<PAGE> 1
S I E R R A T R U S T F U N D S
A N N U A L R E P O R T
for the year ended June 30, 1996
[PICTURE]
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S I E R R A
TRUST FUNDS
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A Family of Mutual Funds
<PAGE> 2
A Message from the President .......................................... 1
Financial Success Begins With a Sound Investment Perspective .......... 2
Individual Fund Reviews ............................................... 3
Statements of Assets and Liabilities .................................. 30
Statements of Operations .............................................. 34
Statements of Changes in Net Assets ................................... 36
Statements of Changes in Net Assets
-- Capital Stock Activity ........................................... 40
Statements of Cash Flows .............................................. 44
Financial Highlights .................................................. 46
Portfolio of Investments .............................................. 62
Notes to Financial Statements ......................................... 99
Report of Independent Accountants ..................................... 116
Tax Information (Unaudited) ........................................... 117
Meeting of Shareholders ............................................... 118
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S I E R R A
TRUST FUNDS
-----------
A Family of Mutual Funds
<PAGE> 3
A MESSAGE FROM THE PRESIDENT
[PHOTOGRAPH]
We are pleased to provide you with the Sierra Trust Funds Annual Report
for the 12 months ended June 30, 1996.
Much attention has focused in the last year on record-breaking levels
achieved by the Dow Jones Industrial Average, the Standard & Poor's 500 (S&P
500), and the Nasdaq Composite Index. Perhaps less well-known are the records
individual investors set in assets invested in mutual funds. Buoyed by investor
confidence and a stock market that has soared in recent years, the mutual fund
industry continues to grow at an extraordinary pace. In January of 1996, $28.9
billion flowed into stock mutual funds, a single-month record. Through the first
half of 1996, inflows into all mutual funds totaled nearly $140 billion.*
The Sierra Trust Funds have participated in this industry-wide growth in
assets. As of June 30, 1996, assets under management in the Sierra Trust Funds
totaled $2.94 billion, with 304,342 Sierra Trust shareholder accounts
diversified among a family of 16 mutual funds.
The strong increase in mutual fund assets helped propel the U.S. stock
market's gain of more than 10% in the first half of this year.** The Federal
Reserve's action to cut short-term interest rates by one-quarter of a percent
early in 1996 also contributed to the market's robust performance. Through
February of 1996, the Dow Jones rose an average of nearly 1% per week. In this
environment of good news, one of the most difficult challenges facing the mutual
fund industry is not in managing assets, but in managing the expectations of
investors.
We at Sierra Trust Funds believe investors should neither be encouraged
nor dissuaded by short-term market performance. Since year-end 1994, the S&P 500
has returned more than 50%, far in excess of the long-term historical
average.*** However, as inflows into mutual funds began to slow in May and June
of this year, and as economic data begins to point to stronger economic growth
and the possibility of higher interest rates, investors can expect market
returns in coming months to more closely reflect longer-term averages.
Rather than focusing on the market's current strength or weakness, we
believe that the most effective investment approach is to plan and invest for
the long term. To achieve investment success, it is important to establish
specific financial goals based on your needs and risk tolerance, develop an
appropriate long-term strategy, and then follow this strategy consistently over
time. Investing on a regular basis, diversifying your assets to control risk,
and maintaining a long-term investment perspective are all keys to achieving
your financial goals through changing market conditions.
As markets change, our goal at Sierra Trust Funds remains the same: To
provide investment diversification opportunities and pursue long-term
performance results consistent with the investment objectives of each Sierra
fund. Over time, our fund family has provided shareholders with this tradition
of performance, as shown in recent comparative reports by Lipper Analytical
Services. The Sierra Emerging Growth Fund, for example, ranked among the top
15%, or 19th out of 133 funds in the Lipper Midcap Funds category for the
one-year period ended June 30, 1996. For the five-year period ended June 30, the
Fund ranked sixth among 37 funds in its category.
Also ranked in the top quintile in their Lipper categories are the
Sierra Growth Fund, ranked 56 among 379 funds in the Growth Fund category since
its inception in 1993 (the three-year period ended June 30, 1996)++++ and the
Sierra Florida Insured Municipal Fund ranked 4 among 77 funds in the Florida
Insured Municipal Fund category for the year ended June 30, 1996.+++++
In addition to helping our shareholders meet their long-term financial
goals, Sierra Trust Funds remains committed to serving our shareholder's
investment needs by providing a diverse array of quality mutual fund
investments. The Sierra Trust Funds family includes money market, taxable and
tax-exempt fixed-income, and domestic and international stock mutual funds.
Investors can also participate in the Sierra Trust Funds through the Sierra
Asset Management Portfolios, which offer professional, active asset allocation
in a convenient and affordable package.
As always, we encourage you to meet at least annually with your
Investment Representative to review your portfolio. Your Investment
Representative can help ensure that your portfolio remains diversified with your
long-term financial goals in mind.
Thank you for selecting the Sierra Trust Funds. We appreciate the
confidence you have placed in us and look forward to serving your investment
needs in the years to come.
Sincerely,
/s/ F. Brian Cerini
F. Brian Cerini
President
* Source: Investment Company Institute
** Source: Bloomberg Business News, based on the S&P 500
*** Source: Bloomberg Business News
++++ For the one-year period ended June 30, 1996, the Sierra Growth Fund ranked
among the top 30%, or 177th out of 619 funds in its Lipper category.
+++++ Lipper rankings exclude sales charges. Rankings represent past performance
and are no guarantee of future results.
<PAGE> 4
F I N A N C I A L S U C C E S S B E G I N S
W I T H A S O U N D
I N V E S T M E N T P E R S P E C T I V E
The U.S. financial markets posted strong results over the 12 months
ended June 30, 1996. Low interest rates and strong corporate earnings in 1995
contributed to one of the strongest markets on record.
Record-breaking highs continued into early 1996, until a surprising
uptrend in economic strength returned the markets to a more normal state of
variability. In recent months, both the stock and bond markets have experienced
periods of higher fluctuation, and this has been a source of concern for some
investors.
MANAGE INVESTMENT RISK WITH
A LONG-TERM PERSPECTIVE
While most investors cannot eliminate investment risk, you can reduce it
by maintaining a long-term perspective. Focusing on your long-term financial
goals can help you feel more comfortable with normal, day-to-day market
fluctuations.
Time generally works to the advantage of the long-term investor. As
historically illustrated below, the longer the investment holding period, the
greater the chance for a positive return with significantly less volatility.
This is particularly true for common stocks which may show the highest
fluctuation in the short term, but can provide the greatest returns over time.
By maintaining a long-term perspective and following sound investment
principles aimed at managing investment risk, you can significantly increase the
likelihood of meeting your financial goals.
THE YEAR IN REVIEW - UPS AND
DOWNS IN THE STOCK & BOND MARKETS
The 12-month period ending June 30, 1996 provided both record market
highs and periods of increased fluctuation. The second half of 1995 was marked
by slower economic growth and declining interest rates as the economy reached a
much sought after "soft landing." Fears of higher inflation receded, benefiting
stocks and bonds. However, concerns over a possible "flat tax" and the lack of
an agreement on a bill to balance the budget created a few market ripples near
year-end.
In the first half of 1996, political events took a back seat to the
outlook for inflation and corporate earnings. On March 8, 1996 stock and bond
prices reacted sharply to a government report showing significantly higher job
growth in February and declining unemployment. Investors fearing higher
inflation and a hike in short-term interest rates drove prices of long-term
bonds down 3.5%, in turn sending the Dow Jones Industrial Average down 171
points. While this decline was the third highest in terms of points in the
history of the Dow, in percentage terms it wasn't even among the top 100.
More good economic news continued to push interest rates higher through
April and May of 1996, with yields on the benchmark 30-year bond reaching above
7%. Frequently, stock prices fall when interest rates rise. But in April and
May, stock prices rose as investors focused on potential growth in corporate
earnings. The Dow posted new highs in May, while the Nasdaq Composite Index,
which includes many small-cap companies, peaked in June, 1996. Over the past
year, returns on international stock indexes were also positive, despite a
stronger dollar. Stock markets in industrialized countries gained 13.28% for
the 12 months ending June 30, 1996, as measured by Morgan Stanley Capital
International's Europe, Australia, and Far East (EAFE) Index.
THE BENEFITS OF LONG-TERM INVESTING
GROWTH OF $100,000 FOR THE HOLDING PERIODS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
U.S. Treasury Bills(1) Long Term Bonds(2) Common Stocks(3)
<S> <C> <C> <C>
5-Year Holding Period 4.21% $122.918 10.45% $164,378 15.72% $ 207,480
10-Year Holding Period 5.47% $170,382 9.37% $244,903 13.79% $ 364,010
20-Year Holding Period 7.28% $407,509 10.29% $709,001 14.20% $1,424,249
</TABLE>
(1) One-Month U.S. Treasury Bills
(2) Lehman Brothers Long-Term Government and Corporate Bond Index
(3) Standard and Poor's 500 Stock Index
<PAGE> 5
INDIVIDUAL FUND REVIEWS
SIERRA INVESTMENT
ADVISORS CORPORATION
SIERRA Investment Advisors Corporation ("SIERRA Advisors"), a registered
investment advisor, is the investment advisor to the SIERRA Trust Funds, and
has general oversight responsibility for the advisory services provided to the
Funds. These services include formulating the Funds' investment policies,
analyzing economic trends affecting the Funds, and directing and evaluating the
investment services provided by the Sub-Advisors and the individual Portfolio
Managers of each Fund. SIERRA Advisors supervises the Portfolio Managers'
day-to-day management of the Funds in the SIERRA Trust Funds family to ensure
that the policies and guidelines are met, and to determine appropriate
investment performance measures.
STEPHEN C. SCOTT
PRESIDENT AND CHIEF INVESTMENT OFFICER
Mr. Scott received his B.A. and M.B.A. from California State University, Long
Beach. He joined the firm in 1988, and is responsible for providing economic
analysis, as well as conducting investment analysis and management for the
SIERRA Asset Management (SAM) Program. Prior to joining SIERRA Advisors, Mr.
Scott was President & Chairman of his own firm, SDS Investment Advisors, after
serving nine years as Senior Pension Investment Manager with the Group Pension
and Investment Division of The Equitable Life Assurance Society of the United
States.
MICHAEL D. GOTH
CHIEF OPERATING OFFICER
Mr. Goth received his B.S. and M.S. degrees from Rensselaer Polytechnic
Institute of New York, and M.B.A. from Harvard Business School. He joined the
firm in 1991 and is responsible for the supervision of the SIERRA Trust Funds'
Portfolio Managers. Previously, he served as Vice President of The Boston
Company Advisors, Inc. He also served as Executive Vice President of the GIT
Mutual Fund Group for over ten years.
UNDERSTANDING THE ENCLOSED CHARTS AND PERFORMANCE FIGURES
In order to help you understand the SIERRA Trust Funds' investment performance,
we have included the following discussions along with graphs that compare the
Funds' performance with certain market indices. Descriptions of these indices
are provided next to the individual graphs on the following pages.
Generally, an index represents the market value of an unmanaged group of
securities, regarded by investors as representative of a particular market. An
index does not reflect any asset-based charges for investment management or
other expenses. Total return is used to measure a Fund's performance and
reflects both changes in the value of the price of the Fund's shares as well as
any income dividend and/or capital gain distributions made by the Fund during
the period. Past performance is not a guarantee of future results. A mutual
fund's share price and investment return will vary with market conditions, and
the principal value of an investment when you sell your shares may be more or
less than the original cost.
The 30-day average yield is computed by dividing net investment income per
share earned over the one-month period ended June 30, 1996, by the maximum
offering price on that date, and annualizing the result.
Yield indicates the investment income per share as a percentage of the offering
price, whereas total return includes both net investment income and changes in
the value of the shares as a percentage of the initial investment. The 30-day
SEC yield is the yield calculated pursuant to a standard formula required by
the Securities and Exchange Commission ("SEC") for performance advertisement
purposes, and does not imply any endorsement or recommendation by the SEC.
TO OUR
SHAREHOLDERS:
WE ARE PLEASED TO PROVIDE YOU WITH AN OVERVIEW OF THE FOLLOWING FUNDS IN
THE SIERRA TRUST FUNDS FAMILY FOR THE 12-MONTH PERIOD ENDED JUNE 30, 1996.
TO HELP YOU BETTER UNDERSTAND THE OUTSTANDING INVESTMENT MANAGEMENT
AVAILABLE TO YOU AS A SIERRA TRUST FUNDS' SHAREHOLDER, WE HAVE ALSO
INCLUDED BIOGRAPHIES HIGHLIGHTING THE INVESTMENT PROFESSIONALS MANAGING
YOUR FUNDS.
3
<PAGE> 6
SHORT TERM HIGH QUALITY BOND FUND
PORTFOLIO MANAGER:
SCUDDER, STEVENS & CLARK, INC.
THOMAS M. POOR
Mr. Poor, Managing Director of Scudder, is the portfolio manager for the SIERRA
SHORT TERM HIGH QUALITY BOND FUND. He is a Chartered Financial Analyst and has
been with Scudder since 1970. Mr. Poor has had primary investment management
responsibility for the Fund since its inception.
PERFORMANCE REVIEW:
From the Fund's inception (November 1, 1993) through June 30, 1996, the SIERRA
SHORT TERM HIGH QUALITY BOND FUND (Class A Shares) advanced 3.25% on an average
annual total return basis, or 1.88% adjusted for the maximum sales charge. For
the 12-month period ended June 30, 1996, the Fund's total return was 5.05%, or
1.37% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
JUNE 30, 1996, WAS 5.95%. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The 12-month period ended June 30, 1996, was marked by sharp swings in bond
investors' expectations for the domestic economy and the level of interest
rates, and mixed returns for the Fund. The fiscal year began with interest
rates modestly higher as signs of an economic revival raised concerns of
increasing inflation. By August 1995 concerns of economic growth abated as
tight monetary and fiscal policies, excess inventories, and weak foreign demand
muted economic activity for much of the third and fourth quarters. Stock and
bond prices rose as economic growth moderated and investors anticipated a
friendly monetary environment. Bond investors were further encouraged by the
increased prospects for a credible deficit reduction plan and for lower
Treasury issuance. In response to this positive environment, interest rates
fell to levels not seen since early 1994 with 30-year Treasuries yielding
5.95%. Interest rates along the entire yield curve dropped between 50 and 65
basis points as investors basked in the slow growth and low inflation
environment.
Going into 1996, the market gradually turned. Budget talks in Washington, which
appeared headed for meaningful deficit reduction, stalled. Commodity prices
rose in sharp fashion which led to increases in headline inflation measures.
The Federal Reserve cut managed rates in January; however, signs of renewed
economic strength, such as strong gains in employment and retail sales, put
further easing into question. By the end of the first half of 1996, Treasury
yields were 95 to 110 basis points higher.
* Index total returns were calculated from 10/31/93 to 6/30/96. The Lehman
Brothers Mutual Fund Short (1-5) Investment Grade Debt Index includes all
investment-grade, corporate debt securities with maturities of one to five
years, assumes reinvestment of all dividends/distributions, and does not
reflect any asset-based charges for investment management or other expenses.
Past performance does not guarantee future performance. The returns shown for
the Fund assume reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation)
and Administrator (SIERRA Fund Administration Corporation) waived a portion of
their management fees; the Advisor absorbed other expenses, and the Custodian
reduced fees by credits. In the absence of the waivers and absorption of other
expenses or fees reduced by credits, yield and total return would have been
lower.
GRAPH
<TABLE>
Growth of a $10,000 Investment (Class A Shares)
<S> <C> <C> <C>
Inception* 11/1/93 10,005 9,655 9,991
10,052 9,700 9,940
Jan-94 10,098 9,745 10,046
10,063 9,711 9,944
Mar 9,947 9,599 9,831
9,908 9,561 9,772
May 9,915 9,568 9,788
9,927 9,580 9,816
Jul 9,981 9,632 9,944
9,989 9,639 9,988
Sep 9,993 9,644 9,933
9,997 9,647 9,945
Nov 10,002 9,652 9,888
9,842 9,497 9,910
Jan-95 9,851 9,507 10,074
9,942 9,594 10,274
Mar 10,037 9,685 10,339
10,130 9,776 10,461
May 10,357 9,995 10,730
10,366 10,003 10,800
Jul 10,375 10,012 10,828
10,472 10,105 10,922
Sep 10,524 10,156 10,993
10,625 10,253 11,100
Nov 10,726 10,351 11,233
10,829 10,450 11,340
Jan-96 10,933 10,550 11,458
10,852 10,472 11,376
Mar 10,815 10,437 11,331
10,776 10,399 11,321
10,786 10,408 11,330
Jun-96 10,891 10,509 11,437
</TABLE>
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------- ----------------
(November 1, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 0.55% 5.05% 3.25%
Fund (adjusted for the maximum 3.5% sales charge) -2.97% 1.37% 1.88%
Lehman Brothers Mutual Fund Short (1-5) Investment
Grade Debt Index* 0.85% 5.89% 5.16%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales
charge) 0.18% 4.27% 3.96%
Fund (adjusted for the maximum 4% contingent deferred
sales charge) -3.72% 0.32% 2.55%++
Lehman Brothers Mutual Fund Short (1-5) Investment Grade
Debt Index* 0.85% 5.89% 7.94%
- ------------------------------------------------------------------------------------------------------------------------
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 0.18% -4.27% 3.96%
Fund (adjusted for the maximum 5% contingent deferred sales
charge) -4.69%- -0.66% 2.07%++++
Lehman Brothers Mutual Fund Short (1-5) Investment Grade
Debt Index* 0.85% -5.89% 7.94%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
++++ Adjusted for the maximum 4% CDSC for shares held since inception.
- -------------------------------------------------------------------------------
4
<PAGE> 7
SHORT TERM HIGH QUALITY BOND FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
During the 12-month period ended June 30, 1996, the Fund's duration, or
sensitivity to changes in interest rates, was actively managed given our
expectations of bond market performance. During the initial six months of the
period, the Fund benefited from the decline in interest rates as duration was
positioned between 2 and 2.5 years for the entire period. This positioning
reflected our view that weak domestic growth and low inflation would lead to
lower interest rates. Fund performance continued to benefit from this
positioning as short and intermediate interest rates trended lower until
reaching a low point by mid-February 1996.
As economic indicators began to challenge our positive view, the Fund's
duration was reduced to 2.3 years by the end of February. Interest rate
exposure was further reduced to a neutral position of 1.7 years in April as
signals of economic growth continued into the second quarter. By the end of
May, the portfolio was positioned defensively at a 1.25 year duration,
reflecting our view that economic growth was accelerating and the risk of
higher interest rates had increased.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
During the year, we managed the Fund's exposure to the various sectors of the
bond market with emphasis on high credit quality investments with high current
income. Portfolio holdings have focused on mortgage pass-throughs, asset-backed
issues, corporate bonds, and Treasuries. As of June 30, 1996, the Fund's
largest sector weighting was in the mortgage sector, with a concentration in
GNMAs. These holdings reflect our preference for seasoned mortgage holdings
that have weathered several refinancing cycles and offer greater prepayment
protection than current coupon issues.
The Fund's holdings of corporate notes steadily increased over the prior year
from 13% as of June 30, 1995, to 26% as of June 30, 1996. During this period,
our credit research identified several issuers with improving credit prospects
as well as issuers which offered attractive valuations. The Fund's performance
benefited from holdings in corporate issuers such as The Money Store, Inc. (a
consumer finance company), Taubman Realty Corporation and Sun Communities Inc.
(both real estate investment trusts), and Tenneco Inc. (a diversified
industrial company).
Within the asset-backed sector, we continue to hold issues backed by
manufactured housing loans, home equity loans, and credit card receivables. The
majority of the Fund's asset-backed holdings have short average lives in the
one- to three-year area while offering attractive yields relative to similar
maturity alternatives.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
As we look forward to the second half of 1996 and into 1997, we see a less
certain environment for bond investors. The domestic economy appears to have
picked up momentum going into the third quarter while the economies of major
trading partners such as Japan and Mexico are showing signs of growth. The U.S.
unemployment rate continues to hover below 6% which historically has been a
sign of a tight labor market, thus increasing odds of a rise in wage inflation.
These factors will weigh heavily on the Federal Reserve as they contemplate
monetary policy and could ultimately lead to higher managed rates. The U.S.
bond market has benefited from a high level of foreign participation and a
strong Dollar which may or may not continue. On the other hand, real interest
rates are high by historical standards and inflation has yet to rise by any
appreciable amount. In addition, with the sharp rise in interest rates year to
date, some slowing in economic activity should be expected.
Given the uncertainties facing the bond market, we plan to continue positioning
the Fund defensively until there are clearer signs of a slowing economy or
interest rates rise to levels reflecting the current risks. This outlook would
anticipate that, over the near term, the Fund's returns will be generated
mainly from income rather than capital appreciation. Over the intermediate and
long term, we continue to believe that the Fund offers an attractive
risk-adjusted return potential given current income and modest increases in net
asset value.
HIGH-QUALITY PORTFOLIO FOR ADDED PRINCIPAL STABILITY
AAA - 64.41% BBB - 20.79%
PIE CHART AA - 3.50% NR - 0.04%
A - 11.26%
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
5
<PAGE> 8
SHORT TERM GLOBAL GOVERNMENT FUND
PORTFOLIO MANAGER:
SCUDDER, STEVENS & CLARK, INC.
ADAM M. GRESHIN
Adam M. Greshin is the lead portfolio manager for the SIERRA SHORT TERM GLOBAL
GOVERNMENT FUND. Mr. Greshin joined Scudder in 1986 as an international bond
analyst. Currently, he is Product Leader for Scudder's global and international
fixed-income investing. He was involved in the original design of the Fund and
has served as a member of the Fund's portfolio management team since 1992. Mr.
Greshin assumed responsibility for the Fund's day-to-day management and
investment strategies in November 1995.
PERFORMANCE REVIEW:
From the Fund's inception (February 11, 1992) through June 30, 1996, the SIERRA
SHORT TERM GLOBAL GOVERNMENT FUND (Class A Shares) advanced 5.63% on an average
annual total return basis, or 4.78% adjusted for the maximum sales charge. For
the 12-month period ended June 30, 1996, the Fund's total return was 10.16% or
6.30% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
JUNE 30, 1996, WAS 5.50%. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
During the 12-month period ended June 30, 1996, the global bond market
experienced two distinct market environments. The first half of the fiscal year
was a bull market for bonds, while the second half witnessed falling bond
prices and a jump in yields, especially at the long end of the yield curve.
In the U.S., the dichotomy between the two periods was especially clear. The
U.S. bond rally in the second half of 1995 was fueled by Congressional efforts
at creating a bipartisan budget reduction plan, and prospects for lower
Treasury bond issuance. By the end of the first quarter of 1996, however,
market sentiment soured as indications of stronger U.S. growth appeared,
including an unexpected jump of 705,000 in the February non-farm payroll
numbers.
Other bond markets, particularly in Europe, did not exhibit such a bearish
scenario in 1996. Indications of slower economic growth, especially in Germany,
subdued inflation, and tighter fiscal policies set the tone for much of the
European market's rally throughout 1995 and into 1996. In response, Germany's
discount rate reached post-war historic lows, and Japan also set new lows. With
the volatility in interest and currency rates, the Fund's style of active
currency management contributed to the Fund's consistent and impressive
returns, especially when measured against competitive funds within the Lipper
Short Term World Income category.
* Index total returns were calculated from 2/28/92 to 6/30/96. The Lehman
Brothers Mutual Fund Short World Multimarket Index includes all debt
instruments of the United States, and 12 Lehman major countries denominated by
U.S. Dollars with maturities of one to five years. The Index assumes
reinvestment of all dividends/distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns shown
for the Fund assume reinvestment of all dividends/distributions by the
shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation),
Administrator (SIERRA Fund Administration Corporation) and Distributor waived a
portion of their management or distribution fees, the Administrator absorbed
other expenses, and the Custodian reduced fees by credits. In the absence of
the waivers, absorption of other expenses, or fees reduced by credits, yield
and total return would have been lower.
GRAPH
<TABLE>
Growth of a $10,000 Investment (Class A Shares)
<S> <C> <C>
Inception* 2/11/92 10,000 9,650 10,000
10,015 9,665 10,000
10,006 9,655 9,945
Apr 10,157 9,801 10,028
10,313 9,952 10,280
10,550 10,181 10,553
Jul 10,636 10,264 10,748
10,544 10,175 11,019
10,617 10,246 10,965
Oct 10,560 10,190 10,688
10,626 10,254 10,521
10,659 10,286 10,561
Jan-93 10,726 10,351 10,702
10,746 10,370 10,768
10,900 10,519 10,904
Apr 10,966 10,582 11,126
11,120 10,731 11,203
11,186 10,795 11,137
Jul 11,249 10,855 11,074
11,315 10,919 11,303
11,341 10,944 11,424
Oct 11,453 11,052 11,394
11,375 10,977 11,291
11,383 10,985 11,359
Jan-94 11,494 11,091 11,480
11,409 11,010 11,442
11,327 10,930 11,493
Apr 11,385 10,986 11,526
11,347 10,950 11,510
11,310 10,914 11,636
Jul 11,327 10,930 11,729
11,294 10,899 11,744
11,354 10,957 11,844
Oct 11,371 10,973 12,020
11,481 11,079 11,825
11,246 10,852 11,843
Jan-95 11,255 10,861 12,069
11,255 10,861 12,284
11,263 10,869 12,661
Apr 11,422 11,022 12,816
11,534 11,131 13,045
11,543 11,139 13,158
Jul 11,705 11,295 13,300
11,817 11,404 13,086
11,981 11,562 13,316
Oct 12,044 11,623 13,464
12,158 11,733 13,538
12,239 11,811 13,709
Jan-96 12,361 11,928 13,640
12,426 11,991 13,677
12,446 12,010 13,662
Apr 12,573 12,133 13,621
12,590 12,150 13,671
Jun-96 12,715 12,270 13,786
</TABLE>
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(February 11, 1992)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 3.89% 10.16% 5.63%
Fund (adjusted for the maximum 3.5% sales charge) 0.26% 6.30% 4.78%
Lehman Brothers Mutual Fund Short World Multimarket
Index* 0.57% 4.77% 7.85%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 3.51% 9.33% 5.25%
Fund (adjusted for the maximum 4% contingent deferred
sales charge) -0.49% 5.33% 3.84%++
Lehman Brothers Mutual Fund Short World Multimarket Index* 0.57% 4.77% 8.85%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 3.51% 9.33% 5.25%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -1.49% 4.33% 3.36%++++
Lehman Brothers Mutual Fund Short World Multimarket Index* 0.57% 4.77% 8.85%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
++++ Adjusted for the maximum 4% CDSC for shares held since inception.
- --------------------------------------------------------------------------------
6
<PAGE> 9
SHORT TERM GLOBAL GOVERNMENT FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The Fund's primary concern for the period was to balance its dual goals of
generating high income and maintaining price stability. In an effort to achieve
both objectives, the Fund allocated its assets among a selection of high
quality, diversified issuers. European bonds continued to dominate the Fund's
portfolio, with weightings ranging from 60% to 70% of overall assets. Research
indicated that inflation-adjusted rates of return remained relatively high in
Europe, especially in the peripheral European markets. Holdings in such
higher-yielding markets as Italy, Sweden and Spain were a prominent component
of the Fund's yield and total return. These markets had suffered significant
price falls during the early part of 1995 in the wake of the Mexican Peso
crisis and represented attractive opportunities throughout late 1995 and early
1996.
For the 12-month period ended June 30, 1996, local currency total returns from
the Swedish benchmark two-year note totaled 13.9%; the Italian two-year
Government benchmark returned approximately 17.2%; and the Spanish two-year
Government benchmark issue returned 14.8%. These figures compare to a return of
6.9% on the German two-year issue for the same period.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
During the period, the U.S. Dollar staged a dramatic rebound against both the
Japanese Yen and German Mark, as well as other foreign currencies. The
appreciating U.S. Dollar would have had a negative impact on the Fund's returns
from foreign bond markets, especially those in Europe; however, this effect was
neutralized by the Fund's hedging strategy against the core European
currencies. In addition, we partially hedged our peripheral currency exposure
and made gains from the appreciating Italian Lira and Swedish Krona.
The Fund's holdings in the dollar-bloc markets of Canada, Australia and New
Zealand had a positive impact on performance. In addition to higher yields, the
Fund benefited from currency appreciation in this sector. The Australian Dollar
in particular rose strongly, gaining 9.9% against the U.S. currency during the
12-month period ended June 30, 1996.
The Fund's selective exposure to some of the higher-yielding emerging markets,
including Indonesia and the Czech Republic, provided shareholders with
attractive yields and limited price fluctuation. South African bonds were added
to the portfolio during the first quarter of 1996 on the premise that the
substantial yield advantage of these issues, combined with rising commodity
prices, would result in a potential credit upgrade by the rating agencies.
However, by the end of the first quarter of 1996, labor disputes in South
Africa led to pressure on the South African Rand and returns in U.S. Dollars
were negative. However, these issues only marginally affected Fund performance
during the period.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The outlook for the Fund remains positive given the diversified global nature
of the portfolio. Evidence appears to indicate a resurgence in U.S. economic
activity and the possibility of higher inflation. This limits the scope for
further interest rate reductions in the U.S. by the Federal Reserve and could
possibly lead to tightening. In contrast, most overseas economies are at a
different stage in the economic cycle and have further room for rate cuts,
particularly in Europe. This interest rate scenario in the global bond markets
should lead to attractive investment opportunities for the Fund.
Due to the short-term nature of its portfolio, the Fund generally does not
experience the price volatility characterized by longer maturity issues. Within
this context, we will continue to monitor individual countries and issues, and
position the portfolio to take full advantage of changing bond and foreign
exchange markets, in order to achieve the highest income potential and
consistent price stability.
DIVERSIFICATION BY REGION
Americas 26.45%
PIE CHART Australia/New Zealand 13.91%
Europe 59.64%
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
7
<PAGE> 10
U.S. GOVERNMENT FUND
PORTFOLIO MANAGER:
BLACKROCK FINANCIAL
MANAGEMENT, INC.
KEITH ANDERSON
ANDREW J. PHILLIPS
The day-to-day management of the SIERRA U.S. GOVERNMENT FUND'S portfolio is the
responsibility of a committee composed of individuals who are officers of
BlackRock. This committee has managed the Fund since December 1994 and is
supervised by Keith Anderson and Andrew J. Phillips. Mr. Anderson, a Managing
Director of BlackRock, has been co-head of the Portfolio Management Group
since 1988. Mr. Phillips has been a portfolio manager of BlackRock since 1991
and a Vice President of BlackRock since 1993.
PERFORMANCE REVIEW:
From the Fund's inception (July 25, 1989) through June 30, 1996, the SIERRA
U.S. GOVERNMENT FUND (Class A Shares) advanced 7.02% on an average annual total
return basis, or 6.31% adjusted for the maximum sales charge. For the 12-month
period ended June 30, 1996, the Fund's total return was 4.34%, or -0.36%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF JUNE
30, 1996, WAS 6.31%, AND ITS 30-DAY AVERAGE YIELD WAS 6.99%. For additional
information, including Class B and Class S Share performance, see the
accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The performance of the Fund was greatly influenced by two profoundly different
market environments for fixed-income securities. Throughout most of 1995 and
early 1996, Treasury bond prices rose and yields fell significantly, primarily
in response to a moderation in economic growth, low inflation, and a gradual
easing by the Federal Reserve. However, investor sentiment toward the
fixed-income markets reversed during mid-February, 1996, as accelerating
economic growth, in addition to a sharp rise in commodity prices, rekindled
inflationary concerns. The possibility of a stronger economy dampened the
likelihood of a continued easing by the Federal Reserve and initiated concerns
of a potentially more restrictive Fed
* Index total returns were calculated from 7/31/89 to 6/30/96. The Lehman
Brothers Mutual Fund U.S. General Government Index represents all U.S.
Government agency and Treasury securities. The Lehman Brothers Mutual Fund U.S.
Mortgage Index includes all U.S. agency mortgage-backed securities. The indices
assume reinvestment of all dividends/distributions, and do not reflect any
asset-based charges for investment management or other expenses. Past
investment performance does not guarantee future performance. The returns shown
for the Fund assume reinvestment of all dividends/distributions by the
shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation),
Administrator (SIERRA Fund Administration Corporation) and Distributor waived a
portion of their management or distribution fees, the Advisor and Administrator
absorbed other expenses, and the Custodian reduced fees by credits. In the
absence of the waivers, absorption of other expenses, or fees reduced by
credits, yield and total return would have been lower.
GRAPH
<TABLE>
Growth of a $10,000 Investment (Class A Shares)
<S> <C> <C> <C> <C>
Inception* 7/25/89 10,000 9,550 10,000 10,000
10,020 9,569 10,000 10,000
Aug 9,920 9,473 9,832 9,870
9,979 9,530 9,874 9,940
10,182 9,724 10,130 10,167
10,292 9,829 10,228 10,278
10,385 9,918 10,246 10,338
Jan-90 10,306 9,842 10,101 10,266
10,345 9,880 10,121 10,326
10,375 9,908 10,119 10,352
10,319 9,855 10,030 10,259
10,561 10,086 10,310 10,577
Jun 10,698 10,217 10,473 10,744
10,869 10,380 10,607 10,931
10,828 10,341 10,460 10,815
10,896 10,406 10,560 10,904
10,999 10,504 10,732 11,027
11,179 10,676 10,970 11,259
11,357 10,846 11,141 11,448
11,466 10,950 11,260 11,622
Dec-91 11,538 11,019 11,324 11,719
11,608 11,085 11,382 11,799
11,712 11,185 11,507 11,908
11,770 11,241 11,552 12,013
Jun 11,783 11,252 11,536 12,023
11,960 11,422 11,673 12,227
12,193 11,644 11,944 12,449
12,408 11,850 12,194 12,682
12,589 12,023 12,302 12,892
12,699 12,127 12,425 12,985
13,041 12,454 12,848 13,246
Dec-92 12,863 12,284 12,648 13,093
12,957 12,373 12,697 13,217
12,864 12,285 12,624 13,132
12,983 12,399 12,703 13,261
Jun 13,217 12,622 12,938 13,500
13,401 12,798 13,123 13,659
13,561 12,951 13,454 13,779
13,722 13,104 13,579 13,958
13,832 13,209 13,771 14,067
13,657 13,043 13,572 13,943
13,678 13,062 13,549 13,987
13,869 13,245 13,777 14,167
Dec-93 14,084 13,451 14,070 14,353
14,235 13,594 14,352 14,498
14,305 13,662 14,399 14,586
14,377 13,730 14,510 14,662
14,408 13,760 14,494 14,745
Jun 14,589 13,933 14,816 14,858
14,648 13,989 14,906 14,917
14,762 14,098 15,239 14,987
14,711 14,049 15,296 15,001
14,771 14,106 15,355 15,044
14,719 14,057 15,186 15,014
14,811 14,144 15,245 15,136
Dec-94 15,014 14,338 15,454 15,285
14,768 14,104 15,126 15,178
14,276 13,634 14,786 14,784
14,085 13,452 14,669 14,674
13,981 13,352 14,650 14,733
Jun 13,919 13,293 14,616 14,701
14,181 13,543 14,885 14,995
14,208 13,569 14,888 15,043
13,996 13,367 14,678 14,829
13,918 13,292 14,668 14,820
13,825 13,203 14,642 14,774
13,943 13,316 14,731 14,892
Dec-95 14,246 13,605 15,005 15,211
14,597 13,940 15,327 15,599
14,656 13,996 15,424 15,672
14,855 14,186 15,626 15,895
15,275 14,587 16,256 16,396
15,335 14,645 16,381 16,489
Jun 15,300 14,611 16,320 16,517
15,472 14,776 16,511 16,689
15,578 14,877 16,670 16,836
15,798 15,087 16,923 16,986
16,018 15,298 17,187 17,179
Dec-96 16,241 15,510 17,431 17,394
16,398 15,660 17,538 17,524
16,111 15,386 17,180 17,379
15,988 15,268 17,037 17,316
15,898 15,183 16,928 17,268
15,824 15,112 16,899 17,218
Jun-96 15,999 15,279 17,117 17,455
</TABLE>
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(July 25, 1989)
<S> <C> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) -1.48% 4.34% 6.31% 7.02%
Fund (adjusted for the maximum 4.5% sales charge) -5.92% -0.36% 5.34% 6.31%
Lehman Brothers Mutual Fund U.S. General Government
Index* -1.80% 4.50% 8.21% 8.08%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 0.35% 5.86% 7.74% 8.39%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) -1.85% 3.56% N/A 6.43%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -6.61% -1.31% N/A 4.54%++
Lehman Brothers Mutual Fund U.S. General Government
Index* -1.80% 4.50% N/A 8.22%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 0.35% 5.86% N/A 8.97%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) -1.85% 3.56% N/A 6.43%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -6.61% -1.31% N/A 4.54%++
Lehman Brothers Mutual Fund U.S. General Government
Index* -1.80% 4.50% N/A 8.22%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 0.35% 5.86% N/A 8.97%
</TABLE>
++ Adjusted for the maximum 4% CDSC for shares held since inception.
8
<PAGE> 11
U.S. GOVERNMENT FUND
policy. These fears translated into a sharp rise in bond yields across the
Treasury yield curve, resulting in the fixed-income markets rescinding much of
their 1995 gains.
The mortgage-backed securities (MBS) market outperformed Treasuries for the
period, as rising interest rates coupled with a reduction in prepayment risk
provided investors an opportunity to reassess the mortgage market. Still, many
investors remained on the sidelines, convinced that even historically wide
mortgage yield spreads offered inadequate compensation for the perceived risks
of owning mortgages. As a result, MBS performance in 1996 has been good but
somewhat short of expectations, given the sharp rise in interest rates.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The Fund's duration, or price sensitivity to interest rate movements, was
continually adjusted to reflect our market bias and outlook. The Fund's
duration was modestly long relative to its benchmark at year-end 1995,
reflecting a belief that the economy was growing at a moderate pace and that
inflation fears were unfounded. During February 1996 the Fund's duration was
adjusted to a more neutral stance, as mixed economic data and Federal Reserve
Chairman Alan Greenspan's congressional testimony suggested a pick-up in
growth. The February new jobs report, which was more than double economists'
estimates, produced the largest one-day price decline in U.S. bond prices in
over seven years. At the close of the annual period, the Fund's duration was
slightly shorter than its benchmark, reflecting our cautious approach to
potentially higher bond yields in response to strong employment and
manufacturing data.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Over the past 12 months, our outlook for the mortgage sector has grown
increasingly positive. The significant rise in interest rates during 1996 and
the corresponding decrease in investor concerns over prepayments afforded the
Fund an opportunity to increase overall mortgage exposure. Accordingly, the
Fund has increased its weighting in mortgage pass-through securities from
approximately two-thirds to three-quarters of portfolio assets while
substantially reducing its Treasury positions. For the 12-month period, the
mortgage market as represented by the Lehman Mortgage Index outperformed the
Fund's day-to-day performance benchmark, the Merrill Lynch 5-7 Year Treasury
Index, by over 150 basis points (1.50%).
Within the mortgage sector, we substantially reduced our holdings in
collateralized mortgage obligations (CMOs), a market that improved
significantly in 1996 and appeared to be nearing its upside potential. The
Fund's CMO holdings were reduced from nearly 10% of assets as of June 30, 1995,
to its current level of approximately 7%. All remaining CMO positions consist
of issues with relatively stable cash flow.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The Fund expects to maintain its neutral duration stance, as second-quarter
economic growth in the U.S. was well above that of the previous two quarters.
Although inflation levels have remained relatively subdued, consistently strong
employment data has elicited concerns about future inflationary pressures. The
Federal Reserve has so far appeared reluctant to slow economic growth, but it
seems likely that the Fed may reverse its easing of monetary policy and tighten
during the third quarter.
In this environment, we believe that the mortgage sector will continue to find
investor support. Interest rate volatility has decreased substantially from its
March peak and is expected to remain relatively benign. Additionally,
prepayments on mortgage securities have slowed and yields relative to other
non-Treasury sectors are attractive. Technically, new issue supply continues to
move lower in the higher interest rate environment, which should allow mortgage
prices to rise.
Longer-term, we believe that the higher-than-expected growth of the second
quarter will moderate over the rest of 1996. The level of consumer debt as a
percentage of disposable income has risen to record levels and credit card
delinquencies are at a 15-year high. With consumers accounting for two-thirds
of Gross Domestic Product (GDP) growth, these developments suggest constraints
on future spending. Additionally, both commercial and consumer lending have
declined sharply, further indicating an eventual slowdown in economic growth.
PORTFOLIO COMPOSITION
FHLMC - 40.15% SBA - 3.84%
GNMA - 22.71% Asset-Backed - 2.03%
PIE CHART FNMA - 9.48% U.S. Treasury - 3.13%
ARM - 5.85% Options - 0.30%
CMO - 6.93% U.S. Agency - 5.58%
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
9
<PAGE> 12
CORPORATE INCOME FUND
PORTFOLIO MANAGER:
TCW FUNDS MANAGEMENT, INC.
JAMES M. GOLDBERG
Mr. Goldberg, a Chartered Financial Analyst and Chartered Investment Counselor,
has been Managing Director of TCW Management since 1989, and Managing Director
of the Trust Company of the West, the parent corporation of TCW Management,
since 1984. He has had primary portfolio management responsibility for the
SIERRA CORPORATE INCOME FUND since its inception.
PERFORMANCE REVIEW:
From the Fund's inception (July 18, 1990) through June 30, 1996, the SIERRA
CORPORATE INCOME FUND (Class A Shares) advanced 8.81% on an average annual
total return basis, or 7.98% adjusted for the maximum sales charge. For the
12-month period ended June 30, 1996, the Fund's total return was 3.81%, or
- -0.86% adjusted for the maximum sales charge. THE CORPORATE INCOME FUND'S
30-DAY SEC YIELD AS OF JUNE 30, 1996, WAS 6.72%. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
Several economic factors contributed significantly to the Fund's performance.
Fund results were mixed, with credit fundamentals improving due to the
increased efficiencies of U.S. manufacturers and the resiliency of the U.S.
economy. However, rising interest rates combined with the Fund's large
portfolio of longer-term bonds had a negative impact on overall performance.
Since February 1996 interest rates have climbed higher, pushing down bond
prices, especially for longer-term corporate bonds like those in the Fund. With
a higher duration than most funds in its peer group - a result of our focus on
long-term income - the Fund returned 3.81% for the 12-month period ended June
30, 1996, compared to a return of 5.11% for the Lehman Brothers Mutual Fund
Corporate Debt BBB-Rated Index.
* Index total returns were calculated from 7/31/90 to 6/30/96. The Lehman
Brothers Mutual Fund Corporate Debt BBB-Rated Index represents all
investment-grade, corporate debt securities, assumes reinvestment of all
dividend/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation),
Administrator (SIERRA Fund Administration Corporation) and Distributor waived a
portion of their management or distribution fees, and the Custodian reduced
fees by credits. In the absence of the waivers, or fees reduced by credits,
yield and total return would have been lower.
GRAPH
<TABLE>
Growth of a $10,000 Investment (Class A Shares)
<S> <C> <C> <C>
Inception* 7/18/90 10,000 9,550 10,000
10,050 9,598 10,000
9,761 9,322 9,841
9,592 9,160 9,886
9,524 9,096 9,931
9,723 9,286 10,135
Dec-90 9,932 9,485 10,278
9,960 9,512 10,409
10,227 9,767 10,587
10,400 9,932 10,717
10,627 10,148 10,856
10,705 10,224 10,931
Jun 10,730 10,247 10,930
10,886 10,396 11,088
11,205 10,701 11,338
11,374 10,862 11,572
11,489 10,972 11,682
11,616 11,093 11,796
Dec-91 11,981 11,442 12,182
11,905 11,369 12,030
12,000 11,460 12,145
11,969 11,430 12,093
12,001 11,461 12,153
12,280 11,728 12,424
Jun 12,478 11,917 12,618
12,883 12,303 12,955
12,944 12,361 13,056
13,089 12,500 13,214
12,839 12,261 12,979
12,842 12,264 13,000
Dec-92 13,140 12,549 13,240
13,453 12,847 13,549
13,867 13,243 13,860
13,946 13,318 13,909
14,050 13,418 14,016
14,143 13,506 14,033
Jun 14,555 13,900 14,374
14,739 14,075 14,477
15,234 14,548 14,838
15,277 14,589 14,873
15,425 14,731 14,948
15,165 14,483 14,764
Dec-93 15,290 14,602 14,851
15,589 14,887 15,139
15,019 14,343 14,782
14,338 13,692 14,328
13,980 13,350 14,190
13,853 13,230 14,138
Jun 13,781 13,161 14,102
14,224 13,584 14,459
14,123 13,488 14,475
13,725 13,107 14,206
13,651 13,036 14,173
13,676 13,061 14,151
Dec-94 13,717 13,100 14,268
14,034 13,402 14,570
14,514 13,861 14,990
14,630 13,971 15,113
14,861 14,192 15,368
15,887 15,172 16,092
Jun 15,926 15,209 16,237
15,693 14,987 16,166
16,129 15,403 16,426
16,379 15,641 16,620
16,722 15,970 16,836
17,053 15,285 17,157
Dec-95 17,432 16,648 17,440
17,390 16,607 17,554
16,716 15,964 17,136
16,498 15,756 16,990
16,264 15,532 16,849
16,220 15,490 16,819
Jun-96 16,532 15,788 17,066
</TABLE>
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(July 18, 1990)
<S> <C> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) -5.16% 3.81% 9.03% 8.81%
Fund (adjusted for the maximum 4.5% sales charge) -9.43% -0.86% 8.03% 7.98%
Lehman Brothers Mutual Fund Corporate Debt BBB-
Rated Index* -2.15% 5.11% 9.32% 9.45%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) -5.51% 3.04% N/A 8.74%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -10.09% -1.79% N/A 6.88%++
Lehman Brothers Mutual Fund Corporate Debt BBB-
Rated Index* -2.15% 5.11% N/A 10.01%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) -5.51% 3.04% N/A 8.74%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -10.09% -1.79% N/A 6.88%++
Lehman Brothers Mutual Fund Corporate Debt BBB-
Rated Index* -2.15% 5.11% N/A 10.01%
</TABLE>
++ Adjusted for the maximum 4% CDSC for shares held since inception.
10
<PAGE> 13
CORPORATE INCOME FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
A period of rising interest rates coupled with fears of accelerating inflation
in the domestic economy affected the Fund's performance. Despite these factors,
the Fund continued to maintain relatively long maturity and duration, a
strategy consistent with the Fund's long-term investment objectives. As a
defensive measure, management efforts were directed to upgrading the credit
quality of the corporate bonds and notes held in the Fund. The Fund continues
to experience a level of credit upgrades relative to downgrades that exceed the
corporate market.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
During the period, the Fund increased its holdings of financial issues, a
sector that showed strengthening credit fundamentals and consistent market
performance. One major purchase in this sector was American General
Corporation, a leading provider of financial services.
Due to our continuing concerns about the risks of deregulation in the electric
utility sector, we have reduced our holdings of utility issues over the
previous 12 months and will continue to keep a low profile in this sector over
the near term. Utility sales include securities of Commonwealth Edison, GTE
Corp., Niagara Mohawk, Philadelphia Electric Company, and Texas Utilities
Electric Company. As a result of deteriorating credit fundamentals, we have
also sold bonds issued by CBS, Inc. and Dayton Hudson, a move that reduced our
holdings in the services sector.
Diversification remains a key element of the Fund's investment strategy. On
June 30, 1996, the Fund held the securities of over 60 different issuers, with
an average credit quality rating of A3 by Moody's Investors Service and A- by
Standard & Poor's. When selecting securities, we continue to focus on companies
that show improving fundamentals and are in favorable positions within their
business cycles.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
With interest rates expected to be relatively stable, the Fund's investment
approach to maturity and duration remains consistent with its long-term goals of
high current income and capital preservation. Although the recent robust pace of
economic growth has provoked anxiety in the bond market, reported inflation
statistics continue to be modest, and we see no reason to change our 1996 and
1997 estimates for the Consumer Price Index (CPI) of 3% and 3.2%, respectively.
As a result, we believe that interest rates are at a reasonable level with the
long-term Treasury bond expected to trade between 6.50% and 7.25%. Over the
intermediate term, the Fund should benefit from these stable interest rates.
The most surprising economic news in 1996 has been provided by the consumer
sector. Higher-than-expected consumer spending has been the result of solid
employment advances, which occurred despite persistent layoff announcements
and political allegations that the economy is failing to create jobs. However,
due to recent news concerning the rapid acceleration of personal bankruptcies
and lenders reporting growing losses on credit cards, we anticipate a slowing
in consumer spending in the second half of 1996. Business spending recently
displayed surprising strength as well. Similar to consumption, we anticipate a
slowdown in this sector as we progress through 1996 and 1997 since recent data
indicate that contracts for new plant expansion are subdued despite the
recent increase in consumer demand.
SECTOR DIVERSIFICATION
Manufacturing 16.51%
Industrial 10.86%
Forest Products 8.25%
Yankee 6.58%
Electric 5.90%
Financial 5.79%
Transportation 5.75%
Media 4.97%
Retail 3.25%
Energy 5.58%
U.S. Treasury 2.23%
U.S. Mortgage-Backed 13.56%
Gas 4.71%
Telecommunications 0.37%
Regional Banks 5.49%
Others 0.10%
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
11
<PAGE> 14
CALIFORNIA MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
JOSEPH A. PIRARO
Mr. Piraro, Vice President of Van Kampen, joined the company in 1992, and
serves as Vice President and portfolio manager of Van Kampen American Capital
Investment Advisory Corp., an affiliate of Van Kampen. He has had primary
portfolio management responsibility for the Sierra California Municipal Fund
since May 1992.
PERFORMANCE REVIEW:
From the Fund's inception (July 25, 1989) through June 30, 1996, the SIERRA
CALIFORNIA MUNICIPAL FUND (Class A Shares) advanced 7.02% on an average annual
total return basis, or 6.31% adjusted for the maximum sales charge. For the
12-month period ended June 30, 1996, the Fund's total return was 6.40% or 1.61%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF JUNE
30, 1996, WAS 5.21%, AND ITS 30-DAY AVERAGE YIELD WAS 5.67% OR 10.35% ON A
TAX-EQUIVALENT BASIS.* For additional information, including Class B and Class
S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The two factors that had the most impact on performance was duration, a measure
of the Fund's sensitivity to interest rate changes, and the portfolio's large
percentage of insured, high-quality holdings. The Fund had a duration of 6.88
years at the end of 1995, which was below the duration of the Lehman California
Bond Index at 7.62 years. With its relatively short duration, the Fund showed
disappointing performance in late 1995, especially as interest rates fell
markedly in the second half of the year. However, as interest rates rose in
1996, the Fund slightly outperformed because of its lower duration. Overall,
for the 12-month period ended June 30, 1996, the Fund had a total return of
6.40%, ranking near the middle of the Lipper peer group.
*Tax-equivalent yield is based on Federal income taxes at 39.6% and California
income taxes at 9.3%, and the federal deduction of state taxes paid.
** Index total returns were calculated from 7/31/89 to 6/30/96. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market, and includes approximately
29,000 municipal bonds. The index assumes reinvestment of all
dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation),
Administrator (SIERRA Fund Administration Corporation) and Distributor waived a
portion of their management or distribution fees, the Administrator absorbed
other expenses, and the Custodian reduced fees by credits. In the absence of
the waivers and absorption of other expenses, or fees reduced by credits, yield
and total return would have been lower.
GRAPH
Growth of a $10,000 Investment (Class A Shares)
<TABLE>
<S> <C> <C> <C>
Inception* 7/25/89 10,000 9,550 10,000
10,080 9,626 10,000
9,978 9,529 9,902
9,952 9,504 9,872
10,117 9,662 9,993
10,252 9,790 10,168
Dec-89 10,325 9,860 10,251
10,208 9,748 10,203
10,303 9,840 10,294
10,379 9,912 10,297
10,214 9,755 10,223
10,458 9,988 10,445
Jun 10,598 10,122 10,537
10,750 10,266 10,692
10,497 10,024 10,537
10,564 10,089 10,544
10,740 10,257 10,734
10,992 10,498 10,950
Dec-90 10,993 10,498 10,998
11,044 10,547 11,146
11,115 10,615 11,243
11,161 10,659 11,247
11,274 10,767 11,397
11,389 10,876 11,498
Jun 11,357 10,846 11,487
11,472 10,956 11,627
11,607 11,085 11,780
11,724 11,196 11,933
11,864 11,330 12,041
11,901 11,365 12,075
Dec-91 12,054 11,511 12,334
12,045 11,503 12,362
12,059 11,516 12,366
12,096 11,552 12,371
12,182 11,633 12,481
12,315 11,761 12,629
Jun 12,556 11,991 12,841
13,015 12,430 13,226
12,812 12,236 13,096
12,851 12,273 13,181
12,587 12,020 13,052
12,970 12,387 13,286
Dec-92 13,159 12,567 13,421
13,336 12,736 13,577
13,899 13,274 14,069
13,787 13,167 13,919
13,939 13,311 13,779
14,028 13,396 13,856
Jun 14,294 13,651 14,087
14,282 13,640 14,106
14,654 13,994 14,399
14,847 14,179 14,563
14,848 14,180 14,591
14,628 13,970 14,463
Dec-93 14,955 14,282 14,768
15,113 14,433 14,936
14,719 14,057 14,549
13,967 13,338 13,957
13,981 13,352 14,076
14,088 13,454 14,198
Jun 13,982 13,352 14,112
14,210 13,570 14,370
14,264 13,622 14,420
14,075 13,441 14,208
13,788 13,168 13,955
13,446 12,841 13,703
Dec-94 13,667 13,052 14,004
14,126 13,490 14,405
14,559 13,904 14,824
14,728 14,065 14,994
14,757 14,093 15,012
15,224 14,539 15,491
Jun 15,040 14,363 15,356
15,112 14,432 15,502
15,300 14,611 15,699
15,414 14,721 15,798
15,660 14,955 16,027
15,950 15,232 16,293
Dec-95 16,139 15,413 16,450
16,212 15,483 16,575
16,123 15,397 16,462
15,885 15,170 16,251
15,869 15,155 16,206
15,869 15,155 16,199
Jun-96 16,004 15,284 16,376
</TABLE>
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(July 25, 1989)
<S> <C> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) -0.84% 6.40% 7.10% 7.02%
Fund (adjusted for the maximum 4.5% sales charge) -5.31% 1.61% 6.12% 6.31%
Lehman Brothers Municipal Bond Index** -0.45% 6.64% 7.35% 7.39%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) -1.21% 5.61% N/A 6.21%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -6.03% 0.61% N/A 4.30%++
Lehman Brothers Municipal Bond Index** -0.45% 6.64% N/A 7.72%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) -1.21% 5.61% N/A 6.21%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -6.03% 0.61% N/A 4.30%++
Lehman Brothers Municipal Bond Index** -0.45% 6.64% N/A 7.72%
</TABLE>
++ Adjusted for the maximum 4% CDSC for shares held since inception.
12
<PAGE> 15
CALIFORNIA MUNICIPAL FUND
In addition to duration, the Fund's performance was also affected by the high
percentage of insured holdings, which totaled 60% of assets on June 30, 1996.
Quality holdings perform well during "bull" markets, but tend to underperform
in rising interest rate environments such as those experienced year-to-date
1996.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
There have been significant swings in interest rates over the 12-month period
ended June 30, 1996. Due partly to a shorter duration compared to similar funds
in its Lipper category, the Fund underperformed during this period. We have
addressed these market conditions by positioning duration to best capture
current opportunities, as well as take advantage of our future outlook on
interest rates. Duration as of June 30, 1996, stood at 7.03 years, and we plan
on continuing to lengthen duration through the purchase of longer maturity
discount securities.
Supply and demand levels in the municipal market were also major determinants
of Fund performance. Overall supply of new California issues was low, and
retail demand for California municipal bonds has also been relatively weak. As
a result of the financial difficulties occurring in highly rated issuers such
as Orange County and Los Angeles County, the entire high-quality sector in
California has come under price pressures. However, over the longer term, we
continue to believe that demand will rebound as the California economy
strengthens and the market's perception of risk declines.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
No significant changes were made in sector concentration. However, AAA rated
bonds, as a percentage of holdings, increased from 50% to 60% during the first
half of the fiscal year, and remained at that level through June 30, 1996, in
order to maintain the high average quality of the Fund's portfolio holdings.
Although major changes in concentration are not expected in the near future, we
continue to seek offerings in undervalued sectors which we feel have the best
price appreciation potential. In particular, the health care industry offers
very attractive opportunities at this time.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The economic environment appears promising for the municipal bond market and
the Fund in particular. Investor concerns over tax reform have abated
considerably, as have credit concerns about municipal issuers. Overall credit
quality continues to improve, as states and other municipalities are more
focused on balancing budgets, a result of the financial woes that the federal
government experienced in late 1995. The two largest state issuers - California
and New York - are financially more viable than a year ago, and it is expected
that California will be upgraded by the rating agencies in the near future.
Concerns over the Orange County bankruptcy have also lessened. With a
significant growth in reinvestable cash coming to the market this year,
investor demand for California municipal securities should continue to improve.
As new money enters the Fund, these assets will be invested with the intent of
maintaining the dividend and lengthening the duration of the Fund.
Sector Diversification
Transportation 11.29%
Utilities 10.45%
Waste Disposal 2.87%
Short-Term Municipal Bonds 1.01%
Public Building 8.63%
Industrial Revenue 5.43%
Public Education 6.66%
Higher Education 3.42%
General Purpose 8.98%
Health Care 6.44%
Housing 13.93%
Water/Sewer 2.00%
Tax District 18.89%
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
13
<PAGE> 16
FLORIDA INSURED MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
JOSEPH A. PIRARO
Mr. Piraro, Vice President of Van Kampen, joined the company in 1992, and
serves as Vice President and portfolio manager of Van Kampen American Capital
Investment Advisory Corp., an affiliate of Van Kampen. He has had primary
portfolio management responsibility for the SIERRA FLORIDA INSURED MUNICIPAL
FUND since June 1995.
PERFORMANCE REVIEW:
From the Fund's inception (June 7, 1993) through June 30, 1996, the SIERRA
FLORIDA INSURED MUNICIPAL FUND (Class A Shares) advanced 4.03% on an average
annual total return basis, or 2.48% adjusted for the maximum sales charge. For
the 12-month period ended June 30, 1996, the Fund's total return was 7.56%, or
2.72% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
JUNE 30, 1996, WAS 5.10%, AND ITS 30-DAY AVERAGE YIELD WAS 5.16% OR 8.54% ON A
TAX-EQUIVALENT BASIS.* For additional information, including Class B and Class
S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The Fund's positive performance was primarily a result of its approach to
duration, a measure of price sensitivity to changes in interest rates, and its
selection of high-quality holdings. In declining interest environments such as
that experienced during the latter half of 1995, funds with longer durations
tend to perform better. At year-end, the Fund had a duration of 9.03 years,
longer than the average for the peer group and the major factor in its
excellent performance during the last half of 1995. As rates began to rise
during the first six months of 1996, the duration of the Fund was shortened
slightly to 8.90 years in order to lessen price volatility.
By prospectus, the Fund is required to invest 80% of assets in AAA-rated
holdings. Quality holdings performed extremely well during the first six
months, particularly in specialty states such as Florida, and this further
contributed to the Fund's strong performance.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
During the last six months of 1995, yields dropped significantly, causing bond
prices to rise. The Fund's relatively long duration allowed the Fund to
outperform its peer group for the second half of 1995. Beginning in
mid-February, the bond market changed direction in response primarily to strong
economic
*Tax-equivalent yield is based on Federal income taxes at 39.6%.
** Index total returns were calculated from 6/30/93 to 6/30/96. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market, and includes approximately
29,000 municipal bonds. The index assumes reinvestment of all
dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation)
and Administrator (SIERRA Fund Administration Corporation) waived a portion of
their management fees, the Advisor absorbed other expenses, and the Custodian
reduced fees by credits. In the absence of the waivers and absorption of other
expenses, or fees reduced by credits, yield and total return would have been
lower.
GRAPH
<TABLE>
<CAPTION>
Growth of a $10,000 Investment (Class A Shares)
<S> <C> <C> <C>
Inception* 6/7/93 10,000 9,550 10,000
10,083 9,629 10,013
Aug 10,387 9,920 10,221
10,511 10,038 10,338
Oct 10,545 10,070 10,357
10,355 9,889 10,266
Dec-93 10,686 10,206 10,483
10,813 10,326 10,602
Feb 10,414 9,945 10,328
9,797 9,356 9,907
Apr 9,893 9,448 9,992
9,970 9,521 10,079
Jun 9,899 9,454 10,017
10,092 9,638 10,200
Aug 10,095 9,641 10,236
9,960 9,512 10,086
Oct 9,675 9,240 9,906
9,410 8,987 9,727
Dec-94 9,780 9,340 9,941
10,043 9,591 10,225
Feb 10,362 9,896 10,523
10,464 9,993 10,644
Apr 10,445 9,975 10,656
10,702 10,220 10,996
Jun 10,495 10,022 10,901
10,587 10,111 11,004
Aug 10,758 10,274 11,144
10,815 10,329 11,214
Oct 11,053 10,556 11,377
11,315 10,806 11,566
Dec-95 11,498 10,981 11,677
11,556 11,036 11,766
Feb 11,431 10,917 11,686
11,156 10,654 11,536
Apr 11,134 10,633 11,504
11,146 10,645 11,499
Jun-96 11,288 10,780 11,624
</TABLE>
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 7, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) -1.83% 7.56% 4.03%
Fund (adjusted for the maximum 4.5% sales charge) -6.24% 2.72% 2.48%
Lehman Brothers Municipal Bond Index** -0.45% 6.64% 5.15%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) -2.19% 6.76% 6.00%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -6.98% 1.76% 4.09%++
Lehman Brothers Municipal Bond Index** -0.45% 6.64% 7.72%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) -2.19% 6.76% 6.00%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -6.98% 1.76% 4.09%++
Lehman Brothers Municipal Bond Index** -0.45% 6.64% 7.72%
</TABLE>
++ Adjusted for the maximum 4% CDSC for shares held since inception.
14
<PAGE> 17
FLORIDA INSURED MUNICIPAL FUND
reports. Interest rates as well as municipal yields rose, and bond prices fell.
By shortening duration during this period, price risk in the Fund was reduced.
With long-term municipal yields on June 30, 1996, about 10 basis points lower
than those from the previous year, the Fund outperformed its peer group in
total return.
In addition to adjusting duration to reflect market conditions, we also
adjusted our percentage of insured holdings to coincide with market movements
and the spread relationship between quality paper and lower-rated securities.
Supply and demand continued to have a major impact on the municipal market.
While retail demand nationally was very weak over the past year (due in large
part to investor concerns over tax reform and the creditworthiness of municipal
issuers) Florida was an exception. The state had a huge number of bonds called
(repaid early) in October, and the majority of cash was pumped back into
Florida issues. Furthermore, Florida was also one of the few states with stable
or increasing new volume issuance. This strong level of supply, however, was
quickly absorbed by both in-state investors as well as national funds,
resulting in the strong performance of Florida securities.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Due to the strong performance of quality Florida issues, we increased triple-A
exposure in the Fund from 82% as of June 30, 1995, to 87% by year-end 1995. As
the market began to sell off in early 1996, we shifted this percentage lower in
order to take advantage of several higher-yielding, lower-quality offerings
which would enhance the yield of the Fund.
Several sector concentration shifts were also made as we made purchases in
undervalued sectors during the year. The portfolio's three largest exposures
are in public education (19% of assets), airport (16% of assets), and health
care (14% of assets). The major shift in sector concentration was a 13%
increase in airport holdings, with resulting decreases in health care and
general purpose bonds (both down 8%).
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
As noted earlier, Florida retail demand remains high, and the Fund has shown
stable performance over the past year. We expect this trend to continue. New
issue supply thus far in 1996 is lower than projected levels, and retail
interest has begun to grow. Concerns over tax reform and the Orange County,
California, bankruptcy have diminished and, with a significant growth in
reinvestable cash coming to the market this year, investor demand should
continue to improve.
We expect retail demand to increase over the remainder of the year due to the
higher-than-normal amount of cash which will become available for reinvestment
(particularly in October 1996). Investor concerns over tax reform have abated
considerably as have credit concerns about municipal issuers, which should
further spur retail demand.
The severe weather that tore through Florida in 1995 and caused billions of
dollars in damage had very little negative impact on municipal issuers in
general and no impact on any of the Fund's holdings. This was due to the
Federal Emergency Management Agency (FEMA) money that poured into the state as
well as the large percentage of insured issues in the market. As the severe
weather season once again approaches, we continue to monitor our uninsured
holdings to minimize any potential risks to the Fund.
Sector Diversification
Transportation 21.05%
Utilities 7.98%
Short Term Municipal Bonds 2.62%
Public Building 3.83%
Industrial Revenue 5.70%
Public Education 19.23%
Higher Education 8.09%
Health Care 14.18%
Housing 9.25%
Water/Sewer 8.07%
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
15
<PAGE> 18
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
JOSEPH A. PIRARO
Mr. Piraro is portfolio manager of Van Kampen's California and national insured
municipal funds, as well as portfolio manager for the SIERRA California
Municipal, Florida Insured Muncipal and SIERRA CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUNDS.
PERFORMANCE REVIEW:
From the Fund's inception (April 4, 1994) through June 30, 1996, the SIERRA
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND (Class A Shares) advanced 7.72%
on an average annual total return basis, or 5.53% adjusted for the maximum
sales charge. On a basis not adjusted for the maximum sales charge, the Fund
outperformed the benchmark Lehman Brothers Municipal Bond Index which advanced
7.24% on an average annual total return basis for the same period.** For the
12-months ended June 30, 1996, the Fund's total return was 6.25%, or 1.47%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF JUNE
30, 1996, WAS 4.35%, AND ITS 30-DAY AVERAGE YIELD WAS 4.70% OR 8.59% ON A
TAX-EQUIVALENT BASIS.* For additional information, including Class B and Class
S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The Fund's duration and its high-quality municipal holdings contributed most
significantly to the Fund's performance over the last 12 months. At year-end
1995, the Fund had a duration of 6.09 years, slightly longer than the Lehman
Intermediate California Bond Index duration of 5.90 years. Duration is similar
to average maturity and is a measure of price sensitivity to changes in interest
rates. With falling interest rates, the Fund benefited from its higher duration
and performed at the top of its peer group during late 1995. However, as
interest rates turned upward in 1996, the Fund slightly underperformed against
its competition.
*Tax-equivalent yield is based on Federal income taxes at 39.6% and California
income taxes at 9.3% and the federal deduction of state taxes paid.
** Index total returns were calculated from 4/30/94 to 6/30/96. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market, and includes approximately
29,000 municipal bonds. The index assumes reinvestment of all
dividends/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation)
and Administrator (SIERRA Fund Administration Corporation) waived a portion of
their management fees, the Advisor absorbed other expenses, and the Custodian
reduced fees by credits. In the absence of the waivers and absorption of other
expenses, or fees reduced by credits, yield and total return would have been
lower.
GRAPH
<TABLE>
<S> <C> <C> <C>
Growth of a $10,000 Investment (Class A Shares)
Inception* 4/4/94 10,000 9,714 10,000
10,259 9,802 10,087
Jun-94 10,220 9,766 10,025
10,405 9,942 10,209
Aug 10,437 9,973 10,245
10,327 9,868 10,094
Oct 10,175 9,723 9,914
10,033 9,587 9,735
Dec-94 10,170 9,717 9,949
10,462 9,997 10,234
Feb 10,787 10,308 10,531
10,905 10,420 10,653
Apr 10,907 10,422 10,665
11,246 10,746 11,006
Jun 11,117 10,617 10,910
11,257 10,751 11,013
Aug 11,430 10,916 11,153
11,507 10,989 11,224
Oct 11,648 11,123 11,386
11,800 11,269 11,575
Dec-95 11,849 11,316 11,686
11,960 11,421 11,775
Feb 11,939 11,402 11,695
11,775 11,245 11,546
Apr 11,754 11,225 11,513
11,732 11,204 11,509
Jun-96 11,811 11,279 11,634
</TABLE>
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(April 4, 1994)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) -0.32% 6.25% 7.72%
Fund (adjusted for the maximum 4.5% sales charge) -4.80% 1.47% 5.53%
Lehman Brothers Municipal Bond Index** -0.45% 6.64% 7.24%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) -0.69% 5.46% 6.69%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -5.56% 0.46% 4.79%++
Lehman Brothers Municipal Bond Index** -0.45% 6.64% 7.72%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) -0.69% 5.46% 6.69%
Fund (adjusted for the maximum 5% contingent deferred sales
charge) -5.56% 0.46% 4.79%++
Lehman Brothers Municipal Bond Index** -0.45% 6.64% 7.72%
</TABLE>
++ Adjusted for the maximum 4% CDSC for shares held since inception.
16
<PAGE> 19
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Interest rates continued to fall during the last half of 1995, causing a surge
in bond prices. The Fund's relatively longer duration allowed the Fund to
outperform its peer group during this period. However, in February 1996
interest rates began to rise in response to strong economic reports, resulting
in relatively weak performance for our longer-duration Fund. Since the net
result was lower interest rates for the 12-month period, the Fund was able to
outperform its peer group in total return, including dividend income and price
changes.
Supply and demand levels in the municipal market also contributed to the Fund's
performance. Although overall supply of new California issues was low, retail
demand for California municipal bonds was also weak. In the wake of negative
news from Orange County and Los Angeles County, both highly rated issuers in the
past, demand for California municipal issues has declined dramatically. As the
market began to sell off in 1996 and the Fund's highly rated bonds began to
underperform, holdings in this sector were decreased from 93% of assets as of
June 30, 1995, to 87% of assets on June 30, 1996.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
In addition to reducing price exposure in the highly rated sector, we shifted
assets to lower-rated (but still investment grade) BBB securities to enhance
the yield of the Fund. Through careful research and in-depth analysis of
California municipal securities, we were able to take advantage of the higher
yield advantages in the BBB issues coming to market.
Although major changes in concentration are not expected in the near future, we
continue to seek offerings in undervalued sectors which we feel have the best
price appreciation potential. The health care and housing sectors frequently
offer attractive opportunities and are both sectors in which we have excellent
research capabilities.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our outlook for the Fund is positive. The California economy is exceptionally
strong, and market perception of the state has improved dramatically over the
year. Over the intermediate and longer term, we expect investor demand to
increase due to the higher-than-normal amount of cash from a disproportionately
large number of called bonds (bonds repaid prior to maturity) in 1996. A high
volume of bonds were issued in late 1985 at higher interest rates and with
ten-year calls. Compared to national levels, a large percentage of this
reinvestable cash is being invested back into the California municipal market.
In addition to greater retail demand, demand from mutual fund companies and
other institutions for California municipals should also increase, further
accelerating potential price appreciation of these securities.
Intermediate term municipals should continue to provide excellent value for the
Fund, offering yields near 85% of long term Treasuries with much less price
volatility than those of longer maturity issues. The Fund is also structured
with a mixture of high coupon "cushion" bonds (which provide maximum income with
lower volatility) and longer-term discounted bonds (which provide maximum total
return potential).
Sector Diversification
<TABLE>
<CAPTION>
<S> <C>
Transportation 6.81%
Utilities 1.75%
Waste Disposal 1.38%
Short Term Municipal Bonds 4.00%
Public Education 13.81%
Higher Education 12.77%
General Purpose 18.16%
Health Care 13.53%
Housing 9.53%
Water/Sewer 9.13%
Tax District 9.13%
</TABLE>
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
17
<PAGE> 20
NATIONAL MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
DAVID C. JOHNSON
Mr. Johnson, Senior Vice President of Van Kampen, has over 14 years' experience
in the tax-free municipal sector of the fixed-income market. He has been with
Van Kampen since 1989 and has had primary portfolio management responsibility
for the SIERRA NATIONAL MUNICIPAL FUND since its inception.
PERFORMANCE REVIEW:
From the Fund's inception (July 18, 1990) through June 30, 1996, the SIERRA
NATIONAL MUNICIPAL FUND (Class A Shares) advanced 8.09% on an average annual
total return basis, or 7.26% adjusted for the maximum sales charge. On a basis
not adjusted for the maximum sales charge, the Fund outperformed the benchmark
Lehman Brothers Municipal Bond Index which advanced 7.47% on an average annual
total return basis for the same period.** For the 12-month period ended June
30, 1996, the Fund's total return was 6.41%, or 1.62% adjusted for the maximum
sales charge. THE FUND'S 30-DAY SEC YIELD AS OF JUNE 30, 1996, WAS 5.25%, AND
ITS 30-DAY AVERAGE YIELD WAS 5.72% OR 9.47% ON A TAX-EQUIVALENT BASIS.* For
additional information, including Class B and Class S Share performance, see
the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The most significant factors in the Fund's performance over the last 12 months
were duration and credit quality. Duration is similar to average maturity and
measures the sensitivity of bond price to interest rate changes. As interest
rates fall, bond funds with longer durations tend to perform better. At the end
of 1995, the Fund had a duration of 8.86 years, up from 7.46 years as of June
30, 1995. When interest rates turned in 1996, the duration of the Fund was
shortened to 8.03 years in order to reduce overall price volatility.
Over the one-year period, the Fund utilized a "barbell" ratings structure, with
AAA-rated securities totaling approximately 42% of assets and BBB-rated
securities totaling approximately 30% of assets. The AAA holdings performed
extremely well during the first six months, further contributing to the Fund's
strong performance. The BBB-rated, higher yielding securities, on the other
hand, are defensive bonds and helped the Fund's performance during the past six
months.
*Tax-equivalent yield is based on Federal income taxes at 39.6%.
** Index total returns were calculated from 7/31/90 to 6/30/96. The Lehman
Brothers Municipal Bond Index is a total return performance benchmark for the
long-term, investment-grade, tax-exempt bond market, and includes approximately
29,000 municipal bonds. The index assumes reinvestment of all
dividends/distributions and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume
reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation),
Administrator (SIERRA Fund Administration Corporation) and Distributor waived a
portion of their management or distribution fees; the Administrator absorbed
other expenses, and the Custodian reduced fees by credits. In the absence of
the waivers and absorption of other expenses, or fees reduced by credits, yield
and total return would have been lower.
GRAPH
<TABLE>
<S> <C> <C> <C>
Growth of a $10,000 Investment (Class A Shares)
Inception 7/18/90 10,060 9,607 10,000
9,834 9,391 9,855
9,871 9,427 9,861
9,939 9,492 10,039
10,170 9,713 10,241
Dec-90 10,218 9,758 10,286
10,320 9,855 10,424
10,473 10,002 10,515
10,504 10,031 10,519
10,702 10,220 10,659
10,827 10,340 10,754
Jun 10,826 10,339 10,743
11,007 10,512 10,874
11,189 10,685 11,018
11,317 10,808 11,161
11,414 10,900 11,261
11,446 10,931 11,293
Dec-91 11,774 11,245 11,536
11,780 11,250 11,562
11,830 11,298 11,566
11,891 11,356 11,570
12,009 11,469 11,673
12,207 11,658 11,811
Jun 12,496 11,934 12,009
13,026 12,440 12,370
12,711 12,139 12,248
12,763 12,189 12,328
12,436 11,876 12,207
12,804 12,228 12,426
Dec-92 12,966 12,382 12,552
13,175 12,582 12,698
13,801 13,180 13,158
13,603 12,991 13,018
13,764 13,144 12,887
13,865 13,241 12,959
Jun 14,172 13,535 13,175
14,202 13,563 13,193
14,549 13,894 13,467
14,738 14,075 13,620
14,743 14,079 13,646
14,624 13,966 13,526
Dec-93 14,916 14,245 13,812
15,097 14,418 13,969
14,698 14,037 13,607
14,018 13,387 13,053
14,036 13,404 13,164
14,143 13,507 13,279
Jun 14,045 13,413 13,198
14,258 13,616 13,439
14,341 13,696 13,487
14,176 13,538 13,288
13,866 13,242 13,052
13,462 12,856 12,815
Dec-94 13,872 13,248 13,097
14,377 13,730 13,472
14,802 14,136 13,864
14,944 14,271 14,023
14,877 14,207 14,040
15,112 14,423 14,488
Jun 14,934 14,262 14,362
15,018 14,342 14,499
15,243 14,557 14,683
15,314 14,625 14,775
15,527 14,828 14,989
15,853 15,140 15,238
Dec-95 16,039 15,318 15,385
16,112 15,387 15,502
16,071 15,347 15,396
15,813 15,101 15,199
15,786 15,076 15,156
15,759 15,050 15,150
Jun-96 15,892 15,176 15,316
</TABLE>
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(July 18, 1990)
<S> <C> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) -0.93% 6.41% 7.98% 8.09%
Fund (adjusted for the maximum 4.5% sales charge) -5.39% 1.62% 6.99% 7.26%
Lehman Brothers Municipal Bond Index** -0.45% 6.64% 7.35% 7.47%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) -1.30% 5.62% N/A 5.59%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -6.11% 0.62% N/A 3.68%++
Lehman Brothers Municipal Bond Index** -0.45% 6.64% N/A 7.72%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) -1.30% 5.62% N/A 5.59%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -6.11% 0.62% N/A 3.68%++
Lehman Brothers Municipal Bond Index** -0.45% 6.64% N/A 7.72%
</TABLE>
++ Adjusted for the maximum 4% CDSC for shares held since inception.
18
<PAGE> 21
NATIONAL MUNICIPAL FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
As interest rates fell throughout late 1995, the Fund's relatively long
duration produced above-average returns. By mid-February, however, interest
rates changed direction in response primarily to strong economic reports.
Long-term municipal yields rose, and bond prices weakened. Under these market
conditions, the Fund's duration was shortened in order to reduce price risk.
Supply and demand factors continued to affect both the Fund and the municipal
market. New issue supply in 1996 has been lower than originally projected,
primarily due to higher interest rates which essentially put an end to most
refunding issues. Retail demand has been weak over the past year primarily as a
result of investor concerns over the impact of tax reform. Additionally, many
individuals have questioned the creditworthiness of municipal issuers in the
wake of news about financially-troubled municipalities such as Orange County,
California, and Los Angeles County, California. In light of these concerns, a
higher-than-normal percentage of issues came to market with insurance.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
During the first half of the fiscal year, AAA-rated exposure increased slightly
in response to consistent performance of higher quality holdings. While the BBB
securities tend to lag in appreciation during market rallies, these securities
contribute to portfolio income and, therefore, the dividend-paying ability of
the Fund. The Fund continues to be well-diversified by sector concentration and
rating distribution. There are no credit concerns in the Fund.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We expect the core structure of the Fund to remain unchanged, as we continue to
concentrate on selecting high-quality municipal issues, maintaining the
dividend, and preserving capital over the long term. The Fund remains committed
to seeking undervalued securities in sectors which we feel have the most price
appreciation potential. The health care sector is one area that deserves
careful examination. In addition, we continue to look for lower-rated issues
which meet our rigid research standards as the higher yields on these
securities can improve the Fund's overall performance. When viewed as a percent
of taxable offerings, municipals are still an excellent value with yields near
85% of Treasuries. We anticipate that these yield levels will continue for the
foreseeable future.
SECTOR DIVERSIFICATION
PIE CHART
Higher Education - 3.99% Waste Disposal - 0.57%
General Purpose - 13.61% Short Term Municipal
Health Care - 23.45% Bonds - 1.96%
Housing - 8.97% Public Building - 2.14%
Tax District - 2.06% Industrial Revenue - 12.43%
Transportation - 11.41% Bond Bank - 0.86%
Utilities - 16.25% Public Education - 2.30%
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
19
<PAGE> 22
GROWTH AND INCOME FUND
PORTFOLIO MANAGER:
J.P. MORGAN INVESTMENT MANAGEMENT INC.
HENRY D. CAVANNA
WILLIAM M. RIEGEL
Mr. Cavanna is a senior portfolio manager in the J.P. Morgan Equity and
Balanced Accounts Group, and has been with J.P. Morgan since 1971.
Mr. Riegel is a senior equity portfolio manager in the Equity and Balanced
Accounts Group, and has been with J.P. Morgan since 1979. They have had primary
portfolio management responsibility for the SIERRA GROWTH AND INCOME FUND since
September 1993.
PERFORMANCE REVIEW:
From the Fund's inception (July 25, 1989) through June 30, 1996, the SIERRA
GROWTH AND INCOME FUND (Class A Shares) advanced 10.82% on an average annual
total return basis, or 9.88% adjusted for the maximum sales charge. For the
12-month period ended June 30, 1996, the Fund's total return was 21.36%, or
14.39% adjusted for the maximum sales charge. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The strong performance of domestic equity markets in the first half of 1995
continued into the second half of the year. As stocks maintained their strong
performance, the S&P 500 continued to set record highs in the third and fourth
quarters of 1995. However, the SIERRA GROWTH AND INCOME FUND began to
underperform the S&P 500 in the latter part of the 12-month period. This
underperformance was due primarily to stock selection, as the Fund did not take
advantage of a strong "narrow" market that emphasized the largest company
stocks among the S&P 500.
In the first quarter of 1996, stock picking created strong relative performance
as the Fund outperformed the S&P 500 in 14 of 17 economic sectors. Overall, the
Fund slightly outperformed both the S&P 500 and the Lipper Growth & Income Fund
Average during this time period. The Fund's strong performance can be
attributed to stock selection and solid corporate earnings growth. Sectors that
lagged in the latter part of 1995 began to improve their performance; basic
industry, retail, and capital goods all benefited from signs of renewed
economic strength. The economic strength caused inflation concerns to surface
and interest rates to increase, but the equity markets continued forward.
In the second quarter of 1996, stock prices reached new highs with a rotation
into defensive growth stocks as investors became increasingly concerned about
a potential Fed tightening as a
* INDEX TOTAL RETURNS WERE CALCULATED FROM 7/31/89 TO 6/30/96. THE STANDARD &
POOR'S 500 COMPOSITE INDEX (S&P 500) REPRESENTS AN UNMANAGED WEIGHTED INDEX OF
500 INDUSTRIAL, TRANSPORTATION, UTILITY, AND FINANCIAL COMPANIES WIDELY
REGARDED BY INVESTORS AS REPRESENTATIVE OF THE STOCK MARKET. THE INDEX ASSUMES
REINVESTMENT OF ALL DIVIDENDS/DISTRIBUTIONS, AND DOES NOT REFLECT ANY
ASSET-BASED CHARGES FOR INVESTMENT MANAGEMENT OR OTHER EXPENSES. PAST
INVESTMENT PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE. THE RETURNS SHOWN
FOR THE FUND ASSUME REINVESTMENT OF ALL DIVIDENDS/DISTRIBUTIONS BY THE
SHAREHOLDER.
DURING THE PERIOD NOTED, THE ADVISOR (SIERRA INVESTMENT ADVISORS CORPORATION),
ADMINISTRATOR (SIERRA FUND ADMINISTRATION CORPORATION) AND DISTRIBUTOR WAIVED A
PORTION OF THEIR MANAGEMENT OR DISTRIBUTION FEES, AND THE CUSTODIAN REDUCED
FEES BY CREDITS. IN THE ABSENCE OF THE WAIVERS, OR FEES REDUCED BY CREDITS,
YIELD AND TOTAL RETURN WOULD HAVE BEEN LOWER.
GRAPH
Growth of a $10,000 Investment (Class A Shares)
<TABLE>
<S> <C> <C> <C>
Inception* 7/25/89 10,000 9,425 10,000
10,030 9,425 10,000
10,210 9,623 10,153
10,170 9,623 10,153
9,930 9,585 9,917
10,110 9,359 10,123
Dec-89 10,144 9,529 10,362
9,630 9,561 9,667
9,761 9,076 9,791
9,973 9,199 10,049
9,679 9,399 9,801
10,450 9,122 10,756
Jun 10,317 9,849 10,681
10,103 9,724 10,647
9,318 9,522 9,685
8,909 8,782 9,209
8,786 8,396 9,175
9,452 8,280 9,766
Dec-90 9,785 8,908 10,033
10,315 9,223 10,477
10,937 9,722 11,227
11,103 10,308 11,494
11,114 10,465 11,526
11,625 10,475 12,019
Jun 11,008 10,956 11,470
11,532 10,375 12,007
11,689 10,868 12,289
11,511 11,017 12,088
11,658 10,849 12,249
11,100 10,988 11,755
Dec-91 12,489 10,462 13,098
12,510 11,771 12,885
12,679 11,791 13,019
12,235 11,950 12,764
12,426 11,532 13,135
12,331 11,712 13,205
Jun 11,960 11,622 13,015
12,310 11,272 13,539
12,055 11,603 13,266
12,236 11,362 13,418
12,215 11,532 13,467
12,716 11,512 13,920
Dec-92 12,829 11,985 14,103
12,904 12,091 14,206
12,807 12,162 14,398
13,178 12,071 14,707
12,952 12,420 14,347
13,329 12,207 14,734
Jun 13,059 12,562 14,783
13,005 12,309 14,713
13,556 12,258 15,274
13,502 12,777 15,161
13,882 12,726 15,469
13,904 13,084 15,323
Dec-93 14,256 13,104 15,512
14,808 13,436 16,039
14,489 13,957 15,604
13,894 13,656 14,924
14,214 13,095 15,115
14,287 13,396 15,363
Jun 13,931 13,466 14,987
14,375 13,130 15,478
14,905 14,548 16,111
14,607 13,048 15,716
14,743 14,767 16,070
14,038 13,895 15,485
Dec-94 14,265 13,231 15,714
14,557 13,444 16,121
15,115 13,720 16,750
15,639 14,246 17,244
15,946 15,740 17,753
16,505 15,029 18,463
Jun 16,796 15,556 18,878
17,396 15,830 19,504
17,436 16,434 20,377
17,882 16,434 20,377
17,414 16,854 20,304
18,377 16,413 21,195
Dec-95 18,703 17,321 21,603
19,280 17,628 22,338
19,684 18,172 22,545
19,987 18,552 22,762
20,435 18,838 23,096
20,680 19,260 23,692
Jun-96 20,384 19,491 23,783
</TABLE>
THE PERFORMANCE OF THE CLASS B SHARES AND CLASS S SHARES WILL BE LESS THAN
INDICATED BY THE LINES SHOWN ABOVE FOR THE CLASS A SHARES, BASED ON THE
DIFFERENCES IN SALES LOADS AND FEES PAID BY CLASS B AND CLASS S SHAREHOLDERS.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(July 25, 1989)
<S> <C> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 8.98% 21.36% 13.11% 10.82%
Fund (adjusted for the maximum 5.75% sales charge) 2.72% 14.39% 11.78% 9.88%
Standard & Poor's 500 Composite Index* 10.09% 25.98% 15.70% 13.34%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 8.59% 20.53% N/A 20.13%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 3.59% 15.53% N/A 18.45%++
Standard & Poor's 500 Composite Index* 10.09% 25.98% N/A 26.01%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 8.58% 20.51% N/A 20.16%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 3.58% 15.51% N/A 18.48%++
Standard & Poor's 500 Composite Index* 10.09% 25.98% N/A 26.01%
</TABLE>
++ ADJUSTED FOR THE MAXIMUM 4% CDSC FOR SHARES HELD SINCE INCEPTION.
20
<PAGE> 23
GROWTH AND INCOME FUND
result of positive economic data. This flight to quality had been driven by a
concern over the sustainability of profits and earnings growth. As a result,
investors concentrated on the stocks with the highest earnings stability, which
were the largest companies in the S&P 500. Our approach to investing, which
avoids dependence on the strength of a few stocks or industry sectors, can
underperform the broader market when buying is heavily focused on certain
subsets of the market. Because of our diversified approach to stock-picking the
Fund slightly underperformed the S&P 500 in the second quarter.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
During the first half of 1996, a calming of inflation and interest rate fears
drove stock prices to new highs with a S&P 500 record high of 661.5 on February
12. Volatility in the stock market also increased dramatically during this
period. In 1995, the market rose at a steady pace; this year, volatility has
taken the form of big up days and big down days with significant rotation in
industry groups. In the first half of 1996, the Fund's shareholders benefited
in absolute terms from the continued gains in the stock market. The rally was
fueled by a combination of declining interest rates, expanding corporate
earnings and profitability, continued prospects for benign inflation, and
record flows of money into domestic stock funds. As always, the Fund maintained
its highly diversified and value-oriented approach to stock selection. This
technique seeks to identify companies that are undervalued relative to our
forecast of long-term earnings and dividend payouts.
Although more volatile, the domestic equity markets continued their positive
performance in the second quarter of 1996. The S&P 500 hit a new high of 678.5
on May 24, 1996, returning 4.48% for the quarter. This was the sixth
consecutive quarter of positive performance for the S&P 500 with a total
cumulative return of 46%. In this environment, we continued to maintain our
sector neutral approach to investment management. The Fund's highly diversified
holdings and our focus on undervalued stocks that we find fundamentally
attractive for the long term, caused the Fund to underperform relative to the
S&P 500 in the second quarter.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Over the past year, our investment strategy involved maintaining our sector
neutral approach coupled with a continued focus on individual stock selection.
The Fund's slight underperformance versus the S&P 500 during the second half of
1995 and the first half of 1996 was primarily due to stock selection in a
market that was still narrowly concentrated. Stocks that contributed
significantly to the underperformance included Quantum Corporation from data
processing and Humana Inc. from healthcare. Stocks that positively impacted the
Fund were Coltec Industries, Inc., Circuit City Stores Inc., and Wellman Inc.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Due to strong employment reports and intensifying wage/labor cost pressures, we
expect a Fed tightening by the end of the summer. We feel that higher interest
rates will be sufficient to moderate the economy while simultaneously
controlling inflation. Looking at the financial markets, opinions continue to
vary widely on whether or not we have reached the top of the equity markets.
However, our approach to investing focuses on finding attractive stocks rather
than attempting the risky practice of timing the market. Therefore, the
portfolio continues to be fully invested in a diversified collection of stocks.
This diversified approach should be beneficial as the possibility of a sell-off
in technology and large multinational stocks becomes more likely, given their
price valuations.
Sector Diversification
Autos & Transportation 7.49%
Technology 5.25%
Producer Durables 4.77%
Utilities 2.43%
U.S. Treasury 1.18%
Other 3.27%
Materials & Processing 15.48%
Consumer Discretionary 14.53%
Financial Services 12.29%
Consumer Staples 8.69%
Energy 8.76%
Telecommunications 8.03%
Health Care 7.83%
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
21
<PAGE> 24
GROWTH FUND
PORTFOLIO MANAGER:
JANUS CAPITAL CORPORATION
WARREN B. LAMMERT
Mr. Lammert is a graduate of Yale University and the London School of
Economics. He first joined Janus in January 1987 and has been portfolio manager
of the SIERRA GROWTH FUND since its inception. He is a Chartered Financial
Analyst.
PERFORMANCE REVIEW:
From the Fund's inception (April 5, 1993) through June 30, 1996, the SIERRA
GROWTH FUND (Class A Shares) advanced 19.53% on an average annual total return
basis, or 17.36% adjusted for the maximum sales charge, outperforming the S&P
500 benchmark's 17.30% average annual total return for the same period.* For
the 12-month period ended June 30, 1996, the Fund had a total return of 25.44%,
or 18.23% adjusted for the maximum sales charge. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
In 1995, we experienced one of the strongest markets on record. Although
momentum slowed in the fourth quarter when the technology sector finally showed
some weakness, the S&P 500 Index still posted a gain of 37.5% for the year. As
1996 opened, surprising signs of economic strength caused concerns about
inflation, pushing interest rates up and lowering bond prices. As interest
rates increased, despite some volatility, the equity markets continued their
advance, and the major indices continued to post strong gains in the first half
of 1996. The volatility rotated through individual sectors. Those market
sectors that had performed well earlier in 1996 - small stocks, technology,
and biotechnology - were hardest hit at the end of the second quarter. Even
with the recent volatility, holdings in the technology sector have contributed
to the Fund's strong performance over the past 12 months, and continue to
comprise a large percentage of fund assets.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
In the second half of 1995, low interest rates and strong corporate earnings
created a positive environment for financial assets. This continued into early
1996 until a surprising uptrend in economic strength returned the markets to a
more normal state of volatility. Evidence for this strength came across many
fronts, including robust employment data, vigorous demand in manufacturing, and
strength in the auto and housing markets. The increase in economic activity
incited inflation concerns with market participants. The prospects for an
increase in prices created a rise in interest rates and the forementioned
volatility in the equity markets.
* INDEX TOTAL RETURNS WERE CALCULATED FROM 4/30/93 TO 6/30/96. THE STANDARD &
POOR'S 500 COMPOSITE INDEX (S&P 500) REPRESENTS AN UNMANAGED WEIGHTED INDEX OF
500 INDUSTRIAL, TRANSPORTATION, UTILITY, AND FINANCIAL COMPANIES WIDELY
REGARDED BY INVESTORS AS REPRESENTATIVE OF THE STOCK MARKET. THE INDEX ASSUMES
REINVESTMENT OF ALL DIVIDENDS/DISTRIBUTIONS, AND DOES NOT REFLECT ANY
ASSET-BASED CHARGES FOR INVESTMENT MANAGEMENT OR OTHER EXPENSES. PAST
INVESTMENT PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE. THE RETURNS SHOWN
FOR THE FUND ASSUME REINVESTMENT OF ALL DIVIDENDS/DISTRIBUTIONS BY THE
SHAREHOLDER.
DURING THE PERIOD NOTED, THE ADVISOR (SIERRA INVESTMENT ADVISORS CORPORATION)
WAIVED A PORTION OF ITS MANAGEMENT FEES AND ABSORBED OTHER EXPENSES, AND THE
CUSTODIAN REDUCED FEES BY CREDITS. IN THE ABSENCE OF THE WAIVERS AND ABSORPTION
OF OTHER EXPENSES, OR FEES REDUCED BY CREDITS, YIELD AND TOTAL RETURN WOULD
HAVE BEEN LOWER.
GRAPH
Growth of a $10,000 Investment (Class A Shares)
<TABLE>
<S> <C> <C> <C>
Inception 4/5/93 10,000 9,444 10,000
10,020 9,943 10,267
10,720 10,104 10,297
10,480 9,877 10,255
Aug 10,900 10,273 10,644
11,250 10,603 10,560
11,500 10,839 10,778
11,300 10,650 10,676
Dec-93 11,680 11,008 10,805
12,160 11,461 11,172
12,040 11,348 10,869
11,740 11,065 10,395
Apr 11,630 10,961 10,529
11,190 10,547 10,701
10,730 10,113 10,439
11,150 10,509 10,782
Aug 11,830 11,150 11,223
11,870 11,187 10,949
12,200 11,499 11,194
11,750 11,074 10,787
Dec-94 11,756 11,080 10,947
11,886 11,203 11,230
12,257 11,552 11,668
12,507 11,788 12,011
Apr 12,938 12,194 12,365
13,428 12,656 12,858
14,199 13,383 13,156
15,121 14,251 13,593
Aug 15,231 14,355 13,627
15,681 14,780 14,201
15,261 14,383 14,151
15,942 15,025 14,771
Dec-95 16,018 15,097 15,056
16,393 15,450 15,568
17,187 16,199 15,712
17,312 16,317 15,863
Apr 18,244 17,195 16,096
18,607 17,537 16,512
Jun-96 17,812 16,788 16,575
</TABLE>
THE PERFORMANCE OF THE CLASS B SHARES AND CLASS S SHARES WILL BE LESS THAN
INDICATED BY THE LINES SHOWN ABOVE FOR THE CLASS A SHARES, BASED ON THE
DIFFERENCES IN SALES LOADS AND FEES PAID BY CLASS B AND CLASS S SHAREHOLDERS.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(April 5, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 11.20% 25.44% 19.53%
Fund (adjusted for the maximum 5.75% sales charge) 4.80% 18.23% 17.36%
Standard & Poor's 500 Composite Index* 10.09% 25.98% 17.30%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 10.82% 24.54% 28.00%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 5.82% 19.54% 26.42%++
Standard & Poor's 500 Composite Index* 10.09% 25.98% 26.01%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 10.82% 24.54% 27.99%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 5.82% 19.54% 26.41%++
Standard & Poor's 500 Composite Index* 10.09% 25.98% 26.01%
</TABLE>
++ ADJUSTED FOR THE MAXIMUM 4% CDSC FOR SHARES HELD SINCE INCEPTION.
22
<PAGE> 25
GROWTH FUND
Although trends in interest rates and market sentiment are closely watched, the
fundamental strategy of the portfolio remains to find attractive individual
ideas and purchase them at inexpensive prices. These companies should be able
to grow their earnings and therefore their stock prices, regardless of economic
conditions.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Our management style is to construct portfolios on an individual stock-by-stock
basis. Each issue is selected according to its own merits as determined by
fundamental, bottom-up research. As such, assets are not allocated to
particular sectors, but they are accumulated as a result of the portfolio's
overall stock selection. Of course, certain themes do develop as our research
locates a number of companies capitalizing on a high growth area within the
same or even differing fields of a particular market sector.
Pharmaceuticals and health care stocks remain an area of focus for the
portfolio. Eli Lilly & Company, a major drug developer, is a significant holding
which currently has a new product line that includes treatments for diabetes,
schizophrenia, acute cardiovascular disease, and cancer. Centocor, Inc. is a
partner in the development of Reopro, Lilly's new cardiovascular drug. Also in
this group are SmithKline Beecham, Amgen, Inc., and Genzyme Corporation.
Additionally, there seems to be growth opportunities with certain companies in
the networking business; the portfolio has positions in companies such as Cisco
Systems, Inc., Shiva Corporation, Stratacom Inc., and the recent addition of
Xylan Corporation. These stocks performed very well, but when prices in this
volatile industry appreciated to high levels, positions were sold. As a result,
we took profits in Westell Technologies, Inc., which makes a wide range of
tele-communications products, although we have since rebuilt the position at
lower prices, and Ascend Communications Inc., which makes networking access
products. Additionally, two PC makers, Dell Computer Corporation and Gateway
2000 Inc. contributed to the strong returns of the Fund. Both companies have
strong outlooks for earnings, despite the slowdown in PC sales.
Technology continues to be an important theme in the portfolio. In addition to
Netscape Communications Corporation, two other exciting technology holdings
were purchased during the quarter. Macronix International Company, Ltd.
manufactures non-volatile memory circuits, and JDA Software Group Inc. provides
comprehensive integrated business management software. Another addition
includes Rentokil Group Plc, a British supplier of maintenance and
environmental services.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The economic debate should continue as the Federal Reserve keeps a close watch
on price pressures and economic growth. Although economic growth usually brings
price pressures, this has not yet surfaced as commodity prices have come down
during the second quarter of 1996. Lower commodity prices are good news for
inflation, because they will take some of the supply pressure off prices.
Meanwhile, on the demand side of the equation, the unusually high rate of
consumer loan delinquencies suggests that consumer spending may slow down in
the near future. A slowdown in consumer demand would help put the brakes on
economic growth.
While higher interest rates could make stock selection more difficult in the
short run, long-term performance is dependent on owning great businesses,
purchased at reasonable prices. Market volatility, or even a substantial
decline, could ultimately facilitate this objective. Regardless of how the
economic debate turns out, we intend to pursue our long-term strategy of
finding attractive individual issues and purchasing them at inexpensive prices.
As long as we adhere to our investment methodology and select issues on their
individual merit, the portfolio should continue its strong relative
performance.
Sector Diversification
<TABLE>
<S> <C>
Autos & Transportation 0.93%
Technology 24.14%
Producer Durables 2.03%
U.S. Treasury 0.79%
Other 7.00%
U.S. Agency 6.02%
Commercial Paper 8.58%
Materials & Processing 3.21%
Consumer Discretionary 11.13%
Financial Services 12.45%
Consumer Staples 0.25%
Energy 0.37%
Telecommunications 9.96%
Health Care 13.14%
</TABLE>
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
23
<PAGE> 26
EMERGING GROWTH FUND
PORTFOLIO MANAGER:
JANUS CAPITAL CORPORATION
JAMES P. GOFF
Mr. Goff has a degree from Yale University and is a Chartered Financial
Analyst. He has been with Janus since 1988, and has had primary portfolio
management responsibility for the SIERRA EMERGING GROWTH FUND since September
1993.
PERFORMANCE REVIEW:
From the Fund's inception (July 18, 1990) through June 30, 1996, the SIERRA
EMERGING GROWTH FUND (Class A Shares) has advanced 16.10% on an average annual
total return basis, or 14.95% adjusted for the maximum sales charge. Over this
same time frame, the Fund outperformed the S&P 500 benchmark index which
achieved an average annual total return of 14.55%.* For the 12-month period
ended June 30, 1996, the Fund's total return was 35.93%, or 28.11% adjusted for
the maximum sales charge. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The markets closed out 1995 on an extremely strong note, ending one of the best
years on record. Low interest rates and a steady stream of strong corporate
earnings fueled strong performance by both stocks and bonds. As 1996 began,
there was renewed volatility in the financial markets, although stocks
continued to perform well. Interest rates moved steadily higher during the
period, causing a drop in bond prices as the economy grew stronger than
previously anticipated. The increase in interest rates put pressure on the
equity markets, increasing volatility, especially in small stocks, which had
performed well earlier in the year. On the whole, however, the market proved
resilient. For the period, the S&P 400 Index managed a respectable gain of
21.59% while the S&P 500 gained 25.98%. The strong overall relative performance
for the Fund (35.93% not adjusted for sales charge) was driven by individual
stock selection, as the Fund has benefited from extremely strong performance by
many of its individual holdings.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The economy appeared to accelerate during the second quarter of 1996, and the
debate intensified over what this new strength meant for the future direction
of interest rates. Robust employment, rising wages, manufacturing demand, and a
general build-up in economic momentum indicated that the
* INDEX TOTAL RETURNS WERE CALCULATED FROM 7/31/90 TO 6/30/96. THE STANDARD &
POOR'S 500 COMPOSITE INDEX (S&P 500) REPRESENTS AN UNMANAGED WEIGHTED INDEX OF
500 INDUSTRIAL, TRANSPORTATION, UTILITY, AND FINANCIAL COMPANIES WIDELY
REGARDED BY INVESTORS AS REPRESENTATIVE OF THE STOCK MARKET. THE INDEX ASSUMES
REINVESTMENT OF ALL DIVIDENDS/DISTRIBUTIONS, AND DOES NOT REFLECT ANY
ASSET-BASED CHARGES FOR INVESTMENT MANAGEMENT OR OTHER EXPENSES. PAST
INVESTMENT PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE. THE RETURNS SHOWN
FOR THE FUND ASSUME REINVESTMENT OF ALL DIVIDENDS/DISTRIBUTIONS BY THE
SHAREHOLDER.
DURING THE PERIOD NOTED, THE ADVISOR (SIERRA INVESTMENT ADVISORS CORPORATION)
WAIVED A PORTION OF ITS MANAGEMENT FEES, AND THE CUSTODIAN REDUCED FEES BY
CREDITS. IN THE ABSENCE OF THE WAIVERS, OR FEES REDUCED BY CREDITS, YIELD AND
TOTAL RETURN WOULD HAVE BEEN LOWER.
GRAPH
<TABLE>
Growth of a $10,000 Investment (Class A Shares)
<S> <C> <C> <C>
Inception* 7/18/90 10,000 9,425 10,000
9,600 9,048 10,000
8,520 8,030 9,097
7,810 7,361 8,655
7,620 7,182 8,618
8,190 7,719 9,174
Dec-90 8,263 7,787 9,430
8,747 8,244 9,840
9,231 8,700 10,542
9,846 9,280 10,797
9,897 9,328 10,823
10,179 9,594 11,288
Jun 9,705 9,147 10,772
10,018 9,442 11,273
10,179 9,594 11,540
10,310 9,718 11,346
10,916 10,288 11,498
10,664 10,050 11,037
Dec-91 11,509 10,847 12,297
12,161 11,462 12,067
12,456 11,740 12,224
11,896 11,212 11,986
11,804 11,126 12,338
12,049 11,356 12,398
Jun 11,886 11,202 12,214
12,100 11,404 12,713
11,733 11,058 12,453
11,845 11,164 12,599
12,395 11,682 12,642
12,935 12,191 13,072
Dec-92 13,281 12,517 13,232
13,581 12,800 13,342
13,850 13,054 13,524
14,212 13,395 13,810
13,581 12,800 13,476
14,191 13,375 13,835
Jun 14,233 13,414 13,876
14,078 13,268 13,820
14,905 14,048 14,343
15,133 14,263 14,230
15,505 14,613 14,524
15,029 14,165 14,386
Dec-93 16,239 15,306 14,560
16,352 15,412 15,055
16,319 15,380 14,646
15,640 14,741 14,009
15,268 14,390 14,189
15,245 14,368 14,421
Jun 14,714 13,868 14,068
15,381 14,496 14,529
16,047 15,125 15,124
16,149 15,220 14,755
17,053 16,073 15,085
15,867 14,954 14,536
Dec-94 16,184 15,253 14,752
16,277 15,341 15,134
16,646 15,689 15,723
16,623 15,667 16,186
16,473 15,526 16,663
16,496 15,548 17,327
Jun 17,883 16,855 17,729
19,190 18,086 18,317
19,791 18,653 18,363
20,681 19,492 19,137
19,849 18,707 19,069
20,149 18,991 19,905
Dec-95 21,404 20,174 20,289
21,091 19,878 20,979
22,212 20,935 21,174
23,646 22,286 21,377
24,321 22,923 21,691
25,261 23,809 22,251
Jun-96 24,309 22,911 22,336
</TABLE>
THE PERFORMANCE OF THE CLASS B SHARES AND CLASS S SHARES WILL BE LESS THAN
INDICATED BY THE LINES SHOWN ABOVE FOR THE CLASS A SHARES, BASED ON THE
DIFFERENCES IN SALES LOADS AND FEES PAID BY CLASS B AND CLASS S SHAREHOLDERS.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(July 18, 1990)
<S> <C> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 13.57% 35.93% 20.16% 16.10%
Fund (adjusted for the maximum 5.75% sales charge) 7.04% 28.11% 18.74% 14.95%
Standard & Poor's 500 Composite Index* 10.09% 25.98% 15.70% 14.55%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 13.15% 34.93% N/A 27.61%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 8.15% 29.93% N/A 26.43%++
Standard & Poor's 500 Composite Index* 10.09% 25.98% N/A 26.01%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 13.15% 34.91% N/A 27.64%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 8.15% 29.91% N/A 26.46%++
Standard & Poor's 500 Composite Index* 10.09% 25.98% N/A 26.01%
</TABLE>
++ ADJUSTED FOR THE MAXIMUM 4% CDSC FOR SHARES HELD SINCE INCEPTION.
24
<PAGE> 27
EMERGING GROWTH FUND
economy had picked up speed. On the other hand, lower commodity prices, the
high rate of consumer loan delinquencies, and low inflation argued against a
rise in rates. As the market worked through this period of uncertainty,
individual stocks and market sectors continued to experience some volatility.
During this period of uncertainty, the Fund's strategy remained basically
unchanged; to find individual companies with exceptional potential for growth,
regardless of economic conditions. These companies are evaluated on their
individual merits, their ability to generate earnings growth, and their
superior management teams, not on the broad analysis of a particular sector or
market trend.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Since the SIERRA EMERGING GROWTH FUND is managed on an individual stock basis,
overall performance is largely affected by the performance of individual
companies. Portfolio holdings that had a significant impact on performance
included HFS, Inc., a hotel franchiser that has developed a number of
successful cross-selling strategies in its lodging and real estate businesses.
HFS is growing through acquisitions and is currently in negotiations to buy
rental car company Avis. Global DirectMail Corporation sells a variety of
computer peripherals and office products through its commercial catalogue. The
company is already growing at 25%-30% annually and is beginning to offer higher
ticket computer hardware. Insignia Financial Group Inc. is the largest real
estate management company in the U.S., and has a joint venture to cross-sell
its services to Century 21, an HFS subsidiary. Other good performers this
quarter were Culligan Water Technologies, Inc., the maker of water purification
products, and Millicom International Cellular, which is expanding its cellular
services into emerging economies.
Insignia Financial, JD Wetherspoon, and Petco Animal Supplies have been
long-term holdings, and all have contributed strongly to the Fund's performance
over time. Although Minerals Technology, Trigen Energy Systems, and Paging
Network have not performed as expected, we have been patient with these
underachievers because they remain outstanding business franchises (i.e.,
competition is scarce) with excellent long-term growth potential.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our outlook for the Fund continues to be positive over the intermediate and long
term. Although we anticipate some volatility over the near term, our longer-term
outlook for the Fund continues to be positive. With corporate earnings at
historically high levels for the last three years, some companies may face very
tough comparisons going forward. The ability of corporations to sustain their
profit and earnings growth will play an important role in the short-term
direction of the market. In this environment, we will continue to adhere to the
methodology of intensive, fundamental research to locate rapidly growing
companies at reasonable prices. This is not always an easy combination to find,
of course, and if interest rates rise further, it could be more difficult.
However, this strategy should provide superior portfolio performance over the
long haul, despite any temporary price fluctuations. In addition, any
volatility, or even a market decline, can be used to acquire strong companies at
lower prices.
Sector Diversification
<TABLE>
<CAPTION>
<S> <C>
Autos & Transportation 6.42%
Technology 4.66%
Producer Durables 7.07%
Other 5.80%
U.S. Agency 1.39%
Commercial Paper 3.47%
Telecommunication 16.47%
Materials & Processing 6.98%
Consumer Discretionary 24.06%
Financial Services 9.78%
Consumer Staples 1.73%
Health Care 12.17%
</TABLE>
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
25
<PAGE> 28
INTERNATIONAL GROWTH FUND
PORTFOLIO MANAGER:
WARBURG, PINCUS COUNSELLORS, INC.
The following team has been primarily responsible for managing the Fund
since April 8, 1996. Richard H. King, Senior Managing Director, joined the firm
to found the department and has 28 years of investment experience. Prior to
joining Warburg, Mr. King was chief investment officer and a director of
Fiduciary Trust Company International S.A. in London from 1984 to 1988. P.
Nicholas Edwards, Senior Vice President, has 12 years of investment experience.
Prior to joining Warburg, Mr. Edwards was a director and senior analyst at
Jardine Fleming Investment Advisers in Tokyo from 1991 to 1995. Harold W.
Ehrlich, CFA, CIC, Senior Vice President, has 13 years of investment
experience. Prior to joining Warburg, Mr. Ehrlich was a senior vice president,
portfolio manager and analyst at Templeton Investment Counsel Inc. from 1987 to
1995. Nicholas P.W. Horsley, Senior Vice President, has 15 years of investment
experience. Prior to joining Warburg, Mr. Horsley was a director, portfolio
manager and analyst at Barclays de Zoete Wedd in New York. Vincent J. McBride,
Vice President, has 9 years of investment experience. Prior to joining
Warburg, Mr. McBride was an international equity analyst at Smith Barney Inc.
from 1993 to 1994. He was an international equity analyst at General Electric
Investments from 1992 to 1993 and a portfolio manager/analyst at United Jersey
Bank from 1989 to 1992.
PERFORMANCE REVIEW:
From the Fund's inception (July 18, 1990) through June 30, 1996, the SIERRA
INTERNATIONAL GROWTH FUND (Class A Shares) has advanced 3.22% on an average
annual total return basis, or 2.20% adjusted for the maximum sales charge. For
the 12-month period ended June 30, 1996, the Fund's total return was 13.16%, or
6.66% adjusted for the maximum sales charge. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
With the Japanese Yen falling some 25% against the U.S. Dollar since June 1995,
our ability to manage currency risk and limit the potential volatility
associated with fluctuating international currencies proved to be a major
positive contributor to the Fund's overall returns. Specific country
allocation also affected Fund performance. Our overweighted position in Japan
helped during the latter part of last year, although Japanese stocks, while
they have recovered in 1996, have not particularly outpaced other markets. The
emphasis on Germany and France was helpful during this period as these markets
performed well relative to the benchmark. Although stock selection in the
* INDEX TOTAL RETURNS WERE CALCULATED FROM 7/31/90 TO 6/30/96. THE MORGAN
STANLEY CAPITAL INTERNATIONAL EAFE INDEX INCLUDES STOCK MARKETS OF EUROPE,
AUSTRALIA, AND THE FAR EAST WEIGHTED BY CAPITALIZATION. EAFE IS A BROAD-BASED
INDEX OF EQUITY MARKETS REPRESENTING 18 COUNTRIES. THE INDEX ASSUMES
REINVESTMENT OF ALL DIVIDENDS/DISTRIBUTIONS, AND DOES NOT REFLECT ANY
ASSET-BASED CHARGES FOR INVESTMENT MANAGEMENT OR OTHER EXPENSES. PAST
INVESTMENT PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE. THE RETURNS SHOWN
FOR THE FUND ASSUME REINVESTMENT OF ALL DIVIDENDS/DISTRIBUTIONS BY THE
SHAREHOLDER.
DURING THE PERIOD NOTED, THE ADVISOR (SIERRA INVESTMENT ADVISORS CORPORATION),
ADMINISTRATOR (SIERRA FUND ADMINISTRATION CORPORATION) AND DISTRIBUTOR WAIVED A
PORTION OF THEIR MANAGEMENT OR DISTRIBUTION FEES, AND THE CUSTODIAN REDUCED
FEES BY CREDITS. IN THE ABSENCE OF THE WAIVERS, OR FEES REDUCED BY CREDITS,
YIELD AND TOTAL RETURN WOULD HAVE BEEN LOWER.
GRAPH
<TABLE>
<S> <C> <C> <C>
Growth of a $10,000 Investment (Class A Shares)
Inception* 7/18/90
10,000 9,425 10,000
9,780 9,340 10,000
8,690 8,299 9,029
7,760 7,411 7,770
8,730 8,337 8,981
8,250 7,879 8,451
Dec-90 8,150 7,783 8,589
8,460 8,079 8,866
9,190 8,776 9,817
8,630 8,242 9,228
8,720 8,328 9,318
8,870 8,471 9,416
Jun 8,270 7,898 8,724
8,680 8,289 9,152
8,700 8,309 8,966
9,020 8,614 9,472
9,050 8,643 9,607
8,800 8,404 9,158
Dec-91 9,325 8,905 9,632
9,255 8,838 9,426
9,124 8,713 9,089
8,742 8,348 8,489
8,792 8,396 8,529
9,214 8,800 9,100
Jun 8,872 8,473 8,668
8,540 8,156 8,446
9,043 8,636 8,976
8,651 8,262 8,799
8,279 7,906 8,337
8,319 7,945 8,415
Dec-92 8,339 7,964 8,459
8,359 7,983 8,458
8,642 8,253 8,714
9,197 8,783 9,474
9,833 9,391 10,373
10,055 9,603 10,592
Jun 9,894 9,449 10,426
10,217 9,757 10,791
10,792 10,307 11,374
10,762 10,278 11,118
11,065 10,567 11,461
10,439 9,969 10,459
Dec-93 11,037 10,540 11,214
11,813 11,282 12,162
11,503 10,985 12,128
10,933 10,441 11,605
11,265 10,758 12,097
11,296 10,787 12,028
Jun 11,120 10,619 12,198
11,430 10,916 12,315
11,679 11,153 12,607
11,296 10,787 12,209
11,513 10,995 12,616
11,026 10,530 12,009
Dec-94 10,892 10,402 12,085
10,324 9,860 11,621
10,182 9,724 11,587
10,368 9,901 12,310
10,695 10,214 12,773
10,794 10,308 12,621
Jun 10,674 10,193 12,400
11,143 10,641 13,154
11,001 10,506 12,551
11,088 10,589 12,865
10,859 10,370 12,675
10,968 10,475 13,010
Dec-95 11,422 10,908 13,440
11,825 11,145 13,496
11,733 11,058 13,541
11,837 11,156 13,829
12,009 11,319 14,231
11,964 11,276 13,972
Jun-96 12,079 11,384 14,033
</TABLE>
THE PERFORMANCE OF THE CLASS B SHARES AND CLASS S SHARES WILL BE LESS THAN
INDICATED BY THE LINES SHOWN ABOVE FOR THE CLASS A SHARES, BASED ON
THE DIFFERENCES IN SALES LOADS AND FEES PAID BY CLASS B AND CLASS S
SHAREHOLDERS.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(July 18, 1990)
<S> <C> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 5.75% 13.16% 7.87% 3.22%
Fund (adjusted for the maximum 5.75% sales charge) -0.33% 6.66% 6.60% 2.20%
Morgan Stanley Capital International EAFE Index* 4.52% 13.28% 10.00% 5.91%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 5.38% 12.34% N/A 3.52%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 0.38% 7.34% N/A 1.63%++
Morgan Stanley Capital International EAFE Index* 4.52% 13.28% N/A 7.31%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 5.27% 12.29% N/A 3.50%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 0.27% 7.29% N/A 1.61%++
Morgan Stanley Capital International EAFE Index* 4.52% 13.28% N/A 7.31%
</TABLE>
++ ADJUSTED FOR THE MAXIMUM 4% CDSC FOR SHARES HELD SINCE INCEPTION.
26
<PAGE> 29
INTERNATIONAL GROWTH FUND
third quarter of 1995 was the most consistently positive influence on the Fund,
it was less helpful moving into 1996. Stock selection returns for the period
were slightly behind the benchmark, with selections in Japan and Hong Kong
having the most negative impact and selections in the UK having the most
positive impact.
Warburg, Pincus Counsellors, Inc. assumed management of the SIERRA
INTERNATIONAL GROWTH FUND on April 8, 1996. Since that date, the new portfolio
managers have assessed the holdings and realigned the portfolio, making
sweeping changes to the individual stocks, as well as country weightings. As of
June 30, we have completed about 90% of the realignment that we feel is
desirable.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
There were several market factors that affected the Fund's performance
interest rates, signs of economic recovery in Japan, and a more favorable
currency environment for international companies. While domestic interest rates
increased, rates have stayed very low in Japan and continued to edge down in
Europe. These falling interest rates have helped the international markets. The
currency environment also added value to the international markets, as the Yen
fell against the Dollar and the Deutsche Mark appeared weak compared to its
neighboring currencies in Europe. Exporting companies in Japan and Germany
benefited from fluctuations in currency.
During this period, the Fund focused on three critical elements in order to
diversify its holdings while contributing to long-term performance. The three
elements were: selecting the most attractive markets, identifying within each
market the most attractive individual companies, and choosing the currencies
with the highest expected returns.
In the second quarter of 1996, foreign equity markets, with few exceptions,
continued to advance, building on momentum established in the first three
months of the year. By region, the strongest showing belonged to Latin America
(specifically Brazil and Mexico, where the portfolio remained under-weighted),
though European and Asian-Pacific markets also enjoyed solid gains. Throughout
the period, the managers of the Fund worked to reposition the portfolio to
bring it in line with our strategy of researching and uncovering good long-term
investments.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Through the second half of 1995 and the first quarter of 1996, the Fund's
Japanese holdings were reduced. Positive returns came from an increased
emphasis in France. Reduced holdings in Italy, England, and Australia also
aided performance as these countries underperformed.
Since assuming management of the portfolio on April 8, we have made significant
shifts in the Fund's portfolio holdings and sectors to reflect our style and
strategy. We have decreased the number of holdings in the Fund by
approximately 30%. This is a reflection of our style, which is to manage with a
more concentrated focus. Also, we are active managers, making investment
decisions by selecting individual stocks that we feel have solid fundamentals
with good long-term prospects for growth; our portfolio will include stocks
from the burgeoning economies of the world, such as South Korea, Malaysia, and
Argentina.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We feel most, if not all, of the recent data on the Japanese economy supports
our growing conviction that the country remains well on the road to recovery.
Strength in Japan stems from resurgence in both consumption and capital
spending. We believe that both these areas will provide fuel to the Japanese
economy in the coming future. The Fund is well-positioned to benefit from the
resurgence in these two areas, with concentrations in the retail and machinery
and industrial-components sectors.
Elsewhere, we remain positive on the Hong Kong market's prospects, its
vulnerability to higher U.S. interest rates notwithstanding. Hong Kong is, and
will likely remain for years, China's financial center; thus it stands to be a
direct beneficiary of the anticipated surge in growth in China through the rest
of the decade. We will search for attractive values on a selective basis in
South Korea, and remain very positive on the New Zealand stock market.
The Fund is currently underweighted in Europe. While we believe there is the
potential for stronger growth in Europe in 1997, we are currently finding more
dynamic opportunities within Asia. That being said, there still remain
selective values on a stock-by-stock basis in Europe.
In summary, we believe non-U.S. equities will continue to provide excellent
long-term growth opportunities and we will continue to research, within select
markets of the world, those companies that we feel may provide long-term
growth.
Diversification by Region
<TABLE>
<S> <C>
Americas 18.44%
Europe 30.62%
Asia 43.42%
Australia/New Zealand 7.52%
</TABLE>
ALLOCATION PERCENTAGES ARE BASED ON TOTAL INVESTMENT VALUE OF THE PORTFOLIO AS
OF 6/30/96.
27
<PAGE> 30
TARGET MATURITY 2002 FUND
PORTFOLIO MANAGER:
BLACKROCK FINANCIAL
MANAGEMENT, INC.
KEITH ANDERSON
ANDREW J. PHILLIPS
The day-to-day management of the SIERRA TARGET MATURITY 2002 FUND'S portfolio
is the responsibility of a committee composed of individuals who are officers
of BlackRock. This committee has managed the Fund since December 1994, and is
supervised by Keith Anderson and Andrew J. Phillips. Mr. Anderson, a Managing
Director of BlackRock, has been co-head of the Portfolio Management Group since
1988. Mr. Phillips has been a portfolio manager of BlackRock since 1991 and a
Vice President of BlackRock since 1993.
PERFORMANCE REVIEW:
From the Fund's inception (March 20, 1995) through June 30, 1996, the SIERRA
TARGET MATURITY 2002 FUND advanced 8.45% on an average annual total return
basis, or 6.75% adjusted for the maximum sales charge. For the 12-month period
ended June 30, 1996, the Fund's total return was 2.91%, or 0.85% adjusted for
the maximum sales charge.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1996?
The most significant factor contributing to the Fund's performance was the
interest rate environment. The Fund has an investment objective to hold at
least 90% of its assets in zero-coupon Treasury notes with a maturity date of
November 2002. With zero-coupon Treasury notes as its primary holdings, the
Fund is very sensitive to interest rate changes, moving inversely in price to
interest rates. As interest rates move up, the Treasury notes in the Fund's
portfolio decrease in value, and vice versa. Since interest rates fell
throughout the second half of 1995, the Fund benefited significantly during
this period. Conversely, as interest rates have risen during the first six
months of 1996, the net asset value of the Fund has decreased.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Since the Fund's holdings are zero-coupon U.S. Treasury notes with a seven-year
maturity, the Fund's performance is primarily affected by interest rate
fluctuations. The rise in interest rates since February has resulted in a
decline in the Fund's net asset value.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/ SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Consistent with the Fund's investment objective, we have held 90% of the Fund's
assets in zero-coupon U.S. Treasury notes with a maturity date of November
2002.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our near-term belief is that employment and income gains, in addition to a
boost to manufacturing activity, will lead to unfavorable conditions for bonds.
Additionally, a shockingly strong June employment report could provide the
stimulus for a Fed tightening before the next regularly scheduled Federal
Reserve meeting in August 1996. Should rates continue to rise, the Fund's net
asset value is expected to fall.
Longer-term, we believe that the above-trend growth level of the second quarter
will moderate over the balance of the year. The level of consumer debt as a
percentage of disposable income has risen to record levels and credit card
delinquencies are at a 15-year high. With consumers accounting for two-thirds
of Gross Domestic Product (GDP) growth, these developments suggest constraints
on future spending. Additionally, both commercial and consumer lending have
declined sharply, further indicating an eventual slowdown in economic growth
and a positive environment for interest rates.
GRAPH
<TABLE>
<CAPTION>
Growth of a $10,000 Investment (Class A Shares)
<S> <C> <C> <C>
Inception* 3/20/95 10,000 9,800 10,000
Mar 9,900 9,790 10,000
Apr 10,140 9,937 10,131
May 10,690 10,476 10,539
Jun 10,780 10,564 10,620
Jul 10,670 10,457 10,581
Aug 10,840 10,623 10,705
Sep 10,960 10,741 10,808
Oct 11,160 10,937 10,972
Nov 11,390 11,162 11,143
Dec-95 11,570 11,339 11,301
Jan 11,642 11,410 11,370
Feb 11,311 11,085 11,138
Mar 11,146 10,923 11,046
Apr 10,990 10,770 10,975
May 10,928 10,710 10,957
Jun-96 11,094 10,873 11,098
</TABLE>
*INDEX TOTAL RETURNS WERE CALCULATED FROM 3/31/95 TO 6/30/96. THE LEHMAN
BROTHERS MUTUAL FUND U.S. GENERAL GOVERNMENT INDEX REPRESENTS ALL U.S.
GOVERNMENT AGENCY AND TREASURY SECURITIES. THE INDEX ASSUMES REINVESTMENT OF THE
DIVIDENDS/DISTRIBUTIONS, AND DOES NOT REFLECT ANY ASSET-BASED CHARGES FOR
INVESTMENT MANAGEMENT OR OTHER EXPENSES. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE PERFORMANCE. THE RETURNS SHOWN FOR THE FUND ASSUME REINVESTMENT OF ALL
DIVIDENDS/DISTRIBUTIONS BY THE SHAREHOLDER.
DURING THE PERIOD NOTED, THE ADVISOR (SIERRA INVESTMENT ADVISORS CORPORATION)
AND ADMINISTRATOR (SIERRA FUND ADMINISTRATION CORPORATION) WAIVED A PORTION OF
THEIR MANAGEMENT FEES, THE ADVISOR ABSORBED OTHER EXPENSES, AND THE CUSTODIAN
REDUCED FEES BY CREDITS. IN THE ABSENCE OF THE WAIVERS AND ABSORPTION OF OTHER
EXPENSES, OR FEES REDUCED BY CREDITS, YIELD AND TOTAL RETURN WOULD HAVE BEEN
LOWER.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(March 20, 1995)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) -4.11% 2.91% 8.45%
Fund (adjusted for the maximum 2% sales charge) -6.03% 0.85% 6.75%
Lehman Brothers Mutual Fund U.S. General Government Index* -1.80% 4.50% 8.69%
</TABLE>
28
<PAGE> 31
SIERRA TRUST FUNDS
ANNUAL REPORT
----------------------------------------------------
For the Year Ended June 30, 1996
29
<PAGE> 32
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
SIERRA TRUST FUNDS
JUNE 30, 1996
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S. CORPORATE
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT INCOME
FUND FUND FUND BOND FUND FUND FUND FUND
------------ ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note 2)
See portfolios of
investments (a)........... $169,484,192 $40,884,658 $57,336,220 $39,622,332 $67,075,711 $637,581,058 $370,590,088
Cash and/or foreign currency
(b)......................... 48,899 74,900 269,335 119,680 256 308,636 --
Net unrealized appreciation of
forward foreign currency
contracts (Note 2) See
portfolios of investments... -- -- -- -- 973,410 -- --
Receivable for dollar roll fee
income (Notes 2 and 6)...... -- -- -- -- -- 330,424 --
Dividends and/or interest
receivable.................. 590,178 317,565 814,672 404,363 2,018,344 3,989,359 7,977,976
Receivable for Fund shares
sold........................ 5,805,173 2,481,344 57,787 15,573 15,384 772,118 173,670
Receivable for investment
securities sold............. 4,993,342 -- -- -- 5,142,411 15,249,825 5,575,685
Unamortized organization costs
(Note 8).................... -- -- -- 8,273 1,295 -- --
Receivable from investment
advisor..................... 8,684 -- -- -- -- -- --
Prepaid expenses and other
assets...................... 2,268 911 1,126 1,294 2,994 10,675 8,529
------------ ----------- ----------- ----------- ----------- ------------ ------------
Total Assets.............. 180,932,736 43,759,378 58,479,140 40,171,515 75,229,805 658,242,095 384,325,948
------------ ----------- ----------- ----------- ----------- ------------ ------------
LIABILITIES:
Net unrealized depreciation of
forward foreign currency
contracts (Note 2) See
portfolios of investments... -- -- -- -- -- -- --
Options written, at value
(Premiums received $31,854
and $194,487, respectively)
(Note 2)
See portfolios of
investments................. -- -- -- 27,977 289,913 -- --
Payable for dollar roll
transactions (Notes 2 and
6).......................... -- -- -- -- -- 150,678,281 46,265,313
Deferred income for dollar
roll transactions........... -- -- -- -- -- 464,764 59,111
Variation Margin (Note 2)..... -- -- -- 49,500 -- 818,969 --
Payable for Fund shares
redeemed.................... 675,325 4,110,179 14,529 37,631 28,757 610,948 1,534,024
Payable for investment
securities purchased........ 4,996,500 -- 7,023,495 497,008 5,138,320 21,562,811 --
Investment advisory fee
payable (Note 3)............ -- 2,551 8,260 1,162 3,391 23,800 117,864
Administration fee payable
(Note 3).................... 41,338 11,637 12,852 13,964 20,037 135,004 95,676
Shareholder servicing and
distribution fees payable
(Note 5).................... 45,933 9,993 10,808 16,345 16,584 129,473 90,267
Dividends payable............. 14,427 2,999 2,273 58,504 134,384 938,116 902,017
Accrued legal and audit
fees........................ 21,900 18,309 18,581 24,944 48,171 36,237 31,737
Accrued transfer agent fees... 26,634 14,473 8,572 15,743 12,340 85,706 57,526
Accrued Trustees' fees and
expenses (Note 4)........... 1,053 296 327 305 437 2,948 2,089
Due to Custodian.............. -- -- -- -- -- -- --
Accrued expenses and other
payables.................... 53,242 7,616 10,631 20,706 6,083 137,717 36,005
------------ ----------- ----------- ----------- ----------- ------------ ------------
Total Liabilities......... 5,876,352 4,178,053 7,110,328 763,789 5,698,417 175,624,774 49,191,629
------------ ----------- ----------- ----------- ----------- ------------ ------------
NET ASSETS.................... $175,056,384 $39,581,325 $51,368,812 $39,407,726 $69,531,388 $482,617,321 $335,134,319
============ =========== =========== =========== =========== ============ ============
</TABLE>
- ---------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
(A) INVESTMENTS, AT COST (NOTE
2)........................ 169,484,192 40,884,658 57,336,220 39,716,022 65,457,556 637,686,783 363,019,833
(B) CASH AND/OR FOREIGN
CURRENCY, AT COST (NOTE
2)........................ 48,899 74,900 269,335 118,750 256 308,636 --
</TABLE>
See Notes to Financial Statements.
30
<PAGE> 33
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$388,398,075 $36,878,762 $ 74,170,062 $242,000,539 $239,638,428 $248,291,481 $360,581,190
-- 67,216 141,846 64,682 18,665 123,112 2,045,883
-- -- -- -- -- -- --
-- -- -- -- -- -- --
6,155,382 567,924 1,191,542 3,329,830 429,353 56,105 23,112
101,664 29,531 144,541 3,004,558 565,572 1,034,274 990,944
977,344 -- -- -- 4,006,081 5,634,062 1,712,869
-- 25,600 4,462 -- -- 20,728 --
-- 5,943 -- -- -- -- --
9,189 787 1,374 6,224 4,075 5,394 12,105
------------ ----------- ------------ ------------ ------------ ------------ ------------
395,641,654 37,575,763 75,653,827 248,405,833 244,662,174 255,165,156 365,366,103
------------ ----------- ------------ ------------ ------------ ------------ ------------
-- -- -- -- -- 16,358 322,571
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
112,500 -- -- 225,000 -- 208,125 --
33,267 123,385 -- 125,201 2,764,099 666,102 1,552,015
1,504,833 2,067,274 -- 7,134,553 4,941,667 3,357,440 6,526,740
87,049 -- 1,115 70,133 155,468 186,016 251,922
112,423 10,036 21,421 68,314 71,586 71,128 102,045
92,758 10,495 27,939 52,924 85,890 93,117 117,459
644,287 70,904 68,923 453,202 21,918 -- --
28,417 15,959 18,717 27,993 30,343 24,340 29,122
65,389 4,112 14,591 39,059 52,090 41,181 67,627
2,455 219 468 1,492 1,563 1,553 2,228
169,657 -- -- -- -- -- --
57,804 13,451 23,084 37,953 48,835 60,759 82,459
------------ ----------- ------------ ------------ ------------ ------------ ------------
2,910,839 2,315,835 176,258 8,235,824 8,173,459 4,726,119 9,054,188
------------ ----------- ------------ ------------ ------------ ------------ ------------
$392,730,815 $35,259,928 $ 75,477,569 $240,170,009 $236,488,715 $250,439,037 $356,311,915
============ =========== ============ ============ ============ ============ ============
372,675,160 36,284,224 71,907,876 228,865,229 219,424,813 219,711,612 283,991,023
-- 67,216 141,846 64,682 18,665 123,403 2,035,759
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
------------ ---------
<S> <C> <C>
$156,082,304 $3,079,516
3,751,093 19,079
605,855 --
-- --
505,714 --
4,700,950 --
6,738,213 --
-- 44,087
-- 2,882
2,725 23
------------ ---------
172,386,854 3,145,587
------------ ---------
-- --
-- --
-- --
-- --
-- --
65,710 1,589
12,324,922 --
106,666 --
44,195 893
57,018 638
-- --
35,299 15,409
22,382 613
965 19
-- --
128,906 1,724
------------ ---------
12,786,063 20,885
------------ ---------
$159,600,791 $3,124,702
============ ==========
149,846,236 3,071,453
3,697,796 19,079
</TABLE>
See Notes to Financial Statements.
31
<PAGE> 34
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
SIERRA TRUST FUNDS
JUNE 30, 1996
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S. CORPORATE
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT INCOME
FUND FUND FUND BOND FUND FUND FUND FUND
------------ ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSETS CONSIST
OF:
Undistributed net
investment
income/
(accumulated net
investment
loss/distributions
in excess of net
investment
income)......... $ 8,033 $ 7,444 $ 2,363 $ (60,622) $ (209,594) $ 5,733 $ (1,086,967)
Accumulated net
realized
gain/(loss) on
investments
sold, futures
contracts,
closed written
options, forward
foreign currency
contracts and
foreign currency
transactions.... 969 (15,708) (40,974) (1,303,060) (2,677,835) (75,544,583) (35,032,631)
Net unrealized
appreciation/
(depreciation)
of investments,
foreign
currency,
written options,
futures
contracts,
forward foreign
currency
contracts and
other assets and
liabilities..... -- -- -- (222,271) 2,513,856 (1,889,735) 7,570,255
Paid-in capital... 175,047,382 39,589,589 51,407,423 40,993,679 69,904,961 560,045,906 363,683,662
------------ ----------- ----------- ----------- ----------- ------------ ------------
Total Net
Assets...... $175,056,384 $39,581,325 $51,368,812 $39,407,726 $69,531,388 $482,617,321 $335,134,319
============ =========== =========== =========== =========== ============ ============
NET ASSETS:
Class A Shares.... $153,785,932 $39,030,913 $51,211,246 $32,440,041 $65,726,028 $423,282,149 $298,517,751
============ =========== =========== =========== =========== ============ ============
Class B Shares.... $ 422,234 $ 111,684 $ 147,145 $ 3,436,692 $ 1,594,138 $ 23,667,824 $ 24,605,864
============ =========== =========== =========== =========== ============ ============
Class S Shares.... $ 20,848,218 $ 438,728 $ 10,421 $ 3,530,993 $ 2,211,222 $ 35,667,348 $ 12,010,704
============ =========== =========== =========== =========== ============ ============
SHARES
OUTSTANDING:
Class A Shares.... 153,677,036 39,043,239 51,252,924 13,985,174 28,740,543 44,993,650 29,386,338
============ =========== =========== =========== =========== ============ ============
Class B Shares.... 421,783 111,719 147,265 1,482,673 697,118 2,515,458 2,422,109
============ =========== =========== =========== =========== ============ ============
Class S Shares.... 20,952,825 438,893 10,430 1,522,546 966,831 3,792,380 1,182,150
============ =========== =========== =========== =========== ============ ============
CLASS A SHARES:
Net asset value
per share of
beneficial
interest
outstanding*.... $1.00 $1.00 $1.00 $2.32 $2.29 $9.41 $10.16
============ =========== =========== =========== =========== ============ ============
Maximum sales
charge.......... -- -- -- 3.50% 3.50% 4.50% 4.50%
Maximum offering
price per share
of beneficial
interest
outstanding..... -- -- -- $2.40 $2.37 $9.85 $10.64
============ =========== =========== =========== =========== ============ ============
CLASS B SHARES:
Net asset value
and offering
price per share
of beneficial
interest
outstanding*.... $1.00 $1.00 $1.00 $2.32 $2.29 $9.41 $10.16
============ =========== =========== =========== =========== ============ ============
CLASS S SHARES:
Net asset value
and offering
price per share
of beneficial
interest
outstanding*.... $1.00 $1.00 $1.00 $2.32 $2.29 $9.41 $10.16
============ =========== =========== =========== =========== ============ ============
</TABLE>
- ---------------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
+ Represents accumulated net investment loss.
See Notes to Financial Statements.
32
<PAGE> 35
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 11,641 $ 35,177 $ 2,768 $ 39,645 $ -- $ (165,570)+ $ 322,571
(14,200,087) (3,053,564) 213,231 (10,790,495) 28,424,080 28,190,464 25,655,387
15,450,233 594,538 2,262,186 12,558,696 20,213,615 28,108,766 76,256,520
391,469,028 37,683,777 72,999,384 238,362,163 187,851,020 194,305,377 254,077,437
------------ ----------- ----------- ------------ ------------ ------------ ------------
$392,730,815 $35,259,928 $ 75,477,569 $240,170,009 $236,488,715 $250,439,037 $356,311,915
============ =========== ============ ============ ============ ============ ============
$372,176,606 $29,820,654 $ 54,518,352 $233,358,861 $183,083,923 $179,720,185 $283,746,937
============ =========== ============ ============ ============ ============ ============
$ 20,542,925 $ 5,428,026 $ 20,947,839 $ 6,799,992 $ 23,923,648 $ 25,067,245 $ 28,919,761
============ =========== ============ ============ ============ ============ ============
$ 11,284 $ 11,248 $ 11,378 $ 11,156 $ 29,481,144 $ 45,651,607 $ 43,645,217
============ =========== ============ ============ ============ ============ ============
35,110,379 3,093,335 5,164,136 21,543,012 12,986,458 11,451,604 14,066,987
============ =========== ============ ============ ============ ============ ============
1,937,826 563,020 1,984,291 627,662 1,705,017 1,620,425 1,454,916
============ =========== ============ ============ ============ ============ ============
1,065 1,167 1,077 1,030 2,100,515 2,950,379 2,195,022
============ =========== ============ ============ ============ ============ ============
$10.60 $9.64 $10.56 $10.83 $14.10 $15.69 $20.17
============ =========== ============ ============ ============ ============ ============
4.50% 4.50% 4.50% 4.50% 5.75% 5.75% 5.75%
$11.10 $10.09 $11.06 $11.34 $14.96 $16.65 $21.40
============ =========== ============ ============ ============ ============ ============
$10.60 $9.64 $10.56 $10.83 $14.03 $15.47 $19.88
============ =========== ============ ============ ============ ============ ============
$10.60 $9.64 $10.56 $10.83 $14.04 $15.47 $19.88
============ =========== ============ ============ ============ ============ ============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
------------ ---------
<S> <C> <C>
$ 1,605,235 $ 102,422
424,907 6,178
6,814,070 8,063
150,756,579 3,008,039
------------ ---------
$ 159,600,791 $3,124,702
============= ==========
$ 116,253,636 $3,124,702
============= ==========
$ 4,447,178 --
=============
$ 38,899,977 --
=============
11,078,231 291,381
============= ==========
428,022 --
=============
3,746,621 --
=============
$10.49 $10.72
============= ==========
5.75% 2.00%
$11.13 $10.94
============= ==========
$10.39 --
=============
$10.38 --
=============
</TABLE>
See Notes to Financial Statements.
33
<PAGE> 36
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S. CORPORATE
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT INCOME
FUND FUND FUND BOND FUND FUND FUND FUND
--------- ---------- --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends........... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Foreign withholding
tax on dividend
income............ -- -- -- -- -- -- --
Interest............ 8,861,890 2,435,414 1,959,603 3,663,591 6,574,203 36,235,413 29,397,282
Foreign withholding
tax on interest
income............ -- -- -- -- (112,902) -- --
Fee income (Note
6)................ -- -- -- -- -- 2,064,175 853,300
--------- --------- --------- ---------- ---------- ----------- -----------
Total investment
income........ 8,861,890 2,435,414 1,959,603 3,663,591 6,461,301 38,299,588 30,250,582
--------- --------- --------- ---------- ---------- ----------- -----------
EXPENSES:
Investment advisory
fee (Note 3)...... 622,915 175,521 206,796 262,885 552,582 2,581,417 2,403,914
Administration fee
(Note 3).......... 467,187 131,641 155,097 184,020 297,544 1,642,720 1,294,415
Custodian fees...... 14,442 2,941 3,053 9,807 15,096 116,421 7,616
Legal and audit
fees.............. 34,959 22,121 23,047 33,010 59,901 79,211 63,643
Trustees' fees and
expenses (Note
4)................ 5,026 1,412 1,675 1,742 2,745 15,120 11,719
Amortization of
organization costs
(Note 8).......... -- -- -- 3,545 2,000 -- --
Registration and
filing fees....... 85,082 31,805 11,414 37,052 4,168 20,601 4,322
Transfer agent
fees.............. 130,106 48,341 41,343 50,322 71,734 375,541 292,609
Other............... 40,484 13,842 15,620 30,919 35,399 218,581 112,060
--------- --------- --------- ---------- ---------- ----------- -----------
Subtotal........ 1,400,201 427,624 458,045 613,302 1,041,169 5,049,612 4,190,298
Shareholder
servicing and
distribution fees
(Note 5):
Class A Shares.... 353,950 108,864 128,956 108,968 203,577 1,092,257 850,156
Class B Shares.... 2,609 724 1,066 32,658 13,843 180,758 208,938
Class S Shares.... 138,880 2,624 103 57,238 21,976 143,697 88,767
Fees waived and/or
expenses absorbed
by investment
advisor and
administrator
(Note 3).......... (771,684) (162,368) (148,062) (348,098) (529,448) (2,896,457) (1,606,290)
Fees reduced by
credits allowed by
the custodian
(Note 3).......... (7,013) (1,565) -- (2,273) (808) (45,546) (1,548)
--------- --------- --------- ---------- ---------- ----------- -----------
Total expenses
before
interest
expense....... 1,116,943 375,903 440,108 461,795 750,309 3,524,321 3,730,321
--------- --------- --------- ---------- ---------- ----------- -----------
Interest expense
(Note 6).......... -- -- -- -- -- 582,417 --
--------- --------- --------- ---------- ---------- ----------- -----------
Total
expenses...... 1,116,943 375,903 440,108 461,795 750,309 4,106,738 3,730,321
--------- --------- --------- ---------- ---------- ----------- -----------
NET INVESTMENT
INCOME/(LOSS)..... 7,744,947 2,059,511 1,519,495 3,201,796 5,710,992 34,192,850 26,520,261
--------- --------- --------- ---------- ---------- ----------- -----------
NET REALIZED AND
UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS
(Notes 2 and 6):
Realized gain/(loss)
from:
Security
transactions.... 1,087 (4,208) 87 (336,498) (312,843) (2,605,006) (4,000,643)
Forward foreign
currency
contracts
and foreign
currency
transactions.... -- -- -- (1,593) (2,645,891) -- --
Futures
contracts....... -- -- -- (25,171) -- (1,173,449) --
Written options... -- -- -- (14,410) 1,988,647 -- --
Net change in
unrealized
appreciation/
(depreciation) of:
Securities........ -- -- -- (538,023) (220,441) (9,885,671) (8,362,491)
Forward foreign
currency
contracts....... -- -- -- -- 3,911,295 -- --
Foreign currency,
written options,
futures
contracts and
other assets and
liabilities..... -- -- -- (128,581) (80,386) (489,868) --
--------- --------- --------- ---------- ---------- ----------- -----------
Net realized and
unrealized
gain/(loss) on
investments....... 1,087 (4,208) 87 (1,044,276) 2,640,381 (14,153,994) (12,363,134)
--------- --------- --------- ---------- ---------- ----------- -----------
NET INCREASE IN NET
ASSETS
RESULTING FROM
OPERATIONS........ $7,746,034 $2,055,303 $1,519,582 $ 2,157,520 $8,351,373 $ 20,038,856 $ 14,157,127
========== ========== ========== =========== ========== ============ ============
</TABLE>
See Notes to Financial Statements.
34
<PAGE> 37
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND
----------- --------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $ 4,555,693 $ 1,461,112 $ 1,282,705
-- -- -- -- (26,222) (49,435) (25,615)
26,386,887 2,097,410 3,826,684 17,066,807 409,112 1,250,902 522,558
-- -- -- -- -- -- --
-- -- -- -- -- -- --
----------- ---------- ---------- ----------- ----------- ----------- -----------
26,386,887 2,097,410 3,826,684 17,066,807 4,938,583 2,662,579 1,779,648
----------- ---------- ---------- ----------- ----------- ----------- -----------
2,233,979 201,769 393,599 1,418,103 1,769,245 2,023,665 2,464,903
1,421,623 128,399 250,472 902,429 809,686 769,573 994,372
27,250 7,946 14,367 6,678 22,999 50,827 33,038
66,287 22,378 25,770 53,575 48,969 43,230 52,472
12,994 1,172 2,310 8,218 7,460 7,098 9,437
-- 13,143 1,622 -- -- 11,618 --
4,972 31,359 32,360 13,214 59,117 60,179 87,491
314,765 25,869 61,676 198,740 199,060 183,309 248,724
128,301 13,504 30,634 88,090 65,360 61,345 75,613
----------- ---------- ---------- ----------- ----------- ----------- -----------
4,210,171 445,539 812,810 2,689,047 2,981,896 3,210,844 3,966,050
982,698 79,701 137,766 629,965 475,235 433,346 596,859
130,879 47,938 164,456 58,399 144,106 152,906 175,798
111 110 112 110 268,342 312,489 277,830
(1,398,796) (296,536) (454,944) (645,198) -- -- --
(27,250) (7,946) (14,367) (6,678) (3,305) (15,835) (10,408)
----------- ---------- ---------- ----------- ----------- ----------- -----------
3,897,813 268,806 645,833 2,725,645 3,866,274 4,093,750 5,006,129
----------- ---------- ---------- ----------- ----------- ----------- -----------
-- -- -- -- -- -- --
----------- ---------- ---------- ----------- ----------- ----------- -----------
3,897,813 268,806 645,833 2,725,645 3,866,274 4,093,750 5,006,129
----------- ---------- ---------- ----------- ----------- ----------- -----------
22,489,074 1,828,604 3,180,851 14,341,162 1,072,309 (1,431,171) (3,226,481)
----------- ---------- ---------- ----------- ----------- ----------- -----------
1,562,145 223,803 506,699 1,820,935 38,695,226 45,059,178 38,787,429
-- -- -- -- (60) 344,548 (180,346)
49,090 (57,904) (65,939) (1,296,125) -- -- --
-- -- -- 51,255 -- -- --
1,407,766 688,756 381,603 2,355,712 4,454,639 4,062,975 48,545,776
-- -- -- -- -- 184,827 (7,972)
(272,682) -- -- (678,932) -- (453,656) (9,832)
----------- ---------- ---------- ----------- ----------- ----------- -----------
2,746,319 854,655 822,363 2,252,845 43,149,805 49,197,872 87,135,055
----------- ---------- ---------- ----------- ----------- ----------- -----------
$25,235,393 $2,683,259 $4,003,214 $16,594,007 $44,222,114 $47,766,701 $83,908,574
=========== ========== ========== =========== =========== =========== ===========
<CAPTION>
TARGET
INTERNATIONAL MATURITY
GROWTH 2002
FUND FUND
------------- ---------
<S> <C> <C>
$ 2,483,189 $ --
(284,585) --
490,034 198,898
(973) --
-- --
------------ --------
2,687,665 198,898
------------ --------
1,062,220 7,915
422,563 11,080
75,082 2,472
50,232 18,747
4,023 101
-- 11,757
50,182 16,614
101,778 2,526
74,052 1,736
----------- --------
1,840,132 72,948
240,623 7,915
31,371 --
213,460 --
-- (58,774)
(5,593) (2,430)
----------- --------
2,319,993 19,659
----------- --------
-- --
----------- --------
2,319,993 19,659
----------- --------
367,672 179,239
----------- --------
1,935,028 6,184
4,600,981 --
-- --
-- --
7,169,283 (105,710)
726,143 --
2,164 --
----------- --------
14,433,599 (99,526)
----------- --------
$14,801,271 $ 79,713
=========== ========
</TABLE>
See Notes to Financial Statements.
35
<PAGE> 38
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S. CORPORATE
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT INCOME
FUND FUND FUND BOND FUND FUND FUND FUND
------------ ----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment
income/(loss)... $ 7,744,947 $ 2,059,511 $ 1,519,495 $ 3,201,796 $ 5,710,992 $ 34,192,850 $ 26,520,261
Net realized
gain/(loss) on
invest-
ments sold,
forward
foreign
currency
contracts,
foreign
currency
transactions,
futures
contracts and
closed written
options during
the year...... 1,087 (4,208) 87 (377,672) (970,087) (3,778,455) (4,000,643)
Net unrealized
appreciation/
(depreciation)
of investments,
forward
foreign
currency
contracts,
foreign
currency,
futures
contracts,
written
options and
other assets
and
liabilities
during the
year.......... -- -- -- (666,604) 3,610,468 (10,375,539) (8,362,491)
------------ ----------- ----------- ----------- ------------ ------------ ------------
Net increase in
net assets
resulting from
operations.... 7,746,034 2,055,303 1,519,582 2,157,520 8,351,373 20,038,856 14,157,127
Distributions to
shareholders
from:
Net investment
income:
Class A
Shares.... (7,159,606) (2,041,798) (1,517,163) (2,639,086) (5,494,977) (30,531,601) (24,434,855)
Class B
Shares.... (11,198) (3,454) (2,251) (174,411) (86,193) (1,121,623) (1,340,683)
Class S
Shares.... (592,142) (12,141) (914) (298,588) (129,822) (880,081) (571,737)
Distributions
in excess of
net
investment
income:
Class A
Shares.... -- -- -- -- (531,573) -- --
Class B
Shares.... -- -- -- -- (9,037) -- --
Class S
Shares.... -- -- -- -- (14,346) -- --
Net realized
gains on
investments:
Class A
Shares.... (15,528) -- -- -- -- -- --
Class B
Shares.... (29) -- -- -- -- -- --
Class S
Shares.... (1,523) -- -- -- -- -- --
Capital (Note
2):
Class A
Shares.... -- -- -- (52,911) -- -- (159,061)
Class B
Shares.... -- -- -- (3,964) -- -- (9,773)
Class S
Shares.... -- -- -- (6,948) -- -- (4,152)
Net increase/
(decrease)
in net assets
from Fund
share
transactions:
Class A
Shares.... 43,695,697 (8,459,449) 2,376,197 (10,594,238) (40,267,647) (25,372,120) (74,157,839)
Class B
Shares.... 181,339 (11,021) 68,438 482,280 271,396 13,704,112 10,428,783
Class S
Shares.... 13,562,225 (298,215) 227 1,409,207 (127,202) 29,327,645 3,739,025
------------ ----------- ----------- ----------- ------------ ------------ ------------
Net increase/
(decrease)
in net
assets........ 57,405,269 (8,770,775) 2,444,116 (9,721,139) (38,038,028) 5,165,188 (72,353,165)
NET ASSETS:
Beginning of
year.......... 117,651,115 48,352,100 48,924,696 49,128,865 107,569,416 477,452,133 407,487,484
------------ ----------- ----------- ----------- ------------ ------------ ------------
End of year..... $175,056,384 $39,581,325 $51,368,812 $ 39,407,726 $ 69,531,388 $482,617,321 $335,134,319
============ =========== =========== ============ ============ ============ ============
Undistributed
net investment
income/(accumulated
net investment
loss /distributions
in excess of
net investment
income) at end
of year....... $ 8,033 $ 7,444 $ 2,363 $ (60,622) $ (209,594) $ 5,733 $ (1,086,967)
============ =========== =========== ============ ============ ============ ============
</TABLE>
- ---------------------
+ Represents accumulated net investment loss.
See Notes to Financial Statements.
36
<PAGE> 39
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 22,489,074 $ 1,828,604 $ 3,180,851 $ 14,341,162 $ 1,072,309 $ (1,431,171) $ (3,226,481)
1,611,235 165,899 440,760 576,065 38,695,166 45,403,726 38,607,083
1,135,084 688,756 381,603 1,676,780 4,454,639 3,794,146 48,527,972
------------ ----------- ----------- ------------ ------------ ------------ ------------
25,235,393 2,683,259 4,003,214 16,594,007 44,222,114 47,766,701 83,908,574
(21,866,901) (1,628,539) (2,545,490) (14,065,960) (1,085,188) -- --
(626,640) (207,585) (635,016) (281,673) (3,403) -- --
(533) (480) (435) (529) (6,969) -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- (228,143) -- (13,503,328) (21,692,930) (9,918,927)
-- -- (63,002) -- (940,597) (1,672,535) (667,520)
-- -- (47) -- (1,874,729) (3,964,701) (1,150,942)
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
(36,668,868) (4,691,281) (534,327) (37,924,473) (9,476,108) 7,653,290 36,111,196
13,450,075 2,048,994 8,572,391 2,018,598 15,589,484 16,910,255 14,676,449
550 500 495 554 12,104,463 25,017,241 25,583,609
------------ ----------- ----------- ------------ ------------ ------------ ------------
(20,476,924) (1,795,132) 8,569,640 (33,659,476) 45,025,739 70,017,321 148,542,439
413,207,739 37,055,060 66,907,929 273,829,485 191,462,976 180,421,716 207,769,476
------------ ----------- ----------- ------------ ------------ ------------ ------------
$392,730,815 $35,259,928 $ 75,477,569 $240,170,009 $236,488,715 $250,439,037 $356,311,915
============ =========== ============ ============ ============ ============ ============
$ 11,641 $ 35,177 $ 2,768 $ 39,645 $ -- $ (165,570)+ $ 322,571
============ =========== ============ ============ ============ ============ ============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
------------ ---------
<S> <C><C> <C>
$ 367,672 $ 179,239
6,536,009 6,184
7,897,590 (105,710)
------------- ----------
14,801,271 79,713
(342,384) (116,707)
(3,408) --
(21,880) --
(387,700) --
(12,636) --
(85,984) --
(3,697,036) --
(128,323) --
(780,562) --
-- --
-- --
-- --
16,833,441 535,878
1,980,810 --
26,294,322 --
------------- ----------
54,449,931 498,884
105,150,860 2,625,818
------------- ----------
$ 159,600,791 $3,124,702
============= ==========
$ 1,605,235 $ 102,422
============= ==========
</TABLE>
See Notes to Financial Statements.
37
<PAGE> 40
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S. CORPORATE
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT INCOME
FUND FUND FUND BOND FUND FUND FUND FUND
------------ ----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment
income/(loss)... $ 4,327,076 $ 1,780,115 $ 1,467,379 $ 3,274,272 $ 11,864,314 $ 39,386,893 $ 33,780,248
Net realized
gain/(loss) on
investments sold,
forward foreign
currency
contracts,
foreign currency
transactions,
futures contracts
and closed
written options
during the
year............. 21,401 (2,254) (20,162) (2,579,188) (11,992,927) (54,757,067) (28,272,871)
Net unrealized
appreciation/
(depreciation) of
investments,
forward foreign
currency
contracts,
foreign currency,
futures
contracts,
written options
and other assets
and liabilities
during the
year............. -- -- -- 1,061,733 2,985,927 61,068,404 51,363,673
------------ ----------- ----------- ----------- ------------ ------------ ------------
Net increase/
(decrease)
in net assets
resulting from
operations....... 4,348,477 1,777,861 1,447,217 1,756,817 2,857,314 45,698,230 56,871,050
Distributions to
shareholders
from:
Net investment
income:
Class A
Shares....... (4,191,083) (1,774,474) (1,465,972) (1,572,815) (1,108,181) (37,939,401) (27,582,318)
Class B
Shares....... (6,712) (1,037) (1,205) (51,308) (518) (403,591) (436,090)
Class S
Shares....... (127,884) (4,604) (202) (44,015) (648) (205,850) (284,731)
Distributions in
excess of net
investment
income:
Class A
Shares....... -- -- -- (1,368,026) (440,172) -- (3,754,869)
Class B
Shares....... -- -- -- (57,854) (206) -- (68,516)
Class S
Shares....... -- -- -- (50,627) (259) -- (44,607)
Net realized
gains on
investments:
Class A
Shares....... (1,350) -- -- -- -- -- --
Class B
Shares....... (2) -- -- -- -- -- --
Class S
Shares....... (45) -- -- -- -- -- --
Distributions in
excess of net
realized gains
on investments:
Class A
Shares....... -- -- -- -- (616,469) -- --
Class B
Shares....... -- -- -- -- (3,918) -- --
Class S
Shares....... -- -- -- -- (7,731) -- --
Capital (Note 2):
Class A
Shares....... -- -- -- (65,223) (8,263,524) -- (1,452,137)
Class B
Shares....... -- -- -- (2,758) (52,527) -- (26,497)
Class S
Shares....... -- -- -- (2,414) (103,627) -- (17,251)
Net increase/
(decrease)
in net assets
from Fund share
transactions:
Class A
Shares....... 56,025,698 17,314,506 (13,644,611) 23,435,197 (109,220,929) (213,296,316) (110,542,297)
Class B
Shares....... 240,444 122,740 78,827 3,026,900 1,341,558 10,370,819 14,144,330
Class S
Shares....... 7,390,600 737,108 10,203 2,354,086 2,365,311 6,662,705 8,162,654
------------ ----------- ----------- ----------- ------------ ------------ ------------
Net increase/
(decrease)
in net assets.... 63,678,143 18,172,100 (13,575,743) 27,357,960 (113,254,526) (189,113,404) (65,031,279)
NET ASSETS:
Beginning of
year............. 53,972,972 30,180,000 62,500,439 21,770,905 220,823,942 666,565,537 472,518,763
------------ ----------- ----------- ----------- ------------ ------------ ------------
End of year........ $117,651,115 $48,352,100 $ 48,924,696 $49,128,865 $ 107,569,416 $ 477,452,133 $ 407,487,484
============ =========== ============ =========== ============= ============= =============
Undistributed net
investment
income/(accumulated
net investment
loss/distributions
in excess of net
investment
income) at end of
year............. $ 26,032 $ 5,326 $ 3,196 $ (60,186) $ 1,813,191 $ 3,118 $ (1,086,967)
============ =========== ============ =========== ============= ============= =============
</TABLE>
- ---------------------
* The Target Maturity 2002 Fund commenced operations on March 20, 1995.
# Amount represents less than $1.00.
+ Represents accumulated net investment loss.
See Notes to Financial Statements.
38
<PAGE> 41
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 25,870,424 $ 1,999,264 $ 2,816,965 $ 18,063,121 $ 1,817,413 $ 336,008 $ (550,525)
(4,641,450) (1,755,884) 65,027 (8,590,608) 11,539,202 17,615,980 3,026,460
7,744,208 1,600,492 2,019,396 7,239,910 17,468,762 25,111,808 29,092,221
------------- ----------- ------------ ------------ ------------ ------------ ------------
28,973,182 1,843,872 4,901,388 16,712,423 30,825,377 43,063,796 31,568,156
(25,700,052) (1,911,228) (2,488,884) (17,947,581) (1,744,256) (162,651) --
(163,977) (87,257) (327,566) (126,501) (19,234) (894) --
(544) (486) (433) (526) (42,887) (1,598) --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
(5,670) -- -- (307,407) (10,906,199) (3,749) (3,353,075)
(42) -- -- (2,881) (178,420) (71) (103,364)
(0)# -- -- (11) (521,173) (226) (68,962)
-- -- -- (2,475,316) -- -- --
-- -- -- (23,199) -- -- --
-- -- -- (88) -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
(106,271,233) (4,653,523) 18,663,791 (81,322,337) 28,907,852 (11,458,811) 34,301,173
7,142,339 3,311,767 12,002,591 4,811,084 6,481,529 6,067,316 9,447,809
10,293 10,496 10,443 10,635 13,411,643 16,110,339 11,037,190
------------- ----------- ------------ ------------ ------------ ------------ ------------
(96,015,704) (1,486,359) 32,761,330 (80,671,705) 66,214,232 53,613,451 82,828,927
509,223,443 38,541,419 34,146,599 354,501,190 125,248,744 126,808,265 124,940,549
------------- ----------- ------------ ------------ ------------ ------------ ------------
$ 413,207,739 $37,055,060 $ 66,907,929 $273,829,485 $191,462,976 $180,421,716 $207,769,476
============= =========== ============ ============ ============ ============ ============
$ 7,094 $ 10,724 $ 2,141 $ 9,823 $ 23,311 $ 64,419 $ (35,894)+
============= =========== ============ ============ ============ ============ ============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND*
------------ ----------
<S> <C> <C>
$ 747,107 $ 25,194
1,298,457 (6)
(7,697,847) 113,773
------------ ----------
(5,652,283) 138,961
(492,964) --
(4,215) --
(22,311) --
-- --
-- --
-- --
(5,380,826) --
(67,746) --
(358,790) --
(741,797) --
(9,339) --
(49,463) --
-- --
-- --
-- --
(24,385,190) 2,486,857
2,471,442 --
12,080,098 --
------------ ----------
(22,613,384) 2,625,818
127,764,244 --
------------ ----------
$105,150,860 $2,625,818
============ ==========
$ (2,539,903) $ 28,133
============ ==========
</TABLE>
See Notes to Financial Statements.
39
<PAGE> 42
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S. CORPORATE
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT INCOME
FUND FUND FUND BOND FUND FUND FUND FUND
------------- ------------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold.................... $ 489,604,814 $ 472,714,088 $ 46,329,303 $ 45,305,421 $ 6,434,828 $ 91,110,162 $ 47,008,825
Issued as reinvestment
of dividends........... 6,822,621 1,946,590 1,482,501 1,923,361 3,769,772 18,152,728 13,378,553
Redeemed................ (452,731,738) (483,120,127) (45,435,607) (57,823,020) (50,472,247) (134,635,010) (134,545,217)
------------- ------------- ------------ ------------ ------------ ------------- -------------
Net increase/(decrease). $ 43,695,697 $ (8,459,449) $ 2,376,197 $(10,594,238) $(40,267,647) $ (25,372,120) $ (74,157,839)
============= ============= ============ ============ ============ ============= =============
CLASS B:
Sold.................... $ 411,746 $ 216,238 $ 617,620 $ 1,843,435 $ 517,070 $ 16,616,782 $ 15,286,512
Issued as reinvestment
of dividends........... 10,385 2,681 1,524 130,535 65,051 696,997 661,629
Redeemed................ (240,792) (229,940) (550,706) (1,491,690) (310,725) (3,609,667) (5,519,358)
------------- ------------- ------------ ------------ ------------ ------------- -------------
Net increase/(decrease).. $ 181,339 $ (11,021) $ 68,438 $ 482,280 $ 271,396 $ 13,704,112 $ 10,428,783
============= ============= ============ ============ ============ ============= =============
CLASS S:
Sold..................... $ 25,004,949 $ 28,107,716 $ -- $ 17,113,179 $ 2,340,079 $ 30,599,063 $ 9,973,109
Issued as reinvestment
of dividends............ 593,654 8,198 227 256,069 116,648 833,015 509,009
Redeemed............... (12,036,378) (28,414,129) -- (15,960,041) (2,583,929) (2,104,433) (6,743,093)
------------- ------------- ------------ ------------ ------------ ------------- -------------
Net increase/(decrease).. $ 13,562,225 $ (298,215) $ 227 $ 1,409,207 $ (127,202) $ 29,327,645 $ 3,739,025
============= ============= ============ ============ ============ ============= =============
SHARES
CLASS A:
Sold..................... 489,604,814 472,714,088 46,329,303 19,279,499 2,823,498 9,500,727 4,439,689
Issued as reinvestment
of dividends............ 6,822,621 1,946,590 1,482,501 820,274 1,650,964 1,882,759 1,270,593
Redeemed................. (452,731,738) (483,120,127) (45,435,607) (24,720,148) (22,088,752) (13,977,794) (12,778,541)
------------- ------------- ------------ ------------ ------------ ------------- -------------
Net increase/(decrease).. 43,695,697 (8,459,449) 2,376,197 (4,620,375) (17,614,290) (2,594,308) (7,068,259)
============= ============= ============ ============ ============ ============= =============
CLASS B:
Sold..................... 411,746 216,238 617,620 782,937 226,638 1,718,996 1,447,368
Issued as reinvestment
of dividends............ 10,385 2,681 1,524 55,691 28,488 72,444 63,015
Redeemed............... (240,792) (229,940) (550,706) (637,527) (136,155) (377,363) (527,389)
------------- ------------- ------------ ------------ ------------ ------------- -------------
Net increase/(decrease).. 181,339 (11,021) 68,438 201,101 118,971 1,414,077 982,994
============= ============= ============ ============ ============ ============= =============
CLASS S:
Sold..................... 25,004,949 28,107,716 -- 7,296,744 1,025,154 3,217,067 944,929
Issued as reinvestment
of dividends............ 593,654 8,198 227 109,688 51,009 86,865 48,653
Redeemed................. (12,036,378) (28,414,129) -- (6,864,612) (1,128,546) (219,071) (638,205)
------------- ------------- ------------ ------------ ------------ ------------- -------------
Net increase/(decrease).. 13,562,225 (298,215) 227 541,820 (52,383) 3,084,861 355,377
============= ============= ============ ============ ============ ============= =============
</TABLE>
See Notes to Financial Statements.
40
<PAGE> 43
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND
----------- ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 34,069,875 $ 5,527,723 $ 11,767,777 $ 67,171,006 $ 130,758,528 $ 264,718,419 $ 386,925,069
14,076,628 801,560 2,095,380 8,267,671 14,421,399 21,025,657 9,724,107
(84,815,371) (11,020,564) (14,397,484) (113,363,150) (154,656,035) (278,090,786) (360,537,980)
----------- ----------- ----------- ------------ ------------ ------------ ------------
$(36,668,868) $ (4,691,281) $ (534,327) $ (37,924,473) $ (9,476,108) $ 7,653,290 $ 36,111,196
=========== =========== =========== ============ ============ ============ ============
$ 15,440,023 $ 3,000,149 $ 10,742,428 $ 3,192,343 $ 16,894,093 $ 17,217,291 $ 16,434,061
454,106 135,115 526,187 163,852 928,373 1,658,263 663,089
(2,444,054) (1,086,270) (2,696,224) (1,337,597) (2,232,982) (1,965,299) (2,420,701)
----------- ----------- ----------- ------------ ------------ ------------ ------------
$ 13,450,075 $ 2,048,994 $ 8,572,391 $ 2,018,598 $ 15,589,484 $ 16,910,255 $ 14,676,449
=========== =========== =========== ============ ============ ============ ============
$ -- $ -- $ -- $ -- $ 27,192,294 $ 36,970,622 $ 31,956,992
550 500 495 554 1,868,391 3,938,760 1,144,027
-- -- -- -- (16,956,222) (15,892,141) (7,517,410)
----------- ----------- ----------- ------------ ------------ ------------ ------------
$ 550 $ 500 $ 495 $ 554 $ 12,104,463 $ 25,017,241 $ 25,583,609
=========== =========== =========== ============ ============ ============ ============
3,184,417 567,167 1,101,756 6,132,609 9,665,189 17,410,639 20,858,749
1,312,377 82,376 195,402 753,398 1,108,522 1,490,125 547,529
(7,935,718) (1,132,188) (1,346,623) (10,348,331) (11,315,736) (18,359,717) (19,340,963)
----------- ----------- ----------- ------------ ------------ ------------ ------------
(3,438,924) (482,645) (49,465) (3,462,324) (542,025) 541,047 2,065,315
=========== =========== =========== ============ ============ ============ ============
1,438,143 307,542 1,002,766 290,339 1,245,754 1,139,184 884,594
42,376 13,875 49,129 14,933 71,847 118,787 37,761
(229,223) (111,655) (252,784) (122,487) (163,885) (128,776) (131,591)
----------- ----------- ----------- ------------ ------------ ------------ ------------
1,251,296 209,762 799,111 182,785 1,153,716 1,129,195 790,764
=========== =========== =========== ============ ============ ============ ============
-- -- -- -- 2,011,945 2,421,489 1,767,771
50 50 44 49 144,483 282,148 65,113
-- -- -- -- (1,200,570) (1,081,090) (407,997)
----------- ----------- ----------- ------------ ------------ ------------ ------------
50 50 44 49 955,858 1,622,547 1,424,887
=========== =========== =========== ============ ============ ============ ============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
------------- -----------
<C> <C>
$ 176,648,351 $ 966,053
4,387,392 116,033
(164,202,302) (546,208)
------------ --------
$ 16,833,441 $ 535,878
============ ========
$ 2,649,861 --
142,345 --
881,574 --
(3,473,851) --
------------
$ 26,294,322 $ --
============
17,342,075 88,006
442,357 10,379
(16,086,838) (50,572)
------------ --------
1,697,594 47,813
============ ========
260,653 --
14,437 --
(80,125) --
------------
194,965 --
============
2,856,688 --
89,685 --
(342,566) --
------------
2,603,807 --
============
</TABLE>
See Notes to Financial Statements.
41
<PAGE> 44
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY (CONTINUED)
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1995*
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S. CORPORATE
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT INCOME
FUND FUND FUND BOND FUND FUND FUND FUND
------------ ------------ ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold..................... $ 344,061,728 $ 273,679,428 $ 50,256,138 $ 73,205,642 $ 45,922,545 $ 69,309,832 $ 84,545,315
Issued as reinvestment
of dividends........... 3,910,296 1,667,813 1,414,049 2,310,310 6,782,801 22,425,147 19,301,502
Redeemed................. (291,946,326) (258,032,735) (65,314,798) (52,080,755) (161,926,275) (305,031,295) (214,389,114)
------------- ------------- ------------ ------------ ------------- ------------- -------------
Net increase/(decrease).. $ 56,025,698 $ 17,314,506 $(13,644,611) $ 23,435,197 $(109,220,929) $(213,296,316) $(110,542,297)
============= ============= ============ ============ ============= ============= =============
CLASS B:
Sold..................... $ 357,829 $ 296,191 $ 157,149 $ 3,748,540 $ 1,726,835 $ 12,281,469 $ 15,366,569
Issued as reinvestment
of dividends........... 6,413 543 926 78,815 37,544 243,129 237,120
Redeemed................. (123,798) (173,994) (79,248) (800,455) (422,821) (2,153,779) (1,459,359)
------------- ------------- ------------ ------------ ------------- ------------- -------------
Net increase............. $ 240,444 $ 122,740 $ 78,827 $ 3,026,900 $ 1,341,558 $ 10,370,819 $ 14,144,330
============= ============= ============ ============ ============= ============= =============
CLASS S:
Sold..................... $ 7,747,143 $ 7,486,699 $ 10,001 $ 5,178,997 $ 6,328,952 $ 7,777,250 $ 10,617,936
Issued as reinvestment
of dividends........... 127,561 1,752 202 86,181 90,872 181,744 309,996
Redeemed................. (484,104) (6,751,343) -- (2,911,092) (4,054,513) (1,296,289) (2,765,278)
------------- ------------- ------------ ------------ ------------- ------------- -------------
Net increase............. $ 7,390,600 $ 737,108 $ 10,203 $ 2,354,086 $ 2,365,311 $ 6,662,705 $ 8,162,654
============= ============= ============ ============ ============= ============= =============
SHARES
CLASS A:
Sold..................... 344,061,728 273,679,428 50,256,138 30,949,418 20,232,716 7,363,825 8,733,946
Issued as reinvestment
of dividends........... 3,910,296 1,667,813 1,414,049 887,524 2,977,677 2,386,233 1,821,240
Redeemed................. (291,946,326) (258,032,735) (65,314,798) (22,359,364) (71,314,635) (32,671,743) (21,974,395)
------------- ------------- ------------ ------------ ------------- ------------- -------------
Net increase/(decrease).. 56,025,698 17,314,506 (13,644,611) 9,477,578 (48,104,242) (22,921,685) (11,419,209)
============= ============= ============ ============ ============= ============= =============
CLASS B:
Sold..................... 357,829 296,191 157,149 1,593,248 750,403 1,306,396 1,563,762
Issued as reinvestment
of dividends........... 6,413 543 926 33,809 16,494 25,853 23,718
Redeemed................. (123,798) (173,994) (79,248) (345,485) (188,750) (230,868) (148,365)
------------- ------------- ------------ ------------ ------------- ------------- -------------
Net increase............. 240,444 122,740 78,827 1,281,572 578,147 1,101,381 1,439,115
============= ============= ============ ============ ============= ============= =============
CLASS S:
Sold..................... 7,747,143 7,486,699 10,001 2,214,031 2,785,355 827,576 1,081,002
Issued as reinvestment
of dividends........... 127,561 1,752 202 32,824 40,467 19,254 31,136
Redeemed................. (484,104) (6,751,343) -- (1,266,129) (1,806,608) (139,311) (285,365)
------------- ------------- ------------ ------------ ------------- ------------- -------------
Net increase............. 7,390,600 737,108 10,203 980,726 1,019,214 707,519 826,773
============= ============= ============ ============ ============= ============= =============
</TABLE>
- ---------------------
* The Funds, with the exception of the Target Maturity 2002 Fund, commenced
selling Class B and Class S shares, in addition to Class A shares, on July 1,
1994. Shares in existence prior to July 1, 1994 were designated Class A
shares.
** The Target Maturity 2002 Fund commenced operations on March 20, 1995.
See Notes to Financial Statements.
42
<PAGE> 45
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 38,869,621 $ 10,025,936 $ 36,674,526 $ 71,622,721 $116,297,145 $ 164,790,182 $ 179,661,800
17,229,951 1,021,929 1,852,989 13,219,823 12,504,774 162,293 3,319,792
(162,370,805) (15,701,388) (19,863,724) (166,164,881) (99,894,067) (176,411,286) (148,680,419)
------------- ------------ ------------ ------------- ------------ ------------- -------------
$(106,271,233) $ (4,653,523) $ 18,663,791 $ (81,322,337) $ 28,907,852 $ (11,458,811) $ 34,301,173
============= ============ ============ ============= ============ ============= =============
$ 8,026,398 $ 3,929,427 $ 12,946,924 $ 5,518,679 $ 6,743,410 $ 6,556,661 $ 10,064,567
119,111 48,332 240,887 99,508 192,797 949 102,495
(1,003,170) (665,992) (1,185,220) (807,103) (454,678) (490,294) (719,253)
------------- ------------ ------------ ------------- ------------ ------------- -------------
$ 7,142,339 $ 3,311,767 $ 12,002,591 $ 4,811,084 $ 6,481,529 $ 6,067,316 $ 9,447,809
============= ============ ============ ============= ============ ============= =============
$ 67,177 $ 10,009 $ 10,010 $ 10,011 $ 15,883,019 $ 17,991,509 $ 11,489,038
517 487 433 624 561,220 1,814 68,743
(57,401) -- -- -- (3,032,596) (1,882,984) (520,591)
------------- ------------ ------------ ------------- ------------ ------------- -------------
$ 10,293 $ 10,496 $ 10,443 $ 10,635 $ 13,411,643 $ 16,110,339 $ 11,037,190
============= ============ ============ ============= ============ ============= =============
4,096,004 1,063,315 3,620,035 6,984,325 9,909,988 13,826,099 12,646,514
1,674,938 109,635 182,396 1,242,336 1,152,061 13,834 237,123
(16,298,541) (1,698,306) (1,968,744) (15,898,135) (8,616,524) (14,745,441) (10,478,150)
------------- ------------ ------------ ------------- ------------ ------------- -------------
(10,527,599) (525,356) 1,833,687 (7,671,474) 2,445,525 (905,508) 2,405,487
============= ============ ============ ============= ============ ============= =============
772,943 419,443 1,279,374 512,482 572,323 530,090 707,285
11,516 5,167 23,589 9,376 17,815 81 7,342
(97,929) (71,352) (117,783) (76,981) (38,837) (38,941) (50,475)
------------- ------------ ------------ ------------- ------------ ------------- -------------
686,530 353,258 1,185,180 444,877 551,301 491,230 664,152
============= ============ ============ ============= ============ ============= =============
6,680 1,065 990 923 1,356,937 1,478,376 801,685
50 52 43 58 51,894 155 4,924
(5,715) -- -- -- (264,174) (150,699) (36,474)
------------- ------------ ------------ ------------- ------------ ------------- -------------
1,015 1,117 1,033 981 1,144,657 1,327,832 770,135
============= ============ ============ ============= ============ ============= =============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND**
------------ -----------
<S> <C> <C>
$ 135,148,440 $2,509,448
6,547,275 --
(166,080,905) (22,591)
------------- ----------
$ (24,385,190) $2,486,857
============= ==========
$ 2,801,600 --
80,533 --
(410,691) --
------------- ----------
$ 2,471,442 --
============= ==========
$ 16,175,188 --
428,494 --
(4,523,584) --
------------- ----------
$ 12,080,098 --
============= ==========
13,257,566 245,738
655,962 --
(16,425,569) (2,170)
------------- ----------
(2,512,041) 243,568
============= ==========
267,274 --
8,096 --
(42,313) --
------------- ----------
233,057 --
============= ==========
1,562,186 --
43,089 --
(462,461) --
------------- ----------
1,142,814 --
============= ==========
</TABLE>
See Notes to Financial Statements.
43
<PAGE> 46
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
U.S. GOVERNMENT FUND
YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Cash used for financing activities:
Proceeds from capital shares sold............................................ $ 138,005,731
Payments on capital shares redeemed.......................................... (140,189,475)
---------------
Cash used for capital share transactions..................................... (2,183,744)
Dividends and distributions paid in cash..................................... (13,058,012)
Net proceeds on dollar roll transactions..................................... 118,756,979
Net payments for reverse repurchase agreements............................... (105,594,950)
Interest paid on reverse repurchase agreements............................... (713,719)
---------------
$(2,793,446)
Cash provided by operations:
Purchases of long-term portfolio securities.................................. (1,641,802,460)
Net purchases of short-term investments...................................... (34,521,572)
Proceeds from sales of long-term portfolio securities........................ 1,641,812,210
Net payments for futures transactions........................................ (1,173,449)
Variation margin for futures transactions.................................... 685,132
---------------
(35,000,139)
---------------
Net investment income........................................................ 34,192,850
Net change in receivables/payables related to operations..................... 3,849,149
---------------
38,041,999
---------------
3,041,860
-----------
Net increase in cash........................................................... 248,414
Cash at beginning of year...................................................... 60,222
-----------
Cash at end of year............................................................ $ 308,636
===========
</TABLE>
See Notes to Financial Statements.
44
<PAGE> 47
- --------------------------------------------------------------------------------
CORPORATE INCOME FUND
YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Cash used for financing activities:
Proceeds from capital shares sold........................................... $ 72,592,573
Payments on capital shares redeemed......................................... (145,511,623)
-------------
Cash used for capital share transactions.................................... (72,919,050)
Dividends and distributions paid in cash.................................... (12,156,020)
Net payments on dollar roll transactions.................................... (22,326,170)
-------------
$(107,401,240)
Cash provided by operations:
Purchases of long-term portfolio securities................................. (92,392,156)
Net proceeds from sales of short-term investments........................... 4,697,185
Proceeds from sales of long-term portfolio securities....................... 167,768,303
-------------
80,073,332
-------------
Net investment income....................................................... 26,520,261
Net change in receivables/payables related to operations.................... 807,647
-------------
27,327,908
-------------
107,401,240
-------------
Net increase in cash.......................................................... 0
Cash at beginning of year..................................................... 0
-------------
Cash at end of year........................................................... $ 0
=============
</TABLE>
See Notes to Financial Statements.
45
<PAGE> 48
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
------------------------------------------------------------- ---------------------- ----------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96 06/30/95 06/30/94 06/30/93 06/30/92 06/30/96 06/30/95* 06/30/96 06/30/95*
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning
of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net
investment
income..... 0.051 0.049 0.030 0.031 0.048 0.043 0.042 0.043 0.042
-------- ------- ------- ------- ------- ------- ------- ------- -------
Total from
investment
operations... 0.051 0.049 0.030 0.031 0.048 0.043 0.042 0.043 0.042
LESS
DISTRIBUTIONS:
Dividends
from net
investment
income..... (0.051) (0.049) (0.030) (0.031) (0.048) (0.043) (0.042) (0.043) (0.042)
-------- ------- ------- ------- ------- ------- ------- ------- ------
Total
distributions (0.051) (0.049) (0.030) (0.031) (0.048) (0.043) (0.042) (0.043) (0.042)
-------- ------- ------- ------- ------- ------- ------- ------- ------
Realized gain
on
investments
distributed
to
shareholders (0.000)# (0.000)# (0.000)# -- -- (0.000)# (0.000)# (0.000)# (0.000)#
-------- ------- ------- ------- ------- ------- ------- ------- ------
Net asset
value, end
of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 5.22% 5.06% 3.04% 3.17% 4.95% 4.40% 4.29% 4.40% 4.29%
======== ======= ======= ======= ======= ======= ======= ======= =======
RATIOS TO
AVERAGE NET
ASSETS/
SUPPLEMENTAL
DATA:
Net assets,
end of year
(in 000's).. $153,786 $110,012 $53,973 $48,283 $71,492 $422 $241 $20,848 $7,399
Ratio of
operating
expenses to
average net
assets..... 0.65% 0.54% 0.45% 0.41% 0.42% 1.40% 1.29% 1.40% 1.29%
Ratio of net
investment
income to
average net
assets..... 5.04% 5.08% 2.99% 3.15% 4.90% 4.29% 4.33% 4.29% 4.33%
Ratio of
operating
expenses to
average net
assets
without
fees
reduced by
credits
allowed by
the
custodian.. 0.65%(a) N/A N/A N/A N/A 1.40%(a) N/A 1.40%(a) N/A
Ratio of
operating
expenses to
average net
assets
without fee
waivers,
expenses
absorbed
and/or fees
reduced by
credits
allowed by
the
custodian.. 1.15%(a) 1.18% 1.35% 1.32% 1.34% 1.90%(a) 1.93% 1.90%(a) 1.93%
Net
investment
income per
share
without fee
waivers,
expenses
absorbed
and/or fees
reduced by
credits
allowed by
the
custodian.. $ 0.046 $ 0.043 $ 0.021 $ 0.022 $ 0.039 $ 0.038 $ 0.036 $ 0.038 $ 0.036
</TABLE>
- ---------------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in
addition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated.
The total returns would have been lower if certain fees had not been waived
and/or expenses absorbed by the investment advisor, administrator and/or
distributor or if fees had not been reduced by credits allowed by the
custodian.
# Amount represents less than $0.001 per share.
(a) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
46
<PAGE> 49
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
------------------------------------------------------------- ---------------------- ----------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96 06/30/95 06/30/94 06/30/93 06/30/92 06/30/96 06/30/95* 06/30/96 06/30/95*
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning
of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net
investment
income..... 0.047 0.046 0.027 0.027 0.042 0.040 0.038 0.040 0.038
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from
investment
operations... 0.047 0.046 0.027 0.027 0.042 0.040 0.038 0.040 0.038
LESS
DISTRIBUTIONS:
Dividends
from net
investment
income..... (0.047) (0.046) (0.027) (0.027) (0.042) (0.040) (0.038) (0.040) (0.038)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions.. (0.047) (0.046) (0.027) (0.027) (0.042) (0.040) (0.038) (0.040) (0.038)
------- ------- ------- ------- ------- ------- ------- ------- -------
Realized gain
on
investments
distributed
to
shareholders.. -- -- -- -- 0.002 -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset
value, end
of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 4.81% 4.67% 2.67% 2.70% 4.45% 4.02% 3.91% 4.02% 3.91%
======= ======= ======= ======= ======= ======= ======= ======= =======
RATIOS TO
AVERAGE NET
ASSETS/
SUPPLEMENTAL
DATA:
Net assets,
end of year
(in 000's). $39,031 $47,492 $30,180 $36,802 $44,233 $112 $123 $439 $737
Ratio of
operating
expenses to
average net
assets..... 0.85% 0.85% 0.85% 0.85% 0.85% 1.60% 1.60% 1.60% 1.60%
Ratio of net
investment
income to
average net
assets..... 4.70% 4.63% 2.68% 2.69% 4.43% 3.95% 3.88% 3.95% 3.88%
Ratio of
operating
expenses to
average net
assets
without
fees
reduced by
credits
allowed by
the
custodian.. 0.85%(a) N/A N/A N/A N/A 1.60%(a) N/A 1.60%(a) N/A
Ratio of
operating
expenses to
average net
assets
without fee
waivers
and/or fees
reduced by
credits
allowed by
the
custodian.. 1.22%(a) 1.25% 1.32% 1.34% 1.35% 1.97%(a) 2.00% 1.97%(a) 2.00%
Net
investment
income per
share
without fee
waivers
and/or fees
reduced by
credits
allowed by
the
custodian.. $ 0.043 $ 0.042 $ 0.022 $ 0.022 $ 0.037 $ 0.036 $ 0.034 $ 0.036 $ 0.034
</TABLE>
- ---------------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in
addition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated.
The total returns would have been lower if certain fees had not been waived
by the investment advisor, administrator and/or distributor or if fees had
not been reduced by credits allowed by the custodian.
(a) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
47
<PAGE> 50
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
-------------------------------------------------------- --------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96 06/30/95 06/30/94 06/30/93 06/30/92 06/30/96 06/30/95* 06/30/96 06/30/95*
-------- -------- -------- -------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income............. 0.029 0.028 0.018 0.021 0.033 0.022 0.020 0.022 0.020
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations......... 0.029 0.028 0.018 0.021 0.033 0.022 0.020 0.022 0.020
LESS DISTRIBUTIONS:
Dividends from net
investment
income............. (0.029) (0.028) (0.018) (0.021) (0.033) (0.022) (0.020) (0.022) (0.020)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions...... (0.029) (0.028) (0.018) (0.021) (0.033) (0.022) (0.020) (0.022) (0.020)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 3.00% 2.79% 1.81% 2.07% 3.35% 2.22% 2.04% 2.22% 2.04%
======= ======= ======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
year (in 000's).... $51,211 $48,836 $62,500 $68,404 $94,607 $147 $79 $10 $10
Ratio of operating
expenses to average
net assets......... 0.85% 0.85% 0.85% 0.85% 0.85% 1.60% 1.60% 1.60% 1.60%
Ratio of net
investment income
to average net
assets............. 2.94% 2.73% 1.80% 2.06% 3.31% 2.19% 1.98% 2.19% 1.98%
Ratio of operating
expenses to average
net assets without
fee waivers........ 1.14% 1.15% 1.27% 1.29% 1.28% 1.89% 1.90% 1.89% 1.90%
Net investment income
per share without
fee waivers........ $ 0.026 $ 0.025 $ 0.014 $ 0.016 $ 0.029 $ 0.019 $ 0.017 $ 0.019 $ 0.017
</TABLE>
- ---------------------
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in
addition to Class A shares. Those shares in existence prior to July 1, 1994
were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated. The
total returns would have been lower if certain fees had not been waived by the
investment advisor, administrator and/or distributor.
48
<PAGE> 51
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
----------------------------------- ----------------------- -----------------------
YEAR YEAR PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96++ 06/30/95 06/30/94* 06/30/96++ 06/30/95* 06/30/96++ 06/30/95*
---------- -------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 2.35 $ 2.39 $ 2.50 $ 2.35 $ 2.39 $ 2.35 $ 2.39
-------- ------- ------- -------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. 0.15 0.08 0.09 0.13 0.06 0.13 0.06
Net realized and unrealized
gain/(loss) on investments.......... (0.03) 0.02 (0.11) (0.03) 0.02 (0.03) 0.02
-------- ------- ------- -------- ------- ------ -------
Total from investment operations...... 0.12 0.10 (0.02) 0.10 0.08 0.10 0.08
LESS DISTRIBUTIONS:
Dividends from net investment
income.............................. (0.15) (0.08 ) (0.09) (0.13) (0.06) (0.13) (0.06)
Distributions in excess of net
investment income................... -- (0.06 ) -- -- (0.06) -- (0.06)
Distributions from capital (Note 2)... (0.00)# (0.00 )# -- (0.00)# (0.00)# (0.00)# (0.00)#
-------- ------- ------- -------- ------- ------ -------
Total distributions................... (0.15) (0.14 ) (0.09) (0.13) (0.12) (0.13) (0.12)
-------- ------- ------- -------- ------- ------ -------
Net asset value, end of year.......... $ 2.32 $ 2.35 $ 2.39 $ 2.32 $ 2.35 $ 2.32 $ 2.35
======== ======= ======= ======== ======= ====== =======
TOTAL RETURN+ 5.05% 4.42% (0.73)% 4.27% 3.64% 4.27% 3.64%
======== ======= ======= ======== ======= ====== =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's).... $ 32,440 $43,811 $21,771 $ 3,437 $ 3,015 $3,531 $ 2,303
Ratio of operating expenses to average
net assets.......................... 0.75% 0.75% 0.00%** 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income to
average net assets.................. 6.22% 6.10% 5.70%** 5.47% 5.35% 5.47% 5.35%
Portfolio turnover rate............... 225% 137% 95% 225% 137% 225% 137%
Ratio of operating expenses to average
net assets without fees reduced by
credits allowed by the custodian.... 0.75%(a) N/A N/A 1.50%(a) N/A 1.50%(a) N/A
Ratio of operating expenses to average
net assets without fee waivers,
expenses absorbed and/or fees
reduced by credits allowed by the
custodian........................... 1.42%(a) 1.39% 1.61%** 2.17%(a) 2.14% 2.17%(a) 2.14%
Net investment income per share
without fee waivers, expenses
absorbed and/or fees reduced by
credits allowed by the custodian.... $ 0.13 $ 0.07 $ 0.06 $ 0.11 $ 0.05 $ 0.11 $ 0.05
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* The Fund commenced operations on November 1, 1993. On July 1, 1994 the Fund commenced selling Class B and Class S shares in
addition to Class A shares. Those shares in existence prior to July 1, 1994 were designated Class A shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses absorbed by the investment
advisor and/or administrator or if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
# Amount represents less than $0.01 per share.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
See notes to financial statements.
</TABLE>
49
<PAGE> 52
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SHORT TERM GLOBAL GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
----------------------------------------------------------- ----------------------- -----------------------
YEAR YEAR YEAR YEAR PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96++ 06/30/95 06/30/94 06/30/93 06/30/92* 06/30/96++ 06/30/95* 06/30/96++ 06/30/95*
---------- -------- -------- -------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning of
year........ $ 2.24 $ 2.34 $ 2.48 $ 2.56 $ 2.50 $ 2.24 $ 2.34 $ 2.24 $ 2.34
-------- ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income...... 0.15 0.17 0.17 0.19 0.07 0.13 0.15 0.13 0.15
Net realized
and
unrealized
gain/(loss)
on
investments... 0.07 (0.12) (0.14) (0.04) 0.07 0.07 (0.12) 0.07 (0.12)
-------- ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations... 0.22 0.05 0.03 0.15 0.14 0.20 0.03 0.20 0.03
LESS
DISTRIBUTIONS:
Dividends from
net
investment
income...... (0.16) (0.02) (0.13) (0.20) (0.08) (0.14) (0.00)# (0.14) (0.00)#
Distributions
in excess of
net
investment
income...... (0.01) (0.00)# (0.03) -- -- (0.01) (0.00)# (0.01) (0.00)#
Distributions
in excess of
net realized
gains....... -- (0.01) (0.01) (0.03) -- -- (0.01) -- (0.01)
Distributions
from capital
(Note 2).... -- (0.12) (0.00)# -- -- -- (0.12) -- (0.12)
-------- ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions.. (0.17) (0.15) (0.17) (0.23) (0.08) (0.15) (0.13) (0.15) (0.13)
-------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset
value, end
of year..... $ 2.29 $ 2.24 $ 2.34 $ 2.48 $ 2.56 $ 2.29 $ 2.24 $ 2.29 $ 2.24
======== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 10.16% 2.10% 1.10% 6.03% 5.34% 9.33% 1.33% 9.33% 1.33%
======== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO
AVERAGE NET
ASSETS/
SUPPLEMENTAL
DATA:
Net assets,
end of year
(in 000's).. $ 65,726 $103,986 $220,824 $215,348 $106,609 $1,594 $1,297 $2,211 $2,286
Ratio of
operating
expenses to
average net
assets...... 0.85% 0.85% 0.85% 0.73% 0.41%** 1.60% 1.60% 1.60% 1.60%
Ratio of net
investment
income to
average net
assets...... 6.75% 7.22% 6.87% 7.67% 8.65%** 6.00% 6.47% 6.00% 6.47%
Portfolio
turnover
rate........ 87% 217% 222% 294% 81% 87% 217% 87% 217%
Ratio of
operating
expenses to
average net
assets
without fees
reduced by
credits
allowed by
the
custodian... 0.85%(a) N/A N/A N/A N/A 1.60%(a) N/A 1.60%(a) N/A
Ratio of
operating
expenses to
average net
assets
without fee
waivers,
expenses
absorbed
and/or fees
reduced by
credits
allowed by
the
custodian... 1.47%(a) 1.44% 1.52% 1.55% 1.92%** 2.22%(a) 2.19% 2.22%(a) 2.19%
Net investment
income per
share
without fee
waivers,
expenses
absorbed
and/or fees
reduced by
credits
allowed by
the
custodian... $ 0.14 $ 0.16 $ 0.16 $ 0.17 $ 0.06 $ 0.12 $ 0.14 $ 0.12 $ 0.14
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* The Fund commenced operations on February 11, 1992. On July 1, 1994 the Fund commenced selling Class B and Class S shares in
addition to Class A shares. Those shares in existence prior to July 1, 1994 were designated Class A shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses absorbed by the investment
advisor, administrator and/or distributor or if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
# Amount represents less than $0.01 per share.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
See notes to financial statements.
</TABLE>
50
<PAGE> 53
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
-------------------------------------------------------- --------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96 06/30/95 06/30/94 06/30/93 06/30/92 06/30/96 06/30/95* 06/30/96 06/30/95*
-------- -------- -------- -------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year.............. $ 9.67 $ 9.45 $ 10.65 $10.52 $ 10.04 $ 9.67 $ 9.45 $ 9.67 $ 9.45
------ -------- -------- ------ -------- ------- ------- ------- ------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income............ 0.67 0.70 0.75 0.74 0.84 0.60 0.63 0.60 0.63
Net realized and
unrealized
gain/(loss) on
investments....... (0.26) 0.22 (1.21) 0.16 0.49 (0.26) 0.22 (0.26) 0.22
------ -------- -------- ------ -------- ------- ------- ------- ------
Total from
investment
operations........ 0.41 0.92 (0.46) 0.90 1.33 0.34 0.85 0.34 0.85
LESS DISTRIBUTIONS:
Dividends from net
investment
income............ (0.67) (0.70) (0.64) (0.74) (0.84) (0.60) (0.63) (0.60) (0.63)
Distributions in
excess of net
realized gains.... -- -- (0.10) -- -- -- -- -- --
Distributions from
capital (Note
2)................ -- -- -- (0.03) (0.01) -- -- -- --
------- -------- -------- ------ -------- ------- ------- ------- ------
Total
distributions..... (0.67) (0.70) (0.74) (0.77) (0.85) (0.60) (0.63) (0.60) (0.63)
------- -------- -------- ------ -------- ------- ------- ------- ------
Net asset value, end
of year........... $ 9.41 $ 9.67 $ 9.45 $10.65 $ 10.52 $ 9.41 $ 9.67 $ 9.41 $ 9.67
====== ======== ======== ====== ======== ======= ======= ======= ======
TOTAL RETURN+ 4.34% 10.17% (4.59)% 8.87% 13.74% 3.56% 9.36% 3.56% 9.36%
======== ======== ======== ====== ======== ======= ======= ======= ======
RATIOS TO AVERAGE
NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of
year (in 000's)... $423,282 $459,968 $666,566 $842,277 $504,776 $23,668 $10,646 $35,667 $6,839
Ratio of operating
expenses to
average net
assets............ 0.70% 0.95% 1.05% 0.91% 0.72% 1.45% 1.70% 1.45% 1.70%
Ratio of net
investment income
to average
net assets........ 7.34% 7.58% 7.26% 6.98% 7.67% 6.59% 6.83% 6.59% 6.83%
Portfolio turnover
rate.............. 356% 226% 27% 67% 35% 356% 226% 356% 226%
Ratio of operating
expenses to
average net assets
without fees
reduced by credits
allowed by the
custodian......... 0.71%(a) N/A N/A N/A N/A 1.46%(a) N/A 1.46%(a) N/A
Ratio of operating
expenses to
average net assets
without fee
waivers, expenses
absorbed and/or
fees reduced by
credits allowed by
the custodian..... 1.45%(a) 1.59% 1.34% 1.34% 1.39% 2.20%(a) 2.34% 2.20%(a) 2.34%
Ratio of operating
expenses to
average net assets
including interest
expense........... 0.82% 1.22% 1.06% 0.91% 0.72% 1.57% 1.97% 1.57% 1.97%
Net investment
income per share
without fee
waivers, expenses
absorbed and/or
fees reduced by
credits allowed by
the custodian..... $ 0.62 $ 0.66 $ 0.72 $ 0.70 $ 0.77 $ 0.55 $ 0.59 $ 0.55 $ 0.59
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses absorbed by the investment
advisor, administrator and/or distributor or if fees had not been reduced by credits allowed by the custodian.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
See notes to financial statements.
</TABLE>
51
<PAGE> 54
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CORPORATE INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
-------------------------------------------------------- --------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96 06/30/95 06/30/94 06/30/93 06/30/92 06/30/96 06/30/95* 06/30/96 06/30/95*
-------- -------- -------- -------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year.............. $10.52 $ 9.87 $ 11.33 $ 10.52 $ 9.87 $ 10.52 $ 9.87 $ 10.52 $ 9.87
------- -------- -------- -------- -------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income............ 0.76 0.68 0.80 0.84 0.91 0.68 0.61 0.68 0.61
Net realized and
unrealized
gain/(loss) on
investments....... (0.36) 0.78 (1.35) 0.84 0.64 (0.36) 0.78 (0.36) 0.78
------- -------- -------- -------- -------- ------- ------- ------- -------
Total from
investment
operations........ 0.40 1.46 (0.55) 1.68 1.55 0.32 1.39 0.32 1.39
LESS DISTRIBUTIONS:
Dividends from net
investment
income............ (0.76) (0.68) (0.78) (0.84) (0.90) (0.68) (0.61) (0.68) (0.61)
Distributions in
excess of net
investment
income............ -- (0.09) (0.01) -- -- -- (0.09) -- (0.09)
Distributions from
net realized
gains............. -- -- (0.06) -- -- -- -- -- --
Distributions in
excess of net
realized gains.... -- -- (0.06) -- -- -- -- -- --
Distributions from
capital (Note
2)................ (0.00)# (0.04) -- (0.03) -- (0.00)# (0.04) (0.00)# (0.04)
------- -------- -------- -------- -------- ------- ------- ------- -------
Total
distributions..... (0.76) (0.81) (0.91) (0.87) (0.90) (0.68) (0.74) (0.68) (0.74)
------- -------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end
of year........... $10.16 $ 10.52 $ 9.87 $ 11.33 $ 10.52 $ 10.16 $ 10.52 $ 10.16 $ 10.52
======= ======== ======== ======== ======== ======= ======= ======= =======
TOTAL RETURN+ 3.81% 15.57% (5.32)% 16.64% 16.29% 3.04% 14.73% 3.04% 14.73%
======= ======== ======== ======== ======== ======= ======= ======= =======
RATIOS TO AVERAGE
NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of
year (in 000's)... $298,518 $383,642 $472,519 $396,357 $169,682 $24,606 $15,145 $12,011 $8,701
Ratio of operating
expenses to
average net
assets............ 0.95% 0.90% 1.35% 1.24% 0.97% 1.70% 1.65% 1.70% 1.65%
Ratio of net
investment income
to average
net assets........ 7.23% 8.26% 7.19% 7.67% 8.29% 6.48% 7.51% 6.48% 7.51%
Portfolio turnover
rate.............. 25% 55% 30% 37% 8% 25% 55% 25% 55%
Ratio of operating
expenses to
average net assets
without fees
reduced by credits
allowed by the
custodian......... 0.95%(a) N/A N/A N/A N/A 1.70% (a) N/A 1.70% (a) N/A
Ratio of operating
expenses to
average net assets
without fee
waivers and/or
fees reduced by
credits allowed by
the custodian..... 1.38%(a) 1.40% 1.42% 1.42% 1.48% 2.13% (a) 2.15% 2.13% (a) 2.15%
Net investment
income per share
without fee
waivers and/or
fees reduced by
credits allowed by
the custodian..... $ 0.72 $ 0.64 $ 0.80 $ 0.82 $ 0.85 $ 0.64 $ 0.57 $ 0.64 $ 0.57
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor, administrator and/or
distributor or if fees had not been reduced by credits allowed by the custodian.
# Amount represents less than $0.01 per share.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
See notes to financial statements.
</TABLE>
52
<PAGE> 55
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
---------------------------------------------------------- ----------------------- -----------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96++ 06/30/95 06/30/94 06/30/93 06/30/92 06/30/96++ 06/30/95* 06/30/96++ 06/30/95*
---------- -------- -------- -------- -------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year.......... $10.53 $10.38 $ 11.22 $ 10.45 $ 10.07 $ 10.53 $ 10.38 $10.53 $ 10.38
------ ------ -------- -------- -------- ------- ------- ------ -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income........ 0.60 0.61 0.61 0.62 0.65 0.51 0.53 0.51 0.53
Net realized and
unrealized
gain/(loss) on
investments... 0.07 0.15 (0.82) 0.77 0.38 0.07 0.15 0.07 0.15
------ ------ -------- -------- -------- ------- ------- ------ -------
Total from
investment
operations.... 0.67 0.76 (0.21) 1.39 1.03 0.58 0.68 0.58 0.68
LESS
DISTRIBUTIONS:
Dividends from
net
investment
income........ (0.60) (0.61) (0.61) (0.62) (0.65) (0.51) (0.53) (0.51) (0.53)
Distributions in
excess of net
investment
income........ -- -- (0.00)# -- -- -- -- -- --
Distributions
from net
realized
gains......... -- (0.00)# -- -- -- -- (0.00)# -- (0.00)#
Distributions in
excess of net
realized
gains......... -- -- (0.02) -- -- -- -- -- --
------ ------ -------- -------- -------- ------- ------- ------ -------
Total
distributions... (0.60) (0.61) (0.63) (0.62) (0.65) (0.51) (0.53) (0.51) (0.53)
------ ------ -------- -------- -------- ------- ------- ------ -------
Net asset value,
end of year... $10.60 $10.53 $ 10.38 $ 11.22 $ 10.45 $ 10.60 $ 10.53 $10.60 $ 10.53
====== ====== ======== ======== ======== ======= ======= ====== =======
TOTAL RETURN+ 6.40% 7.57% (2.19)% 13.84% 10.56% 5.61% 6.78% 5.61% 6.78%
====== ====== ======== ======== ======== ======= ======= ====== =======
RATIOS TO
AVERAGE NET
ASSETS/
SUPPLEMENTAL
DATA:
Net assets, end
of year (in
000's)........ $372,177 $405,967 $509,223 $511,364 $309,146 $20,543 $7,230 $11 $11
Ratio of
operating
expenses to
average net
assets........ 0.94% 0.85% 0.79% 0.80% 0.94% 1.69% 1.60% 1.69% 1.60%
Ratio of net
investment
income to
average net
assets........ 5.56% 5.89% 5.45% 5.74% 6.08% 4.81% 5.14% 4.81% 5.14%
Portfolio
turnover
rate.......... 17% 22% 50% 41% 29% 17% 22% 17% 22%
Ratio of
operating
expenses to
average net
assets without
fees reduced
by credits
allowed by the
custodian..... 0.94%(a) N/A N/A N/A N/A 1.69%(a) N/A 1.69%(a) N/A
Ratio of
operating
expenses to
average net
assets without
fee waivers
and/or fees
reduced by
credits
allowed by the
custodian..... 1.29%(a) 1.29% 1.39% 1.41% 1.40% 2.04%(a) 2.04% 2.04%(a) 2.04%
Net investment
income per
share without
fee waivers
and/or fees
reduced by
credits
allowed by the
custodian..... $ 0.56 $ 0.56 $ 0.54 $ 0.56 $ 0.60 $ 0.47 $ 0.48 $ 0.47 $ 0.48
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor, administrator and/or
distributor or if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
# Amount represents less than $0.01 per share.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
53
<PAGE> 56
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
------------------------------------------------ ---------------------- ----------------------
YEAR YEAR YEAR PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96 06/30/95 06/30/94 06/30/93* 06/30/96 06/30/95* 06/30/96 06/30/95*
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year................. $ 9.43 $ 9.40 $ 10.05 $ 10.00 $ 9.43 $ 9.40 $ 9.43 $ 9.40
------- ------- -------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income..... 0.50 0.52 0.52 0.00# 0.42 0.45 0.42 0.45
Net realized and
unrealized gain/(loss)
on investments.......... 0.21 0.03## (0.65) 0.05 0.21 0.03## 0.21 0.03##
------- ------- -------- ------- ------- ------- ------- -------
Total from investment
operations.............. 0.71 0.55 (0.13) 0.05 0.63 0.48 0.63 0.48
LESS DISTRIBUTIONS:
Dividends from net
investment income....... (0.50) (0.52) (0.52) -- (0.42) (0.45) (0.42) (0.45)
Distributions in excess of
net investment income... -- -- (0.00)# -- -- -- -- --
Distributions in excess of
net realized gains...... -- -- (0.00)# -- -- -- -- --
------- ------- -------- ------- ------- ------- ------- -------
Total distributions....... (0.50) (0.52) (0.52) -- (0.42) (0.45) (0.42) (0.45)
------- ------- -------- ------- ------- ------- ------- -------
Net asset value, end of
year.................... $ 9.64 $ 9.43 $ 9.40 $ 10.05 $ 9.64 $ 9.43 $ 9.64 $ 9.43
======= ======= ======== ======= ======= ======= ======= =======
TOTAL RETURN+ 7.56% 6.01% (1.50)% 0.50% 6.76% 5.23% 6.76% 5.23%
======= ======= ======== ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year
(in 000's).............. $29,821 $33,714 $38,541 $4,837 $5,428 $3,330 $11 $11
Ratio of operating
expenses to average
net assets.............. 0.63% 0.39% 0.00% 0.00%** 1.38% 1.14% 1.38% 1.14%
Ratio of net investment
income to average net
assets.................. 5.08% 5.53% 5.09% 0.48%** 4.33% 4.78% 4.33% 4.78%
Portfolio turnover rate... 52% 44% 83% 0% 52% 44% 52% 44%
Ratio of operating
expenses to average net
assets without fees
reduced by credits
allowed by the
custodian............... 0.66%(a) N/A N/A N/A 1.41%(a) N/A 1.41%(a) N/A
Ratio of operating
expenses to average net
assets without fee
waivers, expenses
absorbed and/or fees
reduced by credits
allowed by the
custodian............... 1.46%(a) 1.51% 1.55% 5.59%** 2.21%(a) 2.26% 2.21%(a) 2.26%
Net investment
income/(loss) per share
without fee waivers,
expenses absorbed and/or
fees reduced by credits
allowed by the
custodian............... $ 0.42 $ 0.42 $ 0.36 $ (0.02) $ 0.34 $ 0.35 $ 0.34 $ 0.35
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* The Fund commenced operations on June 7, 1993. On July 1, 1994 the Fund commenced selling Class B and Class S shares in
addition to Class A shares. Those shares in existence prior to July 1, 1994 were designated Class A shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses absorbed by the investment
advisor and administrator or if fees had not been reduced by credits allowed by the custodian.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
54
<PAGE> 57
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
--------------------------------- --------------------- ---------------------
YEAR YEAR PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96 06/30/95 06/30/94* 06/30/96 06/30/95* 06/30/96 06/30/95*
-------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year......... $ 10.45 $ 10.10 $ 10.00 $ 10.45 $ 10.10 $10.45 $ 10.10
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.49 0.50 0.11 0.41 0.43 0.41 0.43
Net realized and unrealized gain on
investments.............................. 0.15 0.35 0.11## 0.15 0.35 0.15 0.35
------- ------- ------- ------- ------- ------- -------
Total from investment operations........... 0.64 0.85 0.22 0.56 0.78 0.56 0.78
LESS DISTRIBUTIONS:
Dividends from net investment income....... (0.49) (0.50) (0.11) (0.41) (0.43) (0.41) (0.43)
Distributions from net realized gains...... (0.04) -- (0.01) (0.04) -- (0.04) --
------- ------- ------- ------- ------- ------- -------
Total distributions........................ (0.53) (0.50) (0.12) (0.45) (0.43) (0.45) (0.43)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of year............... $ 10.56 $ 10.45 $ 10.10 $ 10.56 $ 10.45 $10.56 $ 10.45
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 6.25% 8.71% 2.20% 5.46% 7.90% 5.46% 7.90%
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year (in 000's)......... $54,518 $54,507 $34,147 $20,948 $12,391 $11 $11
Ratio of operating expenses to average net
assets................................... 0.73% 0.42% 0.00%** 1.48% 1.17% 1.48% 1.17%
Ratio of net investment income to average
net assets............................... 4.62% 4.95% 4.25%** 3.87% 4.20% 3.87% 4.20%
Portfolio turnover rate.................... 27% 13% 17% 27% 13% 27% 13%
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian................. 0.75%(a) N/A N/A 1.50%(a) N/A 1.50%(a) N/A
Ratio of operating expenses to average net
assets without fee waivers, expenses
absorbed and/or fees reduced by credits
allowed by the custodian................. 1.39%(a) 1.41% 1.95%** 2.14%(a) 2.16% 2.14%(a) 2.16%
Net investment income per share without fee
waivers, expenses absorbed and/or fees
reduced by credits allowed by
the custodian............................ $ 0.42 $ 0.40 $ 0.06 $ 0.34 $ 0.33 $ 0.34 $ 0.33
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* The Fund commenced operations on April 4, 1994. On July 1, 1994 the Fund commenced selling Class B and Class S shares in
addition to Class A shares. Those shares in existence prior to July 1, 1994 were designated Class A shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses absorbed by the investment
advisor and administrator or if fees had not been reduced by credits allowed by the custodian.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
55
<PAGE> 58
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
NATIONAL MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
-------------------------------------------------------- --------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96 06/30/95 06/30/94 06/30/93 06/30/92 06/30/96 06/30/95* 06/30/96 06/30/95*
-------- -------- -------- -------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year.............. $10.76 $10.85 $ 11.65 $ 10.96 $ 10.16 $10.76 $ 10.85 $10.76 $ 10.85
------ ------ -------- -------- -------- ------ ------ ------ ------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income............ 0.61 0.64 0.65 0.67 0.72 0.53 0.56 0.53 0.56
Net realized and
unrealized
gain/(loss) on
investments....... 0.07 0.01## (0.73) 0.75 0.79 0.07 0.01## 0.07 0.01##
------ ------ -------- -------- -------- ------ ------ ------ ------
Total from
investment
operations........ 0.68 0.65 (0.08) 1.42 1.51 0.60 0.57 0.60 0.57
LESS DISTRIBUTIONS:
Dividends from net
investment
income............ (0.61) (0.64) (0.65) (0.67) (0.71) (0.53) (0.56) (0.53) (0.56)
Distributions in
excess of net
investment
income............ -- -- (0.00)# -- -- -- -- -- --
Distributions from
net realized
gains............. -- (0.01) (0.07) (0.06) -- -- (0.01) -- (0.01)
Distributions in
excess of net
realized gains.... -- (0.09) -- -- -- -- (0.09) -- (0.09)
------ ------ -------- -------- -------- ------ ------ ------ ------
Total
distributions..... (0.61) (0.74) (0.72) (0.73) (0.71) (0.53) (0.66) (0.53) (0.66)
------ ------ -------- -------- -------- ------ ------ ------ ------
Net asset value, end
of year........... $10.83 $10.76 $ 10.85 $ 11.65 $ 10.96 $10.83 $ 10.76 $10.83 $ 10.76
====== ====== ======== ======== ======== ====== ====== ====== ======
TOTAL RETURN+ 6.41% 6.32% (0.90)% 13.41% 15.42% 5.62% 5.54% 5.62% 5.54%
====== ====== ======== ======== ======== ====== ====== ====== ======
RATIOS TO AVERAGE
NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of
year (in 000's)... $233,359 $269,033 $354,501 $390,187 $226,984 $6,800 $4,786 $11 $11
Ratio of operating
expenses to
average net
assets............ 1.04% 0.83% 0.87% 0.86% 0.64% 1.79% 1.58% 1.79% 1.58%
Ratio of net
investment income
to average net
assets............ 5.58% 5.97% 5.60% 5.89% 6.34% 4.83% 5.22% 4.83% 5.22%
Portfolio turnover
rate.............. 25% 23% 44% 83% 61% 25% 23% 25% 23%
Ratio of operating
expenses to
average net assets
without fees
reduced by credits
allowed by the
custodian......... 1.04%(a) N/A N/A N/A N/A 1.79%(a) N/A 1.79%(a) N/A
Ratio of operating
expenses to
average net assets
without fee
waivers, expenses
absorbed and/or
fees reduced by
credits allowed by
the custodian..... 1.29%(a) 1.30% 1.36% 1.37% 1.40% 2.04%(a) 2.05% 2.04%(a) 2.05%
Net investment
income per share
without fee
waivers, expenses
absorbed and/or
fees reduced by
credits allowed by
the custodian..... $ 0.58 $ 0.59 $ 0.59 $ 0.61 $ 0.63 $ 0.50 $ 0.51 $ 0.50 $ 0.51
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses absorbed by the investment
advisor, administrator and/or distributor or if fees had not been reduced by credits allowed by the custodian.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
56
<PAGE> 59
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GROWTH AND INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
---------------------------------------------------------- ----------------------- -----------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96++ 06/30/95 06/30/94 06/30/93 06/30/92 06/30/96++ 06/30/95* 06/30/96++ 06/30/95*
---------- -------- -------- -------- -------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning of
year......... $ 12.58 $ 11.30 $12.09 $ 11.25 $ 10.51 $ 12.55 $ 11.30 $ 12.55 $ 11.30
-------- -------- ------ ------- ------- -------- ------- -------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income/(loss)... 0.08 0.13 0.12 0.12 0.17 (0.02) 0.05 (0.02) 0.05
Net realized
and
unrealized
gain on
investments... 2.51 2.04 0.72 0.91 0.74 2.50 2.04 2.51 2.04
-------- -------- ------ ------- ------- -------- ------- -------- -------
Total from
investment
operations... 2.59 2.17 0.84 1.03 0.91 2.48 2.09 2.49 2.09
LESS
DISTRIBUTIONS:
Dividends from
net
investment
income....... (0.08) (0.12) (0.12) (0.12) (0.17) (0.01) (0.07) (0.01) (0.07)
Distributions
from net
realized
gains........ (0.99) (0.77) (1.51) (0.07) -- (0.99) (0.77) (0.99) (0.77)
-------- -------- ------ ------- ------- -------- ------- -------- -------
Total
distributions... (1.07) (0.89) (1.63) (0.19) (0.17) (1.00) (0.84) (1.00) (0.84)
-------- -------- ------ ------- ------- -------- ------- -------- -------
Net asset
value, end of
year......... $ 14.10 $ 12.58 $11.30 $ 12.09 $ 11.25 $ 14.03 $ 12.55 $ 14.04 $ 12.55
======== ======== ====== ======= ======= ======== ======= ======== =======
TOTAL RETURN+ 21.36% 20.47% 6.67% 9.20% 8.65% 20.53% 19.67% 20.51% 19.75%
======== ======== ====== ======= ======= ======== ======= ======== =======
RATIOS TO
AVERAGE NET
ASSETS/
SUPPLEMENTAL
DATA:
Net assets, end
of year (in
000's)....... $183,084 $170,177 $125,249 $97,873 $83,825 $23,924 $6,918 $29,481 $14,368
Ratio of
operating
expenses to
average net
assets....... 1.54% 1.56% 1.50% 1.46% 1.50% 2.29% 2.31% 2.29% 2.31%
Ratio of net
investment
income/(loss)
to average
net assets... 0.60% 1.11% 1.04% 1.01% 1.51% (0.15)% 0.36% (0.15)% 0.36%
Portfolio
turnover
rate......... 90% 72% 127% 47% 16% 90% 72% 90% 72%
Ratio of
operating
expenses to
average net
assets
without fees
reduced by
credits
allowed by
the
custodian.... 1.54%(a) N/A N/A N/A N/A 2.29%(a) N/A 2.29%(a) N/A
Ratio of
operating
expenses to
average net
assets
without fee
waivers
and/or fees
reduced by
credits
allowed by
the
custodian.... 1.54%(a) 1.56% 1.59% 1.46% 1.55% 2.29%(a) 2.31% 2.29%(a) 2.31%
Net investment
income/(loss)
per share
without fee
waivers
and/or fees
reduced by
credits
allowed by
the
custodian.... $ 0.08 $ 0.13 $ 0.11 $ 0.12 $ 0.16 $ (0.02) $ 0.05 $ (0.02) $ 0.05
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor and/or administrator or
if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
57
<PAGE> 60
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
------------------------------------------------- ------------------------- -------------------------
YEAR YEAR YEAR PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96++ 06/30/95++ 06/30/94 06/30/93* 06/30/96++ 06/30/95*++ 06/30/96++ 06/30/95*++
---------- ---------- -------- --------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year.............. $ 14.18 $ 10.73 $ 10.72 $ 10.00 $ 14.10 $ 10.73 $ 14.11 $ 10.73
-------- -------- -------- ------- --------- --------- -------- ---------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income/(loss)..... (0.07) 0.05 (0.02) 0.00# (0.19) (0.04) (0.19) (0.04)
Net realized and
unrealized gain on
investments....... 3.47 3.42 0.03## 0.72 3.45 3.42 3.44 3.42
-------- -------- -------- ------- --------- --------- -------- ---------
Total from
investment
operations........ 3.40 3.47 0.01 0.72 3.26 3.38 3.25 3.38
LESS DISTRIBUTIONS:
Dividends from net
investment
income............ -- (0.02) -- -- -- (0.01) -- (0.00)#
Distributions from
net realized
gains............. (1.89) (0.00)# -- -- (1.89) (0.00)# (1.89) (0.00)#
-------- -------- -------- ------- --------- --------- -------- ---------
Total
distributions..... (1.89) (0.02) -- -- (1.89) (0.01) (1.89) (0.00)
-------- -------- -------- ------- --------- --------- -------- ---------
Net asset value, end
of year........... $ 15.69 $ 14.18 $ 10.73 $ 10.72 $ 15.47 $ 14.10 $ 15.47 $ 14.11
======== ======== ======== ======= ========= ========= ======== =========
TOTAL RETURN+ 25.44% 32.33% 0.00% 7.30% 24.54% 31.46% 24.54% 31.44%
======== ======== ======== ======= ========= ========= ======== =========
RATIOS TO AVERAGE
NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of
year (in 000's)... $179,720 $154,763 $126,808 $23,323 $ 25,067 $ 6,928 $ 45,652 $ 18,730
Ratio of operating
expenses to
average net
assets............ 1.70% 1.76% 1.75% 1.44%** 2.45% 2.51% 2.45% 2.51%
Ratio of net
investment
income/(loss) to
average net
assets............ (0.49)% 0.28% (0.35)% (0.63)%** (1.24)% (0.47)% (1.24)% (0.47)%
Portfolio turnover
rate.............. 205% 233% 227% 13% 205% 233 % 205% 233%
Ratio of operating
expenses to
average net assets
without fees
reduced by credits
allowed by the
custodian......... 1.71%(a) N/A N/A N/A 2.46%(a) N/A 2.46%(a) N/A
Ratio of operating
expenses to
average net assets
without fee
waivers, expenses
absorbed and/or
fees reduced by
credits allowed by
the custodian..... 1.71%(a) 1.76% 1.75% 2.52%** 2.46%(a) 2.51% 2.46%(a) 2.51%
Net investment
income/(loss) per
share without fee
waivers, expenses
absorbed and/or
fees reduced by
credits allowed by
the custodian..... $ (0.07) $ 0.05 $ (0.02) $ (0.01) $ (0.19) $ (0.04) $ (0.19) $ (0.04)
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* The Fund commenced operations on April 5, 1993. On July 1, 1994 the Fund commenced selling Class B and Class S shares in
addition to Class A shares. Those shares in existence prior to July 1, 1994 were designated Class A shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and expenses absorbed by the investment advisor
or if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
58
<PAGE> 61
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
---------------------------------------------------------- ------------------------ ------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96++ 06/30/95++ 06/30/94 06/30/93 06/30/92++ 06/30/96++ 06/30/95*++ 06/30/96++ 06/30/95*++
---------- ---------- -------- -------- ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year.......... $ 15.47 $ 13.02 $ 13.76 $ 11.67 $ 9.62 $ 15.37 $ 13.02 $ 15.37 $ 13.02
-------- -------- ------- ------- -------- -------- ------- -------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
loss.......... (0.19) (0.00)# (0.09) (0.02) (0.01) (0.32) (0.10) (0.32) (0.10)
Net realized and
unrealized
gain on
investments... 5.65 2.77 0.68 2.31 2.16 5.59 2.77 5.59 2.77
-------- -------- ------- ------- -------- -------- ------- -------- -------
Total from
investment
operations.... 5.46 2.77 0.59 2.29 2.15 5.27 2.67 5.27 2.67
LESS
DISTRIBUTIONS:
Dividends from
net investment
income........ -- -- -- -- (0.01) -- -- -- --
Distributions
from net
realized
gains......... (0.76) (0.32) (1.33) (0.20) (0.08) (0.76) (0.32) (0.76) (0.32)
Distributions
from capital
(Note 2)...... -- -- -- -- (0.01) -- -- -- --
-------- -------- ------- ------- -------- -------- ------- -------- -------
Total
distributions... (0.76) (0.32) (1.33) (0.20) (0.10) (0.76) (0.32) (0.76) (0.32)
-------- -------- ------- ------- -------- -------- ------- -------- -------
Net asset value,
end of year... $ 20.17 $ 15.47 $ 13.02 $ 13.76 $ 11.67 $ 19.88 $ 15.37 $ 19.88 $ 15.37
======== ======== ======= ======= ======== ======== ======= ======== =======
TOTAL RETURN+ 35.93% 21.54% 3.40% 19.75% 22.47% 34.93% 20.69% 34.91% 20.76%
======== ======== ======= ======= ======== ======== ======= ======== =======
RATIOS TO
AVERAGE NET
ASSETS/
SUPPLEMENTAL
DATA:
Net assets, end
of year (in
000's)........ $283,747 $185,722 $124,941 $96,646 $27,652 $28,920 $10,208 $43,645 $11,840
Ratio of
operating
expenses to
average net
assets........ 1.64% 1.68% 1.66% 1.59% 1.93% 2.39% 2.43% 2.39% 2.43%
Ratio of net
investment
loss to
average net
assets........ (1.02)% (0.31)% (0.68)% (0.32)% (0.04)% (1.77)% (1.06)% (1.77)% (1.06)%
Portfolio
turnover
rate.......... 131% 181% 224% 28% 60% 131% 181% 131% 181%
Ratio of
operating
expenses to
average net
assets without
fees reduced
by credits
allowed by the
custodian..... 1.65%(a) N/A N/A N/A N/A 2.40%(a) N/A 2.40%(a) N/A
Ratio of
operating
expenses to
average net
assets without
fee waivers
and/or fees
reduced by
credits
allowed by the
custodian..... 1.65%(a) 1.68% 1.66% 1.59% 1.93% 2.40%(a) 2.43% 2.40%(a) 2.43%
Net investment
loss per share
without fee
waivers and/or
fees reduced
by credits
allowed by the
custodian..... $ (0.19) $ (0.00)# $ (0.09) $ (0.02) $ (0.01) $ (0.32) $ (0.10) $ (0.32) $ (0.10)
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
# Amount represents less than $0.01 per share.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
See notes to financial statements.
</TABLE>
59
<PAGE> 62
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS S SHARES
-------------------------------------------------------- ------------------------ ------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/96++ 06/30/95++ 06/30/94 06/30/93 06/30/92 06/30/96++ 06/30/95*++ 06/30/96++ 06/30/95*++
---------- ---------- -------- -------- -------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year............ $ 9.78 $ 10.74 $ 9.80 $ 8.82 $ 8.27 $ 9.73 $ 10.74 $ 9.73 $ 10.74
-------- -------- -------- ------- ------- -------- --------- -------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income/(loss)... 0.05 (0.11) 0.06 0.07 0.05 (0.03) (0.17) (0.03) (0.17)
Net realized and
unrealized
gain/(loss) on
investments..... 1.21 (0.31) 1.15 0.94 0.55 1.21 (0.31) 1.20 (0.31)
-------- -------- -------- ------- ------- -------- --------- -------- -------
Total from
investment
operations...... 1.26 (0.42) 1.21 1.01 0.60 1.18 (0.48) 1.17 (0.48)
LESS
DISTRIBUTIONS:
Dividends from net
investment
income.......... (0.05) (0.04) (0.02) (0.03) (0.05) (0.02) (0.03) (0.02) (0.03)
Distributions in
excess of net
investment
income.......... (0.04) -- -- -- -- (0.04) -- (0.04) --
Distributions from
net realized
gains........... (0.46) (0.44) (0.25) -- -- (0.46) (0.44) (0.46) (0.44)
Distributions in
excess of net
realized
gains........... -- (0.06) -- -- -- -- (0.06) -- (0.06)
-------- -------- -------- ------- ------- -------- --------- -------- -------
Total
distributions... (0.55) (0.54) (0.27) (0.03) (0.05) (0.52) (0.53) (0.52) (0.53)
-------- -------- -------- ------- ------- -------- --------- -------- -------
Net asset value,
end of year..... $ 10.49 $ 9.78 $ 10.74 $ 9.80 $ 8.82 $ 10.39 $ 9.73 $ 10.38 $ 9.73
======== ======== ======== ======= ======= ======== ========= ======== =======
TOTAL RETURN+ 13.16% (4.01)% 12.39% 11.51% 7.28% 12.34% (4.61)% 12.29% (4.61)%
======== ======== ======== ======= ======= ======== ========= ======== =======
RATIOS TO AVERAGE
NET ASSETS/
SUPPLEMENTAL
DATA:
Net assets, end of
year (in 000's). $116,254 $ 91,763 $127,764 $56,962 $24,479 $ 4,447 $ 2,268 $ 38,900 $11,120
Ratio of operating
expenses to
average net
assets.......... 1.77% 1.69% 1.69% 1.80% 2.25% 2.52% 2.44% 2.52% 2.44%
Ratio of net
investment
income/(loss) to
average net
assets.......... 0.46% 0.62% 0.54% 1.07% 0.69% (0.29)% (0.13)% (0.29)% (0.13)%
Portfolio turnover
rate............ 125% 81% 44% 63% 66% 125% 81% 125% 81%
Ratio of operating
expenses to
average net
assets without
fees reduced by
credits allowed
by the
custodian....... 1.77%(a) N/A N/A N/A N/A 2.52%(a) N/A 2.52%(a) N/A
Ratio of operating
expenses to
average net
assets without
fee waivers
and/or fees
reduced by
credits allowed
by the
custodian....... 1.77%(a) 1.69% 1.69% 1.80% 2.29% 2.52%(a) 2.44% 2.52%(a) 2.44%
Net investment
income/(loss)
per share
without fee
waivers and/or
fees reduced by
credits allowed
by the
custodian....... $ 0.05 $ (0.11) $ 0.06 $ 0.07 $ 0.04 $ (0.03) $ (0.17) $ (0.03) $ (0.17)
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* On July 1, 1994 the Fund commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
+ Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor, administrator and/or
distributor or if fees had not been reduced by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
60
<PAGE> 63
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
TARGET MATURITY 2002 FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------
YEAR PERIOD
ENDED ENDED
06/30/96 06/30/95*
-------- ---------
<S> <C> <C>
Net asset value, beginning of year................................................................... $10.78 $ 10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................................................................ 0.63 0.12
Net realized and unrealized gain/(loss) on investments............................................... (0.30) 0.66
------ ------
Total from investment operations..................................................................... 0.33 0.78
LESS DISTRIBUTIONS:
Dividends from net investment income................................................................. (0.39) --
------ ------
Total distributions.................................................................................. (0.39) --
------ ------
Net asset value, end of year......................................................................... $10.72 $ 10.78
====== ======
TOTAL RETURN+ 2.91% 7.80%
====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)................................................................... $3,125 $2,626
Ratio of operating expenses to average net assets.................................................... 0.62% 0.74%**
Ratio of net investment income to average net assets................................................. 5.66% 5.22%**
Portfolio turnover rate.............................................................................. 5% 0%
Ratio of operating expenses to average net assets without fees reduced by credits allowed by the
custodian.......................................................................................... 0.70%(a) N/A
Ratio of operating expenses to average net assets without fee waivers, expenses absorbed and/or fees
reduced by credits allowed by the custodian........................................................ 2.55%(a) 4.71%**
Net investment income per share without fee waivers, expenses absorbed and/or fees reduced by credits
allowed by the custodian........................................................................... $ 0.41 $ 0.03
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* The Fund commenced operations on March 20, 1995.
** Annualized.
+ Total return represents aggregate total return for the period indicated and does not reflect any applicable sales charges.
The total return would have been lower if certain fees had not been waived and/or expenses absorbed by the investment advisor
and administrator or if fees had not been reduced by credits allowed by the custodian.
(a) The ratio includes custodian fees before reduction by credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
</TABLE>
61
<PAGE> 64
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GLOBAL MONEY FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMERCIAL PAPER -- (DOMESTIC) -- 30.7%
$7,000,000 AT&T Corporation,
5.280% due 07/03/1996++............. $ 6,997,947
7,500,000 BellSouth Capital Funding Corporation,
5.310% due 07/10/1996++............. 7,490,044
8,000,000 Coca-Cola Company,
5.350% due 08/08/1996++............. 7,954,822
7,500,000 Deere & Company,
5.310% due 07/09/1996++............. 7,491,150
7,500,000 Eli Lilly & Company,
5.350% due 07/01/1996++............. 7,500,000
7,000,000 Ford Motor Credit Company,
5.340% due 07/16/1996++............. 6,984,425
4,000,000 Southern Company,
5.400% due 07/02/1996++............. 3,999,400
5,381,000 UBS Finance, Inc.,
5.550% due 07/01/1996++............. 5,381,000
-----------
Total Commercial Paper -- (Domestic)
(Cost $53,798,788).................. 53,798,788
-----------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 21.7%
Federal Home Loan Mortgage Corporation
(FHLMC):
5,000,000 5.200% due 07/16/1996++............... 4,989,167
5,000,000 5.270% due 07/22/1996++............... 4,984,611
8,000,000 5.280% due 07/22/1996++............... 7,975,378
5,000,000 5.290% due 07/25/1996++............... 4,982,367
5,000,000 5.280% due 07/31/1996++............... 4,978,000
5,000,000 5.300% due 08/12/1996++............... 4,969,083
5,000,000 Federal National Mortgage
Association (FNMA),
5.670% due 06/11/1997++............. 4,996,339
-----------
Total U.S. Government Agency Discount
Notes (Cost $37,874,945)............ 37,874,945
-----------
CERTIFICATES OF DEPOSIT -- (YANKEE) -- 18.3%
4,000,000 Bayerische Vereinsbank,
5.320% due 07/23/1996............... 4,000,000
5,000,000 Canadian Imperial Bank of Commerce,
5.410% due 08/26/1996............... 5,000,000
8,000,000 Credit Agricole (Chicago),
5.330% due 07/22/1996............... 8,000,000
5,000,000 National Australia Bank,
5.750% due 10/02/1996............... 4,998,416
5,000,000 National Westminster Bank USA,
5.280% due 08/20/1996............... 5,000,069
5,000,000 Societe Generale, New York,
5.350% due 07/08/1996............... 5,000,019
-----------
Total Certificates of
Deposit -- (Yankee) (Cost
$31,998,504)........................ 31,998,504
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MEDIUM-TERM NOTES -- 13.7%
$5,000,000 Bayerische Landesbank,
5.354% due 01/15/1997+.............. $ 4,998,286
5,000,000 Federal Home Loan Bank (FHLB),
5.875% due 06/27/1997............... 4,993,818
Federal National Mortgage Association
(FNMA):
3,000,000 5.600% due 11/01/1996................. 2,998,356
4,000,000 5.370% due 12/18/1996................. 3,997,147
2,000,000 5.300% due 12/26/1996................. 1,997,938
5,000,000 John Deere Capital,
5.850% due 07/03/1997............... 4,996,500
-----------
Total Medium-Term Notes
(Cost $23,982,045).................. 23,982,045
-----------
COMMERCIAL PAPER -- (FOREIGN) -- 9.7%
5,000,000 Abbey National, N.A.,
5.075% due 07/26/1996++............. 4,982,378
4,000,000 Bayerische Vereinsbank,
5.310% due 07/03/1996++............. 3,998,820
8,000,000 Commerzbank U.S. Finance Inc.,
5.350% due 08/19/1996++............. 7,941,744
-----------
Total Commercial Paper -- (Foreign)
(Cost $16,922,942).................. 16,922,942
-----------
TIME DEPOSIT -- 1.4% (Cost $2,499,276)
2,500,000 NationsBank of Texas,
4.900% due 02/05/1997............... 2,499,276
-----------
CERTIFICATE OF DEPOSIT -- (DOMESTIC) -- 1.1%
(Cost $1,998,954)
2,000,000 Bank of New York,
5.550% due 04/01/1997............... 1,998,954
-----------
U.S. TREASURY BILL -- 0.2% (Cost $408,738)
415,000 5.030% due 10/17/1996++............... 408,738
-----------
TOTAL INVESTMENTS (COST $169,484,192*)..... 96.8% 169,484,192
OTHER ASSETS AND LIABILITIES (NET)......... 3.2 5,572,192
----- ------------
NET ASSETS................................. 100.0% $175,056,384
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Rate represents annualized yield at date of purchase (unaudited).
See Notes to Financial Statements.
62
<PAGE> 65
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
U.S. GOVERNMENT MONEY FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 98.2%
STUDENT LOAN MARKETING ASSOCIATION
(SLMA) -- 34.3%
$8,590,000 5.690% due 08/22/1996+................. $ 8,592,771
5,000,000 5.590% due 11/20/1997+................. 5,004,357
-----------
Total SLMAs (Cost $13,597,128)......... 13,597,128
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) -- 30.3%
2,700,000 Discount Note, 5.520% due
07/01/1996++......................... 2,700,000
6,900,000 Discount Note, 5.270% due
07/15/1996++......................... 6,885,859
400,000 Discount Note, 5.290% due
07/16/1996++......................... 399,118
1,900,000 Discount Note, 5.280% due
07/22/1996++......................... 1,894,148
100,000 Discount Note, 5.210% due
07/29/1996++......................... 99,595
-----------
Total FHLMCs (Cost $11,978,720)........ 11,978,720
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 17.7%
3,000,000 5.405% due 10/04/1996+................. 3,000,209
2,000,000 5.390% due 12/04/1996.................. 2,000,132
2,000,000 5.400% due 04/04/1997+................. 1,999,289
-----------
Total FNMAs (Cost $6,999,630).......... 6,999,630
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
FEDERAL HOME LOAN BANK (FHLB) -- 15.9%
$1,000,000 5.380% due 03/14/1997+................. $ 997,475
2,000,000 5.300% due 05/23/1997+................. 1,998,432
3,300,000 Discount Note, 5.230% due
07/19/1996++......................... 3,291,371
-----------
Total FHLBs (Cost $6,287,278).......... 6,287,278
-----------
Total U.S. Government Agency
Obligations (Cost $38,862,756)....... 38,862,756
-----------
U.S. TREASURY NOTE -- 5.1%
(Cost $2,021,902)
2,000,000 6.875% due 02/28/1997.................. 2,021,902
-----------
TOTAL INVESTMENTS (COST $40,884,658*)....... 103.3% 40,884,658
OTHER ASSETS AND LIABILITIES (Net).......... (3.3) (1,303,333)
----- -----------
NET ASSETS.................................. 100.0% $39,581,325
===== ===========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ Variable rate securities payable upon not more than seven calendar days'
notice. The interest rate shown reflects the rate currently in effect.
++ Rate represents annualized yield at date of purchase (unaudited).
See Notes to Financial Statements.
63
<PAGE> 66
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CALIFORNIA MONEY FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 111.6%
CALIFORNIA -- 111.6%
$2,500,000 Alameda County, Transportation
District, RAN, Series 96,
4.250% due 01/30/1997................ $ 2,507,017
Alameda County, IDR:
2,400,000 Heat and Control Inc., Series 95A,
3.300% due 11/01/2025+............... 2,400,000
2,400,000 JMS Family Partnership, Series 95A,
3.300% due 10/01/2025+............... 2,400,000
California Housing Finance Agency,
Home Mortgage:
2,200,000 Series 15A,
3.500% due 08/01/2025+............... 2,200,000
2,500,000 Series 96J,
4.000% due 07/24/1997................ 2,500,000
California Pollution Control Financing
Authority, Solid Waste Revenue:
3,000,000 Pacific Gas & Electric, Series 96B,
3.400% due 12/01/2016+............... 3,000,000
2,900,000 Western Waste Industries, Series 94A,
3.100% due 10/01/2006+............... 2,900,000
2,000,000 California School Cash Reserve Program
Authority, Series 95,
4.750% due 07/03/1996................ 2,000,033
1,000,000 California State Economic Development
Authority, IDR, National R.V. Inc.,
3.450% due 12/01/2020+............... 1,000,000
California Statewide Communities
Projects, IDR:
2,000,000 Howard Industrial Development, Series
95B,
3.400% due 07/01/2020+............... 2,000,000
1,120,000 Lorber Industries, Series 92,
3.400% due 06/01/1998+............... 1,120,000
500,000 Pacific Project, Series 89,
3.450% due 10/01/2009+............... 500,000
1,950,000 Independent Cities, Lease Finance
Authority, Series 88,
3.200% due 06/01/1998+............... 1,950,000
Los Angeles County:
2,400,000 MFHR, Studio Colony, Series C,
3.250% due 05/01/2007+............... 2,400,000
400,000 Museum of Art, Series 85A,
3.400% due 11/01/2005+............... 400,000
2,500,000 TRAN, Series 95,
4.500% due 07/01/1996................ 2,500,000
2,500,000 Moreno Valley, Unified School District,
GO, TRAN, Series 96,
4.500% due 06/30/1997................ 2,511,975
300,000 Oceanside, MFHR, Riverview Springs,
Series 90A,
3.800% due 07/01/2020+............... 300,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
$2,000,000 Orange County, COP, Florence Crittendon
Services, Series 90,
3.300% due 03/01/2016+............... $ 2,000,000
2,000,000 Riverside County, GO, School Financing
Authority, RAN,
4.625% due 07/17/1997................ 2,011,520
5,000,000 San Bernadino County, GO, TRAN, Series
95,
4.500% due 07/05/1996................ 5,000,268
San Francisco City and County:
2,030,000 IDR, Hoefer Scientific, Series 92A,
3.800% due 08/01/2007+............... 2,030,000
1,000,000 MFHR, Bayside Village Project, Series
85B,
3.400% due 12/01/2005+............... 1,000,000
Santa Clara:
500,000 Electric Revenue, Series 85B,
3.200% due 07/01/2010+............... 500,000
2,500,000 Unified School District, GO, TRAN,
Series 95,
4.500% due 07/10/1996................ 2,500,296
885,000 Santa Clara County Housing Authority,
MFHR, Avenida Espana Gardens,
Series 91A,
3.200% due 10/01/2021+............... 885,000
3,000,000 Turlock, Irrigation District, Series
88A,
3.100% due 01/01/2014+............... 3,000,000
2,400,000 Vallejo, IDR, Meyer Cookware, Series
93A,
3.450% due 12/01/2023+............... 2,400,000
1,420,000 Ventura, Unified School District, GO,
TRAN, Series 95,
4.750% due 07/05/1996................ 1,420,111
-----------
TOTAL INVESTMENTS (COST $57,336,220*)....... 111.6% 57,336,220
OTHER ASSETS AND LIABILITIES (NET).......... (11.6) (5,967,408)
----- -----------
NET ASSETS.................................. 100.0% $51,368,812
===== ===========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ Variable rate demand notes payable upon not more than seven calendar days'
notice. The interest rate shown reflects the rate currently in effect.
<TABLE>
<S> <C>
GLOSSARY OF TERMS
COP -- Certificates of Participation
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue
MFHR -- Multi-family Housing Revenue
RAN -- Revenue Anticipation Note
TRAN -- Tax and Revenue Anticipation Note
</TABLE>
See Notes to Financial Statements.
64
<PAGE> 67
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SHORT TERM HIGH QUALITY BOND FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 26.4%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) -- 16.3%
$ 299,399 #038720, Seasoned,
11.000% due 02/15/2010**............. $ 333,180
240,893 #130183, Seasoned,
11.000% due 05/15/2015**............. 268,177
229,876 #131917, Seasoned,
11.000% due 10/15/2015............... 255,911
160,831 #132833, Seasoned,
11.000% due 12/15/2015............... 179,252
110,452 #139704, Seasoned,
11.000% due 11/15/2015............... 123,103
230,506 #140835, Seasoned,
11.000% due 11/15/2015............... 256,276
119,270 #189482, Seasoned,
11.000% due 04/15/2020............... 133,065
1,320,660 #267824, Seasoned,
10.000% due 04/15/2018**............. 1,441,579
826,290 #279572, Seasoned,
9.000% due 12/15/2019**.............. 871,993
344,250 #291375, Seasoned,
11.000% due 08/15/2020**............. 384,714
81,069 #392937,
9.000% due 02/15/2025................ 84,844
422,474 #403698,
9.000% due 05/15/2025................ 442,144
492,456 #407180,
9.000% due 04/15/2025................ 515,385
1,031,923 #780081, Seasoned,
10.000% due 02/15/2025**............. 1,125,756
----------
Total GNMAs (Cost $6,404,131).......... 6,415,379
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 6.5%
33,039 #250247,
7.500% due 02/01/2010................ 33,229
36,792 #304366,
7.500% due 07/01/2010................ 37,005
28,529 #309390,
7.500% due 06/01/2010................ 28,733
31,441 #322856,
7.500% due 10/01/2010................ 31,579
946,488 #343456,
7.500% due 05/01/2011................ 950,624
936,495 #347021,
7.500% due 05/01/2011................ 941,470
542,258 7 Year Balloon, #250235,
8.500% due 02/01/2002................ 555,472
----------
Total FNMAs (Cost $2,590,134).......... 2,578,112
----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES
(ARM) -- 3.6%
$ 667,751 Federal Home Loan Mortgage Corporation,
#845988,
7.963% due 11/01/2021+............... $ 693,212
Federal National Mortgage Association:
333,262 #124571,
7.674% due 11/01/2022+............... 341,647
377,648 #152205,
7.363% due 01/01/2019+............... 388,211
----------
Total ARMs (Cost $1,407,851)........... 1,423,070
----------
Total U.S. Government Agency Mortgage-
Backed Securities (Cost
$10,402,116)......................... 10,416,561
----------
CORPORATE NOTES -- 25.7%
1,000,000 Bayerische Landesbank, MTN, (Inverse
Floater),
6.120% due 12/29/1997+............... 989,000
Capital One Bank Corporation:
500,000 6.875% due 04/24/2000.................. 495,755
300,000 7.000% due 04/30/2001.................. 297,501
700,000 General Motors Acceptance Corporation,
Deb.,
8.625% due 06/15/1999**.............. 735,672
330,000 Lockheed Martin Corporation,
5.875% due 03/15/1998................ 326,406
Lyondell Petrochemical Company:
175,000 8.250% due 03/15/1997.................. 177,105
925,000 10.000% due 06/01/1999................. 999,093
1,000,000 Southern National Corporation, Sub.
Note,
7.050% due 05/23/2003................ 994,990
500,000 Sun Communities Inc., Sr. Note,
7.625% due 05/01/2003................ 495,830
Taubman Realty Corporation, MTN:
300,000 7.400% due 06/10/2002.................. 304,071
500,000 7.500% due 06/15/2002.................. 481,150
Tele-Communications, Inc., Sr. Note,
200,000 9.250% due 04/15/2002.................. 212,666
500,000 9.875% due 04/01/1998.................. 524,210
500,000 Tenneco Inc.,
10.375% due 11/15/2000............... 560,705
The Money Store, Inc.:
200,000 9.160% due 09/09/1997++................ 205,130
400,000 9.160% due 09/09/1997++................ 410,260
1,500,000 7.630% due 04/15/1998++................ 1,511,955
Time Warner Inc.:
300,000 7.450% due 02/01/1998.................. 303,249
100,000 7.950% due 02/01/2000.................. 102,150
----------
Total Corporate Notes (Cost
$10,144,476)......................... 10,126,898
----------
ASSET-BACKED SECURITIES -- 23.4%
610,648 Advanta Mortgage Loan Trust, 1996-2-A1,
6.740% due 11/25/2009................ 613,763
650,000 Discover Card Trust, 1993-AB,
6.800% due 09/15/1998**.............. 650,813
EquiCredit:
27,233 1993-4-B1,
5.650% due 12/15/2008................ 25,952
25,884 1994-4-A1,
8.300% due 02/15/2002................ 25,959
</TABLE>
See Notes to Financial Statements.
65
<PAGE> 68
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM HIGH QUALITY BOND FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
ASSET-BACKED SECURITIES -- (CONTINUED)
Green Tree Financial Corporation:
$ 450,000 1993-2-B2,
8.000% due 07/15/2018................ $ 450,702
900,000 1995-1-B2,
9.200% due 06/15/2025................ 943,875
500,000 1996-2-B2,
7.900% due 04/15/2027................ 480,780
398,489 Green Tree NIM, 1994-B, Class A,
7.850% due 07/15/2004................ 397,493
646,950 Green Tree Recreational, Equipment &
Consumer, 1996-A, Class A1,
5.550% due 02/15/2018................ 633,573
312,276 Green Tree Security Mortgage Trust,
1994-A,
6.900% due 02/15/2004................ 309,251
200,000 Household Affinity Credit Card, 1993,
4.950% due 03/15/1999**.............. 199,062
Merrill Lynch Mortgage Investors, Inc.:
236,261 1991-B-A,
9.200% due 04/15/2011................ 240,691
295,676 1991-I-A,
7.650% due 01/15/2012................ 298,077
838,928 1992-B-A4,
7.850% due 04/15/2012................ 848,626
1,316,575 Mid-State Trust, Series 4, Class A,
8.330% due 04/01/2030................ 1,365,891
Standard Credit Card Trust:
125,000 90-3B,
9.850% due 07/10/1998**.............. 129,101
200,000 94-1A,
4.650% due 03/07/1999**.............. 198,500
The Money Store, Inc.:
72,241 1993-D-A2,
5.075% due 02/15/2018................ 70,347
36,853 1994-D-A1,
7.625% due 10/15/2004................ 36,880
700,000 1996-A-A2,
6.330% due 06/15/2008................ 700,168
600,000 1996-B-A1,
6.720% due 02/15/2010................ 601,125
----------
Total Asset-Backed Securities (Cost
$9,258,855).......................... 9,220,629
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 14.5%
75,000 Chemical Mortgage Securities Inc.,
1993-1-A4,
7.450% due 02/25/2023**.............. 75,023
Countrywide Funding Corporation:
114,402 1994-1-A3,
6.250% due 03/25/2024................ 107,109
1,000,000 1994-2-A8,
6.500% due 02/25/2009**.............. 994,060
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
Countrywide Mortgage-Backed
Securities, Inc.:
$ 75,000 1994-A-A3,
6.750% due 03/25/2024**.............. $ 72,703
170,000 1994-C-A5,
6.375% due 03/25/2024**.............. 160,330
Federal Home Loan Mortgage Corporation
(FHLMC), P/O:
376,118 #167-A,
Zero coupon due 05/01/1999........... 326,870
754,886 REMIC, #1719-C,
Zero coupon due 04/15/1999........... 660,526
279,195 Federal National Mortgage Association
(FNMA), REMIC, 1992-121-C,
7.000% due 07/25/1999................ 278,408
690,171 Fund America Investors Corporation,
1991-1-H,
7.950% due 02/20/2020**.............. 698,577
598,555 General Electric Capital Mortgage
Association, 1994-27-A1,
6.500% due 07/25/2024**.............. 591,773
Prudential Home Mortgage Securities:
344,965 1992-47,
7.500% due 01/25/2023................ 344,534
1,069,603 1993-43-A1,
5.400% due 10/25/2023................ 1,044,531
264,359 Ryland Acceptance Corporation,
8.950% due 08/20/2019................ 273,363
100,000 Sears Mortgage Securities Corporation,
1993-11-T4,
7.125% due 11/25/2020**.............. 97,625
----------
Total Collateralized Mortgage
Obligations
(Cost $5,770,383).................... 5,725,432
----------
FOREIGN BOND -- 6.7% (Cost $2,637,679)
NZD 3,850,000 Government of New Zealand,
9.000% due 11/15/1996........... 2,636,681
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.2%
800,000 Federal Home Loan Bank (FHLB),
(Coupon rate is 6.250% until
06/30/1997),
7.250% due 06/11/1999........... 802,192
425,000 Federal National Mortgage
Association (FNMA), (Inverse
Floater),
9.901% due 12/29/1997+.......... 441,469
------------
Total U.S. Government Agency
Obligations (Cost $1,234,659)... 1,243,661
------------
COMMERCIAL PAPER -- 0.6% (Cost $236,000)
236,000 General Electric Capital
Corporation,
5.560% due 07/01/1996........... 236,000
------------
</TABLE>
See Notes to Financial Statements.
66
<PAGE> 69
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM HIGH QUALITY BOND FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL EXPIRATION STRIKE VALUE
AMOUNT DATE PRICE (NOTE 2)
- --------------- ----------- ------ -----------
<S> <C> <C> <C> <C>
PUT OPTION PURCHASED ON FOREIGN
CURRENCY -- 0.0% # (Cost $31,854)
NZD 4,006,839 New Zealand $ 16,470
Dollar Put..... 11/13/1996 $0.660
----------
TOTAL INVESTMENTS (COST $39,716,022*).......... 100.5% 39,622,332
CALL OPTION WRITTEN ON FOREIGN
CURRENCY -- (0.0)%#
(Premium received $31,854)
NZD 4,006,839 New Zealand (27,977)
Dollar Call.... 11/13/1996 $0.685
OTHER ASSETS AND LIABILITIES (Net)............. (0.5)% (186,629)
---- ----------
NET ASSETS..................................... 100.0% $39,407,726
---- ----------
---- ----------
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** A portion or all of this security is pledged as collateral for options and
futures contracts.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
# Amount represents less than 0.1% of net assets.
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- --------- --------------
<S> <C> <C>
FUTURES CONTRACTS -- SHORT POSITION
50 U.S. Treasury Note, Five Year,
September 1996........................... $ (68,109)
33 U.S. Treasury Note, Ten Year,
September 1996........................... (65,642)
----------
Net Unrealized Depreciation of Futures
Contracts -- Short Position.............. $ (133,751)
----------
----------
GLOSSARY OF TERMS
BALLOON -- Five- and seven-year mortgages with larger
dollar amounts of payments falling due in the
later years of the obligation
MTN -- Medium Term Note
NZD -- New Zealand Dollar
P/O -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
</TABLE>
See Notes to Financial Statements.
67
<PAGE> 70
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SHORT TERM GLOBAL GOVERNMENT FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------------ ------------
<S> <C> <C>
FOREIGN BONDS AND NOTES -- 73.6%
GERMAN DEUTSCHE MARK BONDS -- 12.5%
DEM 4,720,000 Deutchmark Bank,
4.500% due 04/02/1998........ $ 3,122,870
Federal Republic of Germany:
6,700,000 6.000% due 02/20/1998.......... 4,539,513
1,565,000 5.250% due 10/20/1998.......... 1,049,440
------------
Total German Deutsche Mark
Bonds (Cost $8,429,399)...... 8,711,823
------------
ITALIAN LIRA BONDS -- 12.0%
Italian Treasury Bonds:
ITL 5,200,000,000 8.500% due 08/01/1997.......... 3,393,112
7,500,000,000 8.500% due 01/01/1999.......... 4,929,166
------------
Total Italian Lira Bonds
(Cost $7,594,322)............ 8,322,278
------------
DANISH KRONER BONDS -- 10.6%
Kingdom of Denmark:
DKK 8,600,000 5.250% due 08/10/1996.......... 1,469,148
10,900,000 9.000% due 11/15/1996.......... 1,861,874
22,000,000 9.000% due 11/15/1998.......... 4,081,545
------------
Total Danish Kroner Bonds
(Cost $7,367,523)............ 7,412,567
------------
SWEDISH KRONA BOND -- 7.7% (Cost $4,418,952)
SEK 32,000,000 Kingdom of Sweden,
11.000% due 01/21/1999....... 5,333,953
------------
AUSTRALIAN DOLLAR BOND AND NOTE -- 7.1%
AUD 3,800,000 Commonwealth of Australia,
7.000% due 08/15/1998........ 2,920,235
2,600,000 New South Wales Treasury Note,
7.500% due 02/01/1998........ 2,039,216
------------
Total Australian Dollar Bond
and
Note (Cost $4,828,782)....... 4,959,451
------------
NEW ZEALAND DOLLAR BOND -- 6.3% (Cost $4,427,565)
NZD 6,500,000 Government of New Zealand,
8.000% due 07/15/1998........ 4,362,315
------------
GREAT BRITAIN POUND STERLING NOTES -- 5.5%
GBP 1,250,000 Abbey National Treasury Note,
6.000% due 08/10/1999........ 1,877,460
1,280,000 United Kingdom Treasury Note,
7.000% due 11/06/2001........ 1,957,419
------------
Total Great Britain Pound
Sterling
Notes (Cost $3,785,675)...... 3,834,879
------------
SPANISH PESETA BOND -- 4.9% (Cost $3,440,422)
ESP 408,000,000 Government of Spain,
11.450% due 08/30/1998....... 3,432,166
------------
NETHERLANDS GUILDER BONDS -- 3.9%
Government of Netherlands:
NLG 3,375,000 6.250% due 07/15/1998.......... 2,060,026
1,000,000 7.500% due 06/15/1999.......... 630,314
------------
Total Netherlands Guilder Bonds
(Cost $2,830,483)............ 2,690,340
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------------ ------------
<S> <C> <C>
CANADIAN DOLLAR BOND -- 3.1% (Cost $2,120,699)
CAD 2,900,000 Government of Canada,
6.500% due 09/01/1998........ $ 2,136,261
------------
Total Foreign Bonds and Notes
(Cost $49,243,822)........... 51,196,033
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES -- 7.1%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) -- 6.1% (Cost $4,237,742)
$ 3,890,020 Pass-through certificates,
10.000% due 03/15/2018-
02/15/2021................... 4,242,135
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 1.0% (Cost $674,945)
661,684 #141461,
7.667% due 11/01/2021+....... 678,332
------------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $4,912,687)............ 4,920,467
------------
ASSET-BACKED SECURITIES -- 5.3%
2,974,058 Green Tree Security Mortgage
Trust, 1994-A,
6.900% due 02/15/2004........ 2,945,247
288,603 Household Finance Corporation,
1992-2SRS-A3,
5.250% due 10/20/2007........ 286,979
279,643 Merrill Lynch Mortgage
Investors, Inc., 1992-B-A4,
7.850% due 04/15/2012........ 282,875
155,740 Old Stone Credit Corporation,
1992-A4,
6.550% due 11/25/2007........ 153,380
------------
Total Asset-Backed Securities
(Cost $3,693,955)............ 3,668,481
------------
CORPORATE BOND AND NOTE -- 4.3%
1,000,000 Sun Communities Inc., Sr. Note,
7.625% due 05/01/2003........ 991,660
2,000,000 USAT Holdings,
9.050% due 05/15/1998++...... 1,960,000
------------
Total Corporate Bond and Note
(Cost $2,996,967)............ 2,951,660
------------
U.S. TREASURY NOTE -- 2.1% (Cost $1,481,573)
1,500,000 5.125% due 03/31/1998**........ 1,477,620
------------
COMMERCIAL PAPER -- 3.7% (Cost $2,590,000)
2,590,000 Ford Motor Credit Company,
5.500% due 07/01/1996........ 2,590,000
------------
</TABLE>
See Notes to Financial Statements.
68
<PAGE> 71
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM GLOBAL GOVERNMENT FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL EXPIRATION STRIKE VALUE
AMOUNT DATE PRICE (NOTE 2)
- ------------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
OPTIONS PURCHASED -- 0.4%
PUT OPTIONS PURCHASED ON FOREIGN CURRENCY -- 0.2%
DEM 8,600,000 German Deutsche $ 61,888
Mark Put......... 07/12/1996 $ 1.510
FRF 25,000,000 French Franc 21,625
Put.............. 07/17/1996 5.150
SEK 9,000,000 Swedish Krona 1
Put.............. 07/22/1996 7.124
NZD 6,622,115 New Zealand Dollar 901
Put.............. 08/12/1996 0.655
ITL 12,500,000,000 Italian Lira 2,375
Put.............. 08/21/1996 1,596.500
NZD 7,650,000 New Zealand Dollar 3,218
Put.............. 08/21/1996 0.658
SEK 29,200,000 Swedish Krona 6,094
Put.............. 08/21/1996 6.984
FRF 27,000,000 French Franc 30,348
Put.............. 11/12/1996 5.290
-----------
126,450
Total Put Options Purchased on Foreign
Currency (Cost $369,677)..................
-----------
<CAPTION>
NUMBER OF
CONTRACTS
- -------------------
<S> <C> <C> <C> <C>
CALL OPTIONS PURCHASED ON FOREIGN INTEREST RATE
FUTURES -- 0.2%
50 Euro Dollar 17,500
Call............. 09/30/1996 $ 94.250
75 Euro Dollar 46,875
Call............. 12/31/1996 94.000
75 Euro Dollar 80,625
Call............. 03/31/1997 93.750
-----------
145,000
Total Call Options Purchased on Foreign
Interest Rate Futures (Cost $168,875).....
-----------
271,450
Total Options Purchased (Cost $538,552)....
-----------
TOTAL INVESTMENTS (COST $65,457,556*)............... 96.5% 67,075,711
-----------
<CAPTION>
PRINCIPAL
AMOUNT
- -------------------
<S> <C> <C> <C> <C>
OPTIONS WRITTEN -- (0.4)%
CALL OPTIONS WRITTEN ON FOREIGN CURRENCY -- (0.4)%
SEK 9,000,000 Swedish Krona (26,100)
Call............. 07/22/1996 $ 6.748
NZD 6,622,115 New Zealand Dollar (65,179)
Call............. 08/12/1996 0.676
ITL 12,500,000,000 Italian Lira (86,250)
Call............. 08/21/1996 1,550.770
SEK 29,200,000 Swedish Krona (65,290)
Call............. 08/21/1996 6.655
AUD 6,364,110 Australian Dollar (47,094)
Call............. 09/06/1996 0.786
-----------
(289,913)
Total Call Options Written on Foreign
Currency (Premiums received $194,487).....
-----------
OTHER ASSETS AND LIABILITIES (Net).................. 3.9% 2,745,590
------ -----------
NET ASSETS.......................................... 100.0% $69,531,388
====== ===========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** A portion of this security is pledged as collateral for options.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE UNREALIZED
---------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ----------- --------------- ----------- ------------ ------------------
<S> <C> <C> <C> <C>
08/20/1996 DEM 7,408,377 4,887,634 4,956,000 $(68,366)
08/20/1996 DEM 4,825,000 3,183,266 3,159,791 23,475
08/20/1996 DEM 16,126,583 10,639,419 10,604,710 34,709
09/18/1996 DEM 2,444,744 1,615,753 1,610,631 5,122
09/18/1996 NLG 3,929,864 2,317,886 2,317,000 886
--------
$ (4,174)
--------
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<CAPTION>
CONTRACTS TO DELIVER UNREALIZED
---------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ----------- --------------- ----------- ------------ ------------------
<S> <C> <C> <C> <C>
07/05/1996 FRF 6,972,931 1,355,666 1,348,390 $ (7,276)
08/20/1996 DEM 3,113,310 2,053,988 2,141,351 87,363
08/20/1996 DEM 18,746,650 12,367,993 13,000,000 632,007
08/20/1996 DEM 6,500,000 4,288,337 4,288,730 393
08/22/1996 BEF 41,306,140 1,324,400 1,386,112 61,712
09/10/1996 GBP 1,500,000 2,330,376 2,312,363 (18,013)
09/13/1996 CHF 5,082,530 4,092,254 4,296,306 204,052
09/18/1996 DEM 2,444,744 1,615,753 1,649,514 33,761
09/18/1996 NLG 20,798,957 12,267,500 12,251,085 (16,415)
--------
$977,584
--------
Net Unrealized Appreciation of Forward
Foreign Currency Contracts.................... $973,410
========
GLOSSARY OF TERMS
AUD -- Australian Dollar
BEF -- Belgian Franc
CAD -- Canadian Dollar
CHF -- Swiss Franc
DEM -- German Deutsche Mark
DKK -- Danish Kroner
ESP -- Spanish Peseta
FRF -- French Franc
GBP -- Great Britain Pound Sterling
ITL -- Italian Lira
NLG -- Netherlands Guilder
NZD -- New Zealand Dollar
SEK -- Swedish Krona
</TABLE>
See Notes to Financial Statements.
69
<PAGE> 72
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
U.S. GOVERNMENT FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES -- 103.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) -- 53.0%
$67,282,048 6.500% due 08/01/2010-10/01/2025**... $ 65,051,424
3,968,449 7.000% due 07/01/2024-02/01/2026**... 3,825,914
31,620,564 7.500% due 05/01/2010-01/01/2011**... 31,831,677
4,676,637 8.500% due 04/01/2019**.............. 4,849,064
1,400,318 8.750% due 01/01/2013**.............. 1,452,648
17,512,074 9.000% due 12/01/2008-08/01/2022**... 18,385,187
1,200,952 9.500% due 06/01/2015-05/01/2017**... 1,284,363
472,177 10.500% due
09/01/2009-05/01/2019**............ 517,034
90,209 10.750% due 12/01/2012**............. 98,735
175,768 11.000% due
09/01/2015-02/01/2016**............ 194,970
213,961 11.750% due 07/01/2013**............. 238,395
47,438 12.000% due 01/01/2015**............. 54,227
18,450,000 Commitment to Purchase, GOLD,
6.500% due 04/11/2011.............. 17,873,438
42,500,000 Commitment to Purchase, GOLD,
6.500% due 04/01/2025.............. 39,857,031
70,000,000 Commitment to Purchase, GOLD,
7.500% due 04/16/2011.............. 70,437,500
-----------
Total FHLMCs (Cost $257,886,440)..... 255,951,607
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) -- 29.3%
71,730,448 7.000% due 08/15/2025-05/15/2026**... 68,771,567
60,654,858 9.000% due 04/15/2016-06/15/2022**... 64,109,248
6,024,829 9.500% due 04/15/2016-11/15/2017**... 6,481,641
1,242,503 10.000% due
02/15/2019-12/15/2020**............ 1,354,533
371,128 10.500% due
09/15/2018-07/15/2020**............ 409,361
98,252 11.000% due
07/15/2018-12/15/2019**............ 109,715
-----------
Total GNMAs (Cost $141,735,544)...... 141,236,065
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 12.3%
44,207 5.500% due 02/01/2009**.............. 41,264
4,465,372 7.000% due 06/01/2010-11/01/2010**... 4,411,782
12,683,000 8.000% due 05/01/2017-01/01/2025**... 12,924,797
13,711,539 8.500% due 11/01/2017-09/01/2025**... 14,146,905
4,449,163 9.000% due 06/01/2016-06/01/2021**... 4,675,241
9,873,306 10.000% due
04/01/2016-05/01/2022**............ 10,753,491
157,804 10.500% due 06/01/2020**............. 173,042
368,877 11.500% due
03/01/2011-07/01/2015**............ 414,582
12,000,000 Commitment to Purchase,
7.000% due 02/15/2011.............. 11,846,250
-----------
Total FNMAs (Cost $59,025,081)....... 59,387,354
-----------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES
(ARM) -- 7.7%
2,048,201 Federal Home Loan Mortgage
Corporation,
7.373% due 04/01/2029+**........... 2,095,248
Federal National Mortgage
Association:
1,894,075 7.250% due 05/01/2019+**............. 1,961,257
2,533,856 7.050% due 01/01/2020+**............. 2,598,799
5,808,776 7.241% due 09/01/2025+**............. 5,965,787
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
Government National Mortgage
Association II:
$17,927,291 7.000% due 08/20/2003-09/20/2023+**.. $ 18,148,514
6,600,000 Commitment to Purchase,
6.000% due 07/20/2026+#.......... 6,540,188
-----------
Total ARMs (Cost $37,005,656)........ 37,309,793
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(GNMA II) -- 0.8%
1,627,902 9.500% due 02/20/2017-03/20/2021**... 1,731,918
300,203 10.000% due 07/20/2019**............. 323,559
134,815 10.500% due
09/20/2019-11/20/2019**............ 148,811
1,144,721 11.000% due
06/20/2019-07/20/2020**............ 1,279,438
70,383 11.500% due 08/20/2019**............. 79,643
-----------
Total GNMA IIs (Cost $3,377,864)..... 3,563,369
-----------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $499,030,585)................ 497,448,188
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 9.1%
6,961,991 Asset Securitization Corporation,
Series 96-D2, Class A1,
6.920% due 02/14/2029**............ 6,742,764
57,455 Federal Home Loan Mortgage
Corporation (FHLMC), REMIC,
Pass-through certificates, Series
1551, Class H, (I/O),
1155.758% due 05/15/2001**......... 297,385
Federal National Mortgage Association
(FNMA), REMIC, Pass-through
certificates:
4,000,000 Trust 89-18, Class-C,
9.500% due 04/25/2004**............ 4,386,240
92,797 Trust 90-98, Class K, (I/O),
949.3846% due 08/25/2020**......... 1,618,259
34,510 Trust 90-133, Class K, (I/O),
1009.500% due 11/25/2020**......... 1,093,151
1,322,054 Trust 92-83, Class X,
7.000% due 02/25/2022**............ 1,174,553
5,000,000 Trust 93-4, Class 4-HB,
11.000% due 01/25/2019**........... 5,743,750
13,812,018 Trust 93-161, Class E, P/O,
Zero coupon due 02/25/2023**....... 8,244,048
5,000,000 JP Morgan Commercial Mortgage Finance
Corporation, Series 96-C3, Class
A1,
7.330% due 04/25/2028**............ 4,990,625
10,000,000 Merrill Lynch Mortgage Investors,
Inc., 1996-CL, Class A3,
7.420% due 04/25/2028**............ 9,909,158
-----------
Total Collateralized Mortgage
Obligations (Cost $43,297,484)..... 44,199,933
-----------
</TABLE>
See Notes to Financial Statements.
70
<PAGE> 73
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
U.S. GOVERNMENT FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.2%
SMALL BUSINESS ADMINISTRATION (SBA) -- 5.0%
$ 5,000,000 7.350% due 08/01/2005**.............. $ 4,945,313
2,969,372 8.500% due 01/01/2015**.............. 3,129,440
8,635,701 6.850% due 10/01/2015**.............. 8,314,561
4,000,000 7.600% due 05/01/2016**.............. 4,040,000
4,000,000 7.550% due 06/01/2016**.............. 4,015,000
------------
Total SBAs (Cost $24,765,249)........ 24,444,314
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 0.2% (Cost $1,028,438)
1,000,000 9.550% due 12/10/1997**.............. 1,047,190
------------
Total U.S. Government Agency
Obligations (Cost $25,793,687)..... 25,491,504
------------
U.S. TREASURY OBLIGATIONS -- 4.2%
U.S. TREASURY BONDS -- 3.0%
8,855,000 8.750% due 08/15/2020**.............. 10,592,794
4,105,000 6.250% due 08/15/2023**.............. 3,721,429
------------
Total U.S. Treasury Bonds
(Cost $14,466,874)................. 14,314,223
------------
U.S. TREASURY NOTES -- 1.2%
700,000 5.375% due 11/30/1997**.............. 694,204
750,000 7.250% due 02/15/1998**.............. 763,245
4,200,000 6.000% due 05/31/1998**.............. 4,190,802
------------
Total U.S. Treasury Notes
(Cost $5,652,429).................. 5,648,251
------------
Total U.S. Treasury Obligations
(Cost $20,119,303)................. 19,962,474
------------
ASSET-BACKED SECURITIES -- 2.7%
5,000,000 Discover Card Trust, 1994-2A,
5.850% due 10/16/2004+**........... 5,034,350
5,000,000 First Chicago Master Trust II,
Series 94-J, Class A,
5.720% due 01/16/2001+**........... 5,012,500
3,000,000 New York City Housing Development
Corporation, Series 96,
6.750% due 06/25/2006**............ 2,902,031
------------
Total Asset-Backed Securities
(Cost $12,951,658)................. 12,948,881
------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTE -- 7.4%
(Cost $35,600,000)
35,600,000 Federal Home Loan Bank (FHLB),
5.520% due 07/01/1996++**.......... 35,600,000
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION STRIKE VALUE
CONTRACTS DATE PRICE (NOTE 2)
--------- ---------- ------- -------------
<S> <C> <C> <C> <C>
CALL OPTION PURCHASED ON U.S. TREASURY BOND
FUTURES -- 0.4% (Cost $894,066)
675 U.S. Treasury
Bond Call......... 08/24/1996 $105.00 $ 1,930,078
------
TOTAL INVESTMENTS (COST $637,686,783*).... 132.1% 637,581,058
OTHER ASSETS AND LIABILITIES (NET)........ (32.1) (154,963,737)
----- -------------
NET ASSETS................................ 100.0% $ 482,617,321
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes is $638,504,512 (Note 6).
** Securities are pledged as collateral for futures contracts, dollar roll
transactions and when-issued securities.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Rate represents annualized yield at date of purchase (unaudited).
# Security purchased on a when-issued basis (Note 2).
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
- ---------- --------------
<S> <C> <C>
FUTURES CONTRACTS -- LONG POSITION
10 U.S. Treasury Note, Five Year,
September 1996..................... $ 5,938
============
<CAPTION>
UNREALIZED
(DEPRECIATION)
--------------
<S> <C> <C>
FUTURES CONTRACTS -- SHORT POSITION
2 U.S. Treasury Note, Two Year,
September 1996..................... $ (2,447)
139 U.S. Treasury Note, Ten Year,
September 1996..................... (331,660)
643 U.S. Treasury Bond, Twenty Year,
September 1996..................... (1,455,841)
------------
Net Unrealized Depreciation of
Futures Contracts -- Short
Position........................... $ (1,789,948)
============
GLOSSARY OF TERMS
GOLD -- Payments are on an accelerated 45-day
payment cycle instead of 75-day cycle
I/O -- Interest Only
P/O -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
</TABLE>
See Notes to Financial Statements.
71
<PAGE> 74
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CORPORATE INCOME FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<S> <C> <C>
CORPORATE BONDS AND NOTES -- 92.9%
MANUFACTURING -- 18.3%
$ 4,000,000 Boeing Company, Deb.,
8.750% due 08/15/2021**............ $ 4,550,000
5,000,000 Caterpillar Inc., Sinking Fund Deb.,
9.750% due 06/01/2019.............. 5,575,000
Ford Motor Company, Deb.:
3,750,000 8.875% due 01/15/2022................ 4,214,062
8,000,000 8.875% due 11/15/2022................ 8,520,000
14,500,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021.............. 16,983,125
7,800,000 Textron Inc., Deb.,
8.750% due 07/01/2022.............. 8,229,000
10,450,000 Tyco Laboratories, Inc., Deb.,
9.500% due 05/01/2022.............. 12,030,563
1,000,000 V.F. Corporation, Note,
9.500% due 05/01/2001.............. 1,100,000
------------
61,201,750
------------
INDUSTRIAL -- 12.0%
2,000,000 AMAX Inc., Note,
9.875% due 06/13/2001.............. 2,230,000
6,000,000 Circus Circus Enterprises Inc., Sr.
Note,
6.450% due 02/01/2006.............. 5,557,500
6,030,000 Conrail Inc., Deb.,
9.750% due 06/15/2020.............. 7,386,750
5,000,000 du Pont (E.I.) de Nemours & Company,
Deb.,
8.250% due 01/15/2022**............ 5,137,500
5,000,000 Northrop Grumman Corporation, Deb.,
9.375% due 10/15/2024.............. 5,300,000
6,500,000 Ogden Corporation, Deb.,
9.250% due 03/01/2022.............. 7,280,000
6,860,000 Praxair, Inc., Deb.,
8.700% due 07/15/2022.............. 7,357,350
------------
40,249,100
------------
FOREST PRODUCTS -- 9.1%
6,351,000 Boise Cascade Corporation, Deb.,
9.450% due 11/01/2009.............. 7,176,630
3,010,000 Federal Paper Board Company, Deb.,
10.000% due 04/15/2011............. 3,657,150
Georgia-Pacific Corporation, Deb.:
5,000,000 9.875% due 11/01/2021................ 5,512,500
7,000,000 9.500% due 05/15/2022................ 7,516,250
6,000,000 James River Corporation, Deb.,
9.250% due 11/15/2021.............. 6,720,000
------------
30,582,530
------------
YANKEE (U.S. DOLLAR DENOMINATED) -- 7.3%
8,400,000 Laidlaw Inc., Deb.,
8.250% due 05/15/2023.............. 8,568,000
8,500,000 Petro-Canada, Deb.,
9.250% due 10/15/2021.............. 9,860,000
5,750,000 Trans-Canada Pipeline Corporation,
Deb.,
8.500% due 03/20/2023.............. 5,951,250
------------
24,379,250
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<S> <C> <C>
ELECTRIC -- 6.5%
$ 5,000,000 Louisiana Power & Light Company,
First Mortgage,
8.500% due 07/01/2022.............. $ 4,950,000
5,000,000 Mississippi Power & Light Company,
First and Refundable Mortgage,
8.650% due 01/15/2023.............. 5,287,500
5,000,000 Philadelphia Electric Company, First
and Refundable Mortgage,
8.250% due 09/01/2022.............. 4,956,250
Texas Utilities Electric Company,
First Mortgage:
1,200,000 8.875% due 02/01/2022................ 1,263,000
3,000,000 8.750% due 11/01/2023................ 3,142,500
2,050,000 Utilicorp United Inc., Sr. Note,
10.500% due 12/01/2020............. 2,275,500
------------
21,874,750
------------
REGIONAL BANKS -- 6.4%
400,000 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010............. 486,500
1,000,000 Barnett Banks, Florida, Inc., Sub.
Note,
10.875% due 03/15/2003............. 1,193,750
1,100,000 First Interstate Bancorp, Sub. Note,
9.125% due 02/01/2004.............. 1,216,875
1,000,000 Mellon Financial Company, Sub. Deb.,
9.750% due 06/15/2001.............. 1,117,500
NCNB Corporation, Sub. Note:
4,200,000 9.375% due 09/15/2009................ 4,845,750
10,125,000 10.200% due 07/15/2015**............. 12,605,625
------------
21,466,000
------------
TRANSPORTATION -- 6.3%
2,000,000 American Airlines Inc., Pass-through
certificates, Series A,
8.040% due 09/16/2011.............. 1,935,000
4,775,000 Carnival Corporation, Deb.,
7.200% due 10/01/2023**............ 4,345,250
United Air Lines Inc.:
5,000,000 Equipment Trust certificates,
10.850% due 07/05/2014............. 5,968,750
Pass-through certificates:
3,000,000 9.080% due 10/26/2015................ 3,097,500
5,500,000 9.560% due 10/19/2018................ 5,946,875
------------
21,293,375
------------
ENERGY -- 6.2%
2,850,000 BP America Inc., Guaranteed Deb.,
(British Petroleum Company),
10.000% due 07/01/2018............. 3,106,500
8,700,000 Occidental Petroleum Corporation,
Sr. Deb.,
11.125% due 08/01/2010............. 11,157,750
5,950,000 Phillips Petroleum Company, Deb.,
9.180% due 09/15/2021.............. 6,411,125
------------
20,675,375
------------
</TABLE>
See Notes to Financial Statements.
72
<PAGE> 75
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CORPORATE INCOME FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<S> <C> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
FINANCIAL -- 6.1%
American General Corporation:
$ 2,000,000 9.625% due 02/01/2018................ $ 2,165,000
3,425,000 Sinking Fund Deb.,
7.500% due 07/15/2025.............. 3,330,813
Barclays North American Capital
Corporation, Capital Note:
1,000,000 10.500% due 12/15/2017**............. 1,101,250
9,000,000 9.750% due 05/15/2021**.............. 10,271,250
2,000,000 Ford Holdings, Inc., Deb.,
9.375% due 03/01/2020**............ 2,340,000
1,000,000 GATX Leasing Corporation, MTN,
10.000% due 03/21/2001............. 1,116,250
------------
20,324,563
------------
MEDIA -- 5.5%
Tele-Communications, Inc.:
Sr. Deb.:
2,000,000 9.800% due 02/01/2012................ 2,150,000
3,950,000 9.250% due 01/15/2023................ 3,930,250
4,000,000 Sr. Note,
9.250% due 04/15/2002................ 4,250,000
7,760,000 Time Warner Inc., Deb.,
9.150% due 02/01/2023.............. 8,089,800
------------
18,420,050
------------
GAS -- 5.2%
12,625,000 ANR Pipeline Company, Deb.,
9.625% due 11/01/2021.............. 14,897,500
2,500,000 Panhandle Eastern Pipe Line Company,
Deb.,
8.625% due 04/15/2025.............. 2,553,125
------------
17,450,625
------------
RETAIL -- 3.6%
May Department Stores Company, Deb.:
1,500,000 9.875% due 06/15/2021**.............. 1,726,875
10,100,000 8.375% due 10/01/2022**.............. 10,314,625
------------
12,041,500
------------
TELECOMMUNICATIONS -- 0.4%
GTE Corporation:
250,000 Deb.,
10.300% due 11/15/2017............. 273,125
1,000,000 Sinking Fund Deb.,
10.750% due 09/15/2017............. 1,092,500
------------
1,365,625
------------
Total Corporate Bonds and Notes
(Cost $304,131,431)................ 311,324,493
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 15.0%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 7.1%
Commitment to Purchase:
$ 9,000,000 7.500% due 07/01/2011................ $ 9,047,812
15,000,000 7.500% due 07/01/2026................ 14,789,063
------------
Total FNMAs (Cost $23,637,188)....... 23,836,875
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) -- 6.8% (Cost $22,453,750)
23,000,000 Commitment to Purchase, GOLD,
7.500% due 07/01/2026.............. 22,647,812
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 1.1%
GOLD:
2,395,843 #C00362,
9.000% due 06/01/2024.............. 2,498,415
1,230,791 #C80253,
9.000% due 01/01/2025.............. 1,283,484
------------
Total FHLMCs (Cost $3,730,901)....... 3,781,899
------------
Total U.S. Government Agency
Mortgage-Backed Securities (Cost
$49,821,839)....................... 50,266,586
------------
U.S. TREASURY BOND -- 2.6% (Cost $8,687,813)
6,000,000 13.750% due 08/15/2004............... 8,620,259
------------
<CAPTION>
SHARES
- ------------
<C> <S> <C>
INVESTMENT COMPANY SECURITY -- 0.1% (Cost $378,750)
378,750 Lehman Provident Tempfund............ 378,750
------------
TOTAL INVESTMENTS (COST $363,019,833*)..... 110.6% 370,590,088
OTHER ASSETS AND LIABILITIES (NET)......... (10.6) (35,455,769)
----- ------------
NET ASSETS................................. 100.0% $335,134,319
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** Security is pledged as collateral for dollar roll transactions.
<TABLE>
<S> <C>
GLOSSARY OF TERMS
GOLD -- Payments are on an accelerated 45-day
payment cycle instead of 75-day cycle
MTN -- Medium Term Note
</TABLE>
See Notes to Financial Statements.
73
<PAGE> 76
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CALIFORNIA MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 98.9%
CALIFORNIA -- 98.7%
Alameda, Improvement Board Act of
1915, Marina Village Assessment
District, Series 89-1:
$ 3,075,000 7.650% due 09/02/2013................ $ 3,167,311
3,310,000 7.650% due 09/02/2014................ 3,409,101
5,360,000 Alhambra, Improvement Board Act of
1915, Assessment District No. 1,
Public Works, (MBIA Insured),
6.125% due 09/02/2018.............. 5,453,800
4,000,000 Anaheim, Public Financing Authority
Revenue, Residual Interest Bond,
(MBIA Insured),
6.450% due 12/28/2018+............. 4,215,000
1,000,000 Arcadia, Hospital Revenue Authority,
(Methodist Hospital),
6.500% due 11/15/2012.............. 1,012,500
2,000,000 Barstow Redevelopment Agency, Central
Redevelopment Project, Tax
Allocation, Series A, (MBIA
Insured),
7.000% due 09/01/2014.............. 2,302,500
1,000,000 Brea & Olinda, Unified School
District, (High School Refinancing
Project), COP, Series A, (FSA
Insured),
6.000% due 08/01/2009.............. 1,028,750
1,535,000 Brisbane, (Capital Improvement
Refinancing Project), COP,
6.000% due 04/01/2018.............. 1,437,144
California Educational Facilities
Authority Revenue:
4,795,000 (College of Osteopathic Medicine),
7.500% due 06/01/2018.............. 5,508,256
(University LaVerne):
705,000 5.700% due 04/01/2001................ 704,119
2,000,000 6.300% due 04/01/2009................ 1,980,000
California Health Facilities
Authority Revenue:
2,140,000 (Aids Healthcare Foundation), Series
C,
6.250% due 09/01/2017.............. 2,140,000
1,000,000 (Kaiser Permanent), Series A,
7.000% due 12/01/2010.............. 1,078,750
4,000,000 (R.F. Kennedy Medical Center),
(State Insured),
7.750% due 03/01/2014.............. 4,310,000
California Housing Finance Agency,
Home Ownership & Improvement
Revenue, AMT:
1,895,000 Series 1988G,
8.150% due 08/01/2019.............. 1,954,219
3,105,000 Series 1989D,
7.500% due 08/01/2020.............. 3,236,962
5,010,000 Series C,
6.650% due 08/01/2014.............. 5,179,087
665,000 Series D, (MBIA Insured),
6.300% due 08/01/2014.............. 670,819
2,630,000 Series F, (MBIA Insured),
6.800% due 08/01/2014.............. 2,754,925
4,370,000 Series F-2,
7.250% due 08/01/2016.............. 4,561,187
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
California Pollution Control
Financing Authority, PCR, AMT:
$ 1,000,000 (Keller Canyon Landfill Company
Project),
6.875% due 11/01/2027.............. $ 1,037,500
5,000,000 (Pacific Gas and Electric), Series B,
(AMBAC Insured),
8.875% due 01/01/2010.............. 5,393,750
4,000,000 (San Diego Gas and Electric), Series
A, (AMBAC Insured),
5.850% due 06/01/2021.............. 3,890,000
(Southern California Edison Company):
4,000,000 (AMBAC Insured),
6.000% due 07/01/2027+............. 3,950,000
13,250,000 Series B, (AMBAC Insured),
6.400% due 12/01/2024.............. 13,713,750
5,000,000 Series B, (FGIC Insured),
6.400% due 12/01/2024**............ 5,175,000
6,565,000 (Tracy Material Recovery Project),
Series A,
6.600% due 08/01/2014**............ 6,638,856
5,000,000 (Waste Management), Series A,
7.150% due 02/01/2011.............. 5,400,000
3,100,000 (Waste Removal Systems), Series A,
7.100% due 11/01/2009.............. 3,262,750
2,250,000 California Residential Efficiency
Financing Authority, (First
Resource Efficiency), (AMBAC
Insured),
6.000% due 07/01/2017.............. 2,264,063
1,425,000 California Rural Home Mortgage
Finance Authority, SFMR,
Mortgage-Backed Securities Project,
Series A-2,
(GNMA Insured),
7.950% due 12/01/2024.............. 1,542,562
7,750,000 California State, GO, (MBIA Insured),
6.000% due 10/01/2014**............ 7,798,437
California Statewide Communities
Development Authority, COP:
3,000,000 (Cedars-Sinai Medical Center),
(MBIA Insured),
6.500% due 08/01/2012.............. 3,198,750
2,500,000 (Childrens Campus),
6.500% due 09/01/2022.............. 2,534,375
Capistrano Unified School District,
Community Facilities District,
Supplemental Tax, (Aliso Viejo):
5,500,000 #87-1,
8.375% due 10/01/2020.............. 5,768,125
2,500,000 #88-1,
7.600% due 09/01/2014.............. 2,521,875
5,865,000 Carson, Improvement Board Act
of 1915, GO,
7.375% due 09/02/2022.............. 5,982,300
Centralia, School District, COP:
775,000 Zero coupon due 06/01/2008........... 383,625
835,000 Zero coupon due 06/01/2009........... 385,144
890,000 Zero coupon due 06/01/2010........... 380,475
940,000 Zero coupon due 06/01/2011........... 374,825
1,010,000 Zero coupon due 06/01/2012........... 374,962
1,075,000 Zero coupon due 06/01/2013........... 370,875
4,675,000 Chula Vista, IDR, (San Diego Gas
and Electric), Series A, AMT,
(AMBAC Insured),
6.400% due 12/01/2027.............. 4,826,938
</TABLE>
See Notes to Financial Statements.
74
<PAGE> 77
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 3,000,000 Chula Vista, Redevelopment Agency,
Tax Allocation Revenue,
8.625% due 09/01/2024.............. $ 3,468,750
Clovis, Unified School District,
Capital Appreciation, Series B,
(FGIC Insured):
2,000,000 Zero coupon due 08/01/2007........... 1,095,000
2,000,000 Zero coupon due 08/01/2008........... 1,025,000
2,750,000 Contra Costa County, COP, (Merrithew
Memorial Hospital),
6.625% due 11/01/2022.............. 2,835,938
Contra Costa County, Finance
Authority, Tax Allocation Revenue,
Series A:
1,595,000 7.000% due 08/01/2009................ 1,650,825
1,000,000 7.100% due 08/01/2022................ 1,036,250
7,749,000 Contra Costa County, MFHR, (Crescent
Park Apartments Project), Series B,
(GNMA Insured),
7.800% due 06/20/2034.............. 8,456,096
3,270,000 Delano, COP, Series A,
9.250% due 01/01/2022.............. 3,560,213
1,985,000 El Cajon, COP, (Helix View Nursing
Hospital), Limited Obligation,
Series 1990, AMT, (FHA Insured),
7.750% due 02/01/2029.............. 2,041,275
4,975,000 Fairfield Housing Authority Revenue,
Mortgage Revenue, (Creekside
Estates Project),
7.875% due 02/01/2015.............. 5,055,844
Foothill Eastern Transportation
Corridor Agency, Series A:
5,000,000 Zero coupon due 01/01/2008........... 2,962,500
10,000,000 Zero coupon due 01/01/2019........... 2,212,500
1,400,000 Fresno, Joint Powers Financing
Authority, Local Agency Revenue,
Series A,
(MBIA Insured),
6.550% due 09/02/2012.............. 1,365,000
Gilroy, Unified School District,
COP, (Measure J Capital Projects),
(FSA Insured):
1,135,000 6.000% due 09/01/2007................ 1,196,006
2,000,000 6.250% due 09/01/2012................ 2,060,000
2,555,000 Kern, High School District, GO,
Series A, (MBIA Insured),
6.600% due 08/01/2016.............. 2,753,013
1,250,000 Kings County, Waste Management
Authority, Solid Waste Revenue,
AMT,
7.200% due 10/01/2014.............. 1,321,875
1,500,000 La Verne, Public Financing Authority,
Capital Improvement,
7.250% due 09/01/2026.............. 1,500,000
1,000,000 Lancaster, Redevelopment Agency,
MFHR, (High Valley Apartments
Project),
(FHA Insured),
6.000% due 06/01/2027.............. 966,250
12,690,000 Long Beach, Harbor Revenue, Series
1989A, AMT, (MBIA Insured),
7.250% due 05/15/2019**............ 13,435,537
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
Los Angeles, Community Redevelopment
Agency, AMT:
$ 1,425,000 5.850% due 12/01/2026................ $ 1,348,406
3,735,000 COP, (Allright Garage L.A.),
7.550% due 10/01/2008.............. 3,912,412
3,490,000 Series C, (AMBAC Insured),
6.750% due 07/01/2014.............. 3,647,050
3,000,000 Los Angeles County, MFHR, (GNMA
Insured),
7.400% due 01/20/2022.............. 3,102,180
Los Angeles County, Residual Interest
Bond:
4,200,000 8.160% due 11/01/2011+**............. 4,326,000
1,000,000 9.076% due 06/01/2015+............... 980,000
3,740,000 (Edmund D. Edelman Children's
Center), COP, (AMBAC Insured),
6.000% due 04/01/2012.............. 3,758,700
11,110,000 (Pension Obligation), COP, (MBIA
Insured), Non-income producing
until 06/30/1996,
6.900% due 06/30/2008.............. 12,401,538
1,520,000 Los Angeles County, Single
Family Housing Revenue, Series B,
(GNMA Insured)
7.600% due 08/01/2016.............. 1,577,000
660,000 Los Angeles, Home Mortgage Revenue,
GNMA collateralized,
8.100% due 05/01/2017.............. 695,475
Los Angeles, Los Angeles Convention
and Exposition Center, Series 1990,
(AMBAC Insured):
5,000,000 Zero coupon due 08/15/2002........... 3,681,250
5,000,000 Zero coupon due 08/15/2003........... 3,481,250
550,000 Los Angeles, SFMR, Program 1990,
Issue A, GNMA collateralized, AMT,
7.550% due 12/01/2023.............. 569,250
1,000,000 Montebello, Unified School District
Revenue,
6.300% due 06/01/2011.............. 966,250
7,000,000 National City Community Development
Revenue, Series A, (AMBAC Insured),
6.250% due 08/01/2012**............ 7,192,500
New Haven, Unified School District,
Capital Appreciation, Series D,
FGIC Insured):
5,720,000 Zero coupon due 08/01/2018........... 1,480,050
5,920,000 Zero coupon due 08/01/2019........... 1,443,000
1,000,000 Newport Beach, Special Tax
Improvement, District No. 95-1,
Series A,
6.750% due 09/01/2020.............. 950,000
3,500,000 Novato, Special Tax Revenue,
(Community Facilities District),
7.200% due 08/01/2015.............. 3,543,750
Oakland, Unified School District:
2,645,000 7.000% due 11/15/2011................ 2,694,594
3,445,000 COP, Energy Retrofit,
6.750% due 11/15/2014.............. 3,358,875
Orange County, Airport Revenue, AMT:
1,400,000 (John Wayne International Airport),
6.625% due 07/01/2017.............. 1,407,644
600,000 Pre-refunded,
6.625% due 07/01/2017.............. 615,498
</TABLE>
See Notes to Financial Statements.
75
<PAGE> 78
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 3,000,000 Orange County, Series A, (MBIA
Insured),
6.000% due 06/01/2010.............. $ 3,067,500
4,500,000 Palm Desert, Financing Authority, Tax
Allocation Revenue, (MBIA Insured),
(Inverse Floater),
8.845% due 04/01/2022+............. 4,702,500
1,150,000 Palm Springs, Financing Authority,
(Convention Center Project), Series
A, (MBIA Insured),
6.750% due 11/01/2021.............. 1,237,687
3,000,000 Pasadena, Special Tax No. 1,
7.200% due 12/01/2012.............. 3,056,250
Port Oakland:
12,500,000 Port Revenue, Series 1989A, AMT,
(MBIA/BIGI Insured),
7.600% due 11/01/2016**............ 13,024,000
(Mitsu Osk Lines Ltd.), Series A:
3,030,000 6.750% due 01/01/2012................ 3,132,263
2,300,000 6.800% due 01/01/2019................ 2,366,125
3,000,000 Rancho, Water District Financing
Authority, Residual Interest Bond,
(AMBAC Insured),
9.074% due 08/17/2021+............. 3,562,500
2,750,000 Redding, Electrical Systems Revenue,
COP, (Inverse Floater), (MBIA
Insured),
8.901% due 07/08/2022+............. 3,076,563
1,500,000 Riverside, School District, Special
Project,
7.250% due 09/01/2018.............. 1,505,625
85,000 Sacramento, City Financing Authority,
Revenue Bonds,
6.700% due 11/01/2011.............. 89,038
6,500,000 Sacramento County, Airport System
Revenue, Series 1989, AMT,
(AMBAC Insured),
7.000% due 07/01/2020.............. 6,922,500
10,000,000 San Bernardino County, Residual
Interest Bond, COP, (MBIA Insured),
7.350% due 07/01/2016+**........... 9,537,500
4,000,000 San Diego County, Residual Interest
Bond, COP, Series B, (MBIA
Insured),
8.670% due 04/08/2021+............. 4,260,000
5,000,000 San Diego, IDR, (San Diego Gas and
Electric Company), Series B, AMT,
(AMBAC Insured),
7.375% due 12/01/2021.............. 5,149,100
3,000,000 San Francisco, City and County,
Airport Commission, International
Airport Revenue, Second Series,
Issue 8A, (FGIC Insured),
6.250% due 05/01/2020.............. 3,026,250
San Francisco, City and County,
Multi-family Mortgage Revenue,
Series A:
1,000,000 6.350% due 02/15/2012................ 1,015,000
1,250,000 6.450% due 02/15/2024................ 1,260,938
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
San Francisco, City and County,
Redevelopment Agency, Lease
Revenue, Capital Appreciation,
(George R. Moscone Project):
$ 3,500,000 Zero coupon due 07/01/2007........... $ 1,833,125
4,500,000 Zero coupon due 07/01/2010........... 1,912,500
3,750,000 Zero coupon due 07/01/2011........... 1,485,938
4,250,000 Zero coupon due 07/01/2013........... 1,455,625
280,000 San Francisco, City and County, SFMR,
GNMA and FNMA Mortgage-Backed
Securities Program,
7.450% due 01/01/2024.............. 291,200
575,000 San Jose, Airport Revenue Authority,
(San Jose Airport), AMT, (AMBAC
Insured), Unrefunded,
7.500% due 03/01/2018.............. 608,781
2,735,000 San Jose, Financing Authority
Revenue, Series C,
7.000% due 09/02/2015.............. 2,782,863
3,000,000 Santa Clarita, Community Development
Authority,
7.500% due 11/15/2012.............. 3,086,250
4,765,000 Santa Rosa, Mortgage Revenue,
(Channate Lodge), (FHA Insured),
6.700% due 12/01/2024.............. 4,925,819
2,000,000 Shasta Lake, COP, (FSA Insured),
6.000% due 04/01/2016.............. 1,997,500
10,000 Sonoma County, Home Mortgage Revenue,
SFMR,
9.125% due 06/01/2015.............. 10,325
South Orange County, Public Financing
Authority, Special Tax Revenue, Sr.
Lien, Series A, (MBIA Insured):
5,000,000 7.000% due 09/01/2008................ 5,675,000
5,000,000 6.200% due 09/01/2013................ 5,081,250
1,200,000 South Tahoe, Joint Powers Financing
Authority, Series B,
6.000% due 10/01/2010.............. 1,153,500
Southern California, Housing Finance
Agency, SFMR, GNMA and FNMA
Mortgage-Backed Securities Program:
1,095,000 Series 1988A, GNMA collateralized,
AMT,
8.125% due 02/01/2021.............. 1,160,700
1,545,000 Series A,
7.350% due 09/01/2024.............. 1,599,075
210,000 Series B,
6.900% due 10/01/2024.............. 219,450
Stockton, Community Facilities
Supplemental Tax #90-2, SFMR, GNMA
Mortgage-Backed Securities Program:
55,000 Series A,
7.450% due 08/01/2010.............. 58,162
4,000,000 Series 002,
7.750% due 08/01/2015.............. 4,110,000
5,000,000 University of California, (Multiple
Purpose Review Projects), (MBIA
Insured),
6.300% due 09/01/2014.............. 5,175,000
1,000,000 Valley Health Systems, California
Hospital Revenue, (Hospital Revenue
Refunding and Improvement Project),
Series A,
6.500% due 05/15/2025.............. 950,000
</TABLE>
See Notes to Financial Statements.
76
<PAGE> 79
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 1,510,000 Watsonville, Insured Hospital,
Watsonville Community Hospital,
Series A,
6.200% due 07/01/2012.............. $ 1,530,762
-----------
Total Municipal Bonds and Notes
(Cost $371,775,160)................ 387,498,075
-----------
SHORT-TERM MUNICIPAL BOND -- 0.2%
(Cost $900,000)
900,000 California, Pollution Control
Financing Authority, PCR,
(Burney Forest Products Project), Series A,
3.650% due 09/01/2020+............... 900,000
-----------
TOTAL INVESTMENTS (COST $372,675,160*)....... 98.9% 388,398,075
OTHER ASSETS AND LIABILITIES (NET)........... 1.1 4,332,740
----- ------------
NET ASSETS................................... 100.0% $392,730,815
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** A portion or all of this security is pledged as collateral for futures
contracts.
+ Variable rate daily demand notes are payable upon not more than one business
day's notice. The interest rate shown reflects the rate currently in effect.
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- ---------- --------------
<S> <C> <C>
FUTURES CONTRACTS -- SHORT POSITION
100 U.S. Treasury Bond, Twenty Year,
September 1996..................... $ (272,682)
==========
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance
Corporation
AMT -- Alternative Minimum Tax
BIGI -- Bond Investors Guarantee Insurance
COP -- Certificates of Participation
CPGAR -- Capital Guaranty
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
SFMR -- Single Family Mortgage Revenue
</TABLE>
See Notes to Financial Statements.
77
<PAGE> 80
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
FLORIDA INSURED MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 97.5%
FLORIDA -- 97.5%
Brevard County, School Board, COP,
(AMBAC Insured):
$1,000,000 Series A,
5.400% due 07/01/2012................ $ 976,250
1,000,000 Series B,
5.500% due 07/01/2021................ 951,250
2,270,000 Broward County, Educational Facilities
Authority Revenue, (Nova Southeastern
University Project), (CONNIE LEE
Insured),
6.000% due 04/01/2008................ 2,360,800
1,000,000 Collier County, Industrial Development
Authority, IDR, (Southern States
Utilities Project), AMT,
6.500% due 10/01/2025................ 956,250
1,940,000 Dade County, Aviation Revenue, Series
B, AMT, (MBIA Insured),
6.600% due 10/01/2022................ 2,041,850
1,690,000 Dade County, School Board, COP, Series
A, (MBIA Insured),
5.750% due 05/01/2008................ 1,734,362
2,000,000 Escambia County, Health Facilities
Revenue, Baptist Hospital, Series B,
6.000% due 10/01/2014................ 1,880,000
1,000,000 Escambia County, PCR,
(Champion International Corporation
Project), AMT,
6.900% due 08/01/2022................ 1,053,750
Florida Housing Finance Agency:
480,000 Landings Boot Ranch, Series K,
(AMBAC Insured),
5.875% due 11/01/2015................ 469,800
715,000 SFMR, Series A, AMT, (GNMA Insured),
6.650% due 01/01/2024................ 741,812
1,000,000 Florida State Turnpike Authority,
Turnpike Revenue, Department of
Transportation, Series A, (FGIC
Insured),
5.000% due 07/01/2016................ 906,250
1,445,000 Hillsborough County, Capital
Improvement Revenue, Criminal Justice
Facilities, (FGIC Insured),
5.250% due 08/01/2016................ 1,351,075
1,000,000 Hillsborough County, Industrial
Development Authority, IDR, Allegany
Health Systems, (John Knox Village of
Tampa Bay, Inc.), (MBIA Insured),
6.000% due 12/01/2006................ 1,051,250
1,500,000 Hillsborough County, PCR, (Tampa
Electric Company Project), (MBIA
Insured),
6.250% due 12/01/2034................ 1,556,250
2,000,000 Hillsborough County, School Board, COP,
(FGIC Insured),
6.000% due 07/01/2012................ 2,042,500
1,000,000 Jacksonville, Health Facilities
Revenue, Baptist Medical Center,
Series A, (MBIA Insured),
7.300% due 06/01/2019................ 1,076,250
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
$1,530,000 Jacksonville, Port Authority, Airport
Revenue, AMT, (AMBAC Insured),
5.250% due 10/01/2017................ $ 1,405,688
1,500,000 Jacksonville, Water & Sewer Revenue,
(United Water Project), AMT,
(AMBAC Insured),
6.350% due 08/01/2025................ 1,545,000
1,350,000 Kissimmee, Utility Authority, Electric
Revenue, (FGIC Insured),
5.250% due 10/01/2018................ 1,260,562
1,000,000 Manatee County, Housing Finance
Authority, SFMR, Sub Series 4, AMT,
(GNMA/FNMA Collateral),
6.875% due 11/01/2026................ 1,063,750
2,000,000 Melbourne, Airport Revenue, AMT,
(MBIA Insured),
6.250% due 10/01/2018................ 2,075,000
1,000,000 Orange County, Housing Finance
Authority, MFHR, (Hands Inc.
Project), Series A,
8.000% due 10/01/2025................ 992,500
1,000,000 Orlando & Orange County, Expressway
Authority, Expressway Revenue, Jr.
Lien, (FSA Insured),
5.950% due 07/01/2023................ 1,005,000
1,050,000 Seminole County, School Board
Authority, COP, Series A, (MBIA
Insured),
6.125% due 07/01/2014................ 1,082,813
1,250,000 Village Center Community Development
District, Flautil Revenue, (FGIC
Insured),
6.000% due 11/01/2018................ 1,303,125
500,000 Volusia County, Educational Facilities
Authority Revenue, Embry-Riddle
Aeronautical University,
6.125% due 10/15/2016................ 495,625
1,000,000 Volusia County, Health Facilities
Authority Revenue, John Knox Village
of Tampa Bay, Inc., Series A,
6.000% due 06/01/2017................ 1,000,000
-----------
Total Municipal Bonds and Notes
(Cost $33,784,224)................... 34,378,762
-----------
SHORT-TERM MUNICIPAL BOND -- 7.1%
(Cost $2,500,000)
2,500,000 Pinellas County, Health Facilities
Authority Revenue, Pooled Hospital
Loan Program,
3.600% due 12/01/2015+............... 2,500,000
-----------
TOTAL INVESTMENTS (COST $36,284,224*)......... 104.6% 36,878,762
OTHER ASSETS AND LIABILITIES (NET)............ (4.6) (1,618,834)
----- -----------
NET ASSETS.................................... 100.0% $35,259,928
===== ===========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ Variable rate daily demand bonds are payable upon not more than one business
day's notice. The interest rate shown reflects the rate currently in effect.
See Notes to Financial Statements.
78
<PAGE> 81
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
FLORIDA INSURED MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<S> <C>
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance
Corporation
AMT -- Alternative Minimum Tax
CONNIE LEE -- College Construction Loan Association
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
SFMR -- Single Family Mortgage Revenue
</TABLE>
See Notes to Financial Statements.
79
<PAGE> 82
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ---------- -----------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 95.6%
CALIFORNIA -- 94.3%
$ 380,000 Adelanto, School District, Capital
Appreciation, GO, Series B, (FGIC
Insured),
Zero coupon due 09/01/2002........... $ 281,675
1,075,000 Alhambra, Redevelopment Agency Tax
Allocation, (Industrial Redevelopment
Project), (FSA Insured),
4.700% due 05/01/2006................ 1,025,281
595,000 Alta Loma, Elementary School District,
GO, Series 2, (AMBAC Insured),
7.250% due 06/01/2002................ 670,863
200,000 Alum Rock, Unified School District,
Series B, (FGIC Insured),
Zero coupon due 09/01/2002........... 147,500
625,000 Berkeley, Unified School District,
Series C, (AMBAC Insured),
5.875% due 08/01/2006................ 659,375
985,000 Brea & Olinda, School District, (High
School Refinancing Program), Series
A, (CGIC Insured),
6.000% due 08/01/2009................ 1,013,319
California Education Facilities
Authority Revenue, University La
Verne:
745,000 5.800% due 04/01/2002................ 745,931
790,000 5.900% due 04/01/2003................ 790,987
California Housing Finance Agency
Revenue, AMT:
2,350,000 Home Mortgage, Series B1,
(AMBAC Insured),
6.200% due 02/01/2007................ 2,452,812
445,000 Series E, (MBIA Insured),
6.050% due 08/01/2006................ 472,812
California State, GO:
(AMBAC Insured):
1,000,000 6.200% due 09/01/2002................ 1,073,750
1,240,000 7.250% due 08/01/2003................ 1,407,400
(FGIC Insured):
200,000 7.100% due 05/01/2005................ 228,000
1,000,000 6.200% due 09/01/2005................ 1,078,750
California State, Public Works Board,
(Various California University
Projects), Series A:
1,000,000 5.900% due 10/01/2004................ 1,051,250
1,500,000 (AMBAC Insured),
5.900% due 12/01/2003................ 1,586,250
California State University Revenue:
200,000 Housing System, (FGIC Insured),
7.625% due 11/01/2003................ 232,500
1,495,000 Series AJ, AL, AM, AN, AP, AQ, AR,
(AMBAC Insured),
6.750% due 11/01/2007................ 1,622,075
California Statewide Communities
Development Authority:
1,600,000 (Children's Hospital), (MBIA Insured),
6.000% due 06/01/2007................ 1,676,000
1,000,000 MFHR, Series E,
5.500% due 12/01/2005................ 995,000
1,255,000 (St. Joseph Health Systems),
(AMBAC Insured),
5.875% due 07/01/2005................ 1,314,613
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ---------- -----------
<S> <C> <C>
$ 350,000 Campbell, Housing Facility Revenue,
(San Tomas Gardens Project), Series
A, (GNMA Insured),
5.750% due 10/20/2004................ $ 355,250
1,000,000 Castaic Lake, Water Agency, COP, (Water
Systems Improvement Project), Series
A, (MBIA Insured),
5.600% due 08/01/2005................ 1,038,750
1,000,000 Desert Hospital District, Hospital
Revenue, COP, (FSA Insured),
6.350% due 07/01/2004................ 1,075,000
1,000,000 Foothill Eastern Transportation
Corridor Agency, Toll Road Revenue,
Capital Appreciation, Sr. Lien,
Series A,
Zero coupon due 01/01/2004........... 625,000
Gilroy, Unified School District, COP,
(FSA Insured):
1,390,000 5.600% due 09/01/2003................ 1,442,125
1,400,000 5.625% due 09/01/2004................ 1,452,500
Los Angeles, Community Redevelopment
Agency, MFHR, (AMBAC Insured):
965,000 5.650% due 07/01/2000................ 987,919
1,155,000 6.000% due 07/01/2004................ 1,201,200
Los Angeles, Department of Water and
Power, Electric Revenue Bond,
(MBIA Insured):
1,500,000 8.500% due 01/15/2002................ 1,762,500
1,000,000 5.400% due 09/01/2006................ 1,013,750
1,000,000 Los Angeles, GO, Series A, (FGIC
Insured),
5.700% due 09/01/2008................ 1,021,250
1,500,000 Los Angeles, Unified School District,
Series B, (AMBAC Insured),
6.000% due 12/01/2001................ 1,591,875
Los Angeles, Wastewater System Revenue:
775,000 Series A, (MBIA Insured),
8.500% due 06/01/2002................ 916,437
1,000,000 Series C,
6.900% due 06/01/2009................ 1,076,250
2,500,000 Los Angeles County, Capital Asset
Leasing Corporation Leashold Revenue,
(AMBAC Insured),
6.000% due 12/01/2006................ 2,646,875
500,000 Los Angeles County, COP, Structured
Yield Curve Certificates,
7.660% due 11/01/2001+............... 524,375
694,000 Modesto, Mortgage Revenue Bond,
(GNMA Insured),
5.875% due 12/01/2004................ 704,410
1,000,000 Murrieta Valley, Unified School
District, GO, (FGIC Insured),
5.200% due 09/01/2007................ 982,500
2,000,000 Oakland, Health Facilities Revenue,
(Children's Hospital Project), Series
A, (CONNIE LEE Insured),
5.300% due 07/01/2008................ 1,935,000
Oakland, Improvement Bond Act of 1915,
Medical Hill Parking Assessment
District #3, (MBIA Insured):
150,000 5.500% due 09/02/1999................ 154,500
250,000 6.000% due 09/02/2004................ 257,778
</TABLE>
See Notes to Financial Statements.
80
<PAGE> 83
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ---------- -----------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 500,000 Orange County, Local Transit Authority,
Sales Tax Revenue Bond, (FGIC
Insured),
5.600% due 02/15/2003................ $ 513,750
Orange County, Recovery Project, Series
A, (MBIA Insured):
1,000,000 6.000% due 06/01/2008................ 1,033,750
1,000,000 COP,
6.000% due 07/01/2006................ 1,048,750
Oxnard, Harbor District Revenue, (FSA
Insured):
1,075,000 7.000% due 08/01/2001................ 1,187,875
1,155,000 7.000% due 08/01/2002................ 1,290,713
1,240,000 7.000% due 08/01/2003................ 1,396,550
Paramount, Redevelopment Agency Tax
Allocation, (Redevelopment Project
Area #1), (MBIA Insured):
1,820,000 6.100% due 08/01/2006................ 1,940,575
1,925,000 6.100% due 08/01/2007................ 2,040,500
560,000 Pioneers Memorial Hospital District,
GO, (AMBAC Insured),
7.000% due 10/01/2005................ 641,900
1,300,000 Sacramento, Municipal Utility District,
Electric Revenue, (AMBAC Insured),
5.500% due 05/15/2007................ 1,313,000
1,000,000 San Diego, Unified School District,
COP, (Capital Projects), Series B,
6.000% due 07/01/2003................ 1,058,750
1,000,000 San Diego County, Water Authority, COP,
Series A, (MBIA Insured),
6.000% due 05/01/2001................ 1,052,500
100,000 San Francisco, Airports Commission, San
Francisco International Airport,
Second Series, (MBIA Insured),
6.350% due 05/01/2004................ 108,250
1,000,000 San Francisco, City and County, GO,
(FGIC Insured), (Public Safety
Improvement Project), Series F,
6.500% due 06/15/2006................ 1,060,000
1,360,000 San Jose, Redevelopment Agency, (Merged
Area Redevelopment Project), Tax
Allocation Bond, (MBIA Insured),
6.000% due 08/01/2006................ 1,443,300
1,050,000 Santa Ana, COP, (Santa Ana Recycling
Project), Series A, AMT, (AMBAC
Insured)
5.400% due 05/01/2007................ 1,044,750
1,350,000 Solano County, (Solano Park Hospital
Project), COP, (FSA Insured),
6.500% due 08/01/2006................ 1,468,125
1,500,000 South Orange County, Public Financing
Authority, Special Tax Revenue, Sr.
Lien, Series A, (MBIA Insured),
5.400% due 09/01/2003................ 1,535,625
University of California:
(MBIA Insured):
1,250,000 Housing Systems, Series A,
5.300% due 11/01/2005................ 1,262,500
1,000,000 (Multiple Purpose Review Projects),
10.000% due 09/01/2001............... 1,235,000
1,070,000 Series A, (CONNIE LEE Insured),
5.500% due 09/01/2006................ 1,070,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ---------- -----------
<S> <C> <C>
$1,000,000 Valley Health Systems, California
Hospital Revenue, (Hospital Revenue
Refunding & Improvement Project),
Series A,
6.125% due 05/15/2005................ $ 975,000
1,040,000 Victor Valley, Joint Union High School
District, (MBIA Insured),
5.600% due 09/01/2004................ 1,080,300
1,070,000 Watsonville, Hospital Revenue,
Watsonville Community Hospital,
Series A,
5.850% due 07/01/2006................ 1,084,712
-----------
71,177,562
-----------
GUAM -- 1.3%
1,000,000 Government of Guam, GO, Series A,
5.900% due 09/01/2005................ 992,500
-----------
Total Municipal Bonds and Notes (Cost
$69,907,876)......................... 72,170,062
-----------
SHORT-TERM MUNICIPAL BONDS -- 2.7%
California, Pollution Control Financing
Authority, PCR:
300,000 (Burney Forest Products Project),
Series A,
3.650% due 09/01/2020++............ 300,000
Southern California Edison Company:
500,000 Series A,
3.450% due 02/28/2008++............ 500,000
600,000 Series B,
3.450% due 02/28/2008++............ 600,000
600,000 Series D,
3.450% due 02/28/2008++............ 600,000
-----------
Total Short-Term Municipal Bonds (Cost
$2,000,000).......................... 2,000,000
-----------
TOTAL INVESTMENTS (COST $71,907,876*)...... 98.3% 74,170,062
OTHER ASSETS AND LIABILITIES (NET)......... 1.7 1,307,507
----- -----------
NET ASSETS................................. 100.0% $75,477,569
===== ===========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Variable rate daily demand bonds are payable upon not more than one business
day's notice. The interest rate shown reflects the rate currently in effect.
<TABLE>
<S> <C>
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance
Corporation
AMT -- Alternative Minimum Tax
CGIC -- Capital Guaranty Insurance Corporation
CONNIE LEE -- College Construction Loan Association
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bonds
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
</TABLE>
See Notes to Financial Statements.
81
<PAGE> 84
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NATIONAL MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 96.6%
ALABAMA -- 2.2%
$ 4,000,000 Courtland, Industrial Development
Board of Solid Waste, (Champion
International Corporation Project),
Disposal Revenue, AMT,
7.750% due 01/01/2020.............. $ 4,270,000
1,000,000 Mobile, Industrial Development Board,
Solid Waste Disposal Revenue,
6.950% due 01/01/2020.............. 1,031,250
------------
5,301,250
------------
ARIZONA -- 0.4%
740,000 Tucson, Airport Authority Inc.,
Supplemental Facilities Revenue,
AMT,
8.700% due 09/01/2019.............. 841,750
------------
CALIFORNIA -- 0.7%
1,550,000 Los Angeles, Regional Airport
Improvement, Series A, AMT,
6.700% due 01/01/2022.............. 1,557,750
------------
COLORADO -- 8.4%
19,000,000 Arapahoe County, Highway Revenue,
Zero coupon due 08/31/2026......... 2,066,250
Denver City and County, Airport
Revenue, AMT:
Series A:
2,000,000 8.875% due 11/15/2012.............. 2,370,000
1,140,000 8.500% due 11/15/2023**............ 1,308,150
2,000,000 8.000% due 11/15/2025**............ 2,255,000
1,920,000 Series C,
6.600% due 11/15/2004.............. 2,028,000
4,500,000 Meridian Metropolitan District, GO,
7.500% due 12/01/2011.............. 4,876,875
5,000,000 University of Colorado, Hospital
Authority, Series A, (AMBAC
Insured),
6.250% due 11/15/2012**............ 5,200,000
------------
20,104,275
------------
DISTRICT OF COLUMBIA -- 1.7%
1,150,000 District of Columbia, COP,
6.875% due 01/01/2003.............. 1,148,563
1,500,000 District of Columbia, Land
Redevelopment Agency, Washington
D.C. Sports Arena, Special Tax,
5.625% due 11/01/2010.............. 1,417,500
1,500,000 Metropolitan District, Washington
D.C., Airport Authority, General
Airport Revenue, Series A, AMT,
(MBIA Insured),
6.625% due 10/01/2019**............ 1,558,125
------------
4,124,188
------------
FLORIDA -- 3.7%
Dade County, Seaport Authority,
Refunding, (MBIA Insured):
425,000 6.500% due 10/01/2008................ 471,219
500,000 6.500% due 10/01/2009................ 552,500
800,000 6.500% due 10/01/2010................ 880,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
$22,520,000 Dade County, Guaranteed Entitlement
Revenue, Capital Appreciation,
Series A, (MBIA Insured),
Zero coupon due 02/01/2018......... $ 6,136,700
240,000 Largo, Sun Coast Health Systems,
5.750% due 03/01/2000.............. 240,900
610,000 Pinellas County, Health Facilities
Authority, (Sun Coast Health Care
Systems Project), Series A,
8.500% due 03/01/2020.............. 698,450
------------
8,979,769
------------
GEORGIA -- 4.2%
1,000,000 Atlanta, Airport Facilities Revenue,
AMT,
7.250% due 01/01/2017.............. 1,076,250
Monroe, PCR, (Oglethorpe Power
Company):
5,000,000 6.700% due 01/01/2009.............. 5,425,000
3,410,000 6.750% due 01/01/2010.............. 3,695,587
------------
10,196,837
------------
HAWAII -- 1.6%
3,500,000 Hawaii Department of Budget and
Finance, Residual Interest Bond,
AMT,
9.232% due 11/01/2021++............ 3,788,750
------------
IDAHO -- 1.5%
2,000,000 Idaho Health Facilities Authority
Revenue, (Inverse Floater),
8.600% due 02/15/2021++............ 2,150,000
1,500,000 Idaho Housing and Finance
Association, SFHR, Series D, AMT,
6.450% due 07/01/2014.............. 1,500,000
------------
3,650,000
------------
ILLINOIS -- 15.6%
Chicago, O'Hare Airport Supplemental
Facilities, AMT:
6,000,000 (MBIA Insured),
6.750% due 01/01/2012**............ 6,337,500
700,000 Special Series A,
7.875% due 11/01/2025.............. 749,875
150,000 Special Series B,
8.500% due 05/01/2018.............. 164,250
United Air Lines:
615,000 8.400% due 05/01/2004.............. 673,425
790,000 8.950% due 05/01/2018.............. 887,763
Cook County, Community High School,
Number 217, (AMBAC Insured):
1,090,000 6.400% due 12/01/2003**............ 1,164,938
1,130,000 6.500% due 12/01/2004**............ 1,207,688
1,370,000 6.600% due 12/01/2005**............ 1,464,188
Cook County, School District, Number
026, (MBIA Insured):
1,445,000 Zero coupon due 12/01/2003......... 977,181
1,020,000 Zero coupon due 12/01/2004......... 651,525
1,000,000 Decatur, Hospital Revenue,
(Decatur Memorial Hospital), Series
B, (MBIA Insured),
6.850% due 10/01/2016**............ 1,056,250
</TABLE>
See Notes to Financial Statements.
82
<PAGE> 85
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIONAL MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
ILLINOIS -- (CONTINUED)
Illinois Health Facilities Authority
Revenue:
Glenoak Medical Center, Series D:
$ 210,000 Pre-refunded,
9.500% due 11/15/2015............ $ 252,263
280,000 Unrefunded,
9.500% due 11/15/2015............ 320,250
4,765,000 Hindsdale Hospital, Series B,
9.000% due 11/15/2015............ 5,384,450
5,000,000 Residual Interest Bond, (MBIA
Insured),
9.547% due 06/19/2015++.......... 5,568,750
300,000 Riverside Senior Living Center
Project,
7.500% due 11/01/2020............ 319,875
5,000,000 Sarah Bush Lincoln,
7.250% due 05/15/2022............ 5,112,500
1,230,000 Servantcor, Series A,
8.000% due 08/15/2021............ 1,419,113
3,000,000 St. Luke's Medical, Residual
Interest Bond, (MBIA Insured),
9.547% due 10/01/2024++.......... 3,330,000
365,000 Illinois Housing Development
Authority, Series A, AMT,
7.350% due 08/01/2010............ 385,075
------------
37,426,859
------------
INDIANA -- 0.8%
2,000,000 Indianapolis, Public Improvement
Board, Series D, (LOC INB National
Bank),
6.500% due 02/01/2022.............. 2,030,000
------------
KENTUCKY -- 1.4%
3,000,000 Jefferson County, Hospital Revenue,
Residual Interest Bond, (MBIA
Insured),
8.759% due 10/01/2008++............ 3,382,500
------------
LOUISIANA -- 1.6%
300,000 East Baton Rouge, Sewer Commission
Revenue,
9.125% due 09/01/2006.............. 325,875
1,500,000 Louisiana Public Facility Authority
Revenue, Series B,
Zero coupon due 12/01/2019......... 360,000
10,000,000 Orleans Parish, School Board Revenue,
(FGIC Insured),
Zero coupon due 02/01/2015......... 3,162,500
------------
3,848,375
------------
MARYLAND -- 0.4%
1,000,000 State of Maryland, Community
Development Administration,
Department of Housing, Single
Family Project, AMT,
7.450% due 04/01/2032.............. 1,036,250
------------
MASSACHUSETTS -- 2.3%
750,000 Commonwealth of Massachusetts,
Consolidated Loan, Series A,
7.625% due 06/01/2008.............. 855,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
Commonwealth of Massachusetts, Health
and Educational Facilities
Authority:
$ 500,000 Framingham Union Hospital, Series B,
8.500% due 07/01/2010.............. $ 575,625
3,000,000 Saint Memorial Medical Center, Series
A,
6.000% due 10/01/2023.............. 2,362,500
400,000 Commonwealth of Massachusetts, Health
Finance Authority,
Melrose-Wakefield Hospital, Series
A,
8.625% due 07/01/2018.............. 408,000
Massachusetts State, GO:
125,000 Pre-refunded,
7.500% due 12/01/2007.............. 141,094
125,000 Unrefunded,
7.500% due 12/01/2007.............. 141,094
1,000,000 Plymouth County, COP, Series A,
7.000% due 04/01/2022.............. 1,081,250
------------
5,564,563
------------
MICHIGAN -- 2.4%
2,670,000 Michigan Municipal Bond Authority,
Revenue Reference, Series A,
(FGIC Insured),
4.750% due 12/01/2009**............ 2,419,687
Michigan State Hospital Finance
Authority Revenue, Detroit Medical,
Series A:
1,500,000 7.500% due 08/15/2011.............. 1,616,250
850,000 5.875% due 07/01/2014.............. 799,000
Reed City, Public Schools Revenue,
(AMBAC Insured):
590,000 Zero coupon due 05/01/2013......... 218,300
610,000 Zero coupon due 05/01/2014......... 209,687
615,000 Zero coupon due 05/01/2015......... 196,800
630,000 Zero coupon due 05/01/2016......... 192,937
------------
5,652,661
------------
MINNESOTA -- 0.2%
2,000,000 Southern Minnesota Municipal Power
Agency, (Capital Appreciation),
Series A, (MBIA Insured),
Zero coupon due 01/01/2024......... 385,000
------------
MISSISSIPPI -- 2.4%
5,000,000 Lowndes County, Solid Waste Disposal,
PCR, Residual Interest Bond,
Floating Rate Note,
8.600% due 04/01/2022++............ 5,475,000
200,000 Warren County, Solid Waste Disposal
Revenue, (International Paper
Project), Series A, AMT,
7.700% due 11/15/2009.............. 214,500
------------
5,689,500
------------
MISSOURI -- 1.7%
1,000,000 Missouri State, Health and
Educational Facilities Authority
Revenue,
6.800% due 11/01/2016**............ 1,113,750
3,000,000 St. Louis, Parking Facilities
Revenue,
6.625% due 12/15/2021.............. 3,060,000
------------
4,173,750
------------
</TABLE>
See Notes to Financial Statements.
83
<PAGE> 86
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIONAL MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
MONTANA -- 0.5%
$ 1,000,000 Forsyth, PCR, Series B, AMT, (AMBAC
Insured),
7.250% due 08/01/2021**............ $ 1,096,250
------------
NEBRASKA -- 0.3%
700,000 Nebraska Investment Finance
Authority, Single Family Housing,
Residual Interest Bond, AMT, (GNMA
Insured),
9.475% due 09/15/2024++............ 713,125
------------
NEVADA -- 4.1%
4,000,000 Clark County, IDR, Series A, AMT,
(FGIC Insured),
6.700% due 06/01/2022**............ 4,170,000
5,495,000 Nevada Housing Division, Single
Family Program, Series A-2, AMT,
(FHA Insured),
6.700% due 10/01/2025.............. 5,563,687
------------
9,733,687
------------
NEW HAMPSHIRE -- 0.4%
1,000,000 New Hampshire State Higher Education
& Health Facilities Authority
Revenue,
8.250% due 07/01/2013.............. 1,068,750
------------
NEW JERSEY -- 1.3%
3,000,000 Bergen County, Utilities Authority
Revenue, (FGIC Insured),
6.500% due 12/15/2012**............ 3,176,250
------------
NEW YORK -- 12.8%
400,000 City of New York, IDR, Industrial
Development Agency, Supplemental
Facilities, AMT,
8.000% due 07/01/2020.............. 427,500
3,000,000 Housing of New York Corporation
Revenue,
5.000% due 11/01/2013.............. 2,613,750
Metropolitan Transportation Authority
Revenue:
2,000,000 Commuter Facilities, Series O,
5.750% due 07/01/2007.............. 1,992,500
1,265,000 Transportation Facilities, Series 7,
4.750% due 07/01/2019.............. 1,030,975
1,000,000 New York, Finance Authority, Series
B, (FSA Insured),
7.000% due 06/01/2014**............ 1,115,000
New York, GO:
995,000 Series A,
8.000% due 08/15/2020............ 1,149,225
5,200,000 Series C,
6.500% due 08/01/2005............ 5,343,000
Series F:
1,845,000 Pre-refunded,
8.250% due 11/15/2018............ 2,163,262
160,000 Unrefunded,
8.250% due 11/15/2018............ 184,000
New York State Energy, Research &
Development Authority:
2,200,000 6.000% due 04/01/2000................ 2,255,000
2,500,000 8.755% due 04/01/2020+............... 2,643,750
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
New York State Energy, Research &
Development Authority (Continued):
Gas Facilities:
$ 5,225,000 7.125% due 12/01/2020................ $ 5,375,114
500,000 (MBIA Insured),
7.125% due 03/15/2022.............. 517,285
275,000 New York State Medical Care
Facilities Finance Authority,
7.750% due 08/15/2011.............. 305,594
2,000,000 New York State Multi-family Mortgage
Revenue, AMT,
6.625% due 08/15/2012.............. 2,075,000
1,490,000 State of New York, Urban Development
Corporation Revenue,
5.625% due 01/01/2007.............. 1,443,437
------------
30,634,392
------------
OHIO -- 1.2%
650,000 East Liverpool, Hospital Revenue,
Series B,
8.125% due 10/01/2011.............. 687,375
1,240,000 Lorain County, Hospital Revenue,
Series B,
7.200% due 12/15/2011.............. 1,326,800
900,000 Westerville, Minerva Place & Blendon
Joint Township Hospital District,
(AMBAC Insured),
6.800% due 09/15/2006.............. 981,000
------------
2,995,175
------------
OKLAHOMA -- 0.9%
1,885,000 Oklahoma Housing and Finance
Authority, Single Family Revenue,
Series B, AMT, (GNMA Insured),
7.997% due 08/01/2018**............ 2,042,869
200,000 Tulsa, Municipal Airport Revenue,
American Airlines Project, AMT,
7.600% due 12/01/2030.............. 213,500
------------
2,256,369
------------
PENNSYLVANIA -- 9.5%
Allegheny County, Hospital
Development Revenue, (Ohio Valley
General Hospital):
700,000 5.100% due 04/01/2001.............. 688,625
735,000 5.300% due 04/01/2002.............. 723,056
625,000 5.400% due 04/01/2003.............. 611,719
3,000,000 5.875% due 04/01/2011.............. 2,816,250
Beaver County, IDR, PCR, (Edison
Project), Series A, (FGIC Insured):
3,675,000 7.000% due 06/01/2021**............ 3,932,250
300,000 7.750% due 09/01/2024.............. 317,250
300,000 Lancaster County, Solid Waste
Authority, Series A, AMT,
8.375% due 12/15/2004.............. 319,500
600,000 Lehigh County, General Purpose
Authority, Series A,
8.100% due 07/15/2010.............. 636,000
500,000 McKean County, Hospital Authority
Revenue,
8.875% due 10/01/2020.............. 585,625
1,250,000 Montgomery County, Higher Education
Revenue,
6.875% due 11/15/2020.............. 1,253,125
</TABLE>
See Notes to Financial Statements.
84
<PAGE> 87
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIONAL MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
PENNSYLVANIA -- (CONTINUED)
Pennsylvania State Higher Education
Revenue, Student Loan Revenue,
Residual Interest Bond, AMT:
$ 3,000,000 (AMBAC Insured),
9.622% due 09/01/2026++............ $ 3,168,750
3,000,000 Series A,
7.250% due 03/01/2011.............. 3,345,000
1,890,000 Series B,
7.250% due 03/01/2005.............. 2,107,350
1,000,000 Philadelphia, Municipal Authority
Revenue, Series B, (FGIC Insured),
7.125% due 11/15/2018**............ 1,123,750
1,000,000 Philadelphia, Water and Sewer
Revenue,
7.500% due 08/01/2010**............ 1,136,250
------------
22,764,500
------------
PUERTO RICO -- 0.9%
2,000,000 Puerto Rico (Commonwealth of), Public
Improvement Revenue,
6.800% due 07/01/2021**............ 2,235,000
------------
RHODE ISLAND -- 1.0%
200,000 Rhode Island Housing and Mortgage
Finance Corporation, AMT,
7.875% due 10/01/2022.............. 207,000
2,000,000 Rhode Island State Health and
Education Revenue, Residual
Interest Bond,
(FGIC Insured),
9.715% due 08/15/2021++............ 2,240,000
------------
2,447,000
------------
TEXAS -- 6.5%
4,000,000 Alliance Airport Authority, (Federal
Express Corporation), AMT,
6.375% due 04/01/2021.............. 3,955,000
80,000 Bexar County, Housing Finance, GNMA
Mortgage, AMT,
8.100% due 03/01/2024.............. 83,300
550,000 Brazos, Higher Educational Facilities
Authority, Series C-2, AMT,
7.100% due 11/01/2004.............. 585,063
5,000,000 Dallas-Fort Worth International
Airport, (Facility Improvement
Corporate Revenue), (American
Airlines, Inc.), AMT,
7.500% due 11/01/2025.............. 5,312,500
4,000,000 Texas State, Department of Housing,
Community Affairs, Residual
Interest Bond, AMT, (GNMA Insured),
9.815% due 07/02/2024++............ 4,275,000
749,000 Texas State, Higher Education
Coordinating Board, Student Loan,
AMT,
7.700% due 10/01/2025.............. 771,470
500,000 West Side Calhoun County, Revenue
Bond, AMT,
8.200% due 03/15/2021.............. 551,875
------------
15,534,208
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
VERMONT -- 0.2%
Vermont Housing Finance Agency,
Single Family, Series 1, AMT:
$ 140,000 6.800% due 05/01/2025.............. $ 141,575
220,000 8.150% due 05/01/2025.............. 231,825
------------
373,400
------------
WASHINGTON -- 1.8%
4,000,000 Tacoma, Electric System Revenue,
Residual Interest Bond, Series C,
(AMBAC Insured),
8.972% due 01/02/2015++............ 4,320,000
------------
WEST VIRGINIA -- 1.5%
2,500,000 Harrison County, Solid Waste
Disposal, (Monongahelea Power),
Series A, AMT,
6.875% due 04/15/2022.............. 2,631,250
150,000 Kanawha County, IDR, Union Carbide
Project), Series A, AMT,
8.000% due 08/01/2020.............. 162,937
750,000 South Charleston, IDR, (Union Carbide
Project), Series A, AMT,
8.000% due 08/01/2020.............. 812,812
------------
3,606,999
------------
WISCONSIN -- 0.5%
1,000,000 Madison, IDR, (Madison Gas & Electric
Company), (Project A), AMT,
6.750% due 04/01/2027................ 1,035,000
250,000 Wisconsin State Health Facilities
Authority Revenue, Franciscan
Health Systems,
7.800% due 03/01/2014.............. 261,407
------------
1,296,407
------------
Total Municipal Bonds and Notes
(Cost $218,850,229)................ 231,985,539
------------
SHORT-TERM MUNICIPAL BONDS -- 4.2%
ILLINOIS -- 1.8%
3,200,000 Illinois Development Finance
Authority Revenue, (Ulichs
Childrens Home),
3.550% due 04/01/2007+............. 3,200,000
1,115,000 Illinois Health Facilities Authority
Revenue, Fransican Sisters Health,
3.750% due 01/01/2018+............. 1,115,000
------------
4,315,000
------------
LOUISIANA -- 0.7%
1,600,000 Louisiana State Recovery District,
Sales Tax Revenue,
3.650% due 07/01/1997+............. 1,600,000
------------
MISSISSIPPI -- 0.9%
2,200,000 Jackson County, PCR, Chevron USA
Inc.,
3.500% due 06/01/2023+............. 2,200,000
------------
NEW YORK -- 0.8%
1,900,000 New York, Municipal Water Finance
Authority, Water & Sewer System
Revenue, Series A,
3.750% due 06/15/2025+............. 1,900,000
------------
Total Short-Term Municipal Bonds
(Cost $10,015,000)................. 10,015,000
------------
</TABLE>
See Notes to Financial Statements.
85
<PAGE> 88
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIONAL MUNICIPAL FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
(NOTE 2)
------------
<S> <C> <C>
TOTAL INVESTMENTS (COST $228,865,229*)..... 100.8% $242,000,539
OTHER ASSETS AND LIABILITIES (NET)......... (0.8) (1,830,530)
----- ------------
NET ASSETS................................. 100.0% $240,170,009
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** A portion or all of this security is pledged as collateral for futures
contracts.
+ Variable rate daily demand notes are payable upon not more than one business
day's notice. The interest rate shown reflects the rate currently in effect.
++ Floating rate note. The interest rate shown reflects the rate currently in
effect.
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- ----------- --------------
<S> <C> <C>
FUTURES CONTRACTS -- SHORT POSITION
200 U.S. Treasury Bond, Twenty Year,
September 1996..................... $ (576,614)
===========
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance
Corporation
AMT -- Alternative Minimum Tax
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Authority
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
PCR -- Pollution Control Revenue
SFHR -- Single Family Housing Revenue
</TABLE>
See Notes to Financial Statements.
86
<PAGE> 89
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GROWTH AND INCOME FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- 96.8%
MATERIALS & PROCESSING -- 15.7%
3,200 Albemarle Corporation................. $ 58,400
20,700 Allegheny Ludlum Corporation.......... 390,712
33,500 Aluminum Company of America........... 1,922,062
55,500 du Pont (E.I.) de Nemours & Company... 4,391,437
39,200 Grainger (W.W.) Inc. ................. 3,038,000
109,800 International Game Technology......... 1,852,875
21,400 Reynolds Metals Company............... 1,115,475
155,300 Teledyne Inc. ........................ 5,610,213
82,400 Tyco International Ltd. .............. 3,357,800
138,400 Union Carbide Corporation............. 5,501,400
108,600 USG Corporation+...................... 3,027,225
94,600 Wellman Inc. ......................... 2,211,275
140,700 WMX Technologies, Inc. ............... 4,607,925
------------
37,084,799
------------
CONSUMER DISCRETIONARY -- 14.7%
81,600 Bausch & Lomb Inc. ................... 3,468,000
71,500 Circuit City Stores Inc. ............. 2,582,937
38,700 Colgate-Palmolive Company............. 3,279,825
94,500 Fruit of the Loom, Inc., Class A+..... 2,409,750
97,100 General Instrument Corporation+....... 2,803,763
40,600 International Flavors & Fragrances
Inc. ............................... 1,933,575
104,200 Limited Inc. ......................... 2,240,300
50,900 Melville Corporation.................. 2,061,450
48,200 Procter & Gamble Company.............. 4,368,125
92,800 Time Warner, Inc. .................... 3,642,400
129,500 Toys R Us Inc.+....................... 3,690,750
46,900 Turner Broadcasting Systems, Inc.,
Class B............................. 1,289,750
27,100 Viacom Inc., Class B+................. 1,053,513
------------
34,824,138
------------
FINANCIAL SERVICES -- 12.5%
27,300 Aetna Life & Casualty Company......... 1,951,950
64,000 AMBAC Inc. ........................... 3,336,000
28,200 BankAmerica Corporation............... 2,136,150
37,700 Dean Witter, Discover & Company....... 2,158,325
20,200 First Hawaiian Inc. .................. 575,700
34,000 First Union Corporation............... 2,069,750
50,400 Firstar Corporation................... 2,324,700
77,300 Fleet Financial Group Inc. (New)...... 3,362,550
55,600 NationsBank Corporation............... 4,593,950
34,700 Pinnacle West Capital Corporation..... 1,054,013
94,000 Providian Corporation................. 4,030,250
48,300 Standard Federal Bancorporation....... 1,859,550
------------
29,452,888
------------
ENERGY -- 8.9%
42,000 Anadarko Petroleum Corporation........ 2,436,000
41,789 Cooper Cameron Corporation+........... 1,828,269
69,200 Diamond Shamrock Inc. ................ 1,998,150
40,200 Exxon Corporation..................... 3,492,375
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
63,500 Repsol SA, ADR........................ $ 2,206,625
23,200 Royal Dutch Petroleum Company, ADR.... 3,567,000
106,000 Sun Company Inc. ..................... 3,219,750
26,800 Texaco Inc. .......................... 2,247,850
------------
20,996,019
------------
CONSUMER STAPLES -- 8.8%
14,600 CPC International Inc. ............... 1,051,200
17,100 Kellogg Company....................... 1,252,575
28,100 Nabisco Holdings Corporation, Class
A................................... 994,038
85,000 PepsiCo Inc. ......................... 3,006,875
60,500 Philip Morris Companies Inc........... 6,292,000
55,200 Ralston Purina Company................ 3,539,700
184,200 Wal-Mart Stores Inc. ................. 4,674,075
------------
20,810,463
------------
TELECOMMUNICATIONS -- 8.1%
70,700 AT&T Corporation...................... 4,383,400
54,500 GTE Corporation....................... 2,438,875
32,500 Harris Corporation.................... 1,982,500
60,800 MCI Communications Corporation........ 1,558,000
24,400 Motorola, Inc. ....................... 1,534,150
269,600 Tele-Communications Inc., TCI Group,
Class A+............................ 4,886,500
77,100 U.S. West Inc. ....................... 2,457,563
------------
19,240,988
------------
HEALTH CARE -- 7.9%
112,400 ALZA Corporation+..................... 3,076,950
77,100 Columbia/HCA Healthcare Corporation... 4,115,213
69,600 Forest Labs Inc.+..................... 2,688,300
41,791 Gensia, Inc.+......................... 211,567
159,100 Humana Inc.+.......................... 2,843,913
31,600 Pfizer, Inc. ......................... 2,255,450
65,000 Warner Lambert Company................ 3,575,000
------------
18,766,393
------------
AUTOS & TRANSPORTATION -- 7.6%
42,800 Boeing Company........................ 3,728,950
85,900 Consolidated Freightways Inc. ........ 1,814,637
127,100 Cooper Tire & Rubber Company.......... 2,827,975
62,500 General Motors Corporation............ 3,273,438
14,300 Johnson Controls Inc. ................ 993,850
76,000 Union Pacific Corporation............. 5,310,500
------------
17,949,350
------------
TECHNOLOGY -- 5.3%
26,300 Adobe Systems Inc. ................... 943,512
52,500 Advanced Micro Devices Inc.+.......... 715,312
26,600 Autodesk Inc. ........................ 794,675
23,300 Broderbund Software Corporation+...... 751,425
119,000 EMC Corporation+...................... 2,216,375
23,300 Hewlett-Packard Company............... 2,321,262
46,600 MagneTek Inc.+........................ 448,525
</TABLE>
See Notes to Financial Statements.
87
<PAGE> 90
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH AND INCOME FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
TECHNOLOGY -- (CONTINUED)
43,200 Perkin Elmer Corporation.............. $ 2,084,400
96,200 Quantum Corporation+.................. 1,406,925
47,800 Soft Key International Inc.+.......... 905,212
------------
12,587,623
------------
PRODUCER DURABLES -- 4.8%
60,400 AlliedSignal Inc. .................... 3,450,350
139,200 Coltec Industries, Inc.+.............. 1,983,600
90,600 Cooper Industries, Inc. .............. 3,759,900
13,100 General Electric Company.............. 1,133,150
53,000 Rohr Inc.+............................ 1,106,375
------------
11,433,375
------------
UTILITIES -- 2.5%
32,400 Entergy Corporation................... 919,350
27,100 Illinova Corporation.................. 779,125
97,100 Pacific Gas & Electric Company........ 2,257,575
4,300 Southern Company...................... 105,887
59,000 Western Resources Inc. ............... 1,762,625
------------
5,824,562
------------
Total Common Stocks (Cost
$209,366,738)....................... 228,970,598
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 1.5%
27,000 K-Mart Financing, Conv. Pfd........... $ 1,464,750
36,500 Owens-Corning, Conv. Pfd.+++.......... 2,057,688
------------
Total Convertible Preferred Stocks
(Cost $3,232,370)................... 3,522,438
------------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<S> <C> <C>
CONVERTIBLE NOTE -- 0.3% (Cost $446,250)
$ 375,000 Rohr Inc., Conv. Sub. Note,
7.750% due 05/15/2004............... 765,937
------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTE -- 1.5%
(Cost $3,545,000)
3,545,000 5.200% due 07/01/1996++............... 3,545,000
------------
U.S. TREASURY BILL -- 1.2% (Cost $2,834,455)
2,867,000 5.100% due 09/19/1996++............... 2,834,455
------------
TOTAL INVESTMENTS (COST $219,424,813*)..... 101.3% 239,638,428
OTHER ASSETS AND LIABILITIES (NET)......... (1.3) (3,149,713)
----- ------------
NET ASSETS................................. 100.0% $236,488,715
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes is $219,699,438 (Note 6).
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase (unaudited).
+++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
<TABLE>
<S> <C>
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
88
<PAGE> 91
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GROWTH FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- 80.6%
TECHNOLOGY -- 23.9%
1,900 ABR Information Services, Inc.+...... $ 95,475
9,525 ADTRAN, Inc.+........................ 675,084
27,850 American Management Systems, Inc.+... 814,612
259,537 Analog Devices Inc.+................. 6,618,194
24,300 Aspen Technology Inc.+............... 1,336,500
38,475 BMC Software Inc.+................... 2,298,881
138,700 Cisco Systems, Inc.+................. 7,853,888
1,675 Citrix Systems Inc.+................. 63,650
18,150 Computer Associates International,
Inc. .............................. 1,256,887
65,050 Dell Computer Corporation+........... 3,309,419
6,100 FORE Systems Inc.+................... 220,363
22,350 Gateway 2000 Inc.+................... 759,900
24,675 Glenayre Technologies Inc.+.......... 1,233,750
34,425 Indus Group Inc.+.................... 697,106
70,425 Informix Corporation+................ 1,584,563
80,600 JDA Software Group Inc.+............. 1,662,375
40,375 Lernout & Hauspie Speech Products
N.V.+.............................. 908,438
48,775 Linear Technology Corporation........ 1,463,250
56,575 Macromedia Inc.+..................... 1,237,578
242,225 Macronix International Company, Ltd.,
ADR+............................... 3,936,156
18,650 Netscape Communications
Corporation+....................... 1,160,962
17,850 PairGain Technologies Inc.+.......... 1,106,700
41,975 PC Docs Group International Inc.+.... 834,253
26,850 Peoplesoft Inc.+..................... 1,913,063
77,475 Pittway Corporation, Class A......... 3,602,588
47,300 Sterling Commerce, Inc.+............. 1,756,013
10,150 Sterling Software Inc.+.............. 781,550
8,650 Technology Solutions Company+........ 299,506
35,350 U.S. Satellite Broadcasting Company,
Class A+........................... 1,334,462
10,650 UUNET Technologies Inc.+............. 705,562
12,775 VeriFone Inc.+....................... 539,744
65,800 Westell Technologies, Inc.+.......... 2,582,650
37,550 Wonderware Corporation+.............. 708,756
35,925 Xeikon N.V., ADR+.................... 408,647
89,950 Xylan Corporation+................... 4,182,675
------------
59,943,200
------------
HEALTH CARE -- 13.0%
21,975 Amgen Inc.+.......................... 1,186,650
3,475 Arrow International.................. 93,825
30,500 ARV Assisted Living, Inc.+........... 472,750
315,850 Centocor, Inc.+...................... 9,436,019
17,850 Coherent, Inc.+...................... 928,200
30,150 CompDent Corporation+................ 1,401,975
162,575 Eli Lilly & Company.................. 10,567,375
21,825 Genzyme Corporation+................. 1,096,706
22,475 Glaxo Wellcome Plc, ADR.............. 601,206
21,750 Glaxo Wellcome Plc, Ord. ............ 292,939
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
59,150 ICU Medical Inc.+.................... $ 813,313
25,700 Omnicare Inc......................... 681,050
10,925 Oxford Health Plans Inc.+............ 449,291
23,650 Respironics Inc.+.................... 437,525
49,050 SmithKline Beecham, ADR.............. 2,667,094
13,250 Sofamor/Danek Group Inc.+............ 367,688
27,425 Target Therapeutics Inc.+............ 1,124,425
------------
32,618,031
------------
FINANCIAL SERVICES -- 12.3%
66,525 Alco Standard Corporation............ 3,010,256
54,375 Associates 1st Capital Corporation,
Class A+........................... 2,045,859
21,868 Banca Popolare Di Bergamo............ 333,356
15,450 Bank of New York Company, Inc. ...... 791,812
75,325 First Data Corporation............... 5,997,753
104,013 Grupo Financiero Inbursa, Series B... 430,588
31,225 Keane Inc.+.......................... 1,151,422
19,275 SunAmerica Inc. ..................... 1,089,037
84,800 UNUM Corporation..................... 5,278,800
45,166 Wells Fargo & Company................ 10,789,028
------------
30,917,911
------------
CONSUMER DISCRETIONARY -- 11.0%
39,800 Anchor Gaming+....................... 2,397,950
39,600 APAC Teleservices, Inc.+............. 1,425,600
13,850 Business Objects SA, ADR+............ 557,462
10,925 Coleman Company+..................... 462,947
8,800 Extended Stay America, Inc.+......... 277,200
53,900 FelCor Suite Hotels Inc. ............ 1,643,950
27,350 Fila Holding SpA, ADR................ 2,358,937
10,000 Grupo Casa Autrey SA, ADR............ 215,000
68,200 Gucci Group+......................... 4,398,900
20,150 ITT Corporation (New)+............... 1,334,938
136,623 Kinnevik Investment, Series B........ 4,147,594
17,775 La Quinta Inns, Inc. ................ 595,463
1,200 Nike Inc., Class B................... 123,300
6,075 Papa John's International Inc.+...... 296,156
75,150 Renters Choice Inc.+................. 1,916,325
22,050 Shiva Corporation+................... 1,764,000
91,225 Singer Company....................... 1,847,306
69,900 Thrifty PayLess Holdings, Inc., Class
B+................................. 1,205,775
12,525 Tommy Hilfiger Corporation+.......... 671,653
------------
27,640,456
------------
TELECOMMUNICATIONS -- 9.9%
26,045 Arch Communications Group Inc.+...... 485,088
16,500 Ascend Communications Inc.+.......... 928,125
46,825 Cincinnati Bell, Inc. ............... 2,440,753
28,375 CommNet Cellular Inc.+............... 851,250
76,200 Heartland Wireless Communications
Inc.+.............................. 1,809,750
53,275 Itron Inc.+.......................... 1,511,678
112,775 Korea Mobile Telecommunications,
ADR+............................... 1,931,272
</TABLE>
See Notes to Financial Statements.
89
<PAGE> 92
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
TELECOMMUNICATIONS -- (CONTINUED)
27,875 MFS Communication Company, Inc.+..... $ 1,048,797
52,650 Millicom International Cellular
SA+................................ 2,507,456
146,704 NetCom Systems AB, Class B+.......... 1,661,803
182,875 Paging Network Inc.+................. 4,389,000
68,025 Palmer Wireless Inc., Class A+....... 1,360,500
28,275 PictureTel Corporation+.............. 1,113,328
13,525 Premisys Communications, Inc.+....... 825,025
33,250 Stratacom Inc.+...................... 1,870,313
------------
24,734,138
------------
OTHER -- 3.7%
132,625 HFS, Inc.+........................... 9,283,750
------------
MATERIALS & PROCESSING -- 3.2%
69,425 Arcadian Corporation................. 1,371,144
51,775 Danka Business Systems, ADR.......... 1,514,419
117,425 International Game Technology........ 1,981,547
18,349 Potash Corporation of Saskatchewan... 1,215,621
44,725 Praxair, Inc. ....................... 1,889,631
------------
7,972,362
------------
PRODUCER DURABLES -- 2.0%
21,325 General Motors, Class H.............. 1,282,166
40,546 Metra AB, Series B, Ord.............. 1,819,148
304,036 Rentokil Group Plc................... 1,932,845
------------
5,034,159
------------
AUTOS & TRANSPORTATION -- 0.9%
8,200 Amway Asia Pacific Ltd. ............. 248,050
28,050 Trans World Airlines Inc.+........... 399,712
50,775 Wisconsin Central Transportation
Corporation+....................... 1,650,188
------------
2,297,950
------------
ENERGY -- 0.4%
18,700 Triton Energy Ltd.+.................. 909,288
------------
CONSUMER STAPLES -- 0.3%
12,539 Cultor OY, Series 1.................. 616,672
------------
Total Common Stocks
(Cost $175,236,075)................ 201,967,917
------------
PREFERRED STOCK -- FOREIGN -- 3.2%
(Cost $6,245,054)
54,527 SAP, AG, Non-Voting, Pfd. ........... 8,093,081
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
COMMERCIAL PAPER -- 8.5%
$ 9,300,000 Ford Motor Credit Company,
5.490% due 07/01/1996.............. $ 9,300,000
12,000,000 General Electric Capital Corporation,
5.370% due 07/02/1996.............. 11,998,210
------------
Total Commercial Paper
(Cost $21,298,210)................. 21,298,210
------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 6.0%
5,000,000 Federal Home Loan Mortgage
Corporation (FHLMC),
5.480% due 07/01/1996++.............. 5,000,000
10,000,000 Federal National Mortgage Association
(FNMA),
5.270% due 07/29/1996++.............. 9,959,011
------------
Total U.S. Government Agency
Discount Notes
(Cost $14,959,011)................. 14,959,011
------------
U.S. TREASURY BILL -- 0.8% (Cost $1,973,262)
2,000,000 5.120% due 10/03/1996++**............ 1,973,262
------------
TOTAL INVESTMENTS (COST $219,711,612*)..... 99.1% 248,291,481
OTHER ASSETS AND LIABILITIES (NET)......... 0.9 2,147,556
----- ------------
NET ASSETS................................. 100.0% $250,439,037
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes is $220,097,724 (Note 6).
** Security is pledged as collateral for futures contracts.
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase (unaudited).
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
----------- --------------
<S> <C> <C>
FUTURES CONTRACTS -- SHORT POSITION
S&P 500 Index Futures, September
111 1996................................ $ (454,259)
=============
</TABLE>
See Notes to Financial Statements.
90
<PAGE> 93
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
JUNE 30, 1996
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE UNREALIZED
-------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ---------------------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
07/25/1996 FIM 2,211,000 477,569 480,768 $ (3,199)
07/25/1996 SEK 13,000,000 1,962,758 1,907,697 55,061
07/25/1996 SEK 3,500,000 528,435 514,139 14,296
08/09/1996 ITL 1,375,000,000 894,005 873,547 20,458
08/12/1996 FIM 2,500,000 540,530 555,914 (15,384)
09/12/1996 CHF 3,300,000 2,656,817 2,711,617 (54,800)
09/12/1996 JPY 69,500,000 642,286 674,560 (32,274)
10/01/1996 CHF 750,000 604,759 612,565 (7,806)
10/01/1996 JPY 60,000,000 555,923 583,788 (27,865)
10/22/1996 SEK 11,005,000 1,661,378 1,613,163 48,215
10/22/1996 JPY 35,000,000 325,291 341,463 (16,172)
11/15/1996 ITL 2,000,000,000 1,291,473 1,276,039 15,434
--------
$ (4,036)
--------
</TABLE>
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER UNREALIZED
-------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ---------------------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
07/02/1996 FIM 110,531 23,843 23,931 $ 88
07/02/1996 SEK 264,338 39,923 39,932 9
07/03/1996 FIM 48,322 10,424 10,426 2
07/03/1996 SEK 231,359 34,942 34,869 (73)
07/15/1996 DEM 500,000 329,132 351,642 22,510
07/25/1996 FIM 2,211,000 477,570 489,652 12,082
07/25/1996 SEK 3,500,000 528,435 502,513 (25,922)
07/25/1996 SEK 13,000,000 1,962,758 1,873,064 (89,694)
08/08/1996 DEM 1,918,000 1,264,408 1,311,812 47,404
08/09/1996 ITL 1,700,000,000 1,105,316 1,057,148 (48,168)
08/12/1996 DEM 1,270,000 837,440 867,072 29,632
08/12/1996 FIM 4,960,000 1,072,412 1,077,394 4,982
09/12/1996 CHF 3,300,000 2,656,817 2,806,480 149,663
09/12/1996 ITL 175,000,000 113,490 109,949 (3,541)
09/12/1996 JPY 69,500,000 642,286 674,888 32,602
09/13/1996 DEM 2,150,000 1,420,538 1,420,868 330
10/01/1996 CHF 750,000 604,759 641,849 37,090
10/01/1996 GBP 1,070,000 1,662,337 1,627,577 (34,760)
10/01/1996 JPY 60,000,000 555,923 578,732 22,809
10/22/1996 FIM 750,000 162,780 158,295 (4,485)
10/22/1996 GBP 100,000 155,357 150,805 (4,552)
10/22/1996 JPY 35,000,000 325,291 335,892 10,601
10/22/1996 SEK 18,000,000 2,717,385 2,678,811 (38,574)
11/12/1996 FIM 3,921,000 852,011 822,875 (29,136)
11/15/1996 ITL 2,300,000,000 1,485,194 1,463,272 (21,922)
11/25/1996 SEK 22,500,000 3,397,295 3,324,837 (72,458)
12/04/1996 DEM 1,222,000 811,626 808,254 (3,372)
12/04/1996 GBP 400,000 621,481 616,012 (5,469)
------------
$ (12,322)
------------
Net Unrealized Depreciation of Forward
Foreign Currency Contracts.......................... $ (16,358)
============
</TABLE>
<TABLE>
<CAPTION>
GLOSSARY OF TERMS
<S> <C>
ADR -- American Depositary Receipt
CHF -- Swiss Franc
DEM -- German Deutsche Mark
FIM -- Finnish Markka
GBP -- Great Britain Pound Sterling
ITL -- Italian Lira
JPY -- Japanese Yen
SEK -- Swedish Krona
</TABLE>
See Notes to Financial Statements.
91
<PAGE> 94
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
EMERGING GROWTH FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- 95.1%
CONSUMER DISCRETIONARY -- 24.3%
101,100 Barnett Inc.+......................... $ 2,906,625
242,550 Family Golf Centers Inc.+............. 6,094,069
16,625 Fastenal Company...................... 723,187
14,565 Fotolabo SA........................... 6,047,388
9,350 Grand Optical-Photoservices........... 1,205,044
159,177 Grosvenor Inns Plc.................... 653,180
85,925 Heritage Media Corporation, Class
A+.................................. 3,426,259
1,184,798 J.D. Wetherspoon Plc Ord.............. 18,507,980
58,475 MSC Industrial Direct Company, Class
A+.................................. 1,885,819
266,400 Papa John's International Inc.+....... 12,987,000
600,000 Petco Animal Supplies Inc.+........... 17,250,000
585,324 PizzaExpress Plc...................... 3,348,057
156,225 Premier Parks Inc.+................... 3,358,837
234,849 Renters Choice Inc.+.................. 5,988,649
56,800 Sunglass Hut International, Inc.+..... 1,384,500
37,425 Wilmar Industries, Inc.+.............. 973,050
-----------
86,739,644
-----------
TELECOMMUNICATIONS -- 16.7%
95,400 Arch Communications Group, Inc.+...... 1,776,825
350,000 CommNet Cellular Inc.+................ 10,500,000
129,825 Millicom International Cellular SA+... 6,182,916
291,525 Omnipoint Corporation+................ 7,597,870
918,375 Paging Network Inc.+.................. 22,041,000
90,800 Palmer Wireless, Inc., Class A+....... 1,816,000
248,781 Pricellular Corporation, Class A+..... 3,016,470
228,500 360(++) Communications Company+....... 5,484,000
45,525 Western Wireless Corporation, Class
A+.................................. 973,097
-----------
59,388,178
-----------
HEALTH CARE -- 12.3%
360,650 ARV Assisted Living Inc.+............. 5,590,075
391,425 DepoTech Corporation+................. 9,883,481
252,025 Exogen Inc.+.......................... 2,142,213
85,525 Gulf South Medical Supply Inc.+....... 3,335,475
52,775 ICU Medical Inc.+..................... 725,656
320,175 Matrix Pharmaceutical, Inc.+.......... 5,763,150
66,450 Medaphis Corporation+................. 2,641,387
39,950 Omnicare Inc.......................... 1,058,675
72,000 QLT Phototherapeutics Inc.+........... 1,332,000
106,725 Respironics Inc.+..................... 1,974,413
52,675 Steris Corporation+................... 1,685,600
402,750 TheraTech Inc.+....................... 7,752,937
-----------
43,885,062
-----------
FINANCIAL SERVICES -- 9.9%
51,850 First Commonwealth Inc.+.............. 1,445,319
772,000 Insignia Financial Group Inc., Class
A+.................................. 20,940,500
195,775 Profit Recovery Group International,
Inc.+............................... 3,964,444
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
99,100 Protective Life Corporation........... $ 3,480,888
525,500 PT Lippo Life Insurance............... 677,336
49,400 United Insurance Companies Ltd.+...... 1,123,850
500,000 World Acceptance Corporation+......... 3,625,000
-----------
35,257,337
-----------
PRODUCER DURABLES -- 7.2%
338,225 APS Holding Corporation, Class A+..... 7,440,950
133,125 Culligan Water Technologies, Inc.+.... 5,058,750
1,803,621 Rentokil Group Plc.................... 11,466,140
88,675 York Group Inc. ...................... 1,529,644
-----------
25,495,484
-----------
MATERIALS & PROCESSING -- 7.1%
100,000 Hughes Supply Inc. ................... 3,475,000
203,630 Minerals Technologies Inc. ........... 6,974,328
102,650 Philip Environmental, Inc.+........... 808,369
144,500 Sealed Air Corporation+............... 4,858,812
480,375 Trigen Energy Corporation............. 9,067,078
-----------
25,183,587
-----------
AUTOS & TRANSPORTATION -- 6.5%
105,675 AutoZone Inc.+........................ 3,672,206
125,325 O'Reilly Automotive Inc.+............. 4,543,031
459,900 Wisconsin Central Transportation
Corporation+........................ 14,946,750
-----------
23,161,987
-----------
TECHNOLOGY -- 4.7%
166,050 American Business Information,
Inc.+............................... 3,030,412
100,000 Bell & Howell Holdings Company+....... 3,262,500
85,150 Black Box Corporation+................ 2,022,313
78,900 CIBER Inc.+........................... 1,735,800
50,975 Lernout & Hauspie Speech Products
N.V.+............................... 1,146,938
88,700 SAES Getters SpA, Sponsored ADR+...... 1,785,087
110,275 Technology Solutions Company+......... 3,818,272
-----------
16,801,322
-----------
OTHER -- 4.6%
137,425 Global DirectMail Corporation+........ 5,428,288
158,975 HFS, Inc.+............................ 11,128,250
-----------
16,556,538
-----------
CONSUMER STAPLES -- 1.8%
250,000 JP Foodservice Inc.+.................. 6,250,000
-----------
Total Common Stocks
(Cost $263,774,988)................. 338,719,139
-----------
WARRANT -- 1.2% (Cost $2,716,035)
149,770 Littelfuse Inc., Series A,
expires 12/27/2001+................. 4,362,051
-----------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<S> <C> <C>
COMMERCIAL PAPER -- 3.5% (Cost $12,500,000)
$12,500,000 Ford Motor Credit Company,
5.490% due 07/01/1996............... 12,500,000
-----------
</TABLE>
See Notes to Financial Statements.
92
<PAGE> 95
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
EMERGING GROWTH FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY DISCOUNT NOTE -- 1.4%
(Cost $5,000,000)
$5,000,000 Federal Home Loan Mortgage Corporation
(FHLMC),
5.480% due 07/01/1996++............. $ 5,000,000
-----------
TOTAL INVESTMENTS (COST $283,991,023*)..... 101.2% 360,581,190
OTHER ASSETS AND LIABILITIES (NET)......... (1.2) (4,269,275)
----- ------------
NET ASSETS................................. 100.0% $356,311,915
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes is $284,070,872 (Note 6).
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase (unaudited).
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER
--------------------------------------------- UNREALIZED
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ----------- ---------------- ---------- ----------- ----------------
<S> <C> <C> <C> <C>
07/15/1996 GBP 1,337,000 2,077,810 2,031,421 $ (46,389)
10/01/1996 GBP 3,500,000 5,437,552 5,323,850 (113,702)
11/25/1996 GBP 3,500,000 5,437,788 5,281,850 (155,938)
12/04/1996 GBP 515,000 800,157 793,615 (6,542)
-------------
Net Unrealized Depreciation of Forward
Foreign Currency Contracts................... $ (322,571)
=============
</TABLE>
<TABLE>
<CAPTION>
GLOSSARY OF TERMS
<S> <C>
ADR -- American Depositary Receipt
GBP -- Great Britain Pound Sterling
</TABLE>
See Notes to Financial Statements.
93
<PAGE> 96
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
INTERNATIONAL GROWTH FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- 89.3%
JAPAN - 30.1%
31,000 Advantest Corporation................. $ 1,232,633
115,000 Anritsu Corporation................... 1,597,806
12,000 Bank of Tokyo-Mitsubishi Ltd.+........ 279,707
75,000 Canon Inc. ........................... 1,563,071
60,000 Cosmo Oil............................. 371,846
243 DDI Corporation....................... 2,123,473
92,000 Denki Kogyo Company Ltd. ............. 950,274
14,000 Diamond Lease Company................. 190,676
160 East Japan Railway Company............ 840,951
50 Fuji Denki Reiki...................... 640
150,000 Fujikura Ltd. ........................ 1,244,973
86,000 Hankyu Realty......................... 919,744
130,000 Hitachi Ltd. ......................... 1,212,066
85,000 Honda Motor Company................... 2,206,581
190,000 Japan Synthetic Rubber Company+....... 1,370,292
50 Japan Tobacco Inc. ................... 383,912
64,000 JUSCO Company......................... 2,100,183
295,000 Kawasaki Heavy Industries............. 1,496,572
160,000 Komatsu Forklift Company, Ltd. ....... 1,162,706
60,000 Matsushita Electric Industrial
Company............................. 1,118,830
117,000 Mitsubishi Estate Company............. 1,614,899
162,000 Mitsubishi Heavy Industrials Ltd. .... 1,411,207
45,000 NEC Corporation....................... 489,488
30,000 Nippon Road Company Ltd. ............. 258,867
5,000 Nitta Corporation..................... 93,693
560,000 NKK Corporation+...................... 1,699,452
50,000 Nomura Securities Company Ltd. ....... 978,062
29,000 Noritsu Koki Company Ltd. ............ 1,468,556
40 NTT Data Communication Systems
Corporation......................... 1,199,269
36,000 Orix Corporation...................... 1,336,015
700 Parco Company......................... 7,806
115,000 Pioneer Electric Corporation.......... 2,743,601
18,000 Rohm Company.......................... 1,191,225
82,000 Sharp Corporation..................... 1,439,122
33,000 Sony Corporation...................... 2,174,863
350,000 Sumitomo Metal Industries............. 1,074,954
55,000 Sumitomo Realty & Development......... 435,877
50,000 Takashimaya Company Ltd. ............. 776,965
30,000 TDK Corporation....................... 1,793,419
50 Tohoku Electric & Power Company....... 1,120
50,000 Tokio Marine & Fire Insurance
Company............................. 667,276
225,000 Toray Industries Inc. ................ 1,554,845
50,000 Toyo Trust and Banking Company........ 516,453
30,000 Toyota Motor Company.................. 751,371
----------
48,045,341
----------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
UNITED STATES -- 15.1%
42,428 Asia Cement, GDS...................... $ 859,175
56,000 Banco de Edwards, ADR................. 1,176,000
145,500 Buenos Aires Embotelladora SA, ADR.... 1,927,875
13,000 ECI Telecommunications Ltd., ADR...... 302,250
94,000 Enersis SA, ADR....................... 2,914,000
63,000 Guangshen Railway Ltd., ADR+.......... 1,204,875
19,500 Hansol Paper Company, GDS+............ 380,250
1,184,000 Hong Kong Land Holdings............... 2,664,000
7,800 Hub Power Company, GDR+............... 189,150
25,400 Hyundai Motor Company Ltd., GDR+...... 311,150
42,000 Jardine Matheson Holdings............. 308,700
25,700 Korea Electric Power Corporation,
ADR................................. 623,225
34,500 Macronix International
Company Ltd., ADR+.................. 560,625
54,666 Mavesa SA, ADR........................ 215,108
35,000 Panamerican Beverages, Class A........ 1,566,250
2,200 Pick Szeged, GDS+..................... 90,200
40,000 Portugal Telecommunications, ADR...... 1,050,000
43,000 Quantas Airways, ADR++................ 728,275
164,000 Reliance Industries Ltd., GDS......... 2,173,000
11,300 Repsol SA, ADR........................ 392,675
20,980 Samsung Electronics Company Ltd.,
GDS................................. 508,753
70,000 Telefonica de Argentina, ADR.......... 2,073,750
85,000 YPF Sociedad Anonima, Sponsored ADR... 1,912,500
----------
24,131,786
----------
FRANCE -- 6.6%
19,000 Assurance Generale de France.......... 514,866
12,536 AXA Company........................... 686,230
15,700 Compagnie Bancaire SA................. 1,770,132
16,850 Credit Commercial de France........... 781,535
71,580 La Gardere Groupe..................... 1,846,463
4,120 L'Air Liquide......................... 728,013
4,850 Promodes.............................. 1,399,115
5,454 Societe Generale Paris................ 600,080
152,800 Usinor Sacilor........................ 2,205,453
----------
10,531,887
----------
UNITED KINGDOM -- 5.9%
220,000 British Airport Authority............. 1,600,358
430,000 Cookson Group Plc..................... 1,894,830
211,000 General Electric Company Plc Ord...... 1,138,048
520,000 Pace Micro Technology++............... 1,535,697
350,000 Rolls Royce Plc....................... 1,218,610
35,000 RTZ Corporation....................... 518,453
419,100 Vodafone Group........................ 1,560,170
----------
9,466,166
----------
</TABLE>
See Notes to Financial Statements.
94
<PAGE> 97
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
NEW ZEALAND -- 4.7%
1,700,500 Fletcher Challenge -- Building
Division+........................... $ 3,334,341
2,075,200 Fletcher Challenge -- Forest
Division............................ 2,584,206
2,160,000 Wrightson Ltd. ....................... 1,590,106
----------
7,508,653
----------
GERMANY -- 3.8%
2,120 Ava Allgemeine Handels Der Verbr AG... 655,246
1,760 M.A.N. AG............................. 438,423
1,183 Munchener Ruckversicherungs........... 2,442,784
1,700 SGL Carbon AG......................... 198,994
2,210 Thyssen AG............................ 404,170
36,450 Veba AG............................... 1,938,455
----------
6,078,072
----------
AUSTRALIA -- 2.6%
285,000 Boral Ltd............................. 739,092
39,210 Broken Hill Proprietary Company
Ltd................................. 541,388
94,400 CSR................................... 333,087
96,000 Lend Lease Corporation................ 1,471,112
52,800 National Australia Bank Ltd........... 487,542
50,700 The News Corporation.................. 287,265
50,550 Western Mining Corporation
Holdings, Ltd....................... 361,495
----------
4,220,981
----------
SPAIN -- 2.5%
5,100 Banco Popular de Espanol.............. 909,996
300,600 Iberdrola SA.......................... 3,088,075
----------
3,998,071
----------
HONG KONG -- 2.5%
93,000 Cheung Kong Holdings.................. 669,799
102,000 Henderson China+...................... 227,962
39,000 Henderson Land Development Company.... 292,220
110,000 Hong Kong Electric Holdings........... 335,368
283,600 Hong Kong Telecommunications.......... 509,258
38,400 HSBC Holdings Ord..................... 580,409
57,000 Hutchison Whampoa Ltd................. 358,609
434,000 Luoyang Glass Company Ltd............. 103,163
71,000 New World Development Company......... 329,283
34,000 Swire Pacific Ltd., Class A........... 290,992
72,000 Television Broadcasts Ltd............. 270,206
----------
3,967,269
----------
NORWAY -- 2.0%
317,000 Den Norske Bank....................... 962,227
18,000 Kvaerner Industrier, Class B.......... 696,143
30,000 Norsk Hydro A.S....................... 1,469,942
----------
3,128,312
----------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
SINGAPORE -- 1.9%
281,000 D.B.S. Land Ltd. ..................... $ 963,884
65,000 Development Bank of Singapore (F)..... 810,773
72,000 Singapore International Airlines Ltd.
(F)................................. 760,312
28,000 Singapore Press Holdings (F).......... 549,681
----------
3,084,650
----------
FINLAND -- 1.7%
17,400 Metra AB, Class B..................... 780,673
111,800 Valmet Corporation, Class A........... 1,893,076
----------
2,673,749
----------
SWITZERLAND -- 1.5%
1,920 Ciba Geigy AG......................... 2,342,400
----------
MALAYSIA -- 1.2%
150,000 Commerce Asset Holdings Berhad........ 914,011
190,000 New Straits Time Press Berhad......... 990,178
----------
1,904,189
----------
PHILLIPINES -- 1.1%
1,434,750 Filinvest Land Inc. .................. 588,686
63,000 Manila Electric Company, Class B...... 661,259
28,400 Philippine National Bank+............. 474,237
----------
1,724,182
----------
PORTUGAL -- 1.0%
64,000 Portugal Telecommunications SA+....... 1,673,280
----------
SWEDEN -- 0.9%
4,790 ABB AB, B Shares...................... 507,142
11,000 Astra AB, Class B..................... 480,139
22,000 Stadshypotek AB....................... 491,769
----------
1,479,050
----------
POLAND -- 0.9%
14,300 Bank Przemyslcowo-Handlowy SA+........ 1,032,525
75,500 Polifarb-Cieszyn SA+.................. 383,826
----------
1,416,351
----------
NETHERLANDS -- 0.8%
18,000 ABN Amro Holdings NV.................. 966,755
23,000 Elsevier NV........................... 349,282
----------
1,316,037
----------
THAILAND -- 0.8%
21,000 Advanced Information Service
Public (F).......................... 311,013
38,200 Bangkok Bank Public Company
Ltd. (F)............................ 517,599
6,700 Siam Cement Public Company
Ltd. (F)............................ 328,825
5,800 Siam Commercial Bank (F).............. 84,071
----------
1,241,508
----------
DENMARK -- 0.7%
48,000 International Service Systems AS,
Class B............................. 1,073,221
----------
</TABLE>
See Notes to Financial Statements.
95
<PAGE> 98
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
INDONESIA -- 0.6%
200,000 P.T. Inco+............................ $ 455,424
171,500 Semen Gresik (F)...................... 499,211
----------
954,635
----------
BELGIUM -- 0.4%
4,600 Fortis AG............................. 607,748
----------
Total Common Stocks
(Cost $136,647,206)................. 142,567,538
----------
PREFERRED STOCKS -- 0.7%
1,900 Henkel, Pfd. ..................... 820,899
1,700 Jungheinrich AG, Pfd. ............ 301,845
------------
Total Preferred Stocks
(Cost $1,012,470)............... 1,122,744
------------
WARRANTS -- 0.2%
120 Dowa Mining Company, expire
12/09/1997+..................... 140,250
261,264 United Overseas Land, expire
06/09/1997+..................... 192,569
------------
Total Warrants (Cost $410,349).... 332,819
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
- ---------------
<S> <C> <C>
CORPORATE BONDS -- 2.8%
$ 55,000 Bangkok Bank, Convertible,
3.250% due 03/03/2004........... 62,535
JPY 80,000,000 BTM Cayman Finance,
4.250% due 03/31/2003........... 1,095,064
JPY 46,000,000 Daido Hoxan Inc., Convertible,
1.600% due 03/29/2002........... 471,773
CHF 790,000 Sandoz Capital Ltd., Convertible,
1.250% due 10/23/2002........... 883,220
$ 1,135,000 Telekom Malaysia Berhad,
4.000% due 10/03/2004........... 1,191,750
JPY 50,000,000 Toyota Motor Corporation,
1.200% due 01/28/1998........... 656,764
------------
Total Corporate Bonds
(Cost $4,094,017)............... 4,361,106
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- -----------
<S> <C> <C>
INVESTMENT COMPANY SECURITY -- 2.0%
(Cost $3,019,191)
3,270,000 General Pacific Securities Taiwan
Index Fund.......................... 3,139,200
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.8%
(Cost $4,513,000)
$4,513,000 Agreement with State Street Bank &
Trust Company, 5.100% dated
06/28/1996, to be repurchased at
$4,514,918 on 07/01/1996,
collateralized by $4,520,000 U.S.
Treasury Note, 6.000% due 08/31/1997
(Market Value -- $4,604,750)........ 4,513,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL EXPIRATION STRIKE VALUE
AMOUNT DATE PRICE (NOTE 2)
- --------------- ---------- ------ ------------
<S> <C> <C> <C> <C>
CALL OPTION PURCHASED ON STOCK INDEX -- 0.0%#
(Cost $150,003)
KRW 11,497,156 Kospi 200 Stock $0.126 $ 45,897
Index........... 12/06/1996
-----------
TOTAL INVESTMENTS (COST $149,846,236*)......... 97.8% 156,082,304
OTHER ASSETS AND LIABILITIES (NET)............. 2.2 3,518,487
-----------
NET ASSETS..................................... 100.0% $159,600,791
===========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes is $149,853,748 (Note 6).
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
# Amount represents less than 0.1% of net assets.
As of June 30, 1996, sector diversification was as follows (unaudited):
<TABLE>
<CAPTION>
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (NOTE 2)
- -------------------------------------- ---------- ------------
<S> <C> <C>
COMMON STOCKS:
Material & Processing................. 16.6% $ 26,453,458
Financial Services.................... 14.9 23,825,610
Producer Durables..................... 9.8 15,692,635
Telecommunications.................... 9.6 15,377,733
Utilities............................. 7.5 12,004,286
Consumer Discretionary................ 6.5 10,420,851
Consumer Staples...................... 5.7 9,096,547
Technology............................ 5.5 8,737,776
Autos & Transportation................ 5.4 8,624,267
Energy................................ 2.6 4,146,964
Health Care........................... 0.3 480,139
Other................................. 4.9 7,707,272
----- ------------
TOTAL COMMON STOCKS................... 89.3 142,567,538
OTHER INVESTMENTS..................... 8.5 13,514,766
----- ------------
TOTAL INVESTMENTS..................... 97.8 156,082,304
OTHER ASSETS AND LIABILITIES (Net).... 2.2 3,518,487
----- ------------
NET ASSETS............................ 100.0% $159,600,791
===== ============
</TABLE>
See Notes to Financial Statements.
96
<PAGE> 99
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
JUNE 30, 1996
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE UNREALIZED
--------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ------------------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
07/01/1996 JPY 154,516,983 1,412,404 1,418,889 $ (6,485)
07/02/1996 NZD 1,567,746 1,078,498 1,070,300 8,198
07/02/1996 JPY 396,181,935 3,621,407 3,621,407 0
--------
$ 1,713
--------
</TABLE>
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER UNREALIZED
--------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ------------------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
07/01/1996 GBP 311,824 484,682 479,898 $ (4,784)
07/01/1996 MYR 444,439 178,164 177,911 (253)
07/01/1996 FRF 10,590,560 2,058,718 2,053,230 (5,488)
07/02/1996 MYR 393,176 157,610 157,579 (31)
03/05/1997 JPY 3,960,839,231 37,511,382 38,117,572 606,190
03/07/1997 FRF 43,731,583 8,605,158 8,613,666 8,508
-----------
$604,142
-----------
Net Unrealized Appreciation of Forward
Foreign Currency Contracts.................. $605,855
===========
</TABLE>
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
ADS -- American Depositary Share
CHF -- Swiss Franc
(F) -- Foreign or Alien Shares
FRF -- French Franc
GBP -- Great Britain Pound Sterling
GDS -- Global Depositary Share
JPY -- Japanese Yen
KRW -- South Korean Won
MYR -- Malaysian Ringgit
NZD -- New Zealand Dollar
See Notes to Financial Statements.
97
<PAGE> 100
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
TARGET MATURITY 2002 FUND
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ----------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATION -- 98.6%
U.S. TREASURY STRIP
$4,655,000 Zero coupon due 11/15/2002............... $3,079,516
----------
TOTAL INVESTMENTS (COST $3,071,453*)........... 98.6% 3,079,516
OTHER ASSETS AND LIABILITIES (NET)............. 1.4 45,186
----------
NET ASSETS..................................... 100.0% $3,124,702
==========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
GLOSSARY OF TERMS
STRIP -- Separate trading of registered interest and
principal of securities
See Notes to Financial Statements.
98
<PAGE> 101
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
SIERRA TRUST FUNDS
1. ORGANIZATION AND BUSINESS
Sierra Trust Funds (the "Company") was organized under the laws of the
Commonwealth of Massachusetts on February 22, 1989 as a business entity commonly
known as a "Massachusetts business trust." The Company is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company offers sixteen managed investment
funds (the "Funds"): the Global Money, U.S. Government Money and California
Money Funds (the "Money Funds"); the Short Term High Quality Bond, Short Term
Global Government, U.S. Government, Corporate Income, California Municipal,
Florida Insured Municipal, California Insured Intermediate Municipal and
National Municipal Funds (the "Bond Funds"); the Growth and Income, Growth,
Emerging Growth and International Growth Funds (the "Equity Funds"); and the
Target Maturity 2002 Fund.
Each of the Funds, except the Target Maturity 2002 Fund, offers three classes of
shares, Class A Shares, Class B Shares and Class S Shares. The Target Maturity
2002 Fund offers only Class A Shares. Class A Shares of non-Money Funds are
subject to an initial sales charge at the time of purchase. Class A Shares of
Money Funds are not subject to an initial sales charge; however, certain Class A
Shares of non-Money Funds purchased without an initial sales charge and Class A
Shares of Money Funds received in exchange for such shares may be subject to a
contingent deferred sales charge ("CDSC") if redeemed within one year or two
years of purchase, depending on the circumstances. Class B Shares and Class S
Shares are not subject to an initial sales charge. Class B Shares of the Short
Term High Quality Bond and Short Term Global Government Funds (the "Short Term
Funds") that are redeemed within four years of purchase, and Class B Shares of
the remaining Funds (the "Long Term Funds") that are redeemed within six years
of purchase will be subject to a CDSC. Class B Shares of Money Funds are not
available for purchase directly and may be purchased only by exchange for Class
B Shares of non-Money Funds. Class S Shares are subject to a CDSC if redeemed
within six years of purchase. Class S Shares are available only to investors who
have Sierra Asset Management Program ("SAM") accounts or do not redeem their
Class S Shares after they close their SAM accounts.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Funds in the
preparation of their financial statements.
PORTFOLIO VALUATION:
Money Funds: The investments of each Money Fund are valued on the basis of
amortized cost so long as the Company's Board of Trustees (the "Board of
Trustees") determines that this method constitutes fair value. Amortized cost
involves valuing a portfolio instrument at its cost initially and, thereafter,
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. Each Money Fund attempts to maintain a constant net asset value
of $1.00 per share.
Bond Funds, Equity Funds and Target Maturity 2002 Fund: A security that is
primarily traded on a United States ("U.S.") or foreign exchange (including
securities traded through the NASDAQ National Market System) is valued at the
last sale price on that exchange or, if there were no sales during the day, at
the current quoted bid price. Portfolio securities that are primarily traded on
foreign exchanges are generally valued at the most recent closing values of such
securities on their respective exchanges, except when an occurrence subsequent
to the time a value was so established is likely to have changed the value, then
the fair value of those securities will be determined in good faith through
consideration of other factors by or under the direction of the Board of
Trustees or its delegates. Over-the-counter securities that are not traded
through the NASDAQ National Market System and securities listed or traded on
certain foreign exchanges whose operations are similar to the U.S.
over-the-counter market, are valued on the basis of the bid price at the close
of business on each day. Investments in U.S. Government securities (other than
short-term securities) are valued at the average of the quoted bid and asked
prices in the over-the-counter market. The current market value of an option is
the last price on the principal exchange on which such option is traded or in
the absence of a sale, is the mean between the last bid and offering price.
Short-term investments that mature in 60 days or less are valued at amortized
cost; such investments denominated in foreign currencies are stated at amortized
cost as determined in the foreign currency, translated to U.S. dollars at the
current day's exchange rate.
Corporate debt securities and debt securities of U.S. issuers (other than U.S.
Government securities and short-term investments), including municipal
securities, are valued by an independent pricing service which utilizes market
quotations and transactions, quotations from dealers and various relationships
among securities in determining value. If not valued by a pricing service, such
99
<PAGE> 102
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
securities are valued at prices obtained from independent brokers. Investments
with prices that cannot be readily obtained, if any, are carried at fair value
as determined in good faith under consistently applied procedures established by
and under the supervision of the Board of Trustees.
REPURCHASE AGREEMENTS:
Each Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund through its custodian takes possession of
an underlying debt obligation subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligation,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its right to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. Each Fund's respective Sub-advisor, acting under the
supervision of the Company's investment advisor, Sierra Investment Advisors
Corporation ("Sierra Advisors"), and the Board of Trustees, reviews the value of
the collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
REVERSE REPURCHASE AGREEMENTS:
The Short Term High Quality Bond, Short Term Global Government, U.S. Government,
Corporate Income, California Municipal, Florida Insured Municipal, California
Insured Intermediate Municipal, National Municipal, Growth and Income, Growth,
Emerging Growth, International Growth and Target Maturity 2002 Funds may engage
in reverse repurchase agreements. Reverse repurchase agreements are the same as
repurchase agreements except that, in this instance, the Funds would assume the
role of seller/borrower in the transaction. The Funds may use reverse repurchase
agreements to borrow short term funds. The value of the reverse repurchase
agreements that the Funds have committed to sell are reflected in the Funds'
Statements of Assets and Liabilities. The Funds will maintain segregated
accounts with the Trust's custodian consisting of U.S. Government securities,
cash or money market instruments that at all times are in an amount equal to
their obligations under reverse repurchase agreements. Reverse repurchase
agreements involve the risks that the market value of the securities sold by the
Funds may decline below the repurchase price of the securities and, if the
proceeds from the reverse repurchase agreement are invested in securities, that
the market value of the securities bought may decline below the repurchase price
of the securities sold.
OPTION CONTRACTS:
The Short Term High Quality Bond, Short Term Global Government, U.S. Government,
Corporate Income, California Insured Intermediate Municipal, Growth and Income,
Growth, Emerging Growth and International Growth Funds may engage in option
contracts. The Funds may use option contracts to manage their exposure to the
stock and bond markets and to fluctuations in interest rates and currency
values. The underlying principal amounts and option values are shown in the
Portfolio of Investments under the captions "Call Option Purchased on U.S.
Treasury Bond Futures," "Options Written," "Options on Foreign Currency
Purchased" and "Call Options Written on Foreign Interest Rate Futures." These
amounts reflect each contract's exposure to the underlying instrument at June
30, 1996. Writing puts and buying calls tends to increase the Funds' exposure to
the underlying instrument. Buying puts and writing calls tends to decrease the
Funds' exposure to the underlying instruments or to hedge other Fund
investments.
Upon the purchase of a put option or a call option by the Funds, the premium
paid is recorded as an investment, the value of which is marked-to-market daily.
When a purchased option expires, the Funds will realize a loss in the amount of
the cost of the option. When the Funds enter into a closing sale transaction,
the Funds will realize a gain or loss depending on whether the sales proceeds
from the closing sale transaction are greater or less than the cost of the
option. When the Funds exercise a put option, they will realize a gain or loss
from the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Funds exercise a call option,
the cost of the security which the Funds purchase upon exercise will be
increased by the premium originally paid.
When the Funds write a call option or a put option, an amount equal to the
premium received by the Funds is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Funds realize a gain
equal to the amount of the premium received. When the Funds enter into a closing
purchase transaction, the Funds realize a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When a written call
100
<PAGE> 103
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
option is exercised, the Funds realize a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security that the Funds
purchased upon exercise.
The risk associated with purchasing options is limited to the premium originally
paid. Options written by a Fund involve, to varying degrees, risk of loss in
excess of the option value reflected in the Statements of Assets and
Liabilities. The risk in writing a covered call option is that the Funds may
forego the opportunity of profit if the market price of the underlying security
increases and the option is exercised. The risk in writing a covered put option
is that the Funds may incur a loss if the market price of the underlying
security decreases and the option is exercised. In addition, there is the risk
the Funds may not be able to enter into a closing transaction because of an
illiquid secondary market or, for over-the-counter options, because of the
counterparty's inability to perform.
The Short Term High Quality Bond, Short Term Global Government, California
Insured Intermediate Municipal, Growth and International Growth Funds may engage
in options on foreign currency and options on interest rate futures as a hedge
to provide protection against adverse movements in the value of foreign
securities in the portfolio.
Certain risks are associated with the use of options on foreign currency and
options on interest rate futures contracts as hedging devices. The predominant
risk is that the movement in the price of the instrument underlying such options
may not correlate perfectly with the movement in the prices of the assets being
hedged. The lack of correlation could render the Funds' hedging strategy
unsuccessful and could result in a loss to the Funds. In addition, there is the
risk the Funds may not be able to enter into a closing transaction because of an
illiquid secondary market or, for over-the-counter options, because of the
counterparty's inability to perform. Options written by a Fund involve, to
varying degrees, risk of loss in excess of the option value reflected in the
Statements of Assets and Liabilities.
FUTURES CONTRACTS:
The Short Term High Quality Bond, Short Term Global Government, U.S. Government,
Corporate Income, California Municipal, Florida Insured Municipal, California
Insured Intermediate Municipal, National Municipal, Growth and Income, Growth,
Emerging Growth and International Growth Funds may engage in futures
transactions. The Funds may use futures contracts to manage their exposure to
the stock and bond markets and to fluctuations in interest rates and currency
values. The underlying value of a futures contract is incorporated within the
unrealized appreciation/(depreciation) shown in the Portfolio of Investments
under the caption "Futures Contracts." This amount reflects each contract's
exposure to the underlying instrument at June 30, 1996. Buying futures contracts
tends to increase the Fund's exposure to the underlying instrument. Selling
futures contracts tends to either decrease the Fund's exposure to the underlying
instrument, or to hedge other Fund investments.
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin." Subsequent payments
("variation margin") are made or received by the Fund each day, depending on the
daily fluctuation of the value of the contract. The daily changes in contract
value are recorded as unrealized gains or losses and the Fund recognizes a
realized gain or loss when the contract is closed. Futures contracts are valued
at the settlement price established by the board of trade or exchange on which
they are traded.
There are several risks in connection with the use of futures contracts as a
hedging device. Futures contracts involve, to varying degrees, risk of loss in
excess of the futures variation margin reflected in the Statements of Assets and
Liabilities. The change in the value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in the value of the hedged instruments. In addition, there is the risk
that the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FOREIGN CURRENCY:
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period, and
purchases and sales of investment securities, income and expenses are translated
on the respective dates of such transactions. It is not practicable to isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the portion that arises from changes in market
prices of investments during the period. Accordingly, all such changes have been
reflected as net gain/(loss) on security transactions in the Statements of
Operations.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/(depreciation) of foreign currency and other assets and
liabilities. Unrealized gains and losses
101
<PAGE> 104
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
of securities, which result from changes in foreign currency exchange rates as
well as changes in market prices of securities, have been included in unrealized
appreciation/(depreciation) of securities. Net realized foreign currency gains
and losses resulting from changes in exchange rates include foreign currency
gains and losses between trade date and settlement date on investment securities
transactions, gains and losses on foreign currency transactions and the
difference between the amounts of interest and dividends recorded on the books
of the Funds and the amount actually received. The portion of foreign currency
gains and losses related to fluctuation in exchange rates between the initial
purchase trade date and subsequent sale trade date is included in realized
gain/(loss) from investment securities sold.
FORWARD FOREIGN CURRENCY CONTRACTS:
The Short Term High Quality Bond, Short Term Global Government, Corporate
Income, Growth and Income, Growth, Emerging Growth and International Growth
Funds may enter into forward foreign currency contracts. Forward foreign
currency contracts are agreements to exchange one currency for another at a
future date and at a specified price. The Funds may use forward foreign currency
contracts to facilitate transactions in foreign securities and to manage the
Funds' foreign currency exposure. The U.S. dollar market value, contract value
and the foreign currencies the Funds have committed to buy or sell are shown in
the Portfolio of Investments under the caption "Schedule of Forward Foreign
Currency Contracts." These amounts represent the aggregate exposure to each
foreign currency the Funds have acquired or hedged through forward foreign
currency contracts at June 30, 1996. Forward foreign currency contracts are
reflected as both a forward foreign currency contract to buy and a forward
foreign currency contract to sell. Forward foreign currency contracts to buy
generally are used to acquire exposure to foreign currencies, while forward
foreign currency contracts to sell are used to hedge the Funds' investments
against currency fluctuations. Also, a forward foreign currency contract to buy
or sell can offset a previously acquired opposite forward foreign currency
contract.
Forward foreign currency contracts are marked-to-market daily using foreign
currency exchange rates supplied by an independent pricing service. The change
in a contract's market value is recorded by the Funds as an unrealized gain or
loss. When the contract is closed or delivery is taken, the Funds record a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. These forward foreign currency
contracts involve market risk in excess of the unrealized
appreciation/(depreciation) of forward foreign currency contracts reflected in
the Funds' Statements of Assets and Liabilities. Although forward foreign
currency contracts used for hedging purposes limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Funds could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts. The Fund's Sub-advisor will enter
into forward foreign currency contracts only with parties approved by the Board
of Trustees because there is a risk of loss to the Funds if the counterparties
do not complete the transaction.
DOLLAR ROLL TRANSACTIONS:
The Short Term High Quality Bond, U.S. Government and Corporate Income Funds, in
order to seek a high level of current income, may enter into dollar roll
transactions with financial institutions to take advantage of opportunities in
the mortgage market. The value of the dollar roll transactions are reflected in
the Funds' Statements of Assets and Liabilities. A dollar roll transaction
involves a sale by the Funds of securities that they hold with an agreement by
the Funds to repurchase similar securities at an agreed upon price and date. The
securities repurchased will bear the same interest as those sold, but generally
will be collateralized at time of delivery by different pools of mortgages with
different prepayment histories than those securities sold. The Funds are paid a
fee for entering into a dollar roll transaction, that is accrued as income over
the life of the dollar roll contract. During the period between the sale and
repurchase, the Funds will not be entitled to receive interest and principal
payments on the securities sold. Management anticipates that the proceeds of the
sale will be invested in additional instruments for the Funds, and the income
from these investments, together with any additional fee income received on the
dollar roll transaction will generate income for the Funds exceeding the
interest that would have been earned on the securities sold. Dollar roll
transactions involve the risk that the market value of the securities sold by
the Funds may decline below the repurchase price of those similar securities
which the Fund is obligated to purchase or that the return earned by the Fund
with the proceeds of a dollar roll may not exceed transaction costs.
102
<PAGE> 105
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
INDEXED SECURITIES:
Each of the Funds, except for the Money Funds, may invest in indexed securities
whose value is linked either directly or inversely to changes in foreign
currencies, interest rates, commodities, indices, or other reference
instruments. Indexed securities may be more volatile than the reference
instrument itself, but any loss is limited to the amount of the original
investment.
ILLIQUID INVESTMENTS:
Up to 15% of the assets of each Bond Fund, Equity Fund and the Target Maturity
2002 Fund, and up to 10% of the assets of each Money Fund, may be invested in
securities that are not readily marketable, including: (1) repurchase agreements
with maturities greater than seven calendar days; (2) time deposits maturing in
more than seven calendar days; (3) to the extent a liquid secondary market does
not exist for the instruments, futures contracts and options thereon; (4)
certain over-the-counter options; (5) certain variable rate demand notes having
a demand period of more than seven days; and (6) securities, the disposition of
which are restricted under Federal securities laws, excluding certain Rule 144A
securities, as defined below.
Illiquid securities generally cannot be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which the
Funds have valued the investments. This may have an adverse effect on the Fund's
ability to dispose of particular illiquid securities at fair market value and
may limit the Fund's ability to obtain accurate market quotations for purposes
of valuing the securities and calculating the net asset value of shares of the
Fund. The Funds may also purchase securities that are not registered under the
Securities Act of 1933, as amended (the "Act"), but that can be sold to
qualified institutional buyers in accordance with Rule 144A under that Act
("Rule 144A Securities"). Rule 144A securities generally may be resold only to
other qualified institutional buyers. If a particular investment in Rule 144A
securities is not determined to be liquid under the guidelines established by
the Board of Trustees, that investment will be included within the 15% or 10%
limitation, as applicable, on investment in illiquid securities.
CASH FLOW INFORMATION:
Cash, as used in the Statements of Cash Flows for the U.S. Government Fund and
Corporate Income Fund, is the amount reported in the Statements of Assets and
Liabilities and represents cash on hand at the Fund's custodian bank account and
does not include any short term investments as of June 30, 1996. Information on
financial transactions which have been settled through receipt or disbursement
of cash is presented in the Statements of Cash Flows. Accounting practices that
do not affect reporting activities on a cash basis include unrealized gain or
loss on investment securities, accretion of income recognized on investment
securities and amortization of deferred organization costs.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date (the date the order to
buy or sell is executed). Realized gains and losses from securities sold are
recorded on the identified cost basis. Interest income is recorded on the
accrual basis and consists of interest accrued and, if applicable, discount
earned less premiums amortized. Dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are recorded as soon
as the Funds are informed of the ex-dividend date. Each Fund's investment income
and realized and unrealized gains and losses are allocated among the classes of
that Fund based upon the relative average net assets of each class. Securities
purchased or sold on a when-issued or delayed-delivery basis may be settled a
month or more after the trade date; interest income is not accrued until
settlement date. Each Fund instructs the custodian to segregate assets of the
Fund in a separate account with a current value at least equal to the amount of
its when-issued purchase commitments.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of the Money Funds and the Bond Funds are
declared daily and paid monthly. Dividends from the net investment income of the
Growth and Income Fund are declared and paid quarterly. Dividends from the net
investment income of the Growth Fund are declared and paid semiannually.
Dividends from the net investment income of the Emerging Growth, International
Growth and Target Maturity 2002 Funds are declared and paid annually.
Distributions of any net long-term capital gains earned by a Fund are made
annually. Distributions of any net short-term capital gains earned by a Fund are
distributed no less frequently than annually at the discretion of the Board of
Trustees. Additional distributions of net investment income and capital gains
for each Fund may be made at the discretion of the Board of Trustees in order to
avoid the application of a 4% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains on
103
<PAGE> 106
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
various investment securities held by the Funds, timing differences and
differing characterization of distributions made by each Fund as a whole.
For the year ended June 30, 1996, permanent differences resulting from book and
tax accounting for organizational costs and redesignated distributions were
reclassified to paid-in capital at year end as stated in the table below.
Certain reclassification adjustments were also made between undistributed net
investment income and realized gains due to different book and tax accounting
for currency gains and losses, market discounts, and paydowns of certain debt
instruments. Per share information in the Financial Highlights reflects the
effect of these reclassifications.
<TABLE>
<CAPTION>
INCREASE/(DECREASE) INCREASE/(DECREASE)
UNDISTRIBUTED NET ACCUMULATED
DECREASE INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
--------------- ------------------- -------------------
<S> <C> <C> <C>
Short Term High Quality Bond Fund................................ $ (2,777) $ (90,147) $ 92,924
Short Term Global Government Fund................................ -- (1,467,829) 1,467,829
U.S. Government Fund............................................. -- (1,656,930) 1,656,930
Corporate Income Fund............................................ -- (172,986) 172,986
California Municipal Fund........................................ -- 9,547 (9,547)
Florida Insured Municipal Fund................................... (2,700) 32,453 (29,753)
California Insured Intermediate Municipal Fund................... -- 717 (717)
National Municipal Fund.......................................... -- 36,822 (36,822)
Growth and Income................................................ -- (60) 60
Growth Fund...................................................... (1,101) 1,201,182 (1,200,081)
Emerging Growth Fund............................................. -- 3,584,946 (3,584,946)
International Growth Fund........................................ -- 4,631,458 (4,631,458)
Target Maturity 2002 Fund........................................ (11,757) 11,757 --
</TABLE>
Paid-in capital was reduced by $63,823 and $172,986 for the Short Term High
Quality Bond and Corporate Income Funds, respectively, due to a tax return of
capital.
FEDERAL INCOME TAXES:
It is each Fund's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by, among other
things, distributing substantially all of its taxable and tax-exempt earnings to
its shareholders. Therefore, no Federal income tax provision is required.
EXPENSES:
General expenses of the Company are allocated to all the Funds based upon
relative net assets of each Fund. Operating expenses directly attributable to a
class of shares are charged to the operations of that class of shares. Expenses
of each Fund not directly attributable to the operations of any class of shares
are prorated among the classes to which the expenses relate based on the
relative average net assets of each class of shares.
OTHER:
The California Municipal, Florida Insured Municipal, California Insured
Intermediate Municipal and National Municipal Funds (the "Municipal Funds") and
the Corporate Income Fund may purchase floating rate, inverse floating rate and
variable rate obligations, including municipal securities and participation
interests therein. Floating rate obligations have an interest rate that changes
whenever there is a change in the external interest rate, while variable rate
obligations provide for a specified periodic adjustment in the interest rate.
The interest rate on an inverse floating rate obligation (an "inverse floater")
can be expected to move in the opposite direction from the market rate of
interest to which the inverse floater is indexed. The Funds may purchase
floating rate, inverse floating rate and variable rate obligations that carry a
demand feature which would permit the Funds to tender them back to the issuer or
remarketing agent at par value prior to maturity. Frequently, floating rate,
inverse floating rate and variable rate obligations are secured by letters of
credit or other credit support arrangements provided by banks. The Corporate
Income Fund may purchase mortgage-backed securities that are floating rate,
inverse floating rate and variable rate obligations. Although variable rate
demand notes are frequently not rated by credit rating agencies, unrated notes
purchased by the Funds will be of comparable quality at the time of purchase to
rated instruments that may be purchased by such Fund, as determined by such
Fund's Sub-advisor. Moreover, while there may be no active secondary market with
respect to a particular
104
<PAGE> 107
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
variable rate demand note purchased by a Fund, the Fund may, upon the notice
specified in the note, demand payment of the principal of and accrued interest
on the note at any time and may resell the note at any time to a third party.
The absence of such an active secondary market, however, could make it difficult
for a Fund to dispose of a particular variable rate demand note in the event the
issuer of the note defaulted on its payment obligations, and the Fund could, for
this or other reasons, suffer a loss to the extent of the default.
An inverse floater may be considered to be leveraged to the extent that its
interest rate varies by a magnitude that exceeds the magnitude of the change in
the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in their market values.
Accordingly, the duration of an inverse floater may exceed its stated final
maturity. Inherent in these instruments is the risk of potential loss should the
Fund be delayed or prevented from exercising the put feature.
3. INVESTMENT ADVISORY, SUB-ADVISORY, ADMINISTRATION FEES AND OTHER
TRANSACTIONS
Sierra Advisors, an indirect wholly-owned subsidiary of Great Western Financial
Corporation ("GWFC"), a publicly held corporation, serves as investment advisor
to the Company. Alliance Capital Management L.P. ("Alliance Capital"), a limited
partnership whose general partner is Alliance Capital Management Corporation, an
indirect wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States, serves as the Sub-advisor to the U.S. Government Money and
California Money Funds. J.P. Morgan Investment Management Inc. ("J.P. Morgan"),
a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated, a publicly traded
company, serves as the Sub-advisor to the Global Money and Growth and Income
Funds and, until April 8, 1996, served as the Sub-advisor to the International
Growth Fund. Warburg, Pincus Counsellors, Inc. ("Warburg"), a privately held
corporation, began serving as the Sub-advisor to the International Growth Fund
on April 8, 1996. Van Kampen American Capital Management Inc. ("Van Kampen"), a
wholly-owned subsidiary of VK/AC Holding, Inc., which is controlled, through the
ownership of a substantial majority of its common stock, by The Clayton &
Dubilier Private Equity Fund IV Limited Partnership ("C&D L.P."), a Connecticut
limited partnership, serves as the Sub-advisor to the California Municipal,
Florida Insured Municipal, California Insured Intermediate Municipal and
National Municipal Funds. BlackRock Financial Management, Inc. ("BlackRock"), an
indirect wholly-owned subsidiary of PNC Bank, N.A., an indirect wholly-owned
subsidiary of PNC Bank Corp. ("PNC"), a publicly traded multi-bank holding
company, serves as the Sub-advisor to the U.S. Government and Target Maturity
2002 Funds. TCW Funds Management, Inc. ("TCW"), a wholly-owned subsidiary of The
TCW Group, Inc., a privately held company, serves as the Sub-advisor to the
Corporate Income Fund. Scudder, Stevens & Clark, Inc., a privately held
corporation, serves as the Sub-advisor to the Short Term Global Government and
Short Term High Quality Bond Funds. Janus Capital Corporation ("Janus"), an
indirect majority-owned subsidiary of Kansas City Southern Industries, Inc.,
which is a publicly traded holding company, serves as the Sub-advisor to the
Growth and Emerging Growth Funds. Each of the foregoing sub-advisors is referred
to individually as a "Sub-advisor" and collectively as the "Sub-advisors."
Sierra Advisors is entitled to a monthly fee, in arrears, based on a percentage
of the average daily net assets of each Fund during the month, out of which
Sierra Advisors pays the Sub-advisor of each Fund a monthly fee, in arrears, at
annual rates as follows:
<TABLE>
<CAPTION>
FEES ON ASSETS FEES ON
EQUAL TO OR ASSETS
LESS THAN EXCEEDING
NAME OF FUND $500 MILLION $500 MILLION
- ------------------------------------------------------------------------------------ -------------- --------------
<S> <C> <C>
Global Money, U.S. Government Money and California Money Funds+
Sierra Advisors................................................................ .35% .25%
Sub-advisor.................................................................... .15% .15%
--- ---
Total fees paid to Sierra Advisors*....................................... .50% .40%
=== ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $200 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$200 MILLION $500 MILLION $500 MILLION
-------------- -------------- --------------
<S> <C> <C> <C>
Short Term High Quality Bond Fund
Sierra Advisors................................................... .35% .35% .30%
Sub-advisor....................................................... .15% .10% .10%
--- --- ---
Total fees paid to Sierra Advisors*.......................... .50% .45% .40%
=== === ===
</TABLE>
105
<PAGE> 108
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $200 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $200 MILLION $500 MILLION $500 MILLION
- ----------------------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Short Term Global Government Fund
Sierra Advisors................................................... .37% .55% .45%
Sub-advisor....................................................... .28%++ .10% .10%
--- --- ---
Total fees paid to Sierra Advisors*.......................... .65% .65% .55%
=== === ===
</TABLE>
<TABLE>
<CAPTION>
WHEN "COMBINED ASSETS"**
WHEN "COMBINED ASSETS"** EXCEED $650 MILLION AND
ARE EQUAL TO OR LESS ARE EQUAL TO OR LESS WHEN "COMBINED ASSETS"**
THAN $650 MILLION THAN $1 BILLION EXCEED $1 BILLION
---------------------------------- ---------------------------------- ----------------------------------
FEES ON FEES ON FEES ON
ASSETS EQUAL FEES ON ASSETS EQUAL FEES ON ASSETS EQUAL FEES ON
TO OR LESS THAN ASSETS EXCEEDING TO OR LESS THAN ASSETS EXCEEDING TO OR LESS THAN ASSETS EXCEEDING
$500 MILLION $500 MILLION $500 MILLION $500 MILLION $500 MILLION $500 MILLION
--------------- ---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
Fund
Sierra
Advisors.... .415% .315% .45% .35% .50% .40%
Sub-advisor**... .185% .185% .15% .15% .10% .10%
---- ---- --- --- --- ---
Total
fees
paid to
Sierra
Advisors*... .600% .500% .60% .50% .60% .50%
==== ==== === === === ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS FEES ON
EQUAL TO OR ASSETS
LESS THAN EXCEEDING
$500 MILLION $500 MILLION
-------------- --------------
<S> <C> <C>
Corporate Income Fund
Sierra Advisors................................................................ .35% .25%
Sub-advisor.................................................................... .30% .25%
--- ---
Total fees paid to Sierra Advisors*....................................... .65% .50%
=== ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $150 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$150 MILLION $500 MILLION $500 MILLION
-------------- -------------- --------------
<S> <C> <C> <C>
California Municipal Fund
Sierra Advisors................................................ .45% .50% .35%
Sub-advisor***................................................. .20% .15% .15%
--- --- ---
Total fees paid to Sierra Advisors*....................... .65% .65% .50%
=== === ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $75 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$75 MILLION $500 MILLION $500 MILLION
-------------- -------------- --------------
<S> <C> <C> <C>
Florida Insured Municipal Fund
Sierra Advisors................................................ .40% .475% .325%
Sub-advisor.................................................... .20% .125% .125%
---- ---- ----
Total fees paid to Sierra Advisors*....................... .60% .600% .450%
==== ==== ====
California Insured Intermediate Municipal Fund
Sierra Advisors................................................ .45% .525% .375%
Sub-advisor.................................................... .20% .125% .125%
---- ---- ----
Total fees paid to Sierra Advisors*....................... .65% .650% .500%
==== ==== ====
</TABLE>
106
<PAGE> 109
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $150 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $150 MILLION $500 MILLION $500 MILLION
- -------------------------------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
National Municipal Fund
Sierra Advisors................................................ .40% .45% .30%
Sub-advisor***................................................. .20% .15% .15%
---- ---- ----
Total fees paid to Sierra Advisors*....................... .60% .60% .45%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS FEES ON ASSETS FEES ON ASSETS
EXCEEDING EXCEEDING EXCEEDING
FEES ON ASSETS $100 MILLION $200 MILLION $400 MILLION FEES ON
EQUAL TO OR AND EQUAL TO AND EQUAL TO AND EQUAL TO ASSETS
LESS THAN OR LESS THAN OR LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $200 MILLION $400 MILLION $500 MILLION $500 MILLION
-------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Growth and Income Fund
Sierra Advisors................... .35% .35% .35% .35% .275%
Sub-advisor....................... .45% .40% .35% .30% .300%
--- --- --- --- ----
Total fees paid to Sierra
Advisors*.................. .80% .75% .70% .65% .575%
=== === === === ====
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $100 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $200 MILLION $200 MILLION
-------------- -------------- ------------
<S> <C> <C> <C>
Growth Fund
Sierra Advisors................................................. .40% .40% .375%
Sub-advisor..................................................... .55% .50% .500%
--- --- ----
Total fees paid to Sierra Advisors*........................ .95% .90% .875%
=== === ====
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $100 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $500 MILLION $500 MILLION
-------------- -------------- --------------
<S> <C> <C> <C>
Emerging Growth Fund
Sierra Advisors................................................ .35% .35% .25%
Sub-advisor.................................................... .55% .50% .50%
--- --- ----
Total fees paid to Sierra Advisors*....................... .90% .85% .75%
=== === ====
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $50 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$50 MILLION $125 MILLION $125 MILLION
-------------- -------------- ------------
<S> <C> <C> <C>
International Growth Fund
Sierra Advisors................................................. .45% .35% .15%
Sub-advisor****................................................. .50% .50% .50%
--- --- ---
Total fees paid to Sierra Advisors*........................ .95% .85% .65%
=== === ===
</TABLE>
107
<PAGE> 110
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
<TABLE>
<CAPTION>
FEES ON ASSETS FEES ON
EQUAL TO OR ASSETS
LESS THAN EXCEEDING
NAME OF FUND $500 MILLION $500 MILLION
- --------------------------------------------------------------------- -------------- ------------
<S> <C> <C>
Target Maturity 2002 Fund
Sierra Advisors................................................................. .20% .15%
Sub-advisor..................................................................... .05%+++ .05%
-------- -------
Total fees paid to Sierra Advisors*........................................ .25% .20%
======== =======
</TABLE>
- ---------------------
* Sierra Advisors retains only the net amount of the fees after
sub-advisory fees have been paid.
** The monthly fee paid to BlackRock is based upon the combined average
daily net assets of the U.S. Government Fund and The Sierra Variable
Trust's U.S. Government Fund (together, the "Combined Assets").
*** Pursuant to the investment sub-advisory agreements with respect to each
of the California Municipal and National Municipal Funds, when the
combined average daily net assets of the California Municipal and
National Municipal Funds (together, the "Combined Assets") exceed $750
million, the Sub-advisor will be paid a fee with respect to each Fund in
proportion to each Fund's average net assets at an annual rate as
follows: .15% of the Combined Assets up to $1 billion; plus .125% of the
Combined Assets over $1 billion.
**** As of April 8, 1996, Warburg replaced J.P. Morgan as Sub-advisor to the
International Growth Fund pursuant to a sub-advisory agreement pending
shareholder approval. On July 31, 1996, at a special meeting of
shareholders, the shareholders of the International Growth Fund approved
the sub-advisory agreement. Prior to April 8, 1996, J.P. Morgan received
monthly fees at the following annual rates: (i) .60% of the Fund's
average daily net assets equal to or less than $50 million; (ii) .50% of
the Fund's average daily net assets exceeding $50 million and equal to or
less than $125 million; and (iii) .40% of the Fund's average daily net
assets exceeding $125 million. As of April 8, 1996, Warburg is paid a
monthly fee at an annual rate of .50% of the Fund's average daily net
assets.
+ Fees paid to Sierra Advisors are based on aggregate assets in the three
Money Funds.
++ The Sub-advisor receives a minimum annual fee of $137,500.
+++ The Sub-advisor receives a minimum annual fee of $25,000.
Sierra Advisors has contractually agreed to limit the annual management fees
that are payable under the investment advisory agreements with the Funds to the
percentages as set forth below.
<TABLE>
<CAPTION>
NAME OF FUND
-----------------------------------------------------------------------------------
<S> <C>
Global Money Fund.................................................................. .40%
U.S. Government Money Fund......................................................... .40%
California Money Fund.............................................................. .40%
U.S. Government Fund............................................................... .55%
California Municipal Fund.......................................................... .55%
Florida Insured Municipal Fund..................................................... .55%
California Insured Intermediate Municipal Fund..................................... .55%
National Municipal Fund............................................................ .55%
</TABLE>
Fees voluntarily waived and expenses absorbed by Sierra Advisors for the year
ended June 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME OF FUND FEES WAIVED EXPENSES ABSORBED
-------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
Global Money Fund............................................. $ 622,915 $ 143,417
U.S. Government Money Fund.................................... 162,368 --
California Money Fund......................................... 148,062 --
Short Term High Quality Bond Fund............................. 262,885 73,583
Short Term Global Government Fund............................. 513,501 --
U.S. Government Fund.......................................... 2,581,417 187,726
Corporate Income Fund......................................... 1,606,290 --
California Municipal Fund..................................... 1,398,796 --
Florida Insured Municipal Fund................................ 201,769 74,295
California Insured Intermediate Municipal Fund................ 393,599 47,057
National Municipal Fund....................................... 645,198 --
Target Maturity 2002 Fund..................................... 7,915 47,054
</TABLE>
Sierra Fund Administration Corporation ("Sierra Administration"), an indirect
wholly-owned subsidiary of GWFC serves as administrator and transfer agent to
each Fund. First Data Investor Services Group, Inc., ("FDISG"), formerly The
Shareholder Services Group, Inc., a wholly-owned subsidiary of First Data
Corporation, serves as sub-administrator and sub-transfer agent to each Fund.
For its services as administrator and transfer agent to each Fund, Sierra
Administration is entitled to a monthly fee at an annual rate of .35% of each
non-Money Fund's average daily net assets and at an annual rate of .30% of each
Money Fund's
108
<PAGE> 111
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
average daily net assets. Out of its fee, Sierra Administration pays FDISG for
its services as sub-administrator and sub-transfer agent. FDISG, as
sub-administrator, is paid a gross annual fee of $1.71 million on the first $1.6
billion of aggregate average daily net assets of the Company, plus fees at the
annual rate of .0452% on the next $1.3 billion aggregate average daily net
assets of the Company, .0429% on the next $1.7 billion aggregate average daily
net assets of the Company and .0362% on the next $3.1 billion aggregate average
daily net assets of the Company. Effective July 1, 1996, FDISG began serving as
transfer agent of the Company.
Fees voluntarily waived by Sierra Administration for the year ended June 30,
1996 are as follows:
<TABLE>
<CAPTION>
NAME OF FUND FEES WAIVED
------------------------------------------------------------------------------- -----------
<S> <C>
Global Money Fund.............................................................. $ 5,352
Short Term High Quality Bond Fund.............................................. 11,630
Short Term Global Government Fund.............................................. 15,947
U.S. Government Fund........................................................... 127,314
Florida Insured Municipal Fund................................................. 20,472
California Insured Intermediate Municipal Fund................................. 14,288
Target Maturity 2002 Fund...................................................... 3,805
</TABLE>
The Company also pays FDISG and Boston Safe Deposit and Trust Company ("Boston
Safe"), the Company's custodian, certain custodial transaction charges reflected
as administration fees. Boston Safe is an indirect wholly-owned subsidiary of
The Boston Company, Inc., which is a wholly-owned subsidiary of Mellon Bank
Corporation.
Custodian fees for certain Funds have been reduced by credits allowed by Boston
Safe for the year ended June 30, 1996 as follows:
<TABLE>
<CAPTION>
CREDITS ALLOWED
BY THE
NAME OF FUND CUSTODIAN
---------------------------------------------------------------------------- ---------------
<S> <C>
Global Money Fund........................................................... $ 7,013
U.S. Government Money Fund.................................................. 1,565
Short Term High Quality Bond Fund........................................... 2,273
Short Term Global Government Fund........................................... 808
U.S. Government Fund........................................................ 45,546
Corporate Income Fund....................................................... 1,548
California Municipal Fund................................................... 27,250
Florida Insured Municipal Fund.............................................. 7,946
California Insured Intermediate Municipal Fund.............................. 14,367
National Municipal Fund..................................................... 6,678
Growth and Income Fund...................................................... 3,305
Growth Fund................................................................. 15,835
Emerging Growth Fund........................................................ 10,408
International Growth Fund................................................... 5,593
Target Maturity 2002 Fund................................................... 2,430
</TABLE>
For the year ended June 30, 1996, GW Securities and Sierra Services have
informed the Funds that they received $3,982,988 and $637,291, respectively,
representing commissions (front-end sales charges). In addition, for the year
ended June 30, 1996, Sierra Services and Funds Distributor Inc. informed the
Funds that they received $912,193 from CDSC fees.
4. TRUSTEES' FEES
No director, officer or employee of Great Western Financial Securities
Corporation ("GW Securities"), a registered broker-dealer, Sierra Investment
Services Corporation ("Sierra Services"), a registered investment adviser and
broker-dealer, Sierra Advisors, Sierra Administration, the Sub-advisors or
FDISG, or any of their affiliates receives any compensation from the Company for
serving as an officer or Trustee of the Company. GW Securities is a wholly-owned
subsidiary (directly held as of January 1, 1996) and Sierra Services is an
indirect wholly-owned subsidiary of GWFC. The Company pays each Trustee who is
not a director, officer or employee of GW Securities, Sierra Services, Sierra
Advisors, the Sub-advisors or FDISG, or any of their affiliates, $7,500 per
annum plus $1,500 per board meeting attended, $1,000 per audit and/or nominating
committee meeting attended and reimbursement for travel and out-of-pocket
expenses. The Chairman of the Audit Committee receives $1,500 per audit
committee meeting attended.
109
<PAGE> 112
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
Pursuant to an exemptive order granted by the Securities and Exchange Commission
on October 11, 1995, the Company's eligible Trustees may participate in a
deferred compensation plan (the "Plan") which may be terminated at any time.
Under the Plan, Trustees may elect to defer receipt of all or a portion of their
fees which, in accordance with the Plan, are invested in mutual fund shares.
Upon termination of the Plan, Trustees that have deferred accounts under the
Plan will be paid benefits not later than the time the payments would otherwise
have been made without regard to such termination. All benefits provided under
these plans are funded and any payments to plan participants are paid solely out
of the Company's assets.
5. DISTRIBUTION PLANS
Sierra Services serves as distributor for Class A Shares, Class B Shares and
Class S Shares of the Funds. Prior to December 20, 1995, Funds Distributor Inc.,
a registered broker-dealer, served as distributor for Class B Shares and Class S
Shares of the Funds.
The Company has adopted a Distribution Plan (the "Class A Plan"), as amended,
pursuant to Rule 12b-1 under the 1940 Act. Under the Class A Plan, Sierra
Services is paid an annual distribution fee of up to .25% of the average daily
net assets of the Class A Shares of each Fund for activities primarily intended
to result in the sale of Fund shares. (The Class A Plan applies to all Class A
Shares of the Funds and all shares of the Funds that were outstanding at the
time of commencement of the offering of Class B Shares or Class S Shares, which
outstanding shares are treated for all purposes as Class A Shares.) For the
Funds which offer Class B Shares and Class S Shares, the Company has also
adopted a Rule 12b-1 distribution plan for each of the Class B Shares (the
"Class B Plan") and Class S Shares (the "Class S Plan") of the Funds. Under the
Class B Plan and the Class S Plan, Sierra Services is paid an annual
distribution fee of up to .75% of the average daily net assets of the Class B
Shares and Class S Shares of a Fund for activities primarily intended to result
in the sale of Class B Shares and Class S Shares of the Fund, respectively. In
addition, under the Class B Plan and the Class S Plan, Class B Shares and Class
S Shares are also subject to a service fee at an annual rate of .25% of the
average daily net assets of the Class B Shares and Class S Shares of the Fund,
respectively. The service fee is paid by the Fund to Sierra Services, which in
turn, pays a portion of the service fee to broker/dealers, including GW
Securities, that sell Class B Shares and Class S Shares and provide services,
such as, accepting telephone inquiries and transaction requests and processing
correspondences, new account applications and subsequent purchases by check, for
the shareholders. Under their terms each of the Class A Plan, Class B Plan and
Class S Plan shall remain in effect from year to year, provided such continuance
is approved annually by vote of the Board of Trustees, including a majority of
those Trustees who are not "interested persons" of the Company, as defined in
the 1940 Act, and who have no direct or indirect financial interest in the
operation of such distribution plans, or any agreements related to such plans,
respectively.
For the year ended June 30, 1996, the Funds incurred the following fees pursuant
to the respective distribution plans described above:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS S
------------ ---------------------- ----------------------
DISTRIBUTION DISTRIBUTION SERVICE DISTRIBUTION SERVICE
NAME OF FUND FEE FEE FEE FEE FEE
- ----------------------------------------------------------- ------------ ------------ ------- ------------ -------
<S> <C> <C> <C> <C> <C>
Global Money Fund.......................................... $ 353,950 $ 1,957 $ 652 $104,160 $34,720
U.S. Government Money Fund................................. 108,864 543 181 1,968 656
California Money Fund...................................... 128,956 799 267 77 26
Short Term High Quality Bond Fund.......................... 108,968 24,494 8,164 42,928 14,310
Short Term Global Government Fund.......................... 203,577 10,382 3,461 16,482 5,494
U.S. Government Fund....................................... 1,092,257 135,569 45,189 107,773 35,924
Corporate Income Fund...................................... 850,156 156,704 52,234 66,575 22,192
California Municipal Fund.................................. 982,698 98,159 32,720 83 28
Florida Insured Municipal Fund............................. 79,701 35,954 11,984 82 28
California Insured Intermediate Municipal Fund............. 137,766 123,342 41,114 84 28
National Municipal Fund.................................... 629,965 43,799 14,600 83 27
Growth and Income Fund..................................... 475,235 108,079 36,027 201,256 67,086
Growth Fund................................................ 433,346 114,680 38,226 234,367 78,122
Emerging Growth Fund....................................... 596,859 131,848 43,950 208,373 69,457
International Growth Fund.................................. 240,623 23,528 7,843 160,095 53,365
Target Maturity 2002 Fund.................................. 7,915 -- -- -- --
</TABLE>
110
<PAGE> 113
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. Government and short-term investments, for the year ended June 30, 1996
were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Short Term High Quality Bond Fund............................... $ 75,132,448 $ 32,090,163
Short Term Global Government Fund............................... 61,748,468 100,926,074
U.S. Government Fund............................................ 53,403,158 43,329,164
Corporate Income Fund........................................... 9,404,490 64,059,025
California Municipal Fund....................................... 66,545,973 92,969,120
Florida Insured Municipal Fund.................................. 19,235,875 21,775,320
California Insured Intermediate Municipal Fund.................. 20,892,777 18,618,203
National Municipal Fund......................................... 64,107,806 104,530,181
Growth and Income Fund.......................................... 205,091,040 204,361,188
Growth Fund..................................................... 406,757,198 406,334,518
Emerging Growth Fund............................................ 429,732,779 363,520,876
International Growth Fund....................................... 180,408,595 143,039,389
</TABLE>
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the year ended June 30, 1996
were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Short Term High Quality Bond Fund............................ $ 38,205,458 $ 89,233,539
Short Term Global Government Fund............................ 5,577,830 1,880,879
U.S. Government Fund......................................... 1,594,663,584 1,584,347,559
Corporate Income Fund........................................ 80,726,766 109,284,963
Target Maturity 2002 Fund.................................... 680,488 164,231
</TABLE>
At June 30, 1996, aggregate gross unrealized appreciation for all securities in
which there is an excess of value over tax cost and aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost over
value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
NAME OF FUND APPRECIATION DEPRECIATION
------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Short Term High Quality Bond Fund.................................. $ 180,256 $ 273,946
Short Term Global Government Fund.................................. 2,347,984 729,829
U.S. Government Fund............................................... 5,567,358 6,490,812
Corporate Income Fund.............................................. 10,456,077 2,885,822
California Municipal Fund.......................................... 16,420,705 697,790
Florida Insured Municipal Fund..................................... 740,027 145,489
California Insured Intermediate Municipal Fund..................... 2,375,881 113,695
National Municipal Fund............................................ 14,021,214 885,904
Growth and Income Fund............................................. 25,544,967 5,605,977
Growth Fund........................................................ 34,540,025 6,346,268
Emerging Growth Fund............................................... 84,284,258 7,773,940
International Growth Fund.......................................... 11,122,107 4,893,551
Target Maturity 2002 Fund.......................................... 8,063 --
</TABLE>
Option activity for the Short Term High Quality Bond Fund for the year ended
June 30, 1996 was as follows:
<TABLE>
<CAPTION>
WRITTEN OPTIONS ON FOREIGN CURRENCY: PREMIUMS
------------------------------------ --------
<S> <C>
Options outstanding at June 30, 1995................................ $ 0
Options written..................................................... 68,721
Options closed...................................................... (36,867)
--------
Options outstanding at June 30, 1996................................ $ 31,854
========
</TABLE>
111
<PAGE> 114
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
Option activity for the Short Term Global Government Fund for the year ended
June 30, 1996 was as follows:
<TABLE>
<CAPTION>
WRITTEN OPTIONS ON FOREIGN CURRENCY: PREMIUMS
------------------------------------ -----------
<S> <C>
Options outstanding at June 30, 1995............................... $ 793,146
Options written.................................................... 2,533,638
Options expired.................................................... (401,418)
Options closed..................................................... (2,730,879)
-----------
Options outstanding at June 30, 1996............................... $ 194,487
===========
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
WRITTEN OPTIONS ON FOREIGN INTEREST RATE FUTURES: PREMIUMS CONTRACTS
------------------------------------------------- --------- ---------
<S> <C> <C>
Options outstanding at June 30, 1995.................................. $ 160,050 120
Options written....................................................... 92,815 76
Options closed........................................................ (252,865) (196)
--------- ----
Options outstanding at June 30, 1996.................................. $ 0 0
========= ====
</TABLE>
Option activity for the National Municipal Fund for the year ended June 30, 1996
was as follows:
<TABLE>
<CAPTION>
NUMBER OF
WRITTEN OPTIONS: PREMIUMS CONTRACTS
---------------- --------- ---------
<S> <C> <C>
Options outstanding at June 30, 1995................................ $ 0 0
Options written..................................................... 107,661 600
Options closed...................................................... (107,661) (600)
-------- ----
Options outstanding at June 30, 1996................................ $ 0 0
======== ====
</TABLE>
Information regarding dollar roll transactions by the U.S. Government and
Corporate Income Funds is as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT CORPORATE INCOME
DOLLAR ROLL TRANSACTIONS: FUND FUND
------------------------- --------------- ----------------
<S> <C> <C>
Maximum amount outstanding during the year.................. $ 313,043,594 $ 52,833,656
Average amount outstanding during the year*................. $ 152,879,279 $ 43,387,887
Average monthly shares outstanding during the year.......... 48,758,959 35,256,936
Average debt per share outstanding during the year.......... $3.14 $1.23
</TABLE>
- ---------------------
* The average amount outstanding during the year was calculated by adding the
borrowings at the end of each day and dividing the sum by the number of days
in the year ended June 30, 1996.
Fee income earned for the year ended June 30, 1996 by the U.S. Government and
Corporate Income Funds for dollar roll transactions aggregated $2,064,175 and
$853,300, respectively.
Information regarding reverse repurchase agreement transactions by the U.S.
Government Fund is as follows:
<TABLE>
<CAPTION>
REVERSE REPURCHASE AGREEMENTS:
------------------------------
<S> <C>
Maximum amount outstanding during the year................................... $135,105,000
Average amount outstanding during the year*.................................. $11,343,525
Average monthly shares outstanding during the year........................... 48,758,959
Average debt per share outstanding during the year........................... $0.23
</TABLE>
- ---------------------
* The average amount outstanding during the year was calculated by summing
borrowings at the end of each day and dividing the sum by the number of days
in the year ended June 30, 1996.
Interest rates ranged from 1.25% to 6.10% during the year. Interest paid for the
year ended June 30, 1996, on borrowings by the Fund under reverse repurchase
agreements, aggregated $582,417.
112
<PAGE> 115
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
7. SHARES OF BENEFICIAL INTEREST
The Company may issue an unlimited number of shares of beneficial interest each
without par value.
As of June 30, 1996, First Interstate Bank as Trustee for Great Western Employee
Saving Plan -- Balanced Fund owned the following Class A Shares:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME OF FUND FUND SHARES TOTAL FUND SHARES
----------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
Growth and Income Fund........................................... 702,375 5.41%
</TABLE>
As of June 30, 1996, First Interstate Bank as Trustee for Great Western Employee
Savings Plan -- Aggressive Fund owned the following Class A Shares:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME OF FUND FUND SHARES TOTAL FUND SHARES
----------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
Emerging Growth Fund............................................. 1,513,319 10.76%
</TABLE>
As of June 30, 1996, Sierra Administration owned greater than five percent of
the following Funds:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
FUND SHARES TOTAL FUND SHARES
----------------- -----------------
NAME OF FUND CLASS B CLASS S CLASS B CLASS S
-------------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Government Money Fund.................................... 10,103 -- 9.04% --
California Money Fund......................................... -- 10,430 -- 100.00%
California Municipal Fund..................................... -- 1,065 -- 100.00
Florida Insured Municipal Fund................................ -- 1,167 -- 100.00
California Insured Intermediate Municipal Fund................ -- 1,077 -- 100.00
National Municipal Fund....................................... -- 1,030 -- 100.00
</TABLE>
8. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Funds, including
the fees and expenses of registering and qualifying its shares for distribution
under Federal and state securities regulations, are being amortized on a
straight-line basis over a period of five years from commencement of operations
of each Fund, respectively. In the event any of the initial shares of a Fund are
redeemed by any holder thereof during the amortization period, the proceeds of
such redemptions will be reduced by an amount equal to the pro-rata portion of
unamortized deferred organizational expenses in the same proportion as the
number of shares being redeemed bears to the number of initial shares of such
Fund outstanding at the time of such redemption.
9. CAPITAL LOSS CARRYFORWARDS
At June 30, 1996, the following Funds had available for federal income tax
purposes unused capital losses as follows:
<TABLE>
<CAPTION>
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
NAME OF FUND IN 2000 IN 2001 IN 2002 IN 2003 IN 2004
-------------------------------------------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
U.S. Government Money Fund.................. -- -- $9,246 $ 1,367 $ 2,404
California Money Fund....................... $7,635 $5,715 7,549 1,294 18,781
Short Term High Quality Bond Fund........... -- -- -- 206,653 672,111
Short Term Global Government Fund........... -- -- -- -- 2,595,508
U.S. Government Fund........................ -- -- -- 37,871,949 33,050,799
Corporate Income Fund....................... -- -- -- 22,615,168 9,952,150
California Municipal Fund................... -- -- -- 9,970,802 4,501,967
Florida Insured Municipal Fund.............. -- -- -- 1,590,869 1,462,695
National Municipal Fund..................... -- -- -- -- 11,367,109
</TABLE>
Under current tax law, capital losses realized after October 31 may be deferred
and treated as occurring on the first day of the following fiscal year.
113
<PAGE> 116
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
For the fiscal year ended June 30, 1996, the following Funds have elected to
defer losses occurring between November 1, 1995 and June 30, 1996 under these
rules, as follows:
<TABLE>
<CAPTION>
CAPITAL CURRENCY
NAME OF FUND LOSSES DEFERRED LOSSES DEFERRED
------------------------------------------------------------------ --------------- ---------------
<S> <C> <C>
Global Money Fund................................................. $ 8,316 --
U.S. Government Money Fund........................................ 2,691 --
Short Term High Quality Bond Fund................................. 558,047 $ 435
Short Term Global Government Fund................................. 106,202 --
U.S. Government Fund.............................................. 4,552,104 --
Corporate Income Fund............................................. 2,465,313 --
International Growth Fund......................................... 1,377,313 --
</TABLE>
Such deferred losses will be treated as arising on the first day of the fiscal
year ending June 30, 1997.
10. GEOGRAPHIC AND INDUSTRY CONCENTRATION
There are certain risks arising from the California Money Fund, California
Municipal Fund and California Insured Intermediate Municipal Funds'
concentration in California municipal securities. Certain California
constitutional amendments, legislative measures, executive orders,
administrative regulations, court decisions and voter initiatives could result
in certain adverse consequences including impairing the ability of certain
issuers of California municipal securities to pay principal and interest on
their obligations.
In addition, the Global Money Fund may invest at least 25% of its assets in bank
obligations. As a result of this concentration policy, the Fund's investments
may be subject to greater risk than a fund that does not concentrate in the
banking industry. In particular, bank obligations may be subject to the risks
associated with interest rate volatility, changes in Federal and state laws and
regulations governing the banking industry and the inability of borrowers to pay
principal and interest when due. In addition, foreign banks present risks
similar to those investing in foreign securities generally and are not subject
to the same reserve requirements and other regulations as U.S. banks.
The Florida Insured Municipal Fund primarily invests in debt obligations issued
by the State of Florida and its political subdivisions, agencies and public
authorities to obtain funds for various public purposes. The Florida Insured
Municipal Fund is more susceptible to factors adversely affecting issuers of
Florida municipal securities than is a municipal bond fund that is not
concentrated in these issuers to the same extent. Uncertain economic conditions
may affect the ability of Florida municipal securities issuers to meet their
financial obligations.
The Global Money, Short Term Global Government, Corporate Income, Growth,
Emerging Growth and International Growth Funds invest in securities of foreign
companies and foreign governments. There are certain risks involved in investing
in foreign securities that are in addition to the usual risks inherent in
domestic investments. These risks include those resulting from future adverse
political and economic developments and the possible imposition of currency
exchange blockages or other foreign governmental laws or restrictions.
11. LINE OF CREDIT
The Company, on behalf of the Bond Funds and the Equity Funds, participates in a
$40 million line of credit provided by Deutsche Bank AG, New York Branch (the
"Bank") under a Credit Agreement (the "Agreement") dated May 22, 1996, primarily
for temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of securities.
Under the Agreement, each Fund as a separate and distinct borrower may borrow up
to its designated base commitment allocation specified in the Agreement, plus
its pro rata portion of any unused base commitment allocation of the other
borrowers under the Agreement. Interest is payable at one of the following rates
depending on the type of loan designated by the borrower: (i) the higher of
0.50% in excess of the Federal Funds Rate and the prime lending rate announced
by the Bank; (ii) the New York Interbank Offered Rate (NIBOR) plus 0.35% on an
annualized basis; or (iii) the London Interbank Offered Rate (LIBOR) plus 0.35%
on an annualized basis. The Funds are charged an aggregate commitment fee
computed at a rate equal to 0.05% on an annual basis of the daily average
unutilized credit balance. The Agreement requires, among other provisions, that
the aggregate outstanding principal amount of the loans made to each borrower
under the Agreement shall not exceed the lesser of (i) 33 1/3% of the value of
the total assets of the borrower less all liabilities and indebtedness not
represented by senior securities;
114
<PAGE> 117
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIERRA TRUST FUNDS
and (ii) any borrower limitations described for such borrowers in the Company's
prospectus. During the period ended June 30, 1996, no Fund borrowed under the
Agreement.
12. SUBSEQUENT EVENT (UNAUDITED)
On June 24, 1996, VK/AC Holding, Inc., the parent of Van Kampen, announced it
had entered into an Agreement and Plan of Merger among Morgan Stanley Group
Inc., MSAM Holdings II, Inc. and MSAM Acquisition Inc., pursuant to which MSAM
Acquisition Inc. will be merged with and into VK/AC Holding, Inc. and VK/AC
Holding, Inc. will be the surviving corporation. MSAM Acquisition Inc. is a
wholly-owned subsidiary of MSAM Holdings II, Inc. which, in turn, is a
wholly-owned subsidiary of Morgan Stanley Group Inc. Subject to a number of
conditions being met, it is currently anticipated that a closing will occur on
or about November 29, 1996. Thereafter, VK/AC Holding, Inc. and its affiliated
entities shall be part of Morgan Stanley Group Inc.
115
<PAGE> 118
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS
OF THE SIERRA TRUST FUNDS
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations, of
changes in net assets, the financial highlights and the statements of cash flows
of U.S. Government Fund and Corporate Income Fund present fairly, in all
material respects, the financial position of each of the sixteen fund series
constituting Sierra Trust Funds (the "Company") at June 30, 1996, the results of
their operations, the changes in their net assets and their financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of those financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at June 30, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
BOSTON, MASSACHUSETTS
AUGUST 13, 1996
116
<PAGE> 119
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
SIERRA TRUST FUNDS
FISCAL YEAR ENDED JUNE 30, 1996 (UNAUDITED)
The following tax information represents fiscal year end disclosures of various
tax benefits passed through to shareholders at calendar year end.
The amount of long term capital gain paid as follows:
<TABLE>
<CAPTION>
NAME OF FUND
-----------------------------------------------------------
<S> <C>
California Insured Intermediate Municipal Fund............. $ 261,827
Growth Fund................................................ 5,646,222
Growth and Income Fund..................................... 9,685,468
Emerging Growth Fund....................................... 2,139,962
International Growth Fund.................................. 4,148,979
</TABLE>
Of the distributions made from investment income the following percentages are
tax exempt for regular Federal income tax purposes.
<TABLE>
<CAPTION>
NAME OF FUND
-----------------------------------------------------------
<S> <C>
California Money Fund...................................... 100.00%
California Municipal Fund.................................. 100.00%
Florida Insured Municipal Fund............................. 100.00%
California Insured Intermediate Municipal Fund............. 100.00%
National Municipal Fund.................................... 100.00%
</TABLE>
A portion of this income may be subject to alternative minimum tax.
Of the distributions made by the following Funds the corresponding percentage
represents the amount of each distribution which will qualify for the dividends
received deduction available to corporate shareholders.
<TABLE>
<CAPTION>
NAME OF FUND
-----------------------------------------------------------
<S> <C>
Growth and Income Fund..................................... 30.88%
Growth Fund................................................ 3.02%
Emerging Growth Fund....................................... 4.24%
</TABLE>
Of the distributions made by the following Funds from investment income the
corresponding percentage represents the portion of each distribution derived
from investments in U.S. Government and Agency Obligations. All or a portion of
the distributions made from this income may be exempt from taxation at the state
level. Please consult your tax advisor for state specific information.
<TABLE>
<CAPTION>
NAME OF FUND
-----------------------------------------------------------
<S> <C>
U.S. Government Money Fund................................. 48.11%
Short Term High Quality Bond Fund.......................... 16.76%
U.S. Government Fund....................................... 22.47%
Corporate Income Fund...................................... 1.98%
Growth and Income Fund..................................... 2.10%
Emerging Growth Fund....................................... 0.76%
Target Maturity 2002 Fund.................................. 100.00%
</TABLE>
The above figures may differ from those cited elsewhere in this report due to
differences in the calculations of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax) purposes.
117
<PAGE> 120
- --------------------------------------------------------------------------------
MEETING OF SHAREHOLDERS
SIERRA TRUST FUNDS
On July 31, 1996 a Special Meeting of Shareholders of the Sierra Trust
International Growth Fund (the "International Growth Fund") was held. The
purpose of the meeting was to approve the selection of Warburg, Pincus
Counsellors, Inc. ("Warburg") as Investment Sub-Advisor for the International
Growth Fund and also to approve the adoption of a new Investment Sub-Advisory
Agreement by and among the Sierra Trust Funds (the "Company"), Sierra Investment
Advisors Corporation and Warburg with respect to the International Growth Fund.
At the meeting 6,347,478 votes were cast in favor of the proposal and 147,354
votes were cast against the proposal. In addition, there were 713,614
abstentions with respect to the proposal.
118
<PAGE> 121
PENALTY FOR MISSING THE MARKET
<TABLE>
<CAPTION>
PERIOD OF AVERAGE ANNUAL DOLLAR VALUE OF DOLLARS LOST BY NOT
INVESTMENT TOTAL RETURN $100,000 INVESTMENT BEING FULLY INVESTED
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fully Invested 15.72% $207,480 --
- ---------------------------------------------------------------------------------------------------------------
Missed the 1 best month 13.24% $186,198 $21,282
- ---------------------------------------------------------------------------------------------------------------
Missed the 3 best months 11.25% $170,377 $37,103
- ---------------------------------------------------------------------------------------------------------------
Missed the 5 best months 9.46% $157,130 $50,350
- ---------------------------------------------------------------------------------------------------------------
Missed the 7 best months 7.76% $145,303 $62,177
- ---------------------------------------------------------------------------------------------------------------
Missed the 10 best months 5.43% $130,261 $77,219
- ---------------------------------------------------------------------------------------------------------------
Missed the 12 best months 4.05% $121,930 $85,550
- ---------------------------------------------------------------------------------------------------------------
Based on five years ending June 30, 1996 Source: Ibbotson Associates; S&P 500
</TABLE>
"BUT WHAT HAVE YOU DONE FOR ME LATELY?"
Despite record highs throughout the past 12 months, at mid-year 1996,
both large and small cap stock markets corrected. By July 15, 1996, the Nasdaq
had fallen some 15% from its June 5th peak. The Dow had also declined 7.4%
from it high on May 22, 1996. These corrections followed lower-than-expected
earnings reports by several prominent technology companies, as well as
continued strength in employment growth.
Should investors be overly concerned about these market fluctuations?
We believe in most cases, no. While in the short run, it may seem difficult to
stick with a long-term investment plan, staying the course over time can offer
you the best chance of meeting your financial goals.
Ups and downs in the stock market are normal, and have historically
occurred with surprising frequency. Unfortunately, individual investors who
try to "beat the market" by timing these corrections often fail. Reacting to a
market event after it has already occurred, getting into the market after a big
run up in prices, or selling after a decline represent three classic investor
"mistakes" that can result in buying high and selling low.
Leaping in and out of the market can negatively impact even the most
well-intentioned investor. And since there is no way of knowing when the best
investment days will occur, the only sure way to benefit from market rises is to
be fully invested. In terms of missed financial opportunity, the risk of not
being invested at the right time can significantly outweigh the risk of riding
out periods of short-term fluctuating (see chart above).
SET YOUR SIGHTS ON YOUR GOALS
No matter what the market environment, following sound investment
practices is critical to achieving financial success. Asset allocation,
diversification, and dollar cost averaging are three of the most important
strategies that can help you maintain your long-term investment plan and
effectively manage risk.
Asset allocation is the practice of spreading your money among stock,
bond, and money market/cash equivalent investments based on your financial
goals, investment time frame, and comfort level with risk. Research has proven
that building the proper investment mix is critical to achieving investment
success. In fact, the applied asset allocation policy -- how you diversify and
allocate your investment among various asset classes -- determines more than
94% of your portfolio's overall performance. Investment election and market
timing contribute only 4% and 2%, respectively.*
DIVERSIFY TO LOWER RISK
Asset allocation is often confused with diversification, but they are
not the same thing. Generally speaking, asset allocation puts you on the
"road" to pursuing your goals, while diversification helps you manage risk
along the way.
Broad diversification has the potential for reducing portfolio risk
while producing solid returns. As illustrated on page 120, over the past decade
a diversified portfolio generated an average return of 11.28% per year, second
only to stocks. However, the diversified portfolio had only about half the
risk of a 100% stock portfolio.**
In addition to investing in stocks and bonds, you can broaden the
diversification of your portfolio in other ways as well. The stock component
of your portfolio can be made up of several different categories of stocks,
such as large-cap, small-cap, and international stocks. The bond component of
your portfolio can be diversified in terms of different maturities and types of
bonds or bond funds.
THE SIERRA ASSET MANAGEMENT SOLUTION
Market conditions are changing every day. As an investor, it is
becoming increasingly difficult to keep track of today's complex markets and
still have time to actively manage your investment portfolio.
Sierra Asset Management (SAM) offers the right solution for many
investors. SAM is a pioneering investment program that diversifies and
allocates your investments across a combination of funds in the Sierra Trust
Funds family.
SAM provides professional, active asset allocation, with an additional
emphasis on achieving the best possible trade-off between risk and return.
When you invest in SAM, your portfolio is automatically reviewed and/or adjusted
at least quarterly. That means you don't have to worry about choosing the right
mix of funds or changing that mix to take advantage of new market opportunities.
SAM offers a convenient and affordable way to diversify your investment
to help manage risk and meet specific long-term goals. SAM also provides:
o Active asset allocation and a broad choice of investment portfolios to
help manage investment risk
o Regular portfolio monitoring and periodic reallocations to take
advantage of market opportunities
* Source: The Financial Analysis Journal, Brinson, Singer, Beebower 1994
** As measured by the standard deviations of the two portfolios. Standard
deviation is a volatility measurement that describes the range of
performance within which an investment's total return has fallen. A higher
standard deviation means a wider range of returns. A lower standard
deviation means less volatility.
119
<PAGE> 122
THE POWER OF DIVERSIFICATION
(JUNE 1986-JUNE 1996)
<TABLE>
<CAPTION>
Return Risk (Standard Deviation)
<S> <C> <C>
T-BILLS 5.47% .52%
INTERMEDIATE-TERM BONDS 8.0 % 3.79%
LONG-TERM BONDS 9.39% 8.67%
DIVERSIFIED PORTFOLIO 11.1% 9.0 %
STOCKS 11.13% 8.87%
RISK (STANDARD DEVIATION)
</TABLE>
SOURCE: IBBOTSON ASSOCIATES. STOCKS ARE REPRESENTED BY THE STANDARD & POOR'S
INDEX OF 500 STOCKS (S&P 500). LONG-TERM BONDS AND INTERMEDIATE-TERM BONDS ARE
REPRESENTED BY THE LEHMAN BROTHERS LONG-TERM GOVERNMENT AND CORPORATE BOND
INDEX AND THE LEHMAN BROTHERS INTERMEDIATE-TERM GOVERNMENT AND CORPORATE BOND
INDEX, RESPECTIVELY. T-BILLS ARE REPRESENTED BY 30-DAY U.S. TREASURY BILLS.
DIVERSIFIED PORTFOLIO REPRESENTS A PORTFOLIO CONSISTING OF 40% STOCKS, 40%
LONG-TERM BONDS, AND 20% INTERMEDIATE-TERM BONDS. PAST PERFORMANCE OF THESE
INDICES IS NOT A GUARANTEE OF FUTURE RESULTS, AND THIS CHART IS NOT INTENDED TO
REFLECT THE PAST OR FUTURE PERFORMANCE OF ANY SAM PORTFOLIO. T-BILLS ARE
GENERALLY CONSIDERED THE SAFEST SECURITIES BECAUSE THEY ARE SHORT-TERM AND
OFFER A FIXED YIELD AT MATURITY, WHICH IS GUARANTEED BY THE U.S. GOVERNMENT.
GOVERNMENT BONDS ARE RISKIER THAN T-BILLS BECAUSE OF THE LONGER MATURITIES, YET
THEY ARE GENERALLY SUBJECT TO LESS CREDIT RISK, BECAUSE THE INTEREST PAYMENTS
AND RETURN OF PRINCIPAL ARE ALSO BACKED BY THE U.S. GOVERNMENT, IF HELD TO
MATURITY. AN INVESTOR WOULD TYPICALLY PURCHASE STOCKS FOR LONG-TERM GROWTH OF
CAPITAL. HOWEVER, STOCKS ARE OFTEN SUBJECT TO SIGNIFICANT PRICE FLUCTUATIONS
AND THEREFORE AN INVESTOR MAY HAVE A GAIN OR LOSS IN PRINCIPAL WHEN THE SHARES
ARE SOLD.
o Diversification among Sierra's world-class portfolio managers, including:
o J. P. Morgan Investment Management Inc.
o Janus Capital Corporation
o Scudder, Stevens & Clark, Inc.
o Warburg, Pincus Counsellors, Inc.
o BlackRock Financial Management, Inc.
o TCW Funds Management, Inc.
INVESTING CONSISTENTLY CAN OFFER LONG-TERM BENEFITS
In addition to asset allocation and diversification, investing
regularly over time can help you benefit from the natural fluctuations in the
markets. When you invest a fixed dollar amount on a regular basis, a strategy
known as DOLLAR COST AVERAGING++, you purchase fewer shares when prices are high
and more when prices are low. Over time, the result can be a lower cost per
share than the average price per share.
Dollar cost averaging can also help you feel more comfortable making
investment decisions during periods of market volatility. If you have a large,
single sum to invest, for example, you may choose to invest that amount
gradually over time rather than all at once. Investing all at once can
potentially result in a higher return if the market is trending upward.
However, if you are concerned about short-term fluctuations, investing
gradually over time will reduce the risk of principal loss.
IMPACT OF ASSET ALLOCATION POLICY ON TOTAL RETURN
Asset Allocation Policy 94%
Security Selection 4%
Timing 2%
SOURCE: THE FINANCIAL ANALYSTS JOURNAL, BRINSON, SINGER, BEEBOWER 1994
KEEP YOUR INVESTMENT REPRESENTATIVE IN THE PICTURE
A sound, long-term plan incorporating the appropriate combination of
investments should provide you with the greatest return potential and the least
amount of investment risk, regardless of the market climate.
Your Investment Representative can help you develop a diversified
investment strategy tied to your future goals, rather than what the market is
or isn't doing today.
FOR MORE INFORMATION ON HOW SIERRA'S DOLLAR COST AVERAGING PLANS AND
SIERRA ASSET MANAGEMENT CAN PROVIDE DIVERSIFICATION PLUS ACTIVE ASSET
ALLOCATION TO HELP REDUCE RISK AND MEET LONG-TERM FINANCIAL GOALS, CONTACT YOUR
INVESTMENT REPRESENTATIVE.
++DOLLAR COST AVERAGING IS A LONG-TERM STRATEGY THAT REQUIRES A FINANCIAL
COMMITMENT TO CONTINUOUS INVESTING EVEN IN A DECLINING MARKET. THEREFORE,
INVESTORS SHOULD CONSIDER THEIR FINANCIAL ABILITY TO CONTINUE PURCHASES
THROUGH PERIODS OF LOW PRICE LEVELS. DOLLAR COST AVERAGING DOES NOT ASSURE
A PROFIT NOR DOES IT PROTECT AGAINST LOSS IN A DECLINING MARKET.
<PAGE> 123
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S I E R R A
TRUST FUNDS
-----------
A Family of Mutual Funds
<PAGE> 124
-----------
S I E R R A
TRUST FUNDS
-----------
A Family of Mutual Funds
This Annual Report is published for the general information of the
shareholders of the SIERRA TRUST FUNDS. It is authorized for distribution to
prospective investors only when preceded or accompanied by a current SIERRA
TRUST FUNDS prospectus. A mutual fund's share price and investment return will
vary with market conditions, and the principal value of an investment when you
sell your shares may be more or less than the original cost.
The SIERRA TRUST FUNDS are not insured by the FDIC. They are not
deposits or obligations of, nor are they guaranteed by the depository
institution. These securities are subject to investment risks, including
possible loss of principal amount invested.
Distributed by
SIERRA INVESTMENT SERVICES CORPORATION
Member NASD
SIERRA TRUST FUNDS ----------------
P.O. Box 5118 Bulk Rate
Westborough, MA 01581-5118 U.S. Postage
PAID
Van Nuys, CA
Permit No. 987
----------------
3996(8/96) 110K
