE INDEX ALLOCATION FUND PERFORM FOR THE SIX-MONTH PERIOD ENDED JUNE
30, 1997?
A. The Fund posted a 13.52% (Class A shares) and 13.08% (Class D shares) total
return. These return figures exclude sales charges and reflect waived expenses.
Q. HOW HAS THE FUND'S ALLOCATION CHANGED DURING THE REPORTING PERIOD, AND WHAT
IS THE CURRENT ASSET MIX OF THE FUND?
A. Although both the stock and bond markets experienced volatility during the
first six months of 1997, our analysis continues to suggest that stocks, for the
time being, are overvalued in comparison to bonds. The Model has therefore
behaved defensively by maintaining a bond allocation. The Fund's asset mix
during this period has remained close to its June 30, 1997 allocation of 70%
stocks, 30% bonds.
Q. WHAT FACTORS HELPED DETERMINE THIS ALLOCATION?
A. Allocations are determined by comparing the expected returns for the three
asset classes, balanced against the Fund's overall risk tolerance. Although the
stock market has continued to post strong gains in 1997, there were several
factors that favored maintaining a bond allocation. In January, the Commerce
Department reported reasonable Gross Domestic Product growth for the previous
year with the lowest inflation rate since 1967. This positive news contributed
to an S&P 500 Index return of 6.24% for the month. The S&P 500 Index has
continued to break new ground, closing over 800 for the first time in February.
The trend reversed itself in March and April, before returning 20.61% for the
year-to-date through June 30.
The bond market has also reacted strongly to economic news--both good and bad.
This has led to volatility, but bonds have overcome the negative return of the
first quarter (-3.60%), returning 2.09% for the period according to the Lehman
Brothers 20+Year Treasury Index.
The Fund, however, does not "chase returns" by trying to guess from month to
month where the highest returns will be. Instead, the Index Allocation model
examines the fundamentals and recommends accordingly. This analysis suggests
that stock prices have been higher throughout the period than the current
earnings expectations can justify. That is why the Fund is not completely
invested in stocks, but has maintained a 30% bond allocation.
Q. WHAT WERE SOME OF THE OTHER FACTORS THAT AFFECTED THE ALLOCATION?
A. There are core inputs that are used to formulate assessments of the relative
values of and the expected returns for stocks, bonds and cash. Other valuable
inputs used are to determine management consensus expectations based on the
investment activities of corporations and corporate officers, and spreads
between expected yields for various corporate bonds.
These factors, along with additional information, are used to determine the
expected returns of each asset class. The Model's inputs are updated daily and
reflect changing market parameters, while maintaining a long-term outlook. The
Model's goal is to build wealth when risk is expected to be rewarded and
conserve wealth when risk is not expected to be rewarded.
8
<PAGE>
OVERLAND EXPRESS INDEX ALLOCATION FUND
As we said, the current allocation is defensive. Although the equity market has
delivered excellent returns recently, we believe the equity market's long-term
return prospects are below historical levels.
Q. HAVE THERE BEEN ANY SIGNIFICANT CHANGES TO THE ASSET ALLOCATION MODEL IN THE
LAST SIX MONTHS?
A. Yes. Previously, the Model's trading guidelines allowed the Fund to change
allocations in 10% increments. In March 1997, the trading guidelines were
refined to allow for greater efficiency in capturing the return information
identified by the Model. These new guidelines allow the Model to rebalance the
Fund's asset allocation mix in increments of 5%. For example, a mix might now be
75% stocks, 25% bonds and no cash, rather than the previous 70/30/0 mix. This
allows the Fund to invest in a mix of assets that is closer to the Model's
optimal mix. This change has affected the timing of rebalances as well. The Fund
can trade more frequently, in smaller amounts, to stay aligned with the Model's
recommendation.
................................................................................
PERFORMANCE OF THE INDEX ALLOCATION FUND AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR 5 YEAR SINCE 4/7/88 INCEPTION
<S> <C> <C> <C> <C> <C>
.....................................................................................................
With Maximum 4.50% Sales Charge 8.40% 17.44% 21.03% 15.63% 12.85%
Without Sales Charge 13.52% 23.02% 22.89% 16.71% 13.41%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C> <C>
.....................................................................................................
With 1.00% Contingent Deferred Sales Charge 12.08% 21.05% 22.05% 16.06%
Without Contingent Deferred Sales Charge 13.08% 22.05% 22.05% 16.06%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
THE S&P 500 INDEX IS AN UNMANAGED INDEX OF 500 WIDELY HELD COMMON STOCKS
REPRESENTING, AMONG OTHERS, INDUSTRIAL, FINANCIAL, UTILITY AND TRANSPORTATION
COMPANIES LISTED OR TRADED ON NATIONAL EXCHANGES OR OVER-THE-COUNTER MARKETS.
THE LEHMAN BROTHERS 20+YEAR TREASURY INDEX IS AN UNMANAGED INDEX COMPOSED OF
U.S. TREASURY ISSUES WITH 20-YEAR OR LONGER MATURITIES.
9
<PAGE>
OVERLAND EXPRESS MONEY MARKET FUND
Q. WHAT WAS THE SEVEN-DAY YIELD AS OF JUNE 30, 1997?
A. The seven-day yield for Class A shares of the Fund as of June 30, 1997 was
5.17%. The yield as of December 31, 1996 was 4.82%.
Q. WAS THE HIGHER YIELD THE RESULT OF THE FEDERAL RESERVE'S ACTION IN RAISING
THE FEDERAL FUNDS TARGET RATE?
A. Only in part. Yields change daily as notes are sold on the open market. It is
important to keep an eye on the general trend in yields rather than draw
conclusions based on a single-day "snapshot" of current returns. The Wall Street
Journal's Market Diary section, for example, publishes a useful graph tracking
interest rates for investors interested in following this sort of information.
The graph indicates that there are frequent spikes and valleys in interest
rates--and therefore in money market fund returns--based on market pressures
even without Fed action.
Q. WHAT ARE SOME OF THE MARKET PRESSURES THAT AFFECT YIELDS?
A. There are a number of influences. If the economy is expected to grow rapidly,
interest rates usually move higher in anticipation of a Fed rate hike. Cash
flows into money market mutual funds are another important factor. The dynamics
of supply and demand as managers invest shareholders' cash can drive yields
higher or drag them lower, particularly for variable rate securities.
Q. WHAT DOES "WEIGHTED AVERAGE MATURITY" TELL US ABOUT THE FUND? HOW HAS IT
CHANGED DURING THE PERIOD?
A. Weighted average maturity is a measure of the average length of time before
securities in a portfolio mature on a dollar for dollar basis. It is one of the
measures of a fund's sensitivity to interest rate changes. Funds with longer
maturities generally are more sensitive to interest rate fluctuations.
Typically, for a money market mutual fund, managers will increase maturity to
lock in higher rates or shorten maturity if they anticipate higher rates being
available soon. Market forces may also make one range relatively more attractive
than another. For the most part, the weighted average maturity for the Fund has
been fairly steady and in the short-to-intermediate range of 45 to 60 days.
Q. SINCE THE FEDERAL RESERVE RAISED THE FEDERAL FUNDS TARGET RATE IN MARCH, DO
YOU EXPECT FURTHER ACTION?
A. The Federal Reserve has rarely effected a single increase when changing
monetary policy, so additional increases seem likely. However, the federal funds
target rate is relatively high compared to the Consumer Price Index (the prime
measure of inflation), so we believe that substantial increases are unlikely.
Recent comments by Federal Reserve Chairman Alan Greenspan, however, have
increased optimism that we may finish the year without seeing another increase.
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.
THE SEVEN-DAY YIELD IS FOR THE SEVEN-DAY PERIOD ENDED JUNE 30, 1997. YIELD
REFLECTS FLUCTUATIONS IN INTEREST RATES ON PORTFOLIO INVESTMENTS AND FUND
EXPENSES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
10
<PAGE>
OVERLAND EXPRESS MUNICIPAL INCOME FUND
Q. HOW DID THE MUNICIPAL INCOME FUND PERFORM FOR THE SIX-MONTH PERIOD ENDED JUNE
30, 1997?
A. The Fund posted a 3.28% (Class A shares) and a 2.97% (Class D shares) total
return. Return figures exclude sales charges and reflect waived expenses.
Q. WHAT WERE SOME OF THE FACTORS INFLUENCING THE FUND'S PERFORMANCE?
A. The Fund's performance tracked the market for housing bonds very closely. The
Fund's portfolio is comprised of approximately 70% housing bonds. Housing bonds
tend to be a defensive choice in an uncertain interest rate environment. They
generally drop less in value than comparable bonds when rates increase, but they
also tend to underperform in a falling interest rate environment because they
are often recalled as homeowners and other issuers refinance at lower rates.
Another factor that affected the Fund's performance was market movement in
interest rates. Interest rates moved lower early in the year, resulting in
higher bond prices. In March, the Federal Reserve increased the federal funds
target rate, which reversed the trend. Interest rates peaked for the period in
early April. In addition to interest rate moves, the Fund's performance was
affected by issuer advanced-refunding, which helped improve the credit quality
and increase the value of certain bonds issues in the Fund's portfolio.
Q. DO YOU ANTICIPATE FURTHER FEDERAL RESERVE ACTION ON INTEREST RATES?
A. The Federal Reserve has rarely effected a single increase when changing
monetary policy, so additional increases seem likely. However, the federal funds
target rate is relatively high compared to the Consumer Price Index (the prime
measure of inflation), so we believe that substantial increases are unlikely.
Recent comments by Federal Reserve Chairman Alan Greenspan, however, have
increased optimism that we may finish the year without seeing another increase.
Q. WHAT WAS THE FUND'S WEIGHTED AVERAGE MATURITY DURING THE FIRST HALF OF 1997?
DO YOU ANTICIPATE CHANGES?
A. The weighted average maturity of the Fund remains close to 20 years.
Generally, we position maturity in anticipation of the direction of interest
rate changes. If we expect rates to fall, we will extend maturity to increase
total return. The resale value of higher-paying bonds tends to increase when
interest rates go down. But if rates are going up, we shorten maturity to try
and maintain share value. In the absence of a strong trend in either direction,
our strategy remains neutral and no significant changes to the Fund's weighted
average maturity are anticipated.
Q. WHAT ARE SOME OF THE CONCERNS FACING THE NATIONAL MUNICIPAL MARKET?
A. One of the major concerns in the national municipal market is utility
deregulation. Certain municipal utilities may continue to have their outstanding
debt downgraded. All of the Fund's holdings in this sector are insured by
municipal bond insurance companies or guaranteed by government agencies, so we
do not expect the Fund to be impacted by any debt downgrades or rating agency
actions in this sector. Nevertheless, this situation bears watching.
11
<PAGE>
OVERLAND EXPRESS MUNICIPAL INCOME FUND
Q. WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A. We anticipate long-term municipal rates to remain in a 50 basis point (or
half of one percent) trading range. The Fund's position in housing bonds is
expected to remain the same because of the high income potential they offer.
................................................................................
PERFORMANCE OF THE MUNICIPAL INCOME FUND AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR 5 YEAR SINCE 7/15/91 INCEPTION
<S> <C> <C> <C> <C> <C>
.....................................................................................................
With Maximum 3.00% Sales Charge 0.19% 4.35% 6.33% 5.89% 6.80%
Without Sales Charge 3.28% 7.61% 7.42% 6.53% 7.35%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C> <C>
.....................................................................................................
With 1.00% Contingent Deferred Sales Charge 1.97% 5.94% 6.79% 4.30%
Without Contingent Deferred Sales Charge 2.97% 6.94% 6.79% 4.30%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
12
<PAGE>
OVERLAND EXPRESS SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
Q. HOW DID THE SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND PERFORM FOR THE SIX-
MONTH PERIOD ENDED JUNE 30, 1997?
A. The Fund posted a 2.90% total return. Return figures exclude sales charges
and reflect waived expenses.
Q. WHAT WERE SOME OF THE FACTORS INFLUENCING THE FUND'S PERFORMANCE?
A. Interest rate fluctuations in reaction to and, more importantly, in
anticipation of changes in monetary policy greatly influenced the performance of
the Fund. After the Fed tightened monetary policy on March 25 by raising the
federal funds target rate from 5.25% to 5.50%, market participants anticipated
further action and interest rates peaked in early April as the yield on two-year
Treasury notes reached 6.53%.
Q. DO YOU ANTICIPATE FURTHER FED ACTION ON INTEREST RATES?
A. The Federal Reserve has rarely effected a single increase when changing
monetary policy, so additional increases seem likely. However, the federal funds
target rate is relatively high compared to the Consumer Price Index (the prime
measure of inflation), so we believe that substantial increases are unlikely.
Recent comments by Federal Reserve Chairman Alan Greenspan, however, have
increased optimism that we may finish the year without seeing another increase.
Q. WHAT ARE SOME OF THE MARKET PRESSURES THAT AFFECT YIELDS?
A. There are a number of market pressures that affect yields. When the economy
is expected to grow rapidly, interest rates usually move higher in anticipation
of a Fed rate hike. Investor activity, in the form of cash flows into and out of
mutual funds, is another important factor. The dynamics of supply and demand as
managers invest shareholders' cash can drive yields higher or drag them lower.
Q. WHAT IS THE RELATIONSHIP BETWEEN CORPORATE AND GOVERNMENT SECURITIES IN THE
PORTFOLIO?
A. Corporate securities permit additional diversification in the Fund and
provide an opportunity to capture additional returns. As of June 30, 1997, 36%
of the Fund was invested in the corporate sector. Currently, the spread in
expected returns between corporate and Treasury securities is fairly narrow by
historical standards, and is expected to remain so due to the healthy economy
and a lack of supply of short-term corporate securities. If these market
conditions continue, the Fund's exposure to the corporate sector is expected to
remain between 30% and 40% with an emphasis on credit quality.
13
<PAGE>
OVERLAND EXPRESS SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
................................................................................
PERFORMANCE OF THE SHORT-TERM GOVERNMENT-CORPORATE INCOME FUND
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR SINCE 9/19/94 INCEPTION
<S> <C> <C> <C>
...................................................................................
With Maximum 3.00% Sales Charge -0.11% 2.89% 4.63%
Without Sales Charge 2.90% 6.00% 5.75%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
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 INTEREST IN THE MASTER FUND WHICH INVESTS IN INDIVIDUAL
SECURITIES. REFERENCES TO THE FUND ARE TO THE MASTER OR FEEDER, AS THE CONTEXT
REQUIRES. THE MASTER PORTFOLIO IS ADVISED BY WELLS FARGO BANK.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
14
<PAGE>
OVERLAND EXPRESS SHORT-TERM MUNICIPAL INCOME FUND
Q. HOW DID THE SHORT-TERM MUNICIPAL INCOME FUND PERFORM FOR THE SIX-MONTH PERIOD
ENDED JUNE 30, 1997?
A. The Fund posted a 1.95% total return. Return figures exclude sales charges
and reflect waived expenses.
Q. WHAT WERE SOME OF THE FACTORS INFLUENCING THE FUND'S PERFORMANCE?
A. The Fund maintained a relatively high cash position during the first half of
the year to meet liquidity needs. Longer maturities outperformed shorter
maturities, and the Fund's high cash position was a factor that caused the
Fund's performance to lag a little. Another factor that affected the Fund's
performance was market movement in interest rates. Interest rates moved lower
early in January, resulting in higher bond prices. By February, anticipation of
a federal funds target rate increase caused prices to slide. In March, the
Federal Reserve increased the federal funds target rate; interest rates peaked
for the period in early April.
Q. DO YOU ANTICIPATE FURTHER FEDERAL RESERVE ACTION ON INTEREST RATES?
A. The Fed may have to tighten interest rates again to rein in the economy.
However, this may not be necessary in the next six months if the pace of
inflation remains slow. Recent comments by Federal Reserve Chairman Alan
Greenspan, however, have increased optimism that we may finish the year without
seeing another increase.
Q. WHAT HAS THE FUND'S WEIGHTED AVERAGE MATURITY BEEN DURING THE FIRST HALF OF
1997? DO YOU ANTICIPATE CHANGES?
A. Weighted average maturity is a measure of the average length of time before
the securities in a portfolio mature on a dollar for dollar basis. Typically, a
longer weighted average maturity means the Fund is more sensitive to interest
rate changes. Average maturity was relatively short in anticipation of the
increase in the federal funds target rate that finally occurred in March.
Overall, the Fund's average maturity fluctuated between 0.9 and 1.5 years for
the first half of 1997. The average maturity will be extended slightly to 1.5
years in response to the neutral interest rate environment.
Q. WHAT ARE SOME OF THE CONCERNS FACING THE NATIONAL MUNICIPAL MARKET?
A. One of the major concerns in the national municipal market is utility
deregulation. Certain municipal utilities may continue to have their outstanding
debt downgraded. All of the Fund's holdings in this sector are insured by
municipal bond insurance companies or guaranteed by government agencies, so we
do not expect the Fund to be impacted by any debt downgrades or rating agency
actions in this sector. Nevertheless, this situation bears watching.
15
<PAGE>
OVERLAND EXPRESS SHORT-TERM MUNICIPAL INCOME FUND
Q. WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A. We think interest rates will remain in a fairly narrow trading range. We
believe that strong demand and a shortage of supply will buoy short-term
municipal performance.
................................................................................
PERFORMANCE OF THE SHORT-TERM MUNICIPAL INCOME FUND AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR SINCE 6/3/94 INCEPTION
<S> <C> <C> <C> <C>
............................................................................................
With Maximum 3.00% Sales Charge -1.04% 1.12% 3.03% 2.82%
Without Sales Charge 1.95% 4.18% 4.05% 3.81%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
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 INTEREST IN THE MASTER FUND
WHICH INVESTS IN INDIVIDUAL SECURITIES. REFERENCES TO THE FUND ARE TO THE MASTER
OR FEEDER, AS THE CONTEXT REQUIRES. THE MASTER PORTFOLIO IS ADVISED BY WELLS
FARGO BANK.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
16
<PAGE>
OVERLAND EXPRESS SMALL CAP STRATEGY FUND
Q. HOW DID THE SMALL CAP STRATEGY FUND PERFORM FOR THE SIX-MONTH PERIOD ENDED
JUNE 30, 1997?
A. The Fund posted a 6.97% (Class A shares) and a 6.69% (Class D shares) total
return. Return figures exclude sales charges and reflect waived expenses.
Q. THE FUND HAS BEEN EXPERIENCING SOME SETBACKS RECENTLY. WHAT ARE SOME OF THE
FACTORS AFFECTING THE FUND'S PERFORMANCE?
A. The Fund's recent weak performance is primarily due to its ownership of
smaller capitalization growth stocks. Small cap stocks are generally subject to
higher risk and risk is exactly what many investors have been trying to avoid in
widespread moves toward large company stocks. This move to large company stocks
has been fueled, in part, by fears of higher inflation and fears of earnings
disappointments. By late April, the trend of underperformance by the small cap,
high growth sector began to change. In May and June smaller cap issues staged a
significant turnaround and the Fund's performance improved in the second
quarter. Technology and healthcare companies have been quite strong as investors
looked for undervalued situations. With most second quarter earnings meeting
analysts expectations, we believe these smaller capitalization stocks should do
very well through the rest of 1997.
Q. ALTHOUGH THE SMALL CAPITALIZATION SECTOR HAS ENJOYED A RECENT TURNAROUND, HAS
THE PRIOR UNDERPERFORMANCE CHANGED YOUR FUNDAMENTAL OUTLOOK?
A. No. We are still very optimistic in our outlook for small cap stocks. In our
opinion, the underlying foundation for the bull market--low inflation and solid
earnings growth--remains intact. We also believe that the earnings growth
prospects for smaller companies are especially attractive given their current
reduced valuations.
Q. WHAT ARE THE SPECIAL PROBLEMS FACED BY A SMALL CAP FUND DURING A GENERAL
MARKET DECLINE? IS THERE A POTENTIAL LIQUIDITY PROBLEM AS MONEY RETREATS TO
"SAFER" INVESTMENTS?
A. A large part of the decline prior to April's resurgence was due to the lack
of liquidity in small cap stocks. However, small cap stocks are always less
liquid than larger cap issues, even when the market is going up. Due to the
relatively small size of this Fund, liquidity has not been a major problem in
selling holdings or establishing new positions. The other factor that affected
growth stocks was a severe contraction in price-to-earnings multiples. This
factor is improving as fears of higher interest rates have subsided.
Q. THE FUND IS REQUIRED TO SELL A COMPANY'S STOCK WHEN THE COMPANY REACHES TWO
BILLION DOLLARS IN CAPITALIZATION. SHORT OF REACHING THAT FIGURE, WHAT ARE
SOME OTHER FACTORS IN YOUR "SELL DISCIPLINE?"
A. We continually review our holdings and will sell for a variety of reasons.
Some of the key reasons might include a negative change in a company's
fundamentals, a stock price becoming significantly overvalued relative to its
expected growth rate, a concern about the management team or its effectiveness,
or a more compelling opportunity in another stock presents itself elsewhere.
17
<PAGE>
OVERLAND EXPRESS SMALL CAP STRATEGY FUND
Q. WHAT ARE YOU LOOKING FOR IN A COMPANY'S MANAGEMENT TEAM?
A. Management is an important criterion we use when evaluating a company. Due to
the smaller size of the companies we buy, the ability of management is very
instrumental in our decision to invest in a company's stock. We expect
management to own a substantial amount of stock and have their bonuses tied to
the earnings of the company and/or the performance of the stock.
................................................................................
PERFORMANCE OF THE SMALL CAP STRATEGY FUND AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR SINCE 11/2/94 INCEPTION
<S> <C> <C> <C>
....................................................................................
With Maximum 4.50% Sales Charge 2.19% -3.17% 34.17%
Without Sales Charge 6.97% 1.41% 36.51%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR SINCE 11/2/94 INCEPTION
<S> <C> <C> <C>
...................................................................................
With 1.00% Contingent Deferred Sales
Charge 5.69% -0.27% 35.52%
Without Contingent Deferred Sales Charge 6.69% 0.73% 35.52%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
THE OVERLAND EXPRESS SMALL CAP STRATEGY FUND INVESTS IN A MASTER PORTFOLIO WHICH
IN TURN INVESTS IN INDIVIDUAL SECURITIES. REFERENCES TO THE INVESTMENT POLICIES
OF THE FUND ARE UNDERSTOOD TO BE REFERENCES TO THE INVESTMENT POLICIES OF THE
MASTER PORTFOLIO.
THE SMALL CAP STRATEGY FUND COMMENCED OPERATIONS ON 9/16/96 AS SUCCESSOR TO THE
SMALL CAPITALIZATION GROWTH FUND FOR EMPLOYEE RETIREMENT PLANS EMPLOYMENT PLANS,
AN UNREGISTERED BANK COLLECTIVE INVESTMENT FUND (THE "PREDECESSOR FUND").
INCEPTION DATE OF THE PREDECESSOR FUND WAS 11/94.
PERFORMANCE FIGURES SHOWN FOR PERIODS PRIOR TO 9/16/96 REPRESENT THE PERFORMANCE
OF THE PREDECESSOR FUND WHICH HAD THE SAME INVESTMENT OBJECTIVE AND STRATEGIES
AS THE SMALL CAP STRATEGY FUND. PERFORMANCE FIGURES ALSO REFLECT EXPENSE
DIFFERENCES BETWEEN THE PREDECESSOR FUND AND THOSE OF THE CLASS A AND CLASS D
SHARES IN EFFECT ON 9/16/96.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
18
<PAGE>
OVERLAND EXPRESS STRATEGIC GROWTH FUND
Q. HOW DID THE STRATEGIC GROWTH FUND PERFORM FOR THE SIX-MONTH PERIOD ENDED JUNE
30, 1997?
A. The Fund posted a 0.33% (Class A shares) and 0.00% (Class D shares) total
return. Return figures exclude sales charges and reflect waived expenses. The
Strategic Growth Fund invests in the Capital Appreciation Master Portfolio.
Q. WHY IS PERFORMANCE DOWN FOR THE PERIOD?
A. This Fund tends to focus on smaller, more volatile stocks that are often
somewhat less liquid than large company stocks. Because many investors have been
concerned about the potential for higher interest rates and slower earnings
growth, the market has shown a significant preference for large company stocks
and other highly liquid issues. These stocks are perceived as "safer" and
generally can be traded in large amounts without a pronounced adverse effect on
the price. When investors' dollars flow towards large stocks, small company
stocks with emerging growth characteristics tend to suffer.
The trend towards large stocks began to reverse during the last part of April
and has continued through the end of the reporting period. Investors now appear
willing to look at company fundamentals and the longer-term outlook for growth
stocks. As a result, small and mid-cap growth stocks have rebounded sharply and
the Fund has benefited. Technology and health care issues have led the rally,
and we feel that many of these companies have more room to move on the upside.
The oil service sector has been quite strong lately as fears of over-capacity
and weak oil prices have subsided. Earnings for the second quarter were quite
good and share prices are responding to the good news. We feel we are well
positioned for the recovery that we believe is occurring in the growth sector of
the market.
Q. HAS THE VOLATILITY IN THE TECHNOLOGY, HEALTHCARE AND OIL SERVICE SECTORS
CHANGED YOUR FUNDAMENTAL OUTLOOK?
A. We have not changed our outlook on the technology, healthcare or oil service
sectors. In fact, we regard the correction in these sectors as a buying
opportunity and increased our exposure at what we believe are attractive prices.
Q. DURING A PERIOD OF GENERAL MARKET DECLINE, WHAT ARE SOME OF THE STEPS YOU
TAKE TO CAPTURE VALUE FOR INVESTORS?
A. The important point is that we do not change our style or investment strategy
in response to short-term market conditions. We focus on issues whose long-term
fundamentals remain attractive within our growth strategy. We believe that solid
companies with favorable long-term growth rates will not fall as far in a
decline and will rebound when the market turns. We believe such companies and
their respective stock prices will eventually respond to their fundamental
strengths. Of course, we also are always looking for favorable short-term
tactical opportunities. Market declines often create such opportunities, but
they do not represent a change in our basic approach. Despite some recent
setbacks, it is our firm belief that the real value in the market today lies in
the aggressive growth sector.
Q. WHEN DO YOU TYPICALLY SELL A HOLDING?
A. Our sell discipline is based on company fundamentals. If a company's growth
rate no longer meets our expectations then we generally sell the position. One
indicator is a company's forward
19
<PAGE>
OVERLAND EXPRESS STRATEGIC GROWTH FUND
price-to-earnings ratio. This means that we examine the company's expected
earnings, compare them to the stock price and sell if we do not believe the
future earnings will justify continued price growth. This is part of our "bottom
up" approach of examining the fundamentals of a particular company rather than
focusing on general trends in the economy.
Q. WHAT MAKES A PARTICULAR FOREIGN INVESTMENT ATTRACTIVE? IS IT THE COMPANY'S
FUNDAMENTALS OR THE OUTLOOK ON THE PARTICULAR COUNTRY'S ECONOMY?
A. We do not treat foreign investment as a sector, nor do we shift investments
"off-shore" in response to some economic trend. For any investment, foreign or
domestic, it is always the company's fundamentals that matter most. For us the
key factors are always earnings growth, company management, and the company's
competitive position. Of course, the political and economic circumstances of a
particular country can influence the fundamentals, and to this extent, a
particular country's political and economic conditions are factors in our
investment decisions.
Q. WHAT ARE YOU LOOKING FOR IN A COMPANY'S MANAGEMENT TEAM?
A. In brief, we are looking for experience, competence and incentive to perform.
We are especially interested in whether management has an equity stake in the
company. If management has an equity stake in the company, they tend to be very
shareholder-driven.
................................................................................
PERFORMANCE OF THE STRATEGIC GROWTH FUND AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR SINCE 1/20/93 INCEPTION
<S> <C> <C> <C> <C>
............................................................................................
With Maximum 4.50% Sales Charge -4.20% -9.10% 20.83% 18.66%
Without Sales Charge 0.33% -4.82% 22.69% 19.89%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C>
............................................................................................
With 1.00% Contingent Deferred Sales
Charge -1.00% -6.43% 21.80% 16.22%
Without Contingent Deferred Sales Charge 0.00% -5.49% 21.80% 16.22%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
THE STRATEGIC GROWTH FUND IS ORGANIZED AS A "MASTER-FEEDER" STRUCTURE. INSTEAD
OF INVESTING DIRECTLY IN A PORTFOLIO OF 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 THE MASTER PORTFOLIO COMMENCED OPERATIONS AS A
MASTER-FEEDER STRUCTURE. REFERENCES TO THE FUND ARE TO THE FEEDER OR MASTER, AS
THE CONTEXT REQUIRES.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
20
<PAGE>
OVERLAND EXPRESS U.S. GOVERNMENT INCOME FUND
Q. HOW DID THE U.S. GOVERNMENT INCOME FUND PERFORM FOR THE SIX-MONTH PERIOD
ENDED JUNE 30, 1997?
A. The Fund posted a 2.65% (Class A shares) and 2.16% (Class D shares) total
return. Return figures exclude sales charges and reflect waived expenses.
Q. WHAT WERE SOME OF THE FACTORS INFLUENCING THE FUND'S PERFORMANCE?
A. The major factor influencing the Fund's performance was the allocation of
assets in its portfolio. The Fund is managed with a "top-down" approach. This
means that we make investments based on broad economic trends, particularly in
regard to the expected movement of interest rates. Based on this, the Fund
invested nearly two-thirds of its assets in mortgaged-backed securities. Within
the mortgage sector, the portfolio held mostly current coupon and premium coupon
securities. These securities, with their higher coupon and relatively low
prepayments, provided the Fund with higher levels of income and better than
expected price performance due to lower than expected prepayment rates.
Mortgages outperformed government securities by more than 125 basis points, or
1.25%, according to the Lehman Brothers Mortgage-Backed Securities Index, which
was up 3.92% as opposed to the Lehman Brothers Government Bond Index, which was
up 2.63%. The duration of the Fund's portfolio, a measure of the Fund's
sensitivity to interest rate changes, was relatively short until May, when it
was increased to take advantage of the fall in market interest rates.
Q. DO YOU ANTICIPATE FURTHER FEDERAL RESERVE ACTION ON INTEREST RATES?
A. We do not expect the Federal Reserve Bank to change monetary policy in the
near term because we believe economic growth will be sustainable at current
levels without sparking inflation. During the second quarter, economic growth
slowed down from the blistering 5.9% growth rate of the first quarter. Current
projections are for the economy to grow at a 1.5-2.5% rate for the remainder of
the year. Inflation continues to be subdued; the Consumer Price Index is
currently at 2.2%, the lowest level in 15 years, and the Producer Price Index is
at 0.3%, the lowest level since 1994.
Q. DO YOU THINK MORTGAGE-BACKED SECURITIES WILL CONTINUE TO OFFER SPECIAL
ADVANTAGES IN THIS ENVIRONMENT?
A. Year to date, mortgage-backed securities generally have provided excellent
returns due to very low interest rate volatility and low prepayment risk.
However, interest rates have moved down (almost 0.75% from the April highs) and
as of June 30, 1997, mortgage-backed securities traded below the 6.255 level on
the 10-year note. This is a threshold where many homeowners will look to
refinance their mortgages, putting downward price pressure on mortgages. As a
result, we will continue to re-evaluate.
21
<PAGE>
OVERLAND EXPRESS U.S. GOVERNMENT INCOME FUND
................................................................................
PERFORMANCE OF THE U.S. GOVERNMENT INCOME FUND AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR 5 YEAR SINCE 4/7/88 INCEPTION
<S> <C> <C> <C> <C> <C>
....................................................................................................
With Maximum 4.50% Sales Charge -2.00% 2.25% 5.32% 5.39% 7.88%
Without Sales Charge 2.65% 7.06% 6.94% 6.37% 8.42%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C> <C>
....................................................................................................
With 1.00% Contingent Deferred Sales Charge 1.16% 5.19% 6.17% 3.81%
Without Contingent Deferred Sales Charge 2.16% 6.19% 6.17% 3.81%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX IS AN UNMANAGED INDEX
COMPOSED OF 15- AND 30-YEAR FIXED RATE SECURITIES BACKED BY MORTGAGE POOLS OF
THE GNMA, FHLMC AND FNMA. THE LEHMAN BROTHERS GOVERNMENT BOND INDEX IN AN
UNMANAGED INDEX COMPOSED OF PUBLIC OBLIGATIONS OF THE U.S. TREASURY AND PUBLICLY
ISSUED DEBT OF U.S. GOVERNMENT AGENCIES.
22
<PAGE>
OVERLAND EXPRESS U.S. TREASURY MONEY MARKET FUND
Q. WHAT WAS THE SEVEN-DAY YIELD AS OF JUNE 30, 1997?
A. The seven-day yield for Class A shares of the Fund as of June 30, 1997 was
4.97%. The yield as of December 31, 1996 was 4.32%.
Q. WAS THE HIGHER YIELD THE RESULT OF THE FEDERAL RESERVE'S ACTION IN RAISING
THE FEDERAL FUNDS TARGET RATE?
A. Only in part. Yields change daily as notes are sold on the open market. It is
important to keep an eye on the general trend in yields rather than draw
conclusions based on a single-day "snapshot" of current returns. The Wall Street
Journal's Market Diary section, for example, publishes a useful graph tracking
interest rates for investors interested in following this sort of information.
You can see from that graph that there are frequent spikes and valleys in
interest rates--and therefore in money market fund returns--based on market
pressures even without Fed action.
Q. WHAT ARE SOME OF THE MARKET PRESSURES THAT AFFECT YIELDS?
A. There are a number of influences. If the economy is expected to grow rapidly,
interest rates usually move higher in anticipation of a federal funds target
rate hike. Cash flows into money market mutual funds are another important
factor. The dynamics of supply and demand as managers invest shareholders' cash
can drive yields higher or drag them lower, particularly for variable rate
securities.
Q. WHAT DOES "WEIGHTED AVERAGE MATURITY" TELL US ABOUT THE FUND? HOW HAS IT
CHANGED DURING THE PERIOD?
A. Weighted average maturity is a measure of the average length of time before
securities in a portfolio mature on a dollar for dollar basis. It is one of the
measures of a fund's sensitivity to interest rate changes. Funds with longer
maturities generally are more sensitive to interest rate fluctuations.
Typically, for a money market mutual fund, managers will increase maturity to
lock in higher rates or shorten maturity if they anticipate higher rates being
available soon. Market forces may also make one range relatively more attractive
than another. For the most part, the weighted average maturity for these Funds
has been fairly steady and in the short-to-intermediate range of 45 to 60 days.
Q. SINCE THE FEDERAL RESERVE RAISED THE FEDERAL FUNDS TARGET RATE IN MARCH, DO
YOU EXPECT FURTHER ACTION?
A. The Federal Reserve has rarely effected a single increase when changing
monetary policy, so additional increases seem likely. However, the federal funds
target rate is relatively high compared to the Consumer Price Index (the prime
measure of inflation), so we believe that substantial increases are unlikely.
Recent comments by Federal Reserve Chairman Alan Greenspan, however, have
increased optimism that we may finish the year without seeing another increase.
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.
THE SEVEN-DAY YIELD IS FOR THE SEVEN-DAY PERIOD ENDED JUNE 30, 1997. YIELD
REFLECTS FLUCTUATIONS IN INTEREST RATES ON PORTFOLIO INVESTMENTS AND FUND
EXPENSES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
23
<PAGE>
OVERLAND EXPRESS VARIABLE RATE GOVERNMENT FUND
Q. HOW DID THE VARIABLE RATE GOVERNMENT FUND PERFORM FOR THE SIX-MONTH PERIOD
ENDED JUNE 30, 1997?
A. The Fund posted a 3.35% (Class A shares) and 3.10% (Class D shares) total
return. Return figures exclude sales charges and reflect waived expenses.
Q. WHAT WERE SOME OF THE FACTORS INFLUENCING THE FUND'S PERFORMANCE?
A. The Fund benefited from an underweighting in Cost-of-Funds Index-based
Adjustable Rate Mortgages ("COFI-based ARMS"). Only 8.00% of the portfolio was
invested in these instruments, compared to the 21.00% for our market benchmark,
the Lehman Brothers ARM Index. According to the Lehman Brothers ARM Index,
COFI-based ARMs underperformed the market by 85 basis points (2.59% vs. 3.44%).
The portfolio maintained a duration that was neutral to the benchmark.
Q. DO YOU ANTICIPATE FURTHER FEDERAL RESERVE ACTION ON INTEREST RATES?
A. We do not expect the Federal Reserve Bank to change monetary policy in the
near future because we believe economic growth will be sustainable at current
levels without sparking inflation. During the second quarter, economic growth
slowed down from the blistering 5.9% growth rate in the first quarter. We expect
the economy to grow at a 1.5-2.5% rate for the remainder of the year. Inflation
remains minimal; the Consumer Price Index is currently at 2.2%, its lowest level
in 15 years, and the Producer Price Index is at 0.3%, its lowest level since
1994.
Q. WHEN THE FED DOES ADJUST RATES, HOW DOES IT AFFECT THE SECURITIES IN THE
FUND'S PORTFOLIO?
A. Changes in monetary policy can affect securities in the Fund's portfolio in
several ways. The coupon on most ARMs is based on short-term interest rates.
When the Fed changes monetary policy, it directly affects short-term interest
rates and coupon rates will move up or down. Also, changes in monetary policy
can increase the risk of prepayments on ARMs. As interest rates decline,
homeowners refinance ARMs into fixed-rate mortgages with lower monthly mortgage
payments. Unexpected changes in monetary policy can increase interest-rate
volatility, making ARMs a less attractive investment.
24
<PAGE>
OVERLAND EXPRESS VARIABLE RATE GOVERNMENT FUND
................................................................................
PERFORMANCE OF THE VARIABLE RATE GOVERNMENT FUND AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR 5 YEAR SINCE 11/1/90 INCEPTION
<S> <C> <C> <C> <C> <C>
.....................................................................................................
With Maximum 3.00% Sales Charge 0.21% 3.07% 3.25% 2.89% 4.28%
Without Sales Charge 3.35% 6.30% 4.31% 3.51% 4.76%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARE PERFORMANCE YEAR TO
AVERAGE ANNUAL TOTAL RETURN DATE 1 YEAR 3 YEAR SINCE 7/1/93 INCEPTION
<S> <C> <C> <C> <C> <C>
.....................................................................................................
With 1.00% Contingent Deferred Sales Charge 2.10% 4.85% 3.80% 2.72%
Without Contingent Deferred Sales Charge 3.10% 5.85% 3.80% 2.72%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
NET ASSET VALUE OF SHARES OF THE FUND WILL FLUCTUATE WITH MARKET CONDITIONS SO
THAT SHARES OF THE FUND, WHEN REDEEMED, MAY HAVE A GREATER OR LESSER NET ASSET
VALUE THAN WHEN ORIGINALLY PURCHASED.
AVERAGE ANNUAL TOTAL RETURNS FOR THE INDICATED PERIODS REPRESENT THE AVERAGE
ANNUAL INCREASE IN THE VALUE OF AN INVESTMENT OVER THE PERIODS ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AT NET ASSET VALUE.
THE FUND'S MANAGER HAS VOLUNTARILY WAIVED PORTIONS OF ITS FEES OR HAS REIMBURSED
EXPENSES TO THE FUND, WHICH HAS REDUCED OPERATING EXPENSES FOR SHAREHOLDERS.
WITHOUT THIS REDUCTION, THE FUND'S RETURNS WOULD HAVE BEEN LOWER.
THE LEHMAN BROTHERS ARM INDEX IS AN UNMANAGED INDEX COMPRISED OF
AGENCY-GUARANTEED SECURITIES WITH COUPONS THAT PERIODICALLY ADJUST BASED ON A
SPREAD OVER A PUBLISHED INDEX.
25
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - 94.50%
$ 1,000,000 ABAG Finance Authority for Nonprofit Corp CA
State Insured 7.10 % 12/01/20 $ 1,084,840
1,000,000 ABAG Finance Authority for Nonprofit Corp
Stanford University Hospital MBIA Insured 5.25 11/01/20 947,170
1,000,000 Alameda CA USD AMBAC Insured 6.05 07/01/11 1,049,250
1,000,000 Alameda County CA Water District Revenue COP
Water System Project MBIA Insured 6.20 06/01/13 1,041,280
3,550,000 California State DWR Central Valley Project
Revenue Series L 5.75 12/01/14 3,589,689
2,300,000 California State DWR Central Valley Project
Revenue Series M 5.00 12/01/15 2,134,722
2,000,000 California State EDFA Revenue Chapman College
Refunding Pending 7.30 01/01/02 2,155,905
1,000,000 California State EDFA Revenue Claremont
Colleges Pooled Facilities 6.38 05/01/22 1,025,590
350,000 California State EDFA Revenue Loyola Marymount
University 6.00 10/01/14 355,541
710,000 California State EDFA Revenue Loyola Marymount
University Series B 6.55 10/01/12 760,005
1,200,000 California State EDFA Revenue University of San
Diego Project 6.50 10/01/08 1,295,568
1,355,000 California State GO AMBAC Insured 5.75 03/01/15 1,370,203
405,000 California State HFA Home Mortgage Revenue AMT
Series B Multiple Credit Enhancements 8.00 08/01/29 422,099
1,085,000 California State HFA Home Mortgage Revenue AMT
Series D Multiple Credit Enhancements 7.75 08/01/10 1,148,114
285,000 California State HFA Home Mortgage Revenue AMT
Series G Multiple Credit Enhancements 8.15 08/01/19 293,653
1,535,000 California State HFA Home Mortgage Revenue
Series A Multiple Credit Enhancements 7.35 08/01/11 1,623,032
</TABLE>
26
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 355,000 California State HFA Home Mortgage Revenue
Series B Multiple Credit Enhancements 7.25 % 08/01/10 $ 372,686
110,000 California State HFA Home Mortgage Revenue
Series F Multiple Credit Enhancements 7.75 08/01/08 112,760
140,000 California State HFA Insured Housing Revenue
AMT Series C MBIA Insured 7.00 08/01/23 147,001
1,575,000 California State HFA Multi-Unit Rental Housing
Revenue Series A AMT 5.50 08/01/15 1,498,156
1,000,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.75 07/01/18 1,024,790
400,000 California State HFFA Episcopal Homes
Foundation Project State Insured 7.85 07/01/15 410,208
1,000,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.25 04/01/10 1,086,770
1,250,000 California State HFFA Gould Medical Foundation
Escrowed to Maturity 7.30 04/01/20 1,365,838
2,000,000 California State HFFA Revenue Catholic
Healthcare West AMBAC Insured 5.75 07/01/15 2,020,200
1,000,000 California State HFFA Revenue Insured Health
Facilities Valleycare Series State Insured 6.50 05/01/05 1,078,500
1,750,000 California State HFFA Revenue Small Insured
Health Facilities Series A 6.75 03/01/20 1,849,278
1,000,000 California State HFFA San Diego Hospital
Association MBIA Insured 6.20 08/01/12 1,049,480
1,000,000 California State Maritime Infrastructure
Authority Revenue Port of San Diego Project
AMBAC Insured 5.25 11/01/15 947,500
1,000,000 California State PCFA Resource Recovery Revenue
Waste Management AMT Series A 7.15 02/01/11 1,081,250
1,000,000 California State PCFA San Diego Gas & Electric
Co AMT 6.80 06/01/15 1,139,420
65,000 California State Public Capital Improvements FA
Revenue Joint Powers Agency Pooled Projects
Series 8.25 03/01/98 66,251
</TABLE>
27
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
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 California State Public Works Board Lease
Revenue University Of California Project Series
A AMBAC Insured 6.30 % 12/01/09 $ 1,078,430
1,590,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/13 1,555,020
1,500,000 California Statewide CDA Motion Picture and
Television Development AMBAC Insured 5.25 01/01/14 1,457,790
1,500,000 California Statewide CDA Revenue COP Hospital
Cedars Sinai Medical Center 6.50 08/01/12 1,653,660
1,250,000 Calleguas-Las Virgines CA PFA Calleguas MUD
FGIC Insured 5.13 07/01/21 1,155,063
1,100,000 Capistrano CA Unified PFA Special Tax Revenue
AMBAC Insured 5.25 09/01/09 1,109,625
3,840,000 Cathedral City CA PFA RevenueTax Allocation
Redevelopment Projects Series A MBIA Insured 5.25 08/01/13 3,753,446
570,000 Chula Vista CA COP Town Centre II Package
Project RDA 6.00 09/01/11 584,005
1,200,000 Contra Costa County CA COP Public Facilities
Merrithew Memorial Hospital Replacement 6.60 11/01/12 1,342,500
500,000 Contra Costa County CA COP Public Facilities
Merrithew Memorial Hospital Replacement 6.63 11/01/22 559,960
270,000 Contra Costa County CA Home Mortgage Revenue
AMT Escrowed to Maturity 7.75 05/01/22 339,711
755,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A Escrowed to Maturity 6.50 03/01/09 840,881
4,000,000 Contra Costa County CA Transportation Authority
Sales Tax Revenue Series A FGIC Insured 5.50 03/01/08 4,125,840
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 1,519,650
</TABLE>
28
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 2,000,000 East Bay CA MUD Wastewater Treatment Revenue
FGIC Insured 5.00 % 06/01/16 $ 1,880,740
2,000,000 East Bay CA MUD Wastewater Treatment Revenue
MBIA Insured 5.00 06/01/14 1,888,200
2,675,000 East Bay CA MUD Water System Revenue MBIA
Insured 6.00 06/01/12 2,770,845
2,000,000 East Bay CA Regional Park District Series B 5.75 09/01/13 2,036,060
500,000 Eastern Municipal Water District CA Water &
Sewer Revenue Certificates FGIC Insured 6.30 07/01/20 518,190
1,000,000 Emeryville CA PFA Housing Increment Revenue
Series A 6.35 05/01/10 1,044,090
1,725,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 5.80 09/01/09 1,813,337
2,000,000 Escondido CA PFA Lease Revenue Center for the
Arts AMBAC Insured 6.00 09/01/18 2,066,500
1,410,000 Fairfield CA PFA CGIC Insured 5.20 08/01/08 1,419,264
3,000,000 Fontana CA USD Convertible Series C FGIC
Insured 6.15 F 05/01/20 3,129,360
1,800,000 Fresno CA Conference Center 5.00 04/01/13 1,721,880
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 09/01/15 941,700
2,000,000 Fresno CA USD Series A MBIA Insured 5.70 08/01/15 2,025,800
1,250,000 Fresno County CA Solid Waste Revenue American
Avenue Landfill Project MBIA Insured 5.75 05/15/14 1,267,138
1,650,000 Haywood CA Certificates Participation Civic
Center Project MBIA Insured 5.50 08/01/17 1,628,105
2,800,000 Huntington Beach CA PFA Revenue Bond 7.00 08/01/10 2,918,188
1,000,000 Indian Wells CA Redevelopment Agency Tax
Allocation MBIA Insured 5.38 12/01/15 984,330
500,000 Industry CA Urban Development Agency 6.70 11/01/03 542,055
1,080,000 Industry CA Urban Development Agency 6.85 11/01/04 1,174,500
</TABLE>
29
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 500,000 Industry CA Urban Development Agency Project 3 6.60 % 11/01/02 $ 539,250
1,000,000 Industry CA Urban Development Agency Tax
Allocation MBIA Insured 5.80 05/01/09 1,036,020
1,000,000 Long Beach CA Finance Authority Revenue AMBAC
Insured 6.00 11/01/17 1,065,740
2,900,000 Los Angeles CA Airport Revenue Series A FGIC
Insured 5.50 05/15/08 3,012,607
1,000,000 Los Angeles CA Community College District COP
Series A CGIC Insured 6.00 08/15/08 1,062,140
2,775,000 Los Angeles CA Harbor Revenue Series B AMT 6.50 08/01/13 2,938,919
110,000 Los Angeles CA SFMR Series A AMT Multiple
Credit Enhancements 7.55 12/01/23 114,365
1,950,000 Los Angeles CA Unified School District
Certificates Participation Multiple Properties
Project Series A FSA Insured 5.50 10/01/16 1,924,572
1,000,000 Los Angeles County CA Metro Transportation
Authority Sales Tax Revenue Series B AMBAC
Insured 4.75 07/01/18 883,290
2,500,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue
Series A AMBAC Insured 5.50 07/01/17 2,481,250
480,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue Series B FGIC Insured 6.50 07/01/15 510,960
1,000,000 Menlo Park CA CDA Tax Allocation Revenue MBIA
Insured 5.38 06/01/16 972,650
2,000,000 Mid Peninsula CA Regional Open Space District
Promissory Notes 7.00 09/01/14 2,207,640
1,835,000 Mountain View CA Shoreline Regional Park
Community Tax Allocation MBIA Insured 5.50 08/01/13 1,840,156
1,450,000 Nevada County CA Solid Waste Revenue 6.50 10/01/06 1,557,445
1,035,000 Northridge CA Water District AMBAC Insured 5.40 02/01/11 1,042,131
1,000,000 Nuview CA USD COP 7.25 02/01/16 1,047,000
</TABLE>
30
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
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 Ontario CA RDFA Revenue Project One MBIA
Insured 6.00 % 08/01/15 $ 1,521,990
1,000,000 Orange County CA Water District Series A 5.50 08/15/10 1,003,880
2,400,000 Pittsburg CA RDFA Tax Allocation Los Medanos
Community Project FGIC Insured 5.50 08/01/07 2,485,032
1,500,000 Pittsburg CA RDFA Tax Allocation Los Medanos
Community Project Series 90-1 7.40 08/15/20 1,692,120
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 1,068,050
1,100,000 Richmond CA Joint Powers Financing Authority
Lease and Gas Tax Revenue Series A 5.25 05/15/13 1,046,199
1,055,000 Riverside CA Sewer Revenue FGIC Insured 5.00 08/01/10 1,040,684
1,750,000 Riverside County CA Asset Leasing Corp Revenue
Riverside County Hospital Project A 6.38 06/01/09 1,846,250
3,000,000 Riverside County CA COP Series A 6.88 11/01/09 3,213,540
1,000,000 Riverside County CA PFA Special Tax Revenue
Series A MBIA Insured 5.25 09/01/13 982,630
275,000 Riverside County CA SFMR Project A AMT GNMA
Collateralized 6.85 10/01/16 303,421
1,335,000 Roseville CA Joint USD Capital Appreciation
Series A 9.80 F 08/01/06 836,778
1,900,000 Sacramento CA Light Rail Transportation Project 6.75 07/01/07 2,054,375
3,600,000 Sacramento CA MUD Electric Revenue Series E
MBIA-IBC Insured 5.70 05/15/12 3,663,684
3,000,000 Sacramento County Main Detention Facility MBIA
Insured 5.75 06/01/15 3,034,050
1,000,000 San Bernardino CA Municipal Water Department
COP FGIC Insured 6.25 02/01/12 1,041,600
1,000,000 San Buenaventura CA Capital Improvement Project
COP 6.85 08/01/16 1,020,730
</TABLE>
31
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 230,000 San Carlos CA RDFA Tax Allocation Series A 7.00 % 09/01/01 $ 252,402
250,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/02 278,520
225,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/03 250,668
235,000 San Carlos CA RDFA Tax Allocation Series A 7.00 09/01/04 261,809
235,000 San Carlos CA RDFA Tax Allocation Series A 7.10 09/01/05 262,692
6,500,000 San Diego CA PFA Sewer Revenue FGIC Insured 5.00 05/15/15 6,124,625
500,000 San Diego County CA Regional Transportation
Community Sales Tax Revenue Series A Escrowed
to Maturity 6.00 04/01/08 537,485
2,715,000 San Elijo Joint Powers Authority San Diego
County CA Water Pollution Control Facility FGIC
Insured 5.38 03/01/13 2,676,040
2,250,000 San Francisco CA BART Sales Tax Revenue FGIC
Insured 5.50 07/01/15 2,234,475
2,000,000 San Joaquin Hills CA Transportation Corridor
Agency Toll Road Revenue Capital Appreciation 5.29 F 01/01/10 1,677,500
2,500,000 San Jose CA RDA Tax Allocation MBIA Insured 5.00 08/01/20 2,288,650
1,395,000 San Jose RDFA Merged Area Project MBIA Insured 5.25 08/01/16 1,344,320
1,935,000 San Mateo County CA Board of Education COP 7.10 05/01/21 2,019,869
1,700,000 Santa Clara County CA COP Multiple Facilities
Project AMBAC Insured 6.00 05/15/12 1,755,250
100,000 Santa Clara County CA COP Public Facilities
Corp 7.75 11/01/08 108,159
750,000 Santa Maria CA RDFA Town Center West Side
Parking Facilities FSA Insured 5.25 06/01/11 743,183
1,000,000 Santa Monica -- Malibu CA USD Facilities
Reconstruction Projects 5.50 08/01/15 1,000,630
</TABLE>
32
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,195,000 Santa Rosa CA High School District FGIC Insured 5.90 % 05/01/13 $ 1,232,368
2,575,000 Santa Rosa CA Wastewater Revenue FGIC insured 4.90 09/01/11 2,462,473
1,000,000 Santa Rosa CA Wastewater Treatment Plant FGIC
Insured 4.75 09/01/16 899,570
1,530,000 Simi Valley CA USD FGIC Insured 4.75 08/01/18 1,363,062
1,500,000 Snowline CA Joint USD COP 6.40 07/01/18 1,531,950
1,000,000 South County CA Regional Wastewater Authority
Revenue Capital Improvement FGIC Insured 5.75 08/01/10 1,032,110
1,000,000 Southern California State Public Power
Authority 5.50 07/01/12 1,003,230
790,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 10/01/22 829,990
465,000 Southern California State SFMR Series A AMT
GNMA Collateralized 7.63 10/01/23 490,124
660,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 6.75 09/01/22 689,179
695,000 Southern California State SFMR Series A AMT
GNMA/FNMA Collateralized 7.35 09/01/24 724,148
2,720,000 Stanislaus County CA COP Capital Improvement
Project Series A MBIA Insured 5.00 05/01/10 2,670,931
20,000 Stockton CA SFMR Government Agency
Collateralized 7.50 02/01/23 21,818
5,690,000 Sulphur Springs CA USD Series A MBIA Insured 9.38 F 09/01/13 2,330,795
1,465,000 Sunnyvale CA Elementary School District Series
A 5.70 09/01/20 1,470,626
1,000,000 Sunnyvale CA Financing Authority Utilities
Revenue Solid Waste Materials Series B AMT MBIA
Insured 6.00 10/01/08 1,053,830
1,000,000 Temecula CA Community Services Recreational
Center Project 7.13 10/01/12 1,091,150
1,000,000 Temecula Valley CA USD Series D FGIC Insured 6.00 09/01/14 1,029,120
1,900,000 Torrance CA COP AMBAC Insured 5.50 04/01/12 1,922,059
</TABLE>
33
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL BONDS - CONTINUED
$ 1,705,000 Torrance CA COP AMBAC Insured 5.75 % 04/01/16 $ 1,731,837
1,000,000 Twentynine Palms CA Water District CA COP 7.00 08/01/17 1,050,960
1,000,000 University of California Housing System Revenue
Series A MBIA Insured 5.00 11/01/13 945,250
3,000,000 University of California Revenue Multiple
Purpose Project C AMBAC Insured 5.25 09/01/11 2,981,190
2,300,000 University of California Revenue Multiple
Purpose Projects Series C AMBAC Insured 5.25 09/01/12 2,261,517
1,750,000 University of California Revenue Seismic Safety
Project MBIA Insured 5.50 11/01/10 1,782,813
990,000 Upland CA HFA Revenue Issue A 7.85 07/01/20 1,025,581
1,000,000 Vacaville CA PFA Tax Allocation Redevelopment
Project MBIA Insured 6.35 09/01/22 1,037,760
1,100,000 Vallejo CA Revenue Water Improvement Project
FSA Insured 5.70 05/01/16 1,107,359
1,750,000 Walnut Creek CA John Muir Medical Center MBIA
Insured 5.00 02/15/16 1,617,718
1,135,000 Walnut Valley CA USD Series C FGIC Insured 5.75 08/01/15 1,149,607
5,000,000 West & Central Basin CA Financing Authority
Series A AMBAC Insured 5.00 08/01/16 4,644,550
1,500,000 West & Century Basin Finance Authority CA
Revenue West Basin Project AMBAC Insured 5.00 08/01/13 1,419,375
1,000,000 Yolo County CA HFA Mortgage Revenue AMT FHA
Collateralized 7.20 08/01/33 1,071,050
------------
TOTAL CALIFORNIA MUNICIPAL BONDS $216,765,737
(Cost $207,944,263)
</TABLE>
34
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 4.27%
CALIFORNIA VARIABLE RATE SECURITIES - 3.25%+
$ 1,000,000 California State PCFA V/R Shell Oil Co Project
Series B 3.70 % 10/01/11 $ 1,000,000
1,000,000 Irvine Ranch CA Water District V/R 3.75 10/01/05 1,000,000
850,000 Los Angeles County CA IDA Komax System Inc V/R
AMT LOC - Dai-Ichi Kangyo Bank Ltd 5.15 12/01/06 850,000
1,250,000 Los Angeles County CA IDA V/R AMT LOC -
Dai-Ichi Kangyo Bank Ltd 5.15 12/01/06 1,250,000
850,000 Los Angeles County CA V/R 5.00 12/01/05 850,000
1,000,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 3.75 08/01/15 1,000,000
1,500,000 Orange County CA Water District LOC - National
Westminster Bank Plc 3.75 08/15/15 1,500,000
------------
$ 7,450,000
</TABLE>
35
<PAGE>
CALIFORNIA TAX-FREE BOND FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - CONTINUED
MONEY MARKET FUNDS - 1.02%
2,336,807 Arbor Fund CA Tax-Exempt Portfolio $ 2,336,807
1,019 Nuveen Institutional CA Tax-Exempt Fund 1,019
------------
$ 2,337,826
TOTAL SHORT-TERM INSTRUMENTS $ 9,787,826
(Cost $9,787,826)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $217,732,089)* (Notes 1 and 3) 98.77 % $226,553,563
Other Assets and Liabilities, Net 1.23 2,821,967
------- ------------
TOTAL NET ASSETS 100.00 % $229,375,530
------- ------------
------- ------------
..........................................................................................................
</TABLE>
F YIELD TO MATURITY.
+ THESE VARIABLE RATE SECURITIES ARE SUBJECT TO A DEMAND FEATURE WHICH
REDUCES THE REMAINING NOTE.
* 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 $ 9,621,975
Gross Unrealized Depreciation (800,501)
-------------
NET UNREALIZED APPRECIATION $ 8,821,474
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES - 91.07%
$ 2,400,000 ABAG Finance Authority for Nonprofit Corp CA
Lucile Salter Packard Project V/R AMBAC Insured 3.90 % 08/01/23 $ 2,400,000
1,700,000 Alhambra CA IDA Sunclipse V/R LOC - Bank of
America 3.40 05/01/07 1,700,000
1,605,000 Anaheim CA COP Police Facilities V/R 3.90 08/01/08 1,605,000
2,800,000 Anaheim CA Public Improvement V/R COP LOC -
Industrial Bank of Japan Ltd 3.90 08/01/19 2,800,000
10,000,000 California Health Facility Finance Authority
Revenue - Catholic Healthcare Series A MBIA
Insured 4.05 07/01/21 10,000,000
2,385,000 California Health Facility Finance Authority
Revenue - Catholic Healthcare Series A MBIA
Insured 4.05 07/01/06 2,385,000
1,000,000 California HFFA Revenue - Sutter Health Series
B 3.75 03/01/20 1,000,000
8,700,000 California HFFA V/R FSA Insured 3.75 07/01/22 8,700,000
5,600,000 California Pollution Control Finance Authority
Revenue V/R 3.85 12/01/18 5,600,000
600,000 California Pollution Control Finance Authority
Revenue V/R 3.95 02/01/16 600,000
3,600,000 California Pollution Control Revenue - Pacific
Gas & Electric 3.75 07/02/97 3,600,000
9,055,000 California State DWR Central Valley Project
Revenue V/R 4.22 12/01/05 9,055,000
1,000,000 California State Educational Facilities Revenue 5.00 12/01/97 1,005,079
300,000 California State Health Facility Revenue Series
B AMBAC Insured 3.75 07/01/12 300,000
2,600,000 California State HFFA Adventist Health System
V/R LOC - Toronto Dominion Bank 3.95 08/01/21 2,600,000
4,700,000 California State HFFA Catholic Healthcare
Series C V/R 4.05 07/01/20 4,700,000
2,000,000 California State HFFA Childrens Hospital V/R
MBIA Insured 4.00 11/01/21 2,000,000
</TABLE>
37
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
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
$ 4,900,000 California State HFFA Kaiser Permanente V/R 3.85 % 05/01/28 $ 4,900,000
800,000 California State HFFA Kaiser Permanente V/R 4.05 11/01/19 800,000
1,300,000 California State HFFA Revenue Catholic
Healthcare West V/R Series B MBIA Insured 4.05 07/01/16 1,300,000
3,400,000 California State HFFA St Joseph Health Center
Series A V/R 3.70 07/01/13 3,400,000
400,000 California State PCFA Pacific Gas & Electric
V/R Series F 3.85 11/01/26 400,000
1,500,000 California State PCFA Shell Oil Company Project
V/R Series C 3.70 10/01/00 1,500,000
5,000,000 California State PCFA Solid Waste Disposal
Revenue Colmac Energy Project Series B V/R AMT
LOC - Swiss Bank 3.95 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 4.15 08/01/14 3,600,000
4,100,000 California State PCFA Southern California
Edison V/R Series D 5.20 02/28/08 4,100,000
2,400,000 California State PCFA Stanislaus Project V/R
AMT LOC - Swiss Bank 3.85 12/01/17 2,400,000
6,000,000 California State PCFA Western Waste Industries
Project V/R LOC - Citibank 4.00 12/01/00 6,000,000
18,525,000 California State School Cash Reserve Projects
Authority Series A 4.75 07/02/97 18,525,480
10,000,000 California State School Cash Reserve Projects
Authority Series A 4.75 07/02/98 10,086,600
2,500,000 California Statewide CDA Apartment Development
Revenue Series A-6 V/R FNMA Collateralized 4.00 05/15/25 2,500,000
500,000 California Statewide CDA Apartment Revenue
Series A-7 V/R AMT FNMA Collateralized 4.05 05/15/25 500,000
2,100,000 California Statewide CDA COP 4.10 06/01/26 2,100,000
</TABLE>
38
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
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
$ 4,800,000 California Statewide CDA St Joseph Health
System V/R 3.90 % 07/01/08 $ 4,800,000
1,910,000 California Statwide CDA Industrial Revenue Tri
H Food Multiple LOC's 4.15 08/01/11 1,910,000
1,210,000 Central Coast Water Authority California
Revenue Series A AMBAC Insured 4.00 10/01/97 1,211,028
11,200,000 Chula Vista CA IDA Revenue Daily San Diego Gas
& Electric 3.75 07/01/21 11,200,000
3,400,000 Chula Vista CA Industrial Development Revenue
San Diego Gas & Electric Series B 5.40 12/01/21 3,400,000
600,000 Colton CA RDFA MFHR V/R LOC - Federal Home Loan
Bank of San Francisco 3.90 05/01/10 600,000
1,100,000 Concord CA MFHR Bel Air Apartments V/R AMT LOC
-Bank of America 3.85 12/01/16 1,100,000
3,000,000 Contra Costa County CA TRAN 4.50 07/03/97 3,000,095
2,000,000 Duarte CA RDFA COP Johnson Duarte Partners
Project V/R Series B LOC - Bank of America 3.95 12/01/14 2,000,000
8,100,000 Eagle Trust V/R Series 94 MBIA Insured 4.30 09/01/03 8,100,000
1,300,000 Foothill / Eastern CA Transportation Corridor
Agency Toll Road Revenue Series C V/R LOC -
Credit Suisse 3.90 01/02/35 1,300,000
6,000,000 Foothill / Eastern CA Transportation Corridor
Toll Road Development Series D V/R LOC -
Industrial Bank of Japan Ltd 4.10 01/02/35 6,000,000
3,200,000 Fremont CA MFHR V/R Creekside Village
Apartments LOC - National Westminster Bank Plc 3.90 09/01/07 3,200,000
4,000,000 Fresno CA USD 4.50 08/14/97 4,002,764
5,000,000 Fresno City CA TRAN Series A 4.75 09/29/97 5,014,308
3,635,000 Huntington Beach CA MFHR Seabridge Villas V/R
LOC - Bank of America 4.00 02/01/10 3,635,000
900,000 Irvine CA Development Revenue V/R 3.75 09/02/21 900,000
</TABLE>
39
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
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 Irvine CA IDA Improvement Bond V/R LOC -
National Westminster Bank Plc 3.75 % 09/02/15 $ 100,000
1,600,000 Irvine CA IDA Irvine East Investment Co V/R LOC
-Bank of America 3.75 12/01/05 1,600,000
4,200,000 Irvine CA Public Facilities & Infrastructure
Authority Lease Revenue V/R Capital Improvement
Project 4.00 11/01/10 4,200,000
100,000 Irvine Ranch CA Water District LOC - National
Westminster Bank Plc 3.75 08/01/16 100,000
1,000,000 Irvine Ranch CA Water District V/R 3.75 10/01/05 1,000,000
600,000 Irvine Ranch CA Water District V/R 3.75 09/01/06 600,000
500,000 Irvine Ranch CA Water District V/R 3.80 11/15/13 500,000
5,100,000 Irvine Ranch CA Water District V/R LOC - Bank
of America 3.75 04/01/33 5,100,000
2,000,000 Irwindale CA IDA Revenue Toys R Us Project 4.25 12/01/19 2,000,000
1,000,000 Kern CO COP Public Facilities Project Series D
V/R 4.00 08/01/06 1,000,000
6,500,000 Long Beach CA Health Facilities Memorial Health
Services V/R 3.95 10/01/16 6,500,000
300,000 Los Angeles CA Community RDFA MFHR Skyline at
Southpark Phase II V/R LOC - Industrial Bank of
Japan Ltd 4.20 12/01/05 300,000
500,000 Los Angeles CA MFHR Series B V/R AMT LOC -
Federal Home Loan Bank of San Francisco 4.25 12/01/26 500,000
3,300,000 Los Angeles CA MFHR V/R AMT LOC - Federal Home
Loan Bank of San Francisco 4.25 08/01/26 3,300,000
1,000,000 Los Angeles County CA HFA MFHR Harbor Cove
Project V/R LOC - Citibank 4.00 10/01/06 1,000,000
2,800,000 Los Angeles County CA HFA MFHR Sand Canyon
Ranch Project V/R LOC - Citibank 4.00 11/01/06 2,800,000
</TABLE>
40
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
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
$ 2,300,000 Los Angeles County CA Metropolitan
Transportation Authority Sales Tax Revenue V/R
Series A 4.00 % 07/01/20 $ 2,300,000
2,700,000 Los Angeles County CA Pension Obligation V/R
Series A AMBAC Insured 3.90 06/30/07 2,700,000
15,000,000 Los Angeles County CA TRAN 4.50 06/30/98 15,093,600
1,100,000 Los Angeles County CA Transportation Commission
Sales Tax Revenue V/R FGIC Insured 3.90 07/01/12 1,100,000
12,800,000 Metropolitan Water District of Southern
California 3.70 08/15/97 12,800,000
2,900,000 Montebello CA V/R LOC - Bank of America 3.40 04/01/15 2,900,000
2,000,000 Monterey County CA Financing Authority Water
Reclamation Projects V/R AMT LOC - Dai-Ichi
Bank Ltd 4.25 09/01/36 2,000,000
2,265,000 Monterey County CA Regional Waste Management
Authority Revenue 7.88 F 12/01/17 2,349,016
8,500,000 Northern California State Public Power Revenue
Geothermeal Project 3A AMBAC Insured 3.90 07/01/05 8,500,000
2,000,000 Ontario CA MFHR Vineyard Village Apartments V/R
LOC - Industrial Bank of Japan Ltd 4.10 12/01/05 2,000,000
1,000,000 Orange County CA Apartment Development Revenue
Series U 3.98 11/01/09 1,000,000
2,000,000 Orange County CA HFA Vintage Wood Apartments
V/R LOC - Mitsubishi Bank Ltd 3.85 11/01/08 2,000,000
4,400,000 Orange County CA Sanitation District Multiple
Credit Enhancments 4.00 08/01/13 4,400,000
2,200,000 Orange County CA Sanitation District V/R LOC -
National Westminster Bank Plc 3.75 08/01/15 2,200,000
</TABLE>
41
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
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
$ 8,600,000 Orange County CA Sanitation District V/R
Multiple Credit Enhancements 3.75 % 08/01/16 $ 8,600,000
2,500,000 Redlands CA Certificates Participation Water
Treatment Facilities Project FGIC Insured 4.00 09/01/15 2,500,000
5,000,000 Regents of the University of California 3.55 08/18/97 5,000,000
2,000,000 Regents of the University of California 3.70 11/14/97 2,000,000
200,000 Sacramento County CA MFHR Series A V/R LOC -
Dai-Ichi Kangyo Bank Ltd 4.25 01/00/00 200,000
13,700,000 Sacramento County CA Tax & Revenue Anticipation
Notes 4.50 09/30/97 13,732,201
2,780,000 Salinas CA MFHR Brentwood Gardens V/R LOC -
Bank of America 3.75 03/01/05 2,780,000
2,185,000 San Bernardino County CA MFHR V/R LOC - Federal
Home Loan Bank of San Francisco 4.05 05/01/17 2,185,000
3,000,000 San Bernardino County CA TRAN 4.50 06/30/98 3,018,720
5,000,000 San Diego CA MFHR Lusk Mira Mesa Apartments V/R
LOC - Bank of America 3.85 04/01/07 5,000,000
2,000,000 San Diego County CA TRAN 4.38 09/30/97 2,004,041
4,900,000 San Francisco CA City & County V/R LOC -
Industrial Bank of Japan Ltd 4.22 12/01/05 4,900,000
1,500,000 San Francisco CA MFHR Winterland Project V/R
LOC - Citibank 4.00 06/01/06 1,500,000
4,150,000 San Francisco CA RDFA MFHR Rincon Center V/R
LOC - Citibank 4.00 12/01/06 4,150,000
1,320,000 San Francisco City & County TRAN 7.25 10/01/15 1,351,785
1,175,000 San Joaquin County CA TRAN 4.50 01/15/98 1,180,852
1,300,000 San Jose CA MFHR Kimberly Woods Apartments V/R
LOC - Bank of America 3.75 11/01/08 1,300,000
2,500,000 San Mateo County CA Utility District 4.50 07/01/98 2,516,850
200,000 Santa Clara CA Electric Revenue V/R Series 85A
LOC - National Westminster Bank Plc 4.00 07/01/10 200,000
</TABLE>
42
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
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
$ 400,000 Santa Clara CA Electric Revenue V/R Series 85B
LOC - National Westminster Bank Plc 4.00 % 07/01/10 $ 400,000
1,000,000 Santa Clara County CA MFHR Foxchase Apartments
V/R Series E FGIC Insured 4.00 11/01/07 1,000,000
6,800,000 Simi Valley CA MFHR Lincoln Wood Ranch V/R LOC
-Sumitomo Bank 4.15 06/01/10 6,800,000
1,000,000 Southern California State Public Power
Authority Palo Verde Project Series B AMBAC
Insured 3.90 07/01/09 1,000,000
2,200,000 Southern California State Public Power
Authority Southern Transmission Project V/R LOC
-Swiss Bank 3.90 07/01/19 2,200,000
15,935,000 Southern California Waterworks Revenue Series A
AMBAC Insured 4.00 06/01/23 15,935,000
5,000,000 State of California GOP 3.75 07/02/97 5,000,000
2,100,000 Tracy CA MFHR Sycamore Village Apartments V/R
LOC - Bank of America 4.00 05/01/15 2,100,000
4,805,000 Turlock CA Irrigation District Revenue V/R
Series A LOC - Canadian Imperial Bank of
Commerce 3.90 01/01/14 4,805,000
2,600,000 Tustin CA Improvement Bond V/R 3.75 09/02/13 2,600,000
2,000,000 Vacaville CA MFHR Western Properties Sycamores
Project V/R LOC - Bank of America 4.00 04/01/05 2,000,000
2,600,000 Walnut Creek CA MFHR Creekside Drive Apartments
V/R LOC - Bank of America 4.00 04/01/07 2,600,000
------------
TOTAL SHORT-TERM CALIFORNIA MUNICIPAL SECURITIES $391,037,419
</TABLE>
43
<PAGE>
CALIFORNIA TAX-FREE MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
MONEY MARKET FUNDS - 2.80%
11,000,000 Arbor Fund CA Tax-Exempt Portfolio $ 11,000,000
1,000,000 Dreyfus General California Fund 1,000,000
------------
TOTAL MONEY MARKET FUNDS $ 12,000,000
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $403,037,419)* (Note 1) 93.87 % $403,037,419
Other Assets and Liabilities, Net 6.13 26,334,703
------- ------------
TOTAL NET ASSETS 100.00 % $429,372,122
------- ------------
------- ------------
..........................................................................................................
</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.
44
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 68.80%
3,518 3Com Corp+ $ 179,536 $ 158,310
8,355 Abbott Laboratories 414,395 557,696
743 Adobe Systems Inc 33,851 26,051
1,497 Advanced Micro Devices+ 39,821 53,892
266 Aegon N.V. ADR Class A 21,420 18,637
279 Aeroquip-Vickers Inc 9,748 13,183
1,630 Aetna Inc 130,137 166,871
1,156 Ahmanson (H F) & Co 34,515 49,708
1,244 Air Products & Chemicals Inc 78,061 101,075
5,359 Airtouch Communications+ 143,857 146,703
596 Alberto-Culver Co Class B 12,763 16,688
2,702 Albertson's Inc 90,168 98,623
2,446 Alcan Aluminium Ltd 79,647 84,846
1,853 Allegheny Teledyne Inc 38,628 50,031
689 Allergan Inc 21,675 21,919
3,069 Allied Signal Inc 181,746 257,796
4,806 Allstate Corp 235,063 350,838
2,006 Alltel Corp 58,060 67,076
1,814 Aluminum Co of America 102,537 136,730
915 ALZA Corp+ 22,586 26,478
1,320 Amdahl Corp+ 14,999 11,550
1,044 Amerada Hess Corp 56,999 58,007
1,978 American Electric Power Inc 75,068 83,076
5,051 American Express Corp 239,740 376,300
2,582 American General Corp 94,814 123,291
795 American Greetings Corp Class A 23,307 29,514
6,805 American Home Products Corp 363,615 520,583
5,018 American International Group Inc 499,243 749,564
1,568 American Stores Co 54,221 77,420
5,836 Ameritech Corp 312,933 396,483
2,849 Amgen Inc+ 143,409 165,598
5,306 Amoco Corp 399,860 461,290
2,340 AMP Inc 93,835 97,695
985 AMR Corp+ 87,882 91,113
964 Andrew Corp+ 26,905 27,113
</TABLE>
45
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
5,318 Anheuser-Busch Inc $ 187,123 $ 223,024
1,785 Aon Corp 72,456 92,374
1,268 Apple Computer Inc+ 40,649 18,069
1,944 Applied Materials Inc+ 83,584 137,660
5,784 Archer-Daniels-Midland Co 111,416 135,924
1,014 Armco Inc+ 5,761 3,929
426 Armstrong World Industries Inc 27,042 31,258
455 ASARCO Inc 13,133 13,934
747 Ashland Inc 30,784 34,642
17,328 AT & T Corp 634,924 607,563
3,492 Atlantic Richfield Corp 225,294 246,186
530 Autodesk Inc 18,534 20,306
3,137 Automatic Data Processing 122,047 147,439
1,597 AutoZone Inc+ 44,941 37,629
1,125 Avery Dennison Corp 31,041 45,141
1,411 Avon Products Inc 65,520 99,564
1,591 Baker Hughes Inc 50,445 61,552
368 Ball Corp 10,289 11,063
1,517 Baltimore Gas & Electric Co 39,274 40,485
6,098 Banc One Corp 248,592 295,372
4,226 Bank of New York Inc 121,513 183,831
7,764 BankAmerica Corp 319,136 501,263
1,669 BankBoston Corp 100,917 120,272
848 Bankers Trust N Y Corp 62,129 73,776
641 Bard (C R) Inc 18,503 23,276
2,313 Barnett Banks Inc 85,607 121,433
3,771 Barrick Gold Corp 97,158 82,962
2,194 Battle Mountain Gold Co 17,420 12,478
643 Bausch & Lomb Inc 25,452 30,301
2,884 Baxter International Inc 114,064 150,689
2,042 Bay Networks Inc+ 71,405 54,241
1,350 Becton Dickinson & Co 47,955 68,344
4,729 Bell Atlantic Corp 293,106 358,813
10,590 BellSouth Corp 397,286 491,111
600 Bemis Co Inc 20,492 26,025
</TABLE>
46
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
613 Beneficial Corp $ 36,938 $ 43,561
1,090 Bethlehem Steel Corp+ 13,478 11,377
1,030 Beverly Enterprises+ 13,757 16,738
1,147 Biomet Inc+ 18,222 21,363
1,024 Black & Decker Corp 34,621 38,080
1,111 Block (H & R) Inc 39,623 35,830
7,688 Boeing Co 317,624 407,945
511 Boise Cascade Corp 17,408 18,045
2,118 Boston Scientific Corp+ 101,152 130,125
270 Briggs & Stratton Corp 10,549 13,500
10,678 Bristol-Myers Squibb Co 527,005 864,918
771 Brown-Forman Corp Class B 32,884 37,634
2,317 Browning-Ferris Industries Inc 74,398 77,040
1,074 Brunswick Corp 25,781 33,563
1,636 Burlington Northern Santa Fe 122,388 147,036
1,333 Burlington Resources Inc 58,411 58,819
1,700 Cabletron Systems Inc+ 57,846 48,131
462 Caliber System Inc 14,736 17,210
5,038 Campbell Soup Co 170,288 251,900
1,139 Cardinal Health Inc 66,178 65,208
1,592 Carolina Power & Light Co 52,484 57,113
827 Case Corp 41,860 56,960
2,047 Caterpillar Inc 146,723 219,797
277 Centex Corp 9,425 11,253
2,231 Central & South West Corp 56,399 47,409
845 Ceridian Corp+ 36,517 35,701
1,041 Champion International Corp 46,016 57,515
979 Charming Shoppes Inc+ 5,031 5,109
4,747 Chase Manhattan Bank 348,241 460,756
6,981 Chevron Corp 411,474 516,158
7,554 Chrysler Corp 217,627 247,866
1,821 Chubb Corp 91,835 121,779
833 CIGNA Corp 98,853 147,858
407 Cincinnati Milacron Inc 9,655 10,557
1,700 Cinergy Corp 51,207 59,181
</TABLE>
47
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,051 Circuit City Stores Inc $ 31,709 $ 37,376
7,073 Cisco Systems Inc+ 357,501 474,775
4,983 Citicorp 452,278 600,763
593 Clorox Co 54,548 78,276
1,155 Coastal Corp 47,057 61,432
26,653 Coca-Cola Co 1,190,438 1,859,047
1,828 Cognizant Corp 59,400 74,034
3,161 Colgate-Palmolive Co 141,018 206,255
565 Columbia Gas System Inc 26,985 36,866
7,231 Columbia HCA Healthcare Corp 243,912 284,269
3,435 Comcast Corp Class A 57,593 73,423
1,109 Comerica Inc 53,942 75,412
2,900 Compaq Computer Corp+ 182,381 287,825
3,862 Computer Associates International Inc 175,247 215,065
802 Computer Sciences Corp+ 58,140 57,844
2,527 ConAgra Inc 111,201 162,044
2,099 Conseco Inc 78,326 77,663
2,543 Consolidated Edison Co 74,655 74,860
990 Consolidated Natural Gas Co 49,453 53,274
1,220 Cooper Industries Inc 51,658 60,695
845 Cooper Tire & Rubber Co 19,431 18,590
362 Coors (Adolph) Co Class B 6,942 9,638
2,219 CoreStates Financial Corp 106,796 119,271
2,442 Corning Inc 83,128 135,836
2,214 Costco Companies Inc+ 46,655 72,785
1,107 Countrywide Credit Industries Inc 36,966 34,525
1,562 CPC International Inc 113,293 144,192
488 Crane Co 14,405 20,405
1,406 Crown Cork & Seal Co 71,089 75,133
2,310 CSX Corp 100,336 128,205
4,262 CUC International Inc+ 102,027 110,013
392 Cummins Engine Co Inc 19,414 27,661
1,747 CVS Corp 72,337 89,534
1,006 Cyprus Amax Minerals 25,798 24,647
1,051 Dana Corp 31,468 39,938
</TABLE>
48
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,535 Darden Restaurants Inc $ 15,483 $ 13,911
355 Data General Corp+ 5,504 9,230
2,307 Dayton-Hudson Corp 79,041 122,704
2,692 Deere & Co 100,568 147,724
1,799 Dell Computer Corp+ 91,415 211,270
755 Delta Air Lines Inc 61,061 61,910
908 Deluxe Corp 28,420 30,986
1,650 Digital Equipment Corp+ 67,428 58,472
1,204 Dillards Inc Class A 35,296 41,689
7,209 Disney (Walt) Co 506,879 578,522
1,934 Dominion Resources Inc 72,526 70,833
1,599 Donnelley (R R) & Sons Co 55,548 58,563
1,167 Dover Corp 54,194 71,771
2,568 Dow Chemical Co 197,275 223,737
1,001 Dow Jones & Co Inc 37,096 40,228
1,863 Dresser Industries Inc 52,939 69,397
1,199 DSC Communications Corp+ 34,856 26,678
1,527 DTE Energy Co 45,837 42,183
3,872 Duke Power Co 150,287 185,614
1,828 Dun & Bradstreet Corp 40,189 47,985
12,050 DuPont (E I) de Nemours 509,696 757,644
201 Eastern Enterprises 6,477 6,972
871 Eastman Chemical Co 50,816 55,309
3,522 Eastman Kodak Co 255,941 270,314
861 Eaton Corp 56,129 75,176
658 Echlin Inc 22,589 23,688
1,425 Echo Bay Mines Ltd 11,937 8,016
680 Ecolab Inc 21,799 32,470
4,627 Edison International 86,683 115,097
462 EG & G Inc 8,174 10,395
2,663 EMC Corp+ 74,039 103,857
4,780 Emerson Electric Co 208,768 263,199
1,551 Engelhard Corp 35,413 32,474
2,684 Enron Corp 107,686 109,541
682 Enserch Corp 13,106 15,175
</TABLE>
49
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,482 Entergy Corp $ 64,031 $ 67,945
1,616 Equifax Inc 57,396 60,095
26,553 Exxon Corp 1,173,845 1,633,010
1,232 Federal Express Corp+ 50,714 71,148
7,604 Federal Home Loan Mortgage Corp 182,925 261,388
11,398 Federal National Mortgage Assoc 378,786 497,238
2,209 Federated Department Stores Inc+ 69,745 76,763
1,183 Fifth Third Bancorp 78,056 97,043
1,420 First Bank System Inc 90,446 121,233
3,404 First Chicago NBD Corp 152,628 205,942
4,813 First Data Corp 174,260 211,471
3,080 First Union Corp 199,868 284,900
2,775 Fleet Financial Group Inc 130,077 175,519
361 Fleetwood Enterprises Inc 9,700 10,762
346 Fleming Co Inc 7,534 6,228
874 Fluor Corp 52,373 48,234
407 FMC Corp+ 29,998 32,331
12,646 Ford Motor Co 409,027 477,387
1,832 Fortune Brands Inc 58,895 68,357
394 Foster Wheeler Corp 14,889 15,957
1,914 FPL Group Inc 81,887 88,164
2,036 Freeport McMoRan Copper & Gold Inc Class B 59,133 63,371
1,731 Frontier Corp 38,777 34,512
796 Fruit of the Loom Inc Class A+ 24,385 24,676
1,547 Gannett Co Inc 109,746 152,766
2,978 Gap Inc 76,756 115,770
700 General Dynamics Corp 44,156 52,500
35,204 General Electric Co 1,496,537 2,301,425
1,458 General Instrument Corp+ 36,748 36,450
1,759 General Mills Inc 100,103 114,555
7,833 General Motors Corp 405,433 436,200
911 General Re Corp 137,441 165,802
528 General Signal Corp 20,779 23,034
1,970 Genuine Parts Co 57,950 66,734
957 Georgia-Pacific Corp 74,548 81,704
</TABLE>
50
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
671 Giant Food Inc Class A $ 22,153 $ 21,724
316 Giddings & Lewis Inc 5,254 6,597
5,904 Gillette Co 400,408 559,404
565 Golden West Financial 30,991 39,550
573 Goodrich (B F) Co 19,931 24,818
1,662 Goodyear Tire & Rubber Co 76,646 105,225
1,329 GPU Inc 42,791 47,678
860 Grace W.R. & Co 45,398 47,408
551 Grainger (W W) Inc 39,154 43,081
372 Great Atlantic & Pacific Tea Co 10,104 10,114
607 Great Lakes Chemical Corp 35,356 31,792
1,514 Great Western Financial Corp 45,845 81,378
1,504 Green Tree Financial Inc 55,049 53,580
10,258 GTE Corp 412,643 450,070
840 Guidant Corp 51,793 71,400
1,326 Halliburton Co 74,504 105,086
716 Harcourt General Inc 31,829 34,100
280 Harland (John H) Co 7,003 6,388
514 Harnischfeger Industries Inc 20,119 21,331
1,038 Harrah's Entertainment Inc+ 25,450 18,944
460 Harris Corp 29,586 38,640
1,276 Hartford Financial Services Group 75,100 105,589
1,388 Hasbro Inc 33,788 39,385
3,643 Healthsouth Corp+ 77,701 90,847
3,970 Heinz (H J) Co 138,211 183,116
221 Helmerich & Payne Inc 9,082 12,735
1,054 Hercules Inc 52,289 50,460
1,623 Hershey Foods Corp 64,518 89,772
10,867 Hewlett Packard Co 490,521 608,552
1,732 HFS Inc+ 110,717 100,456
2,614 Hilton Hotels Corp 59,388 69,434
5,119 Home Depot Inc 252,636 352,891
1,495 Homestake Mining Co 23,832 19,528
1,385 Honeywell Inc 77,406 105,087
1,066 Household International Inc 85,020 125,188
</TABLE>
51
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,454 Houston Industries Inc $ 51,819 $ 52,608
1,721 Humana Inc+ 41,716 39,798
1,424 IKON Office Solutions 50,694 35,511
2,657 Illinois Tool Works Inc 93,691 132,684
1,820 Inco Ltd 56,665 54,714
1,137 Ingersoll-Rand Co 48,953 70,210
493 Inland Steel Industries Inc 12,209 12,880
8,770 Intel Corp 827,639 1,243,696
430 Intergraph Corp+ 4,444 3,655
10,669 International Business Machines Corp 685,338 962,210
1,132 International Flavors & Fragrances 53,713 57,166
3,209 International Paper Co 131,927 155,837
911 Interpublic Group Cos Inc 42,981 55,856
1,275 ITT Corp+ 65,274 77,855
1,277 ITT Industries Inc 29,493 32,883
886 James River Corp 25,808 32,782
784 Jefferson-Pilot Corp 39,709 54,782
14,216 Johnson & Johnson 655,040 915,155
879 Johnson Controls Inc 33,312 36,094
375 Jostens Inc 8,145 9,891
5,193 K Mart Corp 65,880 63,614
382 Kaufman & Broad Home Corp 5,392 6,709
2,287 Kellogg Co 160,143 195,824
568 Kerr-McGee Corp 35,363 35,997
2,445 KeyCorp 102,437 136,614
6,001 Kimberly-Clark Corp 238,336 298,550
355 King World Productions+ 14,160 12,425
1,010 Knight-Ridder Inc 34,571 49,553
2,707 Kroger Co+ 54,823 78,503
3,220 Laidlaw Inc Class B 35,003 44,476
5,895 Lilly (Eli) & Co 365,774 644,397
2,897 Limited Inc 57,440 58,664
1,084 Lincoln National Corp 54,779 69,783
800 Liz Claiborne Inc 27,791 37,300
2,057 Lockheed Martin Corp 158,065 213,028
</TABLE>
52
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,239 Loews Corp $ 93,260 $ 124,055
403 Longs Drug Stores Corp 8,071 10,554
375 Louisiana Land & Exploration Co 19,189 21,422
1,148 Louisiana-Pacific Corp 27,881 24,252
1,860 Lowe's Co Inc 64,258 69,053
1,534 LSI Logic Corp+ 53,718 49,088
6,795 Lucent Technologies Inc 350,660 489,665
750 Mallinckrodt Inc 28,587 29,250
623 Manor Care Inc 13,648 20,325
1,417 Marriott International 65,458 86,968
1,684 Marsh & McLennan Companies Inc 84,618 120,196
1,754 Masco Corp 57,758 73,230
3,076 Mattel Inc 78,573 104,200
2,638 May Department Stores Co 108,835 124,646
1,012 Maytag Corp 19,370 26,439
431 MBIA Inc 45,009 48,622
3,570 MBNA Corp 78,696 130,751
613 McDermott International Inc 15,003 17,892
7,427 McDonald's Corp 318,943 358,817
2,302 McDonnell Douglas Corp 104,270 157,687
1,097 McGraw-Hill Inc 50,126 64,517
7,305 MCI Communications 202,980 279,645
539 Mead Corp 30,308 33,553
2,586 Medtronic Inc 147,140 209,466
2,756 Mellon Bank Corp 84,863 124,365
441 Mercantile Stores Co Inc 21,814 27,755
12,862 Merck & Co Inc 870,577 1,331,217
563 Meredith Corp 10,307 16,327
3,533 Merrill Lynch & Co Inc 122,894 210,655
1,333 MGIC Investment Corp 46,964 63,901
2,229 Micron Technology Inc 89,083 89,021
12,921 Microsoft Corp+ 876,573 1,632,891
502 Millipore Corp 19,789 22,088
4,444 Minnesota Mining & Manufacturing Co 320,638 453,288
8,406 Mobil Corp 480,295 587,369
</TABLE>
53
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
6,318 Monsanto Co $ 182,827 $ 272,069
1,004 Moore Corp Ltd 21,018 19,766
1,991 Morgan (J P) & Co Inc 167,840 207,811
6,149 Morgan St Dean Witter Discover 196,966 264,791
1,502 Mortan International Inc 42,360 45,342
6,384 Motorola Inc 378,943 485,184
89 NACCO Industries Inc Class A 4,519 5,023
746 Nalco Chemical Co 27,161 28,814
2,357 National City Corp 97,989 123,743
1,484 National Semiconductor+ 36,262 45,448
463 National Service Industries Inc 14,746 22,542
7,867 NationsBank 344,081 507,422
722 Navistar International+ 9,834 12,455
1,009 New York Times Co Class A 33,763 50,955
1,717 Newell Co 49,421 68,036
1,704 Newmont Mining Corp 66,956 66,456
1,409 Niagara Mohawk Power Corp+ 16,835 12,065
569 NICOR Inc 18,399 20,413
3,112 Nike Inc Class B 126,163 181,663
1,446 NorAm Energy Corp 15,615 22,052
904 Nordstrom Inc 38,594 44,353
1,339 Norfolk Southern Corp 106,650 134,904
727 Northern States Power Co 34,556 37,622
2,805 Northern Telecom Ltd 155,906 255,255
614 Northrop Grumman Corp 44,328 53,917
3,941 Norwest Corp 156,987 221,681
3,507 Novell Inc+ 57,428 24,330
955 Nucor Corp 48,857 54,674
4,725 NYNEX Corp 220,014 272,278
3,496 Occidental Petroleum Corp 82,176 87,619
1,638 Ohio Edison Co 35,439 35,729
340 ONEOK Inc 8,588 10,944
7,019 Oracle Systems Corp+ 260,343 353,582
1,068 Oryx Energy Co+ 19,197 22,562
594 Owens Corning Fiberglass Corp 24,726 25,616
</TABLE>
54
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
853 PACCAR Inc $ 26,577 $ 39,611
884 Pacific Enterprises 24,924 29,725
3,165 PacifiCorp 63,807 69,630
1,328 Pall Corp 31,962 30,876
1,314 Parametric Technology Corp+ 54,544 55,927
835 Parker Hannifin Corp 34,910 50,674
2,308 PECO Energy Co 59,306 48,468
2,659 Penney (J C) Co Inc 129,841 138,767
540 Pennzoil Co 27,690 41,445
326 Peoples Energy Corp 10,051 12,205
663 Pep Boys-Manny Moe & Jack 21,352 22,583
16,661 Pepsico Inc 471,336 625,829
471 Perkin-Elmer Corp 23,459 37,474
6,865 Pfizer Inc 490,859 820,368
4,332 PG&E Corp 110,529 105,051
5,393 Pharmacia and Upjohn Inc 199,385 187,407
664 Phelps Dodge Corp 42,327 56,565
26,185 Philip Morris Co Inc 826,309 1,161,959
2,856 Phillips Petroleum Co 113,233 124,950
897 Pioneer Hi Bred International Inc 53,846 71,760
1,563 Pitney Bowes Inc 79,644 111,364
2,477 Placer Dome Inc 58,947 40,561
3,547 PNC Bank Corp 127,468 147,644
533 Polaroid Corp 21,933 29,582
259 Potlatch Corp 11,149 11,720
1,715 PP & L Resources Inc 41,282 34,193
1,964 PPG Industries Inc 94,760 114,158
1,677 Praxair Inc 65,728 93,912
7,284 Procter & Gamble Co 703,368 1,028,865
969 Providian Financial Corp+ 14,756 31,129
2,497 Public Services Enterprise Group 69,489 62,425
266 Pulte Corp 7,569 9,194
1,502 Quaker Oats Co 55,885 67,402
1,182 Ralston-Purina Group 78,855 97,146
478 Raychem Corp 33,385 35,551
</TABLE>
55
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
2,572 Raytheon Co $ 113,784 $ 131,172
551 Reebok International Ltd 19,938 25,759
629 Republic New York Corp 48,196 67,618
773 Reynolds Metals Co 45,097 55,076
1,321 Rite Aid Corp 49,402 65,885
2,297 Rockwell International Corp 117,141 135,523
639 Rohm & Haas Co 43,725 57,550
887 Rowan Co Inc+ 13,858 25,002
5,764 Royal Dutch Petroleum Co 888,810 1,245,024
1,591 Rubbermaid Inc 43,153 47,332
454 Russell Corp 13,442 13,450
844 Ryder System Inc 23,233 27,852
1,387 SAFECO Corp 50,694 64,756
635 Safety-Kleen Corp 10,753 10,716
1,062 Salomon Inc 46,165 59,074
1,056 Santa Fe Energy Resources Inc+ 13,061 15,510
5,155 Sara Lee Corp 175,845 214,577
9,832 SBC Communication Inc 483,581 608,355
7,868 Schering-Plough Corp 237,904 376,681
2,599 Schlumberger Ltd 230,848 324,875
1,834 Schwab (Charles) Corp 73,474 74,621
755 Scientific-Atlanta Inc 14,420 16,516
2,597 Seagate Technology Inc+ 90,067 91,382
3,939 Seagram Co Ltd 135,850 158,545
4,166 Sears Roebuck & Co 171,443 223,923
2,498 Service Corp International 62,064 82,122
329 Shared Medical System Corp 14,164 17,766
1,840 Sherwin Williams Co 43,735 56,810
1,016 Sigma-Aldrich Corp 27,246 35,624
1,828 Silicon Graphics Inc+ 50,654 27,420
696 Snap-On Inc 21,861 27,405
897 Sonat Inc 38,271 45,971
7,161 Southern Co 156,424 156,647
1,536 Southwest Airlines Co 37,520 39,744
182 Springs Industries Inc Class A 7,935 9,601
</TABLE>
56
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
4,612 Sprint Corp $ 178,740 $ 242,707
1,018 St Jude Medical Inc+ 36,358 39,702
920 St Paul Co Inc 52,411 70,150
928 Stanley Works 24,782 37,120
206 State Street Corp 9,124 9,528
1,024 Stone Container Corp 17,865 14,656
457 Stride Rite Corp 5,335 5,884
799 Sun Co Inc 23,066 24,769
3,983 Sun Microsystems Inc+ 85,114 148,242
2,366 SunTrust Banks Inc 93,481 130,278
760 Supervalu Inc 22,449 26,220
1,889 Sysco Corp 60,477 68,949
1,150 Tandem Computers Inc+ 16,406 23,288
607 Tandy Corp 28,263 33,992
331 Tektronix Inc 15,532 19,860
7,013 Tele-Communication Inc Class A+ 99,262 104,318
1,870 Tellabs Inc+ 62,018 104,486
635 Temple-Inland Inc 33,183 34,290
3,187 Tenet Healthcare Corp+ 71,896 94,216
1,846 Tenneco 77,623 83,416
2,800 Texaco Inc 246,993 304,500
2,013 Texas Instruments Inc 124,721 169,218
2,353 Texas Utilities Co 83,640 81,031
1,756 Textron Inc 68,905 116,555
1,587 Thermo Electron Corp+ 65,704 53,958
537 Thomas & Betts Corp 22,318 28,226
6,042 Time Warner Inc 248,736 291,527
991 Times Mirror Co Class A 35,332 56,301
708 Timken Co 17,147 25,178
1,752 TJX Companies Inc 27,849 46,209
779 Torchmark Corp 37,550 55,504
3,106 Toys R Us Inc+ 92,587 108,710
754 Transamerica Corp 55,088 70,546
6,851 Travelers Group Inc 251,052 432,032
1,336 Tribune Co 47,998 64,212
</TABLE>
57
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,384 TRW Inc $ 63,918 $ 78,629
697 Tupperware Corp+ 28,914 25,441
1,786 Tyco International Ltd 77,301 124,239
1,620 U.S. Bancorp 68,896 103,883
5,100 U.S. West Inc 149,056 192,206
6,654 U.S. West Media Group+ 123,951 134,744
2,248 Unicom Corp 58,382 50,018
1,732 Unilever NV 267,315 370,756
739 Union Camp Corp 37,617 36,950
1,399 Union Carbide Corp 54,470 65,840
1,047 Union Electric Co 39,748 39,459
2,639 Union Pacific Corp 134,962 186,050
2,619 Union Pacific Resources Group Inc 71,673 65,148
1,684 Unisys Corp+ 15,012 12,841
1,949 United Healthcare Corp 88,763 101,348
728 United States Surgical 22,691 27,118
2,496 United Technologies Corp 139,899 207,168
2,720 Unocal Corp 95,466 105,570
1,533 UNUM Corp 46,555 64,386
787 USAir Group Inc+ 15,949 27,545
1,187 USF & G Corp 21,795 28,488
1,961 UST Inc 59,683 54,418
3,101 USX - Marathon Group 69,631 89,541
886 USX - US Steel Group 27,744 31,065
676 VF Corp 42,963 57,545
3,781 Viacom Inc Class B+ 153,887 113,430
1,742 Wachovia Corp 84,688 101,580
24,580 Wal Mart Stores Inc 635,832 831,111
2,667 Walgreen Co 91,172 143,018
2,949 Warner Lambert Co 187,568 366,413
4,816 Waste Management Inc 151,468 154,714
961 Wells Fargo & Co 200,389 258,990
1,403 Wendy's International Inc 28,306 36,390
566 Western Atlas Inc+ 34,072 41,460
6,767 Westinghouse Electric Corp 127,171 156,487
</TABLE>
58
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
1,050 Westvaco Corp $ 30,274 $ 33,009
2,128 Weyerhaeuser Co 97,114 110,656
824 Whirlpool Corp 42,427 44,960
1,103 Whitman Corp 22,967 27,920
547 Willamette Industries Inc 37,543 38,290
1,651 Williams Co Inc 52,478 72,231
1,591 Winn-Dixie Stores Inc 51,501 59,265
1,455 Woolworth Corp+ 28,879 34,920
9,283 WorldCom Inc+ 239,832 297,056
1,024 Worthington Industries Inc 20,208 18,752
1,266 Wrigley (Wm) Jr Co 67,010 84,822
3,501 Xerox Corp 169,555 276,141
------------ ------------
TOTAL COMMON STOCKS $ 55,611,173 $ 72,908,762
</TABLE>
59
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 31.50%
U.S. TREASURY BILLS - 3.19%
$ 110,000 U.S. Treasury Bills 4.62 %F 07/03/97 $ 109,956
344,000 U.S. Treasury Bills 4.97 F 07/10/97 343,524
19,000 U.S. Treasury Bills 4.98 F 07/31/97 18,924
148,000 U.S. Treasury Bills 5.00 F 07/17/97 147,672
130,000 U.S. Treasury Bills 5.05 F 08/07/97 129,355
619,000 U.S. Treasury Bills 5.10 F 09/04/97 613,219
1,096,000 U.S. Treasury Bills 5.11 F 08/21/97 1,088,096
223,000 U.S. Treasury Bills 5.12 F 08/14/97 221,625
284,000 U.S. Treasury Bills 5.13 F 08/28/97 281,599
431,000 U.S. Treasury Bills 5.13 F 09/18/97 426,121
------------
$ 3,380,091
U.S. TREASURY BONDS - 28.31%
$ 1,000,000 U.S. Treasury Bonds 6.00 % 02/15/26 $ 894,688
1,000,000 U.S. Treasury Bonds 6.50 11/15/26 958,438
1,000,000 U.S. Treasury Bonds 6.63 02/15/27 978,340
800,000 U.S. Treasury Bonds 6.75 08/15/26 791,500
3,550,000 U.S. Treasury Bonds 7.50 11/15/24 3,828,455
2,500,000 U.S. Treasury Bonds 7.63 11/15/22 2,721,875
2,150,000 U.S. Treasury Bonds 7.63 02/15/25 2,353,756
4,830,000 U.S. Treasury Bonds 8.00 11/15/21 5,462,430
2,200,000 U.S. Treasury Bonds 8.13 05/15/21 2,516,939
800,000 U.S. Treasury Bonds 8.50 02/15/20 947,250
1,950,000 U.S. Treasury Bonds 8.88 08/15/17 2,374,125
2,800,000 U.S. Treasury Bonds 8.88 02/15/19 3,425,626
2,200,000 U.S. Treasury Bonds 9.13 05/15/18 2,746,564
------------
$ 29,999,986
TOTAL U.S. TREASURY SECURITIES $ 33,380,077
(Cost $33,071,947)
</TABLE>
60
<PAGE>
INDEX ALLOCATION FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $88,683,120)* (Notes 1 and 3) 100.30 % $106,288,839
Other Assets and Liabilities, Net (0.30 ) (318,922)
------- ------------
TOTAL NET ASSETS 100.00 % $105,969,917
------- ------------
------- ------------
..........................................................................................................
</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 $ 18,445,625
Gross Unrealized Depreciation (839,906)
-------------
NET UNREALIZED APPRECIATION $ 17,605,719
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSITS - 22.36%
$ 50,000,000 Branch Banking & Trust Co 6.50 % 07/01/97 $ 50,000,000
10,000,000 CC USA Inc 6.18 05/26/98 10,000,000
35,000,000 Commercial Bank of Detroit 6.18 05/27/98 34,991,600
35,000,000 Huntington National Bank 6.05 01/06/98 35,000,000
30,000,000 Northern Trust Corp 5.40 08/22/97 30,000,000
50,000,000 Societe Generale (Yankee) 5.81 01/13/98 49,995,213
50,000,000 U.S. National Bank of Oregon 5.56 07/11/97 50,000,000
25,000,000 Union Bank of California 5.73 11/03/97 25,000,000
------------
TOTAL CERTIFICATES OF DEPOSITS $284,986,813
COMMERCIAL PAPER - 46.61%
$ 20,000,000 ABN-Ambro North America Finance Inc 5.50 %F 12/08/97 $ 19,511,111
35,000,000 Asset Securitization Cooperative Corp++ 5.56 F 07/14/97 34,929,728
50,000,000 Bankers Trust Corp 5.34 F 08/11/97 49,695,917
20,000,000 Caisee National De Credit Agricole 5.94 F 06/23/98 19,988,531
25,000,000 Canadian Imperial Holding Inc 5.54 F 07/10/97 24,965,363
45,000,000 Corporate Receivables Corp++ 5.54 F 07/09/97 44,944,600
35,000,000 First Bank System Inc 5.55 F 07/07/97 34,967,625
45,000,000 Ford Motor Corp 5.55 F 08/08/97 44,736,375
25,000,000 General Electric Capital Corp 5.29 F 08/08/97 24,860,403
30,000,000 General Electric Capital Corp 5.37 F 07/28/97 29,879,175
25,000,000 Goldman Sachs & Co 5.54 F 07/08/97 24,973,069
55,000,000 Merrill Lynch Corp 5.55 F 07/07/97 54,949,125
30,000,000 Morgan Stanley Group Inc 5.57 F 07/22/97 29,902,525
50,000,000 Preferred Receivables Funding Corp 6.20 F 07/01/97 50,000,000
32,300,000 Sherrield Receivables Corp++ 5.56 F 07/21/97 32,200,229
25,000,000 Sweden Kingdom Corp 5.47 F 12/01/97 24,418,813
25,000,000 Sweden Kingdom Corp 5.60 F 12/05/97 24,389,444
25,000,000 WCP Funding Inc++ 5.56 F 08/19/97 24,810,804
------------
TOTAL COMMERCIAL PAPER $594,122,837
</TABLE>
62
<PAGE>
MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
VARIABLE AND FLOATING RATE BONDS - 21.14%
$ 43,500,000 Abbey National North America 5.58 % 07/17/97 $ 43,469,985
34,000,000 Barclays Bank Plc 5.62 02/20/98 33,983,561
45,000,000 FCC National Bank 5.60 06/11/98 44,965,242
25,000,000 Federal Home Loan Bank 5.28 08/08/97 24,983,138
15,000,000 Morgan Guaranty Trust 5.96 06/22/98 14,994,956
44,000,000 PHH Corp 5.37 09/22/97 44,000,000
43,000,000 PNC Bank Corp 5.59 10/01/97 42,992,868
20,000,000 Sony Capital Corp 5.78 08/29/97 19,999,153
------------
TOTAL VARIABLE AND FLOATING RATE BONDS $269,388,903
REPURCHASE AGREEMENTS - 9.90%
$ 63,172,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.85 % 07/01/97 $ 63,172,000
31,000,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.80 07/01/97 31,000,000
32,000,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.95 07/01/97 32,000,000
------------
TOTAL REPURCHASE AGREEMENTS $126,172,000
</TABLE>
63
<PAGE>
MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $1,274,670,553)* (Note 1) 100.01 % $1,274,670,553
Other Assets and Liabilities, Net (0.01 ) (86,030)
------- ------------
TOTAL NET ASSETS 100.00 % $1,274,584,523
------- ------------
------- ------------
..........................................................................................................
</TABLE>
F YIELD TO MATURITY.
++ 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 ADVISOR
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.
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
MUNICIPAL INCOME FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 96.49%
ALABAMA - 0.33%
$ 160,000 Alabama State SFMR Series B AMT GNMA
Collateralized 7.40 % 04/01/22 $ 164,170
ALASKA - 3.11%
1,000,000 Alaska Industrial Development Authority Revenue
Series A 6.13 04/01/27 1,021,760
490,000 Alaska State Housing Finance Corporation Second
Series AMT Government Agency Collateralized 7.10 06/01/22 513,358
CALIFORNIA - 29.06%
9,750,000 Riverside County CA SFMR Series B AMT Escrowed
to Maturity 8.35 06/01/13 12,452,213
1,000,000 San Francisco CA City AMT 6.15 05/01/16 1,036,550
820,000 Southern California State SFMR Project B AMT
GNMA/FNMA Collateralized 6.90 10/01/24 857,925
DISTRICT OF COLUMBIA - 0.68%
320,000 District of Columbia SFMR AMT GNMA
Collateralized 7.10 12/01/24 337,443
FLORIDA - 0.46%
215,000 Brevard County FL HFA SFMR Refunded Series B
FSA Insured 7.00 03/01/13 226,825
HAWAII - 2.69%
725,000 Hawaii State Airports Systems Revenue AMT FGIC
Insured 7.00 07/01/20 789,344
500,000 Hawaii State Harbor Capital Improvement Revenue
AMT MBIA Insured 7.00 07/01/17 538,125
IDAHO - 3.12%
1,500,000 Idaho State HFA SFMR Series C-2 AMT 6.35 07/01/15 1,540,845
ILLINOIS - 5.21%
500,000 Chicago IL O'Hare International Airport Special
Facilities Revenue AMT LOC - Bayerische
Landesbank 7.13 05/01/18 539,190
</TABLE>
65
<PAGE>
MUNICIPAL INCOME FUND - JUNE 30, 1997 (UNAUDITED)
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 $ 2,030,245
INDIANA - 5.29%
2,500,000 Indiana State HFA Series A-2 AMT GNMA/FNMA
Collateralized 6.45 07/01/14 2,613,750
IOWA - 3.84%
1,435,000 Iowa State HFA SFMR Series B AMT GNMA/FNMA
Collateralized 6.95 07/01/24 1,512,533
365,000 Iowa State HFA SFMR Series B AMT GNMA/FNMA
Collateralized 7.45 07/01/23 382,549
KANSAS - 0.36%
165,000 Kansas City KS Mortgage Revenue AMT GNMA
Collateralized 7.35 12/01/23 175,141
KENTUCKY - 4.49%
1,100,000 Kenton County KY Cincinnati/Northern Kentucky
International Airport Revenue AMT FSA Insured 6.30 03/01/15 1,140,513
1,025,000 Kentucky State HFA MFHR Series D AMT FHA
Collateralized 7.45 01/01/23 1,077,982
LOUISIANA - 1.44%
670,000 Louisiana State Public Facilities Authority
Student Loan Revenue AMT FSA Insured 6.85 01/01/09 710,562
MASSACHUSETTS - 2.17%
1,000,000 Massachusetts State HFA Residential Development
FNMA Collateralized 6.90 11/15/21 1,071,830
MINNESOTA - 0.91%
425,000 Minneapolis-St Paul MN Housing Finance Board
Revenue SFMR Phase IX AMT GNMA Collateralized 7.30 08/01/31 449,790
</TABLE>
66
<PAGE>
MUNICIPAL INCOME FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
NEVADA - 11.81%
$ 1,020,000 Nevada State SFMR Series A-2 AMT FHA
Collateralized 6.55 % 10/01/15 $ 1,072,887
1,825,000 Nevada State SFMR Series C AMT FHA
Collateralized 6.35 10/01/13 1,899,661
2,700,000 Washoe County NV Gas Facilities Sierra Pacific
Power AMT MBIA Insured 6.55 09/01/20 2,858,678
NEW JERSEY - 2.66%
1,250,000 New Jersey State MFHR FHA Collateralized 7.00 05/01/30 1,314,425
NEW YORK - 2.09%
1,000,000 Port Authority New York & New Jersey 5.75 09/15/12 1,031,370
OKLAHOMA - 2.71%
200,000 Pryor Creek OK Economic Development Authority
Mortgage Revenue Series A FNMA Collateralized 7.13 07/01/21 208,316
570,000 Tulsa County OK HFA Mortgage Revenue Series B
Remarket AMT GNMA Collateralized 7.10 06/01/22 601,755
500,000 Tulsa County OK HFA Mortgage Revenue Series B
Remarket AMT GNMA Collateralized 7.55 05/01/23 528,265
PENNSYLVANIA - 1.07%
500,000 Pennsylvania State Higher EDFA Student Loan
Revenue Series D AMT AMBAC Insured 7.05 10/01/16 525,625
TEXAS - 0.92%
425,000 Travis County TX HFC Residential Mortgage
Revenue Series A GNMA/FNMA Collateralized 7.00 12/01/11 453,241
UTAH - 9.02%
500,000 Utah State Board of Regents Student Loan
Revenue Series F AMT AMBAC Insured 7.45 11/01/08 528,485
</TABLE>
67
<PAGE>
MUNICIPAL INCOME FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
UTAH - CONTINUED
$ 1,100,000 Utah State Board of Regents Student Loan
Revenue Series H AMT AMBAC Insured 6.70 % 11/01/15 $ 1,142,295
1,920,000 Utah State HFA SFMR Series B-2 AMT FHA
Collateralized 6.50 07/01/15 2,003,693
750,000 Utah State HFA SFMR Series D-2 AMT FHA
Collateralized 6.45 01/01/11 779,993
WASHINGTON - 3.05%
1,440,000 Washington State SFMR Series D AMT GNMA/FNMA
Collateralized 7.10 07/01/22 1,505,491
------------
TOTAL MUNICIPAL BONDS $ 47,636,823
(Cost $44,941,825)
</TABLE>
68
<PAGE>
MUNICIPAL INCOME FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 2.65%
MONEY MARKET FUNDS- 2.65%
1,307,000 Provident National Municipal Fund
$ 1,307,000
(Cost $1,307,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $46,248,825)* (Notes 1 and 3) 99.14 % $ 48,943,823
Other Assets and Liabilities, Net 0.86 423,617
------- ------------
TOTAL NET ASSETS 100.00 % $ 49,367,440
------- ------------
------- ------------
..........................................................................................................
</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 $ 2,694,998
Gross Unrealized Depreciation 0
-----------
NET UNREALIZED APPRECIATION $ 2,694,998
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
U.S. GOVERNMENT INCOME FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 86.28%
ADJUSTABLE RATE MORTGAGES - 0.35%
$ 17,750 GNMA #8109 (CMT) 7.00 % 03/20/16 $ 18,249
30,144 GNMA #8119 (CMT) 7.13 04/20/16 31,067
9,355 GNMA #8137 (CMT) 7.13 06/20/16 9,629
15,484 GNMA #8292 (CMT) 6.87 11/20/17 15,890
26,995 GNMA #8293 (CMT) 6.87 12/20/17 27,703
7,552 GNMA #8310 (CMT) 7.00 01/20/18 7,778
30,734 GNMA #8392 (CMT) 7.13 08/20/18 31,637
31,329 GNMA #8393 (CMT) 7.13 08/20/18 32,308
17,449 GNMA #8429 (CMT) 6.87 11/20/18 17,929
95,356 GNMA #8761 (CMT) 7.00 03/20/21 97,859
------------
$ 290,049
FEDERAL AGENCY - OTHER - 5.97%
$ 5,000,000 Tennessee Valley Authority 6.38 % 06/15/05 $ 4,889,050
FEDERAL FARM CREDIT - 6.51%
$ 5,350,000 Federal Farm Credit Bank 6.38 % 02/25/02 $ 5,330,366
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 14.74%
$ 3,888,901 FNMA #250799 7.50 % 12/01/26 $ 3,899,479
5,000,000 FNMA #31364 7.00 02/20/07 4,939,050
3,024,329 FNMA #70765 9.00 03/01/21 3,223,783
------------
$ 12,062,312
FIXED RATE MORTGAGES - 56.73%
$ 3,767,891 FHLMC #00683 8.50 % 12/01/25 $ 3,922,035
4,731,477 FHLMC #20277 7.50 12/01/11 4,812,432
35,540 FHLMC #275825 9.50 08/01/16 38,206
30,442 FHLMC #304114 9.00 05/01/18 32,291
121,699 FHLMC #304398 9.00 06/01/18 129,128
29,556 FHLMC #305831 10.00 08/01/18 32,316
7,524 FHLMC #307323 9.50 09/01/18 8,088
54,378 FHLMC #307637 9.50 07/01/16 58,181
30,700 FHLMC #307915 9.50 10/01/18 33,024
5,510 FHLMC #308074 9.50 10/01/18 5,927
</TABLE>
70
<PAGE>
U.S. GOVERNMENT INCOME FUND - JUNE 30, 1997 (UNAUDITED)
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
$ 16,678 FHLMC #360020 10.00 % 01/01/18 $ 18,238
23,332 FHLMC #360045 10.00 02/01/19 25,507
28,427 FHLMC #532468 9.50 04/01/19 30,560
13,959 GNMA #150499 10.50 03/15/16 15,422
57,677 GNMA #17087 9.00 09/15/16 61,991
130,228 GNMA #173055 9.00 09/15/16 139,968
79,057 GNMA #176892 9.00 10/15/16 84,970
365,976 GNMA #190848 9.00 01/15/17 393,347
149,853 GNMA #191961 9.00 02/15/20 160,430
39,739 GNMA #202624 9.00 11/15/19 42,574
40,020 GNMA #236877 9.00 04/15/18 42,945
49,176 GNMA #285963 9.00 01/15/20 52,646
13,993 GNMA #289319 9.00 11/15/20 14,980
136,096 GNMA #303235 9.00 05/15/21 145,596
159,806 GNMA #304653 9.00 09/15/21 170,960
2,501,042 GNMA #306052 9.00 06/15/21 2,675,623
4,046 GNMA #314150 9.00 10/15/21 4,328
2,035,752 GNMA #319413 7.25 12/15/18 2,010,305
15,579 GNMA #33080 9.00 08/15/22 16,622
23,583 GNMA #335400 9.00 12/15/22 25,163
1,915,056 GNMA #358863 7.25 01/15/24 1,891,117
2,477,117 GNMA #444645 8.50 04/15/27 2,576,920
4,946,716 GNMA #450871 8.00 05/15/27 5,066,327
602,966 GNMA II #1124 11.00 01/20/19 679,495
292,065 GNMA II #1221 11.00 07/20/19 329,490
88,910 GNMA II #1562 10.00 02/20/21 97,000
31,811 GNMA II #194221 10.00 09/20/20 34,705
3,279,967 GNMA II #2020 8.50 06/20/25 3,395,684
2,620,321 GNMA II #2022 9.00 06/20/25 2,749,687
2,916,576 GNMA II #2068 7.50 08/20/26 2,912,930
2,434,064 GNMA II #2303 7.50 10/20/26 2,431,021
3,387,097 GNMA II #2324 8.00 11/20/26 3,455,246
4,963,601 GNMA II #2359 7.00 01/20/27 4,857,082
315,931 GNMA II #266120 10.00 08/20/19 344,823
</TABLE>
71
<PAGE>
U.S. GOVERNMENT INCOME FUND - JUNE 30, 1997 (UNAUDITED)
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
$ 3,236 GNMA II #272537 10.00 % 08/20/19 $ 3,532
18,098 GNMA II #278055 10.00 07/20/19 19,753
61,932 GNMA II #289000 10.00 05/20/20 67,567
161,852 GNMA II #85 10.00 02/20/22 176,579
130,051 GNMA II #908 10.00 01/20/18 142,005
------------
$ 46,434,766
U.S. GOVERNMENT AGENCY NOTES - 1.98%
$ 1,700,000 FNMA Principal Strip 10.89 %F 03/09/22 $ 1,619,352
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 70,625,895
(Cost $70,083,236)
U.S. TREASURY SECURITIES - 12.72%
U.S. TREASURY BONDS - 7.17%
$ 6,000,000 U.S. Treasury Bonds 6.63 % 02/15/27 $ 5,870,640
U.S. TREASURY NOTES - 5.55%
$ 4,500,000 U.S. Treasury Notes 6.63 % 04/30/02 $ 4,541,490
TOTAL U.S. TREASURY SECURITIES $ 10,412,130
(Cost $10,436,485)
SHORT-TERM INSTRUMENTS - 0.78%
REPURCHASE AGREEMENTS - 0.78%
$ 636,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.85 % 07/01/97 $ 636,000
(Cost $636,000)
</TABLE>
72
<PAGE>
U.S. GOVERNMENT INCOME FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $81,155,721)* (Notes 1 and 3) 99.78 % $ 81,674,025
Other Assets and Liabilities, Net 0.22 177,399
------- ------------
TOTAL NET ASSETS 100.00 % $ 81,851,424
------- ------------
------- ------------
..........................................................................................................
</TABLE>
+ 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 $ 720,133
Gross Unrealized Depreciation (201,829)
-------------
NET UNREALIZED APPRECIATION $ 518,304
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
73
<PAGE>
U.S. TREASURY MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 36.69%
U.S. TREASURY BILLS - 19.94%
$ 40,000,000 U.S. Treasury Bills 5.01 %F 07/24/97 $ 39,875,289
10,000,000 U.S. Treasury Bills 5.11 F 08/21/97 9,927,821
20,000,000 U.S. Treasury Bills 5.15 F 11/13/97 19,603,250
25,000,000 U.S. Treasury Bills 5.16 F 10/16/97 24,609,896
------------
TOTAL U.S. TREASURY BILLS $ 94,016,256
U.S. TREASURY NOTES - 16.75%
$ 9,620,000 U.S. Treasury Notes 5.13 % 04/30/98 $ 9,541,109
15,300,000 U.S. Treasury Notes 5.88 07/31/97 15,306,209
20,000,000 U.S. Treasury Notes 6.13 05/15/98 20,017,364
8,000,000 U.S. Treasury Notes 7.88 01/15/98 8,080,184
10,000,000 U.S. Treasury Notes 7.88 04/15/98 10,136,517
6,660,000 U.S. Treasury Notes 8.50 07/15/97 6,668,008
9,200,000 U.S. Treasury Notes 8.75 10/15/97 9,283,232
------------
TOTAL U.S. TREASURY NOTES $ 79,032,623
TOTAL U.S. TREASURY SECURITIES $173,048,879
REPURCHASE AGREEMENTS - 63.47%
$ 81,640,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.85 % 07/01/97 $ 81,640,000
78,723,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.80 07/01/97 78,723,000
82,000,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.95 07/01/97 82,000,000
57,000,000 Morgan Stanley & Co Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 6.00 07/01/97 57,000,000
------------
TOTAL REPURCHASE AGREEMENTS $299,363,000
</TABLE>
74
<PAGE>
U.S. TREASURY MONEY MARKET FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $472,411,879)* (Note 1) 100.16 % $472,411,879
Other Assets and Liabilities, Net (0.16 ) (746,231)
------- ------------
TOTAL NET ASSETS 100.00 % $471,665,648
------- ------------
------- ------------
..........................................................................................................
</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.
75
<PAGE>
VARIABLE RATE GOVERNMENT FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 86.22%
ADJUSTABLE RATE MORTGAGES - 85.19%
$ 11,782,832 FHLMC #610237 (CMT) 7.49 % 10/01/25 $ 12,158,469
11,080,411 FHLMC #610303 7.78 04/01/18 11,456,148
5,588,217 FHLMC #755102 (CMT) 7.41 06/01/18 5,797,775
3,762,062 FHLMC #840118 8.04 09/01/18 3,968,976
32,158 FHLMC #845410 (CMT) 7.46 07/01/23 33,244
13,235 FHLMC #845613 (CMT) 8.11 01/01/24 13,715
16,901,118 FHLMC #846111 7.79 06/01/24 17,598,289
13,991,244 FHLMC #846150 (CMT) 7.81 04/01/21 14,760,763
12,841,660 FHLMC #846299 7.82 06/01/25 13,265,049
15,830,808 FHLMC #846415 7.76 09/01/23 16,617,441
8,105,985 FNMA #136014 (COFI) 5.85 05/01/18 8,442,626
10,010,436 FNMA #303990 7.83 01/01/25 10,378,019
12,996,115 FNMA #313100 6.15 10/01/26 13,430,705
13,248,841 FNMA #313242 6.15 11/01/26 13,708,443
10,321,267 FNMA #334439 7.82 04/01/24 10,848,581
7,542,476 FNMA #57733 6.07 02/01/17 7,410,482
3,187,468 FNMA #57775 6.01 05/01/18 3,163,562
10,608,099 FNMA #66397 6.12 03/01/18 10,420,760
10,043,594 GNMA II #8076 6.88 11/20/22 10,321,400
9,633,564 GNMA II #8303 (CMT) 6.88 10/20/23 9,886,445
7,442,685 GNMA II #8358 (CMT) 7.00 01/20/24 7,614,834
8,314,370 GNMA II #8443 (CMT) 7.13 06/20/24 8,558,646
10,700,811 GNMA II #8705 (CMT) 7.13 09/20/25 11,006,747
20,909,449 GNMA II #8746 6.88 11/20/25 21,422,358
19,997,329 GNMA II #8767 6.88 12/20/25 20,484,864
23,090,724 GNMA II #8793 7.00 01/20/26 23,649,981
------------
$286,418,322
REAL ESTATE MORTGAGE INVESTMENT CONDUITS - 1.03%
$ 3,295,848 FHLMC #1534 7.09 % 06/15/23 $ 3,454,444
------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $289,872,766
(Cost $287,963,162)
</TABLE>
76
<PAGE>
VARIABLE RATE GOVERNMENT FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES - 9.38%
U.S. TREASURY BILLS - 3.14%
$ 11,000,000 U.S. Treasury Bills 5.28 %F 04/02/98 $ 10,557,140
U.S. TREASURY NOTES - 6.24%
$ 11,000,000 U.S. Treasury Notes 5.88 % 02/28/99 $ 10,974,038
10,000,000 U.S. Treasury Notes 6.00 06/30/99 9,985,900
------------
$ 20,959,938
TOTAL U.S. TREASURY SECURITIES $ 31,517,078
(Cost $31,484,989)
SHORT-TERM INSTRUMENTS - 3.35%
REPURCHASE AGREEMENTS - 3.35%
$ 2,223,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.85 % 07/01/97 $ 2,223,000
9,012,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.80 07/01/97 9,012,000
32,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.95 07/01/97 32,000
------------
TOTAL SHORT-TERM INSTRUMENTS $ 11,267,000
(Cost $11,267,000)
</TABLE>
77
<PAGE>
VARIABLE RATE GOVERNMENT FUND - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $330,715,151)* (Notes 1 and 3) 98.95 % $332,656,844
Other Assets and Liabilities, Net 1.05 3,542,054
------- ------------
TOTAL NET ASSETS 100.00 % $336,198,898
------- ------------
------- ------------
..........................................................................................................
</TABLE>
+ 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 $ 2,466,636
Gross Unrealized Depreciation (524,943)
-------------
NET UNREALIZED APPRECIATION $ 1,941,693
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) -
JUNE 30, 1997
<TABLE>
<CAPTION>
CALIFORNIA
CALIFORNIA TAX-FREE
TAX-FREE MONEY MARKET
BOND FUND FUND
<S> <C> <C>
..........................................................................
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below)
(U.S. Treasury Money Market Fund
includes
repurchase agreements of
$299,363,000) $226,553,563 $403,037,419
Cash 1,730 45,810,755
Receivables:
Dividends and interest 3,702,342 3,011,219
Fund shares sold 205 0
Investment securities sold 0 20,000,000
Due from co-administrator (Note 2) 0 0
Organization expenses, net of
amortization 713 0
Prepaid expenses 185,620 5,832
TOTAL ASSETS 230,444,173 471,865,225
LIABILITIES
Cash overdraft due to custodian (Note 2) 0 0
Payables:
Investment securities purchased 0 40,715,770
Distribution to shareholders 890,778 1,065,215
Fund shares redeemed 12,131 0
Due to sponsor and distributor (Note
2) 7,357 469,644
Due to WFB (Note 2) 129,648 188,092
Other 28,729 54,382
TOTAL LIABILITIES 1,068,643 42,493,103
TOTAL NET ASSETS
$229,375,530 $429,372,122
NET ASSETS CONSIST OF:
Paid-in capital $220,195,791 $429,435,894
Undistributed (overdistributed)
net investment income 0 0
Undistributed net realized gain (loss)
on investments 358,265 (63,772)
Net unrealized appreciation
(depreciation)
of investments 8,821,474 0
TOTAL NET ASSETS $229,375,530 $429,372,122
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Net assets - Class A(1) $223,651,118 $429,372,122
Shares outstanding - Class A(1) 21,214,728 429,435,202
Net asset value per share - Class A(1) $10.54 $1.00
Maximum offering price per share - Class
A(1) $11.04(2) $1.00
Net assets - Class D or Institutional $ 5,724,412 N/A
Shares outstanding - Class D or
Institutional 415,880 N/A
Net asset value and offering price per
share -
Class D or Institutional $13.76 N/A
INVESTMENT AT COST (NOTE 3) $217,732,089 $403,037,419
</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.
The accompanying notes are an integral part of these financial statements.
79
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) -
JUNE 30, 1997
<TABLE>
<CAPTION>
INDEX MONEY MUNICIPAL
ALLOCATION MARKET INCOME
FUND FUND FUND
<S> <C> <C> <C>
............................................................................................
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below)
(U.S. Treasury Money Market Fund
includes
repurchase agreements of
$299,363,000) $106,288,839 $1,274,670,553 $48,943,823
Cash 8,527 1,926 1,240
Receivables:
Dividends and interest 560,132 5,093,046 815,373
Fund shares sold 157,618 0 0
Investment securities sold 0 0 0
Due from co-administrator (Note 2) 0 0 0
Organization expenses, net of
amortization 4,576 24,773 4,099
Prepaid expenses 0 167,039 514
TOTAL ASSETS 107,019,692 1,279,957,337 49,765,049
LIABILITIES
Cash overdraft due to custodian (Note 2) 0 0 0
Payables:
Investment securities purchased 84,241 0 0
Distribution to shareholders 591,594 4,712,430 212,174
Fund shares redeemed 31,684 0 1,707
Due to sponsor and distributor (Note
2) 118,277 307,698 47,194
Due to WFB (Note 2) 76,180 334,188 18,534
Other 147,799 18,498 118,000
TOTAL LIABILITIES 1,049,775 5,372,814 397,609
TOTAL NET ASSETS
$105,969,917 $1,274,584,523 $49,367,440
NET ASSETS CONSIST OF:
Paid-in capital $ 80,010,897 $1,274,649,212 $50,688,690
Undistributed (overdistributed)
net investment income 0 0 0
Undistributed net realized gain (loss)
on investments 8,353,301 (64,689) (4,016,248)
Net unrealized appreciation
(depreciation)
of investments 17,605,719 0 2,694,998
TOTAL NET ASSETS $105,969,917 $1,274,584,523 $49,367,440
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Net assets - Class A(1) $ 72,691,494 $ 589,281,220 $40,762,763
Shares outstanding - Class A(1) 4,632,859 589,354,186 3,780,372
Net asset value per share - Class A(1) $15.69 $1.00 $10.78
Maximum offering price per share - Class
A(1) $16.43(2) $1.00 $11.11(3)
Net assets - Class D or Institutional $ 33,278,423 $ 685,303,303 $ 8,604,677
Shares outstanding - Class D or
Institutional 1,703,379 685,294,984 589,285
Net asset value and offering price per
share -
Class D or Institutional $19.54 $1.00 $14.60
INVESTMENT AT COST (NOTE 3) $ 88,683,120 $1,274,670,553 $46,248,825
</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.
80
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM SHORT-TERM U.S.
GOVERNMENT- MUNICIPAL SMALL CAP STRATEGIC GOVERNMENT
CORPORATE INCOME STRATEGY GROWTH INCOME
INCOME FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
........................................................................................................................
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below)
(U.S. Treasury Money Market Fund
includes
repurchase agreements of
$299,363,000) $10,214,515(4) $21,500,777(4) $5,082,519(4) $164,806,507(4) $81,674,025
Cash 0 0 0 0 80,853
Receivables:
Dividends and interest 55,980 73,153 2,871 0 650,903
Fund shares sold 0 0 4,782 24,329 0
Investment securities sold 0 0 0 0 12,166
Due from co-administrator (Note 2) 4,988 2,747 6,522 0 0
Organization expenses, net of
amortization 47,836 41,591 71,252 13,350 4,085
Prepaid expenses 136 7,712 0 6,536 17,260
TOTAL ASSETS 10,323,455 21,625,980 5,167,946 164,850,722 82,439,292
LIABILITIES
Cash overdraft due to custodian (Note 2) 0 0 0 0 0
Payables:
Investment securities purchased 0 0 0 0 0
Distribution to shareholders 52,343 66,301 0 0 410,703
Fund shares redeemed 0 0 0 384,713 3,919
Due to sponsor and distributor (Note
2) 7,170 17,660 84,587 138,169 4,129
Due to WFB (Note 2) 0 0 0 22,867 48,185
Other 44,811 41,133 48,190 329,857 120,932
TOTAL LIABILITIES 104,324 125,094 132,777 875,606 587,868
TOTAL NET ASSETS
$10,219,131 $21,500,886 $5,035,169 $163,975,116 $81,851,424
NET ASSETS CONSIST OF:
Paid-in capital $10,288,059 $21,474,824 $4,679,767 $143,452,796 $84,689,606
Undistributed (overdistributed)
net investment income 0 0 (20,176) (964,819) 0
Undistributed net realized gain (loss)
on investments (63,012) (1,351) (100,781) 13,611,900 (3,356,486)
Net unrealized appreciation
(depreciation)
of investments (5,916) 27,413 476,359 7,875,239 518,304
TOTAL NET ASSETS $10,219,131 $21,500,886 $5,035,169 $163,975,116 $81,851,424
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Net assets - Class A(1) $10,219,131 $21,500,886 $2,983,067 $121,541,608 $80,058,438
Shares outstanding - Class A(1) 2,053,608 4,327,508 277,658 6,576,940 7,944,381
Net asset value per share - Class A(1) $4.98 $4.97 $10.74 $18.48 $10.08
Maximum offering price per share - Class
A(1) $5.13(3) $5.12(3) $11.25(2) $19.35(2) $10.55(2)
Net assets - Class D or Institutional N/A N/A $2,052,102 $ 42,433,508 $ 1,792,986
Shares outstanding - Class D or
Institutional N/A N/A 192,120 1,878,541 130,165
Net asset value and offering price per
share -
Class D or Institutional N/A N/A $10.68 $22.59 $13.77
INVESTMENT AT COST (NOTE 3) N/A N/A N/A N/A $81,155,721
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
81
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) -
JUNE 30, 1997
<TABLE>
<CAPTION>
U.S. VARIABLE
TREASURY RATE
MARKET GOVERNMENT
FUND FUND
<S> <C> <C>
..........................................................................
ASSETS
INVESTMENTS:
In securities, at market value (see
cost below)
(U.S. Treasury Money Market Fund
includes
repurchase agreements of
$299,363,000) $472,411,879 $332,656,844
Cash 0 1,873
Receivables:
Dividends and interest 1,550,291 3,553,029
Fund shares sold 0 0
Investment securities sold 0 1,969,361
Due from co-administrator (Note 2) 0 0
Organization expenses, net of
amortization 7,825 3,052
Prepaid expenses 49,031 19,622
TOTAL ASSETS 474,019,026 338,203,781
LIABILITIES
Cash overdraft due to custodian (Note 2) 7,622 0
Payables:
Investment securities purchased 0 0
Distribution to shareholders 1,903,425 1,569,751
Fund shares redeemed 0 8,751
Due to sponsor and distributor (Note
2) 278,327 230,255
Due to WFB (Note 2) 138,315 127,649
Other 25,689 68,477
TOTAL LIABILITIES 2,353,378 2,004,883
TOTAL NET ASSETS
$471,665,648 $336,198,898
NET ASSETS CONSIST OF:
Paid-in capital $471,622,679 $478,956,619
Undistributed (overdistributed)
net investment income 0 0
Undistributed net realized gain (loss)
on investments 42,969 (144,699,414)
Net unrealized appreciation
(depreciation)
of investments 0 1,941,693
TOTAL NET ASSETS $471,665,648 $336,198,898
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Net assets - Class A(1) $294,130,493 $325,236,589
Shares outstanding - Class A(1) 294,119,766 35,022,207
Net asset value per share - Class A(1) $1.00 $9.29
Maximum offering price per share - Class
A(1) $1.00 $9.58(2)
Net assets - Class D or Institutional $177,535,155 $ 10,962,309
Shares outstanding - Class D or
Institutional 177,506,276 789,380
Net asset value and offering price per
share -
Class D or Institutional $1.00 $13.89
INVESTMENT AT COST (NOTE 3) $472,411,879 $330,715,151
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) MAXIMUM OFFERING PRICE IS COMPUTED AS 100/97 OF NET ASSET VALUE. ON
INVESTMENTS OF $100,000 OR MORE THE OFFERING PRICE IS REDUCED.
The accompanying notes are an integral part of these financial statements.
82
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED) - FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
CALIFORNIA
TAX-FREE
CALIFORNIA MONEY
TAX-FREE MARKET
BOND FUND FUND
<S> <C> <C>
......................................................................
INVESTMENT INCOME (NOTE 6)
Dividends $ 0 $ 0
Interest 6,769,962 6,674,207
Net expenses allocated from Master
Portfolio N/A N/A
TOTAL INVESTMENT INCOME 6,769,962 6,674,207
EXPENSES (NOTE 2)
Advisory fees 579,099 857,565
Administration fees 135,274 136,112
Custody fees 20,803 36,564
Shareholder servicing fees 7,517 0
Portfolio accounting fees 53,905 68,611
Transfer agency fees 155,369 161,200
Distribution fees 15,033 0
Amortization of organization expenses 581 0
Legal and audit fees 12,160 22,765
Registration fees 2,285 1,899
Directors' fees 2,205 2,184
Shareholder reports 16,834 1,603
Other 17,374 4,657
TOTAL EXPENSES 1,018,439 1,293,160
Less:
Waived fees and reimbursed expenses (142,045) (76,948)
NET EXPENSES 876,394 1,216,212
NET INVESTMENT INCOME 5,893,568 5,457,995
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 64,005 (4,855)
Net change in unrealized appreciation
(depreciation) of investments 820,025 0
NET GAIN (LOSS) ON INVESTMENTS 884,030 (4,855)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $6,777,598 $5,453,140
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
83
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED) - FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
INDEX MONEY MUNICIPAL
ALLOCATION MARKET INCOME
FUND FUND FUND
<S> <C> <C> <C>
........................................................................................
INVESTMENT INCOME (NOTE 6)
Dividends $ 528,437 $ 0 $ 0
Interest 1,249,248 32,245,239 1,622,179
Net expenses allocated from Master
Portfolio N/A N/A N/A
TOTAL INVESTMENT INCOME 1,777,685 32,245,239 1,622,179
EXPENSES (NOTE 2)
Advisory fees 328,935 1,452,657 125,773
Administration fees 40,724 505,374 23,472
Custody fees 0 99,861 4,097
Shareholder servicing fees 35,555 0 11,694
Portfolio accounting fees 0 146,708 29,856
Transfer agency fees 62,647 198,830 38,149
Distribution fees 188,586 553,548 55,587
Amortization of organization expenses 2,110 5,506 1,768
Legal and audit fees 23,165 48,251 13,162
Registration fees 20,576 28,319 13,474
Directors' fees 2,192 2,188 2,478
Shareholder reports 31,917 18,328 14,300
Other 5,922 7,768 6,390
TOTAL EXPENSES 742,329 3,067,338 340,200
Less:
Waived fees and reimbursed expenses (30,435) (199,275) (103,259)
NET EXPENSES 711,894 2,868,063 236,941
NET INVESTMENT INCOME 1,065,791 29,377,176 1,385,238
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 6,995,279 13,572 (12,217)
Net change in unrealized appreciation
(depreciation) of investments 3,933,393 0 316,499
NET GAIN (LOSS) ON INVESTMENTS 10,928,672 13,572 304,282
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $11,994,463 $29,390,748 $ 1,689,520
</TABLE>
................................................................................
(1) ALLOCATED FROM THE MASTER PORTFOLIO.
The accompanying notes are an integral part of these financial statements.
84
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT- SHORT-TERM SMALL U.S.
CORPORATE MUNICIPAL CAP STRATEGIC GOVERNMENT
INCOME INCOME STRATEGY GROWTH INCOME
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
.............................................................................................................
INVESTMENT INCOME (NOTE 6)
Dividends $ 0 $ 0 $ 2,292(1) $ 81,242(1) $ 0
Interest 366,755(1) 518,965(1) 13,814(1) 126,894(1) 2,775,309
Net expenses allocated from Master
Portfolio 0 0 (13,234) (487,928) N/A
TOTAL INVESTMENT INCOME 366,755 518,965 2,872 (279,792) 2,775,309
EXPENSES (NOTE 2)
Advisory fees 0 0 0 0 199,187
Administration fees 7,465 15,227 1,926 109,745 34,579
Custody fees 0 0 0 0 11,673
Shareholder servicing fees 0 0 2,135 58,450 2,532
Portfolio accounting fees 0 0 0 0 36,026
Transfer agency fees 6,851 13,110 2,542 107,330 51,960
Distribution fees 14,973 30,131 9,847 323,705 5,065
Amortization of organization expenses 7,820 7,541 8,237 7,425 1,736
Legal and audit fees 12,212 13,711 20,193 24,455 12,577
Registration fees 4,943 4,959 14,878 25,633 27,801
Directors' fees 2,480 2,480 2,480 2,159 2,480
Shareholder reports 4,647 6,517 9,096 29,273 15,013
Other 600 1,607 3,563 3,307 8,569
TOTAL EXPENSES 61,991 95,283 74,897 691,482 409,198
Less:
Waived fees and reimbursed expenses (39,843) (47,750) (51,849) (6,455) (48,260)
NET EXPENSES 22,148 47,533 23,048 685,027 360,938
NET INVESTMENT INCOME 344,607 471,432 (20,176) (964,819) 2,414,371
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments (3,173)(1) (5,864)(1) (12,586)(1) 31,041(1) (907,763)
Net change in unrealized appreciation
(depreciation) of investments (8,553)(1) (21,759)(1) 336,733(1) 1,152,670(1) 519,073
NET GAIN (LOSS) ON INVESTMENTS (11,726) (27,623) 324,147 1,183,711 (388,690)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $332,881 $443,809 $303,971 $ 218,892 $2,025,681
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
85
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED) - FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
U.S. VARIABLE
TREASURY RATE
MARKET GOVERNMENT
FUND FUND
<S> <C> <C>
........................................................................
INVESTMENT INCOME (NOTE 6)
Dividends $ 0 $ 1,197,072
Interest 12,343,997 10,817,675
Net expenses allocated from Master
Portfolio N/A N/A
TOTAL INVESTMENT INCOME 12,343,997 12,014,747
EXPENSES (NOTE 2)
Advisory fees 583,294 907,805
Administration fees 202,404 192,094
Custody fees 41,616 36,808
Shareholder servicing fees 0 9,089
Portfolio accounting fees 77,160 66,808
Transfer agency fees 141,025 232,989
Distribution fees 365,922 462,991
Amortization of organization expenses 4,901 2,505
Legal and audit fees 21,296 53,528
Registration fees 23,219 16,479
Directors' fees 2,480 2,480
Shareholder reports 9,917 14,944
Other 9,829 26,261
TOTAL EXPENSES 1,483,063 2,024,781
Less:
Waived fees and reimbursed expenses (181,195) (491,421)
NET EXPENSES 1,301,868 1,533,360
NET INVESTMENT INCOME 11,042,129 10,481,387
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on sale of
investments 3,245 1,137,740
Net change in unrealized appreciation
(depreciation) of investments 0 261,011
NET GAIN (LOSS) ON INVESTMENTS 3,245 1,398,751
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $11,045,374 $11,880,138
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
86
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
.............................
(Unaudited)
For the Six For the
Months Ended Year Ended
June 30, Dec. 31,
1997 1996
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 5,893,568 $ 13,008,723
Net realized gain (loss) on sale of
investments 64,005 3,630,526
Net change in unrealized appreciation
(depreciation) of investments 820,025 (6,951,220)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 6,777,598 9,688,029
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (5,763,949) (12,719,724)
Class D or Institutional (129,619) (288,999)
From net realized gain on sales of
investments
Class A 0 (3,536,604)
Class D or Institutional 0 (93,922)
In excess of realized gain on sales of
investments
Class A 0 (1,650,016)
Class D or Institutional 0 (50,270)
From tax return of capital
Class A 0 0
Class D or Institutional 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 6,024,305 11,398,703
Reinvestment of dividends - Class A(1) 2,887,543 9,865,419
Cost of shares redeemed - Class A(1) (25,827,905) (41,495,204)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (16,916,057) (20,231,082)
Proceeds from shares sold - Class D or
Institutional 584,423 1,595,401
Reinvestment of dividends - Class D or
Institutional 58,272 209,559
Cost of shares redeemed - Class D or
Institutional (1,444,667) (2,127,643)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL (801,972) (322,683)
INCREASE (DECREASE) IN NET ASSETS (16,833,999) (29,205,271)
NET ASSETS:
Beginning net assets 246,209,529 275,414,800
ENDING NET ASSETS $229,375,530 $246,209,529
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 573,202 1,083,239
Shares issued in reinvestment of
dividends - Class A(1) 276,401 935,506
Shares redeemed - Class A(1) (2,479,789) (3,923,454)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) (1,630,186) (1,904,709)
Shares sold - Class D or Institutional 42,874 115,559
Shares issued in reinvestment of
dividends - Class D or Institutional 4,272 15,218
Shares redeemed - Class D or
Institutional (106,187) (154,787)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL (59,041) (24,010)
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
87
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY
MARKET FUND
...............................
(Unaudited)
For the Six For the
Months Ended Year Ended
June 30, 1997 Dec. 31, 1996
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 5,457,995 $ 9,742,731
Net realized gain (loss) on sale of
investments (4,855) 13,211
Net change in unrealized appreciation
(depreciation) of investments 0 0
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 5,453,140 9,755,942
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (5,457,995) (9,742,731)
Class D or Institutional N/A N/A
From net realized gain on sales of
investments
Class A 0 0
Class D or Institutional N/A N/A
In excess of realized gain on sales of
investments
Class A 0 0
Class D or Institutional N/A N/A
From tax return of capital
Class A 0 0
Class D or Institutional N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 589,601,778 989,271,782
Reinvestment of dividends - Class A(1) 1,802,633 3,431,592
Cost of shares redeemed - Class A(1) (553,314,408) (957,297,444)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 38,090,003 35,405,930
Proceeds from shares sold - Class D or
Institutional N/A N/A
Reinvestment of dividends - Class D or
Institutional N/A N/A
Cost of shares redeemed - Class D or
Institutional N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL N/A N/A
INCREASE (DECREASE) IN NET ASSETS 38,085,148 35,419,141
NET ASSETS:
Beginning net assets 391,286,974 355,867,833
ENDING NET ASSETS $ 429,372,122 $ 391,286,974
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 589,601,778 989,271,083
Shares issued in reinvestment of
dividends - Class A(1) 1,802,633 3,431,592
Shares redeemed - Class A(1) (553,314,408) (957,297,441)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) 38,090,003 35,405,234
Shares sold - Class D or Institutional N/A N/A
Shares issued in reinvestment of
dividends - Class D or Institutional N/A N/A
Shares redeemed - Class D or
Institutional N/A N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL N/A N/A
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
88
<PAGE>
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND MUNICIPAL
............................ MONEY MARKET FUND INCOME FUND
................................... ............
(Unaudited) (Unaudited) (Unaudited)
For the Six For the For the Six
Months Ended Year Ended For the Six For the Months Ended
June 30, Dec. 31, Months Ended Year Ended June 30,
1997 1996 June 30, 1997 Dec. 31, 1996 1997
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 1,065,791 $ 1,402,424 $ 29,377,176 $ 51,015,787 $ 1,385,238
Net realized gain (loss) on sale of
investments 6,995,279 10,067,335 13,572 115,019 (12,217)
Net change in unrealized appreciation
(depreciation) of investments 3,933,393 460,902 0 0 316,499
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 11,994,463 11,930,661 29,390,748 51,130,806 1,689,520
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (816,947) (1,128,185) (10,865,954) (20,095,416) (1,159,760)
Class D or Institutional (248,844) (274,239) (18,511,222) (30,920,371) (225,478)
From net realized gain on sales of
investments
Class A 0 (6,814,078) 0 0 0
Class D or Institutional 0 (2,767,279) 0 0 0
In excess of realized gain on sales of
investments
Class A 0 0 0 0 0
Class D or Institutional 0 0 0 0 0
From tax return of capital
Class A 0 0 0 0 0
Class D or Institutional 0 0 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 7,581,890 9,154,800 2,155,540,503 2,266,030,281 2,241,935
Reinvestment of dividends - Class A(1) 589,870 6,367,210 4,654,270 8,654,713 564,739
Cost of shares redeemed - Class A(1) (3,428,718) (8,048,045) (1,955,445,899) (2,265,443,706) (6,629,488)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 4,743,042 7,473,965 204,748,874 9,241,288 (3,822,814)
Proceeds from shares sold - Class D or
Institutional 7,196,424 9,098,246 1,361,969,915 2,542,261,944 515,136
Reinvestment of dividends - Class D or
Institutional 127,158 1,942,667 16,918,020 26,404,912 73,635
Cost of shares redeemed - Class D or
Institutional (2,033,155) (2,535,609) (1,447,685,327) (2,138,796,870) (1,781,928)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL 5,290,427 8,505,304 (68,797,392) 429,869,986 (1,193,157)
INCREASE (DECREASE) IN NET ASSETS 20,962,141 16,926,149 135,965,054 439,226,293 (4,711,689)
NET ASSETS:
Beginning net assets 85,007,776 68,081,627 1,138,619,469 699,393,176 54,079,129
ENDING NET ASSETS $105,969,917 $85,007,776 $ 1,274,584,523 $ 1,138,619,469 $ 49,367,440
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 512,948 626,835 2,155,540,503 2,266,030,281 211,492
Shares issued in reinvestment of
dividends - Class A(1) 41,871 455,598 4,654,270 8,654,713 52,909
Shares redeemed - Class A(1) (234,725) (547,890) (1,955,445,899) (2,265,443,706) (618,863)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) 320,094 534,543 204,748,874 9,241,288 (354,462)
Shares sold - Class D or Institutional 392,026 501,829 1,361,969,915 2,542,261,944 35,612
Shares issued in reinvestment of
dividends - Class D or Institutional 7,280 112,003 16,918,020 26,404,912 5,094
Shares redeemed - Class D or
Institutional (111,105) (138,443) (1,447,685,327) (2,138,796,870) (123,221)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL 288,201 475,389 (68,797,392) 429,869,986 (82,515)
<CAPTION>
For the
Year Ended
Dec. 31,
1996
<S> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 3,327,334
Net realized gain (loss) on sale of
investments (245,237)
Net change in unrealized appreciation
(depreciation) of investments (1,169,068)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 1,913,029
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (2,799,470)
Class D or Institutional (527,864)
From net realized gain on sales of
investments
Class A 0
Class D or Institutional 0
In excess of realized gain on sales of
investments
Class A 0
Class D or Institutional 0
From tax return of capital
Class A 0
Class D or Institutional 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 1,939,494
Reinvestment of dividends - Class A(1) 1,286,152
Cost of shares redeemed - Class A(1) (16,163,244)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (12,937,598)
Proceeds from shares sold - Class D or
Institutional 828,882
Reinvestment of dividends - Class D or
Institutional 175,875
Cost of shares redeemed - Class D or
Institutional (3,284,233)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL (2,279,476)
INCREASE (DECREASE) IN NET ASSETS (16,631,379)
NET ASSETS:
Beginning net assets 70,710,508
ENDING NET ASSETS $ 54,079,129
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 181,822
Shares issued in reinvestment of
dividends - Class A(1) 120,347
Shares redeemed - Class A(1) (1,514,411)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) (1,212,242)
Shares sold - Class D or Institutional 57,300
Shares issued in reinvestment of
dividends - Class D or Institutional 12,152
Shares redeemed - Class D or
Institutional (226,734)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL (157,282)
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
89
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT- CORPORATE INCOME
FUND
.............................
(Unaudited)
For the Six For the
Months Ended Year Ended
June 30, Dec. 31,
1997 1996
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 344,607 $ 613,660
Net realized gain (loss) on sale of
investments (3,173) (63,690)
Net change in unrealized appreciation
(depreciation) of investments (8,553) (11,931)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 332,881 538,039
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (344,607) (613,660)
Class D or Institutional N/A N/A
From net realized gain on sales of
investments
Class A 0 0
Class D or Institutional N/A N/A
In excess of realized gain on sales of
investments
Class A 0 0
Class D or Institutional N/A N/A
From tax return of capital
Class A 0 0
Class D or Institutional N/A N/A
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 5,322,560 23,550,292
Reinvestment of dividends - Class A(1) 285,026 368,319
Cost of shares redeemed - Class A(1) (9,399,354) (15,774,832)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (3,791,768) 8,143,779
Proceeds from shares sold - Class D or
Institutional N/A N/A
Reinvestment of dividends - Class D or
Institutional N/A N/A
Cost of shares redeemed - Class D or
Institutional N/A N/A
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL N/A N/A
INCREASE (DECREASE) IN NET ASSETS (3,803,494) 8,068,158
NET ASSETS:
Beginning net assets 14,022,625 5,954,467
ENDING NET ASSETS $ 10,219,131 $ 14,022,625
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 1,069,891 4,726,783
Shares issued in reinvestment of
dividends - Class A(1) 57,290 73,914
Shares redeemed - Class A(1) (1,888,690) (3,170,650)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) (761,509) 1,630,047
Shares sold - Class D or Institutional N/A N/A
Shares issued in reinvestment of
dividends - Class D or Institutional N/A N/A
Shares redeemed - Class D or
Institutional N/A N/A
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL N/A N/A
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) SEE NOTE 7.
(3) SEE NOTE 5.
The accompanying notes are an integral part of these financial statements.
90
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL INCOME SMALL CAP STRATEGY FUND STRATEGIC
FUND GROWTH FUND
............................. ......................... .............
From Sept.
(Unaudited) 16, 1996
For the (commencement (Unaudited)
(Unaudited) Six of
For the Six For the Months operations)
Months Ended Year Ended Ended to For the Six
June 30, Dec. 31, June 30, Dec. 31, Months Ended
1997 1996 1997 1996(2) June 30, 1997
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 471,432 $ 859,434 $ (20,176) $ (6,006) $ (964,819)
Net realized gain (loss) on sale of
investments (5,864) 4,708 (12,586) (88,195) 31,041
Net change in unrealized appreciation
(depreciation) of investments (21,759) (81,904) 336,733 139,626 1,152,670
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 443,809 782,238 303,971 45,425 218,892
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (471,432) (859,434) 0 0 0
Class D or Institutional N/A N/A 0 0 0
From net realized gain on sales of
investments
Class A 0 0 0 0 0
Class D or Institutional N/A N/A 0 0 0
In excess of realized gain on sales of
investments
Class A 0 0 0 0 0
Class D or Institutional N/A N/A 0 0 0
From tax return of capital
Class A 0 0 0 0 0
Class D or Institutional N/A N/A 0 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 9,799,923 20,946,410 711,962 3,117,624 96,818,478
Reinvestment of dividends - Class A(1) 470,745 780,444 0 0 38
Cost of shares redeemed - Class A(1) (15,455,662) (11,422,620) (826,977) (204,264) (106,622,389)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) (5,184,994) 10,304,234 (115,015) 2,913,360 (9,803,873)
Proceeds from shares sold - Class D or
Institutional N/A N/A 550,695 1,812,007 125,206,166
Reinvestment of dividends - Class D or
Institutional N/A N/A 0 0 0
Cost of shares redeemed - Class D or
Institutional N/A N/A (266,458) (208,816) (137,935,765)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL N/A N/A 284,237 1,603,191 (12,729,599)
INCREASE (DECREASE) IN NET ASSETS (5,212,617) 10,227,038 473,193 4,561,976 (22,314,580)
NET ASSETS:
Beginning net assets 26,713,503 16,486,465 4,561,976 0 186,289,696
ENDING NET ASSETS $ 21,500,886 $ 26,713,503 $5,035,169 $4,561,976 $ 163,975,116
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 1,972,461 4,213,144 73,778 313,258 5,611,335
Shares issued in reinvestment of
dividends - Class A(1) 94,715 156,919 0 0 2
Shares redeemed - Class A(1) (3,112,318) (2,299,217) (88,462) (20,916) (6,158,728)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) (1,045,142) 2,070,846 (14,684) 292,342 (547,391)
Shares sold - Class D or Institutional N/A N/A 57,808 184,164 5,913,864
Shares issued in reinvestment of
dividends - Class D or Institutional N/A N/A 0 0 0
Shares redeemed - Class D or
Institutional N/A N/A (28,136) (21,716) (6,472,805)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL N/A N/A 29,672 162,448 (558,941)
<CAPTION>
For the
Year Ended
Dec. 31,
1996(3)
<S> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ (1,450,885)
Net realized gain (loss) on sale of
investments 12,997,935
Net change in unrealized appreciation
(depreciation) of investments (4,523,410)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 7,023,640
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A 0
Class D or Institutional 0
From net realized gain on sales of
investments
Class A (941,378)
Class D or Institutional (415,927)
In excess of realized gain on sales of
investments
Class A 0
Class D or Institutional 0
From tax return of capital
Class A 0
Class D or Institutional 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 154,071,907
Reinvestment of dividends - Class A(1) 728,971
Cost of shares redeemed - Class A(1) (86,486,498)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 68,314,380
Proceeds from shares sold - Class D or
Institutional 110,701,166
Reinvestment of dividends - Class D or
Institutional 176,740
Cost of shares redeemed - Class D or
Institutional (83,911,395)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL 26,966,511
INCREASE (DECREASE) IN NET ASSETS 100,947,226
NET ASSETS:
Beginning net assets 85,342,470
ENDING NET ASSETS $186,289,696
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 8,224,812
Shares issued in reinvestment of
dividends - Class A(1) 38,619
Shares redeemed - Class A(1) (4,647,225)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) 3,616,206
Shares sold - Class D or Institutional 4,803,786
Shares issued in reinvestment of
dividends - Class D or Institutional 7,629
Shares redeemed - Class D or
Institutional (3,640,411)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL 1,171,004
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
(2) SEE NOTE 7.
(3) SEE NOTE 5.
The accompanying notes are an integral part of these financial statements.
91
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
................................
(Unaudited)
For the Six
Months Ended For the
June 30, Year Ended
1997 Dec. 31, 1996
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 2,414,371 $ 2,616,427
Net realized gain (loss) on sale of
investments (907,763) (499,201)
Net change in unrealized appreciation
(depreciation) of investments 519,073 (979,155)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 2,025,681 1,138,071
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (2,360,311) (2,481,512)
Class D or Institutional (54,060) (134,915)
From net realized gain on sales of
investments
Class A 0 0
Class D or Institutional 0 0
In excess of realized gain on sales of
investments
Class A 0 0
Class D or Institutional 0 0
From tax return of capital
Class A 0 0
Class D or Institutional 0 0
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 16,848,341 60,822,363
Reinvestment of dividends - Class A(1) 1,829,884 1,102,521
Cost of shares redeemed - Class A(1) (15,484,865) (13,841,571)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 3,193,360 48,083,313
Proceeds from shares sold - Class D or
Institutional 186,925 357,679
Reinvestment of dividends - Class D or
Institutional 23,863 73,898
Cost of shares redeemed - Class D or
Institutional (693,150) (771,274)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL (482,362) (339,697)
INCREASE (DECREASE) IN NET ASSETS 2,322,308 46,265,260
NET ASSETS:
Beginning net assets 79,529,116 33,263,856
ENDING NET ASSETS $ 81,851,424 $ 79,529,116
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 1,679,580 6,055,576
Shares issued in reinvestment of
dividends - Class A(1) 182,462 107,850
Shares redeemed - Class A(1) (1,548,512) (1,358,313)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) 313,530 4,805,113
Shares sold - Class D or Institutional 13,639 25,817
Shares issued in reinvestment of
dividends - Class D or Institutional 1,740 5,293
Shares redeemed - Class D or
Institutional (50,717) (55,042)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL (35,338) (23,932)
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
92
<PAGE>
<TABLE>
<CAPTION>
U.S. TREASURY
MONEY MARKET FUND VARIABLE RATE GOVERNMENT FUND
................................... ...............................
(Unaudited) (Unaudited)
For the Six For the For the Six For the
Months Ended Year Ended Months Ended Year Ended
June 30, 1997 Dec. 31, 1996 June 30, 1997 Dec. 31, 1996
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $ 11,042,129 $ 18,292,799 $ 10,481,387 $ 28,838,854
Net realized gain (loss) on sale of
investments 3,245 89,127 1,137,740 (4,577,544)
Net change in unrealized appreciation
(depreciation) of investments 0 0 261,011 (1,951,636)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 11,045,374 18,381,926 11,880,138 22,309,674
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A (6,789,774) (12,422,629) (10,290,179) (26,355,616)
Class D or Institutional (4,252,355) (5,870,170) (191,208) (327,816)
From net realized gain on sales of
investments
Class A 0 (15,959) 0 0
Class D or Institutional 0 (7,621) 0 0
In excess of realized gain on sales of
investments
Class A 0 0 0 0
Class D or Institutional 0 0 0 0
From tax return of capital
Class A 0 0 0 (2,128,910)
Class D or Institutional 0 0 0 (26,512)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - Class A(1) 1,067,751,044 2,168,619,387 23,644,553 13,360,648
Reinvestment of dividends - Class A(1) 1,955,948 3,858,257 1,795,625 6,013,951
Cost of shares redeemed - Class A(1) (1,053,394,514) (2,093,456,183) (95,536,101) (272,864,909)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS A(1) 16,312,478 79,021,461 (70,095,923) (253,490,310)
Proceeds from shares sold - Class D or
Institutional 215,349,510 515,834,680 128,099,010 82,466,303
Reinvestment of dividends - Class D or
Institutional 3,673,481 5,208,358 111,653 184,258
Cost of shares redeemed - Class D or
Institutional (198,296,617) (427,392,856) (122,778,463) (84,794,106)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE
TRANSACTIONS - CLASS D OR INSTITUTIONAL 20,726,374 93,650,182 5,432,200 (2,143,545)
INCREASE (DECREASE) IN NET ASSETS 37,042,097 172,737,190 (63,264,972) (262,163,035)
NET ASSETS:
Beginning net assets 434,623,551 261,886,361 399,463,870 661,626,905
ENDING NET ASSETS $ 471,665,648 $ 434,623,551 $ 336,198,898 $ 399,463,870
SHARES ISSUED AND REDEEMED:
Shares sold - Class A(1) 1,067,751,044 2,168,619,388 2,552,112 1,440,106
Shares issued in reinvestment of
dividends - Class A(1) 1,955,948 3,858,257 194,001 648,270
Shares redeemed - Class A(1) (1,053,394,514) (2,093,452,821) (10,313,261) (29,451,100)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS A(1) 16,312,478 79,024,824 (7,567,148) (27,362,724)
Shares sold - Class D or Institutional 215,349,510 515,834,680 9,249,674 5,964,908
Shares issued in reinvestment of
dividends - Class D or Institutional 3,673,481 5,208,358 8,070 13,296
Shares redeemed - Class D or
Institutional (198,296,617) (427,392,856) (8,867,296) (6,132,463)
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING - CLASS D OR INSTITUTIONAL 20,726,374 93,650,182 390,448 (154,259)
</TABLE>
................................................................................
(1) INCLUDES FUNDS WITH A SINGLE CLASS.
The accompanying notes are an integral part of these financial statements.
93
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
.................................................
CLASS A
.................................................
(Unaudited)
Six Months
Ended Year Ended Year Ended
June 30, 1997 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.49 $10.84 $10.20
------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.26 0.54 0.60
Net realized and unrealized gain
(loss) on investments 0.05 (0.12) 1.03
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.31 0.42 1.63
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.26) (0.54) (0.60)
Distributions from net realized
gain 0.00 (0.23) (0.39)
Tax return of capital 0.00 0.00 0.00
------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.26) (0.77) (0.99)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $10.54 $10.49 $10.84
------------- ------------- -------------
------------- ------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 3.02% 4.03% 16.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $223,651 $239,703 $268,352
Number of shares outstanding, end
of period (000) 21,215 22,845 24,750
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 0.73% 0.71% 0.58%
Ratio of net investment income to
average net assets 5.05% 5.08% 5.59%
Portfolio turnover 1% 19% 38%
Average commission rate paid(1) N/A N/A N/A
........................................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 0.85% 0.82% 0.78%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 4.93% 4.97% 5.39%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
94
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND (CONT.)
.....................................................................................
CLASS D(2)
CLASS A (CONT.) ...............................
................................................. (Unaudited)
Year Ended Six Months
Year Ended Sept. 30, Year Ended Ended Year Ended
Dec. 31, 1994 1993 Dec. 31, 1992 June 30, 1997 Dec. 31, 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.47 $10.92 $10.73 $13.70 $14.16
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.64 0.63 0.68 0.29 0.60
Net realized and
unrealized gain (loss)
on investments (1.13) 0.75 0.26 0.06 (0.16)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (0.49) 1.38 0.94 0.35 0.44
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.64) (0.63) (0.68) (0.29) (0.60)
Distributions from net
realized gain (0.14) (0.20) (0.07) 0.00 (0.30)
Tax return of capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.78) (0.83) (0.75) (0.29) (0.90)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $10.20 $11.47 $10.92 $13.76 $13.70
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* (4.32)% 12.98% 9.01% 2.56% 3.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $273,105 $361,779 $375,376 $5,724 $6,506
Number of shares
outstanding, end of
period (000) 26,780 31,529 34,376 416 475
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.50% 0.69% 0.50% 1.47% 1.46%
Ratio of net investment
income to average net
assets 5.87% 5.54% 6.24% 4.30% 4.33%
Portfolio turnover 4% 10% 24% 1% 19%
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.95% 0.85% 0.85% 1.63% 1.59%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 5.42% 5.38% 5.89% 4.14% 4.20%
<CAPTION>
Year Ended
Dec. 31, 1995
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.32
-------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.68
Net realized and
unrealized gain (loss)
on investments 1.35
------
TOTAL FROM INVESTMENT
OPERATIONS 2.03
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.68)
Distributions from net
realized gain (0.51)
Tax return of capital 0.00
------
TOTAL FROM DISTRIBUTIONS (1.19)
-------------
NET ASSET VALUE, END OF
PERIOD $14.16
-------------
-------------
TOTAL RETURN (NOT
ANNUALIZED)* 15.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $7,063
Number of shares
outstanding, end of
period (000) 499
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.30%
Ratio of net investment
income to average net
assets 4.87%
Portfolio turnover 38%
Average commission rate
paid(1) N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 1.57%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 4.60%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
95
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE BOND FUND
(CONT.)
...............................
CLASS D(2) (CONT.)
...............................
Six Months
Year Ended Ended
Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $14.98 $15.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.73 0.34
Net realized and unrealized gain
(loss) on investments (1.47) 0.24
------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.74) 0.58
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.73) (0.34)
Distributions from net realized
gain (0.19) (0.26)
Tax return of capital 0.00 0.00
------ ------
TOTAL FROM DISTRIBUTIONS (0.92) (0.60)
------------- -------------
NET ASSET VALUE, END OF PERIOD $13.32 $14.98
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* (5.00)% 3.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $7,346 $7,641
Number of shares outstanding, end
of period (000) 552 510
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 1.20% 1.32%
Ratio of net investment income to
average net assets 5.15% 4.50%
Portfolio turnover 4% 10%
Average commission rate paid(1) N/A N/A
......................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.82% 1.61%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 4.53% 4.21%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
96
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE MONEY MARKET FUND
.....................................................................................
(Unaudited)
Six Months
Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<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) 0.01 0.03 0.03 0.02 0.02
Net realized and
unrealized gain (loss)
on investments 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.01 0.03 0.03 0.02 0.02
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.01) (0.03) (0.03) (0.02) (0.02)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.01) (0.03) (0.03) (0.02) (0.02)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 1.43% 2.81% 3.25% 2.22% 1.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $429,372 $391,287 $355,868 $288,409 $397,712
Number of shares
outstanding, end of
period (000) 429,435 391,345 355,940 288,409 397,717
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.64% 0.63% 0.68% 0.68% 0.66%
Ratio of net investment
income to average net
assets 2.87% 2.79% 3.20% 2.17% 1.82%
Portfolio turnover N/A N/A N/A N/A N/A
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.68% 0.63% 0.68% 0.70% 0.70%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 2.83% 2.79% 3.20% 2.15% 1.78%
<CAPTION>
Year Ended
Dec. 31, 1992
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00
------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.03
Net realized and
unrealized gain (loss)
on investments 0.00
-----
TOTAL FROM INVESTMENT
OPERATIONS 0.03
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03)
Distributions from net
realized gain 0.00
Tax return of capital 0.00
-----
TOTAL FROM DISTRIBUTIONS (0.03)
------
NET ASSET VALUE, END OF
PERIOD $1.00
------
------
TOTAL RETURN (NOT
ANNUALIZED)* 2.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $363,067
Number of shares
outstanding, end of
period (000) 363,069
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.66%
Ratio of net investment
income to average net
assets 2.50%
Portfolio turnover N/A
Average commission rate
paid(1) N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.69%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 2.47%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
97
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND
.................................................
CLASS A
.................................................
(Unaudited)
Six Months
Ended Year Ended Year Ended
June 30, 1997 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.99 $13.76 $10.67
------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.18 0.29 0.28
Net realized and unrealized gain
(loss) on investments 1.70 2.02 3.42
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.88 2.31 3.70
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.18) (0.29) (0.28)
Distributions from net realized
gain 0.00 (1.79) (0.33)
Tax return of capital 0.00 0.00 0.00
------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.18) (2.08) (0.61)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD 15.69 13.99 $13.76
------------- ------------- -------------
------------- ------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 13.52% 17.04% 34.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $72,691 $60,353 $52,007
Number of shares outstanding, end
of period (000) 4,633 4,313 3,778
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 1.29% 1.31% 1.30%
Ratio of net investment income to
average net assets 2.49% 2.06% 2.07%
Portfolio turnover 36% 67% 47%
Average commission rate paid(1) $0.0341 $0.0227 N/A
........................................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.35% 1.44% 1.35%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 2.43% 1.93% 2.02%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
98
<PAGE>
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND (CONT.)
.....................................................................................
CLASS D(2)
...............................
CLASS A (CONT.) (Unaudited)
................................................. Six Months
Year Ended Year Ended Year Ended Ended Year Ended
Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 June 30, 1997 Dec. 31, 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.90 $11.45 $11.95 $17.42 $17.10
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.31 0.30 0.47 0.15 0.22
Net realized and
unrealized gain (loss)
on investments (0.39) 1.12 0.36 2.12 2.54
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (0.08) 1.42 0.83 2.27 2.76
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.31) (0.30) (0.63) (0.15) (0.22)
Distributions from net
realized gain (0.84) (0.67) (0.70) 0.00 (2.22)
Tax return of capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (1.15) (0.97) (1.33) (0.15) (2.44)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $10.67 $11.90 $11.45 $19.54 $17.42
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* (0.68)% 12.54% 7.44% 13.08% 16.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $40,308 $53,124 $41,165 $33,278 $24,655
Number of shares
outstanding, end of
period (000) 3,779 4,465 3,596 1,703 1,415
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.30% 1.36% 1.25% 2.04% 2.05%
Ratio of net investment
income to average net
assets 2.41% 2.64% 4.08% 1.75% 1.35%
Portfolio turnover 50% 53% 38% 36% 67%
Average commission rate
paid(1) N/A N/A N/A $0.0341 $0.0227
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 1.38% 1.47% 1.71% 2.11% 2.20%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 2.33% 2.53% 3.62% 1.68% 1.20%
<CAPTION>
Year Ended
Dec. 31, 1995
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.26
-------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.20
Net realized and
unrealized gain (loss)
on investments 4.24
------
TOTAL FROM INVESTMENT
OPERATIONS 4.44
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.20)
Distributions from net
realized gain (0.40)
Tax return of capital 0.00
------
TOTAL FROM DISTRIBUTIONS (0.60)
-------------
NET ASSET VALUE, END OF
PERIOD $17.10
-------------
-------------
TOTAL RETURN (NOT
ANNUALIZED)* 33.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $16,075
Number of shares
outstanding, end of
period (000) 940
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 2.05%
Ratio of net investment
income to average net
assets 1.30%
Portfolio turnover 47%
Average commission rate
paid(1) N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 2.17%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 1.18%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
99
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
INDEX ALLOCATION FUND (CONT.)
...............................
CLASS D(2) (CONT.)
...............................
Year Ended Ended
Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $14.75 $15.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.25 0.07
Net realized and unrealized gain
(loss) on investments (0.45) 0.61
------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.20) 0.68
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.25) (0.10)
Distributions from net realized
gain (1.04) (0.83)
Tax return of capital 0.00 0.00
------ ------
TOTAL FROM DISTRIBUTIONS (1.29) (0.93)
------------- -------------
NET ASSET VALUE, END OF PERIOD $13.26 $14.75
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* (1.38)% 4.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $9,798 $8,996
Number of shares outstanding, end
of period (000) 739 610
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 2.01% 0.96%
Ratio of net investment income to
average net assets 1.75% 0.53%
Portfolio turnover 50% 53%
Average commission rate paid(1) N/A N/A
......................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 2.20% 1.12%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 1.56% 0.37%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
100
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
.....................................................................................
CLASS A
.....................................................................................
(Unaudited)
Six Months
Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<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 0.05 0.05 0.04 0.03
Net realized and
unrealized gain (loss)
on investments 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.02 0.05 0.05 0.04 0.03
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.02) (0.05) (0.05) (0.04) (0.03)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.02) (0.05) (0.05) (0.04) (0.03)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 2.45% 4.89% 5.44% 3.70% 2.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $589,281 $384,527 $375,218 $307,878 $228,084
Number of shares
outstanding, end of
period (000) 589,354 384,605 375,364 307,915 228,085
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.65% 0.65% 0.65% 0.68% 0.74%
Ratio of net investment
income to average net
assets 4.90% 4.79% 5.43% 3.71% 2.54%
Portfolio turnover N/A N/A N/A N/A N/A
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.71% 0.66% 0.69% 0.72% 0.74%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 4.84% 4.78% 5.39% 3.67% 2.54%
<CAPTION>
Year Ended
Dec. 31, 1992
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00
------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.03
Net realized and
unrealized gain (loss)
on investments 0.00
-----
TOTAL FROM INVESTMENT
OPERATIONS 0.03
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03)
Distributions from net
realized gain 0.00
Tax return of capital 0.00
-----
TOTAL FROM DISTRIBUTIONS (0.03)
------
NET ASSET VALUE, END OF
PERIOD $1.00
------
------
TOTAL RETURN (NOT
ANNUALIZED)* 3.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $268,424
Number of shares
outstanding, end of
period (000) 268,434
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.75%
Ratio of net investment
income to average net
assets 3.17%
Portfolio turnover N/A
Average commission rate
paid(1) N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.75%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 3.17%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
101
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
MONEY MARKET FUND (CONT.)
...............................
INSTITUTIONAL CLASS(2)
...............................
(Unaudited)
Six Months
Ended Year Ended
June 30, 1997 Dec. 31, 1996
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.03 0.05
Net realized and unrealized gain
(loss) on investments 0.00 0.00
----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.03 0.05
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.03) (0.05)
Distributions from net realized
gain 0.00 0.00
Tax return of capital 0.00 0.00
----- -----
TOTAL FROM DISTRIBUTIONS (0.03) (0.05)
------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
------ ------
------ ------
TOTAL RETURN (NOT ANNUALIZED)* 2.58% 5.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $685,303 $754,092
Number of shares outstanding, end
of period (000) 685,295 754,092
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 0.40% 0.40%
Ratio of net investment income to
average net assets 5.14% 5.04%
Portfolio turnover N/A N/A
Average commission rate paid(1) N/A N/A
......................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 0.41% 0.41%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 5.13% 5.03%
</TABLE>
................................................................................
(1) 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.
(2) THE INSTITUTIONAL CLASS SHARES 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.
102
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND (CONT.) MUNICIPAL INCOME FUND
............................... .................................................
CLASS A
INSTITUTIONAL CLASS(2) (CONT.) .................................................
(Unaudited)
............................... Six Months
Year Ended Period Ended Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 June 30, 1997 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00 $10.72 $10.93 $9.91
------ ------ ------------- ------------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.06 0.02 0.29 0.57 0.57
Net realized and
unrealized gain (loss)
on investments 0.00 0.00 0.06 (0.21) 1.02
----- ----- ------ ------ -----
TOTAL FROM INVESTMENT
OPERATIONS 0.06 0.02 0.35 0.36 1.59
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.06) (0.02) (0.29) (0.57) (0.57)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
----- ----- ------ ------ -----
TOTAL FROM DISTRIBUTIONS (0.06) (0.02) (0.29) (0.57) (0.57)
------ ------ ------------- ------------- ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $10.78 $10.72 $10.93
------ ------ ------------- ------------- ------
------ ------ ------------- ------------- ------
TOTAL RETURN (NOT
ANNUALIZED)* 5.71% 1.83% 3.28% 3.49% 16.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $324,175 $11,237 $40,763 $44,326 $58,440
Number of shares
outstanding, end of
period (000) 324,222 11,238 3,780 4,135 5,347
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.39% 0.38% 0.80% 0.80% 0.71%
Ratio of net investment
income to average net
assets 5.70% 5.05% 5.40% 5.39% 5.49%
Portfolio turnover N/A N/A 2% 16% 14%
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.45% 0.55% 1.17% 1.25% 1.09%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 5.64% 4.88% 5.03% 4.94% 5.11%
<CAPTION>
Year Ended
Dec. 31, 1994
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.27
-------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.60
Net realized and
unrealized gain (loss)
on investments (1.36)
------
TOTAL FROM INVESTMENT
OPERATIONS (0.76)
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.60)
Distributions from net
realized gain 0.00
Tax return of capital 0.00
------
TOTAL FROM DISTRIBUTIONS (0.60)
-------------
NET ASSET VALUE, END OF
PERIOD $9.91
-------------
-------------
TOTAL RETURN (NOT
ANNUALIZED)* (6.82)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $73,791
Number of shares
outstanding, end of
period (000) 7,446
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.43%
Ratio of net investment
income to average net
assets 5.77%
Portfolio turnover 32%
Average commission rate
paid(1) N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.98%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 5.22%
</TABLE>
................................................................................
(1) 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.
(2) THE INSTITUTIONAL CLASS SHARES 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.
103
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND (CONT.)
...............................
CLASS A (CONT.)
...............................
Year Ended Year Ended
Dec. 31, 1993 Dec. 31, 1992
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.56 $10.25
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.64 0.66
Net realized and unrealized gain
(loss) on investments 0.71 0.32
------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.35 0.98
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.64) (0.66)
Distributions from net realized
gain 0.00 (0.01)
Tax return of capital 0.00 0.00
------ ------
TOTAL FROM DISTRIBUTIONS (0.64) (0.67)
------------- -------------
NET ASSET VALUE, END OF PERIOD $11.27 $10.56
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 13.11% 9.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $104,701 $52,553
Number of shares outstanding, end
of period (000) 9,294 4,976
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 0.39% 0.23%
Ratio of net investment income to
average net assets 5.56% 6.05%
Portfolio turnover 15% 67%
Average commission rate paid(1) N/A N/A
......................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.09% 1.20%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 4.86% 5.08%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
104
<PAGE>
<TABLE>
<CAPTION>
MUNICIPAL INCOME FUND (CONT.)
.....................................................................................
CLASS D(2)
.....................................................................................
(Unaudited)
Six Months Six Months
Ended Year Ended Year Ended Year Ended Ended
June 30, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.52 $14.80 $13.42 $15.26 $15.00
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.34 0.69 0.69 0.73 0.36
Net realized and
unrealized gain (loss)
on investments 0.08 (0.28) 1.38 (1.84) 0.26
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 0.42 0.41 2.07 (1.11) 0.62
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.34) (0.69) (0.69) (0.73) (0.36)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.34) (0.69) (0.69) (0.73) (0.36)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $14.60 $14.52 $14.80 $13.42 $15.26
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 2.97% 2.90% 15.75% (7.37)% 4.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $8,605 $9,753 $12,271 $15,545 $14,771
Number of shares
outstanding, end of
period (000) 589 672 829 1,158 968
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.40% 1.40% 1.32% 1.02% 1.13%
Ratio of net investment
income to average net
assets 4.82% 4.79% 4.88% 5.17% 4.14%
Portfolio turnover 2% 16% 14% 32% 15%
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 1.92% 1.92% 1.78% 1.74% 1.84%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 4.30% 4.27% 4.42% 4.45% 3.43%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
105
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT-CORPORATE
INCOME FUND(2)
...............................
(Unaudited)
Six Months
Ended Year Ended
June 30, 1997 Dec. 31, 1996
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $4.98 $5.02
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.14 0.28
Net realized and unrealized gain
(loss) on investments 0.00 (0.04)
----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.14 0.24
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.14) (0.28)
Distributions from net realized
gain 0.00 0.00
Tax return of capital 0.00 0.00
----- -----
TOTAL FROM DISTRIBUTIONS (0.14) (0.28)
------ ------
NET ASSET VALUE, END OF PERIOD $4.98 $4.98
------ ------
------ ------
TOTAL RETURN (NOT ANNUALIZED)* 2.90% 4.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $10,219 $14,023
Number of shares outstanding, end
of period (000) 2,054 2,815
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 0.37%(3) 0.36%(3)
Ratio of net investment income to
average net assets 5.75%(3) 5.47%(3)
Portfolio turnover N/A N/A
Average commission rate paid(1) N/A N/A
......................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.84%(3) 1.85%(3)
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 4.28%(3) 3.98%(3)
</TABLE>
................................................................................
(1) 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.
(2) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 19, 1994.
(3) THE RATIO INCLUDES INCOME AND/OR EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(4) THE FUND COMMENCED OPERATIONS ON JUNE 3, 1994.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
106
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM SHORT-TERM MUNICIPAL INCOME FUND(4)
GOVERNMENT-CORPORATE .................................................
INCOME FUND(2) (CONT.) (Unaudited)
............................... Six Months
Year Ended Period Ended Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 June 30, 1997 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $4.93 $5.00 $4.97 $4.99 $4.92
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.30 0.08 0.10 0.20 0.22
Net realized and
unrealized gain (loss)
on investments 0.09 (0.07) 0.00 (0.02) 0.07
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.39 0.01 0.10 0.18 0.29
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.30) (0.08) (0.10) (0.20) (0.22)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.30) (0.08) (0.10) (0.20) (0.22)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $5.02 $4.93 $4.97 $4.97 $4.99
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 8.05% 0.28% 1.95% 3.62% 6.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $5,954 $96 $21,501 $26,714 $16,486
Number of shares
outstanding, end of
period (000) 1,185 20 4,328 5,373 3,302
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.30%(3) 0.30%(3) 0.39%(3) 0.40%(3) 0.38%(3)
Ratio of net investment
income to average net
assets 6.01%(3) 5.77%(3) 3.89%(3) 3.95%(3) 4.39%(3)
Portfolio turnover N/A N/A N/A N/A N/A
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 6.79%(3) 67.89%(3) 1.48%(3) 1.43%(3) 1.97%(3)
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses (0.48)%(3) (61.82)%(3) 2.80%(3) 2.92%(3) 2.80%(3)
<CAPTION>
Period Ended
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 0.00
Tax return of capital 0.00
-----
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 0.27%(3)
Ratio of net investment
income to average net
assets 3.67%(3)
Portfolio turnover N/A
Average commission rate
paid(1) N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 1.98%(3)
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 1.96%(3)
</TABLE>
................................................................................
(1) 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.
(2) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 19, 1994.
(3) THE RATIO INCLUDES INCOME AND/OR EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(4) THE FUND COMMENCED OPERATIONS ON JUNE 3, 1994.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
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>
SMALL CAP
STRATEGY FUND(2)
...............................
CLASS A
...............................
(Unaudited)
Six Months
Ended Period Ended
June 30, 1997 Dec. 31, 1996
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.04 $10.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.03) (0.01)
Net realized and unrealized gain
(loss) on investments 0.73 0.05
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.70 0.04
LESS DISTRIBUTIONS:
Dividends from net investment
income 0.00 0.00
Distributions from net realized
gain 0.00 0.00
Tax return of capital 0.00 0.00
------ ------
TOTAL FROM DISTRIBUTIONS 0.00 0.00
------------- -------------
NET ASSET VALUE, END OF PERIOD $10.74 $10.04
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 6.97% 0.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $2,983 $2,935
Number of shares outstanding, end
of period (000) 278 292
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 1.33%(3) 1.41%(3)
Ratio of net investment income to
average net assets (0.61)%(3) (0.40)%(3)
Portfolio turnover N/A N/A
Average commission rate paid(1) N/A N/A
......................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 3.98%(3) 5.57%(3)
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses (3.26)%(3) (4.56)%(3)
</TABLE>
................................................................................
(1) 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.
(2) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 16, 1996.
(3) THE RATIO INCLUDES INCOME AND/OR EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(4) THE RATIO REFLECTS ACTIVITY FOR THE STAND-ALONE PERIOD ONLY. SEE NOTE
5.
(5) THE FUND COMMENCED OPERATIONS ON JANUARY 20, 1993.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
108
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP
STRATEGY FUND(2) (CONT.) STRATEGIC GROWTH FUND
............................... .................................................
CLASS D CLASS A(5)
............................... .................................................
(Unaudited) (Unaudited)
Six Months Six Months
Ended Period Ended Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 June 30, 1997 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.01 $10.00 $18.42 $16.82 $13.29
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) (0.06) (0.02) (0.08) (0.03) (0.04)
Net realized and
unrealized gain (loss)
on investments 0.73 0.03 0.14 1.77 5.66
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 0.67 0.01 0.06 1.74 5.62
LESS DISTRIBUTIONS:
Dividends from net
investment income 0.00 0.00 0.00 0.00 0.00
Distributions from net
realized gain 0.00 0.00 0.00 (0.14) (2.09)
Tax return of capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS 0.00 0.00 0.00 (0.14) (2.09)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $10.68 $10.01 $18.48 $18.42 $16.82
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 6.69% 0.10% 0.33% 10.32% 42.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $2,052 $1,627 $121,542 $131,226 $59,016
Number of shares
outstanding, end of
period (000) 192 162 6,577 7,124 3,508
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 2.09%(3) 2.16%(3) 1.20%(3) 1.24%(3) 1.28%
Ratio of net investment
income to average net
assets (1.36)%(3) (1.12)%(3) (0.95)%(3) (0.82)%(3) (0.76)%
Portfolio turnover N/A N/A N/A 10%(4) 171%
Average commission rate
paid(1) N/A N/A N/A $0.0760(4) N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 4.68%(3) 6.30%(3) 1.20%(3) 1.27%(3) 1.38%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses (3.95)%(3) (5.26)%(3) (0.95)%(3) (0.85)%(3) (0.86)%
<CAPTION>
Year Ended Period Ended
Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.20 $10.00
------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) (0.11) (0.03)
Net realized and
unrealized gain (loss)
on investments 0.67 3.68
------ ------
TOTAL FROM INVESTMENT
OPERATIONS 0.56 3.65
LESS DISTRIBUTIONS:
Dividends from net
investment income 0.00 (0.03)
Distributions from net
realized gain (0.33) (0.41)
Tax return of capital (0.14) (0.01)
------ ------
TOTAL FROM DISTRIBUTIONS (0.47) (0.45)
------------- -------------
NET ASSET VALUE, END OF
PERIOD $13.29 $13.20
------------- -------------
------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 4.23% 36.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $26,744 $25,413
Number of shares
outstanding, end of
period (000) 2,013 1,926
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.20% 0.66%
Ratio of net investment
income to average net
assets (0.81)% (0.01)%
Portfolio turnover 149% 182%
Average commission rate
paid(1) N/A N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 1.55% 1.64%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses (1.16)% (0.99)%
</TABLE>
................................................................................
(1) 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.
(2) THE FUND COMMENCED OPERATIONS ON SEPTEMBER 16, 1996.
(3) THE RATIO INCLUDES INCOME AND/OR EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(4) THE RATIO REFLECTS ACTIVITY FOR THE STAND-ALONE PERIOD ONLY. SEE NOTE
5.
(5) THE FUND COMMENCED OPERATIONS ON JANUARY 20, 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>
STRATEGIC GROWTH FUND (CONT.)
...............................
CLASS D(2)
...............................
(Unaudited)
Six Months
Ended Year Ended
June 30, 1997 Dec. 31, 1996
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $22.59 $20.79
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.18) (0.08)
Net realized and unrealized gain
(loss) on investments 0.18 2.05
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.00 1.97
LESS DISTRIBUTIONS:
Dividends from net investment
income 0.00 0.00
Distributions from net realized
gain 0.00 (0.17)
Tax return of capital 0.00 0.00
------ ------
TOTAL FROM DISTRIBUTIONS 0.00 (0.17)
------------- -------------
NET ASSET VALUE, END OF PERIOD $22.59 $22.59
------------- -------------
------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* 0.00% 9.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $42,434 $55,063
Number of shares outstanding, end
of period (000) 1,879 2,437
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 1.93%(3) 2.00%(3)
Ratio of net investment income to
average net assets (1.68)%(3) (1.58)%(3)
Portfolio turnover N/A 10%(4)
Average commission rate paid(1) N/A $0.0760(4)
......................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.95%(3) 2.02%(3)
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses (1.70)%(3) (1.60)%(3)
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES COMMENCED OPERATIONS ON JULY 1, 1993.
(3) THE RATIO INCLUDES INCOME AND/OR EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(4) THE RATIO REFLECTS ACTIVITY FOR THE STAND-ALONE PERIOD ONLY. SEE NOTE
5.
* TOTAL RETURNS DO NOT INCLUDE ANY SALES CHARGES.
The accompanying notes are an integral part of these financial statements.
110
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
STRATEGIC GROWTH FUND (CONT.) ...............................
................................................. CLASS A
...............................
CLASS D(2) (CONT.) (Unaudited)
................................................. Six Months
Year Ended Year Ended Period Ended Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 June 30, 1997 Dec. 31, 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $16.54 $16.55 $15.00 $10.12 $10.78
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) (0.16) (0.24) (0.43) 0.30 0.63
Net realized and
unrealized gain (loss)
on investments 6.99 0.81 2.51 (0.04) (0.66)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 6.83 0.57 2.08 0.26 (0.03)
LESS DISTRIBUTIONS:
Dividends from net
investment income 0.00 0.00 0.00 (0.30) (0.63)
Distributions from net
realized gain (2.58) (0.40) (0.53) 0.00 0.00
Tax return of capital 0.00 (0.18) 0.00 0.00 0.00
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (2.58) (0.58) (0.53) (0.30) (0.63)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $20.79 $16.54 $16.55 $10.08 $10.12
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 41.54% 3.46% 13.84% 2.65% (0.11)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $26,326 $15,335 $11,932 $80,058 $77,239
Number of shares
outstanding, end of
period (000) 1,266 927 721 7,944 7,631
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 2.02% 1.95% 0.61% 0.89% 0.89%
Ratio of net investment
income to average net
assets (1.49)% (1.56)% (1.00)% 6.07% 6.07%
Portfolio turnover 171% 149% 182% 125% 240%
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 2.09% 2.23% 2.14% 0.97% 1.24%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses (1.56)% (1.84)% (2.53)% 5.99% 5.72%
<CAPTION>
Year Ended
Dec. 31, 1995
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $9.66
------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.69
Net realized and
unrealized gain (loss)
on investments 1.12
-----
TOTAL FROM INVESTMENT
OPERATIONS 1.81
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.69)
Distributions from net
realized gain 0.00
Tax return of capital 0.00
-----
TOTAL FROM DISTRIBUTIONS (0.69)
------
NET ASSET VALUE, END OF
PERIOD $10.78
------
------
TOTAL RETURN (NOT
ANNUALIZED)* 19.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $30,471
Number of shares
outstanding, end of
period (000) 2,826
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.88%
Ratio of net investment
income to average net
assets 6.79%
Portfolio turnover 95%
Average commission rate
paid(1) N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 1.24%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 6.44%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES COMMENCED OPERATIONS ON JULY 1, 1993.
(3) THE RATIO INCLUDES INCOME AND/OR EXPENSES CHARGED TO THE MASTER
PORTFOLIO.
(4) THE RATIO REFLECTS ACTIVITY FOR THE STAND-ALONE PERIOD ONLY. SEE NOTE
5.
* 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>
U.S. GOVERNMENT INCOME FUND (CONT.)
.................................................
CLASS A (CONT.)
.................................................
Year Ended Year Ended Year Ended
Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.87 $10.56 $10.97
------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.70 0.74 0.79
Net realized and unrealized gain
(loss) on investments (1.21) 0.36 (0.14)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.51) 1.10 0.65
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.70) (0.74) (0.79)
Distributions from net realized
gain 0.00 (0.05) (0.27)
Tax return of capital 0.00 0.00 0.00
------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.70) (0.79) (1.06)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $9.66 $10.87 $10.56
------------- ------------- -------------
------------- ------------- -------------
TOTAL RETURN (NOT ANNUALIZED)* (4.81)% 10.67% 6.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $35,838 $50,301 $40,883
Number of shares outstanding, end
of period (000) 3,711 4,628 3,871
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 0.76% 0.53% 0.47%
Ratio of net investment income to
average net assets 6.84% 6.79% 6.26%
Portfolio turnover 50% 115% 128%
Average commission rate paid(1) N/A N/A N/A
........................................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.08% 1.01% 1.13%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 6.52% 6.31% 5.60%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
112
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND (CONT.)
.....................................................................................
CLASS D(2)
.....................................................................................
(Unaudited)
Six Months
Ended Year Ended Year Ended Year Ended Period Ended
June 30, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.84 $14.74 $13.20 $14.85 $15.00
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.36 0.77 0.85 0.86 0.42
Net realized and
unrealized gain (loss)
on investments (0.07) (0.90) 1.54 (1.65) (0.08)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 0.29 (0.13) 2.39 (0.79) 0.34
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.36) (0.77) (0.85) (0.86) (0.42)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 (0.07)
Tax return of capital 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.36) (0.77) (0.85) (0.86) (0.49)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $13.77 $13.84 $14.74 $13.20 $14.85
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* 2.16% (0.79)% 18.54% (5.45)% 2.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $1,793 $2,290 $2,793 $3,722 $9,594
Number of shares
outstanding, end of
period (000) 130 166 189 282 646
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 1.63% 1.62% 1.62% 1.37% 0.90%
Ratio of net investment
income to average net
assets 5.34% 5.50% 6.07% 6.14% 5.90%
Portfolio turnover 125% 240% 95% 50% 115%
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 3.13% 3.39% 2.29% 1.87% 2.03%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 3.84% 3.73% 5.40% 5.64% 4.77%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
113
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
U.S. TREASURY MONEY MARKET FUND
.................................................
CLASS A(2)
.................................................
(Unaudited)
Six Months
Ended Year Ended Year Ended
June 30, 1997 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 0.05 0.05
Net realized and unrealized gain
(loss) on investments 0.00 0.00 0.00
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.02 0.05 0.05
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.02) (0.05) (0.05)
Distributions from net realized
gain 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00
----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.02) (0.05) (0.05)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
------ ------ ------
------ ------ ------
TOTAL RETURN (NOT ANNUALIZED)* 2.32% 4.60% 5.09%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $294,130 $277,816 $198,753
Number of shares outstanding, end
of period (000) 294,120 227,807 198,782
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 0.65% 0.65% 0.65%
Ratio of net investment income to
average net assets 4.62% 4.60% 4.97%
Portfolio turnover N/A N/A N/A
Average commission rate paid(1) N/A N/A N/A
........................................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 0.75% 0.71% 0.73%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 4.52% 4.54% 4.89%
</TABLE>
................................................................................
(1) 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.
(2) THE FUND COMMENCED OPERATIONS ON MAY 12, 1992.
(3) THE INSTITUTIONAL 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.
114
<PAGE>
<TABLE>
<CAPTION>
U.S. TREASURY MONEY MARKET FUND (CONT.)
.....................................................................................
INSTITUTIONAL CLASS(3)
...............................
CLASS A(2) (CONT.) (Unaudited)
................................................. Six Months
Year Ended Year Ended Period Ended Ended Year Ended
Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 June 30, 1997 Dec. 31, 1996
<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) 0.03 0.03 0.02 0.02 0.05
Net realized and
unrealized gain (loss)
on investments 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.03 0.03 0.02 0.02 0.05
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.03) (0.03) (0.02) (0.02) (0.05)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.03) (0.03) (0.02) (0.02) (0.05)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 3.44% 2.56% 1.97% 2.44% 4.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $195,031 $118,169 $137,412 $177,535 $156,808
Number of shares
outstanding, end of
period (000) 195,042 118,169 137,416 177,506 156,780
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.63% 0.52% 0.27% 0.40% 0.40%
Ratio of net investment
income to average net
assets 3.47% 2.55% 3.12% 4.91% 4.79%
Portfolio turnover N/A N/A N/A N/A N/A
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.80% 0.77% 0.79% 0.44% 0.45%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 3.30% 2.30% 2.60% 4.87% 4.74%
<CAPTION>
Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00
------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.05 0.02
Net realized and
unrealized gain (loss)
on investments 0.00 0.00
----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.05 0.02
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.05) (0.02)
Distributions from net
realized gain 0.00 0.00
Tax return of capital 0.00 0.00
----- -----
TOTAL FROM DISTRIBUTIONS (0.05) (0.02)
------ ------
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00
------ ------
------ ------
TOTAL RETURN (NOT
ANNUALIZED)* 5.35% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $63,134 $3,898
Number of shares
outstanding, end of
period (000) 63,130 3,900
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.39% 0.23%
Ratio of net investment
income to average net
assets 5.16% 4.42%
Portfolio turnover N/A N/A
Average commission rate
paid(1) N/A N/A
............................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.49% 0.57%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 5.06% 4.08%
</TABLE>
................................................................................
(1) 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.
(2) THE FUND COMMENCED OPERATIONS ON MAY 12, 1992.
(3) THE INSTITUTIONAL 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.
115
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND
.................................................
CLASS A
.................................................
(Unaudited)
Six Months
Ended Year Ended Year Ended
June 30, 1997 Dec. 31, 1996 Dec. 31, 1995
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $9.25 $9.35 $9.19
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.27 0.50 0.53
Net realized and unrealized gain
(loss) on investments 0.04 (0.10) 0.16
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.31 0.40 0.69
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.27) (0.46) (0.53)
Distributions from net realized
gain 0.00 0.00 0.00
Tax return of capital 0.00 (0.04) 0.00
----- ----- -----
TOTAL FROM DISTRIBUTIONS (0.27) (0.50) (0.53)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.29 $9.25 $9.35
------ ------ ------
------ ------ ------
TOTAL RETURN (NOT ANNUALIZED)* 3.35% 4.41% 7.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $325,237 $393,948 $653,897
Number of shares outstanding, end
of period (000) 35,022 42,589 69,952
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to average net
assets 0.83% 0.88% 0.84%
Ratio of net investment income to
average net assets 5.78% 5.36% 5.71%
Portfolio turnover 40% 277% 317%
Average commission rate paid(1) N/A N/A N/A
........................................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.10% 0.98% 0.96%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 5.51% 5.26% 5.59%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
116
<PAGE>
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND (CONT.)
.....................................................................................
CLASS D(2)
...............................
CLASS A (CONT.) (Unaudited)
................................................. Six Months
Year Ended Year Ended Year Ended Ended Year Ended
Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 June 30, 1997 Dec. 31, 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $9.99 $9.95 $10.13 $13.83 $13.97
------ ------ ------------- ------------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.43 0.44 0.59 0.36 0.68
Net realized and
unrealized gain (loss)
on investments (0.80) 0.04 (0.18) 0.06 (0.14)
----- ----- ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (0.37) 0.48 0.41 0.42 0.54
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.43) (0.44) (0.59) (0.36) (0.63)
Distributions from net
realized gain 0.00 0.00 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00 0.00 (0.05)
----- ----- ------ ------ ------
TOTAL FROM DISTRIBUTIONS (0.43) (0.44) (0.59) (0.36) (0.68)
------ ------ ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD $9.19 $9.99 $9.95 $13.89 $13.83
------ ------ ------------- ------------- -------------
------ ------ ------------- ------------- -------------
TOTAL RETURN (NOT
ANNUALIZED)* (3.81)% 4.87% 4.23% 3.10% 3.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000) $1,215,546 $1,949,013 $2,559,363 $10,962 $5,516
Number of shares
outstanding, end of
period (000) 132,256 195,132 257,238 789 399
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED):
Ratio of expenses to
average net assets 0.79% 0.76% 0.75% 1.34% 1.38%
Ratio of net investment
income to average net
assets 4.40% 4.37% 5.62% 5.30% 4.85%
Portfolio turnover 164% 201% 197% 40% 277%
Average commission rate
paid(1) N/A N/A N/A N/A N/A
.....................................................................................................................
Ratio of expenses to average
net assets prior to waived
fees and reimbursed expenses 0.94% 0.95% 0.94% 1.81% 1.67%
Ratio of net investment
income to average net assets
prior to waived fees and
reimbursed expenses 4.25% 4.18% 5.43% 4.83% 4.56%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
117
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
<TABLE>
<CAPTION>
VARIABLE RATE GOVERNMENT FUND (CONT.)
.................................................
CLASS D(2) (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 0.00 0.00 0.00
Tax return of capital 0.00 0.00 0.00
------ ------ ------
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 1.35% 1.29% 1.26%
Ratio of net investment income to
average net assets 5.23% 3.94% 3.41%
Portfolio turnover 317% 164% 201%
Average commission rate paid(1) N/A N/A N/A
........................................................................................
Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.64% 1.55% 1.75%
Ratio of net investment income to
average net assets prior to waived
fees and reimbursed expenses 4.95% 3.68% 2.92%
</TABLE>
................................................................................
(1) 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.
(2) THE CLASS D SHARES 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.
118
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
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 consists of twelve separate diversified funds: the Index 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.
Financial statements for the Overland Sweep and National Tax-Free Institutional
Money Market Funds are presented separately.
On February 14, 1997, the Overland Express Asset Allocation Fund's name was
changed to the Overland Express Index Allocation Fund.
The California Tax-Free Bond, Index Allocation, Municipal Income, Small Cap
Strategy, Strategic Growth, U.S. Government Income and Variable Rate Government
Funds each offers Class A and Class D shares. The Money Market and U.S. Treasury
Money Market Funds each offers Class A and Institutional Class shares. The
California Tax-Free Money Market, Short-Term Government-Corporate Income and
Short-Term Municipal Income Funds each offers a single class of shares. The
three classes of shares differ principally in the applicable sales charges (if
any), distribution fees, shareholder servicing fees and transfer agency 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 declared
separately for each class. Gains are allocated to each class pro rata based on
the 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, shareholder
servicing and transfer agency 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 ("GAAP") for investment
companies. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, 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. These estimates should not be
considered an indication of actual or expected figures; actual results may
differ.
119
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENT POLICY AND SECURITY VALUATION
Equity securities, for which the primary market is a national securities
exchange or the National Association of Securities Dealers Automated Quotation
("NASDAQ") system, are valued at the last reported sales price on the day of
valuation. U.S. Government obligations are valued at the reported bid price. In
the absence of any sale of such securities on the valuation date and in the case
of other securities, excluding money market instruments 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. 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. Securities for which quotations are not readily available are
valued at fair value as determined by policies set by the Company's Board of
Directors, or, in the case of the Master Investment Trust (the "Trust"), by the
Trust's Board of Trustees.
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 invest in securities with remaining maturities not exceeding 397 days
(thirteen months). Certain floating- and variable-rate instruments in the
portfolios may have maturities in excess of 397 days, but carry a demand feature
that permits the holder to tender the instruments back to the issuer at par
value prior to maturity. The California Tax-Free Money Market, Money Market and
U.S. Treasury Money Market Funds also seek to maintain a constant net asset
value of $1.00 per share, although there is no assurance that the funds will be
able to do so.
The Short-Term Government-Corporate Income, Short-Term Municipal Income, Small
Cap Strategy and Strategic Growth Funds invest only in beneficial interests
("Interests") of the Short-Term Government-Corporate Income, Short-Term
Municipal Income, Small Cap and Capital Appreciation Master Portfolios (the
"Master Portfolios"), respectively, of the Trust. Each Master Portfolio has the
same investment objective as the Fund that invests in that Master Portfolio. The
value of the Funds' investment in the Master Portfolios reflects the Funds'
Interest in the net assets of the Master Portfolios. As of June 30, 1997, the
Short-Term Government-Corporate Income, Short-Term Municipal Income, Small Cap
Strategy and Strategic Growth Funds owned approximately 99.99%, 99.99%, 9.87%
and 74.81% of the outstanding Interests of the Short-Term Government-Corporate
Income, Short-Term Municipal Income, Small Cap and Capital Appreciation Master
Portfolios, respectively. Except during temporary defensive periods, the
Short-Term Government-Corporate Income and Short-Term Municipal Income Master
Portfolios each seek to maintain a portfolio of securities with an average
weighted maturity of between 90 days to 2 years.
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.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are recorded no later than one business day after trade
date. Dividend income is recognized on the ex-dividend date, and interest income
is accrued daily. Realized gains or losses
120
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
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 of 1986, as amended (the "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 purchase commitment
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 June 30, 1997.
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 and the Master
Portfolio's (in this paragraph, the "Funds") Portfolio of Investments. The Funds
may participate in pooled repurchase agreement transactions with other funds
advised by Wells Fargo Bank, N.A. ("WFB"). 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
custodian's responsibility to value collateral daily and to take action 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 are
collateralized by instruments such as U.S. Treasury or federal agency
obligations.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of the Index Allocation Fund, if any, are
declared and distributed quarterly. Dividends from net investment income of the
Small Cap Strategy and Strategic Growth Funds, if any, are declared and
distributed annually. Dividends from net investment income of 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.
121
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
Government Income, U.S. Treasury Money Market and Variable Rate Government
Funds, if any, are declared daily and distributed monthly. Any distributions to
shareholders from net realized capital gains are declared and distributed
annually.
FEDERAL INCOME TAXES
Each Fund is treated as a separate entity for federal income tax purposes. It is
the policy of each Fund of the Company to continue to qualify as a regulated
investment company by complying with the provisions applicable to regulated
investment companies, as defined in the Code, and to make distributions of
substantially all of its investment company taxable income and any net realized
capital gains (after reduction for capital loss carryforwards) sufficient to
relieve it from all, or substantially all, federal income taxes. Accordingly, no
provision for federal income taxes was required at December 31, 1996. The
following Funds had net capital loss carryforwards at December 31, 1996:
<TABLE>
<CAPTION>
YEAR CAPITAL LOSS
FUND EXPIRES CARRYFORWARDS
<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
Short-Term Government-Corporate Income Fund 2004 63,690
Small Cap Strategy Fund 2004 88,195
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>
The Company's Board of Directors intends to offset net capital gains with each
capital loss carryforward, and no capital gain distribution shall be made until
each carryforward has been fully utilized or expires.
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.
122
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION EXPENSES
The Funds have been charged for expenses incurred in connection with the
organization and initial registration of the various Funds and/or classes of
shares. These expenses are being amortized by the Funds on a straight-line basis
over 60 months from the date the Funds and/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 WFB. Pursuant to the
contracts, WFB has agreed to provide the Funds with daily portfolio management.
Under the contract with the Index 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 average daily net assets in excess of
$500 million. 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 each
Fund's average daily net assets. 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 Short-Term Government-Corporate Income, Short-Term Municipal Income, Small
Cap Strategy and Strategic Growth Funds do not directly retain an investment
adviser because each Fund invests all of its assets in a separate Master
Portfolio which, in turn, retains WFB as investment adviser.
Barclays Global Fund Advisors ("BGFA") currently acts as sub-adviser to the
Index Allocation Fund. BGFA is entitled to receive from WFB, as compensation for
its sub-advisory services, an annual fee of $60,000 and a monthly fee at the
annual rate of 0.20% of the Index Allocation Fund's average daily net assets.
BGFA is an indirect subsidiary of Barclays Bank PLC.
The Company has entered into contracts on behalf of each Fund (other than the
Index Allocation Fund, for which Barclays Global Investors, N.A. ("BGI") serves
as custodian) with WFB, whereby WFB is responsible for providing custody and
portfolio accounting services for the Funds. Pursuant to the contracts, WFB is
entitled to certain transaction charges plus 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 of each
Fund's average daily net assets, 0.045% of the next $50 million and 0.02% of
each Fund's average daily net assets in excess of $100 million. WFB will not be
entitled to compensation for its custodial services to the Short-Term
Government-Corporate Income, Short-Term Municipal Income, Small Cap Strategy and
Strategic Growth Funds so long as it is entitled to compensation for providing
advisory services to the Master Portfolios.
123
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
BGI currently acts as custodian to the Index 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.
The Company has entered into a contract on behalf of the Funds with WFB, whereby
WFB provides transfer agency services for the Funds. Under the transfer agency
contract, WFB is 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 California
Tax-Free Bond, Index Allocation, 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. Prior to February 1, 1997, under
the contract with the Funds, WFB was paid a per account fee plus other related
costs with a minimum monthly fee of $3,000 per fund, unless net assets of a fund
were less than $20 million. For as long as the net assets remained under $20
million, a Fund would not be charged any transfer agency fees by WFB.
Transfer agency fees paid on behalf of the Funds for the six months ended June
30, 1997 were as follows:
<TABLE>
<CAPTION>
TRANSFER TRANSFER TRANSFER
AGENCY FEES AGENCY FEES AGENCY FEES
FUND CLASS A CLASS D INSTITUTIONAL CLASS
<S> <C> <C> <C>
..................................................................................................
California Tax-Free Bond Fund $ 151,384 $ 3,985 N/A
Index Allocation Fund 43,639 19,008 N/A
Money Market Fund 148,790 N/A $ 50,040
Municipal Income Fund 31,310 6,839 N/A
Small Cap Strategy Fund 1,550 992 N/A
Strategic Growth Fund 77,068 30,262 N/A
U.S. Government Income Fund 50,650 1,310 N/A
U.S. Treasury Money Market Fund 125,053 N/A 15,972
Variable Rate Government Fund 228,294 4,695 N/A
..................................................................................................
</TABLE>
Transfer agency fees paid on behalf of the Funds with a single class of shares
(the California Tax-Free Money Market, Short-Term Government-Corporate Income
and Short-Term Municipal Income Funds) are disclosed in the Statement of
Operations.
The Funds, other than 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
124
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
have agreed to provide shareholder liaison services, including responding to
customer inquiries and providing information on their investments, and providing
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.
Shareholder servicing fees paid on behalf of Class D shares for the six months
ended June 30, 1997 are disclosed in the Statement of Operations.
WFB as administrator and Stephens Inc. ("Stephens") as co-administrator provide
each Fund with administration services. For these services, WFB and Stephens are
entitled to receive monthly fees at the annual rates of 0.04% and 0.02%,
respectively, of each Fund's average daily net assets. Prior to May 1, 1997,
Stephens provided substantially the same services as sole administrator to the
Funds. Under the previous agreements, the California Tax-Free Bond, Short-Term
Government-Corporate Income, Short-Term Municipal Income, Strategic Growth and
Variable Rate Government Funds had each agreed to pay Stephens a monthly fee at
the annual rate of 0.15% of each such Funds' average daily net assets up to $200
million and 0.10% of the average daily net assets in excess of $200 million; and
the California Tax-Free Money Market, Index Allocation and U.S. Government
Income Funds had each agreed to pay Stephens a monthly fee at the annual rate of
0.10% of each such Fund's average daily net assets up to $200 million and 0.05%
of the average daily net assets in excess of $200 million. Also under the
previous agreement, the Money Market, Municipal Income, Small Cap Strategy and
U.S. Treasury Money Market Funds had each agreed to pay Stephens a monthly fee
at the annual rate of 0.10% of each such Fund's average daily net assets.
The Company has adopted separate Distribution Plans for Class A and Class D
shares of the Funds pursuant to Rule 12b-1 under the 1940 Act (each, a "Plan").
The Plan for Class A shares of the California Tax-Free Bond, California Tax-Free
Money Market and U.S. Government Income Funds provides that each such Fund may
defray all or part of the cost of preparing, printing and distributing
prospectuses and other promotional materials by paying for cost incurred on an
annual basis up to the greater of $100,000 or 0.05% of each such Fund's average
daily net assets attributable to the Class A shares. 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.
Under the Plan for Class A shares of the Index Allocation, Money Market,
Municipal Income, Short-Term Government-Corporate, Short-Term Municipal Income,
Small Cap Strategy, Strategic Growth, U.S. Treasury Money Market and Variable
Rate Government Funds, each 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 Class A shares of such Funds.
Payments under the Plan for the Class A shares of the Municipal Income Fund are
currently capped by WFB and Stephens at the annual rate of 0.15% of the average
daily net assets attributable to the Class A shares of the Fund.
125
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
Under the Plan for Class D shares of the Index Allocation Fund, Small Cap
Strategy and Strategic Growth Funds, each Fund may pay Stephens, as compensation
for distribution-related services, a monthly fee at an annual rate of up to
0.75% of the average daily net assets attributable to the Fund's Class D shares.
Under the Plan for Class D shares of the California Tax-Free Bond, Municipal
Income, U.S. Government Income and Variable Rate Government Funds, each Fund may
pay Stephens, as compensation for distribution-related services, a monthly fee
at an annual rate of up to 0.50% of the average daily net assets attributable to
the Fund's Class D shares.
Distribution fees paid on behalf of Class A and Class D shares of the Funds for
the six months ended June 30, 1997 were as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES DISTRIBUTION FEES
FUND CLASS A CLASS D
<S> <C> <C>
..................................................................................................
California Tax-Free Bond Fund $ 0 $ 15,033
Index Allocation Fund 81,922 106,664
Money Market Fund 553,548 N/A
Municipal Income Fund 32,200 23,387
Small Cap Strategy Fund 3,441 6,406
Strategic Growth Fund 148,355 175,350
U.S. Government Income Fund 0 5,065
U.S. Treasury Money Market Fund 365,922 N/A
Variable Rate Government Fund 444,814 18,177
..................................................................................................
</TABLE>
Distribution fees paid on behalf of the Funds with a single class of shares, the
California Tax-Free Money Market, Short-Term Government-Corporate Income and
Short-Term Municipal Income Funds, are disclosed in the Statement of Operations.
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 Index 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.
126
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
WAIVED FEES AND REIMBURSED EXPENSES
Waived fees and reimbursed expenses for the six months ended June 30, 1997 were
as follows:
<TABLE>
<CAPTION>
EXPENSES
FEES WAIVED REIMBURSED BY
FUND BY WFB STEPHENS
<S> <C> <C>
...................................................................................................
California Tax-Free Bond Fund $ 142,045 $ 0
California Tax-Free Money Market Fund 76,948 0
Index Allocation Fund 30,435 0
Money Market Fund 199,275 0
Municipal Income Fund 103,259 0
Short-Term Government-Corporate Income Fund 7,607 32,236
Short-Term Municipal Income Fund 14,491 33,259
Small Cap Strategy Fund 2,851 48,998
Strategic Growth Fund 6,455 0
U.S. Government Income Fund 48,260 0
U.S. Treasury Money Market Fund 181,195 0
Variable Rate Government Fund 491,421 0
...................................................................................................
</TABLE>
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens.
Certain officers and one director of the Company are also officers of Stephens.
As of June 30, 1997, Stephens owned 1,895 shares of the California Tax-Free Bond
Fund, 47,885 shares of the California Tax-Free Money Market Fund, 204,445 shares
of the Index Allocation Fund, 1,439,638 shares of the Money Market Fund, 14,030
shares of the Municipal Income Fund, one share of the Short-Term
Government-Corporate Income Fund, 2,124 shares of the Short-Term Municipal
Income Fund, one share of the Small Cap Strategy Fund, 6,030 shares of the
Strategic Growth Fund, 3,111 shares of the U.S. Government Income Fund, 131,321
shares of the U.S. Treasury Money Market Fund and 13,074 shares of the Variable
Rate Government Fund.
Stephens has retained $394,526 as sales charges from the proceeds of Class A
shares sold and $43,088 as proceeds from Class D shares redeemed by the Company
for the six months ended June 30, 1997. Wells Fargo Securities Inc., a
subsidiary of WFB, received $97,108 as sales charges from the proceeds of Class
A shares sold and $5,460 as proceeds from Class D shares redeemed by the Company
for the six months ended June 30, 1997.
127
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for each Fund
for the six months ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
AGGREGATE PURCHASES AND SALES
......................................
PURCHASES
FUND AT COST SALES PROCEEDS
<S> <C> <C>
...............................................................................................................
California Tax-Free Bond Fund $ 2,167,704 $ 20,478,075
Index Allocation Fund 42,809,463 33,079,568
Municipal Income Fund 1,022,500 5,320,220
U.S. Government Income Fund 99,013,736 95,349,984
Variable Rate Government Fund 107,778,576 205,223,580
</TABLE>
All Funds not reflected in this schedule traded exclusively in short-term
securities or were feeder funds that invested all their assets in a
corresponding Master Portfolio.
4. CAPITAL SHARE TRANSACTIONS
As of June 30, 1997, there were 20 billion shares of $.001 par value capital
stock authorized by the Company. As of June 30, 1997, 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, 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
AUTHORIZED
FUND PER CLASS
<S> <C>
.................................................................................................................
California Tax-Free Money Market Fund 3 billion
Money Market Fund 1 billion
Short-Term Government-Corporate Income Fund 300 million
Short-Term Municipal Income Fund 300 million
U.S. Treasury Money Market Fund 1 billion
Variable Rate Government Fund 500 million
</TABLE>
Transactions in capital shares for the six months ended June 30, 1997 and the
year ended December 31, 1996 are disclosed in detail in the Statements of
Changes in Net Assets.
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
128
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
existing Fund invests all of its assets in a corresponding Master Portfolio. 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.
6. INCOME AND EXPENSE ALLOCATIONS
The components of total investment income of the Short-Term Government-Corporate
Income, Short-Term Municipal Income, Small Cap Strategy and Strategic Growth
Funds are allocated from their corresponding Master Portfolios. The detail of
allocated total investment income for the six months ended June 30, 1997 was as
follows:
<TABLE>
<CAPTION>
GROSS
FUND DIVIDENDS INTEREST EXPENSES WAIVED FEES
<S> <C> <C> <C> <C>
............................................................................................................
Short-Term Government-Corporate Income Fund $ 0 $ 366,755 $ (48,009) $ 48,009
Short-Term Municipal Income Fund 0 518,965 (83,931) 83,931
Small Cap Strategy Fund 2,292 13,814 (20,189) 6,955
Strategic Growth Fund 81,242 126,894 (487,928) 0
............................................................................................................
</TABLE>
7. REORGANIZATION OF SMALL CAP STRATEGY FUND
The Small Cap Strategy Fund 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 certain 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 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 lawsuit asserted 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 settled all claims in the class action, and the settlement was
approved by the Court on March 10, 1997. The VRG Fund was not required to
contribute to the settlement fund under the terms of the settlement agreement.
129
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
9. REORGANIZATION OF OVERLAND EXPRESS FUNDS, INC.
At a meeting held on July 23, 1997, the Company's Board of Directors approved an
Agreement and Plan of Consolidation to reorganize Overland Express Funds, Inc.
into Stagecoach Funds, Inc. This Plan of Consolidation is subject to approval by
Overland Express Fund shareholders. The agreement provides, among other things,
for the transfer of assets and liabilities of each Overland Express Fund (each a
"Predecessor Fund") to a corresponding series of Stagecoach Funds, Inc. (each a
"Stagecoach Fund"). The Agreement provides that each Stagecoach Fund will assume
certain identified liabilities of the corresponding Predecessor Fund and will
deliver to that Predecessor Fund shares of common stock of the Stagecoach Fund
having an aggregate net asset value equivalent to the aggregate net asset value
of the assets transferred to the Stagecoach Fund by the Predecessor Fund
(collectively, the "Consolidation"). At the time of Consolidation, the Funds
that currently are structured as "feeder" Funds in a "master-feeder" structure
will be restructured to invest directly in a portfolio of securities, rather
than to invest in portfolio securities through a "master" Fund. The
Consolidation is expected to be a tax-free exchange.
Dividends from net investment income and net realized capital gains, if any, of
the Predecessor Funds will be distributed to Overland Express Fund shareholders
prior to the Consolidation. The Consolidation is expected to close in December,
1997. All of the expenses incurred in connection with the Consolidation will be
paid by Wells Fargo or Stephens.
130
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION
MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 98.09%
ADVERTISING - 2.13%
130,000 HA-LO Industries inc+ $ 1,833,313 $ 3,071,250
60,000 Snyder Communications Inc+ 1,425,802 1,616,250
------------ ------------
$ 3,259,115 $ 4,687,500
BIOTECHNOLOGY - 1.47%
135,000 General Surgical Innovations Inc+ $ 1,826,250 $ 759,375
115,000 Neurex Corp+ 1,887,125 1,624,375
37,500 Serologicals Corp+ 764,584 862,500
------------ ------------
$ 4,477,959 $ 3,246,250
COMMERCIAL SERVICES - 4.58%
200,000 AccuStaff Inc+ $ 4,090,759 $ 4,737,500
93,000 Peapod Inc+ 1,486,650 1,046,250
55,000 Quintiles Transnational Corp+ 3,314,499 3,829,375
60,000 Stericycle Inc+ 558,542 480,000
------------ ------------
$ 9,450,450 $ 10,093,125
COMPUTER SOFTWARE - 14.09%
32,500 3-D Labs Inc+ $ 934,375 $ 942,500
78,700 America Online Inc+ 3,193,275 4,377,688
14,000 Aris Corp+ 247,562 306,250
30,000 Axent Technologies Inc+ 513,750 457,500
10,000 Check Point Software Tech+ 260,000 233,750
120,000 Checkfree Corp+ 2,014,082 2,115,000
38,000 Creative Technology Ltd+ 681,250 646,000
55,000 Documentum Inc+ 1,326,250 1,368,125
130,000 Imnet Systems Inc+ 2,878,450 4,038,125
175,000 Inference Corp Class A+ 3,187,250 732,813
27,000 Microsoft Corp+ 1,736,806 3,412,121
30,000 Oracle Systems Corp+ 1,199,370 1,511,250
19,000 Peerless Systems Corp+ 268,375 261,250
27,000 Procom Technology Inc+ 311,063 290,250
150,183 Pure Atria Corp+ 3,774,057 2,121,335
</TABLE>
131
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION
MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
COMPUTER SOFTWARE - CONTINUED
135,000 Quadramed Corp+ $ 1,687,847 $ 911,250
100,000 Veritas Software Corp+ 4,079,294 5,025,000
45,000 Viasoft Inc+ 1,820,815 2,283,750
------------ ------------
$ 30,113,871 $ 31,033,957
COMPUTER SYSTEMS - 5.58%
130,000 Adaptec Inc+ $ 4,921,373 $ 4,517,500
55,000 Cisco Systems Inc+ 3,445,205 3,691,875
197,774 Komag Inc+ 5,009,263 3,238,549
23,000 Security Dynamics Technologies Inc+ 844,438 848,125
------------ ------------
$ 14,220,279 $ 12,296,049
ELECTRICAL EQUIPMENT - 3.38%
35,000 Gemstar International Group Ltd+ $ 647,500 $ 643,125
90,000 Integrated Process Equipment Corp+ 2,005,305 2,278,125
65,000 Interlink Electronics Inc+ 344,375 455,000
40,000 Nokia Corp ADR Class A 1,969,357 2,950,000
30,500 Spectrian Corp+ 912,281 1,124,688
------------ ------------
$ 5,878,818 $ 7,450,938
ENERGY & RELATED - 10.13%
110,000 Ensco International Inc+ $ 3,812,199 $ 5,802,500
40,000 Falcon Drilling Co Inc+ 1,599,751 2,305,000
125,000 Global Industries Ltd+ 1,421,038 2,919,922
60,000 Nabors Industries Inc+ 1,380,549 1,485,000
110,000 Newpark Resources Inc+ 2,354,701 3,712,500
66,000 Smedvig ASA - Sponsored ADR Class B 1,423,972 1,683,000
100,000 Tetra Technologies Inc+ 2,462,522 2,475,000
85,000 Veritas Digicon Inc+ 1,320,391 1,933,750
------------ ------------
$ 15,775,123 $ 22,316,672
ENTERTAINMENT & LEISURE - 4.23%
120,000 Family Golf Centers Inc+ $ 2,208,391 $ 2,760,000
</TABLE>
132
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION
MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
ENTERTAINMENT & LEISURE - CONTINUED
47,500 HFS Inc+ $ 2,907,073 $ 2,755,000
115,000 Regal Cinemas Inc+ 3,287,663 3,795,000
------------ ------------
$ 8,403,127 $ 9,310,000
FINANCE & RELATED - 8.02%
16,500 ARM Financial Group Inc+ $ 247,500 $ 330,000
115,000 Capital One Financial Corp 3,370,107 4,341,250
225,000 Envoy Corp (New)+ 7,705,681 7,481,250
65,000 Firstplus Financial Group+ 1,777,836 2,210,000
115,000 Money Store Inc 2,734,484 3,299,063
------------ ------------
$ 15,835,608 $ 17,661,563
FOOD & RELATED - 3.47%
145,000 North Land Cranberries Inc $ 3,241,888 $ 2,338,125
118,000 NuCo2 Inc+ 1,924,024 2,035,500
80,000 Suiza Foods Corp+ 1,982,228 3,280,000
------------ ------------
$ 7,148,140 $ 7,653,625
GENERAL BUSINESS & RELATED - 5.66%
60,000 HBO & Co $ 3,237,209 $ 4,132,500
100,000 Homegate Hospitality Inc+ 988,438 975,000
47,500 P-Com Inc+ 1,472,488 1,567,500
160,000 Proxim Inc+ 3,572,325 3,880,000
60,000 Wackenhut Corrections Corp+ 1,661,379 1,747,500
9,000 Waste Industries Inc+ 129,000 158,625
------------ ------------
$ 11,060,839 $ 12,461,125
HEALTHCARE - 9.10%
70,000 Access Health Inc $ 1,179,665 $ 1,715,000
40,000 Algos Pharmaceuticals Corp+ 732,263 730,000
50,000 Covance Inc+ 977,950 965,625
150,000 Genesis Health Ventures Inc+ 3,940,085 5,062,500
242,700 Healthsouth Corp+ 3,922,501 6,052,331
</TABLE>
133
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION
MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
HEALTHCARE - CONTINUED
140,000 Renal Treatment Centers+ $ 2,606,195 $ 3,762,500
51,000 Vivus Inc+ 1,311,649 1,214,438
25,000 Zonagen Inc+ 572,500 546,875
------------ ------------
$ 15,242,808 $ 20,049,269
MANUFACTURING PROCESSING - 1.77%
175,000 Biochem Pharma Inc+ $ 4,318,238 $ 3,893,750
MEDICAL EQUIPMENT & SUPPLIES - 2.90%
21,000 Closure Medical Corp+ $ 304,447 $ 404,250
147,500 Endosonics Corp+ 1,761,922 1,604,063
115,000 Life Med Sciences Inc+ 727,344 431,250
180,000 Ultrafem Inc+ 3,138,115 2,475,000
130,000 Uroquest Medical Corp+ 819,205 845,000
125,000 Vidamed Inc+ 1,542,813 632,813
------------ ------------
$ 8,293,846 $ 6,392,376
PHARMACEUTICALS - 0.90%
100,000 Anesta Corp+ $ 1,392,104 $ 1,900,000
80,000 Seragen Inc+ 444,940 80,000
------------ ------------
$ 1,837,044 $ 1,980,000
REAL ESTATE INVESTMENT TRUSTS - 0.23%
36,000 Lexington Corp Properties $ 495,000 $ 504,000
RETAIL & RELATED - 5.61%
57,500 Amazon.com Inc+ $ 1,056,991 $ 1,063,750
270,000 Corporate Express Inc+ 5,100,062 3,898,125
115,000 Eagle Hardware & Garden+ 2,573,184 2,630,625
115,000 Galoob (Lewis) Toys Inc+ 2,069,000 2,170,625
45,000 North Face Inc+ 765,774 821,250
</TABLE>
134
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION
MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
RETAIL & RELATED - CONTINUED
83,000 Oakley Inc $ 1,014,440 $ 1,167,188
19,000 Pacific Sunwear of California+ 639,171 612,750
------------ ------------
$ 13,218,622 $ 12,364,313
SEMICONDUCTORS - 2.51%
33,000 ASE Test Limited+ $ 1,379,562 $ 1,394,250
70,000 LSI Logic Corp+ 2,464,237 2,240,000
55,000 Triquint Semiconductor Inc+ 1,875,313 1,890,625
------------ ------------
$ 5,719,112 $ 5,524,875
TELECOMMUNICATIONS - 9.35%
116,000 Ascend Communication Inc+ $ 6,761,855 $ 4,567,500
20,000 Clear Channel Communications Inc+ 999,980 1,231,250
62,500 IXC Communications+ 1,500,021 1,640,625
255,000 LCI International Inc+ 4,677,332 5,578,125
205,000 NEXTEL Communications Class A+ 3,411,187 3,882,188
205,000 Paging Network Inc+ 3,817,562 1,800,156
55,000 Teledata Communications Ltd+ 1,623,224 1,890,625
------------ ------------
$ 22,791,161 $ 20,590,469
TRANSPORTATION - 2.98%
80,000 Atlas Air Inc+ $ 3,600,819 $ 2,760,000
175,000 Trico Marine Services Inc+ 3,106,321 3,817,188
------------ ------------
$ 6,707,140 $ 6,577,188
TOTAL COMMON STOCKS $204,246,300 $216,087,044
</TABLE>
135
<PAGE>
MASTER INVESTMENT TRUST CAPITAL APPRECIATION
MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<C> <S> <C> <C> <C> <C>
WARRANTS - 2.53%
2,295 Checkers Drive-In Restaurant expires 12/22/2000+ $ 1,721
55,000 Intel Corp expires 3/14/1998+ 5,582,500
------------
TOTAL WARRANTS $ 5,584,221
(Cost $2,973,392)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $207,219,692)* (Notes 1 and 3) 100.62 % $221,671,265
Other Assets and Liabilities, Net (0.62 ) (1,369,995)
------- ------------
TOTAL NET ASSETS 100.00 % $220,301,270
------- ------------
------- ------------
..........................................................................................................
</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 $ 36,964,901
Gross Unrealized Depreciation (22,513,328)
-------------
NET UNREALIZED APPRECIATION $ 14,451,573
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
136
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER
PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 35.81%
BANK & FINANCE - 19.49%
$ 500,000 GMAC 5.63 % 10/19/98 $ 497,700
500,000 International Lease Finance 5.75 04/15/98 499,945
500,000 PNC Bank NA 5.71 06/25/98 499,890
500,000 Wachovia Bank NC 4.90 09/19/98 493,104
------------
$ 1,990,639
MISCELLANEOUS BONDS - 16.32%
$ 500,000 Donnelley (R.R.) & Sons Co 6.11 % 06/22/98 $ 501,050
630,000 Ford Capital BV 9.00 08/15/98 650,658
500,000 Sears Roebuck Co 8.45 11/01/98 515,205
------------
$ 1,666,913
TOTAL CORPORATE BONDS & NOTES $ 3,657,552
(Cost $3,667,264)
U.S. GOVERNMENT AGENCY SECURITIES - 19.54%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.79%
$ 1,000,000 FHLMC 5.84 % 04/08/98 $ 999,880
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.75%
$ 1,000,000 FNMA 5.84 % 01/19/99 $ 996,160
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 1,996,040
(Cost $1,991,662)
U.S. TREASURY SECURITIES - 41.71%
U.S. TREASURY NOTES - 41.71%
$ 2,750,000 U.S. Treasury Notes 6.00 % 09/30/98 $ 2,752,998
1,500,000 U.S. Treasury Notes 6.25 06/30/98 1,507,110
------------
TOTAL U.S. TREASURY SECURITIES $ 4,260,108
(Cost $4,260,625)
</TABLE>
137
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM GOVERNMENT- CORPORATE INCOME MASTER
PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 2.35%
REPURCHASE AGREEMENTS - 2.35%
$ 86,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.85 % 07/01/97 $ 86,000
155,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.95 07/01/97 155,000
------------
TOTAL SHORT-TERM INSTRUMENTS $ 241,000
(Cost $241,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $10,160,551)* (Notes 1 and 3) 99.41 % $ 10,154,700
Other Assets and Liabilities, Net 0.59 59,885
------- ------------
TOTAL NET ASSETS 100.00 % $ 10,214,585
------- ------------
------- ------------
..........................................................................................................
</TABLE>
* 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 $ 8,864
Gross Unrealized Depreciation (14,715)
-------------
NET UNREALIZED DEPRECIATION $ (5,851)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
138
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - 94.72%
ARIZONA - 3.47%
$ 700,000 Arizona State Transportation Board Tax Revenue
Maricopa County Regional Area Road Fund MBIA
Insured 7.00 % 07/01/00 $ 745,556
COLORADO - 7.88%
790,000 Arapahoe County CO School District Revenue 4.75 12/15/98 798,358
900,000 Colorado State Student Obligation Bond
Authority Series C 4.35 09/01/99 896,463
HAWAII - 2.34%
500,000 Honolulu HI Improvement Board Series B 4.50 10/01/98 502,615
ILLINOIS - 5.77%
200,000 Chicago IL AMBAC Insured 6.00 01/01/98 202,152
1,025,000 Metropolitan Pier & Exposition Authority IL
Dedicated State Revenue 5.80 06/01/98 1,037,536
INDIANA - 2.35%
500,000 Indiana Secondary Market Educational Loan
Revenue Series A 6.75 12/01/97 505,180
MINNESOTA - 5.74%
200,000 Minneapolis MN Special School District No. One
COP Prerefunded 7.38 02/01/15 203,968
1,000,000 Minnesota State Refunded State Trunk Highway 6.90 08/01/01 1,030,140
MISSOURI - 0.93%
200,000 Branson MO Tax Allocation Revenue Street
Improvement Project CGIC Insured 4.95 10/01/97 200,578
NEVADA - 2.42%
500,000 Clark County NV USD Series A 7.30 03/01/99 520,595
</TABLE>
139
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
NEW MEXICO - 4.67%
$ 1,000,000 Albuquerque NM Gross Receipts Tax MBIA Insured 4.50 % 07/01/98 $ 1,003,750
NEW YORK - 5.42%
250,000 New York State Mortgage Agency Revenue
Homeowner Mortgage Series 44 AMT FHA
Collateralized 6.00 04/01/99 253,770
900,000 New York/New Jersey Port Authority Consolidated
Revenue MBIA Insured 5.00 09/01/98 910,773
NORTH CAROLINA - 2.35%
500,000 North Carolina State Municipal Power Agency
Catawba No. 1 Electrical Revenue FGIC Insured 5.10 01/01/99 506,450
NORTH DAKOTA - 3.49%
750,000 North Dakota State Financing Agency Series D 4.15 10/02/97 750,195
OHIO - 4.70%
1,000,000 Ohio State Public Facility Commission Higher
Education Capital Facility Series II-B FSA
Insured 5.00 11/01/98 1,011,070
OREGON - 1.40%
300,000 Lane County OR School District No. 52 FGIC
Insured 5.20 12/01/97 301,740
PENNSYLVANIA - 3.32%
500,000 Bethel Park PA USD Series B AMBAC Insured 6.05 02/01/98 506,175
200,000 Montgomery County PA Higher Education & Health
Authority Hospital Revenue Bryn Manor Hospital
Project Prerefunded 9.38 12/01/19 208,460
</TABLE>
140
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
PUERTO RICO - 2.33%
$ 500,000 Commonwealth of Puerto Rico Aquaduct and Sewer
Authority Revenue 4.50 % 07/01/99 $ 501,320
SOUTH DAKOTA - 4.71%
1,000,000 South Dakota Student Loan Finance Corp Student
Loan Revenue Series A - GTD STD LN Insured 5.50 08/01/98 1,012,460
TEXAS - 11.99%
240,000 Brazos TX Higher Education Authority AMT Series
C-1 6.00 11/01/99 246,146
1,000,000 Brazos TX Higher Education Authority Inc 5.30 12/01/97 1,004,030
275,000 Dallas TX Waterworks & Sewer System Revenue
Series A 9.00 10/01/97 278,273
275,000 Port of Houston Authority TX AMT 8.50 10/01/98 289,471
310,000 Texas State Department Housing & Community MBIA
Insured 4.20 03/01/98 310,164
450,000 Texas State Department Housing & Community
Mortgage Series E MBIA Insured 4.20 09/01/98 450,432
VIRGINIA - 4.84%
1,000,000 Richmond VA Public Utilities Revenue Series A 7.80 01/15/06 1,040,440
WASHINGTON - 8.08%
200,000 Southern Columbia Basin WA Irrigation District 5.50 12/01/98 203,792
500,000 Thirstin County WA Olympia USD No. 111 FGIC
Insured 5.25 12/01/98 508,335
1,000,000 Washington State Series A 6.50 07/01/98 1,024,720
WEST VIRGINIA - 2.33%
500,000 West Virginia State HFFA Charleston Area
Medical Center Series A MBIA Insured 4.30 09/01/99 500,485
</TABLE>
141
<PAGE>
MASTER INVESTMENT TRUST SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO -
JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
MUNICIPAL BONDS - CONTINUED
WYOMING - 4.19%
$ 900,000 Lincoln County WY Pollution Control Revenue
Series A 4.25 % 07/01/17 $ 900,000
------------
TOTAL MUNICIPAL BONDS $ 20,365,592
(Cost $20,337,785)
SHORT-TERM INSTRUMENTS - 4.06%
MONEY MARKET FUNDS - 4.06%
315,000 Arbor Institutional National Fund $ 315,000
559,000 National Municipal Fund 559,000
------------
TOTAL SHORT-TERM INSTRUMENTS $ 874,000
(Cost $874,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $21,211,785)* (Notes 1 and 3) 98.78 % $ 21,239,592
Other Assets and Liabilities, Net 1.22 261,588
------- ------------
TOTAL NET ASSETS 100.00 % $ 21,501,180
------- ------------
------- ------------
..........................................................................................................
</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 $ 40,062
Gross Unrealized Depreciation (12,255)
-------------
NET UNREALIZED APPRECIATION $ 27,807
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
142
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - 87.31%
ADVERTISING - 1.87%
41,625 HA-LO Industries Inc+ $ 866,604 $ 983,391
BIOTECHNOLOGY - 2.17%
58,000 Neurex Corp+ $ 917,063 $ 819,250
14,000 Serologicals Corp+ 261,188 322,000
------------ ------------
$ 1,178,251 $ 1,141,250
CAPITAL GOODS - 3.16%
11,000 Cymer Inc+ $ 495,688 $ 536,250
23,000 Neomagic Corp+ 295,493 514,625
11,000 U.S. Rental Inc+ 229,427 277,750
20,000 Xcellenet Inc+ 354,375 327,500
------------ ------------
$ 1,374,983 $ 1,656,125
COMMERCIAL SERVICES - 2.98%
21,391 Billing Information Concepts+ $ 604,318 $ 746,011
20,000 NCO Group+ 352,000 587,500
20,500 Peapod Inc+ 301,750 230,625
------------ ------------
$ 1,258,068 $ 1,564,136
COMPUTER SOFTWARE - 5.31%
8,000 3-D Labs Inc+ $ 231,525 $ 232,000
16,500 Aris Corp+ 304,143 360,938
37,500 Creative Technology Ltd+ 581,250 637,500
2,500 Documentum Inc+ 62,500 62,188
5,000 Great Plains Software Inc+ 80,000 135,000
40,000 Intelligroup Inc+ 434,941 385,000
28,000 Peregrine Systems Inc+ 253,900 430,500
5,000 Procom Technology Inc+ 59,688 53,750
10,023 Pure Atria Corp+ 324,795 141,575
20,000 Viisage Technology+ 217,813 347,500
------------ ------------
$ 2,550,555 $ 2,785,951
</TABLE>
143
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
COMPUTER SYSTEMS - 3.46%
12,000 Clarify Inc+ $ 141,412 $ 135,750
40,000 Exabyte Corp+ 563,879 512,500
18,000 Jetfax Inc+ 144,000 139,500
21,000 Micron Electronics Inc 385,875 374,063
30,500 National Techteam Inc+ 680,229 651,938
------------ ------------
$ 1,915,395 $ 1,813,751
ELECTRICAL EQUIPMENT - 2.20%
37,000 Integrated Process Equipment Corp+ $ 904,695 $ 936,563
31,500 Interlink Electronics Inc+ 216,563 220,500
------------ ------------
$ 1,121,258 $ 1,157,063
ENERGY & RELATED - 4.33%
30,000 Costilla Energy Inc+ $ 376,250 $ 386,250
26,000 KCS Energy 422,528 529,750
20,000 Marine Drilling Co Inc+ 332,500 392,500
20,000 Pride Petroleum Services Inc+ 447,500 480,000
19,000 Smedvig ASA - Sponsored ADR Class B 427,282 484,500
------------ ------------
$ 2,006,060 $ 2,273,000
ENTERTAINMENT & LEISURE - 2.82%
37,000 Family Golf Centers Inc+ $ 925,577 $ 851,000
19,000 Regal Cinemas Inc+ 486,533 627,000
------------ ------------
$ 1,412,110 $ 1,478,000
FINANCE & RELATED - 7.43%
23,000 Amresco Inc+ $ 327,750 $ 494,500
7,500 ARM Financial Group Inc+ 112,500 150,000
25,000 Envoy Corp (New)+ 838,125 831,250
22,000 IMC Mortgage Co+ 404,313 365,750
35,000 Imperial Credit Industries+ 637,403 719,688
54,000 Long Beach Financial Corp+ 362,250 472,500
</TABLE>
144
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
FINANCE & RELATED - CONTINUED
25,000 Medallion Financial Corp $ 432,375 $ 478,125
19,000 Ocwen Asset Investment Corp 315,900 384,750
------------ ------------
$ 3,430,616 $ 3,896,563
FOOD & RELATED - 4.29%
50,000 North Land Cranberries Inc $ 1,096,550 $ 806,250
15,000 NuCo2 Inc+ 326,250 258,750
29,000 Suiza Foods Corp+ 638,000 1,189,000
------------ ------------
$ 2,060,800 $ 2,254,000
GENERAL BUSINESS & RELATED - 17.48%
15,500 Allen Telecom Inc+ $ 351,036 $ 321,625
18,750 American Homestar Corp+ 343,750 400,781
15,000 American Residential Services+ 250,635 348,750
13,375 Cox Radio Inc Class A+ 336,748 342,734
44,000 Equity Corp International+ 908,250 1,064,250
55,000 Philip Services Corp+ 705,828 873,125
10,000 Racing Champions Corp+ 150,000 155,000
32,000 Renter's Choice Inc+ 561,688 636,000
28,000 Romac International Inc+ 647,817 917,000
9,500 Staff Leasing Inc+ 161,500 178,125
23,000 Staffmark Inc+ 304,921 514,625
23,000 Suburban Lodges of America Inc+ 439,909 483,000
59,000 Sunquest Information Systems+ 828,966 885,000
30,000 UOL Publishing Inc+ 366,000 367,500
67,000 VDI Media Corp+ 468,045 753,750
17,500 Wackenhut Corrections Corp+ 480,887 509,688
24,000 Waste Industries Inc+ 388,917 423,000
------------ ------------
$ 7,694,897 $ 9,173,953
HEALTHCARE - 14.42%
6,000 Access Health Inc $ 120,750 $ 147,000
10,000 Algos Pharmaceuticals Corp+ 197,080 182,500
</TABLE>
145
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
HEALTHCARE - CONTINUED
26,000 Applied Graphics Technologies+ $ 711,744 $ 1,033,496
25,000 Cima Labs Inc+ 178,125 103,125
26,000 Covance Inc+ 483,954 502,125
21,000 Genesis Health Ventures Inc+ 660,380 708,750
47,000 Healthcare Recoveries Inc+ 658,000 910,625
17,000 KOS Pharmaceuticals Inc+ 284,500 471,750
20,500 Medicis Pharmaceutical Corp+ 640,000 1,022,438
29,500 Orthodontic Centers of America Inc+ 621,064 536,531
16,891 Pathogenesis Corp+ 386,555 491,950
29,000 Renal Treatment Centers+ 843,399 779,375
11,000 Sangstat Medical Corp+ 231,000 254,375
15,000 Vivus Inc+ 376,200 357,188
3,000 Zonagen Inc+ 68,400 65,625
------------ ------------
$ 6,461,151 $ 7,566,853
MEDICAL EQUIPMENT & SUPPLIES - 2.37%
10,000 Cardima Inc+ $ 70,000 $ 62,500
20,000 Endosonics Corp+ 276,900 217,500
22,000 Kaynar Technologies Inc+ 321,000 398,750
10,000 Perclose Inc+ 216,250 250,000
23,000 Ultrafem Inc+ 370,702 316,250
------------ ------------
$ 1,254,852 $ 1,245,000
PHARMACEUTICALS - 0.72%
20,000 Anesta Corp+ $ 323,750 $ 380,000
RETAIL & RELATED - 4.49%
19,500 Eagle Hardware & Garden+ $ 384,188 $ 446,063
15,500 Nautica Enterprises 346,332 409,781
15,000 North Face Inc+ 231,317 273,750
58,500 Oakley Inc 713,798 822,656
17,000 Regis Corp 375,953 401,625
------------ ------------
$ 2,051,588 $ 2,353,875
</TABLE>
146
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<C> <S> <C> <C> <C> <C>
COMMON STOCKS - CONTINUED
TELECOMMUNICATIONS - 4.05%
30,000 Inter-Tel Inc+ $ 594,375 $ 637,500
52,000 Metro One Telecommunications+ 389,788 383,500
35,000 Superior Telecom Inc+ 838,666 1,102,500
------------ ------------
$ 1,822,829 $ 2,123,500
TRANSPORTATION - 3.76%
18,000 Atlas Air Inc+ $ 636,643 $ 621,000
18,000 Ryanair Holdings Plc-SP ADR+ 337,839 488,250
30,000 Trico Marine Services Inc+ 624,688 654,375
10,500 U.S. Xpess Enterprises Class A+ 175,807 207,375
------------ ------------
$ 1,774,977 $ 1,971,000
TOTAL COMMON STOCKS $ 40,558,744 $ 45,817,411
</TABLE>
147
<PAGE>
MASTER INVESTMENT TRUST SMALL CAP MASTER PORTFOLIO - JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<C> <S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 12.27%
REPURCHASE AGREEMENTS - 12.27%
$ 2,344,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.85 % 07/01/97 $ 2,344,000
2,178,000 HSBC Securities Inc Repurchase Agreement - 102%
Collateralized by U.S. Government Securities 5.80 07/01/97 2,178,000
1,917,000 JP Morgan Securities Inc Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.95 07/01/97 1,917,000
------------
TOTAL SHORT-TERM INSTRUMENTS $ 6,439,000
(Cost $6,439,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<C> <S> <C> <C>
(Cost $46,997,744)* (Notes 1 and 3) 99.58 % $ 52,256,411
Other Assets and Liabilities, Net 0.42 219,189
------- ------------
TOTAL NET ASSETS 100.00 % $ 52,475,600
------- ------------
------- ------------
..........................................................................................................
</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 $ 7,043,536
Gross Unrealized Depreciation (1,784,869)
-------------
NET UNREALIZED APPRECIATION $ 5,258,667
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
148
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) - JUNE 30, 1997
<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) (Small Cap Master
Portfolio includes repurchase
agreements of $6,439,000) $221,671,265 $10,154,700 $21,239,592 $52,256,411
Cash 151,394 4,182 1,319 1,879
Receivables:
Dividends and interest 1,200 130,322 357,827 1,049
Investment securities sold 2,299,061 0 0 94,966
Due from co-administrator (Note 2) 0 1,583 2,280 0
Organizational expenses, net of
amortization 0 1,712 1,572 0
Prepaid expenses and other assets 376,372 0 149 2,949
TOTAL ASSETS 224,499,292 10,292,499 21,602,739 52,357,254
LIABILITIES
Payables:
Investment securities purchased 4,101,759 0 0 819,811
Distribution to beneficial interest
holders 0 55,980 73,154 26,622
Due to advisor (Note 2) 83,387 0 0 1,645
Other 12,876 21,934 28,405 33,576
TOTAL LIABILITIES 4,198,022 77,914 101,559 881,654
TOTAL NET ASSETS
$220,301,270 $10,214,585 $21,501,180 $51,475,600
INVESTMENT AT COST (NOTE 3) $207,219,692 $10,160,551 $21,211,785 $46,997,744
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
149
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED) -
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
SHORT-TER
GOVERNMENT- SHORT-
TERM
CAPITAL CORPORATE MUNICIPAL
APPRECIATION INCOME INCOME SMALL CAP
MASTER MASTER MASTER MASTER
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
........... ........ ......... ...........
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 104,703 $ 0 $ 0 $ 20,219
Interest 163,233 366,755 518,965 121,883
TOTAL INVESTMENT INCOME 267,936 366,755 518,965 142,102
EXPENSES (NOTE 2)
Advisory fees 536,553 29,243 58,021 118,098
Custody fees 29,944 983 2,026 5,767
Portfolio accounting fees 51,944 4,818 5,270 25,882
Amortization of organization expenses 0 343 310 0
Legal and audit fees 5,267 10,986 16,310 20,962
Other 7,472 1,636 1,994 5,456
TOTAL EXPENSES 631,180 48,009 83,931 176,165
Less:
Waived fees and reimbursed expenses 0 (48,009) (83,931) (60,685)
NET EXPENSES 631,180 0 0 115,480
NET INVESTMENT INCOME (LOSS) (363,244) 366,755 518,965 26,622
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on sale of
investments (3,736,525) (3,173) (5,864) 331,521
Net change in unrealized appreciation
(depreciation) of investments 5,771,227 (8,766) (20,508) 3,489,029
NET GAIN (LOSS) ON INVESTMENTS 2,034,702 (11,939) (26,372) 3,820,550
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,671,458 $354,816 $ 492,593 $ 3,847,172
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
150
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT-
CAPITAL APPRECIATION MASTER CORPORATE INCOME MASTER
PORTFOLIO PORTFOLIO
............................. ...........................
From Feb.
20, 1996 (Unaudited)
(Unaudited) (commencement For the Six
For the Six of Months For the
Months Ended operations) Ended Year Ended
June 30, to Dec. 31, June 30, Dec. 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ (363,244) $ (255,840) $ 366,755 $ 654,198
Net realized gain (loss) on sale of
investments (3,736,525) 10,162,551 (3,173) (63,690)
Net change in unrealized appreciation
(depreciation) of investments 5,771,227 8,680,346 (8,766) (11,676)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 1,671,458 18,587,057 354,816 578,832
Net increase (decrease) in net assets
resulting from beneficial interest
transactions (16,871,115) 216,913,870 (4,153,605) 7,511,920
INCREASE (DECREASE) IN NET ASSETS (15,199,657) 235,500,927 (3,798,789) 8,090,752
NET ASSETS:
Beginning net assets 235,500,927 0 14,013,374 5,922,622
ENDING NET ASSETS $220,301,270 $235,500,927 $10,214,585 $14,013,374
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
151
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL INCOME SMALL CAP MASTER PORTFOLIO
MASTER PORTFOLIO
........................... ...........................
From Sept.
(Unaudited) (Unaudited) 16, 1996
For the Six For the Six (commencement
Months For the Months of
Ended Year Ended Ended operations)
June 30, Dec. 31, June 30, to Dec. 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 518,965 $ 946,275 $ 26,622 $ 2,599
Net realized gain (loss) on sale of
investments (5,864) 4,708 331,521 (1,405,188)
Net change in unrealized appreciation
(depreciation) of investments (20,508) (80,537) 3,489,029 1,769,638
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 492,593 870,446 3,847,172 367,049
Net increase (decrease) in net assets
resulting from beneficial interest
transactions (5,698,890) 9,390,327 11,588,564 35,672,815
INCREASE (DECREASE) IN NET ASSETS (5,206,297) 10,260,773 15,435,736 36,039,864
NET ASSETS:
Beginning net assets 26,707,477 16,446,704 36,039,864 0
ENDING NET ASSETS $21,501,180 $26,707,477 $51,475,600 $36,039,864
</TABLE>
................................................................................
The accompanying notes are an integral part of these financial statements.
152
<PAGE>
MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Capital Appreciation, Short-Term Municipal Income, Short-Term
Government-Corporate Income 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 Declaration of Trust permits the issuance of beneficial
interests. The Trust currently issues nine series of investment portfolios: 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 financial statements represent only the Capital Appreciation, Short-Term
Government-Corporate Income, Short-Term Municipal Income and Small Cap Master
Portfolios.
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 ("GAAP") for investment
companies. The preparation of financial statements in conformity with GAAP for
investment companies requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, 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. These estimates
should not be considered an indication of actual or expected figures; actual
results may differ.
INVESTMENT POLICY AND SECURITY VALUATION
Equity securities, for which the primary market is a national securities
exchange or the National Association of Securities Dealers Automated Quotation
("NASDAQ") system, are valued at the last reported sales price on the day of
valuation. U.S. Government obligations are valued at the reported bid price. In
the absence of any sale of such securities on the valuation date and in the case
of other securities, excluding money market instruments 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. 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. Securities for which quotations are not readily available are
valued at fair value as determined by policies set by the Trust's Board of
Trustees. Except during temporary defensive periods, the Short-Term
Government-Corporate Income and Short-Term Municipal Income Master Portfolios
each seek to maintain a portfolio of securities with an average weighted
maturity of between 90 days to 2 years.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are recorded no later than one business day after trade
date. Dividend income is recognized on the ex-dividend date, and interest income
is accrued daily. Realized gains and
153
<PAGE>
MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 of 1986, as amended (the "Code").
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 Master Portfolio's Portfolio
of Investments. The Master Portfolios may participate in pooled repurchase
agreement transactions with other funds advised by Wells Fargo Bank, N.A.
("WFB"). 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 custodian's responsibility to value
collateral daily and to take action to obtain additional collateral as necessary
to maintain market value equal to or greater than the resale price. Repurchase
agreements held in the Funds are collateralized by instruments such as U.S.
Treasury or federal agency obligations.
FEDERAL INCOME TAXES
Each Master Portfolio intends to qualify for federal income tax purposes as a
partnership. Management, 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 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 a Master Portfolio will be able to satisfy the requirements of
Subchapter M of the Code, assuming that the investment company invests all of
its assets in a Master Portfolio.
ORGANIZATION EXPENSES
The Master Portfolios have been charged for expenses incurred in connection with
the organization and initial registration of the Master Portfolios. These
expenses are being amortized on a straight-line basis over 60 months from the
date each Master Portfolio commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into advisory contracts on behalf of each Master Portfolio
with WFB. Pursuant to the contracts, WFB has agreed to provide each Master
Portfolio with daily portfolio management. Under the contracts with the Capital
Appreciation, Short-Term Government-Corporate Income and Short-Term Municipal
Income Master Portfolios, WFB is entitled to receive a monthly advisory fee at
154
<PAGE>
MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
an annual rate of 0.50% of the average daily net assets of each Master
Portfolio. Under the contract with the Small Cap Master Portfolio, WFB is
entitled to receive a monthly advisory fee at an annual rate of 0.60% of average
daily net assets of the Master Portfolio.
The Trust has entered into a contract on behalf of the Master Portfolios with
WFB, whereby WFB is responsible for providing custody and portfolio accounting
services to each Master Portfolio. Pursuant to the contract, WFB is entitled to
certain transaction charges plus a custody fee at an annual rate of 0.0167% of
the average daily net assets of each Master Portfolio. For providing portfolio
accounting services, WFB is entitled to receive a monthly base fee of $2,000
plus an annual fee of 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 each
Master Portfolio's average daily net assets in excess of $100 million.
WAIVED FEES AND REIMBURSED EXPENSES
Waived fees and reimbursed expenses for the six months ended June 30, 1997, were
as follows:
<TABLE>
<CAPTION>
EXPENSES
FEES WAIVED REIMBURSED BY
MASTER PORTFOLIO BY WFB STEPHENS
<S> <C> <C>
................................................................................................................
Capital Appreciation Master Portfolio $ 0 $ 0
Short-Term Government-Corporate Income Master Portfolio 35,045 12,964
Short-Term Municipal Income Master Portfolio 71,614 12,317
Small Cap Master Portfolio 60,685 0
</TABLE>
Waived fees and reimbursed expenses continue at the discretion of WFB and
Stephens.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities
(securities with maturities of one year or less at purchase date), for the
Master Portfolios for the six months ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
AGGREGATE PURCHASES AND SALES
........................................
FUND PURCHASES AT COST SALES PROCEEDS
<S> <C> <C>
...............................................................................................................
Capital Appreciation Master Portfolio $193,543,783 $190,092,942
Short-Term Government-Corporate Income Master Portfolio 13,254,994 13,144,672
Short-Term Municipal Income Master Portfolio 3,897,989 7,568,269
Small Cap Master Portfolio 44,435,418 32,155,096
...............................................................................................................
</TABLE>
155
<PAGE>
MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. FINANCIAL HIGHLIGHTS
The portfolio turnover rate, exclusive of short-term securities, and average
commission rate paid for each Master Portfolio for the stated periods were as
follows:
<TABLE>
<CAPTION>
AVERAGE
PORTFOLIO COMMISSION
PERIOD TURNOVER RATE PAID
<S> <C> <C>
...............................................................................................................
CAPITAL APPRECIATION MASTER PORTFOLIO
Six Months Ended June 30, 1997 91% $0.0717
Period Ended December 31, 1996(1) 137% 0.0781
SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
Six Months Ended June 30, 1997 143% N/A
Year Ended December 31, 1996 247% N/A
Year Ended December 31, 1995 227% N/A
Period Ended December 31, 1994(2) 0% N/A
SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO
Six Months Ended June 30, 1997 19% N/A
Year Ended December 31, 1996 47% N/A
Year Ended December 31, 1995 46% N/A
Period Ended December 31, 1994(3) 8% N/A
SMALL CAP MASTER PORTFOLIO
Six Months Ended June 30, 1997 90% $0.0722
Period Ended December 31, 1996(4) 28% 0.0775
...............................................................................................................
</TABLE>
(1) THE MASTER PORTFOLIO COMMENCED OPERATIONS ON FEBRUARY 20, 1996.
(2) THE MASTER PORTFOLIO COMMENCED OPERATIONS ON SEPTEMBER 19, 1994.
(3) THE MASTER PORTFOLIO COMMENCED OPERATIONS ON JUNE 3, 1994.
(4) THE MASTER PORTFOLIO COMMENCED OPERATIONS ON SEPTEMBER 16, 1996.
156
<PAGE>
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157
<PAGE>
LIST OF ABBREVIATIONS
The following is a list of common abbreviations for terms and entities which may
have appeared in this report.
<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>
158
<PAGE>
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159
<PAGE>
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160
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
SUPPLEMENT DATED AUGUST 15, 1997
TO THE PROSPECTUSES DATED MAY 1, 1997
DESCRIBING THE FOLLOWING FUNDS
<TABLE>
<S> <C>
CALIFORNIA TAX-FREE BOND SHORT-TERM GOVERNMENT-CORPORATE
CALIFORNIA TAX-FREE MONEY MARKET INCOME
INDEX ALLOCATION SHORT-TERM MUNICIPAL INCOME
MONEY MARKET SMALL CAP STRATEGY
MUNICIPAL INCOME STRATEGIC GROWTH
NATIONAL TAX-FREE INSTITUTIONAL U.S. TREASURY MONEY MARKET
MONEY MARKET U.S. GOVERNMENT INCOME
OVERLAND SWEEP VARIABLE RATE GOVERNMENT
</TABLE>
On July 23, 1997 the Board of Directors of Overland Express Funds, Inc.
("Overland") approved an Agreement and Plan of Consolidation with Stagecoach
Funds, Inc. ("Stagecoach"), another open-end management investment company
advised by Wells Fargo Bank, to consolidate each Overland Fund with and into
certain new or existing Stagecoach Funds which have (except as described below)
the same or similar investment objectives and policies (the "Consolidation"). If
the Consolidation is approved by shareholders of the Overland Funds, they will
become shareholders of a corresponding Stagecoach Fund, as indicated in the
chart below. At closing, they will receive shares of the designated class of the
corresponding Stagecoach Fund having a total value equal to the total value of
the shares of the Overland Fund held by the shareholder immediately before the
closing. The Consolidation is expected to close on or about December 15, 1997.
OVERLAND/STAGECOACH FUNDS CONSOLIDATION MAP
<TABLE>
<CAPTION>
Existing Stagecoach Funds -
Overland Express Funds - Classes Existing or New Classes
- -------------------------------------- --------------------------------------
<S> <C>
California Tax-Free Bond - A and D California Tax-Free Bond - A and C
California Tax-Free Money Market California Tax-Free Money Market
Mutual
Money Market - A and Institutional Prime Money Market Mutual - A and
Administrative
Municipal Income - A and D National Tax-Free Fund - A and C
National Tax-Free Institutional Money National Tax-Free Money Market Mutual
Market - Institutional
Small Cap Strategy - A and D Small Cap - A and C
Strategic Growth - A and D Aggressive (Strategic) Growth - A and
C
U.S. Government Income - A and D Ginnie Mae (U.S. Government Income) -
A and C
U.S. Treasury Money Market - A and Treasury Money Market Mutual - A and
Institutional Administrative
</TABLE>
i
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
SUPPLEMENT DATED AUGUST 15, 1997
TO THE PROSPECTUSES DATED MAY 1, 1997 -- (CONTINUED)
<TABLE>
<CAPTION>
Overland Express Funds - Classes New Stagecoach Funds Classes
- -------------------------------------- --------------------------------------
<S> <C>
Index Allocation - A and D Index Allocation - A and C
Overland Sweep Overland Sweep
Short-Term Municipal Income Short-Term Municipal Income
Short-Term Government-Corporate Income Short-Term Government-Corporate Income
Variable Rate Government - A and D Variable Rate Government - A and C
</TABLE>
If the Consolidation is approved, shareholders of Overland's Municipal
Income and U.S. Government Income Funds will become shareholders of the
Stagecoach National Tax-Free and Ginnie Mae Funds, respectively. Investors
should be aware of the following differences in these Funds. Although the
Municipal Income Fund and National Tax-Free Fund each invests a significant
portion of its assets in securities exempt from federal income taxes, the
Municipal Income Fund generally invests at least 80% of its assets in securities
that may be subject to the alternative minimum tax, and the National Tax-Free
Fund generally invests no more than 20% of its assets in such securities. The
Ginnie Mae Fund currently invests primarily in Ginnie Mae securities. If the
Consolidation is approved, the Ginnie Mae Fund will pursue an investment policy
of investing primarily in a broader array of mortgage pass-through securities
issued or guaranteed by the U.S. Government.
At the July 23, 1997 meeting, the Overland Board of Directors, subject to
the approval of Class D shareholders of the Overland California Tax-Free Bond,
Municipal Income and U.S. Government Income Funds, approved an increase in the
Rule 12b-1 distribution fee payable under the Class C Rule 12b-1 Plan of the
corresponding Stagecoach Funds, from 0.50% to 0.75% of the average daily net
assets of the Class C shares of such Stagecoach Funds. The increase is intended
to encourage the Funds' selling agents to devote sufficient resources to
marketing the Funds' Class C shares. Although the Rule 12b-1 fee payable by the
Class C shares of the corresponding Stagecoach Funds will increase, Wells Fargo
Bank and Stephens Inc. have agreed to waive or reimburse certain other fees so
that the total operating expenses payable by the Class C shares will remain at
the current level paid by Class D shares of the corresponding Overland Funds
through December 31, 1998.
Overland shareholders on the record date (currently expected to be September
30, 1997) are eligible to vote on issues relating to the Consolidation and will
be sent additional information. Shareholders who make an initial investment
after the record date will not be eligible to vote, but may obtain additional
information by calling 1-800-572-7797.
In addition, if the Consolidation is completed as anticipated, any Fund that
currently is part of a master-feeder structure will be reorganized into a
stand-alone Fund. This means that each such Fund will withdraw its investment in
the corresponding Master Portfolio and instead will invest directly in a
portfolio of securities. Each such Fund will retain Wells Fargo Bank, the
investment adviser to the Master Portfolios, to manage its assets directly, in
substantially the same manner as Wells Fargo Bank currently manages each Master
Portfolio's assets and for the same advisory fee level.
ii
<PAGE>
OVERLAND EXPRESS FUNDS, INC.
SUPPLEMENT DATED AUGUST 15, 1997
TO THE PROSPECTUSES DATED MAY 1, 1997 -- (CONTINUED)
New Portfolio Managers
Mr. Kenneth Lee became a portfolio co-manager to the SMALL CAP MASTER
PORTFOLIO as of June 18, 1997 and is responsible for providing fundamental
security analysis and portfolio management. Mr. Lee joined Wells Fargo Bank in
1993 and went from Investment Operations to the Portfolio Management group in
1995. Prior to 1993 he worked as an associate at Wells Fargo Nikko Investment
Advisors and at Dean Witter Reynolds (Morgan Stanley Dean Witter Discover) and
has over 8 years experience in the industry. He holds bachelor degrees both in
economics and in organizational studies from the University of California at
Davis and is working toward his chartered financial analyst designation.
Mr. Chris Greene joined Wells Fargo Bank on April 1, 1997, to work as
portfolio co-manager of the CAPITAL APPRECIATION MASTER PORTFOLIO. Immediately
prior to joining Wells Fargo Bank, Mr. Greene worked for three years in the
Mergers & Acquisitions group for Hambrecht & Quist, an investment banking firm
focusing on growth companies. Before that he worked for two years at GB Capital
Management and prior to that worked at Wood Island Associates, firms focusing on
equity and fixed-income securities. He has over five years experience in the
industry. Mr. Greene received his B.A. in Economics from Claremont McKenna
College.
OEX P (SUPP 8/97)
iii
<PAGE>
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<PAGE>
[OVERLAND EXPRESS LOGO]
POST OFFICE BOX 63084
SAN FRANCISCO, CA 94163
This report and the financial statements
contained herein are submitted for the general
information of the shareholders of the Overland
Express Funds. If this report is used for promotional
purposes, distribution of the report must be
accompanied or preceded by a current prospectus.
For a prospectus containing more complete
information, including charges and expenses,
call 1.800.552.9612. Read the prospectus
carefully before you invest.
THIS BOOKLET INCLUDES THE SEMI-ANNUAL REPORT AND A
PROSPECTUS SUPPLEMENT. THE PROSPECTUS SUPPLEMENT
APPEARS ON THREE PAGES FOLLOWING THE REPORT.
OEXSAR8/97
DATED MATERIAL - PLEASE EXPEDITE
