<PAGE> 1
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
1 Message from the President
- --------------------------------------------------
2 1996 Year-in-Review / 1997 Outlook
- --------------------------------------------------
9 Individual Fund Reviews
- --------------------------------------------------
36 Statements of Assets and Liabilities
- --------------------------------------------------
40 Statements of Operations
- --------------------------------------------------
42 Statements of Changes in Net Assets
- --------------------------------------------------
46 Statements of Changes in Net Assets
- Capital Stock Activity
- --------------------------------------------------
50 Statements of Cash Flows
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52 Financial Highlights
- --------------------------------------------------
83 Portfolio of Investments
- --------------------------------------------------
119 Notes to Financial Statements (unaudited)
- --------------------------------------------------
[SIERRA TRUST FUNDS LOGO]
<PAGE> 2
A MESSAGE FROM THE PRESIDENT
[PHOTO OF F. BRIAN CERINI, PRESIDENT]
DEAR SHAREHOLDER,
We are pleased to provide you with the SIERRA Trust Funds Semi-Annual Report for
the six-month period ended December 31, 1996.
The past year was another excellent one for the U.S. stock market, with both
large- and small-cap stocks posting double-digit gains. From the beginning of
1995 to the end of 1996, the U.S. stock market provided investors with a
cumulative total return of more than 68%, as measured by the Standard & Poor's
Composite Index of 500 Stocks (S&P 500). Over the past year, investors continued
to invest new assets in domestic and international mutual funds. According to
the Investment Company Institute (ICI), net investments into equity funds
totaled $233 billion in 1996, well ahead of the previous single-year asset
record of $135 billion set in 1993.
The past year was also favorable for many SIERRA shareholders, and our
commitment to professional portfolio management continued to successfully serve
our long-term investors. As of December 31, 1996, there were 220,331 shareholder
accounts diversified among our family of 16 mutual funds, and $2.34 billion in
total assets under management. As detailed in the Individual Fund Reviews
section of this report, several of the SIERRA Trust Funds outperformed their
benchmark index and rewarded shareholders with positive, double-digit returns
for 1996, including the Growth and Income Fund, the Growth Fund and the Short
Term Global Government Fund.
A recent driving force in the U.S. stock market has been the growing awareness
among individuals of the need to build assets for retirement. In 1996, members
of the 70-million-strong baby boomer generation began turning 50, typically the
beginning of peak earning years. Some analysts predict that the income of this
generation will rise by as much as 90% in coming years, which could mean an
enormous surge in retirement savings for the stock market.
The importance of personal retirement savings has also been underscored by
recent tax legislation included in the Small Business Protection Act of 1996.
One important change is an increase in the contributions single-earner couples
can make to tax-deferred individual retirement accounts, effective with the 1997
tax year. In addition, a Federal advisory panel has recommended that the U.S.
Government considers investing a portion of its Social Security revenues in the
stock market. This could funnel billions of new dollars into equities.
The Dow Jones Industrial Average's record-breaking surge past 6,000 captured
public attention and most likely contributed to record inflows in 1996. Measured
from its low in 1982, the current bull market has averaged a 19% return
annually. This remarkable performance, however, has led to perhaps overconfident
expectations of the stock market among many investors. Yet, these expectations
may not take into account that since 1992, the market's 10-year returns have
been among the highest in 200 years. Additionally, since 1919, there have been
47 years in which the market has fallen 10% or more from the prior year's high.*
Rather than focusing on the market's current strengths or potential weaknesses,
we at SIERRA Trust Funds believe that the most effective investment approach is
to plan and invest for the long term. Developing a long-term investment strategy
and following that strategy consistently over time are critical to achieving
your financial goals in today's quickly changing environment. In addition, it is
important to set realistic expectations and to prepare for the market's normal
ups and downs by diversifying your portfolio to manage risk.
With the complexities of today's global markets, building a properly diversified
portfolio is increasingly difficult. SIERRA offers investors a broad range of
professionally managed diversification solutions, including our family of 16
mutual funds and the Sierra Asset Management (SAM) Portfolios, which use active
asset allocation to help investors manage risk and achieve specific performance
objectives. By investing in the SAM Portfolios, investors receive triple
diversification -- among asset classes, individual securities and some of the
nation's most successful portfolio managers.
As you plan and invest for the long term, we encourage you to meet at least
annually with your Investment Representative. Regular communications with your
Investment Representative will help ensure that your portfolio remains
appropriately diversified.
Thank you for selecting the SIERRA Trust Funds. We appreciate the opportunity
to serve your investment needs and remain committed to providing quality
investments and services for your financial future.
Sincerely,
/s/ F. Brian Cerini
F. Brian Cerini
PRESIDENT
* Source: Standard & Poor's. Based on S&P 500
<PAGE> 3
1996 YEAR-IN-REVIEW
1997 OUTLOOK
The U.S. economy continued to grow at a moderate pace in 1996, setting the stage
for continued growth in corporate earnings and higher stock prices through the
year. For most of 1996, it seemed as if it was "all systems go" -- employment
growth, income growth, high consumer confidence, political resolution, budget
deficits in retreat, steady monetary policy, new records in stock prices, record
earnings -- all with benign inflation.
Despite these seemingly positive indicators, however, a dichotomy existed in the
domestic economy throughout the second half of 1996. While there was evidence of
growth in areas such as manufacturing and overall employment, the rate of growth
was slowing, and weakness existed in areas such as consumer spending. This
dichotomy incited some volatility in the financial markets, although year-end
results were decidedly positive.
1996 MARKET RETURNS OF MAJOR ASSET CLASSES
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
Large Company Stocks 23.07%
Small Company Stocks 17.62%
International Stocks 6.36%
Treasury Bills 5.28%
Intermediate-Term Bonds 4.06%
Long-Term Bonds 0.14%
</TABLE>
Source: Ibbotson Associates. T-bills represent 90-day U.S. Treasury Bills;
Intermediate-Term Bonds are represented by Lehman Brothers Intermediate-Term
Government and Corporate Bond Index; Long-Term Bonds are represented by Lehman
Brothers Long-Term Government and Corporate Bond Index; Small Company Stocks
are represented by Ibbotson Small Company Index; Large Company Stocks are
represented by S&P 500 Composite Index; and International Stocks are represented
by MSCI EAFE Index. Indexes represent unmanaged performance. 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. This chart is not intended to represent the performance of any SIERRA
TRUST FUND.
<PAGE> 4
A visual chart depicts performance of the Dow Jones
Industrial Average from Dec '95 to Dec '96
THE DOW REACHED NEW HIGHS IN 1996
(12/31/95-12/31/96)
Source: The Dow is represented by the Dow Jones Industrial Average, a
price-weighted average of 30 blue-chip stocks that are generally leaders in
their industry and are listed on the New York Stock Exchange.
MARKET HIGHLIGHTS
While the past year resulted in greater price movements than in recent years,
1996 marked the sixth year of the U.S. stock market's current bull run.
Large-capitalization stocks posted double-digit gains, with the Standard &
Poor's Composite Index of 500 Stocks up 23.07%.(1)
What's behind this year's gains in the stock market? Low inflation, moderate
economic growth and positive corporate earnings growth were favorable
fundamentals. Inflation, the rising costs of goods and services as measured by
the Consumer Price Index, was 3.3% in 1996, well below its 20-year average.
STOCKS POST ALL-TIME HIGHS
Economic stability created a positive setting in the equity markets, especially
for the larger capitalized companies represented by the S&P 500 and the Dow
Jones Industrial Average. While both the S&P 500 and the broader based NASDAQ
stock market repeatedly posted all-time highs in 1996, equity investors had to
maintain a longer-term perspective through some volatile periods during the
summer months.
Early in the third quarter, sharp declines in small-cap stocks dropped the
Russell 2000 Index more than 15% through mid-July from its June peak. The S&P
500 also fell, declining about 8% from its high on May 24. This increased
volatility resulted from stronger GDP growth in the first half of 1996, and
sharp declines in the unemployment rate (to a low of 5.1% in August) raised
concerns that the Federal Reserve would increase short-term interest rates. At
the same time, several large technology companies reported lower than expected
earnings. By the end of August, however, many large-cap stocks had recovered,
while small-cap stocks took the remainder of 1996 to regain lost ground, never
reaching previous highs.
ELECTION RESULTS
The stock market reacted positively in November to the 1996 election results,
reflecting a view that the balance of power distributed among the administration
and Congress will lead to a moderate course in government programs and fiscal
policies. Democratic and Republican leaders alike expressed hope that a budget
agreement will be reached in 1997, setting the stage for a balanced budget early
in the 21st century. Market observers will be looking for constructive budget
negotiations in the first half of 1997 with an agreement by the third quarter. A
breakdown in negotiations similar to what occurred in 1995 and early 1996 would
likely have a negative impact on both stocks and bonds.
BONDS POST MIXED RESULTS
Fixed-income investors who may have hoped for a repeat of 1995, were
disappointed by lower average returns on many bond investments. The U.S.
fixed-income market experienced volatility in 1996, as economic growth raised
concerns that price pressure (inflation) would surely follow. This resulted in
higher interest rates (as rates rise, bond prices fall), with the yield on the
30-year Treasury Bond rising to a high of 7.19% in July, 1996, up from 5.95% at
the end of 1995. Inflationary pressures never surfaced, and yields came down and
remained in the 6.4%-6.8% range for the remainder of the year. With moderate
inflation (3.3% for the year), the yield on the benchmark 30-year government
bond finished at 6.64%.(2)
(1) Source: Ibboston Associates. Past performance does not guarantee future
results. The S&P 500 is an unmanaged index representative of the U.S. stock
market. Individuals cannot invest directly in any index.
(2) Source: Bloomberg Business News.
3
<PAGE> 5
The U.S. bond markets experienced higher volatility in 1996 due to uncertainty
over potential rate adjustments by the Federal Reserve. The central bank cut
short-term interest rates early in the year by 25 basis points (one-quarter of
one percentage point), but then stayed on the sidelines for the remainder of the
year. Long-term bonds were more negatively impacted by the uncertainty (Lehman
Brothers Long-Term Government and Corporate Bond Index posted a 0.14% return for
the 12 months ended 12/31/96), while intermediate- and short-term issues fared
better. Treasury bonds maturing in the five- to seven-year range returned 2.82%
for the year and mortgage-backed issues returned 5.35% for the same time
period.(3)
THE MUNICIPAL MARKET
Municipal bonds posted gains as concerns of a flat tax receded and new issuance
rose in 1996. Investors in state-specific bonds closely watched the result of
the passage of California's Proposition 218 ballot initiative in November which
limits the ability of governmental units to raise revenues without the consent
of affected taxpayers. Market analysts are focusing on General Obligation bonds
issued after November 5, bonds supported by special taxes levied or increased
after January 1, 1995, and some assessment bonds. Although some rating
downgrades have occurred as a result, none of the bonds held in Sierra's
California municipal funds have yet been affected. Those downgrades, so far,
have been minor (from AA to AA-, for example), and appear to be more symbolic
than indicative of any credit deterioration. There are basic legal protections
against "undoing" contracts already in force, and any financial impact of
Proposition 218 is expected to be minimal, possibly affecting up to only 0.2% of
annual municipal revenues. With business activity generally on an upswing
throughout California, the expected growth in municipal revenues should be more
than sufficient to offset any effects of Proposition 218. Overall, we expect
state and local economic conditions (and the usual political forces) to remain
the major determinants of the financial capability of California's
municipalities.
Although the Sierra California municipal funds experienced no defaults in 1996,
a small group of 11 non-rated local (city and county) municipal bonds worth
around $88.2 million defaulted during the year. Out of the approximately $130
billion in municipal bonds outstanding in California, these defaults represent
only 0.07%, a very small amount but large in comparison to past years. These
bonds were generally confined to one sector -- to finance the building and
improvement of sewers, lighting,
(3) Source: Lehman Brothers indexes. Past performance is no guarantee of future
results. Government bonds are guaranteed as to principal and interest, although
funds that invest in them are not.
4
<PAGE> 6
1996 AVERAGE STOCK GAINS IN KEY FOREIGN MARKETS
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
Spain 40.05%
Sweden 37.21%
Finland 33.94%
Hong Kong 33.08%
France 21.20%
Germany 13.58%
Japan -15.50%
</TABLE>
Source: Morgan Stanley Capital International. Currencies have been converted to
U.S. dollars. Investments outside the U.S. are subject to special risks,
including currency fluctuations, the volatility and potential for political
unrest in many international markets, as well as regulations and corporate
responsibility to shareholders. Returns shown do not reflect any asset-based
charges for management or other expenses.
streets, or other basic facilities associated with land/property development;
the underlying land and any real property on that land served as collateral. The
recent upturn in business activity in the state and signs of rising property
values should help solve some of the problems, and bondholders and officials of
the respective municipalities are discussing other alternatives for resolution.
CATALYSTS FOR CHANGE IN
THE GLOBAL ECONOMY
Fueled by declining interest rates in the industrial nations, all of the major
world regions are experiencing positive economic growth. Foreign markets gained
an average of 11.3% in local currency terms in 1996, as measured by Morgan
Stanley Capital International Europe, Australia & Far East (EAFE) Index.
However, a strengthening U.S. dollar during the course of the year reduced those
gains to 6.05% in U.S. dollar terms.(4)
In Europe, efforts to reduce budget deficits to meet targets set by the European
Monetary Union pushed interest rates lower, supporting moderate economic growth.
The Maastricht Treaty sets a 3% deficit-to-budget target ratio, and attempts to
meet these targets resulted in a more stable currency environment in 1996. Many
European markets posted double-digit gains in U.S. dollar terms, led by Spain
(40.05%), Sweden (37.21%), and Finland (33.94%).
Many emerging markets in Latin America and Asia also showed strong performances
in 1996. Japan, however, is a recent area of concern. The world's second-largest
economy enjoyed stronger economic growth early in the year along with a rising
stock market. As growth momentum sputtered in the second half of the year,
however, the Japanese government gave notice that it would allow market forces
greater freedom, through deregulation and cuts in government spending on
programs supporting certain industries. This announcement, combined with a
gloomy government forecast of 1.9% GDP growth for next year, sent Japanese
stocks skidding some 16% from the end of November, 1996 through early January,
1997.
OUTLOOK FOR 1997
Looking ahead, we believe the economy is poised for continued growth in the
2.0%-2.5% range, although speculation regarding the direction of the economy
will likely fuel heightened volatility in the capital markets over short-term
periods. We are slightly more optimistic in our corporate earnings outlook for
the first half of 1997, in spite of relatively weak consumer spending. Strength
in such areas as manufacturing, inventory restocking, export growth, and
business investment should continue to drive the economy forward.
Our interest rate outlook anticipates slightly higher long-term rates in the
first half of the year, with the Federal Reserve poised to raise rates at the
first hard evidence of price pressure stemming from stronger growth. The yield
spread between long-term bonds and underlying inflation
(4) International investors are subject to higher taxation and risks including
political and currency risks. Past performance is no guarantee of future
results.
5
<PAGE> 7
finished the year at 3.4% (high by historical standards). Consequently, at this
stage of the economic cycle, investors are not convinced that inflation will
remain contained, in spite of all evidence pointing to benign price pressures.
Although price inflation has not surfaced, the costs of labor and oil have
risen, which adds to the concern for future inflation. A positive offset to
these pressures, however, appears to be the unwillingness of consumers to pay up
for goods and services.
Given today's environment of low core inflation, high levels of employment and
consumer confidence, and a positive outlook for U.S. export growth, the economy
is well positioned for continued growth with little hard evidence of any
widespread inflation rising dramatically over 1996 levels. This scenario
combined with the current interest rate environment should have a positive
impact on both equity and fixed-income market performance, though some
volatility is likely as prices get too far ahead of earnings.
IN SUMMARY, OUR 1997 OUTLOOK CALLS FOR:
- - CONTINUED GROWTH WITH HIGHER EXPECTATIONS DURING THE FIRST
HALF OF 1997
- - INFLATION RISING OVER 1996, BUT
STILL AT A MANAGEABLE LEVEL
- - THE FEDERAL RESERVE'S MONETARY POLICY HOLDING STEADY, BUT WITH THE
POTENTIAL FOR A SLIGHTLY MORE RESTRICTIVE POSTURE SHOULD GDP GROWTH TREND
MUCH BEYOND 3.5%
- - INTERNATIONAL GROWTH EXPANDING (EXCLUDING JAPAN, WHICH IS STILL CONTENDING
WITH LONG-TERM STRUCTURAL PROBLEMS)
- - CORPORATE PROFITS EXPANDING,
BUT AT SLOWER RATES THAN 1996
- - DOMESTIC STOCK PRICES
(ALTHOUGH HIGHLY VALUED), POISED FOR ANOTHER POSITIVE YEAR, YET VULNERABLE
TO SLIGHT ADJUSTMENTS IN EARNINGS ESTIMATES
LOOK TO SOUND STRATEGIES TO
STEER YOUR COURSE IN 1997
Gains in many of the world's financial markets, despite ups and downs along the
way, have helped buoy investor confidence in the virtues of staying invested
through periods of market turbulence. Nevertheless, investors should not become
overconfident that the markets will continue to provide the above-average
returns that many have offered in recent years.
BE PREPARED FOR
MARKET VOLATILITY
Even in a bull market, it is wise to be prepared for market volatility. Since
investment risk and reward go
6
<PAGE> 8
POWER OF DIVERSIFICATION
(1/1/87-12/31/96)
[GRAPH]
Risk
Return (Standard Deviation)
------ --------------------
T-Bills 5.74% 0.52%
Intermediate-Term Bonds 7.91% 3.77%
Long-Term Bonds 9.50% 8.77%
Diversified Portfolio 11.73% 8.75%
Stocks 15.28% 16.61%
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 90-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 indicies 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.
hand-in-hand, it is essential that you take steps to protect your assets while
striving to meet your long-term goals. Asset allocation helps to minimize risk
through diversification. Investing in different asset classes, such as stocks,
bonds and cash equivalents, helps minimize the effect a downturn in one market
sector may have on your entire portfolio.
While creating a well-diversified portfolio through asset allocation can help
smooth out the effects of market swings on your overall portfolio, it is
essential that you review your investment mix on a regular basis. Over time, if
one asset class grows faster than the others, your portfolio mix may not reflect
your original asset allocation plan. Allowing your portfolio to become too
heavily weighted in one class can reduce diversification and expose you to
unnecessary risk.
THE SIERRA ASSET MANAGEMENT (SAM) SOLUTION
The SAM Portfolios are a family of mutual funds that provide asset allocation
strategies designed to help you control risk and reach your long-term financial
objectives. SAM offers actively managed diversification, with a focus on regular
portfolio monitoring and periodic reallocations to capture market opportunities.
As an investor, it is becoming increasingly difficult to keep track of today's
complex markets and still find time to actively manage your investment
portfolio. The SAM Portfolios might offer the right solution for you:
- - AN INVESTMENT APPROACH THAT BALANCES YOUR RISK TOLERANCE WITH YOUR LONG-TERM
FINANCIAL GOALS
- - DIVERSIFIED PORTFOLIOS THAT OFFER POTENTIALLY LESS RISK AND HIGHER RETURNS
THAN SINGLE INVESTMENTS
- - REGULAR PORTFOLIO MONITORING AND PERIODIC ADJUSTMENTS TO TAKE ADVANTAGE OF
MARKET TRENDS AND ECONOMIC ACTIVITY
AN INTELLIGENT APPROACH TO ASSET ALLOCATION
How you invest for retirement may be one of the most important financial
decisions you will ever make. There are no easy answers, especially when you are
dealing with what could be your most serious financial assets.
The SAM Portfolios offer the right kind of approach for retirement investors --
control price volatility (risk) generally at levels lower than single funds and
individual investments. With the SAM Portfolios you receive:
- - ACTIVE ASSET MANAGEMENT DESIGNED TO MANAGE RISK AND ACHIEVE SPECIFIC INVEST-
MENT OBJECTIVES
- - CAREFULLY CONSTRUCTED MIX OF ASSET CLASSES WITH LOW CORRELATIONS
- - TRIPLE DIVERSIFICATION ... AMONG ASSET CLASSES, INDIVIDUAL SECURITIES AND
SOME OF THE INDUSTRY'S MOST SUCCESSFUL PORTFOLIO MANAGERS
7
<PAGE> 9
AN EXCELLENT CHOICE FOR YOUR IRA!
The SAM Portfolios were structured to provide not only active asset management
for your retirement dollars, but also more efficient management and streamlined
processing of your IRA transactions. With a SAM Portfolios IRA, you will also
benefit from:
- - NO ANNUAL MAINTENANCE OR CUSTODIAL FEES
With a Sierra IRA, you will never have to pay maintenance or custodial fees
for as long as you own the account.
- - NO SALES CHARGE WHEN YOU TRANSFER FROM ANOTHER IRA
If you own other IRAs, now may be the perfect time to consolidate into a
Sierra IRA. When you transfer your IRA investment(s) from another mutual
fund into a Sierra IRA, the sales charge will be waived.(5)
MEET WITH YOUR INVESTMENT REPRESENTATIVE
To keep your investment portfolio on track in 1997, stay focused on your
investment objectives and time frame.
To keep your portfolio properly diversified and in line with your goals, meet
with your Investment Representative at least once this year. Your Investment
Representative can help you re-evaluate your financial objectives and ensure
that your portfolio remains on track to meet your long-term goals.
To find out how the SAM Portfolios can help you reach your retirement goals,
please contact your Investment Representative for a SAM Portfolios prospectus
which contains more complete information, including charges and expenses. Please
read the prospectus carefully before you invest or send money.
(5) Waiver of front-end sales charge applies to redemption of shares of a
non-affiliated non-money market fund (except where the investor paid a CDSC),
where the Sierra fund purchase occurs within 15 days of the prior redemption.
SAM OFFERS SEVERAL INVESTMENT PORTFOLIOS
<TABLE>
<CAPTION>
<S> <C> <C>
Portfolio Investment Goal* General Investment Mix
CAPITAL GROWTH PORTFOLIO High Growth of Capital Equity Funds
GROWTH PORTFOLIO Growth of Capital Mostly Equity Funds
BALANCED PORTFOLIO Growth of Capital and Income Equity Funds/Bonds Funds
VALUE PORTFOLIO Income with Added Growth Potential Mostly Bond Funds
INCOME PORTFOLIO High Income and Capital Preservation Bond Funds
</TABLE>
* The stated goals of the Portfolios may or may not be met. They are not
intended to reflect past or future performance of any Sierra Trust Fund or SAM
Portfolio, and are in no way a guarantee of future performance.
8
<PAGE> 10
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) Portfolios and the 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 December 31, 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 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.
9
<PAGE> 11
SHORT TERM HIGH QUALITY BOND FUND
PORTFOLIO MANAGER:
SCUDDER, STEVENS & CLARK, INC.
[Photo of 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 December 31, 1996, the
SIERRA SHORT TERM HIGH QUALITY BOND FUND (Class A Shares) advanced 3.86% on an
average annual total return basis, or 2.70% adjusted for the maximum sales
charge. For the 12-month period ended December 31, 1996, the Fund's total return
was 4.09%, or 0.45% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC
YIELD AS OF DECEMBER 31, 1996, WAS 5.81%. For additional information, including
Class B and Class S Share performance, see the accompanying chart.
[Line Graph]
[Growth of a $10,000 Investment (Class A Shares)]
TRUST - ST HiQualBond
<TABLE>
<S> <C> <C> <C>
Inception 11/1/93 10005 9655 10000
10052 9700 9904
10098 9745 10046
10068 9711 9944
Mar. 9946 9599 9831
9907 9561 9772
9915 9568 9788
Jun. 9927 9580 9816
9981 9632 9944
9989 9639 9988
Sep. 9993 9644 9933
9997 9647 9945
10002 9652 9888
Dec. 94 8842 9497 9910
9851 9507 10074
9942 9594 10274
Mar. 10036 9685 10339
10130 9776 10461
10357 9995 10730
Jun. 10366 10003 10800
10375 10012 10828
10472 10105 10922
Sep. 10524 10156 10993
10625 10253 11100
10726 10351 11233
Dec. 95 10829 10450 11340
10933 10550 11458
10852 10472 11378
Mar. 10815 10437 11331
10776 10399 11321
10786 10408 11330
Jun. 10891 10509 11437
10951 10587 11480
10963 10579 11504
Sep. 11069 10682 11650
11171 10780 11831
11268 10874 11962
Dec. 96 11274 10879 11920
</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.
* Index total returns were calculated from 10/31/93 to 12/31/96. 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.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
The economic environment during the last six months of 1996 was positive for
U.S. bonds, as economic growth moderated from the second quarter's torrid pace
and interest rates declined. The slowing in economic activity contradicted
market expectations calling for continued growth, rising inflation, and a more
restrictive monetary policy. Slower growth both domestically and abroad
dispelled investor fears and led to lower interest rates.
Yields on bonds with maturities of two years and longer fell roughly 25 basis
points as investors found reassurance in the slowing of economic activity.
Inflation measures further supported the bond market as core price inflation
remained subdued in spite of low unem-
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(November 1, 1993)
<S> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 3.52% 4.09% 3.86%
Fund (adjusted for the maximum 3.5% sales charge) -0.10% 0.45% 2.70%
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 4.23% 5.12% 4.33%
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
Class B Shares
Fund (not adjusted for contingent deferred sales charge) 3.14% 3.33% 4.44%
Fund (adjusted for the maximum 4% contingent deferred sales charge) -0.86% -0.59% 3.70%++
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 4.23% 5.12% 8.08%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 3.14% 3.33% 4.43%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -1.86% -1.57% 3.33%++++
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 4.23% 5.12% 8.08%
</TABLE>
++Adjusted for the maximum 2% CDSC for shares held since inception.
++++Adjusted for the maximum 3% CDSC for shares held since inception.
10
<PAGE> 12
SHORT TERM HIGH QUALITY BOND FUND
ployment and high levels of consumer confidence. The Fund's performance
benefited from renewed confidence in the U.S. fixed income market as the decline
in interest rates led to a higher net asset value and a steady level of current
income.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The U.S. bond market provided investors with positive returns during the second
half of 1996 as interest rates declined in reaction to improved economic
fundamentals and strong foreign demand for U.S. bonds. The decline in interest
rates, however, masked underlying uncertainty and high market volatility. For
example, during the period, the yield on the 3-year Treasury bond fluctuated
over a 90-basis-point range as investors grappled with conflicting economic
signals. Positive economic indicators included slower economic activity both
domestically and abroad, accompanied by benign inflation. Risks included a tight
labor market, indications of rising wages, and a continued dependence on foreign
capital.
The Fund began the period positioned defensively with a duration of 1.25 years
as economic indicators signaled moderate to strong economic activity. Portfolio
duration was extended to 1.65 years in late August as real interest rates rose
to attractive levels. Later in the fourth quarter, as economic indicators and
core inflation measures remained steady, the Fund's duration was moved to 2.25
years. This action reflected our view that the risks to the bond market had
moderated.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The Fund's exposure to the various sectors of the bond market were managed
actively during the period given relative value opportunities. In the corporate
bond market, we added to positions in the real estate investment trust area and
increased the Fund's allocation to mortgage-backed securities. Holdings in U.S.
Treasuries were reduced in favor of higher yielding alternatives such as
mortgages, asset-backed issues, and corporate bonds.
Investments in higher yielding Treasury alternatives including mortgages,
asset-backed issues and corporate bonds were beneficial during the period. The
Fund's holdings in seasoned premium mortgages did particularly well during the
period as the uncertain interest rate environment rewarded investors who focused
on issues with greater prepayment protection and more predictable cash flow.
The Fund's asset-backed holdings were strong performers as investors flocked to
high credit quality bonds offering attractive yields. Issues backed by home
equity loans and manufactured housing loans performed particularly well.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
As we look out into 1997, we believe the outlook for the U.S. fixed income
market is favorable. This outlook reflects our belief that the U.S. economy may
be reaching the end of an unusually long period of sustained economic growth.
The high level of consumer debt, the rise in long-term interest rates, and
weakness abroad are all factors that could slow growth in 1997. We anticipate
inflation to remain subdued as secular trends such as increased use of
technology, aging demographics, and deregulation act to contain price pressures.
We also expect to see continued interest rate volatility as investors weigh
these often conflicting economic indicators and secular trends.
Given our outlook, we believe interest rates will trend lower over the
intermediate and long term. Bond investors should also benefit from a general
decline in inflation expectations. In this favorable environment, we expect
investors with a long-term outlook to be rewarded with attractive returns in the
U.S. fixed-income market and the Sierra Short Term High Quality Bond Fund.
[PIE CHART]
High-Quality Portfolio for Added Principal Stability
<TABLE>
<CAPTION>
<S> <C>
AAA 65.66%
A 8.12%
BBB 26.19%
NR 0.03%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
11
<PAGE> 13
SHORT TERM GLOBAL GOVERNMENT FUND
PORTFOLIO MANAGER:
SCUDDER, STEVENS & CLARK, INC.
[Photo of 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 December 31, 1996, the
SIERRA SHORT TERM GLOBAL GOVERNMENT FUND (Class A Shares) advanced 6.36% on an
average annual total return basis, or 5.59% adjusted for the maximum sales
charge. For the 12-month period ended December 31, 1996, the Fund's total return
was 10.45% or 6.58% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC
YIELD AS OF DECEMBER 31, 1996, WAS 4.46%. 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
The environment for global bonds during the second half of 1996 was very
favorable. Moderate economic growth worldwide and low inflation led to a fall in
yields across the major global markets. In the U.S., the Federal Reserve's
decision to leave short-term interest rates unchanged, particularly during the
second and third quarters of 1996, reassured fixed-income investors that a
tighter monetary policy was not on the near-term horizon.
In Europe, further cuts in short-term interest rates by the German Bundesbank
and other European central banks fueled a rally in fixed-income assets. The
higher yielding bond markets continued to benefit from a combination of higher
global liquidity,
[Line Graph]
[Growth of a $10,000 Investment (Class A Shares)]
TRUST - ST GLOBAL GOVT
<TABLE>
<S> <C> <C> <C>
Inception 2/11/92 10000 9650 10000
10000 9650 10000
10015 9665 10000
Mar 10006 9655 9945
10157 9801 10028
10313 9952 10280
Jun 10550 10181 10553
10636 10264 10748
10544 10175 11019
Sep 10617 10246 10965
10560 10190 10688
10626 10254 10521
Dec 92 10659 10286 10561
10726 10351 10702
10746 10370 10768
Mar 10900 10519 10904
10966 10582 11126
11120 10731 11203
Jun 11186 10795 11137
11249 10855 11074
11315 10919 11303
Sep 11341 10944 11424
11453 11052 11394
11375 10977 11291
Dec 93 11383 10985 11359
11494 11091 11480
11409 11010 11442
Mar 11327 10930 11493
11385 10986 11526
11347 10950 11510
Jun 11310 10914 11636
11327 10930 11729
11294 10899 11744
Sep 11354 10957 11844
11371 10973 12020
11485 11083 11825
Dec 94 11250 10856 11843
11259 10865 12069
11259 10865 12284
Mar 11267 10872 12661
11426 11026 12816
11538 11135 13045
Jun 11543 11139 13158
11705 11295 13300
11817 11404 13086
Sep 11981 11562 13316
12044 11623 13464
12158 11733 13538
Dec 95 12239 11811 13709
12361 11928 13640
12426 11991 13677
Mar 12446 12010 13662
12573 12133 13621
12590 12150 13671
Jun 12715 12270 13786
12731 12285 13997
12857 12407 14069
Sep 13037 12580 14102
13219 12757 14321
13403 12934 14420
Dec 96 13517 13044 14423
</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.
* Index total returns were calculated from 2/28/92 to 12/31/96. The Lehman
Brothers Mutual Fund Short World Multimarket Index includes all debt instruments
of the United States, and 12 Lehman major countries, with each instrument
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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(February 11, 1992)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 6.31% 10.45% 6.36%
Fund (adjusted for the maximum 3.5% sales charge) 2.59% 6.58% 5.59%
Lehman Brothers Mutual Fund Short World Multimarket Index* 4.62% 5.21% 8.01%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 5.91% 9.63% 6.59%
Fund (adjusted for the maximum 4% contingent deferred sales charge) 1.91% 5.63% 5.87%++
Lehman Brothers Mutual Fund Short World Multimarket Index* 4.62% 5.21% 8.97%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 5.91% 9.63% 6.59%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 0.91% 4.63% 5.50%++++
Lehman Brothers Mutual Fund Short World Multimarket Index* 4.62% 5.21% 8.97%
</TABLE>
++Adjusted for the maximum 2% CDSC for shares held since inception.
++++Adjusted for the maximum 3% CDSC for shares held since inception.
12
<PAGE> 14
SHORT TERM GLOBAL GOVERNMENT FUND
moderate growth, and low inflation. European markets, particularly France,
Spain, and Italy, appeared more attractive in light of their tighter fiscal
budgets and apparent determination to implement the European Monetary Union
(EMU).
The markets of Australia, New Zealand, and Canada--referred to collectively as
the "dollar-bloc" because of their close correlation with the U.S. bond and
currency markets--performed very well for the Fund. The dollar-bloc was aided by
relatively high coupon rates compared to those of equivalent maturities for U.S.
Treasuries and by relatively stable currencies versus the U.S. Dollar.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The Fund was well diversified during this period emphasizing exposure to Europe,
the U.S., and the dollar-bloc. The Fund's positions in the higher yielding
European issues of Italy, Sweden and Spain were major contributors to the Fund's
yield and total return. The move towards a single European currency and a single
central bank contributed to the stronger performance of the peripheral European
markets relative to the "core" countries, a pattern that has remained
unchallenged for the last 18 months.
The Fund and global bonds in general benefited from improving economic factors,
such as benign inflation, slow economic growth, and high real rates when
measured against inflation. With inflation under control, the period was
characterized by an increasing appetite for risk as investors searched the world
for yield and incremental return.
The U.S. Dollar remained relatively strong during this period posting gains
against the major reserve currencies, including the Japanese Yen, German
Deutsche Mark, and Swiss Franc. The U.S. Dollar was aided by a booming U.S.
equity market, increasing overseas demand for U.S. assets, and interest rate
cuts in Europe and the dollar-bloc. The Fund's currency exposure was managed
primarily for yield and limited share price fluctuation. With a hedging strategy
of minimal foreign currency exposure, the Fund was able to participate in the
prolonged rally in overseas fixed-income instruments while being insulated from
the depreciation of their respective currencies.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The portfolio's weighting in the dollar-bloc remained largely unchanged and
provided the Fund with additional yield over equivalent U.S. Treasury
securities. European exposure was reduced during the six-month period with the
sale of some positions in Denmark, and more significantly, Sweden, where we
found the premium over the benchmark German issues narrowed significantly
following a prolonged rally of Swedish bonds. Some of these assets were shifted
to the U.S. and a small percentage allocated to Southeast Asia in the form of
short-term, high yielding instruments. After extensive in-house research, we
believe these Southeast Asian issues offer an appropriate combination of
excellent income potential and manageable volatility. Similar instruments have
been employed successfully in the past, and their opportunistic use remains part
of our global approach to investing.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
European growth should remain sluggish for most of 1997 in light of the
significant tightening of fiscal policy undertaken by most countries. Inflation
worldwide should remain subdued, although a slight rise may be anticipated. The
world's bond markets are greatly influenced by the U.S. bond market where the
outlook for growth continues to be somewhat clouded.
The situation in Japan, where the economy has been in recession for much of the
1990s, is similarly uncertain. With interest rates already at historical lows in
Germany and Japan, any significant rate cuts appear unlikely. The direction of
interest rates in the U.S. will depend on how the outlook for growth develops.
Global yields have fallen dramatically in the past 12 months. For example, the
average yield of the Salomon Non-U.S. Government Bond Index fell almost 80 basis
points from 5.39% to 4.61%. The changes have been even more dramatic in the
markets in which we have traditionally invested. During 1996, Spanish 3-year
government bond yields have dropped by nearly a third from 9.4% to 5.8%. Italian
bond yields have dropped 380 basis points from 10.45% to 6.65%, and Swedish bond
yields have fallen 310 basis points from 8.10% to 5.00%. With Spanish 3-year
bond yields below U.S. Treasuries and Italian yields merely 50 basis points
above, the Fund will have difficulty finding attractive yield opportunities in
its traditional markets. However, by keeping currency risk under tight control
and taking advantage of the capital gains resulting from falling yields, we
expect to continue providing a reasonable return over short-term U.S. Dollar
investments.
[PIE CHART]
<TABLE>
<CAPTION>
Diversification by Region
<S> <C>
Americas 30.31%
Asia 3.27%
Australia/New Zealand 13.42%
Europe 53.00%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
13
<PAGE> 15
U.S. GOVERNMENT FUND
PORTFOLIO MANAGER:
BLACKROCK FINANCIAL
MANAGEMENT, INC.
[Photo of Keith Anderson]
[Photo of 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 its Portfolio Management Group since
1988. Mr. Phillips has been a portfolio manager of BlackRock since 1991 and a
Principal of BlackRock since 1996.
PERFORMANCE REVIEW:
From the Fund's inception (July 25, 1989) through December 31, 1996, the SIERRA
U.S. GOVERNMENT FUND (Class A Shares) advanced 7.26% on an average annual total
return basis, or 6.60% adjusted for the maximum sales charge. For the 12-month
period ended December 31, 1996, the Fund's total return was 3.66%, or -1.00%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
DECEMBER 31, 1996, WAS 6.39%, AND ITS 30-DAY AVERAGE YIELD WAS 6.66%. For
additional information, including Class B and Class S Share performance, see the
accompanying chart.
[Growth of a $10,000 Investment (Class A Shares) Line Graph]
TRUST - USGOVT
<TABLE>
<S> <C> <C> <C> <C>
Inception 7/25/89 10000 9550 10000 10000
10020 9569 10000 10000
9920 9473 9832 9870
9979 9530 9874 9940
10182 9724 10130 10167
10292 9829 10228 10278
Dec 89 10385 9918 10246 10338
10306 9842 10101 10266
10345 9880 10121 10326
10375 9908 10119 10352
10319 9855 10030 10259
10561 10086 10310 10577
Jun 10698 10217 10473 10744
10869 10380 10607 10931
10828 10341 10460 10815
10896 10406 10560 10904
10999 10504 10732 11027
11179 10676 10970 11259
Dec 90 11357 10846 11141 11448
11466 10950 11260 11622
11538 11019 11324 11719
11608 11085 11382 11799
11712 11185 11507 11908
11770 11241 11552 12013
Jun 11783 11252 11536 12023
11960 11422 11673 12227
12183 11644 11944 12449
12408 11850 12194 12682
12589 12023 12302 12892
12699 12127 12425 12985
Dec 91 13041 12454 12848 13246
12863 12284 12648 13093
12957 12373 12697 13217
12864 12285 12624 13132
12983 12399 12703 13261
13217 12622 12938 13500
Jun 13401 12798 13123 13659
13561 12951 13454 13779
13722 13104 13579 13958
13832 13209 13771 14067
13657 13043 13572 13943
13678 13062 13549 13987
Dec 92 13869 13245 13777 14167
14084 13451 14070 14353
14235 13594 14352 14498
14305 13662 14399 14586
14377 13730 14510 14662
14408 13760 14494 14745
Jun 14589 13933 14816 14858
14648 13989 14906 14917
14762 14098 15239 14987
14711 14049 15296 15001
14771 14106 15355 15044
14719 14057 15186 15014
Dec 93 14811 14144 15245 15136
15014 14338 15454 15285
14768 14104 15126 15178
14276 13634 14786 14784
14085 13452 14669 14674
13981 13352 14650 14733
Jun 13919 13293 14616 14701
14181 13543 14885 14995
14208 13569 14888 15043
13996 13367 14678 14829
13918 13292 14668 14820
13825 13203 14642 14774
Dec 94 13943 13316 14731 14892
14246 13605 15005 15211
14597 13940 15327 15599
14656 13996 15424 15672
14855 14186 15626 15895
15275 14587 16256 16396
Jun 15335 14645 16381 16489
15300 14611 16320 16517
15472 14776 16511 16689
15578 14877 16670 16836
15798 15087 16923 16986
16018 15298 17187 17179
Dec 95 16241 15510 17431 17394
16398 15660 17538 17524
16111 15386 17180 17379
15988 15268 17037 17316
15898 15183 16928 17288
15824 15112 16899 17218
Jun 15999 15279 17117 17455
16041 15319 17160 17520
16014 15293 17122 17520
16296 15582 17407 17813
16684 15933 17790 18162
16917 16156 18099 18421
Dec 96 16836 16078 17915 18326
</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.
* Index total returns were calculated from 7/31/89 to 12/31/96. 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) 5.22% 3.66% 5.24% 7.26%
Fund (adjusted for the maximum 4.5% sales charge) 0.49% -1.00% 4.28% 6.60%
Lehman Brothers Mutual Fund U.S. General Government Index* 4.65% 2.77% 6.88% 8.17%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 4.98% 5.35% 6.71% 8.51%
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 4.83% 2.89% N/A 7.10%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.17% -1.95% N/A 6.01%++
Lehman Brothers Mutual Fund U.S. General Government Index* 4.65% 2.77% N/A 8.48%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 4.98% 5.35% N/A 9.21%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 4.83% 2.89% N/A 7.10%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.17% -1.95% N/A 6.01%++
Lehman Brothers Mutual Fund U.S. General Government Index* 4.65% 2.77% N/A 8.48%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 4.98% 5.35% N/A 9.21%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
14
<PAGE> 16
U.S. GOVERNMENT FUND
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
After a torrid second quarter, the pace of economic growth slowed over the past
six-months ended December 31, 1996. In response to softer economic data and
continued moderation in the broad inflation measures during the third quarter of
1996, the Federal Reserve left short-term interest rates unchanged at its August
and September policy meetings. In addition to the favorable economic news, a
stronger dollar, large foreign buying of U.S. Treasuries, and balanced budget
hopes following the November elections also supported the market early in the
fourth quarter. However, Alan Greenspan's mention of "irrational exuberance" on
December 4, 1996 rattled the U.S. Treasury market, leading to a month-long rise
in rates. A resilient housing market and strong consumer confidence contributed
to the market decline in late December.
With positive supply-and-demand conditions during the past six months, the
market for mortgage-backed securities (MBS) modestly outperformed the broader
investment-grade bond market. Strong demand from the mortgage agencies (Fannie
Mae and Freddie Mac) helped support MBS prices even as mortgage rates fell and
refinancing activity increased. For the period, the MBS market as measured by
the Lehman Brothers Mutual Fund U.S. Mortgage Index posted a 4.98% total return
versus the 4.90% return of the Lehman Brothers Aggregate Index.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The Fund's performance was primarily affected by two major factors: MBS exposure
and duration positioning. Entering the second half of 1996, approximately 75% of
the assets in the Fund was comprised of mortgage pass-through securities backed
by mortgages and owned by investors who receive income from the interest and
principal on the underlying mortgages. Despite relatively strong performance
during the third quarter, we adopted a less favorable view of that market due to
tight yield spreads compared to U.S. Treasuries and concern over accelerating
prepayments, or early payment of mortgages by homeowners, if interest rates
declined significantly. Accordingly, the Fund's MBS exposure was reduced to
below two-thirds of portfolio assets in October. However, as conditions
improved, the Fund shifted assets back to the mortgage pass-through sector
throughout the fourth quarter, ending the year at approximately 75% of portfolio
assets.
Additionally, the Fund's duration, or price sensitivity to interest rate
movements, was adjusted to reflect our market outlook. The Fund maintained a
relatively aggressive duration stance versus its day-to-day duration benchmark,
the Merrill Lynch 5-7 Year Treasury Index, for much of the period due to our
positive views on domestic interest rates. The Fund's duration was significantly
shortened in the weeks prior to Federal Reserve Chairman Greenspan's December 4,
1996 speech, and subsequently lengthened after the pronounced bond market
decline. At the end of the fourth quarter, the Fund's duration is positioned in
excess of its benchmark, as we anticipate a favorable environment for bonds in
1997.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
As stated above, the Fund significantly altered its mortgage pass-through
exposure throughout the period. However, the Fund has maintained its focus on
seasoned mortgages, which have weathered several refinancing cycles and are
expected to provide more stable prepayment characteristics than newly issued
mortgages. Additionally, the Fund increased its exposure to 10- and 20-year
Small Business Administration Loans (SBAs), which offer agency credit quality,
attractive yield spreads over U.S. Treasuries, and relatively strong pre-payment
protection. Lastly, the Fund eliminated its asset-backed security (ABS)
holdings, taking advantage of that sector's strong 1996 performance. Looking
ahead, ABS could experience price weakness should consumer credit deteriorate
due to a recession in the coming year.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Although the bond market closed 1996 on a weak note and is susceptible to
further near-term weakness should economic activity increase, the Fund expects
to maintain its modestly aggressive duration positioning. Low inflation,
moderate economic growth and continued strong international participation in the
U.S. fixed-income market are anticipated to provide strong support for domestic
bonds in 1997. With respect to individual sectors, we expect to maintain the
Fund's emphasis on seasoned mortgage pass-throughs, while seeking opportunities
to increase positions in SBA and commercial mortgage-backed securities.
[PIE CHART]
<TABLE>
<CAPTION>
Portfolio Composition
<S> <C>
FHLMC 38.25%
GNMA 26.09%
FNMA 8.51%
ARM 3.06%
CMO 8.83%
SBA 5.17%
FHA 3.20%
U.S. TREASURY 2.95%
REPURCHASE AGREEMENT 3.94%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
15
<PAGE> 17
CORPORATE INCOME FUND
PORTFOLIO MANAGER:
TCW FUNDS MANAGEMENT, INC.
[PHOTO OF 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 December 31, 1996, the SIERRA
CORPORATE INCOME FUND (Class A Shares) advanced 9.12% on an average annual total
return basis, or 8.34% adjusted for the maximum sales charge. For the 12-month
period ended December 31, 1996, the Fund's total return was 0.71%, or -3.82%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
DECEMBER 31, 1996, WAS 6.40%. 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
The two factors that had the most impact on Fund performance over the past
six-months ended December 31, 1996 were: (1) the Fund's longer duration relative
to its benchmark index, and (2) the improving credit quality of corporate bond
issues held in the Fund.
The Fund returned 6.19% for the six-month period ended December 31, 1996
compared to a return of 5.55% for the Lehman Brothers Mutual Fund Corporate Debt
BBB-Rated Index. Results during this period are primarily attributable to the
portfolio's longer maturity during a period of declining interest rates. In
addition, the credit fundamentals of corporate bonds held in the Fund
strengthened during the period due to the efficiency and competitiveness of U.S.
manufacturers and the
[Growth of a $10,000 Investment (Class A Shares) Line Graph]
TRUST - CORP
<TABLE>
<S> <C> <C> <C>
Inception* 7/18/90 10000 9550 10000
10000 9550 10000
10050 9598 10000
9761 9322 9841
9592 9160 9886
9524 9096 9931
9723 9286 10135
Dec 90 9932 9485 10278
9960 9512 10409
10227 9767 10587
10400 9932 10717
10627 10148 10856
10705 10224 10931
Jun 10730 10247 10930
10886 10396 11088
11205 10701 11338
11374 10862 11572
11489 10972 11682
11616 11093 11796
Dec 91 11981 11442 12182
11905 11369 12030
12000 11460 12145
11969 11430 12093
12001 11461 12153
12280 11728 12424
Jun 12478 11917 12618
12883 12303 12955
12944 12361 13056
13089 12500 13214
12839 12261 12979
12842 12264 13000
Dec 92 13140 12549 13240
13453 12847 13549
13867 13243 13860
13946 13318 13909
14050 13418 14016
14143 13506 14033
Jun 14555 13900 14374
14739 14075 14477
15234 14548 14838
15277 14589 14873
15425 14731 14948
15165 14483 14764
Dec 93 15290 14602 14851
15589 14887 15139
15019 14343 14782
14338 13692 14328
13980 13350 14190
13853 13230 14138
Jun 13781 13161 14102
14224 13584 14459
14123 13488 14475
13725 13107 14206
13651 13036 14173
13676 13061 14151
Dec 94 13717 13100 14268
14034 13402 14570
14514 13861 14990
14630 13971 15113
14861 14192 15368
15887 15172 16092
Jun 15926 15209 16237
15693 14987 16166
16129 15403 16426
16379 15641 16620
16722 15970 16836
17053 15285 17157
Dec 95 17432 16648 17440
17390 16607 17554
16716 15964 17135
16498 15756 16990
16264 15532 16849
16220 15490 16819
Jun 16532 15788 17066
16537 15793 17099
16378 15641 17046
16812 16056 17407
17381 16599 17882
17854 17050 18265
Dec 96 17557 16767 18013
</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 12/31/96 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) 6.19% 0.71% 7.94% 9.12%
Fund (adjusted for the maximum 4.5% sales charge) 1.41% -3.82% 6.95% 8.34%
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 5.55% 3.28% 8.14% 9.61%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) 5.79% -.04% N/A 9.35%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 0.79% -4.72% N/A 8.30%++
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 5.55% 3.28% N/A 10.28%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 5.79% -0.04% N/A 9.36%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 0.79% -4.72% N/A 8.30%++
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 5.55% 3.28% N/A 10.28%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
16
<PAGE> 18
CORPORATE INCOME FUND
continued resiliency of the domestic economy. Although fears of an economic
slowdown as well as increased corporate issuance placed pressure on corporate
credit spreads at year-end, the Fund consistently experienced a higher level of
credit upgrades than downgrades throughout the period.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
A period of declining interest rates, a benign inflation environment, and
improving corporate profitability affected the Fund's performance. Due to the
long-term nature of the Fund's investment objectives, we maintained average
maturity and duration at relatively stable levels. The average maturity of the
Fund was shortened slightly during the period, declining from 22.7 years at June
30, 1996 to 22.2 years at December 31, 1996. The effective duration of the Fund
at December 31, 1996 was 8.0 years, down slightly from 8.3 years at June 30,
1996. As a defensive measure, continuing efforts were directed to upgrading the
credit quality of the corporate bonds held in the Fund. The Fund continues to be
fully invested in quality securities that we believe can achieve a high level of
current income consistent with preservation of capital.
A cornerstone of the Fund's investment strategy remains diversification. At
December 31, 1996, the Fund held the securities of approximately 50 different
issuers with an average credit quality rating of A2 by Moody's Investors Service
and A- by Standard & Poor's. We focus our purchase decisions on companies which
are experiencing improving fundamentals and favorable positions within the
business cycle of their industries.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The most significant changes occurred in the Fund's industrial holdings and its
U.S. Treasury and Agency issues. Given the decline in interest rates and the
positive environment for credit quality, both these changes had a positive
impact on Fund performance.
The Fund's exposure to industrial issues decreased during the past six months.
However, the Fund either sold or reduced positions in Laidlaw, Inc. and Northrop
Grumman Corporation, as our internal credit analysis indicated that it was an
appropriate time to realize gains from these issues.
The Fund's weighting in financial issues remained essentially unchanged during
the period, while its holdings of utility issues increased slightly during the
past six months. In order to realize gains from improving credit quality, we
sold several issues in the services sector, including American Airlines and
Carnival Corporation, therefore reducing our holdings in this sector.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our outlook for the Fund is positive as we see no reason for the Federal Reserve
to raise interest rates in the foreseeable future. In fact, our portfolio
managers believe at some point a modest reduction in rates is possible for 1997.
We also expect corporate profitability to be reasonably maintained in 1997.
At year-end 1996, the U.S. economy achieved a state of equilibrium which few
market participants thought possible. Our present forecast calls for a
continuation of this trend with real GDP growth for 1997 estimated to average
between 2.0-2.5%, and inflation, as measured by the Consumer Price Index, at
approximately 3.0%. With a positive environment for both interest rates,
inflation, and economic growth, we expect the Fund to continue to perform well
in terms of both yield and price appreciation.
SECTOR DIVERSIFICATION
[PIE CHART]
<TABLE>
<CAPTION>
<S> <C>
Manufacturing 17.78%
Industrial 10.12%
Forest Products 8.88%
Yankee 4.65%
Electric 5.48%
Financial 4.90%
Transportation 4.32%
Media 4.72%
Gas 5.17%
Energy 5.97%
U.S. Treasury 1.63%
U.S. Mortgage-Backed 16.01%
Other 1.77%
Retail 2.01%
Telecommunications 0.38%
Regional Banks 6.21%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
17
<PAGE> 19
CALIFORNIA MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
[PHOTO OF 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 December 31, 1996, the SIERRA
CALIFORNIA MUNICIPAL FUND (Class A Shares) advanced 7.27% on an average annual
total return basis, or 6.61% adjusted for the maximum sales charge. For the
12-month period ended December 31, 1996, the Fund's total return was 4.42% or
- -0.28% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
DECEMBER 31, 1996, WAS 4.60%, AND ITS 30-DAY AVERAGE YIELD WAS 5.36% OR 9.79% 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
Two factors contributed to the Fund's performance over the past six months: the
duration and overall structure of the Fund's portfolio.
Duration is a measure of the sensitivity of a fund's price to interest rate
movements. Funds with shorter durations are less volatile than longer duration
funds and therefore maintain a more stable price when interest rates fluctuate.
At 6/30/96, the Fund's duration was 7.03 years and it ended the six-month period
at 6.42 years on 12/31/96, shorter than the Lehman Brothers California Municipal
Index duration of 8.22 years. With a net decline in interest rates for the
period, the Fund just kept pace with its peer group average.
When interest rates are declining, AAA rated securities and those priced at
discounts typically perform better. This occurs, because quality securities are
more sensitive to interest rate movements than lower rated bonds, which are
evaluated more on the basis of their creditworthiness. Discounted bonds will
increase more quickly in price, because their upward reaction to falling
interest rates is combined with movements toward par as maturity approaches.
The Fund produced a return of 5.31% for the six-month period, ranking near
[GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES) LINE GRAPH]
TRUST - Cal Muni
<TABLE>
<S> <C> <C> <C>
Inception**7/25/89 10000 9550 10000
10000 9550 10000
10080 9626 10000
9978 9529 9902
9952 9504 9872
10117 9662 9993
10252 9790 10168
Dec 89 10325 9860 10251
10208 9748 10203
10303 9840 10294
10379 9912 10297
10214 9755 10223
10458 9988 10445
Jun 10598 10122 10537
10750 10266 10692
10487 10024 10537
10564 10089 10544
10740 10257 10734
10992 10498 10950
Dec 90 10993 10498 10998
11044 10547 11146
11115 10615 11243
11161 10659 11247
11274 10767 11397
11389 10876 11498
Jun 11357 10846 11487
11472 10956 11627
11607 11085 11780
11724 11196 11933
11864 11330 12041
11901 11365 12075
Dec 91 12054 11511 12334
12045 11503 12362
12059 11516 12366
12096 11552 12371
12182 11633 12481
12315 11761 12629
Jun 12556 11991 12841
13015 12430 13226
12812 12236 13096
12851 12273 13181
12587 12020 13052
12970 12387 13286
Dec 92 13159 12567 13421
13336 12736 13577
13899 13274 14069
13787 13167 13919
13939 13311 14060
14028 13396 14139
Jun 14294 13651 14375
14282 13640 14394
14654 13994 14693
14847 14179 14860
14848 14180 14889
14628 13970 14758
Dec 93 14955 14282 15069
15113 14433 15241
14719 14057 14846
13967 13338 14242
13981 13352 14363
14088 13454 14488
Jun 13982 13352 14400
14210 13570 14663
14264 13622 14714
14075 13441 14498
13788 13168 14240
13446 12841 13982
Dec 94 13667 13052 14290
14126 13490 14699
14559 13904 15126
14728 14065 15300
14757 14093 15319
15224 14539 15807
Jun 15040 14363 15670
15112 14432 15819
15300 14611 16019
15414 14721 16120
15660 14955 16354
15950 15232 16626
Dec 95 16139 15413 16785
16212 15483 16913
16123 15397 16798
15885 15170 16583
15869 15155 16536
15869 15155 16530
Jun 16004 15284 16710
16168 15440 16862
16228 15497 16859
16440 15701 17095
16623 15875 17288
16899 16138 17604
Dec 96 16851 16093 17528
</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.
*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 12/31/96. 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
34,000 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) 5.31% 4.42% 6.93% 7.27%
Fund (adjusted for the maximum 4.5% sales charge) 0.57% -0.28% 5.95% 6.61%
Lehman Brothers Municipal Bond Index** 4.90% 4.43% 7.28% 7.86%
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 4.91% 3.64% N/A 6.96%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.09% -1.30% N/A 5.87%++
Lehman Brothers Municipal Bond Index** 4.90% 4.43% N/A 8.18%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 4.91% 3.64% N/A 6.96%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.09% -1.30% N/A 5.87%++
Lehman Brothers Municipal Bond Index** 4.90% 4.43% N/A 8.18%
</TABLE>
++Adjusted for the maximum 3% CDSC for shares held since inception.
18
<PAGE> 20
CALIFORNIA MUNICIPAL FUND
the middle of its peer group and performing in line with the Lehman Brothers
California Municipal Index, which returned 5.36%. The Fund produced top (1st)
quartile returns in its Lipper category for the year, 1996.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Lower interest rates and supply and demand within the state were major
fundamental factors affecting the Fund's performance during the period, as was
the perception of the state's economic strength.
Interest rates fell around 0.35% for the period, raising bond prices and,
thereby, adding to the Fund's total return. Total return consists of current
yield plus appreciation or less price declines.
As the state economy strengthened significantly, and memories of Orange County's
financial problems faded, demand for California municipal securities increased
dramatically from both state and national municipal bond funds. The result of
this increased demand was that the prices of California municipal securities
strengthened.
At the same time, declining supplies of uninsured, higher-yielding issues caused
higher prices and falling yields. With the resulting narrowing of the yield
advantage over higher-rated, insured bonds, demand shifted toward those higher
quality issues. As a result, we increased the Fund's holdings of AAA assets to
62%, up 2% from the beginning of the period.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Sector concentration shifted slightly due to market pricing and trading
activity, but no changes were made that significantly impacted the Fund's
performance.
As noted above at year end, 62% of assets in the portfolio were AAA rated, with
23% of assets rated BBB or non-rated. We feel the Fund will perform better under
this current structure for two reasons. First, a large percentage of the AAA
holdings were acquired at yields higher than those currently available on lower
rated offerings, so there is no coupon or yield advantage to swapping existing
securities. Therefore, swapping would decrease the overall credit quality of the
portfolio, without a meaningful increase in yield.
Second, since the portfolio is allowed to invest up to 20% of assets in
non-rated securities, we continued to seek opportunities in that sector. As
opportunities arose, we acquired lower rated or non-rated holdings either with
new money flowing into the Fund or by exchanging existing holdings.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Retail demand for the Fund should be strong. At year end, municipal bonds
generally yielded 5.96%, or close to 90% of the yield from a 30-year U.S.
Treasury. On a tax-equivalent basis, the Fund produces very attractive current
yields relative to Treasuries. An unusually large number of bonds were retired
in 1996, and much of the resulting cash still remains in short-term funds. We
expect the money which is currently invested in equity and short-term money
market funds will move into the tax-exempt market.
We intend to maintain the duration of the Fund at a level which is slightly
shorter than our benchmark to reduce volatility. We expect tax exempt yields to
rise, at least in the early part of the year, because economic strength during
the last quarter of 1996 should continue at least through early 1997. This
strategy should position the Fund to continue its strong performance in the
coming year.
One factor that will likely affect California municipal bonds is the recent
November, 1996, passage of Proposition 218. This new law limits the ability of
governmental units to raise revenue without the consent of affected taxpayers.
Although some rating downgrades have occurred as a result, none of the bonds
held in the Fund have yet been affected. Those downgrades, so far, have been
minor (from AA to AA-, for example), and appear to be more symbolic, not
indicating any real concern about the credit quality of those outstanding
issues. The financial impact of Prop. 218 is expected to be minimal, possibly
affecting up to only 0.2% of the annual municipal revenues. With business
activity generally on an upswing throughout California, the expected growth in
municipal revenues should be more than sufficient to offset any effects of Prop.
218. Overall, we expect state and local economic conditions (and the usual
political forces) to continue to be the major determinants, of the financial
capability of California's municipalities.
Finally, the extensive flooding that occurred throughout Northern California
caused an estimated $2 billion worth of property damage as of the middle of
January 1997. However, it is not expected to have a major negative credit
impact, as the areas affected are mainly rural and not significant debt issuers.
Sector Diversification
[PIE CHART]
<TABLE>
<CAPTION>
<S> <C>
Education 7.33%
General Purpose 9.79%
Health Care 5.08%
Housing 17.00%
Water/Sewer 2.11%
Tax District 18.72%
Transportation 10.90%
Utilities 8.95%
Waste Disposal 2.96%
Public Building 7.76%
Industrial Revenue 6.96%
Short-Term Muni Bonds 2.44%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
19
<PAGE> 21
FLORIDA INSURED MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
[PHOTO OF 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 December 31, 1996, the SIERRA
FLORIDA INSURED MUNICIPAL FUND (Class A Shares) advanced 4.98% on an average
annual total return basis, or 3.63% adjusted for the maximum sales charge. For
the 12-month period ended December 31, 1996, the Fund's total return was 3.41%,
or -1.24% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS
OF DECEMBER 31, 1996, WAS 4.53%, AND ITS 30-DAY AVERAGE YIELD WAS 4.87% OR 8.07%
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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
The significant factors affecting the Fund's performance during the period were:
the duration of the Fund's portfolio and structure and the strong performance of
the insured sector.
Duration, a measure of the sensitivity of a fund's price to interest rate
movements, was 8.90 years at 6/30/96. By 12/31/96, duration had been shortened
to 7.74 years but was still slightly longer than the Lehman Brothers Municipal
Bond Index duration of 7.64 years. During periods when interest rates are
falling, funds with longer durations tend to perform better than funds with
shorter durations.
Regarding the structure of the Fund, in a "bull" market when interest rates are
[GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES) LINE GRAPH]
TRUST - FLORIDA
<TABLE>
<S> <C> <C> <C>
Inception 6/7/93 10000 9550 10000
10000 9550 10000
10083 9629 10013
10387 9920 10221
Sep 10511 10038 10338
10545 10070 10357
10355 9889 10266
Dec 93 10686 10206 10483
10813 10326 10602
10414 9945 10328
Mar 9797 9356 9907
9893 9448 9992
9970 9521 10079
Jun 9899 9454 10017
10092 9638 10200
10095 9641 10236
Sep 9960 9512 10086
9675 9240 9906
9410 8987 9727
Dec 94 9780 9340 9941
10043 9591 10225
10362 9896 10523
Mar 10464 9993 10644
10445 9975 10656
10702 10220 10996
Jun 10495 10022 10901
10587 10111 11004
10758 10274 11144
Sep 10815 10329 11214
11053 10556 11377
11315 10806 11566
Dec 95 11498 10981 11677
11556 11036 11766
11431 10917 11686
Mar 11156 10654 11536
11134 10633 11504
11146 10645 11499
Jun 11288 10780 11624
11430 10916 11730
11420 10906 11728
Sep 11598 11076 11892
11729 11201 12026
11945 11408 12246
Dec 96 11891 11356 12195
</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.
*Tax-equivalent yield is based on Federal income taxes at 39.6%.
** Index total returns were calculated from 6/30/93 to 12/31/96. 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
34,000 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 7, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 5.34% 3.41% 4.98%
Fund (adjusted for the maximum 4.5% sales charge) 0.60% -1.24% 3.63%
Lehman Brothers Municipal Bond Index** 4.90% 4.43% 5.83%
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 4.94% 2.64% 6.80%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.06% -2.27% 5.71%++
Lehman Brothers Municipal Bond Index** 4.90% 4.43% 8.18%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 4.94% 2.64% 6.80%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.06% -2.27% 5.71%++
Lehman Brothers Municipal Bond Index** 4.90% 4.43% 8.18%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
20
<PAGE> 22
FLORIDA INSURED MUNICIPAL FUND
declining, AAA rated quality securities outperform lower
rated securities. While the BBB and non-rated securities tend to lag in
appreciation during market rallies, because their valuations are based more on
creditworthiness, these securities contribute to the dividend paying ability of
the Fund. 16% of assets were invested in BBB rated or non-rated securities.
For the six-month period ended 12/31/96, the Fund produced a return of 5.34%,
ranking in the top quartile of its peer group, and outperforming the Lehman
Brothers Municipal Bond Index return of 4.90%. For the year, 1996, the Fund
outperformed its Lipper category average and was ranked in the top 31%.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
A net decline in interest rates and supply and demand within the state were
major factors affecting the Fund's performance for the six-month period.
With interest rates falling around 0.35% for the period, prices of municipal
bond funds rose, adding to the total return from the Fund. Total return consists
of current yield plus appreciation or less price declines. The Fund's relatively
longer duration helped to produce higher-than-average gains for the period.
A very high percentage of Florida municipal bonds continued to be insured. With
the scarcity of uninsured securities causing rising prices and falling yields,
the traditional spreads between AAA rated securities and those lower rated
securities narrowed, producing less of a yield advantage for those uninsured
issues. Demand shifted from the lower- to the higher-quality bonds not only
within Florida, but nationally as well.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Exposure to certain sectors shifted slightly during the last six months, but
none of these changes made a significant impact on the Fund's performance. The
Fund had an excellent year primarily due to its long duration in a bull market
(declining interest rates) and the high percentage of Fund assets invested in
insured holdings.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our outlook for the Fund is positive. Municipal yields at year-end offer almost
90% of yields from longer term, 30-year Treasuries. In addition, the Fund's
current yield is very attractive on a tax-equivalent basis. This has been true
throughout most of the period.
We also look for retail demand for municipals to increase. A disproportionally
large number of bonds were retired in 1996, and much of the resulting cash
continues to remain in short-term funds. The strong equity markets also
attracted capital. It is our expectation that the money which is currently
invested in equity and short-term money market funds will move into the
tax-exempt market.
We intend to maintain the duration of the Fund at a level which is slightly
shorter than our benchmark in order to reduce potential volatility. We expect
tax-exempt yields to rise, at least in the early part of the year, given
economic strength during the fourth quarter should continue at least through the
early part of 1997.
This strategy should position the Fund to continue its strong performance in the
coming year, as well as continue to maintain the dividend and preserve capital.
We also expect municipal yields to remain at levels which are attractive on an
absolute basis and on a tax-equivalent basis relative to Treasuries' yields.
[PIE CHART]
SECTOR DIVERSIFICATION
<TABLE>
<CAPTION>
ALLOCATION
PERCENTAGES
-----------
<S> <C>
Public Education 19.09%
Industrial Revenue 8.92%
Public Building 4.50%
Short Term Muni bonds 0.65%
Utilities 5.14%
Transportation 19.96%
Water/Sewer 8.54%
Housing 12.41%
Health Care 13.00%
Higher Education 7.79%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
21
<PAGE> 23
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
[PICTURE OF 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, SIERRA Florida Insured Municipal and SIERRA CALIFORNIA INSURED
INTERMEDIATE MUNICIPAL FUNDS.
PERFORMANCE REVIEW:
From the Fund's inception (April 4, 1994) through December 31, 1996, the SIERRA
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND (Class A Shares) advanced 7.89%
on an average annual total return basis, or 6.09% 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
7.75% on an average annual total return basis for the same period.** For the
12-months ended December 31, 1996, the Fund's total return was 3.91%, or -0.77%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
DECEMBER 31, 1996, WAS 3.82%, AND ITS 30-DAY AVERAGE YIELD WAS 4.50% OR 8.21% 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
Two major factors contributed to the Fund's performance over the past six
months: the duration of the Fund's portfolio and the high (primarily AAA)
quality of the securities we hold in the Fund.
Duration is a measure of the sensitivity of a fund's price to interest rate
movements. Funds with shorter durations are less volatile than longer duration
funds and therefore maintain a more stable price when interest rates fluctuate.
At 6/30/96, duration stood at 6.11 years and remained relatively unchanged,
ending the six-month period at 5.81 years, slightly shorter than the benchmark
Lehman Brothers Intermediate California Bond Index. With a net decline in
interest rates for the period, the Fund just kept pace with its peer group
average.
When interest rates decline, AAA rated securities and those priced at discounts
typically perform better. This occurs, because quality securities are more sen-
[LINE GRAPH]
[GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)- ]
<TABLE>
<CAPTION>
TRUST - Callins
<S> <C> <C> <C>
Inception 4/4/94 10000 9550 10000
10259 9797 10087
Jun 10220 9761 10025
10405 9936 10209
10437 9967 10245
Sep 10327 9862 10094
10175 9717 9914
10033 9582 9735
Dec 94 10170 9712 9949
10462 9992 10234
10787 10302 10531
Mar 10905 10414 10653
10907 10416 10665
11246 10740 11006
Jun 11117 10617 10910
11257 10751 11013
11430 10916 11153
Sep 11507 10989 11224
11648 11123 11386
11800 11269 11575
Dec 95 11849 11316 11686
11960 11421 11775
11939 11402 11695
Mar 11775 11245 11546
11754 11225 11613
11732 11204 11509
Jun 11811 11279 11634
11925 11389 11740
11937 11400 11738
Sep 12028 11487 11902
12153 11606 12036
12358 11802 12257
Dec 96 12311 11757 12205
</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.
*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 12/31/96. 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
34,000 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(April 4, 1994)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 4.24% 3.91% 7.89%
Fund (adjusted for the maximum 4.5% sales charge) -0.45% -0.77% 6.09%
Lehman Brothers Municipal Bond Index** 4.90% 4.43% 7.75%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 3.85% 3.14% 6.91%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -1.15% -1.80% 5.81%++
Lehman Brothers Municipal Bond Index** 4.90% 4.43% 8.18%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 3.85% 3.14% 6.91%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -1.15% -1.80% 5.81%++
Lehman Brothers Municipal Bond Index** 4.90% 4.43% 8.18%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
</TABLE>
22
<PAGE> 24
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
sitive to interest rate movements than lower rated bonds, which are evaluated
more on their creditworthiness. Discounted bonds will increase more quickly in
price, because their upward reaction to falling interest rates is combined with
movement toward par as maturity approaches.
For the six-month period, the Fund returned 4.24% on NAV, ranking in the upper
half of its peer group, and performing in line with the Lehman Brothers
California Intermediate Index return of 4.90%.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
A net decline in interest rates and increasing demand were major factors
affecting Fund performance during the period.
For the six-month period, interest rates fell around 0.35%. Since bond prices
move inversely (in the opposite direction) to interest rates, bond prices rose
and added to the total return of the Fund. Total return consists of current
yield plus price appreciation or less price declines.
As the state economy strengthened significantly, and memories of Orange County's
financial problems faded, demand for bonds of California municipalities
increased dramatically from both state and national municipal bond funds. The
result of this increased demand was that the prices of California municipal
bonds strengthened.
In addition, declining supplies of uninsured, higher-yielding issues caused
higher prices and falling yields. With the resulting narrowing of the yield
advantage over higher-rated, insured bonds, demand shifted toward the higher
quality issues.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Sector concentration shifted slightly, but none were made which had a
significant impact on Fund performance.
Due to both the scarcity of non-insured offerings as well as the narrow spreads,
we held approximately 87% in AAA rated issues throughout the period. By
prospectus, the Fund is required to invest at least 80% of its assets in insured
bonds.
The portfolio may also invest up to 20% of assets in non-rated bonds, so we
continued to look for opportunities in that sector of the market. As a result we
purchased several attractively priced blocks of non-rated securities. By
decreasing holdings of BBB rated bonds, we were able to increase our holdings of
non-rated issues to 6% of portfolio assets.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Retail interest in the Fund should be strong. The intermediate range of the
tax-exempt yield curve yields almost 90% of the yield from longer-maturity
30-year tax-exempt securities but with only 54% of the volatility, making the
Fund a strong choice for more conservative investors. In addition, municipal
bonds produce very attractive current yields on a tax-equivalent basis relative
to Treasuries. An unusually large number of bonds were retired in 1996, and much
of the resulting cash still remains in short-term funds. We expect that the
money which is currently invested in these funds will move into the tax-exempt
market.
We intend to maintain a slightly shorter duration than our benchmark to reduce
volatility. We anticipate that municipal yields will rise, at least through the
first half of the new year, because the economic strength exhibited during the
fourth quarter 1996 should continue at least through early 1997. This strategy
should position the Fund to continue its strong performance through the coming
year.
One factor that will likely affect California municipal bonds is the recent
November, 1996, passage of Proposition 218. This new law limits the ability of
governmental units to raise revenue without the consent of affected taxpayers.
Although some rating downgrades have occurred as a result, none of the bonds
held in the Funds have yet been affected. Those downgrades, so far, have been
minor (from AA to AA-, for example), and appear to be more symbolic, not
indicating any real concern about the credit quality of those outstanding
issues. The financial impact of Prop. 218 is expected to be minimal, possibly
affecting up to only 0.2% of annual municipal revenues. With business activity
generally on an upswing throughout California, the expected growth in municipal
revenues should be more than sufficient to offset any effects of Prop. 218.
Overall, we expect state and local economic conditions (and the usual political
forces) to continue to be the major determinants, of the financial capability of
California's municipalities.
Finally, the extensive flooding that occurred throughout Northern California
caused an estimated $2 billion worth of property damage as of the middle of
January 1997. However, it is not expected to have a major negative credit
impact, as the areas affected are mainly rural and not significant debt issuers.
SECTOR DIVERSIFICATION
<TABLE>
<CAPTION>
ALLOCATION
PERCENTAGES
-----------
<S> <C>
Industrial Revenue 2.72%
Airport 0.15%
Waste Disposal 4.26%
Utilities 1.79%
Transportation 6.84%
Tax District 7.96%
Water/Sewer 7.84%
Housing 10.72%
Health Care 12.54%
General Purpose 23.00%
Education 22.18%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
23
<PAGE> 25
NATIONAL MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
[PHOTO OF 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 December 31, 1996, the SIERRA
NATIONAL MUNICIPAL FUND (Class A Shares) advanced 8.31% on an average annual
total return basis, or 7.54% 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 8.01% on an average annual
total return basis for the same period.** For the 12-month period ended December
31, 1996, the Fund's total return was 4.31%, or -0.38% adjusted for the maximum
sales charge. THE FUND'S 30-DAY SEC YIELD AS OF DECEMBER 31, 1996, WAS 4.58%,
AND ITS 30-DAY AVERAGE YIELD WAS 5.41% OR 8.96% 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
The most significant factors contributing to performance are the Fund's duration
and structure of the Fund's portfolio.
Duration, which is a measure of the sensitivity of a fund's price to interest
rate movements, was 8.03 years on 6/30/96. By the end of the year, 12/31/96,
duration was 7.38 years, slightly shorter than the Lehman Brothers Municipal
Bond Index duration of 7.64 years. During periods when interest rates are
falling, funds with longer durations tend to perform better than funds with
shorter durations. The Fund's higher duration in the early part of the period
helped it outperform the Index for the six-month period.
Regarding the structure of the Fund, in a "bull" market when interest rates are
declining, AAA rated bonds and bonds priced at discount perform relatively well.
Since credit is not an issue with AAA securities, they perform more according to
interest rate changes. Discounted bonds also perform well, because the upward
reaction to falling rates is enhanced by the tendency for prices to move toward
par as maturity
[GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES) LINE GRAPH]
TRUST - NATIONAL
<TABLE>
<S> <C> <C> <C>
Inception** 7/18/90 10060 9607 10000
9834 9391 9855
9871 9427 9861
9939 9492 10039
10170 9713 10241
Dec 90 10218 9758 10286
10320 9855 10424
10473 10002 10515
10504 10031 10519
10702 10220 10659
10827 10340 10754
Jun 10826 10339 10743
11007 10512 10874
11189 10685 11018
11317 10808 11161
11414 10900 11261
11446 10931 11293
Dec 91 11774 11245 11536
11780 11250 11562
11830 11298 11566
11891 11356 11570
12009 11469 11673
12207 11658 11811
Jun 12496 11934 12009
13026 12440 12370
12711 12139 12248
12763 12189 12328
12436 11876 12207
12804 12228 12426
Dec 92 12966 12382 12552
13175 12582 12698
13801 12582 12698
13603 12991 13018
13764 13144 13150
13865 13241 13223
Jun 14172 13535 13444
14202 13563 13462
14549 13894 13742
14738 14075 13898
14743 14079 13925
14624 13966 13802
Dec 93 14916 14245 14093
15097 14418 14254
14698 14037 13885
14018 13387 13320
14036 13404 13433
14143 13507 13550
Jun 14045 13413 13467
14258 13616 13714
14341 13696 13762
14176 13538 13559
13866 13242 13318
13462 12856 13077
Dec 94 13872 13248 13365
14377 13730 13747
14802 14136 14147
14944 14271 14310
14877 14207 14327
15112 14423 14784
Jun 14934 14262 14655
15018 14342 14794
15243 14557 14982
15314 14625 15077
15527 14828 15295
15853 15140 15549
Dec 95 16039 15318 15699
16112 15387 15818
16071 15347 15710
15813 15101 15509
15786 15076 15466
15759 15050 15460
Jun 15892 15176 15628
16010 15289 15770
16040 15318 15767
16294 15560 15988
16458 15718 16169
16743 15990 16464
Dec 96 16730 15977 16395
</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.
*Tax-equivalent yield is based on Federal income taxes at 39.6%.
** Index total returns were calculated from 7/31/90 to 12/31/96. 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
34,000 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/3196 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) 5.29% 4.31% 7.28% 8.31%
Fund (adjusted for the maximum 4.5% sales charge) 0.55% -0.38% 6.30% 7.54%
Lehman Brothers Municipal Bond Index** 4.90% 4.43% 7.28% 8.01%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) 4.89% 3.54% N/A 6.46%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.11% -1.40% N/A 5.36%(++)
Lehman Brothers Municipal Bond Index** 4.90% 4.43% N/A 8.18%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 4.89% 3.54% N/A 6.45%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.11% -1.40% N/A 5.35%(++)
Lehman Brothers Municipal Bond Index** 4.90% 4.43% N/A 8.18%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
24
<PAGE> 26
NATIONAL MUNICIPAL FUND
nears. While the BBB securities tend to lag in appreciation during market
rallies, because their valuations are based more on creditworthiness, these
securities contribute to the dividend paying ability of the Fund.
The Fund produced a return of 5.29% over the six-month period, ranking in the
top quartile of its peer group, and outperforming the Lehman Brothers Municipal
Bond Index, which returned 4.90%. The Fund ranked in the top 18% of its Lipper
category for the year ended 1996, and ranked in the top 20% of its Lipper
category for 5-year returns.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Net declines in interest rates and strengthening demand for municipal bonds were
major factors affecting Fund performance during the period.
Interest rates fell approximately 0.35% for the six-month period, causing bond
prices to rise. This price appreciation added to the Fund's total return, since
total return consists of current yield plus appreciation or less price declines.
We focused on the purchase of longer maturity, deeper discount bonds to maximize
the effects of the favorable market conditions.
Another market condition impacting the Fund is the declining supply of uninsured
primary (newly offered) securities. Of total new issue volume, the percentage
coming to market with insurance has increased steadily since 1989's level of 25%
to near 50% in 1996. This makes it increasingly difficult to purchase higher
yielding, lower rated securities. Due to the scarcity and stronger prices of
these higher yielding issues, the yield advantage of the lower rated, uninsured
bonds over the insured offerings remained narrow. Although this tends to shift
demand to high quality paper, lower rated holdings produce significant benefits
for a portfolio.
To address the narrow yield spread and minimize the overall volatility of the
portfolio, our strategy is to continue to focus holdings in the AAA and BBB (or
lower) ratings. The high quality, AAA holdings provide liquidity and perform
well when yields are declining. The higher-yielding, BBB bonds, on the other
hand, are defensive securities. These securities will perform better when yields
are rising.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
There were no major shifts in sector concentration during the period which had a
significant impact on performance.
The credit quality of the portfolio also rose over the period, with 46% of
assets AAA rated at 12/31/96, up 2% from 6/30/96; AA rated assets rose 4% from
6/30/96. These increases were offset by decreasing BBB exposure by 6%, primarily
as a result of market supply.
However, the Fund continued to seek undervalued securities in sectors with the
most price appreciation potential. In addition, we continued to look for
lower-rated issues which meet our standards, as the yields on these securities
enhance the yield of the portfolio.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Retail demand for municipal bonds should increase for several reasons. On a
relative basis to Treasuries, municipal bonds are very attractive. For example,
at year end, the Bond Buyer 25 Revenue Bond Index yielded 5.96%, or close to 90%
of the yield from a 30-year Treasury. In addition, municipal bonds offer very
attractive tax-equivalent yields compared to their taxable counterparts. This
has been true throughout most of the period.
A disproportionally large number of bonds were retired in 1996, and much of the
resulting cash continues to remain in short-term funds. The strong equity
markets also attracted those proceeds. It is our expectation that the money
which is currently invested in equity and short-term money market funds will
move into the tax-exempt market.
We intend to maintain the duration of the Fund at a level which is slightly
shorter than our benchmark in order to reduce potential volatility. We expect
tax-exempt yields to rise, at least in the early part of the year, because the
economic strength exhibited during the 4th quarter of 1996 should continue at
least through early 1997.
This strategy should position the Fund to continue its strong performance in the
coming year, as well as continue to maintain the dividend and preserve capital.
We also expect municipal yields to remain at levels which are attractive for
their absolute yields and on a tax-equivalent basis relative to Treasuries.
[PIE CHART]
SECTOR DIVERSIFICATION
<TABLE>
<CAPTION>
Allocation
Percentages
-----------
<S> <C>
Industrial Revenue 13.81%
Public Building 2.12%
Waste Disposal 0.63%
Utilities 9.66%
Transportation 10.64%
Tax District 2.23%
Water/Sewer 2.14%
Housing 10.13%
Health Care 23.42%
General Purpose 15.02%
Education 9.27%
Bond Bank 0.93%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
25
<PAGE> 27
GROWTH AND INCOME FUND
PORTFOLIO MANAGER:
J.P. MORGAN INVESTMENT
MANAGEMENT INC.
[PHOTO OF Henry D. Cavanna]
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.
[PHOTO OF William M. Riegel]
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 December 31, 1996, the SIERRA
GROWTH AND INCOME FUND (Class A Shares) advanced 11.69% on an average annual
total return basis, or 10.80% adjusted for the maximum sales charge. For the
12-month period ended December 31, 1996, the Fund's total return was 21.59%, or
14.60% 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 LAST SIX-MONTH PERIOD ENDED DECEMBER 31, 1996.
During the second half of 1996, stock selection in the energy, basic industry,
and transportation sectors provided the largest contribution to performance.
Specific stocks within those sectors that positively impacted performance
include: Cooper Cameron Corporation and Tosco Corporation (energy), Teledyne
Inc. and Allegheny Teledyne (materials and processing), Union Pacific
Corporation and Consolidated Freightways Inc. (autos and transportation).
Stock selection in the technology, consumer staple, and services sectors
detracted from performance. Specific stocks within those sectors that negatively
impacted performance include: General Instrument Corporation,
[LINE GRAPH]
[GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)]
TRUST - GROWTH & INCOME
<TABLE>
<S> <C> <C> <C>
Inception* (7/25/89) 10000 10000 10000
10000 9425 10000
10030 9425 10000
10210 9453 10193
10170 9623 10153
9930 9585 9917
10110 9359 10123
Dec 89 10144 9529 10362
9630 9561 9667
9761 9076 9791
9973 9199 10049
9679 9399 9801
10450 9122 10756
Jun 10317 9849 10681
10103 9724 10647
9318 9522 9685
8909 8782 9209
8786 8396 9175
9452 8280 9766
Dec 90 9785 8908 10033
10315 9223 10477
10937 9722 11227
11103 10308 11494
11114 10465 11526
11625 10475 12019
Jun 11008 10956 11470
11532 10375 12007
11689 10868 12289
11511 11017 12088
11658 10849 12249
11100 10988 11755
Dec 91 12489 10462 13098
12510 11771 12855
12679 11791 13019
12235 11950 12764
12426 11532 13135
12331 11712 13206
Jun 11960 11622 13015
12310 11272 13539
12055 11603 13266
12236 11362 13418
12215 11532 13467
12716 11512 13920
Dec 92 12829 11985 14103
12904 12091 14206
12807 12162 14398
13178 12071 14707
12952 12420 14347
13329 12207 14734
Jun 13059 12562 14783
13005 12309 14713
13556 12258 15274
13502 12777 15161
13882 12726 15469
13904 13084 15323
Dec 93 14256 13104 15512
14808 13436 16039
14489 13957 15604
13894 13656 14924
14214 13095 15115
14287 13396 15363
Jun 13931 13466 14987
14375 13130 15478
14905 13548 16111
14607 14048 15716
14743 13767 16070
14038 13895 15485
Dec 94 14265 13231 15714
14557 13444 16121
15115 13720 16750
15639 14246 17244
15946 14740 17753
16505 15029 18463
Jun 16796 15556 18878
17396 15830 19504
17436 16396 19553
17882 16434 20377
17414 16854 20304
18377 16413 21195
Dec 95 18703 17321 21603
19280 17628 22338
19684 18172 22545
19987 18552 22762
20435 18838 23096
20680 19260 23692
Jun 20384 19212 23783
19285 18176 22731
19950 18803 23211
20890 19689 24518
21137 19921 25194
22990 21668 27096
Dec 96 22744 21436 26560
</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.
* Index total returns were calculated from 7/31/89 to 12/31/96. 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 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) 11.57% 21.59% 12.73% 11.69%
Fund (adjusted for the maximum 5.75 sales charge) 5.15% 14.60% 11.41% 10.80%
Standard & Poor's 500 Composite Index* 11.68% 22.95% 15.20% 14.08%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) 11.10% 20.65% N/A 20.76%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 6.28% 15.65% N/A 19.85%(++)
Standard & Poor's 500 Composite Index* 11.68% 22.95% N/A 25.75%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 11.03% 20.56% N/A 20.75%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 6.21% 15.56% N/A 19.84%(++)
Standard & Poor's 500 Composite Index* 11.68% 22.95% N/A 25.75%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception
26
<PAGE> 28
GROWTH AND INCOME FUND
Kellogg Company, and Tele-Communications Inc., respectively.
Overall, performance in the last six months was very strong, as economic
uncertainty provided the backdrop for investment in the larger capitalized
companies of the U.S. domestic stock markets.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
In a market environment like 1996, which exhibited slow, steady economic growth,
low inflation, and a lack of exogenous shocks, betting on current winners was
rewarded. The larger-capitalization and defensive growth stocks that have led
the market the past two years continued their strong performance. As evidence of
a slowing economy emerged, the strong market performance attracted further
interest in these "momentum" stocks. Searching for turnaround candidates was
rewarded in only a few sectors, with traditional value factors such as
price-to-book ratios providing less overall benefit. This is evidenced by the
fact that for the S&P 500 Index growth stocks outperformed value stocks by 200
basis points over the past year.
The market conditions in the third quarter of 1996 were not favorable to the
value-orientation of this Fund. However, in the last three months, the Fund
outperformed the S&P 500 Index as overvalued stocks were recognized, driving
previous market trailers to outperform. Our investment valuation process had the
Fund positioned well as breadth returned to the market.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Over the past six months, our investment strategy involved maintaining our
sector neutral approach coupled with a continued focus on individual stock
selection. In addition, we continue to emphasize the importance of holding a
highly diversified selection of value stocks.
The biggest winners in the portfolio were two technology stocks, EMC Corporation
(+79.1%) and Quantum Corporation (+95.7%). Both companies are significant
players in data storage, with Quantum Corporation in the desktop level and EMC
Corporation in the systems area. We remain bullish on both stocks as the
companies are well positioned to benefit from the strong trends in data
warehousing, the growth in internets, and the use of multimedia and digital
photography that will require increasing amounts of data to be stored digitally.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our approach to investing focuses on finding attractive stocks, maintaining a
low median market capitalization, and avoiding the risky practice of market
timing. Therefore, the portfolio continues to be fully invested in a diversified
collection of stocks. This diversified approach and aversion to overvalued
stocks should be beneficial as the large blue-chip stocks, which have scored
impressive gains as of late, turn out of favor as breadth continues to return to
the market.
[PIE CHART]
SECTOR DIVERSIFICATION
<TABLE>
<CAPTION>
ALLOCATION
PERCENTAGES
-----------
<S> <C>
Retail 5.08%
U.S. Agency 1.73%
Utilities 2.14%
U.S. Treasury 2.59%
Producer Durables 7.80%
Technology 7.78%
Autos & Transportation 5.11%
Health Care 10.86%
Telecommunications 6.05%
Energy 10.23%
Consumer Staples 7.00%
Financial Services 12.45%
Consumer Discretionary 7.32%
Materials & Processing 9.12%
Computer Software & Services 1.92%
Other 2.82%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
27
<PAGE> 29
GROWTH FUND
PORTFOLIO MANAGER:
JANUS CAPITAL CORPORATION
[PHOTO OF 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 December 31, 1996, the SIERRA
GROWTH FUND (Class A Shares) advanced 18.29% on an average annual total return
basis, or 16.43% adjusted for the maximum sales charge. For the 12-month period
ended December 31, 1996, the Fund had a total return of 16.92%, or 10.20%
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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
While equities posted solid returns in the last half of the year, it was not
without substantial volatility, especially during the third quarter. The equity
markets dropped roughly 10% in July -- a significant decline by the standards of
the 1990s -- recovered in August, then moved upward again. The rally continued
through the fourth quarter, as the S&P 500 Index gained 11.68% for the second
half of 1996. The Fund gained 5.15%. The market's narrow focus in the fourth
quarter accounted for much of the difference in performance. Almost across the
board, the market rally was a flight to size. Not only did large stocks
outperform smaller stocks by a wide margin, but the largest stocks in each
capitalization category -- small, mid, and large -- performed better than their
smaller siblings. According to a study published in the December 30, 1996, issue
of Barron's, the 100 largest stocks (as measured by market capitalization) in
the S&P 500 Index gained a healthy 30.9% on the year -- while the bottom 20%
were up just 9%. The largest 30 stocks in the S&P 500 Index did better still, up
35.5%. Results in the small-cap arena were even more dramatic. The top 20% of
stocks in the S&P 600 Small Cap Index gained 46% on the year, but the bottom 20%
were actually down 4.8%.
[LINE GRAPH]
[GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)]
TRUST - GROWTH
<TABLE>
<S> <C> <C> <C>
Inception 4/5/93 10000 9444 10000
10020 9943 10267
Jun 10720 10104 10297
10480 9877 10255
10900 10273 10644
Sep 11250 10603 10560
11500 10839 10778
11300 10650 10676
Dec 93 11680 11008 10805
12160 11461 11172
12040 11348 10869
Mar 11740 11065 10395
11630 10961 10529
11190 10547 10701
Jun 10730 10113 10439
11150 10509 10782
11830 11150 11223
Sep 11870 11187 10949
12200 11499 11194
11750 11074 10787
Dec 94 11756 11080 10947
11886 11203 11230
12257 11552 11668
Mar 12507 11788 12011
12938 12194 12365
13428 12656 12858
Jun 14199 13383 13156
15121 14251 13593
15231 14355 13627
Sep 15681 14780 14201
15261 14383 14151
15942 15025 14771
Dec 95 16018 15097 15056
16393 15450 15568
17187 16199 15712
Mar 17312 16317 15863
18244 17195 16096
18607 17537 16512
Jun 18728 18513 17651
16563 15611 15842
17665 16649 16176
Sep 18823 17741 17087
18189 17152 17558
18857 17773 18884
Dec 96 18728 17651 18513
</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.
* Index total returns were calculated from 4/30/93 to 12/31/96. 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(April 5, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 5.15% 16.92% 18.29%
Fund (adjusted for the maximum 5.75% sales charge) -0.90% 10.20% 16.43%
Standard & Poor's 500 Composite Index* 11.68% 22.95% 18.29%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 4.69% 16.02% 24.06%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 0.22% 11.07% 23.18%++
Standard & Poor's 500 Composite Index* 11.68% 22.95% 25.75%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 4.76% 16.09% 24.08%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 0.29% 11.13% 23.21%++
Standard & Poor's 500 Composite Index* 11.68% 22.95% 25.75%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
28
<PAGE> 30
GROWTH FUND
This large-cap market leadership occurred during the second half of the year,
after the July decline, when large stocks recovered quickly and moved higher,
while smaller stocks, which had been severely battered in the summer sell-off,
continued to languish.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
While there is no definitive explanation for the market's current infatuation,
large stocks often come into favor when investors are nervous about earnings and
market valuations. Earnings slowed in 1996 and appears to be slowing further in
1997, at least compared to the record gains of 1992-1995. Meanwhile, the broad
market proceeded higher, supported by nearly ideal economic conditions: moderate
growth, mild inflation, and low interest rates. The combination of uncertain
earnings growth and dramatic market advances put the squeeze on stock
valuations, and sent investors scurrying for a safe haven in the fourth quarter.
The bad news in this scenario is that "safe" stocks were bid up to "unsafe"
levels. The good news is that many of the stocks the current rally ignored have
fallen to attractive valuations. As a result, small- and mid-sized companies now
have significantly more potential for appreciation, and significantly less
potential for depreciation, than the high-flying behemoths. We cannot pinpoint
the time when the market will abandon its current fixation on size and again
reward individual companies for exceptional earnings growth.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
At Janus, portfolios are constructed 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.
Additionally, certain themes may develop as our research locates a number of
companies capitalizing on a high growth area within the same or even differing
fields.
That said, the fourth quarter was tough on those of us who choose stocks based
on their individual merits. Although our large stocks performed reasonably well,
small- and mid-cap holdings inhibited portfolio performance, and many business
services or outsourcing stocks also came under profit-taking after posting
substantial gains earlier. Examples of these companies are: National Processing,
Inc., First USA Paymentech Inc., which process credit card transactions, and
TeleTech Holdings Inc., a provider of customer phone representatives. TeleTech
retrenched significantly during the fourth quarter for no fundamental reason, so
we are holding the position. However, we took losses in stocks where the
fundamentals had deteriorated. These included Itron, which produces equipment
for automated utility meter reading and Black & Decker, the power tools
manufacturer. We also reduced holdings in drug manufacturer Centocor Inc.
JDA Software Group Inc., which produces integrated business software
applications, was sold at a profit after reaching full valuation. Other
positions that did well during the fourth quarter, but still have further to go,
include the insurer UNUM Corporation, MFS Communications Company Inc., which was
just acquired by WorldCom, Inc. (another portfolio holding), Cincinnati Bell,
Inc., Pittway Corporation, and Warner-Lambert Company.
Several prominent additions included Parametric Technology Company, which
develops design and manufacturing software, Lamar Advertising Company, a
billboard advertising company, and Monsanto Company, which is rapidly changing
itself from a chemical company to a global manufacturer of agricultural and
pharmaceutical products.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
As we enter 1997, our approach to portfolio management remains consistent. We
rely on intensive, fundamental research to locate individual companies that have
exceptional fundamentals. Additionally, we intend to execute our strategy
opportunistically, because we expect stock prices to be volatile this year. By
being more selective, we hope to enhance the Fund's returns by using market
fluctuations to obtain better prices on both the buy and sell side.
[PIE CHART]
SECTOR DIVERSIFICATION
<TABLE>
<CAPTION>
ALLOCATION
PERCENTAGES
-----------
<S> <C>
Restaurants 0.28%
Computer Software & Services 13.70%
U.S. Agency 2.59%
Other 0.58%
Commercial Paper 1.31%
Retail 2.11%
Technology 19.04%
Autos & Transportation 0.75%
Health Care 11.89%
Telecommunications 16.80%
Energy 1.30%
Consumer Staples 0.25%
Financial Services 13.36%
Consumer Discretionary 12.19%
Materials & Processing 3.85%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
29
<PAGE> 31
EMERGING GROWTH FUND
PORTFOLIO MANAGER:
JANUS CAPITAL CORPORATION
[PHOTO OF 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 December 31, 1996, the SIERRA
EMERGING GROWTH FUND (Class A Shares) has advanced 13.95% on an average annual
total return basis, or 12.91% adjusted for the maximum sales charge. For the
12-month period ended December 31, 1996, the Fund's total return was 8.50%, or
2.26% 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
Stocks produced very respectable gains in the last half of the year, and a
number of indices ended the fourth quarter at or near record levels. The S&P 500
Index gained 11.68%, and the S&P MidCap 400 Index was up 9.14%. During this
period, the Fund was down 4.47%, underperforming the S&P 400 Index.
According to a study published in the December 30, 1996, issue of Barron's, the
100 largest stocks (measured by total market value) in the S&P 500 Index gained
a healthy 30.9% on the year, while the bottom 20% were up just 9%. The largest
30 stocks in the S&P 500 Index did better still, up 35.5%. Results in the
small-cap sector were even more dramatic. The top 20% of stocks in the S&P 600
SmallCap Index gained 46% on the year, but the bottom 20% (again, as measured by
market value) were actually down 4.8%. In short, performance within the indices
was highly segmented, with the most liquid issues far outpacing everything else.
Much of this large-cap market leadership occurred during the second half of the
year, after the July decline, when large stocks rebounded quickly and smaller
stocks, which had been severely battered in the summer sell-off, recovered only
moderately.
Typically, when investors become nervous about earnings and/or market
valuations, larger, more well-established companies draw a premium. Earnings
slowed in 1996, and appear to be slowing further in 1997 (at least compared to
the record gains of 1992-1995).
[LINE GRAPH]
[GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES) - GRAPH PLOT]
<TABLE>
<CAPTION>
TRUST - Emerging
<S> <C> <C> <C>
Inception 7/18/90 10000 9425 10000
10000 9425 10000
9600 9048 10000
8520 8030 9097
7810 7361 8649
7620 7182 8617
8190 7719 9172
Dec 90 8263 7787 9424
8747 8244 9840
9231 8700 10545
9846 9280 10796
9897 9328 10826
10179 9594 11289
Jun 9705 9147 10773
10018 9442 11278
10179 9594 11543
10310 9718 11353
10916 10288 11505
10664 10050 11041
Dec 91 11509 10847 12303
12161 11462 12074
12456 11740 12228
11896 11212 11989
11804 11126 12338
12049 11356 12404
Jun 11886 11202 12224
12100 11404 12717
11733 11058 12460
11845 11164 12603
12395 11682 12649
12935 12191 13075
Dec 92 13281 12517 13246
13581 12800 13343
13850 13054 13523
14212 13395 13814
13581 12800 13475
14191 13375 13839
Jun 14233 13414 13885
14078 13268 13820
14905 14048 14346
15133 14263 14240
15505 14613 14529
15029 14165 14392
Dec 93 16243 15306 14570
16356 15412 15065
16322 15380 14657
15643 14741 14018
15270 14390 14197
15248 14368 14430
Jun 14717 13868 14076
15384 14496 14538
16050 15125 15133
16152 15220 14762
17056 16073 15094
15870 14954 14545
Dec 94 16187 15253 14760
16280 15341 15142
16650 15889 15733
16627 15667 16197
16476 15526 16675
16499 15548 17342
Jun 17887 16856 17744
19193 18086 18156
19795 18653 18201
20685 19492 18969
19852 18707 18901
20153 18991 19730
Dec 95 21409 20174 20111
21095 19878 20979
22216 20935 21174
23651 22286 21377
24363 22923 21691
25303 23809 22251
Jun 96 24309 22911 22336
21437 20120 21348
23047 21722 21799
23842 22471 23026
23057 21732 23661
23334 21992 25448
Dec 96 23224 21889 24944
</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.
* Index total returns were calculated from 7/31/90 to 12/31/96. 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.
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) -4.47% 8.50% 15.07% 13.95%
Fund (adjusted for the maximum 5.75% sales charge) -9.96% 2.26% 13.72% 12.91%
Standard & Poor's 500 Composite Index* -11.68% 22.95% 15.20% 15.31%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) -4.84% 7.74% N/A 19.17%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -9.21% 2.79% N/A 18.25%++
Standard & Poor's 500 Composite Index* 11.68% 22.95% N/A 25.75%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) -4.84% 7.67% N/A 19.17%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -9.21% 2.73% N/A 18.25%++
Standard & Poor's 500 Composite Index* 11.68% 22.95% N/A 25.75%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception
30
<PAGE> 32
EMERGING GROWTH FUND
Meanwhile, stock prices have surged, supported by excellent economic conditions:
moderate growth, mild inflation, and low interest rates. During the quarter, the
combination of slower earnings growth and dramatic market advances put the
squeeze on valuations, and sent investors scurrying for safe haven.
Unfortunately, "safe" stocks were bid up to "unsafe" levels. On the plus side,
however, many stocks that the rally ignored fell to attractive valuations, so
many smaller companies now have significantly more potential for appreciation,
and significantly less potential for depreciation, than their larger,
high-flying siblings.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The Fund lagged the Index in part due to several individual disappointments,
especially in the wireless communications area, but also because broad market
advances had an unusually narrow focus the last three months. Almost across the
board, the fourth quarter rally was a flight to liquidity -- that is, investors
put money almost exclusively into companies with larger market capitalizations.
Not only did large stocks continue to outperform smaller stocks, but the largest
stocks in each capitalization category -- small-, mid-, and large-cap --
performed better than their smaller siblings.
We cannot predict when market conditions will change. But we do know the market
will eventually abandon its fixation on size -- probably sooner rather than
later -- and once again start rewarding companies for exceptional individual
fundamentals. Historically, the record shows that the fourth quarter was an
anomaly in the equities markets.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
A number of our holdings either came under profit-taking, or were out of sync
with market psychology, even though their long-term fundamentals have not
changed or have even improved. Many of our wireless communications holdings
declined during the fourth quarter, which include Paging Network Inc., Millicom
International Cellular SA, Pricellular Corporation, and Omnipoint Corporation.
Paging Network's new Voice Now pager product was delayed; Millicom had some
unforeseen development expenses; and the infrastructure of Omnipoint's New York
system was not completed as soon as had been expected. HFS Inc. has been off
from its recent peaks, but continues to make sound strategic acquisitions,
although the market has been concerned about the general pace of these
acquisitions. We believe that HFS has a highly competent management team and
should be able to successfully integrate these recent acquisitions, producing
continued synergies while generating considerable revenue growth. Fastenal
Company is a compelling story that unfortunately came under price pressure early
in the quarter after missing earnings estimates. Fortunately, the stock has come
back off its lows and remains a top position. The company has strong earnings
prospects as it continues to expand while leveraging its existing distribution
network with new products. The company is currently in a transition period as it
prepares for these new product lines. New products require additional personnel,
and these costs have negatively impacted current earnings. However, this should
only have a negligible effect as these product lines should ramp up earnings in
a relatively short period of time. Insignia Financial Group Inc., the largest
administrator of real estate partnerships in the U.S., suffered a setback when a
major acquisition was abandoned, and Viking Office Products Inc., where the
fundamentals are very much intact, declined on concerns about the pace of
domestic revenue growth. Though the setbacks were real, they should prove
temporary because the long-term outlook for these companies continues to be very
positive.
Among recent gainers were Trigen Energy Corporation, an independent supplier of
utilities to large commercial buildings and institutions; Barnett Inc., a
distributor of plumbing, hardware, and electrical supplies, whose rate of
earnings growth continues to improve; and longtime holding Wisconsin Central
Transportation Corporation.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We remain committed to our investment philosophy: intensive, fundamental
analysis. We apply a number of screens to discover small- to medium-sized
companies that meet our investment criteria. Primarily, we look for companies
with rapid growth prospects and currently, we are looking at a minimum rate of
20%. At the same time, we want a low-risk company that is not only insulated
from the general economy, but which also has a dominant market position.
Finally, we look for stocks that are under-followed. Although this may seem like
a difficult combination to find, we feel that the Fund's current holdings
reflect this investment philosophy.
SECTOR DIVERSIFICATION
[PIE CHART]
<TABLE>
<CAPTION>
ALLOCATION
PERCENTAGES
-----------
<S> <C>
Computer Software & Services 0.30%
Restaurants 11.64%
Retail 19.61%
Telecommunications 10.15%
Commercial Paper 4.73%
U.S. Agency 1.78%
Other 0.27%
Producer Durables 2.24%
Technology 2.69%
Autos & Transportation 5.76%
Health Care 5.61%
Consumer Staples 2.78%
Financial Services 7.85%
Consumer Discretionary 14.70%
Materials & Processing 8.09%
Warrant 1.80%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
31
<PAGE> 33
INTERNATIONAL GROWTH FUND
PORTFOLIO MANAGER:
Warburg, Pincus Counsellors, Inc.
The following team has been primarily responsible for managing the SIERRA
INTERNATIONAL GROWTH 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 December 31, 1996, the SIERRA
INTERNATIONAL GROWTH FUND (Class A Shares) has advanced 3.31% on an average
annual total return basis, or 2.37% adjusted for the maximum sales charge. For
the 12-month period ended December 31, 1996, the Fund's total return was 8.02%,
or 1.81% 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
In the third quarter, the Fund saw strong performance from many of its European
holdings, but much of these gains were negated by weakness in Japan and South
Korea. Although there is a possibility for near-term weakness, we continue to
view the prospects of both these Asian markets favorably. The fourth quarter
produced strong results for most of the foreign stock markets. By region, the
largest gains once again belonged to Europe, whose markets continued to benefit
from falling interest rates and optimism regarding the prospects for monetary
union.
[GROWTH OF A $10,000 INVESTMENT - GRAPH]
TRUST - IntGrowth
<TABLE>
<S> <C> <C> <C>
Inception 7/18/90 10000 9550 10000
10000 9425 10000
9780 9218 10000
8690 8190 9029
7760 7314 7770
8730 8228 8981
8250 7776 8451
Dec 90 8150 7681 8589
8460 7974 8866
9190 8662 9817
8630 8134 9228
8720 8219 9318
8870 8380 9416
Jun 8270 7794 8724
8680 8181 9152
8700 8200 8966
9020 8501 9472
9050 8530 9607
8800 8294 9158
Dec 91 9325 8789 9632
9255 8722 9426
9124 8599 9089
8742 8239 8489
8792 8286 8529
9214 8685 9100
Jun 8872 8362 8668
8540 8049 8446
9043 8523 8976
8651 8154 8799
8279 7803 8337
8319 7841 8415
Dec 92 8339 7860 8459
8359 7879 8458
8642 8145 8714
9197 8668 9474
9833 9268 10373
10055 9477 10592
Jun 9894 9325 10426
10217 9630 10791
10792 10172 11374
10762 10143 11118
11065 10429 11461
10439 9839 10459
Dec 93 11037 10402 11214
11813 11134 12162
11503 10841 12128
10933 10305 11605
11265 10617 12097
11296 10646 12028
Jun 11120 10480 12198
11430 10773 12315
11679 11007 12607
11296 10646 12209
11513 10851 12616
11026 10392 12009
Dec 94 10892 10266 12085
10324 9731 11621
10182 9597 11587
10368 9772 12310
10695 10080 12773
10794 10173 12621
Jun 10674 10060 12400
11143 10502 13154
11001 10368 12551
11088 10451 12865
10859 10235 12675
10968 10338 13010
Dec 95 11422 10765 13440
11825 11145 13496
11733 11058 13541
11837 11156 13829
12009 11319 14231
11964 11276 13972
Jun 96 12079 11384 14033
11502 10841 13416
11640 10971 13571
11905 11220 13903
11824 11144 13743
12353 11643 14271
Dec 96 12337 11628 14068
</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.
* Index total returns were calculated from 7/31/90 to 12/31/96. 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) 2.15% 8.02% 5.76% 3.31%
Fund (adjusted for the maximum 5.75% sales charge) -3.72% 1.81% 4.52% 2.37%
Morgan Stanley Capital International EAFE Index* 1.46% 6.05% 8.15% 5.68%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96 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) 1.73% 7.20% N/A 3.51%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -3.27% 2.20% N/A 2.40%++
Morgan Stanley Capital International EAFE Index* 1.46% 6.05% N/A 6.42%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 1.77% 7.13% N/A 3.51%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -3.23% 2.13% N/A 2.39%++
Morgan Stanley Capital International EAFE Index* 1.46% 6.05% N/A 6.42%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception
32
<PAGE> 34
INTERNATIONAL GROWTH FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Much of the performance over the past six months can be attributed to the
individual geographic region or country performance. In the third quarter, many
European markets showed solid gains, supported by an easing of monetary policy
by several of the region's central banks. Asian-Pacific markets generally fell,
Latin American markets were varied: Brazil, Mexico and Venezuela advanced, while
Argentina and Chile lagged.
In the fourth quarter, European holdings provided much of the strength in
overall portfolio performance. British companies have enjoyed strong profit
growth in recent quarters, and are much closer to hitting a peak in their
earnings cycle than are companies elsewhere in Europe. In addition, the Fund's
Spanish stocks contributed positively to its performance during the fourth
quarter, continuing to benefit from the decline in Spanish bond yields. We
continue to avoid the Italian stock market, which significantly underperformed
most other European markets in local currency terms in 1996.
In Asia and the Pacific, the Fund continues to get value from its holding in
Hong Kong, which largely represents plays on economic growth in China. In South
Korea, the market continued to fall in the fourth quarter due to concerns over
slower economic growth and widening current account and trade deficits. The
equity market in Japan underperformed in the fourth quarter, largely due to
worries over a slowdown in economic growth.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The Fund has benefited from a reduction in Japanese holdings during the second
half of 1996 as the Japanese equity market declined considerably during the
fourth quarter. The Fund has increased holdings over the past six months in
markets such as Sweden and South Korea.
Some individual securities that have been recently added to the portfolio are
Korea Electric Power Corporation, GEA AG, and Eaux (Cie Generale des). Korea
Electric Power Corporation is a large, blue-chip company selling at extremely
low multiples, reflecting the general weakness in the South Korean market. At
its current level, the stock is one of the cheapest electric-utility companies
in the world. GEA is a German engineering company with strong global market
share in three areas: food processing, air treatment and refrigeration, and
thermal and power technology. Our conservative estimate is that the company can
generate annual earnings-per-share growth of nearly 15% through the year 2000.
Eaux (Cie Generale des) is a large, French, multi-industry company that
historically has earned most of its revenues from water management and
construction. The company has made a large number of acquisitions, including the
expansion of its emphasis on cellular communications. This stands to be an
extremely profitable area and should help the company grow its overall earnings
far faster than the French market as a whole.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Most of our buying in Europe is outside the U.K. where the potential for
earnings is proportionately greater. The major risk to the Italian stock market
is that the country fails to meet the criteria for a single European currency.
If this happens, Italian bond yields could rise significantly. This would take a
heavy toll on the stock market; hence we remain wary of making any major new
commitments. We continue to view the prospects for the Spanish market favorably.
The Fund's Spanish holdings include Iberdrola SA, an electric utility, and
Repsol SA, ADR, an oil and gas company. In France, we think that the potential
exists for stronger economic growth in 1997, given the continued low level of
interest rates, which would provide broad benefit to French companies.
Our positive outlook on Australian stocks is due to tangible signs of recovery
in corporate earnings (after two years of generally poor results) and the
potential for further cuts in short-term interest rates from the Bank of
Australia. Positive signs for the New Zealand market can be seen with the
results of the October elections favoring a center right coalition government,
and the recent modification of the Reserve Bank Act. This has allowed New
Zealand's central bank to lower short-term interest rates, with potentially
further easing. In Hong Kong, we remain confident that the territory's pending
change from British to Chinese hands will result in little disruption of its
financial markets, and are also encouraged by the earnings outlook for many Hong
Kong companies in 1997.
It seems reasonable to expect a better year for Japanese equities in 1997
than in 1996; thus we have maintained representation in the Fund. We continue to
hedge a portion of the Fund's yen exposure as a defensive measure, and have
implemented a Nikkei Index hedge.
[PIE CHART]
DIVERSIFICATION BY REGION
<TABLE>
<CAPTION>
ALLOCATION
PERCENTAGES
-----------
<S> <C>
Europe 29.92%
Americas 23.88%
Australia/New Zealand 9.44%
Asia 36.76%
</TABLE>
Allocation percentages are based on total investment value of the portfolio as
of 12/31/96.
33
<PAGE> 35
TARGET MATURITY 2002 FUND
[PHOTO OF Keith Anderson]
[PHOTO OF Andrew J. Phillips]
PORTFOLIO MANAGER:
BLACKROCK FINANCIAL
MANAGEMENT, INC.
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
Principal of BlackRock since 1996.
PERFORMANCE REVIEW:
From the Fund's inception (March 20, 1995) through December 31, 1996, the SIERRA
TARGET MATURITY 2002 FUND advanced 8.81% on an average annual total return
basis, or 7.58% adjusted for the maximum sales charge. For the 12-month period
ended December 31, 1996, the Fund's total return was 0.44%, or -1.57% adjusted
for the maximum sales charge.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1996?
The decrease in interest rates over the six-month period was the most
significant factor contributing to the Fund's performance. With at least 90% of
its assets in zero-coupon Treasury notes, the Fund is very sensitive to interest
rate changes. As rates decrease, the price of the Fund's shares rise in value,
and vice versa. Due to the net decrease in U.S. Treasury rates during the second
half of 1996, the Fund's net asset value increased during this period.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The Fund's performance is affected primarily by economic conditions and interest
rates, in particular. With a portfolio consisting mostly of zero coupon Treasury
notes, the Fund's share price moves inversely to interest rates. As a result,
falling rates during the last six-months have resulted in an increase 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?
There were no significant changes in the Fund's portfolio holdings. As required
by the Fund's investment objective, we continue to hold at least 90% of
portfolio assets in zero-coupon Treasury notes that mature in November, 2002.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
While economic data released in December indicated a break in the recent pattern
of moderation, we do not believe they suggest a longer-term trend toward
stronger economic growth. Certainly, fourth quarter 1996 growth increased
slightly from third quarter levels; however, the full year estimate of
approximately 2.4% does not appear inflationary. Reduced financing costs for
U.S. corporations and soaring global competition and production are further
restraining inflation. Finally, consumers appear to remain heavily indebted, and
the aging of the overall population continues to limit spending patterns.
Overall, we believe that 1997 will be a favorable year for domestic bonds, with
low inflation, moderate economic growth, and strong international demand,
providing support for the U.S. fixed income market. Despite some near-term
volatility, interest rates should also remain positive for U.S. bonds.
[LINE GRAPH]
[GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES) - ]
TRUST - Target Maturity
<TABLE>
<S> <C> <C> <C>
Inception* 3/20/95 10000 10000 10000
9900 9790 10000
10140 9937 10131
10690 10476 10539
Jun 95 10780 10584 10620
10670 10457 10581
Aug 10840 10623 10705
10960 10741 10808
Oct 11160 10937 10972
11390 11162 11143
Dec 95 11570 11339 11301
11642 11410 11370
Feb 11311 11085 11138
11146 10923 11046
Apr 10990 10770 10975
10928 10710 10957
Jun 11094 10873 11098
11104 10882 11126
Aug 11042 10821 11101
11270 11044 11285
Oct 11580 11349 11534
11808 11572 11734
Dec 96 11621 11389 11615
</TABLE>
Index total returns were calculated from 3/31/95 to 12/31/96. The Lehman
Brothers Mutual Fund U.S. General Government Index represents all U.S.
Government agency and Treasury securities. The Index assumes reinvestment of 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 reinventment 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 12/31/96 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(March 20, 1995)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 4.75% 0.44% 8.81%
Fund (adjusted for the maximum 2% sales charge) 2.66% -1.57% 7.58%
Lehman Brothers Mutual Fund U.S. General Government Index* 4.66% 2.77% 8.93%
</TABLE>
34
<PAGE> 36
SIERRA TRUST FUNDS
SEMI-ANNUAL REPORT
------------------------------------------
For the six months ended December 31, 1996
35
<PAGE> 37
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
SIERRA TRUST FUNDS
DECEMBER 31, 1996 (UNAUDITED)
<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).......... $173,820,248 $31,694,708 $46,472,833 $31,574,444 $ 59,713,877 $615,001,778 $352,152,096
Cash and/or foreign currency
(b)........................ 254,358 79,262 138,768 56,450 83,114 347,846 13,750
Net unrealized appreciation
of forward foreign currency
contracts (Note 2)
See portfolios of
investments.............. -- -- -- -- 628,804 -- --
Receivable for dollar roll
fee income
(Notes 2 and 6)............ -- -- -- -- -- 155,929 --
Dividends and/or interest
receivable................. 888,511 219,602 419,363 283,176 1,331,535 4,091,511 7,208,618
Receivable for Fund shares
sold....................... 2,646,766 2,368,728 30,042 28,561 17,833 1,303,184 5,941
Receivable for investment
securities sold............ -- -- -- 467,933 -- 2,847,613 --
Variation Margin (Note 2).... -- -- -- -- -- -- --
Unamortized organization
costs
(Note 8)................... -- -- -- 6,500 295 -- --
Receivable from investment
advisor.................... 524 -- -- 5,838 -- -- --
Prepaid expenses and other
assets..................... 8,012 2,274 6,069 2,413 4,013 23,857 17,626
------------ ----------- ----------- ----------- ------------ ------------ ------------
Total Assets............. 177,618,419 34,364,574 47,067,075 32,425,315 61,779,471 623,771,718 359,398,031
------------ ----------- ----------- ----------- ------------ ------------ ------------
LIABILITIES:
Net unrealized depreciation
of forward foreign currency
contracts (Note 2)
See portfolios of
investments.............. -- -- -- -- -- -- --
Options written, at value
(Premiums received $9,678,
$101,465 and $171,953,
respectively)
(Notes 2 and 6)
See portfolios of
investments.............. -- -- -- 8,457 117,554 146,992 --
Payable for dollar roll
transactions
(Notes 2 and 6)............ -- -- -- -- -- 149,900,484 53,273,910
Deferred income for dollar
roll transactions (Notes 2
and 6)..................... -- -- -- -- -- -- 46,268
Variation Margin (Note 2).... -- -- -- -- -- 127,500 --
Payable for Fund shares
redeemed................... 2,425,991 211,412 124,624 88,387 97,422 904,184 570,653
Payable for investment
securities purchased....... -- -- -- -- -- 24,065,819 --
Investment advisory fee
payable
(Note 3)................... -- 3,839 4,815 -- 820 252,330 166,537
Administration fee payable
(Note 3)................... 43,922 8,538 12,042 9,706 18,231 134,829 92,350
Shareholder servicing and
distribution fees payable
(Note 5)................... 34,183 7,792 10,083 8,376 13,880 103,714 79,014
Dividends payable............ 196,006 1,920 3,077 72,056 514,173 2,449,191 932,706
Accrued legal and audit
fees....................... 21,510 15,295 16,311 16,567 33,874 41,739 34,389
Accrued transfer agent
fees....................... 32,180 6,514 8,975 6,263 11,785 86,405 59,057
Accrued Trustees' fees and
expenses (Note 4).......... 1,760 342 483 333 626 4,632 3,172
Accrued registration and
filing fees payable........ 5,079 2,838 867 936 2,614 2,208 1,460
Due to Custodian............. -- -- -- -- -- -- --
Accrued expenses and other
payables................... 22,477 5,187 6,413 15,459 12,806 104,381 43,111
------------ ----------- ----------- ----------- ------------ ------------ ------------
Total Liabilities........ 2,783,108 263,677 187,690 226,540 823,785 178,324,408 55,302,627
------------ ----------- ----------- ----------- ------------ ------------ ------------
NET ASSETS................... $174,835,311 $34,100,897 $46,879,385 $32,198,775 $ 60,955,686 $445,447,310 $304,095,404
============ =========== =========== =========== ============ ============ ============
</TABLE>
- ---------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
(A) INVESTMENTS, AT COST
(NOTE 2)................. $173,820,248 $31,694,708 $46,472,833 $31,366,303 $ 58,209,237 $610,665,286 $339,193,182
(B) CASH AND/OR FOREIGN
CURRENCY, AT COST
(NOTE 2)................. $ 254,358 $ 79,262 $ 138,768 $ 56,450 $ 117,507 $ 347,846 $ 13,750
</TABLE>
See Notes to Financial Statements.
36
<PAGE> 38
- --------------------------------------------------------------------------------
<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>
$379,263,322 $30,925,257 $73,333,641 $218,237,783 $261,748,173 $267,866,381 $329,365,153
86,444 479,214 -- -- -- -- 115,916
-- -- -- -- -- 55,166 --
-- -- -- -- -- -- --
6,418,799 550,951 1,268,720 3,141,924 492,985 37,486 44,321
6,706 172,146 89,117 19,474 270,738 248,287 334,712
-- -- -- 4,775,870 147,051 1,984,899 1,939,963
-- -- -- 128,125 -- -- --
-- 19,028 3,651 -- -- 14,919 --
-- -- -- -- -- -- --
19,666 1,762 3,638 12,246 11,669 13,623 46,096
------------ ----------- ----------- ------------ ------------ ------------ ------------
385,794,937 32,148,358 74,698,767 226,315,422 262,670,616 270,220,761 331,846,161
------------ ----------- ----------- ------------ ------------ ------------ ------------
-- -- -- -- -- -- 917,691
== == == == == == ==
== == == == == == ==
155,275 55,141 33,771 237,320 597,564 3,198,780 840,631
1,701,686 -- -- 7,135,275 298,846 176,641 737,546
128,022 2,054 12,766 61,340 172,936 206,462 237,460
114,055 9,532 22,138 65,014 80,098 79,188 96,029
96,615 10,203 29,729 50,918 73,171 70,068 83,986
615,135 80,641 68,733 414,893 25,046 41 --
32,062 14,504 17,490 27,905 29,810 27,562 34,355
72,288 6,106 14,012 41,545 50,004 50,497 55,839
3,918 327 760 2,233 2,751 2,720 3,299
2,323 1,265 862 1,810 11,120 9,199 6,690
-- -- 56,943 347,689 21,118 130,644 --
53,641 5,428 11,905 32,726 37,659 40,905 45,839
------------ ----------- ----------- ------------ ------------ ------------ ------------
2,975,020 185,201 269,109 8,418,668 1,400,123 3,992,707 3,059,365
------------ ----------- ----------- ------------ ------------ ------------ ------------
$382,819,917 $31,963,157 $74,429,658 $217,896,754 $261,270,493 $266,228,054 $328,786,796
============ =========== =========== ============ ============ ============ ============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
------------ ----------
<S> <C> <C>
$183,654,098 $3,067,289
553,114 69,894
962,345 --
-- --
358,402 --
85,895 --
2,345,157 --
-- --
-- 38,209
-- 4,116
7,140 157
------------ ----------
187,966,151 3,179,665
------------ ----------
== ==
== ==
-- --
1,062,656 --
701,510 --
126,659 --
54,481 942
35,539 673
1,124 --
33,800 14,979
33,976 595
1,871 32
11,951 1,434
-- --
33,129 470
------------ ----------
2,096,696 19,125
------------ ----------
$185,869,455 $3,160,540
============ ==========
$357,073,153 $29,674,652 $69,815,694 $201,282,880 $230,289,820 $236,565,108 $263,750,892
$ 86,444 $ 479,214 $ -- $ -- $ -- $ -- $ 156,146
<CAPTION>
$173,405,294 $3,012,112
<S> <C> <C>
$ 557,893 $ 69,894
</TABLE>
See Notes to Financial Statements.
37
<PAGE> 39
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
SIERRA TRUST FUNDS
DECEMBER 31, 1996 (UNAUDITED)
<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
loss/distributions
net investment
in excess of net
investment
income)......... $ (8,917) $ 7,398 $ 2,363 $ 18,714 $(1,190,805) $ 548,636 $ (1,071,576)
Accumulated net
realized
gain/(loss) from
security
transactions,
futures
contracts,
closed written
options, forward
foreign currency
contracts and
foreign currency
transactions.... 21,022 (15,219) (40,974) (1,718,971) (382,774) (74,291,914) (32,815,199)
Net unrealized
appreciation of
securities,
foreign
currency,
written options,
futures
contracts,
forward foreign
currency
contracts and
other assets and
liabilities..... -- -- -- 209,362 2,103,804 4,317,667 12,958,914
Paid-in capital... 174,823,206 34,108,718 46,917,996 33,689,670 60,425,461 514,872,921 325,023,265
------------ ----------- ----------- ----------- ----------- ------------ ------------
Total Net
Assets...... $174,835,311 $34,100,897 $46,879,385 $32,198,775 $60,955,686 $445,447,310 $304,095,404
============ =========== =========== =========== =========== ============ ============
NET ASSETS:
Class A Shares.... $117,525,901 $32,553,140 $46,803,120 $20,041,648 $54,393,819 $321,915,909 $248,464,500
============ =========== =========== =========== =========== ============ ============
Class B Shares.... $ 731,934 $ 1,251,587 $ 64,731 $ 3,273,585 $ 2,058,561 $ 22,552,046 $ 23,924,555
============ =========== =========== =========== =========== ============ ============
Class S Shares.... $ 7,818,984 $ 295,149 $ 10,522 $ 1,234,559 $ 527,062 $ 12,044,092 $ 3,903,241
============ =========== =========== =========== =========== ============ ============
Class I Shares.... $ 48,758,492 $ 1,021 $ 1,012 $ 7,648,983 $ 3,976,244 $ 88,935,263 $ 27,803,108
============ =========== =========== =========== =========== ============ ============
SHARES
OUTSTANDING:
Class A Shares.... 117,762,509 32,564,675 46,844,859 8,616,848 23,479,089 33,649,080 23,884,270
============ =========== =========== =========== =========== ============ ============
Class B Shares.... 728,877 1,252,030 64,789 1,407,442 888,105 2,357,517 2,299,846
============ =========== =========== =========== =========== ============ ============
Class S Shares.... 7,781,260 295,254 10,532 530,782 227,427 1,258,885 375,178
============ =========== =========== =========== =========== ============ ============
Class I Shares.... 48,554,822 1,021 1,012 3,288,846 1,716,165 9,297,885 2,672,780
============ =========== =========== =========== =========== ============ ============
CLASS A SHARES:
Net asset value
per share of
beneficial
interest
outstanding*.... $1.00 $1.00 $1.00 $2.33 $2.32 $9.57 $10.40
============ =========== =========== =========== =========== ============ ============
Maximum sales
charge.......... -- -- -- 3.50% 3.50% 4.50% 4.50%
Maximum offering
price per share
of beneficial
interest
outstanding..... -- -- -- $2.41 $2.40 $10.02 $10.89
============ =========== =========== =========== =========== ============ ============
CLASS B SHARES:
Net asset value
and offering
price per share
of beneficial
interest
outstanding*.... $1.00 $1.00 $1.00 $2.33 $2.32 $9.57 $10.40
============ =========== =========== =========== =========== ============ ============
CLASS S SHARES:
Net asset value
and offering
price per share
of beneficial
interest
outstanding*.... $1.00 $1.00 $1.00 $2.33 $2.32 $9.57 $10.40
============ =========== =========== =========== =========== ============ ============
CLASS I SHARES:
Net asset value,
offering and
redemption price
per share of
beneficial
interest
outstanding..... $1.00 $1.00 $1.00 $2.33 $2.32 $9.57 $10.40
============ =========== =========== =========== =========== ============ ============
</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.
38
<PAGE> 40
- --------------------------------------------------------------------------------
<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 $ (8,655) $ (3,453) $ 39,645 $ 2,796 $ (995,809)+ $ (1,833,781)+
(11,516,519) (2,804,768) 56,223 (9,868,357) 9,519,615 (670,036) (2,080,285)
22,190,169 1,250,605 3,517,947 16,941,599 31,458,353 31,364,849 64,666,989
372,134,626 33,525,975 70,858,941 210,783,867 220,289,729 236,529,050 268,033,873
------------ ----------- ----------- ------------ ------------ ------------ ------------
$382,819,917 $31,963,157 $ 74,429,658 $217,896,754 $261,270,493 $266,228,054 $328,786,796
============ =========== =========== ============ ============ ============ ============
$358,975,906 $26,639,297 $ 52,451,383 $210,907,459 $155,779,526 $127,700,865 $205,628,154
============ =========== =========== ============ ============ ============ ============
$ 23,831,121 $ 5,311,016 $ 21,965,419 $ 6,976,546 $ 30,471,122 $ 28,653,283 $ 30,915,985
============ =========== =========== ============ ============ ============ ============
$ 11,837 $ 11,796 $ 11,817 $ 11,695 $ 11,990,329 $ 17,127,429 $ 13,257,091
============ =========== =========== ============ ============ ============ ============
$ 1,053 $ 1,048 $ 1,039 $ 1,054 $ 63,029,516 $ 92,746,477 $ 78,985,566
============ =========== =========== ============ ============ ============ ============
33,061,172 2,694,734 4,898,170 19,022,850 11,424,969 9,037,140 11,599,313
============ =========== =========== ============ ============ ============ ============
2,194,799 537,245 2,051,222 629,253 2,251,927 2,071,106 1,778,986
============ =========== =========== ============ ============ ============ ============
1,090 1,193 1,103 1,055 885,936 1,237,632 762,940
============ =========== =========== ============ ============ ============ ============
97 106 97 95 4,622,612 6,552,867 4,449,364
============ =========== =========== ============ ============ ============ ============
$10.86 $9.89 $10.71 $11.09 $13.64 $14.13 $17.73
============ =========== =========== ============ ============ ============ ============
4.50% 4.50% 4.50% 4.50% 5.75% 5.75% 5.75%
$11.37 $10.35 $11.21 $11.61 $14.47 $14.99 $18.81
============ =========== =========== ============ ============ ============ ============
$10.86 $9.89 $10.71 $11.09 $13.53 $13.83 $17.38
============ =========== =========== ============ ============ ============ ============
$10.86 $9.89 $10.71 $11.09 $13.53 $13.84 $17.38
============ =========== =========== ============ ============ ============ ============
$10.86 $9.89 $10.71 $11.09 $13.64 $14.15 $17.75
============ =========== =========== ============ ============ ============ ============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
------------ ---------
<S> <C> <C>
$ (823,173) $ (5,902)
(1,701,281) (20)
11,221,119 55,177
177,172,790 3,111,285
------------ ---------
$ 185,869,455 $3,160,540
============ =========
$ 67,334,053 $3,160,540
============ =========
$ 4,671,672 --
============
$ 14,792,962 --
============
$ 99,070,768 --
============
6,432,139 301,774
============ =========
450,199 --
============
1,416,262 --
============
9,499,055 --
============
$10.47 $10.47
============ =========
5.75% 2.00%
$11.11 $10.69
============ =========
$10.38 --
============
$10.45 --
============
$10.43 --
============
</TABLE>
See Notes to Financial Statements.
39
<PAGE> 41
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<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............ 4,781,461 1,015,254 877,687 1,301,616 2,431,427 17,504,032 13,164,892
Foreign withholding
tax on interest
income............ -- -- -- -- (43,939) -- --
Fee income
(Note 6).......... -- -- -- -- -- 1,561,550 644,482
--------- --------- --------- ---------- ---------- ----------- -----------
Total Investment
Income........ 4,781,461 1,015,254 877,687 1,301,616 2,387,488 19,065,582 13,809,374
--------- --------- --------- ---------- ---------- ----------- -----------
EXPENSES:
Investment advisory
fee (Note 3)...... 350,278 75,858 99,496 89,234 213,863 1,300,699 1,049,332
Administration fee
(Note 3).......... 262,709 56,894 74,622 62,464 115,157 827,718 565,025
Custodian fees...... 1,672 -- 1,312 2,588 7,032 25,751 4,120
Legal and audit
fees.............. 18,486 10,054 12,455 10,882 24,537 42,038 32,969
Trustees' fees and
expenses
(Note 4).......... 5,946 1,302 1,675 1,186 2,218 15,905 10,858
Amortization of
organization costs
(Note 8).......... -- -- -- 1,773 1,000 -- --
Registration and
filing fees....... 19,321 12,368 5,726 14,720 7,124 2,946 7,105
Transfer agent
fees.............. 71,974 11,204 19,458 7,396 25,237 185,900 127,156
Other............... 16,654 3,442 4,536 10,805 8,687 86,155 39,593
--------- --------- --------- ---------- ---------- ----------- -----------
Subtotal........ 747,040 171,122 219,280 201,048 404,855 2,487,112 1,836,158
Shareholder
servicing and
distribution fees
(Note 5):
Class A Shares.... 178,217 46,435 62,080 34,086 76,581 490,169 350,715
Class B Shares.... 3,602 2,186 362 17,207 9,181 117,538 122,669
Class S Shares.... 95,245 1,717 53 13,636 7,668 162,596 48,652
Fees waived and/or
expenses absorbed
by investment
advisor and
administrator
(Note 3).......... (394,229) (58,069) (69,963) (111,158) (205,723) (591,067) (245,306)
Fees reduced by
credits allowed by
the custodian
(Note 3).......... (458) (84) -- (135) (1,153) (11,580) (110)
--------- --------- --------- ---------- ---------- ----------- -----------
Total expenses
before
interest
expense....... 629,417 163,307 211,812 154,684 291,409 2,654,768 2,112,778
--------- --------- --------- ---------- ---------- ----------- -----------
Interest expense
(Note 6).......... -- -- -- -- -- 27,078 --
--------- --------- --------- ---------- ---------- ----------- -----------
Total
Expenses...... 629,417 163,307 211,812 154,684 291,409 2,681,846 2,112,778
--------- --------- --------- ---------- ---------- ----------- -----------
NET INVESTMENT
INCOME/(LOSS)..... 4,152,044 851,947 665,875 1,146,932 2,096,079 16,383,736 11,696,596
--------- --------- --------- ---------- ---------- ----------- -----------
NET REALIZED AND
UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS
(Notes 2 and 6):
Realized gain/(loss)
from:
Security
transactions.... 20,053 489 -- (58,164) 759,051 4,161,471 2,217,432
Forward foreign
currency
contracts and
foreign currency
transactions.... -- -- -- (83,703) 1,115,814 -- --
Futures
contracts....... -- -- -- (282,148) -- (2,908,802) --
Written options... -- -- -- 8,104 420,196 -- --
Net unrealized
appreciation/
(depreciation) of:
Securities........ -- -- -- 301,831 (113,515) 4,442,217 5,388,659
Forward foreign
currency
contracts....... -- -- -- -- (344,606) -- --
Foreign currency,
written options,
futures
contracts and
other assets and
liabilities..... -- -- -- 129,802 48,069 1,765,185 --
--------- --------- --------- ---------- ---------- ----------- -----------
Net Realized and
Unrealized
Gain/(Loss) on
Investments....... 20,053 489 -- 15,722 1,885,009 7,460,071 7,606,091
--------- --------- --------- ---------- ---------- ----------- -----------
NET
INCREASE/(DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS........ $4,172,097 $ 852,436 $ 665,875 $ 1,162,654 $3,981,088 $ 23,843,807 $ 19,302,687
========= ========= ========= ========== ========== =========== ===========
</TABLE>
See Notes to Financial Statements.
40
<PAGE> 42
- --------------------------------------------------------------------------------
<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>
$ -- $ -- $ -- $ -- $ 2,413,013 $ 591,700 $ 459,932
-- -- -- -- -- (10,062) (49,728)
12,797,335 980,175 2,059,379 7,628,337 134,154 1,002,839 281,854
== == == == == == ==
----------- --------- ---------- ----------- ----------- ----------- -----------
12,797,335 980,175 2,059,379 7,628,337 2,547,167 1,584,477 692,058
----------- --------- ---------- ----------- ----------- ----------- -----------
1,079,586 92,908 209,192 630,258 966,920 1,194,913 1,424,329
687,009 59,123 133,122 401,074 445,652 457,801 576,110
-- 1,389 2,057 -- 8,244 24,669 9,239
32,327 12,276 14,349 26,042 24,196 25,988 32,960
13,198 1,141 2,556 7,722 8,367 8,528 10,748
-- 6,572 811 -- -- 5,809 --
2,978 4,684 3,558 7,979 21,484 21,210 22,178
152,077 14,877 27,224 89,770 89,589 98,727 113,035
53,733 7,219 13,428 35,489 30,122 31,707 35,560
----------- --------- ---------- ----------- ----------- ----------- -----------
2,020,908 200,189 406,297 1,198,334 1,594,574 1,869,352 2,224,159
462,052 35,749 67,949 277,722 225,490 206,602 304,234
114,611 25,866 108,490 34,975 135,124 135,915 150,880
58 58 58 57 139,701 209,894 171,914
(470,331) (101,255) (180,191) (206,671) -- -- --
-- (1,389) (2,057) -- (965) (7,047) (2,777)
----------- --------- ---------- ----------- ----------- ----------- -----------
2,127,298 159,218 400,546 1,304,417 2,093,924 2,414,716 2,848,410
----------- --------- ---------- ----------- ----------- ----------- -----------
-- -- -- -- -- -- --
----------- --------- ---------- ----------- ----------- ----------- -----------
2,127,298 159,218 400,546 1,304,417 2,093,924 2,414,716 2,848,410
----------- --------- ---------- ----------- ----------- ----------- -----------
10,670,037 820,957 1,658,833 6,323,920 453,243 (830,239) (2,156,352)
----------- --------- ---------- ----------- ----------- ----------- -----------
2,554,927 169,564 139,393 1,820,933 17,079,773 8,052,790 (1,084,160)
-- -- -- -- -- (175,487) (912,637)
128,641 79,232 24,949 (898,795) -- 2,682,530 --
-- -- -- -- -- -- --
6,467,254 656,067 1,255,761 3,819,593 11,244,738 2,721,404 (10,975,906)
-- -- -- -- -- 71,524 (595,120)
272,682 -- -- 563,310 -- 463,155 (18,505)
----------- --------- ---------- ----------- ----------- ----------- -----------
9,423,504 904,863 1,420,103 5,305,041 28,324,511 13,815,916 (13,586,328)
----------- --------- ---------- ----------- ----------- ----------- -----------
$20,093,541 $1,725,820 $3,078,936 $11,628,961 $28,777,754 $12,985,677 $(15,742,680)
=========== ========= ========== =========== =========== =========== ===========
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
----------- ---------
<S> <C> <C>
$ 1,460,266 $ --
(153,607) --
240,371 102,545
(489) --
-- --
----------- -------
1,546,541 102,545
----------- -------
722,602 3,988
307,660 5,583
27,131 690
37,665 12,186
5,858 107
-- 5,878
21,073 4,639
72,003 1,148
44,870 212
----------- -------
1,238,862 34,431
134,876 3,988
22,835 --
184,853 --
-- (27,481)
(6,313) (683)
----------- -------
1,575,113 10,255
----------- -------
-- --
----------- -------
1,575,113 10,255
----------- -------
(28,572) 92,290
----------- -------
(303,963) 8,292
(10,599) --
== ==
4,054,392 47,114
356,490 --
(3,833) --
----------- -------
4,092,487 55,406
----------- -------
$ 4,063,915 $147,696
=========== =======
</TABLE>
See Notes to Financial Statements.
41
<PAGE> 43
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<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)... $ 4,152,044 $ 851,947 $ 665,875 $ 1,146,932 $ 2,096,079 $ 16,383,736 $ 11,696,596
Net realized
gain/(loss)
from security
transactions,
forward
foreign
currency
contracts,
foreign
currency
transactions,
futures
contracts and
closed written
options during
the period.... 20,053 489 -- (415,911) 2,295,061 1,252,669 2,217,432
Net unrealized
appreciation/
(depreciation)
of securities,
forward
foreign
currency
contracts,
foreign
currency,
futures
contracts,
written
options and
other assets
and
liabilities
during the
period........ -- -- -- 431,633 (410,052) 6,207,402 5,388,659
------------ ----------- ----------- ----------- ------------ ------------ ------------
Net
increase/(decrease)
in net assets
resulting from
operations.... 4,172,097 852,436 665,875 1,162,654 3,981,088 23,843,807 19,302,687
Distributions to
shareholders
from:
Net investment
income:
Class A
Shares.... (3,437,833) (836,892) (665,068) (837,933) (2,842,788) (13,287,536) (10,259,230)
Class B
Shares.... (14,695) (8,644) (689) (91,082) (82,698) (708,224) (803,862)
Class S
Shares.... (386,426) (6,436) (102) (73,745) (51,870) (981,613) (320,118)
Class I
Shares.... (330,040) (21) (16) (64,836) (99,934) (863,460) (297,995)
Net realized
gains on
investments:
Class A
Shares.... -- -- -- -- -- -- --
Class B
Shares.... -- -- -- -- -- -- --
Class S
Shares.... -- -- -- -- -- -- --
Class I
Shares.... -- -- -- -- -- -- --
Net
increase/(decrease)
in net assets
from Fund
share
transactions:
Class A
Shares.... (35,914,527) (6,478,564) (4,408,065) (12,483,005) (12,201,962) (108,312,317) (56,793,650)
Class B
Shares.... 307,094 1,140,311 (82,476) (175,782) 441,004 (1,508,799) (1,265,423)
Class S
Shares.... (13,171,565) (143,639) 102 (2,307,374) (1,716,809) (24,419,551) (8,389,594)
Class I
Shares.... 48,554,822 1,021 1,012 7,662,152 3,998,267 89,067,682 27,788,270
------------ ----------- ----------- ----------- ------------ ------------ ------------
Net
increase/(decrease)
in net
assets........ (221,073) (5,480,428) (4,489,427) (7,208,951) (8,575,702) (37,170,011) (31,038,915)
NET ASSETS:
Beginning of
period........ 175,056,384 39,581,325 51,368,812 39,407,726 69,531,388 482,617,321 335,134,319
------------ ----------- ----------- ----------- ------------ ------------ ------------
End of period... $174,835,311 $34,100,897 $46,879,385 $ 32,198,775 $ 60,955,686 $445,447,310 $304,095,404
============ =========== =========== =========== ============ ============ ============
Undistributed
net investment
income/(accumulated
net investment
loss/distributions
in excess of
net investment
income) at end
of period..... $ (8,917) $ 7,398 $ 2,363 $ 18,714 $ (1,190,805) $ 548,636 $ (1,071,576)
============ =========== =========== =========== ============ ============ ============
</TABLE>
- ---------------------
+ Represents accumulated net investment loss.
See Notes to Financial Statements.
42
<PAGE> 44
- --------------------------------------------------------------------------------
<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>
$ 10,670,037 $ 820,957 $ 1,658,833 $ 6,323,920 $ 453,243 $ (830,239) $ (2,156,352)
2,683,568 248,796 164,342 922,138 17,079,773 10,559,833 (1,996,797)
6,739,936 656,067 1,255,761 4,382,903 11,244,738 3,256,083 (11,589,531)
------------ ----------- ----------- ------------ ------------ ------------ ------------
20,093,541 1,725,820 3,078,936 11,628,961 28,777,754 12,985,677 (15,742,680)
(10,128,985) (747,885) (1,248,364) (6,156,147) (365,490) -- --
(540,750) (116,562) (416,444) (167,472) -- -- --
(276) (262) (224) (275) -- -- --
(26) (80) (22) (26) (84,957) -- --
-- -- (226,589) -- (21,831,640) (19,083,057) (16,295,525)
-- -- (94,705) -- (4,043,990) (4,239,788) (2,456,114)
-- -- (51) -- (1,738,840) (2,712,699) (1,158,776)
-- -- (5) -- (8,369,768) (13,384,789) (5,828,460)
(22,080,491) (3,911,658) (2,854,250) (27,593,253) (24,408,710) (40,678,752) (49,078,458)
2,744,787 (247,473) 712,506 13,656 7,588,906 6,515,103 5,792,289
276 304 275 275 (18,361,010) (27,571,758) (27,109,693)
1,026 1,025 1,026 1,026 67,619,523 103,959,080 84,352,298
------------ ----------- ----------- ------------ ------------ ------------ ------------
(9,910,898) (3,296,771) (1,047,911) (22,273,255) 24,781,778 15,789,017 (27,525,119)
392,730,815 35,259,928 75,477,569 240,170,009 236,488,715 250,439,037 356,311,915
------------ ----------- ----------- ------------ ------------ ------------ ------------
$382,819,917 $31,963,157 $ 74,429,658 $217,896,754 $261,270,493 $266,228,054 $328,786,796
============ =========== =========== ============ ============ ============ ============
$ 11,641 $ (8,655) $ (3,453) $ 39,645 $ 2,796 $ (995,809)+ $ (1,833,781)+
============ =========== =========== ============ ============ ============ ============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
------------ ---------
<S> <C><C> <C>
$ (28,572) $ 92,290
(314,562) 8,292
4,407,049 47,114
------------ ---------
4,063,915 147,696
(944,865) (200,614)
(33,752) --
-- --
(1,421,219) --
(740,110) (14,490)
(45,566) --
(157,992) --
(867,958) --
(48,254,464) 103,246
223,911 --
(23,883,341) --
98,330,105 --
------------ ---------
26,268,664 35,838
159,600,791 3,124,702
------------ ---------
$ 185,869,455 $3,160,540
============ =========
$ (823,173) $ (5,902)
============ =========
</TABLE>
See Notes to Financial Statements.
43
<PAGE> 45
- --------------------------------------------------------------------------------
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) from
security
transactions,
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
securities,
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.
44
<PAGE> 46
- --------------------------------------------------------------------------------
<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>
$ 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.
45
<PAGE> 47
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL
MONEY MONEY MONEY QUALITY GOVERNMENT
FUND FUND FUND BOND FUND FUND
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold.......................... $ 223,177,277 $ 134,854,953 $ 16,030,346 $ 1,575,717 $ 1,115,255
Issued as reinvestment
of dividends................ 3,235,960 765,716 645,210 533,073 1,794,552
Redeemed...................... (262,327,764) (142,099,233) (21,083,621) (14,591,795) (15,111,769)
------------ ------------ ----------- ----------- -----------
Net increase/(decrease)....... $ (35,914,527) $ (6,478,564) $ (4,408,065) $(12,483,005) $(12,201,962)
============ ============ =========== =========== ===========
CLASS B:
Sold.......................... $ 948,282 $ 11,029,303 $ -- $ 354,333 $ 676,094
Issued as reinvestment
of dividends............... 11,759 5,396 657 67,782 61,762
Redeemed..................... (652,947) (9,894,388) (83,133) (597,897) (296,852)
------------ ------------ ----------- ----------- -----------
Net increase/(decrease)...... $ 307,094 $ 1,140,311 $ (82,476) $ (175,782) $ 441,004
============ ============ =========== =========== ===========
CLASS S:
Sold.......................... $ 5,291,230 $ 4,620,928 $ -- $ 220,727 $ 189,849
Issued as reinvestment
of dividends................ 372,833 6,315 102 54,050 38,808
Redeemed...................... (18,835,628) (4,770,882) -- (2,582,151) (1,945,466)
------------ ------------ ----------- ----------- -----------
Net increase/(decrease)....... $ (13,171,565) $ (143,639) $ 102 $ (2,307,374) $ (1,716,809)
============ ============ =========== =========== ===========
CLASS I:
Sold.......................... $ 48,648,709 $ 1,000 $ 1,000 $ 7,806,646 $ 4,246,241
Issued as reinvestment
of dividends................ -- 21 12 -- --
Redeemed...................... (93,887) -- -- (144,494) (247,974)
------------ ------------ ----------- ----------- -----------
Net increase.................. $ 48,554,822 $ 1,021 $ 1,012 $ 7,662,152 $ 3,998,267
============ ============ =========== =========== ===========
SHARES
CLASS A:
Sold.......................... 223,177,277 134,854,953 16,030,346 679,723 482,892
Issued as reinvestment
of dividends................ 3,235,960 765,716 645,210 229,428 775,422
Redeemed...................... (262,327,764) (142,099,233) (21,083,621) (6,277,477) (6,519,768)
------------ ------------ ----------- ----------- -----------
Net increase/(decrease)....... (35,914,527) (6,478,564) (4,408,065) (5,368,326) (5,261,454)
============ ============ =========== =========== ===========
CLASS B:
Sold.......................... 948,282 11,029,303 -- 152,819 291,952
Issued as reinvestment
of dividends................ 11,759 5,396 657 29,164 26,652
Redeemed...................... (652,947) (9,894,388) (83,133) (257,214) (127,617)
------------ ------------ ----------- ----------- -----------
Net increase/(decrease)....... 307,094 1,140,311 (82,476) (75,231) 190,987
============ ============ =========== =========== ===========
CLASS S:
Sold.......................... 5,291,230 4,620,928 -- 95,091 79,684
Issued as reinvestment
of dividends................ 372,833 6,315 102 23,280 19,764
Redeemed...................... (18,835,628) (4,770,882) -- (1,110,135) (838,852)
------------ ------------ ----------- ----------- -----------
Net increase/(decrease)....... (13,171,565) (143,639) 102 (991,764) (739,404)
============ ============ =========== =========== ===========
CLASS I:
Sold.......................... 48,648,709 1,000 1,000 3,350,848 1,822,154
Issued as reinvestment
of dividends................ -- 21 12 -- --
Redeemed...................... (93,887) -- -- (62,002) (105,989)
------------ ------------ ----------- ----------- -----------
Net increase.................. 48,554,822 1,021 1,012 3,288,846 1,716,165
============ ============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
U.S. CORPORATE
GOVERNMENT INCOME
FUND FUND
------------ ------------
<S> <C> <C>
AMOUNT
CLASS A:
Sold.......................... $ 16,130,458 $ 10,255,296
Issued as reinvestment
of dividends................ 8,274,361 5,533,494
Redeemed...................... (132,717,136) (72,582,440)
------------ ------------
Net increase/(decrease)....... $(108,312,317) $(56,793,650)
============ ============
CLASS B:
Sold.......................... $ 2,226,955 $ 1,731,650
Issued as reinvestment
of dividends............... 440,850 399,863
Redeemed..................... (4,176,604) (3,396,936)
------------ ------------
Net increase/(decrease)...... $ (1,508,799) $ (1,265,423)
============ ============
CLASS S:
Sold.......................... $ 7,629,452 $ 1,917,485
Issued as reinvestment
of dividends................ 919,216 284,561
Redeemed...................... (32,968,219) (10,591,640)
------------ ------------
Net increase/(decrease)....... $ (24,419,551) $ (8,389,594)
============ ============
CLASS I:
Sold.......................... $ 89,563,948 $ 28,097,477
Issued as reinvestment
of dividends................ -- --
Redeemed...................... (496,266) (309,207)
------------ ------------
Net increase.................. $ 89,067,682 $ 27,788,270
============ ============
SHARES
CLASS A:
Sold.......................... 1,715,435 1,003,788
Issued as reinvestment
of dividends................ 869,507 539,656
Redeemed...................... (13,929,512) (7,045,512)
------------ ------------
Net increase/(decrease)....... (11,344,570) (5,502,068)
============ ============
CLASS B:
Sold.......................... 244,137 170,046
Issued as reinvestment
of dividends................ 38,080 38,973
Redeemed...................... (440,158) (331,282)
------------ ------------
Net increase/(decrease)....... (157,941) (122,263)
============ ============
CLASS S:
Sold.......................... 842,095 189,065
Issued as reinvestment
of dividends................ 67,239 27,867
Redeemed...................... (3,442,829) (1,023,904)
------------ ------------
Net increase/(decrease)....... (2,533,495) (806,972)
============ ============
CLASS I:
Sold.......................... 9,349,684 2,702,200
Issued as reinvestment
of dividends................ -- --
Redeemed...................... (51,799) (29,420)
------------ ------------
Net increase.................. 9,297,885 2,672,780
============ ============
</TABLE>
See Notes to Financial Statements.
46
<PAGE> 48
- --------------------------------------------------------------------------------
<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>
$ 12,776,259 $ 1,619,580 $ 4,230,455 $ 15,958,359 $ 58,955,197 $ 64,907,103 $ 133,379,000
6,441,318 366,641 1,127,470 3,583,052 21,805,761 18,433,018 16,032,518
(41,298,068) (5,897,879) (8,212,175) (47,134,664) (105,169,668) (124,018,873) (198,489,976)
----------- ----------- ----------- ------------ ------------ ------------ ------------
$(22,080,491) $ (3,911,658) $ (2,854,250) $ (27,593,253) $ (24,408,710) $ (40,678,752) $ (49,078,458)
=========== =========== =========== ============ ============ ============ ============
$ 4,798,869 $ 460,203 $ 1,968,930 $ 733,814 $ 6,723,861 $ 8,092,315 $ 14,395,691
381,710 76,273 397,639 94,088 3,980,455 4,183,527 2,398,228
(2,435,792) (783,949) (1,654,063) (814,246) (3,115,410) (5,760,739) (11,001,630)
----------- ----------- ----------- ------------ ------------ ------------ ------------
$ 2,744,787 $ (247,473) $ 712,506 $ 13,656 $ 7,588,906 $ 6,515,103 $ 5,792,289
=========== =========== =========== ============ ============ ============ ============
$ -- $ -- $ -- $ -- $ 7,441,113 $ 10,219,431 $ 7,743,390
276 304 275 275 1,686,456 2,644,251 1,126,275
-- -- -- -- (27,488,579) (40,435,440) (35,979,358)
----------- ----------- ----------- ------------ ------------ ------------ ------------
$ 276 $ 304 $ 275 $ 275 $ (18,361,010) $ (27,571,758) $ (27,109,693)
=========== =========== =========== ============ ============ ============ ============
$ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 67,786,107 $ 103,970,864 $ 84,359,503
26 25 26 26 -- -- --
-- -- -- -- (166,584) (11,784) (7,205)
----------- ----------- ----------- ------------ ------------ ------------ ------------
$ 1,026 $ 1,025 $ 1,026 $ 1,026 $ 67,619,523 $ 103,959,080 $ 84,352,298
=========== =========== =========== ============ ============ ============ ============
1,187,945 165,302 397,086 1,461,765 5,697,940 4,093,273 7,021,984
598,308 37,347 105,551 326,418 17,442 1,319,471 928,883
(3,835,460) (601,250) (768,603) (4,308,345) (7,276,871) (7,827,208) (10,418,541)
----------- ----------- ----------- ------------ ------------ ------------ ------------
(2,049,207) (398,601) (265,966) (2,520,162) (1,561,489) (2,414,464) (2,467,674)
=========== =========== =========== ============ ============ ============ ============
447,145 47,233 184,764 67,134 764,919 515,363 763,605
35,415 7,146 37,221 8,570 -- 305,813 141,655
(225,587) (80,154) (155,054) (74,113) (218,009) (370,495) (581,190)
----------- ----------- ----------- ------------ ------------ ------------ ------------
256,973 (25,775) 66,931 1,591 546,910 450,681 324,070
=========== =========== =========== ============ ============ ============ ============
-- -- -- -- 658,465 663,380 412,267
25 26 26 25 -- 193,152 66,525
-- -- -- -- (1,873,044) (2,569,279) (1,910,874)
----------- ----------- ----------- ------------ ------------ ------------ ------------
25 26 26 25 (1,214,579) (1,712,747) (1,432,082)
=========== =========== =========== ============ ============ ============ ============
95 103 95 93 4,633,690 6,553,632 4,449,745
2 3 2 2 -- -- --
-- -- -- -- (11,078) (765) (381)
----------- ----------- ----------- ------------ ------------ ------------ ------------
97 106 97 95 4,622,612 6,552,867 4,449,364
=========== =========== =========== ============ ============ ============ ============
<CAPTION>
INTERNATIONAL TARGET
GROWTH MATURITY
FUND 2002 FUND
------------- ---------
<S> <C> <C>
$ 63,903,896 $ 73,978
1,660,283 214,280
(113,818,643) (185,012)
------------- ----------
$ (48,254,464) $ 103,246
============= ==========
$ 748,075 --
77,717 --
(601,881) --
-------------
$ 223,911 --
=============
$ 11,954,520 --
154,429 --
(35,992,290) --
-------------
$ (23,883,341) --
=============
$ 98,342,071 --
-- --
(11,966) --
-------------
$ 98,330,105 --
=============
6,194,312 6,932
159,796 20,369
(11,000,200) (16,908)
------------ ---------
(4,646,092) 10,393
============ =========
73,488 --
7,546 --
(58,857) --
------------
22,177 --
============
1,176,813 --
14,891 --
(3,522,063) --
------------
(2,330,359) --
============
9,500,237 --
-- --
(1,182) --
------------
9,499,055 --
============
</TABLE>
See Notes to Financial Statements.
47
<PAGE> 49
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY (CONTINUED)
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL
MONEY MONEY MONEY QUALITY GOVERNMENT
FUND FUND FUND BOND FUND FUND
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
AMOUNT
CLASS A:
Sold....................... $ 489,604,814 $ 472,714,088 $ 46,329,303 $ 45,305,421 $ 6,434,828
Issued as reinvestment
of dividends............. 6,822,621 1,946,590 1,482,501 1,923,361 3,769,772
Redeemed................... (452,731,738) (483,120,127) (45,435,607) (57,823,020) (50,472,247)
------------- ------------- ------------ ------------ -------------
Net increase/(decrease).... $ 43,695,697 $ (8,459,449) $ 2,376,197 $(10,594,238) $ (40,267,647)
============= ============= ============ ============ =============
CLASS B:
Sold....................... $ 411,746 $ 216,238 $ 617,620 $ 1,843,435 $ 517,070
Issued as reinvestment
of dividends............. 10,385 2,681 1,524 130,535 65,051
Redeemed................... (240,792) (229,940) (550,706) (1,491,690) (310,725)
------------- ------------- ------------ ------------ -------------
Net increase/(decrease).... $ 181,339 $ (11,021) $ 68,438 $ 482,280 $ 271,396
============= ============= ============ ============ =============
CLASS S:
Sold....................... $ 25,004,949 $ 28,107,716 $ -- $ 17,113,179 $ 2,340,079
Issued as reinvestment
of dividends............... 593,654 8,198 227 256,069 116,648
Redeemed... (12,036,378) (28,414,129) -- (15,960,041) (2,583,929)
------------- ------------- ------------ ------------ -------------
Net increase/(decrease).... $ 13,562,225 $ (298,215) $ 227 $ 1,409,207 $ (127,202)
============= ============= ============ ============ =============
SHARES
CLASS A:
Sold....................... 489,604,814 472,714,088 46,329,303 19,279,499 2,823,498
Issued as reinvestment
of dividends............... 6,822,621 1,946,590 1,482,501 820,274 1,650,964
Redeemed................... (452,731,738) (483,120,127) (45,435,607) (24,720,148) (22,088,752)
------------- ------------- ------------ ------------ -------------
Net increase/(decrease).... 43,695,697 (8,459,449) 2,376,197 (4,620,375) (17,614,290)
============= ============= ============ ============ =============
CLASS B:
Sold....................... 411,746 216,238 617,620 782,937 226,638
Issued as reinvestment
of dividends............... 10,385 2,681 1,524 55,691 28,488
Redeemed................... (240,792) (229,940) (550,706) (637,527) (136,155)
------------- ------------- ------------ ------------ -------------
Net increase/(decrease).... 181,339 (11,021) 68,438 201,101 118,971
============= ============= ============ ============ =============
CLASS S:
Sold....................... 25,004,949 28,107,716 -- 7,296,744 1,025,154
Issued as reinvestment
of dividends............... 593,654 8,198 227 109,688 51,009
Redeemed................... (12,036,378) (28,414,129) -- (6,864,612) (1,128,546)
------------- ------------- ------------ ------------ -------------
Net increase/(decrease).... 13,562,225 (298,215) 227 541,820 (52,383)
============= ============= ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
U.S. CORPORATE
GOVERNMENT INCOME
FUND FUND
------------ ------------
<S> <C> <C>
AMOUNT
CLASS A:
Sold....................... $ 91,110,162 $ 47,008,825
Issued as reinvestment
of dividends............. 18,152,728 13,378,553
Redeemed................... (134,635,010) (134,545,217)
------------- -------------
Net increase/(decrease).... $ (25,372,120) $ (74,157,839)
============= =============
CLASS B:
Sold....................... $ 16,616,782 $ 15,286,512
Issued as reinvestment
of dividends............. 696,997 661,629
Redeemed................... (3,609,667) (5,519,358)
------------- -------------
Net increase/(decrease).... $ 13,704,112 $ 10,428,783
============= =============
CLASS S:
Sold....................... $ 30,599,063 $ 9,973,109
Issued as reinvestment
of dividends............... 833,015 509,009
Redeemed... (2,104,433) (6,743,093)
------------- -------------
Net increase/(decrease).... $ 29,327,645 $ 3,739,025
============= =============
SHARES
CLASS A:
Sold....................... 9,500,727 4,439,689
Issued as reinvestment
of dividends............... 1,882,759 1,270,593
Redeemed................... (13,977,794) (12,778,541)
------------- -------------
Net increase/(decrease).... (2,594,308) (7,068,259)
============= =============
CLASS B:
Sold....................... 1,718,996 1,447,368
Issued as reinvestment
of dividends............... 72,444 63,015
Redeemed................... (377,363) (527,389)
------------- -------------
Net increase/(decrease).... 1,414,077 982,994
============= =============
CLASS S:
Sold....................... 3,217,067 944,929
Issued as reinvestment
of dividends............... 86,865 48,653
Redeemed................... (219,071) (638,205)
------------- -------------
Net increase/(decrease).... 3,084,861 355,377
============= =============
</TABLE>
See Notes to Financial Statements.
48
<PAGE> 50
- --------------------------------------------------------------------------------
<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>
$ 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
------------ -----------
<S> <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 --
(811,396) --
------------
$ 1,980,810 --
============
$ 28,886,599 --
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.
49
<PAGE> 51
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
U.S. GOVERNMENT FUND
SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Cash used for financing activities:
Proceeds from capital shares sold.......................................... $ 115,019,747
Payments on capital shares redeemed........................................ (170,064,989)
---------------
Cash used for capital share transactions................................... (55,045,242)
Dividends and distributions paid in cash................................... (4,695,331)
Net payments on dollar roll transactions................................... (66,540,871)
Interest paid on reverse repurchase agreements............................. (27,078)
---------------
$(126,308,522)
Cash provided by operations:
Purchases of long-term portfolio securities................................ (1,718,502,334)
Net proceeds from sales of short-term investments.......................... 14,294,066
Proceeds from sales of long-term portfolio securities...................... 1,816,541,907
Net payments for futures transactions...................................... (2,908,802)
Variation margin for futures transactions.................................. 1,048,755
Premiums received for written options...................................... 171,953
---------------
110,645,545
---------------
Net investment income...................................................... 16,383,736
Net change in receivables/payables related to operations................... (681,549)
---------------
15,702,187
---------------
126,347,732
-------------
Net increase in cash....................................................... 39,210
Cash at beginning of period................................................ 308,636
-------------
Cash at end of period...................................................... $ 347,846
=============
</TABLE>
See Notes to Financial Statements.
50
<PAGE> 52
- --------------------------------------------------------------------------------
CORPORATE INCOME FUND
SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Cash used for financing activities:
Proceeds from capital shares sold............................................. $ 42,169,637
Payments on capital shares redeemed........................................... (87,843,594)
------------
Cash used for capital share transactions...................................... (45,673,957)
Dividends and distributions paid in cash...................................... (5,432,598)
Net payments on dollar roll transactions...................................... (36,161,169)
------------
$(87,267,724)
Cash provided by operations:
Purchases of long-term portfolio securities................................... (5,658,749)
Net purchases of short-term investments....................................... (5,837,389)
Proceeds from sales of long-term portfolio securities......................... 86,295,370
------------
74,799,232
------------
Net investment income......................................................... 11,696,596
Net change in receivables/payables related to operations...................... 785,646
------------
12,482,242
------------
87,281,474
------------
Net increase in cash............................................................ 13,750
Cash at beginning of period..................................................... 0
------------
Cash at end of period........................................................... $ 13,750
============
</TABLE>
See Notes to Financial Statements.
51
<PAGE> 53
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/96 06/30/95 06/30/94 06/30/93 06/30/92
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................... 0.024 0.051 0.049 0.030 0.031 0.048
-------- ------- ------- ------- ------- -------
Total from investment operations............ 0.024 0.051 0.049 0.030 0.031 0.048
LESS DISTRIBUTIONS:
Dividends from net investment income........ (0.024) (0.051) (0.049) (0.030) (0.031) (0.048)
-------- ------- ------- ------- ------- -------
Total distributions......................... (0.024) (0.051) (0.049) (0.030) (0.031) (0.048)
-------- ------- ------- ------- ------- -------
Realized gain on investments distributed to
shareholders.............................. -- (0.000) # (0.000) # (0.000)# -- --
-------- ------- ------- ------- ------- -------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= =======
TOTAL RETURN+ 2.45% 5.22% 5.06% 3.04% 3.17% 4.95%
======== ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's)........ $ 117,526 $153,786 $110,012 $53,973 $48,283 $71,492
Ratio of operating expenses to average net
assets.................................... 0.65%** 0.65% 0.54% 0.45% 0.41% 0.42%
Ratio of net investment income to average
net assets................................ 4.81%** 5.04% 5.08% 2.99% 3.15% 4.90%
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian.................. 0.65%**(a) 0.65% (a) N/A N/A N/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.................. 1.10%**(a) 1.15% (a) 1.18% 1.35% 1.32% 1.34%
Net investment income per share without fee
waivers, expenses absorbed and/or fees
reduced by credits allowed by the
custodian................................. $ 0.022 $ 0.046 $ 0.043 $ 0.021 $ 0.022 $ 0.039
</TABLE>
- ---------------------
** Annualized.
+ 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.
52
<PAGE> 54
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------ ------------------------------------ --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED) 06/30/96 06/30/95* (UNAUDITED) 06/30/96 06/30/95* (UNAUDITED)*
----------- -------- --------- ----------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.021 0.043 0.042 0.021 0.043 0.042 0.022
------- ------- ------- ------- ------- ------- -------
Total from investment
operations..................... 0.021 0.043 0.042 0.021 0.043 0.042 0.022
LESS DISTRIBUTIONS:
Dividends from net investment
income......................... (0.021) (0.043) (0.042) (0.021) (0.043) (0.042) (0.022)
------- ------- ------- ------- ------- ------- -------
Total distributions.............. (0.021) (0.043) (0.042) (0.021) (0.043) (0.042) (0.022)
------- ------- ------- ------- ------- ------- -------
Realized gain on investments
distributed to shareholders.... -- (0.000) # (0.000)# -- (0.000) # (0.000)# --
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 2.07% 4.40% 4.29% 2.07% 4.40% 4.29% 2.24%
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)......................... $ 732 $ 422 $ 241 $ 7,819 $20,848 $ 7,399 $ 48,758
Ratio of operating expenses to
average net assets............. 1.40%** 1.40% 1.29% 1.40%** 1.40% 1.29% 0.40%**
Ratio of net investment income to
average net assets............. 4.06%** 4.29% 4.33% 4.06%** 4.29% 4.33% 5.06%**
Ratio of operating expenses to
average net assests without
fees reduced by credits allowed
by the custodian............... 1.40%**(a) 1.40% (a) N/A 1.40%**(a) 1.40% (a) N/A 0.40%**(a)
Ratio of operating expenses to
average net assests without fee
waivers, expenses absorbed
and/or fees reduced by credits
allowed by the custodian....... 1.85%**(a) 1.90% (a) 1.93% 1.85%**(a) 1.90% (a) 1.93% 0.85%**(a)
Net investment income per share
without fee waivers, expenses
absorbed and/or fees reduced by
credits allowed by the
custodian...................... $ 0.019 $ 0.038 $ 0.036 $ 0.019 $ 0.038 $ 0.036 $ 0.020
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ 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 and administrator or if fees had not been paid
indirectly 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.
</TABLE>
53
<PAGE> 55
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/96 06/30/95 06/30/94 06/30/93 06/30/92
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................... 0.023 0.047 0.046 0.027 0.027 0.042
-------- ------- ------- ------- ------- -------
Total from investment operations............ 0.023 0.047 0.046 0.027 0.027 0.042
LESS DISTRIBUTIONS:
Dividends from net investment income........ (0.023) (0.047) (0.046) (0.027) (0.027) (0.042)
-------- ------- ------- ------- ------- -------
Total distributions......................... (0.023) (0.047) (0.046) (0.027) (0.027) (0.042)
-------- ------- ------- ------- ------- -------
Realized gain on investments distributed to
shareholders.............................. -- -- -- -- -- 0.002
-------- ------- ------- ------- ------- -------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= =======
TOTAL RETURN+ 2.29% 4.81% 4.67% 2.67% 2.70% 4.45%
======== ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's)........ $32,553 $39,031 $47,492 $30,180 $36,802 $44,233
Ratio of operating expenses to average net
assets.................................... 0.85%** 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income to average
net assets................................ 4.51%** 4.70% 4.63% 2.68% 2.69% 4.43%
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian.................. 0.85%**(a) 0.85%(a) N/A N/A N/A N/A
Ratio of operating expenses to average net
assets without fee waivers and/or fees
reduced by credits allowed by the
custodian................................. 1.15%**(a) 1.22%(a) 1.25% 1.32% 1.34% 1.35%
Net investment income per share without fee
waivers and/or fees reduced by credits
allowed by the custodian.................. $ 0.021 $ 0.043 $ 0.042 $ 0.022 $ 0.022 $ 0.037
</TABLE>
- ---------------------
** Annualized.
+ 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 and/or 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.
54
<PAGE> 56
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
---------------------------------- ---------------------------------- --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED) 06/30/96 06/30/95* (UNAUDITED) 06/30/96 06/30/95* (UNAUDITED)*
---------- -------- -------- ---------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ 0.019 0.040 0.038 0.019 0.040 0.038 0.021
------- ------- ------- ------- ------- ------ -------
Total from investment operations..... 0.019 0.040 0.038 0.019 0.040 0.038 0.021
LESS DISTRIBUTIONS:
Dividends from net investment
income............................. (0.019) (0.040) (0.038) (0.019) (0.040) (0.038) (0.021)
------- ------- ------- ------- ------- ------ -------
Total distributions.................. (0.019) (0.040) (0.038) (0.019) (0.040) (0.038) (0.021)
------- ------- ------- ------- ------- ------ -------
Net asset value, end of period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ====== =======
TOTAL RETURN+ 1.90% 4.02% 3.91% 1.90% 4.02% 3.91% 2.11%
======= ======= ======= ======= ======= ====== =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)............................. $1,252 $ 112 $ 123 $ 295 $ 439 $ 737 $ 1
Ratio of operating expenses to
average net assets................. 1.60%** 1.60% 1.60% 1.60%** 1.60% 1.60% 0.60%**
Ratio of net investment income to
average net assets................. 3.76%** 3.95% 3.88% 3.76%** 3.95% 3.88% 4.76%**
Ratio of operating expenses to
average net assets without fees
reduced by credits allowed by the
custodian.......................... 1.60%**(a) 1.60%(a) N/A 1.60%**(a) 1.60%(a) N/A 0.60%**(a)
Ratio of operating expenses to
average net assets without fee
waivers and/or fees reduced by
credits allowed by the custodian... 1.90%**(a) 1.97%(a) 2.00% 1.90%**(a) 1.97%(a) 2.00% 0.90%**(a)
Net investment income per share
without fee waivers and/or fees
reduced by credits allowed by the
custodian.......................... $0.017 $0.036 $0.034 $0.017 $0.036 $0.034 $0.019
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I shares.
** Annualized.
+ 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 and/or 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>
55
<PAGE> 57
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/96 06/30/95 06/30/94 06/30/93 06/30/92
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................... 0.014 0.029 0.028 0.018 0.021 0.033
-------- ------- ------- ------- ------- -------
Total from investment operations.............. 0.014 0.029 0.028 0.018 0.021 0.033
LESS DISTRIBUTIONS:
Dividends from net investment income.......... (0.014) (0.029) (0.028) (0.018) (0.021) (0.033)
-------- ------- ------- ------- ------- -------
Total distributions........................... (0.014) (0.029) (0.028) (0.018) (0.021) (0.033)
-------- ------- ------- ------- ------- -------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= =======
TOTAL RETURN+ 1.37% 3.00% 2.79% 1.81% 2.07% 3.35%
======== ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's).......... $46,803 $51,211 $48,836 $62,500 $68,404 $94,607
Ratio of operating expenses to average net
assets...................................... 0.85%** 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income to average net
assets...................................... 2.68%** 2.94% 2.73% 1.80% 2.06% 3.31%
Ratio of operating expenses to average net
assets without fee waivers.................. 1.13%** 1.14% 1.15% 1.27% 1.29% 1.28%
Net investment income per share without fee
waivers..................................... $ 0.013 $ 0.026 $ 0.025 $ 0.014 $ 0.016 $ 0.029
</TABLE>
- ---------------------
** Annualized.
+ 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 and/or administrator.
56
<PAGE> 58
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------ ------------------------------------ --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED) 06/30/96 06/30/95* (UNAUDITED) 06/30/96 06/30/95* (UNAUDITED)*
----------- -------- --------- ----------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.010 0.022 0.020 0.010 0.022 0.020 0.013
------- ------- ------- ------- ------- ------- -------
Total from investment
operations..................... 0.010 0.022 0.020 0.010 0.022 0.020 0.013
LESS DISTRIBUTIONS:
Dividends from net investment
income......................... (0.010) (0.022) (0.020) (0.010) (0.022) (0.020) (0.013)
------- ------- ------- ------- ------- ------- -------
Total distributions.............. (0.010) (0.022) (0.020) (0.010) (0.022) (0.020) (0.013)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ======== ========= =========== ======== ========= =============
TOTAL RETURN+ 0.97% 2.22% 2.04% 0.97% 2.22% 2.04% 1.33%
=========== ======== ========= =========== ======== ========= =============
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)......................... $ 65 $ 147 $ 79 $ 11 $ 10 $ 10 $ 1
Ratio of operating expenses to
average net assets............. 1.60%** 1.60% 1.60% 1.60%** 1.60% 1.60% 0.60%**
Ratio of net investment income to
average net assets............. 1.93%** 2.19% 1.98% 1.93%** 2.19% 1.98% 2.93%**
Ratio of operating expenses to
average net assets without fee
waivers........................ 1.88%** 1.89% 1.90% 1.88%** 1.89% 1.90% 0.88%**
Net investment income per share
without fee waivers............ $ 0.009 $ 0.019 $ 0.017 $ 0.009 $ 0.019 $ 0.017 $ 0.012
</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. On July 25, 1996 the Fund commenced selling
Class I shares.
** Annualized.
+ 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 and/or administrator.
57
<PAGE> 59
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
12/31/96 ENDED ENDED ENDED
(UNAUDITED) 06/30/96++ 06/30/95 06/30/94*
----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..................................... $ 2.32 $ 2.35 $ 2.39 $ 2.50
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................................... 0.07 0.15 0.08 0.09
Net realized and unrealized gain/(loss) on investments................... 0.01 (0.03) 0.02 (0.11)
------- ------- ------- -------
Total from investment operations......................................... 0.08 0.12 0.10 (0.02)
LESS DISTRIBUTIONS:
Dividends from net investment income..................................... (0.07) (0.15) (0.08) (0.09)
Distributions in excess of net investment income......................... -- -- (0.06) --
Distributions from capital (Note 2)...................................... -- (0.00)# (0.00)# --
------- ------- ------- -------
Total distributions...................................................... (0.07) (0.15) (0.14) (0.09)
------- ------- ------- -------
Net asset value, end of period........................................... $ 2.33 $ 2.32 $ 2.35 $ 2.39
======= ======= ======= =======
TOTAL RETURN+ 3.52% 5.05% 4.42% (0.73)%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..................................... $20,042 $ 32,440 $43,811 $ 21,771
Ratio of operating expenses to average net assets........................ 0.75%** 0.75% 0.75% 0.00% **
Ratio of net investment income to average net assets..................... 6.54%** 6.22% 6.10% 5.70% **
Portfolio turnover rate.................................................. 33% 225% 137% 95%
Ratio of operating expenses to average net assets without fees reduced by
credits allowed by the custodian....................................... 0.75%**(a) 0.75%(a) N/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.............................................................. 1.38%**(a) 1.42%(a) 1.39% 1.61% **
Net investment income per share without fee waivers, expenses absorbed
and/or fees reduced by credits allowed by the custodian................ $ 0.06 $ 0.13 $ 0.07 $ 0.06
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* The Fund commenced operations on November 1, 1993.
** 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 period 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>
58
<PAGE> 60
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------- --------------------------------------- --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED) 06/30/96++ 06/30/95* (UNAUDITED) 06/30/96++ 06/30/95* (UNAUDITED)*
----------- -------- ---------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $ 2.32 $ 2.35 $ 2.39 $ 2.32 $ 2.35 $ 2.39 $ 2.32
------- ------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income........ 0.06 0.13 0.06 0.06 0.13 0.06 0.06
Net realized and unrealized
gain/(loss) on
investments................ 0.01 (0.03) 0.02 0.01 (0.03) 0.02 0.01
------- ------- ------- ------- ------- ------ -------
Total from investment
operations................. 0.07 0.10 0.08 0.07 0.10 0.08 0.07
LESS DISTRIBUTIONS:
Dividends from net investment
income..................... (0.06) (0.13) (0.06) (0.06) (0.13) (0.06) (0.06)
Distributions in excess of
net investment income...... -- -- (0.06) -- -- (0.06) --
Distributions from capital
(Note 2)................... -- (0.00) # (0.00)# -- (0.00)# (0.00)# --
------- ------- ------- ------- ------- ------ -------
Total distributions.......... (0.06) (0.13) (0.12) (0.06) (0.13) (0.12) (0.06)
------- ------- ------- ------- ------- ------ -------
Net asset value, end of
period..................... $ 2.33 $ 2.32 $ 2.35 $ 2.33 $ 2.32 $ 2.35 $ 2.33
======= ======= ======= ======= ======= ====== =======
TOTAL RETURN+ 3.14% 4.27% 3.64% 3.14% 4.27% 3.64% 3.19%
======= ======= ======= ======= ======= ====== =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)..................... $ 3,274 $ 3,437 $ 3,015 $ 1,235 $3,531 $2,303 $7,649
Ratio of operating expenses
to average net assets...... 1.50%** 1.50% 1.50% 1.50%** 1.50% 1.50% 0.50%**
Ratio of net investment
income to average net
assets..................... 5.79%** 5.47% 5.35% 5.79%** 5.47% 5.35% 6.79%**
Portfolio turnover rate...... 33% 225% 137% 33% 225% 137% 33%
Ratio of operating expenses
to average net assets
without fees reduced by
credits allowed by the
custodian.................. 1.50%**(a) 1.50% (a) N/A 1.50%**(a) 1.50%(a) N/A 0.50%**(a)
Ratio of operating expenses
to average net assets
without fee waivers,
expenses absorbed and/or
fees reduced by credits
allowed by the
custodian.................. 2.13%**(a) 2.17% (a) 2.14% 2.13%**(a) 2.17%(a) 2.14% 1.13%**(a)
Net investment income per
share without fee waivers,
expenses absorbed and/or
fees reduced by credits
allowed by the custodian... $ 0.05 $ 0.11 $ 0.05 $ 0.05 $ 0.11 $ 0.05 $ 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. On July 25, 1996 the Fund commenced selling Class I 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 period 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> 61
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SHORT TERM GLOBAL GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED)++ 06/30/96++ 06/30/95 06/30/94 06/30/93 06/30/92*
------------- ---------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 2.29 $ 2.24 $ 2.34 $ 2.48 $ 2.56 $ 2.50
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................... 0.07 0.15 0.17 0.17 0.19 0.07
Net realized and unrealized gain/(loss)
on investments........................ 0.07 0.07 (0.12) (0.14) (0.04) 0.07
------- ------- ------- ------- ------- -------
Total from investment operations........ 0.14 0.22 0.05 0.03 0.15 0.14
LESS DISTRIBUTIONS:
Dividends from net investment income.... (0.11) (0.16) (0.02) (0.13) (0.20) (0.08)
Distributions in excess of net
investment income..................... -- (0.01) (0.00)# (0.03) -- --
Distributions in excess of net realized
gains................................. -- -- (0.01) (0.01) (0.03) --
Distributions from capital (Note 2)..... -- -- (0.12) (0.00)# -- --
------- ------- ------- ------- ------- -------
Total distributions..................... (0.11) (0.17) (0.15) (0.17) (0.23) (0.08)
------- ------- ------- ------- ------- -------
Net asset value, end of period.......... $ 2.32 $ 2.29 $ 2.24 $ 2.34 $ 2.48 $ 2.56
======= ======= ======= ======= ======= =======
TOTAL RETURN+ 6.31% 10.16% 2.10% 1.10% 6.03% 5.34%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).... $54,394 $ 65,726 $103,986 $220,824 $215,348 $106,609
Ratio of operating expenses to average
net assets............................ 0.85%** 0.85% 0.85% 0.85% 0.73% 0.41% **
Ratio of net investment income to
average net assets.................... 6.40%** 6.75% 7.22% 6.87% 7.67% 8.65% **
Portfolio turnover rate................. 32% 87% 217% 222% 294% 81%
Ratio of operating expenses to average
net assets without fees reduced by
credits allowed by the custodian...... 0.85%**(a) 0.85%(a) N/A N/A N/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... 1.48%**(a) 1.47%(a) 1.44% 1.52% 1.55% 1.92% **
Net investment income per share without
fee waivers, expense absorbed and/or
fees reduced by credits allowed by the
custodian............................. $ 0.07 $ 0.14 $ 0.16 $ 0.16 $ 0.17 $ 0.06
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* The Fund commenced operations on February 11, 1992.
** 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 period 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>
60
<PAGE> 62
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SHORT TERM GLOBAL GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
---------------------------------------- ---------------------------------------- --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED)++ 06/30/96++ 06/30/95* (UNAUDITED)++ 06/30/96++ 06/30/95* (UNAUDITED)*++
------------- ---------- --------- ------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 2.29 $ 2.24 $ 2.34 $ 2.29 $ 2.24 $ 2.34 $ 2.29
----- ----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... 0.06 0.13 0.15 0.06 0.13 0.15 0.07
Net realized and
unrealized gain/(loss)
on investments......... 0.07 0.07 (0.12) 0.07 0.07 (0.12) 0.07
----- ----- ----- ----- ----- ----- -----
Total from investment
operations............. 0.13 0.20 0.03 0.13 0.20 0.03 0.14
LESS DISTRIBUTIONS:
Dividends from net
investment income...... (0.10) (0.14) (0.00)# (0.10) (0.14) (0.00)# (0.11)
Distributions in excess
of net investment
income................. -- (0.01) (0.00)# -- (0.01) (0.00)# --
Distributions in excess
of net realized
gains.................. -- -- (0.01) -- -- (0.01) --
Distributions from
capital (Note 2)....... -- -- (0.12) -- -- (0.12) --
----- ----- ----- ----- ----- ----- -----
Total distributions...... (0.10) (0.15) (0.13) (0.10) (0.15) (0.13) (0.11)
----- ----- ----- ----- ----- ----- -----
Net asset value, end of
period................. $ 2.32 $ 2.29 $ 2.24 $ 2.32 $ 2.29 $ 2.24 $ 2.32
===== ===== ===== ===== ===== ===== =====
TOTAL RETURN+ 5.91% 9.33% 1.33% 5.91% 9.33% 1.33% 5.97%
===== ===== ===== ===== ===== ===== =====
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period
(in 000's)............. $ 2,059 $1,594 $ 1,297 $ 527 $2,211 $ 2,286 $3,976
Ratio of operating
expenses to average net
assets................. 1.60%** 1.60% 1.60% 1.60%** 1.60% 1.60% 0.60%**
Ratio of net investment
income to average net
assets................. 5.65%** 6.00% 6.47% 5.65%** 6.00% 6.47% 6.65%**
Portfolio turnover
rate................... 32% 87% 217% 32% 87% 217% 32%
Ratio of operating
expenses to average net
assets without fees
reduced by credits
allowed by the
custodian.............. 1.60%**(a) 1.60%(a) N/A 1.60%**(a) 1.60%(a) N/A 0.60%**(a)
Ratio of operating
expenses to average net
assets without fee
waivers and/or fees
reduced by credits
allowed by the
custodian.............. 2.23%**(a) 2.22%(a) 2.19% 2.23%**(a) 2.22%(a) 2.19% 1.23%**(a)
Net investment income per
share without fee
waivers and/or fees
reduced by credits
allowed by the
custodian.............. $ 0.06 $ 0.12 $ 0.14 $ 0.06 $ 0.12 $ 0.14 $ 0.07
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I 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 by the investment advisor and 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 period 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>
61
<PAGE> 63
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED)++ 06/30/96 06/30/95 06/30/94 06/30/93 06/30/92
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 9.41 $ 9.67 $ 9.45 $ 10.65 $ 10.52 $ 10.04
------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................. 0.33 0.67 0.70 0.75 0.74 0.84
Net realized and unrealized gain/(loss) on
investments.......................................... 0.15 (0.26) 0.22 (1.21) 0.16 0.49
------- ------- ------- ------- ------- ------
Total from investment operations....................... 0.48 0.41 0.92 (0.46) 0.90 1.33
LESS DISTRIBUTIONS:
Dividends from net investment income................... (0.32) (0.67) (0.70) (0.64) (0.74) (0.84)
Distributions in excess of net realized gains.......... -- -- -- (0.10) -- --
Distributions from capital (Note 2).................... -- -- -- -- (0.03) (0.01)
------- ------- ------- ------- ------- ------
Total distributions.................................... (0.32) (0.67) (0.70) (0.74) (0.77) (0.85)
------- ------- ------- ------- ------- ------
Net asset value, end of period......................... $ 9.57 $ 9.41 $ 9.67 $ 9.45 $ 10.65 $ 10.52
======= ======= ======= ======= ======= ======
TOTAL RETURN+ 5.22% 4.34% 10.17% (4.59)% 8.87% 13.74%
======= ======= ======= ======= ======= ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)................... $ 321,916 $423,282 $459,968 $666,566 $842,277 $504,776
Ratio of operating expenses to average net assets...... 1.05%** 0.70% 0.95% 1.05% 0.91% 0.72%
Ratio of net investment income to average net assets... 7.00%** 7.34% 7.58% 7.26% 6.98% 7.67%
Portfolio turnover rate................................ 370% 356% 226% 27% 67% 35%
Ratio of operating expenses to average net assets
without fees reduced by credits allowed by the
custodian............................................ 1.05%**(a) 0.71%(a) N/A N/A N/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.......... 1.30%**(a) 1.45%(a) 1.59% 1.34% 1.34% 1.39%
Ratio of operating expenses to average net assets
including interest expense........................... 1.06%** 0.82% 1.22% 1.06% 0.91% 0.72%
Net investment income per share without fee waivers,
expenses absorbed and/or fees reduced by credits
allowed by the custodian............................. $ 0.32 $ 0.62 $ 0.66 $ 0.72 $ 0.70 $ 0.77
</TABLE>
- ---------------------
<TABLE>
<S> <C>
** 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 period 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.
See notes to financial statements.
</TABLE>
62
<PAGE> 64
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
-------------------------------------- -------------------------------------- --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED)++ 06/30/96 06/30/95* (UNAUDITED)++ 06/30/96 06/30/95* (UNAUDITED)*++
------------- -------- --------- ------------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 9.41 $ 9.67 $ 9.45 $ 9.41 $ 9.67 $ 9.45 $ 9.35
------- ------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income......... 0.30 0.60 0.63 0.30 0.60 0.63 0.30
Net realized and unrealized
gain/(loss) on
investments................. 0.15 (0.26) 0.22 0.15 (0.26) 0.22 0.21
------- ------- ------- ------- ------- ------ -------
Total from investment
operations.................. 0.45 0.34 0.85 0.45 0.34 0.85 0.51
LESS DISTRIBUTIONS:
Dividends from net investment
income...................... (0.29) (0.60) (0.63) (0.29) (0.60) (0.63) (0.29)
------- ------- ------- ------- ------- ------ -------
Total distributions........... (0.29) (0.60) (0.63) (0.29) (0.60) (0.63) (0.29)
------- ------- ------- ------- ------- ------ -------
Net asset value, end of
period...................... $ 9.57 $ 9.41 $ 9.67 $ 9.57 $ 9.41 $ 9.67 $ 9.57
======= ======= ======= ======= ======= ====== =======
TOTAL RETURN+ 4.83% 3.56% 9.36% 4.83% 3.56% 9.36% 5.54%
======= ======= ======= ======= ======= ====== =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)...................... $22,552 $23,668 $10,646 $12,044 $35,667 $ 6,839 $ 88,935
Ratio of operating expenses to
average net assets.......... 1.80%** 1.45% 1.70% 1.80%** 1.45% 1.70% 0.80%**
Ratio of net investment income
to average net
assets...................... 6.25%** 6.59% 6.83% 6.25%** 6.59% 6.83% 7.25%**
Portfolio turnover rate....... 370% 356% 226% 370% 356% 226% 370%
Ratio of operating expenses to
average net assets without
fees reduced by credits
allowed by the custodian.... 1.80%**(a) 1.46% (a) N/A 1.80%**(a) 1.46% (a) N/A 0.80%**(a)
Ratio of operating expenses to
average net assets
without fee waivers, expenses
absorbed and/or fees reduced
by credits allowed by the
custodian............ 2.05%**(a) 2.20% (a) 2.34% 2.05%**(a) 2.20% (a) 2.34% 1.05%**(a)
Ratio of operating expenses to
average net assets including
interest expense............ 1.81%** 1.57% 1.97% 1.81%** 1.57% 1.97% 0.81%**
Net investment income per
share without fee waivers,
expenses absorbed and/or
fees reduced by credits
allowed by the custodian.... $ 0.29 $ 0.55 $ 0.59 $ 0.29 $ 0.55 $ 0.59 $ 0.29
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I 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 period 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>
63
<PAGE> 65
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CORPORATE INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/96 06/30/95 06/30/94 06/30/93 06/30/92
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 10.16 $ 10.52 $ 9.87 $ 11.33 $ 10.52 $ 9.87
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.38 0.76 0.68 0.80 0.84 0.91
Net realized and unrealized gain/(loss) on
investments........................................... 0.24 (0.36) 0.78 (1.35) 0.84 0.64
------- ------- ------- ------- ------- -------
Total from investment operations........................ 0.62 0.40 1.46 (0.55) 1.68 1.55
LESS DISTRIBUTIONS:
Dividends from net investment income.................... (0.38) (0.76) (0.68) (0.78) (0.84) (0.90)
Distributions in excess of net investment income........ -- -- (0.09) (0.01) -- --
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) --
------- ------- ------- ------- ------- -------
Total distributions..................................... (0.38) (0.76) (0.81) (0.91) (0.87) (0.90)
------- ------- ------- ------- ------- -------
Net asset value, end of period.......................... $ 10.40 $ 10.16 $ 10.52 $ 9.87 $ 11.33 $ 10.52
======= ======= ======= ======= ======= =======
TOTAL RETURN+ 6.19% 3.81% 15.57% (5.32)% 16.64% 16.29%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................... $ 248,465 $298,518 $383,642 $472,519 $396,357 $169,682
Ratio of operating expenses to average net assets....... 1.24%** 0.95% 0.90% 1.35% 1.24% 0.97%
Ratio of net investment income to average net assets.... 7.32%** 7.23% 8.26% 7.19% 7.67% 8.29%
Portfolio turnover rate................................. 2% 25% 55% 30% 37% 8%
Ratio of operating expenses to average net assets
without fees reduced by credits allowed by the
custodian............................................. 1.24%**(a) 0.95%(a) N/A N/A N/A N/A
Ratio of operating expenses to average net assets
without fee waivers and/or fees reduced by credits
allowed by the custodian.............................. 1.39%**(a) 1.38%(a) 1.40% 1.42% 1.42% 1.48%
Net investment income per share without fee waivers
and/or fees reduced by credits allowed by the
custodian............................................. $ 0.37 $ 0.72 $ 0.64 $ 0.80 $ 0.82 $ 0.85
</TABLE>
- ---------------------
<TABLE>
<C> <S>
** 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 by the investment advisor and/or administrator 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>
64
<PAGE> 66
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CORPORATE INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------ ------------------------------------ --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED) 06/30/96 06/30/95* (UNAUDITED) 06/30/96 06/30/95* (UNAUDITED)*
----------- -------- --------- ----------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.16 $ 10.52 $ 9.87 $ 10.16 $ 10.52 $ 9.87 $ 10.03
-------- -------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income........... 0.34 0.68 0.61 0.34 0.68 0.61 0.34
Net realized and unrealized
gain/(loss) on investments.... 0.24 (0.36) 0.78 0.24 (0.36) 0.78 0.37
-------- -------- -------- -------- -------- ------- -------
Total from investment
operations.................... 0.58 0.32 1.39 0.58 0.32 1.39 0.71
LESS DISTRIBUTIONS:
Dividends from net investment
income........................ (0.34) (0.68) (0.61) (0.34) (0.68) (0.61) (0.34)
Distributions in excess of net
investment income............. -- -- (0.09) -- -- (0.09) --
Distributions from capital (Note
2)............................ -- (0.00) # (0.04) -- (0.00) # (0.04) --
-------- -------- -------- -------- -------- ------- -------
Total distributions............. (0.34) (0.68) (0.74) (0.34) (0.68) (0.74) (0.34)
-------- -------- -------- -------- -------- ------- -------
Net asset value, end of
period........................ $ 10.40 $ 10.16 $ 10.52 $ 10.40 $ 10.16 $ 10.52 $ 10.40
======== ======== ======== ======== ======== ======= =======
TOTAL RETURN+ 5.79% 3.04% 14.73% 5.79% 3.04% 14.73% 7.17%
======== ======== ======== ======== ======== ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)........................ $ 23,925 $24,606 $15,145 $ 3,903 $12,011 $ 8,701 $ 27,803
Ratio of operating expenses to
average net assets............ 1.99%** 1.70% 1.65% 1.99%** 1.70% 1.65% 0.99%**
Ratio of net investment income
to average net assets......... 6.57%** 6.48% 7.51% 6.57%** 6.48% 7.51% 7.57%**
Portfolio turnover rate......... 2% 25% 55% 2% 25% 55% 2%
Ratio of operating expenses to
average net assets without
fees reduced by credits
allowed by the custodian...... 1.99%**(a) 1.70% (a) N/A 1.99%**(a) 1.70% (a) N/A 0.99%**(a)
Ratio of operating expenses to
average net assets without fee
waivers and/or fees reduced by
credits allowed by the
custodian..................... 2.14%**(a) 2.13% (a) 2.15% 2.14%**(a) 2.13% (a) 2.15% 1.14%**(a)
Net investment income per share
without fee waivers and/or
fees reduced by credits
allowed by the custodian...... $ 0.33 $ 0.64 $ 0.57 $ 0.33 $ 0.64 $ 0.57 $ 0.33
</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. On July 25, 1996 the Fund commenced selling Class I 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 by the investment advisor and/or administrator 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>
65
<PAGE> 67
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/96++ 06/30/95 06/30/94 06/30/93 06/30/92
----------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 10.60 $ 10.53 $ 10.38 $ 11.22 $ 10.45 $ 10.07
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................ 0.30 0.60 0.61 0.61 0.62 0.65
Net realized and unrealized gain/(loss) on
investments.................................... 0.26 0.07 0.15 (0.82) 0.77 0.38
-------- -------- -------- -------- -------- --------
Total from investment operations................. 0.56 0.67 0.76 (0.21) 1.39 1.03
LESS DISTRIBUTIONS:
Dividends from net investment income............. (0.30) (0.60) (0.61) (0.61) (0.62) (0.65)
Distributions in excess of net investment
income......................................... -- -- -- (0.00)# -- --
Distributions from net realized gains............ -- -- (0.00)# -- -- --
Distributions in excess of net realized gains.... -- -- -- (0.02) -- --
-------- -------- -------- -------- -------- --------
Total distributions.............................. (0.30) (0.60) (0.61) (0.63) (0.62) (0.65)
-------- -------- -------- -------- -------- --------
Net asset value, end of period................... $ 10.86 $ 10.60 $ 10.53 $ 10.38 $ 11.22 $ 10.45
======== ======== ======== ======== ======== ========
TOTAL RETURN+ 5.31% 6.40% 7.57% (2.19)% 13.84% 10.56%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............. $ 358,976 $372,177 $405,967 $509,223 $511,364 $309,146
Ratio of operating expenses to average net
assets......................................... 1.04%** 0.94% 0.85% 0.79% 0.80% 0.94%
Ratio of net investment income to average net
assets......................................... 5.48%** 5.56% 5.89% 5.45% 5.74% 6.08%
Portfolio turnover rate.......................... 22% 17% 22% 50% 41% 29%
Ratio of operating expenses to average net assets
without fees reduced by credits allowed by the
custodian...................................... 1.04%** 0.94%(a) N/A N/A N/A N/A
Ratio of operating expenses to average net assets
without fee waivers and/or fees reduced by
credits allowed by the custodian............... 1.28%** 1.29%(a) 1.29% 1.39% 1.41% 1.40%
Net investment income per share without fee
waivers and/or fees reduced by credits allowed
by the custodian............................... $ 0.28 $ 0.56 $ 0.56 $ 0.54 $ 0.56 $ 0.60
</TABLE>
- ---------------------
<TABLE>
<C> <S>
** 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 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 period 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>
66
<PAGE> 68
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
-------------------------------------- -------------------------------------- --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED) 06/30/96++ 06/30/95* (UNAUDITED) 06/30/96++ 06/30/95* (UNAUDITED)*
----------- ---------- --------- ----------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $ 10.60 $ 10.53 $ 10.38 $ 10.60 $ 10.53 $ 10.38 $ 10.62
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income........ 0.26 0.51 0.53 0.26 0.51 0.53 0.27
Net realized and unrealized
gain on investments........ 0.26 0.07 0.15 0.26 0.07 0.15 0.24
------- ------- ------- ------- ------- ------- -------
Total from investment
operations................. 0.52 0.58 0.68 0.52 0.58 0.68 0.51
LESS DISTRIBUTIONS:
Dividends from net investment
income..................... (0.26) (0.51) (0.53) (0.26) (0.51) (0.53) (0.27)
Distributions from net
realized gains............. -- -- (0.00)# -- -- (0.00)# --
------- ------- ------- ------- ------- ------- -------
Total distributions.......... (0.26) (0.51) (0.53) (0.26) (0.51) (0.53) (0.27)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period..................... $ 10.86 $ 10.60 $ 10.53 $ 10.86 $ 10.60 $ 10.53 $ 10.86
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 4.91% 5.61% 6.78% 4.91% 5.61% 6.78% 4.85%
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)..................... $23,831 $ 20,543 $ 7,230 $ 12 $ 11 $ 11 $ 1
Ratio of operating expenses
to average net assets...... 1.79%** 1.69% 1.60% 1.79%** 1.69% 1.60% 0.79%**
Ratio of net investment
income to average net
assets..................... 4.73%** 4.81% 5.14% 4.73%** 4.81% 5.14% 5.73%**
Portfolio turnover rate...... 22% 17% 22% 22% 17% 22% 22%
Ratio of operating expenses
to average net assets
without fees reduced by
credits allowed by the
custodian.................. 1.79%** 1.69%(a) N/A 1.79%** 1.69%(a) N/A 0.79%**
Ratio of operating expenses
to average net assets
without fee waivers and/or
fees reduced by credits
allowed by the custodian... 2.03%** 2.04%(a) 2.04% 2.03%** 2.04%(a) 2.04% 1.03%**
Net investment income per
share without fee waivers
and/or fees reduced by
credits allowed by the
custodian.................. $ 0.24 $ 0.47 $ 0.48 $ 0.24 $ 0.47 $ 0.48 $ 0.25
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I 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 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 period 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>
67
<PAGE> 69
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
12/31/96 ENDED ENDED ENDED ENDED
(UNAUDITED)++ 06/30/96 06/30/95 06/30/94 06/30/93*
------------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......................... $ 9.64 $ 9.43 $ 9.40 $ 10.05 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................................ 0.25 0.50 0.52 0.52 0.00#
Net realized and unrealized gain/(loss) on investments....... 0.26 0.21 0.03 ## (0.65) 0.05
------- ------- ------- ------- -------
Total from investment operations............................. 0.51 0.71 0.55 (0.13) 0.05
LESS DISTRIBUTIONS:
Dividends from net investment income......................... (0.26) (0.50) (0.52) (0.52) --
Distributions in excess of net investment income............. -- -- -- (0.00) # --
Distributions in excess of net realized gains................ -- -- -- (0.00) # --
------- ------- ------- ------- -------
Total distributions.......................................... (0.26) (0.50) (0.52) (0.52) --
------- ------- ------- ------- -------
Net asset value, end of period............................... $ 9.89 $ 9.64 $ 9.43 $ 9.40 $ 10.05
======= ======= ======= ======= =======
TOTAL RETURN+ 5.34% 7.56% 6.01% (1.50)% 0.50%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)......................... $26,639 $29,821 $33,714 $38,541 $ 4,837
Ratio of operating expenses to average net assets............ 0.83%** 0.63% 0.39% 0.00% 0.00%**
Ratio of net investment income to average net assets......... 4.98%** 5.08% 5.53% 5.09% 0.48%**
Portfolio turnover rate...................................... 30% 52% 44% 83% 0%
Ratio of operating expenses to average net assets without
fees reduced by credits allowed by the custodian........... 0.84%**(a) 0.66% (a) N/A N/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................................... 1.44%**(a) 1.46% (a) 1.51% 1.55% 5.59%**
Net investment income/(loss) per share without fee waivers,
expenses absorbed and/or fees reduced by credits allowed by
the custodian.............................................. $ 0.22 $ 0.42 $ 0.42 $ 0.36 $ (0.02)
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* The Fund commenced operations on June 7, 1993.
** 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.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the period 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>
68
<PAGE> 70
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
-------------------------------------- -------------------------------------- --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED)++ 06/30/96 06/30/95* (UNAUDITED)++ 06/30/96 06/30/95* (UNAUDITED)*++
------------- -------- --------- ------------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 9.64 $ 9.43 $ 9.40 $ 9.64 $ 9.43 $ 9.40 $ 9.68
------- ------- -------- ------- ------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income....... 0.21 0.42 0.45 0.21 0.42 0.45 0.23
Net realized and unrealized
gain on investments....... 0.26 0.21 0.03## 0.26 0.21 0.03## 0.22
------- ------- -------- ------- ------- -------- --------
Total from investment
operations................ 0.47 0.63 0.48 0.47 0.63 0.48 0.45
LESS DISTRIBUTIONS:
Dividends from net
investment income......... (0.22) (0.42) (0.45) (0.22) (0.42) (0.45) (0.24)
------- ------- -------- ------- ------- -------- --------
Total distributions......... (0.22) (0.42) (0.45) (0.22) (0.42) (0.45) (0.24)
------- ------- -------- ------- ------- -------- --------
Net asset value, end of
period.................... $ 9.89 $ 9.64 $ 9.43 $ 9.89 $ 9.64 $ 9.43 $ 9.89
======= ======= ======== ======= ======= ======== ========
TOTAL RETURN+ 4.94% 6.76% 5.23% 4.94% 6.76% 5.23% 4.67%
======= ======= ======== ======= ======= ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's)................ $ 5,311 $ 5,428 $ 3,330 $ 12 $ 11 $ 11 $ 1
Ratio of operating expenses
to average net assets..... 1.58%** 1.38% 1.14% 1.58%** 1.38% 1.14% 0.58%**
Ratio of net investment
income to average net
assets.................... 4.23%** 4.33% 4.78% 4.23%** 4.33% 4.78% 5.23%**
Portfolio turnover rate..... 30% 52% 44% 30% 52% 44% 30%
Ratio of operating expenses
to average net assets
without fees reduced by
credits allowed by the
custodian................. 1.59%**(a) 1.41% (a) N/A 1.59%**(a) 1.41% (a) N/A 0.59%**(a)
Ratio of operating expenses
to average net assets
without fee waivers,
expenses absorbed and/or
fees reduced by credits
allowed by the
custodian................. 2.19%**(a) 2.21% (a) 2.26% 2.19%**(a) 2.21% (a) 2.26% 1.19%**(a)
Net investment income per
share without fee waiver,
expenses absorbed and/or
fees reduced by credits
allowed by the
custodian................. $ 0.18 $ 0.34 $ 0.35 $ 0.18 $ 0.34 $ 0.35 $ 0.20
</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. On July 25, 1996 the Fund commenced selling Class I 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.
++ Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the period since the use of the undistributed income method did not accord with results of operations.
## 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>
69
<PAGE> 71
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
12/31/96 ENDED ENDED ENDED
(UNAUDITED) 06/30/96 06/30/95 06/30/94*
----------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................................... $ 10.56 $ 10.45 $ 10.10 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................................................... 0.25 0.49 0.50 0.11
Net realized and unrealized gain on investments............................ 0.19 0.15 0.35 0.11##
------- ------- ------- -------
Total from investment operations........................................... 0.44 0.64 0.85 0.22
LESS DISTRIBUTIONS:
Dividends from net investment income....................................... (0.25) (0.49) (0.50) (0.11)
Distributions from net realized gains...................................... (0.04) (0.04) -- (0.01)
------- ------- ------- -------
Total distributions........................................................ (0.29) (0.53) (0.50) (0.12)
------- ------- ------- -------
Net asset value, end of period............................................. $ 10.71 $ 10.56 $ 10.45 $ 10.10
======= ======= ======= =======
TOTAL RETURN+ 4.24% 6.25% 8.71% 2.20%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....................................... $52,451 $54,518 $54,507 $34,147
Ratio of operating expenses to average net assets.......................... 0.84%** 0.73% 0.42% 0.00%**
Ratio of net investment income to average net assets....................... 4.58%** 4.62% 4.95% 4.25%**
Portfolio turnover rate.................................................... 16% 27% 13% 17%
Ratio of operating expenses to average net assets without fees reduced by
credits allowed by the custodian......................................... 0.84%**(a) 0.75% (a) N/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................................................................ 1.32%**(a) 1.39% (a) 1.41% 1.95%**
Net investment income per share without fee waivers, expenses absorbed
and/or fees reduced by credits allowed by the custodian.................. $ 0.22 $ 0.42 $ 0.40 $ 0.06
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* The Fund commenced operations on April 4, 1994.
** 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>
70
<PAGE> 72
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------ ------------------------------------ --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED) 06/30/96 06/30/95* (UNAUDITED) 06/30/96 06/30/95* (UNAUDITED)*
----------- -------- --------- ----------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 10.56 $ 10.45 $ 10.10 $ 10.56 $10.45 $ 10.10 $10.58
------- ------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.21 0.41 0.43 0.21 0.41 0.43 0.23
Net realized and unrealized gain
on investments................. 0.19 0.15 0.35 0.19 0.15 0.35 0.17
------- ------- ------- ------ ------ ------ ------
Total from investment
operations..................... 0.40 0.56 0.78 0.40 0.56 0.78 0.40
LESS DISTRIBUTIONS:
Dividends from net investment
income......................... (0.21) (0.41) (0.43) (0.21) (0.41) (0.43) (0.23)
Distributions from net realized
gains.......................... (0.04) (0.04) -- (0.04) (0.04) -- (0.04)
------- ------- ------- ------ ------ ------ ------
Total distributions.............. (0.25) (0.45) (0.43) (0.25) (0.45) (0.43) (0.27)
------- ------- ------- ------ ------ ------ ------
Net asset value, end of period... $ 10.71 $ 10.56 $ 10.45 $ 10.71 $10.56 $ 10.45 $10.71
======= ======= ======= ====== ====== ====== ======
TOTAL RETURN+ 3.85% 5.46% 7.90% 3.85% 5.46% 7.90% 3.85%
======= ======= ======= ====== ====== ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)......................... $21,965 $20,948 $12,391 $ 12 $ 11 $ 11 $ 1
Ratio of operating expenses to
average net assets............. 1.59%** 1.48% 1.17% 1.59%** 1.48% 1.17% 0.59%**
Ratio of net investment income to
average net assets............. 3.83%** 3.87% 4.20% 3.83%** 3.87% 4.20% 4.83%**
Portfolio turnover rate.......... 16% 27% 13% 16% 27% 13% 16%
Ratio of operating expenses to
average net assets without fees
reduced by credits allowed by
the custodian.................. 1.59%**(a) 1.50% (a) N/A 1.59%**(a) 1.50%(a) N/A 0.59%**(a)
Ratio of operating expenses to
average net assets without fee
waivers, expenses absorbed
and/or fees reduced by credits
allowed by the custodian....... 2.07%**(a) 2.14% (a) 2.16% 2.07%**(a) 2.14%(a) 2.16% 1.07%**(a)
Net investment income per share
without fee waivers, expenses
absorbed and/or fees reduced by
credits allowed by the
custodian...................... $ 0.18 $ 0.34 $ 0.33 $ 0.18 $ 0.34 $ 0.33 $ 0.20
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I 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.
(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>
71
<PAGE> 73
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
NATIONAL MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/96 06/30/95 06/30/94 06/30/93 06/30/92
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 10.83 $ 10.76 $ 10.85 $ 11.65 $ 10.96 $ 10.16
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.31 0.61 0.64 0.65 0.67 0.72
Net realized and unrealized gain/(loss) on
investments........................................... 0.26 0.07 0.01## (0.73) 0.75 0.79
------- ------- ------- ------- ------- -------
Total from investment operations........................ 0.57 0.68 0.65 (0.08) 1.42 1.51
LESS DISTRIBUTIONS:
Dividends from net investment income.................... (0.31) (0.61) (0.64) (0.65) (0.67) (0.71)
Distributions in excess of net investment income........ -- -- -- (0.00)# -- --
Distributions from net realized gains................... -- -- (0.01) (0.07) (0.06) --
Distributions in excess of net realized gains........... -- -- (0.09) -- -- --
------- ------- ------- ------- ------- -------
Total distributions..................................... (0.31) (0.61) (0.74) (0.72) (0.73) (0.71)
------- ------- ------- ------- ------- -------
Net asset value, end of period.......................... $ 11.09 $ 10.83 $ 10.76 $ 10.85 $ 11.65 $ 10.96
======= ======= ======= ======= ======= =======
TOTAL RETURN+ 5.29% 6.41% 6.32% (0.90)% 13.41% 15.42%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................... $ 210,907 $233,359 $269,033 $354,501 $390,187 $226,984
Ratio of operating expenses to average net assets....... 1.12%** 1.04% 0.83% 0.87% 0.86% 0.64%
Ratio of net investment income to average net assets.... 5.54%** 5.58% 5.97% 5.60% 5.89% 6.34%
Portfolio turnover rate................................. 14% 25% 23% 44% 83% 61%
Ratio of operating expenses to average net assets
without fees reduced by credits allowed by the
custodian............................................. 1.12%** 1.04%(a) N/A N/A N/A N/A
Ratio of operating expenses to average net assets
without fee waivers and/or fees reduced by credits
allowed by the custodian.............................. 1.30%** 1.29%(a) 1.30% 1.36% 1.37% 1.40%
Net investment income per share without fee waivers
and/or fees reduced by credits allowed by the
custodian............................................. $ 0.30 $ 0.58 $ 0.59 $ 0.59 $ 0.61 $ 0.63
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* 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 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>
72
<PAGE> 74
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
NATIONAL MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------ ------------------------------------ --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED) 06/30/96 06/30/95* (UNAUDITED) 06/30/96 06/30/95* (UNAUDITED)*
----------- -------- --------- ----------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 10.83 $ 10.76 $ 10.85 $ 10.83 $ 10.76 $ 10.85 $ 10.82
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.26 0.53 0.56 0.26 0.53 0.56 0.28
Net realized and unrealized gain
on investments................. 0.26 0.07 0.01## 0.26 0.07 0.01## 0.27
------- ------- ------- ------- ------- ------- -------
Total from investment
operations..................... 0.52 0.60 0.57 0.52 0.60 0.57 0.55
LESS DISTRIBUTIONS:
Dividends from net investment
income......................... (0.26) (0.53) (0.56) (0.26) (0.53) (0.56) (0.28)
Distributions from net realized
gains.......................... -- -- (0.01) -- -- (0.01) --
Distributions in excess of net
realized gains................. -- -- (0.09) -- -- (0.09) --
------- ------- ------- ------- ------- ------- -------
Total distributions.............. (0.26) (0.53) (0.66) (0.26) (0.53) (0.66) (0.28)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period... $ 11.09 $ 10.83 $ 10.76 $ 11.09 $ 10.83 $ 10.76 $ 11.09
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 4.89% 5.62% 5.54% 4.89% 5.62% 5.54% 5.12%
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)......................... $ 6,977 $ 6,800 $ 4,786 $ 12 $ 11 $ 11 $ 1
Ratio of operating expenses to
average net assets............. 1.87%** 1.79% 1.58% 1.87%** 1.79% 1.58% 0.87%**
Ratio of net investment income to
average net assets............. 4.79%** 4.83% 5.22% 4.79%** 4.83% 5.22% 5.79%**
Portfolio turnover rate.......... 14% 25% 23% 14% 25% 23% 14%
Ratio of operating expenses to
average net assets without fees
reduced by credits allowed by
the custodian.................. 1.87%** 1.79% (a) N/A 1.87%** 1.79% (a) N/A 0.87%**
Ratio of operating expenses to
average net assets without fee
waivers and/or fees reduced by
credits allowed by the
custodian...................... 2.05%** 2.04% (a) 2.05% 2.05%** 2.04% (a) 2.05% 1.05%**
Net investment income per share
without fee waivers and/or fees
reduced by credits allowed by
the custodian.................. $ 0.25 $ 0.50 $ 0.51 $ 0.25 $ 0.50 $ 0.51 $ 0.27
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I 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 by the investment advisor and/or 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>
73
<PAGE> 75
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GROWTH AND INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED)++ 06/30/96++ 06/30/95 06/30/94 06/30/93 06/30/92
------------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 14.10 $ 12.58 $ 11.30 $ 12.09 $ 11.25 $ 10.51
-------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................... 0.04 0.08 0.13 0.12 0.12 0.17
Net realized and unrealized gain on investments..... 1.59 2.51 2.04 0.72 0.91 0.74
-------- -------- -------- -------- ------- -------
Total from investment operations.................... 1.63 2.59 2.17 0.84 1.03 0.91
LESS DISTRIBUTIONS:
Dividends from net investment income................ (0.03) (0.08) (0.12) (0.12) (0.12) (0.17)
Distributions from net realized gains............... (2.06) (0.99) (0.77) (1.51) (0.07) --
-------- -------- -------- -------- ------- -------
Total distributions................................. (2.09) (1.07) (0.89) (1.63) (0.19) (0.17)
-------- -------- -------- -------- ------- -------
Net asset value, end of period...................... $ 13.64 $ 14.10 $ 12.58 $ 11.30 $ 12.09 $ 11.25
======== ======== ======== ======== ======= =======
TOTAL RETURN+ 11.57% 21.36% 20.47% 6.67% 9.20% 8.65%
======== ======== ======== ======== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)................ $ 155,780 $183,084 $170,177 $125,249 $97,873 $83,825
Ratio of operating expenses to average net assets... 1.50%** 1.54% 1.56% 1.50% 1.46% 1.50%
Ratio of net investment income to average net
assets............................................ 0.50%** 0.60% 1.11% 1.04% 1.01% 1.51%
Portfolio turnover rate............................. 43% 90% 72% 127% 47% 16%
Ratio of operating expenses to average net assets
without fees reduced by credits allowed by the
custodian......................................... 1.50%**(a) 1.54%(a) N/A N/A N/A N/A
Ratio of operating expenses to average net assets
without fee waivers and/or fees reduced by credits
allowed by the custodian.......................... 1.50%**(a) 1.54%(a) 1.56% 1.59% 1.46% 1.55%
Net investment income per share without fee waivers
and/or fees reduced by credits allowed by the
custodian......................................... $ 0.04 $ 0.08 $ 0.13 $ 0.11 $ 0.12 $ 0.16
Average commission rate paid (b).................... $ 0.0495 N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
<TABLE>
<C> <S>
** 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 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 period 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.
(b) Average commission rate paid per share of securities purchased and sold by the Fund as required by amended disclosure
requirements effective for fiscal years beginning on or after September 1, 1995.
</TABLE>
74
<PAGE> 76
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GROWTH AND INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
---------------------------------------- ---------------------------------------- --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED)++ 06/30/96++ 06/30/95* (UNAUDITED)++ 06/30/96++ 06/30/95* (UNAUDITED)*++
------------- ---------- --------- ------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 14.03 $ 12.55 $ 11.30 $ 14.04 $ 12.55 $ 11.30 $ 13.12
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income/(loss).......... (0.02) (0.02) 0.05 (0.02) (0.02) 0.05 0.05
Net realized and
unrealized gain on
investments............ 1.58 2.50 2.04 1.57 2.51 2.04 2.58
------- ------- ------- ------- ------- ------- -------
Total from investment
operations............. 1.56 2.48 2.09 1.55 2.49 2.09 2.63
LESS DISTRIBUTIONS:
Dividends from net
investment income...... -- (0.01) (0.07) -- (0.01) (0.07) (0.05)
Distributions from net
realized gains......... (2.06) (0.99) (0.77) (2.06) (0.99) (0.77) (2.06)
------- ------- ------- ------- ------- ------- -------
Total distributions...... (2.06) (1.00) (0.84) (2.06) (1.00) (0.84) (2.11)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 13.53 $ 14.03 $ 12.55 $ 13.53 $ 14.04 $ 12.55 $ 13.64
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 11.10% 20.53% 19.67% 11.03% 20.51% 19.75% 20.05%
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period
(in 000's)............. $ 30,471 $ 23,924 $ 6,918 $ 11,990 $ 29,481 $14,368 $ 63,030
Ratio of operating
expenses to average net
assets................. 2.25%** 2.29% 2.31% 2.25%** 2.29% 2.31% 1.25%**
Ratio of net investment
income/(loss) to
average net assets..... (0.25)%** (0.15)% 0.36% (0.25)%** (0.15)% 0.36% 0.75%**
Portfolio turnover
rate................... 43% 90% 72% 43% 90% 72% 43%
Ratio of operating
expenses to average net
assets without fees
reduced by credits
allowed by the
custodian.............. 2.25%**(a) 2.29% (a) N/A 2.25%**(a) 2.29% (a) N/A 1.25%**(a)
Ratio of operating
expenses to average net
assets without fee
waivers and/or fees
reduced by credits
allowed by the
custodian.............. 2.25%**(a) 2.29% (a) 2.31% 2.25%**(a) 2.29% (a) 2.31% 1.25%**(a)
Net investment
income/(loss) per share
without fee waivers
and/or fees reduced by
credits allowed by the
custodian.............. $ (0.02) $ (0.02) $ 0.05 $ (0.02) $ (0.02) $ 0.05 $ 0.05
Average commission rate
paid (b)............... $ 0.0495 N/A N/A $ 0.0495 N/A N/A $ 0.0495
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I 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 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 period 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.
(b) Average commission rate paid per share of securities purchased and sold by the Fund as required by amended disclosure
requirements effective for fiscal years beginning on or after September 1, 1995.
</TABLE>
75
<PAGE> 77
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
12/31/96 ENDED ENDED ENDED ENDED
(UNAUDITED)++ 06/30/96++ 06/30/95++ 06/30/94 06/30/93*
------------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 15.69 $ 14.18 $ 10.73 $ 10.72 $ 10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss)............................. (0.04) (0.07) 0.05 (0.02) 0.00#
Net realized and unrealized gain on investments.......... 0.82 3.47 3.42 0.03## 0.72
------- ------- ------- ------- -------
Total from investment operations......................... 0.78 3.40 3.47 0.01 0.72
LESS DISTRIBUTIONS:
Dividends from net investment income..................... -- -- (0.02) -- --
Distributions from net realized gains.................... (2.34) (1.89) (0.00)# -- --
------- ------- ------- ------- -------
Total distributions...................................... (2.34) (1.89) (0.02) -- --
------- ------- ------- ------- -------
Net asset value, end of period........................... $ 14.13 $ 15.69 $ 14.18 $ 10.73 $ 10.72
======= ======= ======= ======= =======
TOTAL RETURN+ 5.15% 25.44% 32.33% 0.00% 7.30%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..................... $ 127,701 $ 179,720 $154,763 $126,808 $23,323
Ratio of operating expenses to average net assets........ 1.67%** 1.70% 1.76% 1.75% 1.44%**
Ratio of net investment income/(loss) to average net
assets................................................. (0.46)%** (0.49)% 0.28% (0.35)% (0.63)%**
Portfolio turnover rate.................................. 58% 205% 233% 227% 13%
Ratio of operating expenses to average net assets without
fees reduced by credits allowed by the custodian....... 1.68%**(a) 1.71% (a) N/A N/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....................... 1.68%**(a) 1.71% (a) 1.76% 1.75% 2.52%**
Net investment income/(loss) per share without fee
waivers, expenses absorbed and/or fees reduced by
credits allowed by the custodian....................... $ (0.04) $ (0.07) $ 0.05 $ (0.02) $ (0.01)
Average commission rate paid (b)......................... $ 0.0421 N/A N/A N/A N/A
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* The Fund commenced operations on April 5, 1993.
** 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 period 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.
(b) Average commission rate paid per share of securities purchased and sold by the Fund as required by amended disclosure
requirements effective for fiscal years beginning on or after September 1, 1995.
</TABLE>
76
<PAGE> 78
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------ ------------------------------------------ --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED)++ 06/30/96++ 06/30/95*++ (UNAUDITED)++ 06/30/96++ 06/30/95*++ (UNAUDITED)*++
------------- ---------- ----------- ------------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............. $ 15.47 $ 14.10 $ 10.73 $ 15.47 $ 14.11 $ 10.73 $ 14.21
------- ------- ------ ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
loss............... (0.09) (0.19) (0.04) (0.09) (0.19) (0.04) (0.01)
Net realized and
unrealized gain on
investments........ 0.79 3.45 3.42 0.80 3.44 3.42 2.29
------- ------- ------ ------- ------- ------- -------
Total from investment
operations......... 0.70 3.26 3.38 0.71 3.25 3.38 2.28
LESS DISTRIBUTIONS:
Dividends from net
investment
income............. -- -- (0.01) -- -- (0.00) # --
Distributions from
net realized
gains.............. (2.34) (1.89) (0.00) # (2.34) (1.89) (0.00) # (2.34)
------- ------- ------ ------- ------- ------- -------
Total
distributions...... (2.34) (1.89) (0.01) (2.34) (1.89) (0.00) (2.34)
------- ------- ------ ------- ------- ------- -------
Net asset value, end
of period.......... $ 13.83 $ 15.47 $ 14.10 $ 13.84 $ 15.47 $ 14.11 $ 14.15
======= ======= ====== ======= ======= ======= =======
TOTAL RETURN+ 4.69% 24.54% 31.46% 4.76% 24.54% 31.44% 16.24%
======= ======= ====== ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of
period (in
000's)............. $ 28,653 $ 25,067 $ 6,928 $ 17,127 $ 45,652 $ 18,730 $ 92,746
Ratio of operating
expenses to average
net assets......... 2.42%** 2.45% 2.51% 2.42%** 2.45% 2.51% 1.42%**
Ratio of net
investment loss to
average net
assets............. (1.21)%** (1.24)% (0.47)% (1.21)%** (1.24)% (0.47)% (0.21)%**
Portfolio turnover
rate............... 58% 205% 233% 58% 205% 233% 58%
Ratio of operating
expenses to average
net assets without
fees reduced by
credits allowed by
the custodian...... 2.43%**(a) 2.46% (a) N/A 2.43%**(a) 2.46%(a) N/A 1.43%**(a)
Ratio of operating
expenses to average
net assets without
fee waivers and/or
fees reduced by
credits allowed by
the custodian...... 2.43%**(a) 2.46% (a) 2.51% 2.43%**(a) 2.46%(a) 2.51% 1.43%**(a)
Net investment loss
per share without
fee waivers and/or
fees reduced by
credits allowed by
the custodian...... $ (0.09) $ (0.19) $ (0.04) $ (0.09) $ (0.19) $ (0.04) $ (0.01)
Average commission
rate paid (b)...... $ 0.0421 N/A N/A $ 0.0421 N/A N/A $ 0.0421
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I 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 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 period 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.
(b) Average commission rate paid per share of securities purchased and sold by the Fund as required by amended disclosure
requirements effective for fiscal years beginning on or after September 1, 1995.
</TABLE>
77
<PAGE> 79
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED)++ 06/30/96++ 06/30/95++ 06/30/94 06/30/93 06/30/92++
------------- ---------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 20.17 $ 15.47 $ 13.02 $ 13.76 $ 11.67 $ 9.62
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss............................ (0.11) (0.19) (0.00) # (0.09) (0.02) (0.01)
Net realized and unrealized gain/(loss) on
investments.................................. (0.83) 5.65 2.77 0.68 2.31 2.16
-------- -------- -------- -------- -------- --------
Total from investment operations............... (0.94) 5.46 2.77 0.59 2.29 2.15
LESS DISTRIBUTIONS:
Dividends from net investment income........... -- -- -- -- -- (0.01)
Distributions from net realized gains.......... (1.50) (0.76) (0.32) (1.33) (0.20) (0.08)
Distributions from capital (Note 2)............ -- -- -- -- -- (0.01)
-------- -------- -------- -------- -------- --------
Total distributions............................ (1.50) (0.76) (0.32) (1.33) (0.20) (0.10)
-------- -------- -------- -------- -------- --------
Net asset value, end of period................. $ 17.73 $ 20.17 $ 15.47 $ 13.02 $ 13.76 $ 11.67
======== ======== ======== ======== ======== ========
TOTAL RETURN+ (4.47)% 35.93% 21.54% 3.40% 19.75% 22.47%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........... $ 205,628 $ 283,747 $ 185,722 $ 124,941 $ 96,646 $ 27,652
Ratio of operating expenses to average net
assets....................................... 1.60%** 1.64% 1.68% 1.66% 1.59% 1.93%
Ratio of net investment loss to average net
assets....................................... (1.18)%** (1.02)% (0.31)% (0.68)% (0.32)% (0.04)%
Portfolio turnover rate........................ 32% 131% 181% 224% 28% 60%
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian..................... 1.60%**(a) 1.65% (a) N/A N/A N/A N/A
Ratio of operating expenses to average net
assets without fee waivers and/or fees
reduced by credits allowed by the
custodian.................................... 1.60%**(a) 1.65% (a) 1.68% 1.66% 1.59% 1.93%
Net investment loss per share without fee
waivers and/or fees reduced by credits
allowed by the custodian..................... $ (0.11) $ (0.19) $ (0.00) # $ (0.09) $ (0.02) $ (0.01)
Average commission rate paid (b)............... $ 0.0292 N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
<TABLE>
<C> <S>
** 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 by the 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 period 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.
(b) Average commission rate paid per share of securities purchased and sold by the Fund as required by amended disclosure
requirements effective for fiscal years beginning on or after September 1, 1995.
See notes to financial statements.
</TABLE>
78
<PAGE> 80
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
----------------------------------------- ----------------------------------------- --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED)++ 06/30/96++ 06/30/95*++ (UNAUDITED)++ 06/30/96++ 06/30/95*++ (UNAUDITED)*++
------------- ---------- ---------- ------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $ 19.88 $ 15.37 $ 13.02 $ 19.88 $ 15.37 $ 13.02 $ 17.52
------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment loss.... (0.18) (0.32) (0.10) (0.18) (0.32) (0.10) (0.07)
Net realized and
unrealized
gain/(loss) on
investments.......... (0.82) 5.59 2.77 (0.82) 5.59 2.77 1.80##
------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... (1.00) 5.27 2.67 (1.00) 5.27 2.67 1.73
LESS DISTRIBUTIONS:
Distributions from net
realized gains....... (1.50) (0.76) (0.32) (1.50) (0.76) (0.32) (1.50)
------- ------- ------- ------- ------- ------- -------
Total distributions.... (1.50) (0.76) (0.32) (1.50) (0.76) (0.32) (1.50)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period............... $ 17.38 $ 19.88 $ 15.37 $ 17.38 $ 19.88 $ 15.37 $ 17.75
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ (4.84)% 34.93% 20.69% (4.84)% 34.91% 20.76% 10.09%
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in 000's).... $ 30,916 $ 28,920 $ 10,208 $ 13,257 $ 43,645 $ 11,840 $ 78,986
Ratio of operating
expenses to average
net assets........... 2.35%** 2.39% 2.43% 2.35%** 2.39% 2.43% 1.35%**
Ratio of net investment
loss to average net
assets............... (1.93)%** (1.77)% (1.06)% (1.93)%** (1.77)% (1.06)% (0.93)%**
Portfolio turnover
rate................. 32% 131% 181% 32% 131% 181% 32%
Ratio of operating
expenses to average
net assets without
fees reduced by
credits allowed by
the custodian........ 2.35%**(a) 2.40% (a) N/A 2.35%**(a) 2.40% (a) N/A 1.35%**(a)
Ratio of operating
expenses to average
net assets without
fee waivers and/or
fees reduced by
credits allowed by
the custodian........ 2.35%**(a) 2.40% (a) 2.43% 2.35%**(a) 2.40% (a) 2.43% 1.35%**(a)
Net investment loss per
share without fee
waivers and/or fees
reduced by credits
allowed by the
custodian............ $ (0.18) $ (0.32) $ (0.10) $ (0.18) $ (0.32) $ (0.10) $ (0.07)
Average commission rate
paid (b)............. $ 0.0292 N/A N/A $ 0.0292 N/A N/A $ 0.0292
</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. On July 25, 1996 the Fund commenced selling Class I 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 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 period since the use of the undistributed income method did not accord with results of operations.
## 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.
(b) Average commission rate paid per share of securities purchased and sold by the Fund as required by amended disclosure
requirements effective for fiscal years beginning on or after September 1, 1995.
</TABLE>
79
<PAGE> 81
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/96 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED)++ 06/30/96++ 06/30/95++ 06/30/94 06/30/93 06/30/92
------------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 10.49 $ 9.78 $ 10.74 $ 9.80 $ 8.82 $ 8.27
------- -------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss)...................... 0.01 0.05 (0.11) 0.06 0.07 0.05
Net realized and unrealized gain/(loss) on
investments..................................... 0.20 1.21 (0.31) 1.15 0.94 0.55
------- -------- ------- -------- ------- -------
Total from investment operations.................. 0.21 1.26 (0.42) 1.21 1.01 0.60
LESS DISTRIBUTIONS:
Dividends from net investment income.............. (0.13) (0.05) (0.04) (0.02) (0.03) (0.05)
Distributions in excess of net investment
income.......................................... -- (0.04) -- -- -- --
Distributions from net realized gains............. (0.10) (0.46) (0.44) (0.25) -- --
Distributions in excess of net realized gains..... -- -- (0.06) -- -- --
------- -------- ------- -------- ------- -------
Total distributions............................... (0.23) (0.55) (0.54) (0.27) (0.03) (0.05)
------- -------- ------- -------- ------- -------
Net asset value, end of period.................... $ 10.47 $ 10.49 $ 9.78 $ 10.74 $ 9.80 $ 8.82
======= ======== ======= ======== ======= =======
TOTAL RETURN+ 2.15% 13.16% (4.01)% 12.39% 11.51% 7.28%
======= ======== ======= ======== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).............. $ 67,334 $116,254 $ 91,763 $127,764 $56,962 $24,479
Ratio of operating expenses to average net
assets.......................................... 1.65%** 1.77% 1.69% 1.69% 1.80% 2.25%
Ratio of net investment income to average net
assets.......................................... 0.11%** 0.46% 0.62% 0.54% 1.07% 0.69%
Portfolio turnover rate........................... 20% 125% 81% 44% 63% 66%
Ratio of operating expenses to average net assets
without fees reduced by credits allowed by the
custodian....................................... 1.66%**(a) 1.77%(a) N/A N/A N/A N/A
Ratio of operating expenses to average net assets
without fee waivers and/or fees reduced by
credits allowed by the custodian................ 1.66%**(a) 1.77%(a) 1.69% 1.69% 1.80% 2.29%
Net investment income/(loss) per share without fee
waivers and/or fees reduced by credits allowed
by the custodian................................ $ 0.01 $ 0.05 $ (0.11) $ 0.06 $ 0.07 $ 0.04
Average commission rate paid (b).................. $ 0.0281 N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
<TABLE>
<C> <S>
** 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 by the 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 period 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.
(b) Average commission rate paid per share of securities purchased and sold by the Fund as required by amended disclosure
requirements effective for fiscal years beginning on or after September 1, 1995.
</TABLE>
80
<PAGE> 82
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------ ------------------------------------------ --------------
SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR YEAR ENDED YEAR YEAR ENDED
12/31/96 ENDED ENDED 12/31/96 ENDED ENDED 12/31/96
(UNAUDITED)++ 06/30/96++ 06/30/95*++ (UNAUDITED)++ 06/30/96 06/30/95*++ (UNAUDITED)*++
------------- ---------- ----------- ------------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............. $ 10.39 $ 9.73 $ 10.74 $ 10.38 $ 9.73 $ 10.74 $ 9.88
------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income/(loss)...... (0.03) (0.03) (0.17) (0.03) (0.03) (0.17) 0.02
Net realized and
unrealized
gain/(loss) on
investments........ 0.20 1.21 (0.31) 0.20 1.20 (0.31) 0.80
------- ------- ------- ------- ------- ------- -------
Total from investment
operations......... 0.17 1.18 (0.48) 0.17 1.17 (0.48) 0.82
LESS DISTRIBUTIONS:
Dividends from net
investment
income............. (0.08) (0.02) (0.03) -- (0.02) (0.03) (0.17)
Distributions in
excess of net
investment
income............. -- (0.04) -- -- (0.04) -- --
Distributions from
net realized
gains.............. (0.10) (0.46) (0.44) (0.10) (0.46) (0.44) (0.10)
Distributions in
excess of net
realized gains..... -- -- (0.06) -- -- (0.06) --
------- ------- ------- ------- ------- ------- -------
Total
distributions...... (0.18) (0.52) (0.53) (0.10) (0.52) (0.53) (0.27)
------- ------- ------- ------- ------- ------- -------
Net asset value, end
of period.......... $ 10.38 $ 10.39 $ 9.73 $ 10.45 $ 10.38 $ 9.73 $ 10.43
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN+ 1.73% 12.34% (4.61)% 1.77% 12.29% (4.61)% 8.43%
======= ======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of
period (in
000's)............. $ 4,672 $ 4,447 $ 2,268 $14,793 $ 38,900 $11,120 $ 99,071
Ratio of operating
expenses to average
net assets......... 2.40%** 2.52% 2.44% 2.40%** 2.52% 2.44% 1.40%**
Ratio of net
investment
income/(loss) to
average net
assets............. (0.64)%** (0.29)% (0.13)% (0.64)%** (0.29)% (0.13)% 0.36%**
Portfolio turnover
rate............... 20% 125% 81% 20% 125% 81% 20%
Ratio of operating
expenses to average
net assets without
fees reduced by
credits allowed by
the custodian...... 2.41%**(a) 2.52%(a) N/A 2.41%**(a) 2.52%(a) N/A 1.41%**(a)
Ratio of operating
expenses to average
net assets without
fee waivers and/or
fees reduced by
credits allowed by
the custodian...... 2.41%**(a) 2.52%(a) 2.44% 2.41%**(a) 2.52%(a) 2.44% 1.41%**(a)
Net investment
income/(loss) per
share without fee
waivers and/or fees
reduced by credits
allowed by the
custodian.......... $ (0.03) $ (0.03) $ (0.17) $ (0.03) $ (0.03) $ (0.17) $ 0.02
Average commission
rate paid (b)...... $0.0281 N/A N/A $0.0281 N/A N/A $ 0.0281
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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. On July 25, 1996 the Fund commenced selling Class I 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 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 period 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.
(b) Average commission rate paid per share of securities purchased and sold by the Fund as required by amended disclosure
requirements effective for fiscal years beginning on or after September 1, 1995.
</TABLE>
81
<PAGE> 83
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
TARGET MATURITY 2002 FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
12/31/96 ENDED ENDED
(UNAUDITED) 06/30/96 06/30/95*
----------- -------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period..................................................... $ 10.72 $ 10.78 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................................................... 0.34 0.63 0.12
Net realized and unrealized gain/(loss) on investments................................... 0.17 (0.30) 0.66
------- ------- -------
Total from investment operations......................................................... 0.51 0.33 0.78
LESS DISTRIBUTIONS:
Dividends from net investment income..................................................... (0.71) (0.39) --
Distributions from net realized gains.................................................... (0.05) -- --
------- ------- -------
Total distributions...................................................................... (0.76) (0.39) --
------- ------- -------
Net asset value, end of period........................................................... $ 10.47 $ 10.72 $ 10.78
======= ======= =======
TOTAL RETURN+ 4.75% 2.91% 7.80%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..................................................... $ 3,161 $ 3,125 $ 2,626
Ratio of operating expenses to average net assets........................................ 0.64%** 0.62% 0.74%**
Ratio of net investment income to average net assets..................................... 5.79%** 5.66% 5.22%**
Portfolio turnover rate.................................................................. 0% 5% 0%
Ratio of operating expenses to average net assets without fees reduced by credits allowed
by the custodian....................................................................... 0.68%**(a) 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................................ 2.41%**(a) 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............................................ $ 0.24 $ 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 periods indicated and does not reflect any applicable sales charges.
The total return would have been lower if certain fees had not been waived and 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>
82
<PAGE> 84
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GLOBAL MONEY FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT -- (YANKEE) -- 26.6%
$8,000,000 Bank of Tokyo Ltd.,
5.520% due 03/06/1997............... $ 8,000,000
8,000,000 Banque Nationale de Paris,
5.380% due 03/03/1997............... 7,999,823
2,000,000 Deutsche Bank,
5.690% due 10/28/1997............... 1,999,213
5,000,000 Industrial Bank of Japan,
5.470% due 02/10/1997............... 4,999,467
5,000,000 Landesbank Hessen-Thueringen,
6.010% due 07/18/1997............... 5,007,710
8,400,000 National Westminster Bank USA,
5.390% due 02/14/1997............... 8,399,992
8,000,000 Sanwa Bank Ltd.,
5.680% due 01/13/1997............... 8,000,027
2,000,000 Societe Generale, New York,
5.840% due 10/06/1997............... 1,999,562
-----------
Total Certificates of
Deposit -- (Yankee) (Cost
$46,405,794)........................ 46,405,794
-----------
COMMERCIAL PAPER -- (FOREIGN) -- 26.0%
8,000,000 Asea Brown Boveri Capital Corporation,
7.100% due 01/03/1997++............. 7,996,845
8,000,000 Barclays U.S. Funding Corporation,
5.700% due 01/03/1997++............. 7,997,458
8,000,000 Bayerische Vereinsbank,
5.400% due 01/06/1997++............. 7,994,000
8,000,000 Commerzbank U.S. Finance Inc.,
5.330% due 01/30/1997++............. 7,965,651
5,000,000 Deutsche Bank,
5.700% due 01/02/1997++............. 4,999,208
8,500,000 Korea Development Bank,
5.320% due 03/05/1997++............. 8,420,865
-----------
Total Commercial Paper -- (Foreign)
(Cost $45,374,027).................. 45,374,027
-----------
MEDIUM-TERM NOTES -- 15.7%
5,000,000 Abbey National Treasury Services,
5.640% due 11/03/1997............... 4,998,374
5,000,000 Bayerische Landesbank,
5.487% due 01/15/1997+.............. 4,999,879
2,500,000 Federal Home Loan Bank (FHLB),
5.875% due 06/27/1997............... 2,498,484
5,000,000 Key Bank N.A.,
4.850% due 07/08/1997+.............. 4,998,246
5,000,000 John Deere Capital,
5.850% due 07/03/1997............... 4,998,245
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
$5,000,000 PNC Bank N.A.,
5.504% due 12/11/1997+.............. $ 4,996,513
-----------
Total Medium-Term Notes
(Cost $27,489,741).................. 27,489,741
-----------
COMMERCIAL PAPER -- (DOMESTIC) -- 15.1%
AIG Funding Corporation:
$3,000,000 5.950% due 01/02/1997++............... $ 2,999,504
4,000,000 5.350% due 01/30/1997++............... 3,982,761
3,000,000 Coca-Cola Company,
5.920% due 01/09/1997++............. 2,996,053
8,500,000 General Electric Capital Corporation,
5.390% due 01/06/1997++............. 8,493,637
8,000,000 Koch Industries,
7.100% due 01/02/1997++............. 7,998,422
-----------
Total Commercial Paper -- (Domestic)
(Cost $26,470,377).................. 26,470,377
-----------
CERTIFICATES OF DEPOSIT -- (DOMESTIC) -- 7.7%
3,000,000 Bank of America,
5.570% due 11/07/1997............... 2,998,756
2,000,000 Bank of New York,
5.550% due 04/01/1997............... 1,999,657
8,500,000 First Union National Bank,
5.360% due 02/18/1997............... 8,500,000
-----------
Total Certificates of
Deposit -- (Domestic)
(Cost $13,498,413).................. 13,498,413
-----------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 6.9%
7,085,000 Federal Home Loan Bank (FHLB),
6.500% due 01/02/1997++............. 7,083,721
5,000,000 Federal National Mortgage Association
(FNMA),
5.360% due 06/11/1997++............. 4,998,291
-----------
Total U.S. Government Agency Discount
Notes (Cost $12,082,012)............ 12,082,012
-----------
TIME DEPOSIT -- 1.4% (Cost $2,499,884)
2,500,000 NationsBank of Texas,
4.900% due 02/05/1997............... 2,499,884
-----------
TOTAL INVESTMENTS (COST $173,820,248)...... 99.4% 173,820,248
OTHER ASSETS AND LIABILITIES (NET)......... 0.6 1,015,063
----- ------------
NET ASSETS................................. 100.0% $174,835,311
===== ============
</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.
See Notes to Financial Statements.
83
<PAGE> 85
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
U.S. GOVERNMENT MONEY FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 87.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 32.5%
$2,000,000 5.270% due 04/04/1997+................. $ 1,999,761
1,600,000 Discount Note, 5.760% due
01/10/1997++......................... 1,597,732
1,445,000 Discount Note, 5.650% due
01/28/1997++......................... 1,438,985
1,700,000 Discount Note, 5.440% due
02/11/1997++......................... 1,689,681
2,400,000 Discount Note, 5.350% due
02/24/1997++......................... 2,381,280
1,000,000 Discount Note, 5.520% due
03/24/1997++......................... 987,768
1,000,000 Discount Note, 5.520% due
03/27/1997++......................... 987,321
-----------
Total FNMAs (Cost $11,082,528)......... 11,082,528
-----------
STUDENT LOAN MARKETING ASSOCIATION
(SLMA) -- 23.5%
3,000,000 5.410% due 09/03/1997+................. 2,998,833
5,000,000 5.570% due 11/20/1997+................. 5,002,776
-----------
Total SLMAs (Cost $8,001,609).......... 8,001,609
-----------
FEDERAL HOME LOAN BANK (FHLB) -- 19.0%
2,000,000 5.300% due 03/05/1997.................. 1,998,948
2,000,000 5.486% due 05/23/1997+................. 1,999,317
2,000,000 5.310% due 12/04/1997+................. 1,998,482
500,000 Discount Note, 5.400% due
02/21/1997++......................... 496,175
-----------
Total FHLBs (Cost $6,492,922).......... 6,492,922
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) -- 8.2%
$1,800,000 Discount Note, 5.380% due
01/14/1997++......................... $ 1,796,575
600,000 Discount Note, 5.350% due
01/17/1997++......................... 598,605
400,000 Discount Note, 5.370% due
02/28/1997++......................... 396,633
-----------
Total FHLMCs (Cost $2,791,813)......... 2,791,813
-----------
FEDERAL FARM CREDIT BANK (FFCB) -- 3.9%
(Cost $1,320,587)
1,325,000 Discount Note, 5.550% due
01/23/1997++......................... 1,320,587
-----------
Total U.S. Government Agency
Obligations (Cost $29,689,459)....... 29,689,459
-----------
U.S. TREASURY NOTE -- 5.8%
(Cost $2,005,249)
2,000,000 6.875% due 02/28/1997.................. 2,005,249
-----------
TOTAL INVESTMENTS (COST $31,694,708*)....... 92.9% 31,694,708
OTHER ASSETS AND LIABILITIES (NET).......... 7.1 2,406,189
----- -----------
NET ASSETS.................................. 100.0% $34,100,897
===== ===========
</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.
See Notes to Financial Statements.
84
<PAGE> 86
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CALIFORNIA MONEY FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- 99.1%
CALIFORNIA -- 99.1%
Alameda County, IDR:
$2,400,000 Heat and Control Inc., Series 95A,
4.250% due 11/01/2025++.............. $ 2,400,000
2,400,000 JMS Family Partnership, Series 95A,
4.250% due 10/01/2025++.............. 2,400,000
2,500,000 Alameda County, Transportation
District, RAN, Series 96,
4.250% due 01/30/1997................ 2,500,956
California Housing Finance Agency, Home
Mortgage Revenue:
2,120,000 Series 15A,
4.250% due 08/01/2025++.............. 2,120,000
2,500,000 Series 96J,
4.000% due 07/24/1997................ 2,500,000
California Pollution Control Financing
Authority, Solid Waste Revenue:
2,500,000 Sanifill Inc., Series 94A,
4.100% due 08/01/2007++.............. 2,500,000
2,400,000 Western Waste Industries, Series 94A,
4.100% due 10/01/2006++.............. 2,400,000
1,000,000 California State Economic Development
Authority, IDR, National R.V. Inc.,
4.400% due 12/01/2020++.............. 1,000,000
2,300,000 California State, GO, RAN, Series C2,
4.050% due 06/30/1997++.............. 2,300,000
California Statewide Communities
Projects, IDR:
1,600,000 K.U.M. Ltd.,
4.150% due 06/01/2022++.............. 1,600,000
420,000 Lorber Industries, Series 92,
4.150% due 06/01/1998++.............. 420,000
1,355,000 Corona, MFHR, Country Hills Apartment
Project, Series 95B,
3.900% due 02/01/2020++.............. 1,355,000
1,600,000 Irvine Ranch, Series B5,
4.000% due 12/01/2005++.............. 1,600,000
300,000 Irvine Ranch, Water District, GO,
Series 85B,
4.850% due 10/01/2009+............... 300,000
2,400,000 Los Angeles County, MFHR, Studio
Colony, Series 85C,
4.200% due 05/01/2007++.............. 2,400,000
2,500,000 Moreno Valley, Unified School District,
GO, TRAN, Series 96,
4.500% due 06/30/1997................ 2,505,921
Newport Beach, Hoag Memorial
Presbyterian Hospital:
1,000,000 5.150% due 10/01/2022+............... 1,000,000
1,200,000 Series 96A,
5.150% due 10/01/2026+............... 1,200,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
$ 300,000 Oceanside, MFHR, Riverview Springs,
Series 90A,
4.250% due 07/01/2020++.............. $ 300,000
2,000,000 Riverside County, GO, School Financing
Authority, RAN, Series 96,
4.625% due 07/17/1997................ 2,005,956
2,200,000 Sacramento County, MFHR, Briarwood
Apartments, Series 85A,
4.250% due 04/15/2007++.............. 2,200,000
1,980,000 San Francisco City and County, IDR,
Hoefer Scientific, Series 92A,
4.750% due 08/01/2007++.............. 1,980,000
2,000,000 Santa Ana Housing Authority, MFHR,
Vintage Apartments, Series 96A,
4.150% due 12/01/2022++.............. 2,000,000
785,000 Santa Clara County Housing Authority,
MFHR, Avenida Espana Gardens, Series
91A,
4.150% due 10/01/2021++.............. 785,000
2,300,000 Southeast Resource Recovery Facilities
Authority, Series 95B,
4.200% due 12/01/2018++.............. 2,300,000
2,400,000 Vallejo, IDR, Meyer Cookware, Series
93A,
4.400% due 12/01/2023++.............. 2,400,000
TOTAL
INVESTMENTS
(COST -----------
$46,472,833*)............................. 99.1% 46,472,833
OTHER ASSETS AND LIABILITIES (NET).......... 0.9 406,552
------ -----------
NET ASSETS.................................. 100.0% $46,879,385
====== ===========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ Variable rate demand notes payable upon not more than one business day's
notice. The interest rate shown reflects the rate currently in effect.
++ 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
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.
85
<PAGE> 87
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SHORT TERM HIGH QUALITY BOND FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 25.1%
$ 473,659 Advanta Mortgage Loan Trust, 1996-2-A1,
6.740% due 11/25/2009................ $ 475,553
Conti-Mortgage Home Equity Loan Trust:
300,000 1996-3-A2,
6.950% due 07/15/2011................ 302,529
300,000 1996-4-A6,
6.710% due 06/15/2014................ 296,154
23,175 EquiCredit, 1993-4-B1,
5.650% due 12/15/2008................ 22,312
Green Tree Financial Corporation:
450,000 1993-2-B2,
8.000% due 07/15/2018................ 455,904
900,000 1995-1-B2,
9.200% due 06/15/2025................ 959,058
500,000 1996-2-B2,
7.900% due 04/15/2027................ 491,250
337,662 Green Tree NIM, 1994-B, Class A,
7.850% due 07/15/2004................ 341,461
512,077 Green Tree Recreational, Equipment &
Consumer, 1996-A, Class A1,
5.550% due 02/15/2018................ 504,779
283,206 Green Tree Security Mortgage Trust,
1994-A,
6.900% due 02/15/2004................ 282,189
300,000 H & T Master Trust,
8.430% due 08/15/2002+++............. 296,700
200,000 Household Affinity Credit Card, 1993,
4.950% due 03/15/1999................ 199,936
Merrill Lynch Mortgage Investors, Inc.:
168,363 1991-B-A,
9.200% due 04/15/2011................ 171,255
242,457 1991-I-A,
7.650% due 01/15/2012................ 245,562
652,813 1992-B-A4,
7.850% due 04/15/2012................ 661,580
1,270,061 Mid-State Trust, Series 4, Class A,
8.330% due 04/01/2030................ 1,345,224
Standard Credit Card Trust:
125,000 90-3B,
9.850% due 07/10/1998**.............. 127,344
200,000 94-1A,
4.650% due 03/07/1999**.............. 199,812
700,000 World Omni Automobile Lease
Securitization, 1996-B,
6.850% due 11/15/2002+++............. 701,969
----------
Total Asset-Backed Securities
(Cost $8,348,674).................... 8,080,571
----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 23.1%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) -- 12.2%
$ 246,451 #038720, Seasoned,
11.000% due 02/15/2010**............. $ 277,811
200,443 #130183, Seasoned,
11.000% due 05/15/2015**............. 227,186
228,182 #131917, Seasoned,
11.000% due 10/15/2015............... 258,626
22,898 #132833, Seasoned,
11.000% due 12/15/2015............... 25,990
99,954 #139704, Seasoned,
11.000% due 11/15/2015............... 113,290
207,556 #140835, Seasoned,
11.000% due 11/15/2015............... 234,867
118,305 #189482, Seasoned,
11.000% due 04/15/2020............... 134,450
1,173,893 #267824, Seasoned,
10.000% due 04/15/2018**............. 1,292,926
314,349 #291375, Seasoned,
11.000% due 08/15/2020**............. 357,996
921,687 #780081, Seasoned,
10.000% due 02/15/2025**............. 1,015,146
----------
Total GNMAs (Cost $3,865,883).......... 3,938,288
----------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES
(ARM) -- 7.7%
597,838 Federal Home Loan Mortgage Corporation
(FHLMC), #845988,
7.792% due 11/01/2021+............... 623,993
Federal National Mortgage Association
(FNMA):
480,048 #82247,
6.125% due 04/01/2019+............... 477,797
285,626 #124571,
7.837% due 11/01/2022+............... 294,149
322,177 #152205,
7.366% due 01/01/2019+............... 332,045
750,000 #313257,
6.132% due 11/01/2035................ 746,483
----------
Total ARMs (Cost $2,454,559)........... 2,474,467
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) --
3.2%
508,581 #250235, 7 Year Balloon,
8.500% due 02/01/2002................ 522,883
452,014 #313030, Seasoned,
10.00% due 05/01/2022................ 498,201
----------
Total FNMAs (Cost $1,015,102).......... 1,021,084
----------
Total U.S. Government Agency Mortgage-
Backed Securities (Cost
$7,335,544).......................... 7,433,839
----------
</TABLE>
See Notes to Financial Statements.
86
<PAGE> 88
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM HIGH QUALITY BOND FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
CORPORATE NOTES -- 21.7%
Capital One Bank Corporation:
$ 500,000 6.875% due 04/24/2000................ $ 501,265
300,000 7.000% due 04/30/2001................ 300,966
400,000 Colonial Realty, Sr. Note,
7.500% due 07/15/2001................ 406,000
400,000 ERP Operating LP,
8.500% due 05/15/1999+++............. 414,236
330,000 Lockheed Martin Corporation,
5.875% due 03/15/1998................ 329,703
175,000 Lyondell Petrochemical Company,
8.250% due 03/15/1997................ 175,772
500,000 Oasis Residential Inc.,
6.750% due 11/15/2001................ 495,000
500,000 Sun Communities Inc., Sr. Note,
7.625% due 05/01/2003................ 510,055
500,000 Susa Partnership LP,
7.125% due 11/01/2003................ 498,750
Taubman Realty Corporation, MTN:
300,000 7.400% due 06/10/2002................ 307,458
500,000 7.500% due 06/15/2002................ 503,925
The Money Store, Inc.:
600,000 9.160% due 09/09/1997+++............. 610,590
1,500,000 7.630% due 04/15/1998+++............. 1,515,990
Time Warner Inc.:
300,000 7.450% due 02/01/1998................ 303,303
100,000 7.950% due 02/01/2000................ 103,269
----------
Total Corporate Notes (Cost
$6,596,287).......................... 6,976,282
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 16.1%
75,000 Chemical Mortgage Securities Inc.,
1993-1-A4,
7.450% due 02/25/2023**.............. 75,445
Countrywide Funding Corporation:
110,834 1994-1-A3,
6.250% due 03/25/2024................ 106,054
1,000,000 1994-2-A8,
6.500% due 02/25/2009**.............. 997,180
Countrywide Mortgage-Backed
Securities, Inc.:
75,000 1994-A-A3,
6.750% due 03/25/2024**.............. 73,734
170,000 1994-C-A5,
6.375% due 03/25/2024**.............. 165,378
678,233 Federal Home Loan Mortgage Corporation
(FHLMC), P/O, REMIC, #1719-C,
Zero coupon due 04/15/1999........... 616,132
451,350 Fund America Investors Corporation,
1991-1-H,
7.950% due 02/20/2020**.............. 457,132
528,609 General Electric Capital Mortgage
Association, 1994-27-A1,
6.500% due 07/25/2024**.............. 525,635
688,726 Norwest Asset Securities Corporation,
1996-5-A13,
7.500% due 11/25/2026................ 692,169
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- --------------- ------------
<S> <C> <C>
Prudential Home Mortgage Securities:
>$ 269,687 1992-47,
7.500% due 01/25/2023............. $ 269,096
924,706 1993-43-A1,
5.400% due 10/25/2023............. 912,851
202,284 Ryland Acceptance Corporation,
8.950% due 08/20/2019............. 207,024
100,000 Sears Mortgage Securities
Corporation,
1993-11-T4,
7.125% due 11/25/2020**........... 99,281
------------
Total Collateralized Mortgage
Obligations (Cost $5,191,399)..... 5,197,111
------------
FOREIGN BOND -- 4.2% (Cost $1,363,585)
NZD 1,975,000 Government of New Zealand,
8.138% due 04/09/1997++........... 1,367,732
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.9%
$ 800,000 Federal Home Loan Bank (FHLB),
(Coupon rate is 6.250% until
06/30/1997),
7.250% due 06/11/1999............. 804,640
425,000 Federal National Mortgage
Association
(FNMA), (Inverse Floater),
9.897% due 12/29/1997+............ 438,813
------------
Total U.S. Government Agency
Obligations (Cost $1,231,342)..... 1,243,453
------------
U.S. TREASURY NOTE -- 3.1% (Cost $1,015,624)
1,000,000 6.500% due 08/31/2001............... 1,010,940
------------
COMMERCIAL PAPER -- 0.8% (Cost $254,000)
254,000 Ford Motor Credit Company,
7.100% due 01/02/1997............. 254,000
------------
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION STRIKE
DATE PRICE
----------- ------
<S> <C> <C> <C> <C>
OPTIONS PURCHASED -- 0.0% #
PUT OPTION PURCHASED ON FOREIGN
CURRENCY -- 0.0% # (Cost $9,678)
NZD 1,975,000 New Zealand 6,016
Dollar Put........ 04/07/1997 $0.685
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS
- ---------------
<C> <S> <C> <C> <C>
CALL OPTION PURCHASED ON FOREIGN
INTEREST RATE FUTURES -- 0.0% # (Cost $20,170)
60 Euro Dollar Call... 03/14/1997 $94.500 4,500
----------
10,516
Total Options Purchased
(Cost $29,848)..........................
----------
TOTAL INVESTMENTS (Cost $31,366,303*)........... 98.0% 31,574,444
----------
</TABLE>
See Notes to Financial Statements.
87
<PAGE> 89
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM HIGH QUALITY BOND FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL EXPIRATION STRIKE VALUE
AMOUNT DATE PRICE (NOTE 2)
- --------------- ----------- ------ -----------
<C> <S> <C> <C> <C>
CALL OPTION WRITTEN ON FOREIGN
CURRENCY -- (0.0)%# (Premium received $9,678)
NZD 1,975,000 New Zealand $ (8,457)
Dollar Call... 04/07/1997 $0.715
----------
OTHER ASSETS AND LIABILITIES (NET) ........... 2.0% 632,788
---- ----------
NET ASSETS.................................... 100.0% $32,198,775
==== ==========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** Security is pledged as collateral for option contracts.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Rate represents annualized yield at date of purchase.
+++ 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>
<S> <C>
GLOSSARY OF TERMS
BALLOON -- Five- and seven-year mortgages with larger
dollar amounts of payments falling due in the
later years of the obligation.
LP -- Limited Partnership
MTN -- Medium Term Note
NZD -- New Zealand Dollar
P/O -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
</TABLE>
See Notes to Financial Statements.
88
<PAGE> 90
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SHORT TERM GLOBAL GOVERNMENT FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------------ ------------
<C> <S> <C>
FOREIGN BONDS AND NOTES -- 70.9%
GERMAN DEUTSCHE MARK BONDS -- 13.3%
DEM 3,475,000 Deutchmark Bank,
4.500% due 04/02/1998........ $ 2,288,665
Federal Republic of Germany:
6,700,000 6.000% due 02/20/1998.......... 4,484,518
2,040,000 5.250% due 10/20/1998.......... 1,367,159
------------
Total German Deutsche Mark
Bonds (Cost $7,935,484)...... 8,140,342
------------
ITALIAN LIRA BONDS -- 12.0%
Italian Treasury Bonds:
ITL 4,680,000,000 8.500% due 08/01/1997.......... 3,099,844
6,115,000,000 8.500% due 01/01/1999.......... 4,198,671
------------
Total Italian Lira Bonds
(Cost $6,550,436)............ 7,298,515
------------
NEW ZEALAND DOLLAR BOND -- 8.6% (Cost $5,270,046)
NZD 7,500,000 Government of New Zealand,
8.700% due 02/10/1997++...... 5,256,911
------------
DANISH KRONER BOND -- 8.1% (Cost $5,038,017)
DKK 26,600,000 Kingdom of Denmark,
9.000% due 11/15/1998........ 4,910,213
------------
CANADIAN DOLLAR BONDS -- 6.0%
Government of Canada:
CAD 2,250,000 6.000% due 09/01/1998.......... 1,705,140
2,600,000 6.500% due 08/01/1999.......... 1,984,243
------------
Total Canadian Dollar Bonds
(Cost $3,553,441)............ 3,689,383
------------
GREAT BRITAIN POUND STERLING NOTES -- 5.9%
GBP 1,250,000 Abbey National Treasury Note,
6.000% due 08/10/1999........ 2,076,405
870,000 United Kingdom Treasury Note,
8.000% due 12/07/2000........ 1,530,846
------------
Total Great Britain Pound
Sterling
Notes (Cost $3,260,049)...... 3,607,251
------------
SPANISH PESETA BOND -- 5.0% (Cost $3,058,328)
ESP 363,000,000 Government of Spain,
11.450% due 08/30/1998....... 3,019,757
------------
AUSTRALIAN DOLLAR BOND AND NOTE -- 4.5%
AUD 785,000 Commonwealth of Australia,
7.000% due 08/15/1998........ 630,821
2,600,000 New South Wales Treasury Note,
7.500% due 02/01/1998........ 2,092,699
------------
Total Australian Dollar Bond
and
Note (Cost $2,611,256)....... 2,723,520
------------
NETHERLANDS GUILDER BONDS -- 4.4%
Government of Netherlands:
NLG 3,375,000 6.250% due 07/15/1998.......... 2,035,627
1,000,000 7.500% due 06/15/1999.......... 628,502
------------
Total Netherlands Guilder Bonds
(Cost $2,826,472)............ 2,664,129
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------------ ------------
<C> <S> <C>
SWEDISH KRONA BOND -- 3.1% (Cost $1,616,528)
SEK 11,600,000 Kingdom of Sweden,
11.000% due 01/21/1999....... $ 1,913,746
------------
Total Foreign Bonds and Notes
(Cost $41,720,057)........... 43,223,767
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES -- 6.9%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) -- 5.9% (Cost $3,587,757)
$ 3,299,262 Pass-through certificates,
10.000% due 03/15/2018-
02/15/2021................... 3,631,648
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 1.0% (Cost $573,269)
562,226 #141461,
7.781% due 11/01/2021+....... 586,475
------------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $4,161,026)............ 4,218,123
------------
U.S. TREASURY NOTES -- 6.3%
1,300,000 5.125% due 03/31/1998**........ 1,291,303
2,500,000 6.875% due 07/31/1999.......... 2,552,000
------------
Total U.S. Treasury Notes
(Cost $3,824,143)............ 3,843,303
------------
ASSET-BACKED SECURITIES -- 5.3%
2,697,203 Green Tree Security Mortgage
Trust, 1994-A,
6.900% due 02/15/2004........ 2,687,510
175,048 Household Finance Corporation,
1992-2-A3,
5.250% due 10/20/2007........ 174,500
217,604 Merrill Lynch Mortgage
Investors, Inc., 1992-B-A4,
7.850% due 04/15/2012........ 220,528
126,327 Old Stone Credit Corporation,
1992-A4,
6.550% due 11/25/2007........ 125,991
------------
Total Asset-Backed Securities
(Cost $3,212,980)............ 3,208,529
------------
CORPORATE NOTES -- 4.9%
2,000,000 Bank UTD Holdings, Sr. Note,
8.050% due 05/15/1998........ 1,952,500
1,000,000 Sun Communities Inc., Sr. Note,
7.625% due 05/01/2003........ 1,020,110
------------
Total Corporate Notes
(Cost $2,997,191)............ 2,972,610
------------
</TABLE>
See Notes to Financial Statements.
89
<PAGE> 91
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM GLOBAL GOVERNMENT FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------------ ------------
<C> <S> <C>
INDEXED NOTES -- 3.2%
J.P. Morgan & Company:
$1,304,000 (Value is directly linked to
the Philippine Peso),
9.700% due 01/21/1997........ $ 1,316,349
650,000 (Value is directly linked to
the South Korean Won),
9.825% due 02/05/1997........ 638,010
------------
Total Indexed Notes
(Cost $1,954,000)............ 1,954,359
------------
COMMERCIAL PAPER -- 0.3% (Cost $169,000)
169,000 Ford Motor Credit Company,
7.100% due 01/02/1997........ 169,000
------------
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION STRIKE
DATE PRICE
----------- ----------
<C> <S> <C> <C> <C>
PUT OPTIONS PURCHASED ON FOREIGN CURRENCY -- 0.2%
DEM 5,000,000 German Deutsche
Mark Put......... 03/03/1997 $ 1.5670 18,500
AUD 3,500,000 Australian Dollar
Put.............. 03/07/1997 0.7897 19,950
NZD 7,400,000 New Zealand Dollar
Put.............. 03/13/1997 0.6850 13,311
ITL 11,470,000,000 Italian Lira
Put.............. 03/25/1997 1,567.7500 28,560
DEM 2,924,300 German Deutsche
Mark Put......... 05/23/1997 1.5208 43,865
-----------
124,186
Total Put Options Purchased on Foreign
Currency (Cost $170,840)..................
-----------
TOTAL INVESTMENTS (COST $58,209,237*)............... 98.0% 59,713,877
-----------
CALL OPTIONS WRITTEN ON FOREIGN CURRENCY -- (0.2)%
AUD 3,500,000 Australian Dollar
Call............. 03/07/1997 $ 0.8075 (12,600)
NZD 7,400,000 New Zealand Dollar
Call............. 03/13/1997 0.7073 (46,457)
ITL 11,470,000,000 Italian Lira
Call............. 03/25/1997 1,508.150 (58,497)
-----------
(117,554)
Total Call Options Written on Foreign
Currency (Premiums received $101,465).....
-----------
OTHER ASSETS AND LIABILITIES (NET).................. 2.2% 1,359,363
---- -----------
NET ASSETS.......................................... 100.0% $60,955,686
==== =========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** A portion of this security is pledged as collateral for option contracts.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Rate represents annualized yield at date of purchase.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE NET UNREALIZED
---------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ----------- --------------- ----------- ------------ ------------------
<S> <C> <C> <C> <C>
01/08/1997 CAD 685,541 500,691 516,220 $ (15,529)
01/08/1997 CAD 3,009,175 2,197,782 2,254,824 (57,042)
02/12/1997 DKK 10,900,000 1,854,635 1,891,146 (36,511)
02/19/1997 DEM 2,924,300 1,906,541 1,950,756 (44,215)
03/18/1997 NLG 6,456,263 3,756,061 3,750,000 6,061
----------
$ (147,236)
----------
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<CAPTION>
CONTRACTS TO DELIVER
---------------------------------------------- NET UNREALIZED
EXPIRATION VALUE IN IN EXCHANGE APPRECIATION
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ----------- --------------- ----------- ------------ ------------------
<S> <C> <C> <C> <C>
01/08/1997 CAD 3,694,716 2,698,474 2,780,072 $ 81,598
01/08/1997 CAD 3,009,175 2,197,783 2,253,937 56,154
02/07/1997 FRF 6,972,931 1,346,994 1,354,493 7,499
02/11/1997 DKK 23,072,000 3,925,503 4,000,000 74,497
02/12/1997 DKK 18,930,450 3,221,016 3,300,000 78,984
02/19/1997 DEM 2,924,300 1,906,541 1,949,144 42,603
02/24/1997 BEF 41,306,140 1,307,192 1,340,456 33,264
02/24/1997 SEK 13,200,000 1,929,528 2,003,795 74,267
02/25/1997 DEM 2,004,291 1,307,193 1,346,065 38,872
03/13/1997 CHF 5,082,530 3,825,161 3,863,573 38,412
03/18/1997 NLG 15,416,993 8,969,146 9,219,036 249,890
----------
$ 776,040
----------
Net Unrealized Appreciation of Forward
Foreign Currency Contracts.................... $ 628,804
====================
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.
90
<PAGE> 92
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
U.S. GOVERNMENT FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES -- 109.2%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) -- 52.8%
$54,689,507 6.500% due 08/01/2010-10/01/2025**... $ 53,789,223
2,295,892 7.000% due 07/01/2024-12/01/2026**... 2,261,811
18,419,826 7.500% due 05/01/2010- 10/01/2010**... 18,725,080
4,248,781 8.500% due 04/01/2019**.............. 4,459,860
1,267,058 8.750% due 01/01/2013**.............. 1,326,357
14,801,454 9.000% due 12/01/2008-08/01/2022**... 15,758,637
1,130,204 9.500% due 06/01/2015-05/01/2017**... 1,224,358
421,112 10.500% due
09/01/2009-05/01/2019**............ 462,665
85,028 10.750% due 12/01/2012**............. 93,427
164,848 11.000% due
09/01/2015-02/01/2016**............ 183,717
193,341 11.750% due 07/01/2013**............. 216,361
40,386 12.000% due 01/01/2015**............. 46,394
81,500,000 Commitment to Purchase, GOLD,
7.500% due 04/16/2011.............. 82,722,500
26,000,000 Commitment to Purchase, GOLD,
7.500% due 07/15/2026.............. 26,032,500
28,450,000 Commitment to Purchase, GOLD,
6.500% due 02/18/2011.............. 27,952,125
-----------
Total FHLMCs (Cost $236,559,148)..... 235,255,015
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) -- 35.3%
7,779,859 7.000% due 01/15/2024-05/15/2026**... 7,614,463
67,783,677 7.500% due 12/15/2022-04/15/2024**... 68,069,758
56,246,811 9.000% due 10/15/2008-06/15/2022**... 60,268,404
5,378,170 9.500% due 04/15/2016-11/15/2017**... 5,841,311
958,157 10.000% due
02/15/2019-12/15/2020**............ 1,054,622
320,368 10.500% due
09/15/2018-07/15/2020**............ 358,651
80,058 11.000% due
07/15/2018-12/15/2019**............ 91,087
14,000,000 Commitment to Purchase, 7.500% due
12/15/2026......................... 14,008,750
-----------
Total GNMAs (Cost $155,980,039)...... 157,307,046
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 11.8%
41,824 5.500% due 02/01/2009**.............. 39,694
4,220,033 7.000% due 06/01/2010-11/01/2010**... 4,223,536
11,840,904 8.000% due 05/01/2017-01/01/2025**... 12,235,829
8,911,390 8.500% due 11/01/2017-09/01/2025**... 9,325,875
3,914,257 9.000% due 06/01/2016-06/01/2021**... 4,171,008
8,883,591 10.000% due
04/01/2016-05/01/2022**............ 9,787,634
136,711 10.500% due 06/01/2020**............. 151,706
345,532 11.500% due
03/01/2011-07/01/2015**............ 392,307
12,000,000 Commitment to Purchase, 7.000% due
02/15/2011......................... 11,992,500
-----------
Total FNMAs (Cost $51,553,817)....... 52,320,089
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
FEDERAL HOUSING ADMINISTRATION
(FHA) -- 4.4%
Audubon Villas:
$ 1,936,588 8.125% due 07/31/2036**.............. $ 1,943,850
3,338,212 8.125% due 07/31/2036, TBA**......... 3,350,730
4,995,517 Lakeland Nursing Home,
7.875% due 12/01/2034**............ 5,027,129
University Park Apartments:
1,165,194 7.875% due 01/01/2038**.............. 1,159,368
3,077,672 7.875% due 01/01/2038, TBA**......... 3,062,284
5,000,000 Village Green,
8.250% due 09/01/2034**............ 5,114,845
-----------
Total FHAs (Cost $19,414,354)........ 19,658,206
-----------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES
(ARM) -- 4.2%
Government National Mortgage
Association II:
7,171,489 7.125% due 08/20/2020+**............. 7,329,477
11,213,376 7.125% due 09/20/2020+**............. 11,462,201
-----------
Total ARMs (Cost $18,758,307)........ 18,791,678
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(GNMA II) -- 0.7%
1,425,534 9.500% due 02/20/2017-03/20/2021**... 1,534,969
298,597 10.000% due 07/20/2019**............. 324,861
119,764 10.500% due
09/20/2019-11/20/2019**............ 134,029
976,689 11.000% due
06/20/2019-07/20/2020**............ 1,111,175
49,969 11.500% due 08/20/2019**............. 57,589
-----------
Total GNMA IIs (Cost $2,956,555)..... 3,162,623
-----------
Total U.S. Government Agency
Mortgage-
Backed Securities (Cost $485,222,220). 486,494,657
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 12.2%
4,000,000 Aetna Commercial Mortgage Trust,
Series 95-C5, Class A2,
6.590% due 12/26/2030.............. 3,996,667
6,904,531 Asset Securitization Corporation,
Series 96-D2, Class A1,
6.920% due 02/14/2029.............. 6,873,559
Federal Home Loan Mortgage
Corporation (FHLMC), REMIC, Pass-
through certificates:
2,500,000 Series 1288, Class HA,
5.500% due 11/15/2020**............ 2,307,025
22,856 Series 1551, Class H, (I/O),
1155.758% due 05/15/2001**......... 60,526
</TABLE>
See Notes to Financial Statements.
91
<PAGE> 93
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
U.S. GOVERNMENT FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- (CONTINUED)
Federal National Mortgage Association
(FNMA), REMIC, Pass-through
certificates:
$ 4,000,000 Trust 89-18, Class-C,
9.500% due 04/25/2004**............ $ 4,375,000
79,069 Trust 90-98, Class K, (I/O),
949.3846% due 08/25/2020**......... 1,517,638
31,260 Trust 90-133, Class K, (I/O),
1009.500% due 11/25/2020**......... 927,342
1,369,006 Trust 92-83, Class X,
7.000% due 02/25/2022**............ 1,250,929
5,000,000 Trust 93-4, Class HB,
11.000% due 01/25/2019**........... 5,707,800
13,812,018 Trust 93-161, Class E, (P/O),
Zero coupon due 02/25/2023**....... 9,189,308
4,925,534 JP Morgan Commercial Mortgage Finance
Corporation, Series 96-C3, Class
A1,
7.330% due 04/25/2028.............. 5,038,668
10,000,000 Merrill Lynch Mortgage Investors,
Inc., 1996-CL, Class A3,
7.420% due 04/25/2028**............ 10,207,457
2,894,241 New York City Housing Development
Corporation, Series 96,
6.750% due 06/25/2006**............ 2,873,891
-----------
Total Collateralized Mortgage
Obligations (Cost $51,876,383)..... 54,325,810
-----------
SMALL BUSINESS ADMINISTRATION (SBA) -- 7.1%
5,000,000 7.350% due 08/01/2005**.............. 5,051,563
2,840,002 8.500% due 01/01/2015**.............. 3,037,027
3,944,617 7.600% due 05/01/2016**.............. 4,072,817
3,938,730 7.550% due 06/01/2016**.............. 4,032,890
3,000,000 7.700% due 07/01/2016**.............. 3,098,906
8,500,000 7.200% due 10/01/2016**.............. 8,550,469
4,000,000 6.950% due 11/01/2016**.............. 3,968,125
-----------
Total SBAs (Cost $31,415,921)........ 31,811,797
-----------
U.S. TREASURY NOTES -- 4.1%
700,000 5.375% due 11/30/1997**.............. 698,467
17,376,000 6.500% due 10/15/2006**.............. 17,471,047
-----------
Total U.S. Treasury Notes
(Cost $17,950,762)................. 18,169,514
-----------
REPURCHASE AGREEMENT -- 5.4% (Cost $24,200,000)
$24,200,000 Agreement with Lehman Brothers Inc.,
5.800% dated 12/31/1996, to be
repurchased at $24,207,798 on
01/02/1997, collateralized by
$16,180,000 U.S. Treasury Bonds,
11.250% due 02/15/2015
(Market Value -- $24,686,522)...... $ 24,200,000
-----------
TOTAL INVESTMENTS (Cost $610,665,286*).... 138.0% 615,001,778
------ ------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION STRIKE
CONTRACTS DATE PRICE
- ----------- ---------- -------
<C> <S> <C> <C> <C>
PUT OPTION WRITTEN ON U.S TREASURY
BOND -- (0.0)%# (Premium received $171,953)
17,750 U.S. Treasury $100.00 (146,992)
Bond............. 02/14/1997
------
OTHER ASSETS AND LIABILITIES (NET)........ (38.0)% (169,407,476)
----- -------------
NET ASSETS................................ 100.0% $ 445,447,310
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** A portion or all of these securities are pledged as collateral for futures
contracts and dollar roll transactions.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
# Amount represents less than 0.1% of net assets.
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- ---------- --------------
<C> <S> <C>
FUTURES CONTRACTS -- LONG POSITION
102 U.S. Treasury Bond, Thirty Year,
March 1997........................ $ (43,786)
============
GLOSSARY OF TERMS
GOLD -- Payments are on an accelerated 45-day
payment cycle instead of 75-day payment
cycle
I/O -- Interest Only
P/O -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
TBA -- To Be Announced
</TABLE>
See Notes to Financial Statements.
92
<PAGE> 94
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CORPORATE INCOME FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 93.4%
MANUFACTURING -- 20.6%
$ 4,000,000 Boeing Company, Deb.,
8.750% due 08/15/2021**............ $ 4,710,000
5,000,000 Caterpillar Inc., Sinking Fund Deb.,
9.750% due 06/01/2019**............ 5,543,750
Ford Motor Company, Deb.:
3,750,000 8.875% due 01/15/2022.............. 4,326,562
8,000,000 8.875% due 11/15/2022.............. 8,640,000
14,500,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021.............. 17,436,250
7,800,000 Textron Inc., Deb.,
8.750% due 07/01/2022.............. 8,541,000
10,450,000 Tyco Laboratories, Inc., Deb.,
9.500% due 05/01/2022.............. 12,291,813
1,000,000 V.F. Corporation, Note,
9.500% due 05/01/2001.............. 1,110,000
------------
62,599,375
------------
INDUSTRIAL -- 11.7%
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.............. 5,692,500
6,030,000 Conrail Inc., Deb.,
9.750% due 06/15/2020.............. 7,552,575
5,000,000 du Pont (E.I.) de Nemours & Company,
Deb.,
8.250% due 01/15/2022**............ 5,250,000
6,500,000 Ogden Corporation, Deb.,
9.250% due 03/01/2022.............. 7,434,375
6,860,000 Praxair, Inc., Deb.,
8.700% due 07/15/2022.............. 7,477,400
------------
35,636,850
------------
FOREST PRODUCTS -- 10.3%
6,351,000 Boise Cascade Corporation, Deb.,
9.450% due 11/01/2009.............. 7,343,344
3,010,000 Federal Paper Board Company, Deb.,
10.000% due 04/15/2011............. 3,743,687
Georgia-Pacific Corporation, Deb.:
5,000,000 9.875% due 11/01/2021.............. 5,606,250
7,000,000 9.500% due 05/15/2022.............. 7,673,750
6,000,000 James River Corporation, Deb.,
9.250% due 11/15/2021.............. 6,907,500
------------
31,274,531
------------
REGIONAL BANKS -- 7.2%
400,000 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010............. 497,500
1,000,000 Barnett Banks, Florida, Inc., Sub.
Note,
10.875% due 03/15/2003............. 1,202,500
1,100,000 First Interstate Bancorp, Sub. Note,
9.125% due 02/01/2004.............. 1,238,875
1,000,000 Mellon Financial Company, Sub. Deb.,
9.750% due 06/15/2001.............. 1,118,750
NCNB Corporation, Sub. Note:
4,200,000 9.375% due 09/15/2009.............. 4,961,250
10,125,000 10.200% due 07/15/2015**........... 12,833,437
------------
21,852,312
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<C> <S> <C>
ENERGY -- 6.9%
2,850,000 BP America Inc., Guaranteed Deb.,
(British Petroleum Company),
10.000% due 07/01/2018............. $ 3,085,125
8,700,000 Occidental Petroleum Corporation, Sr.
Deb.,
11.125% due 08/01/2010............. 11,386,125
5,950,000 Phillips Petroleum Company, Deb.,
9.180% due 09/15/2021**............ 6,567,312
------------
21,038,562
------------
ELECTRIC -- 6.4%
5,000,000 Louisiana Power & Light Company,
First Mortgage,
8.500% due 07/01/2022.............. 5,068,750
5,000,000 Mississippi Power & Light Company,
First and Refundable Mortgage,
8.650% due 01/15/2023.............. 5,337,500
2,000,000 Philadelphia Electric Company,
First and Refundable Mortgage,
8.250% due 09/01/2022.............. 2,065,000
Texas Utilities Electric Company,
First Mortgage:
1,200,000 8.875% due 02/01/2022.............. 1,293,000
3,000,000 8.750% due 11/01/2023.............. 3,206,250
2,050,000 Utilicorp United Inc., Sr. Note,
10.500% due 12/01/2020............. 2,339,563
------------
19,310,063
------------
GAS -- 6.0%
12,625,000 ANR Pipeline Company, Deb.,
9.625% due 11/01/2021.............. 15,576,094
2,500,000 Panhandle Eastern Pipe Line Company,
Deb.,
8.625% due 04/15/2025.............. 2,631,250
------------
18,207,344
------------
FINANCIAL -- 5.7%
2,000,000 American General Corporation,
9.625% due 02/01/2018.............. 2,147,500
Barclays North American Capital
Corporation, Capital Note:
1,000,000 10.500% due 12/15/2017**........... 1,085,000
9,000,000 9.750% due 05/15/2021**............ 10,496,250
2,000,000 Ford Holdings, Inc., Deb.,
9.375% due 03/01/2020**............ 2,397,500
1,000,000 GATX Leasing Corporation, MTN,
10.000% due 03/21/2001............. 1,117,500
------------
17,243,750
------------
MEDIA -- 5.5%
Tele-Communications, Inc.:
3,950,000 Sr. Deb.,
9.250% due 01/15/2023.............. 3,930,250
4,000,000 Sr. Note,
9.250% due 04/15/2002.............. 4,265,000
</TABLE>
See Notes to Financial Statements.
93
<PAGE> 95
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CORPORATE INCOME FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
MEDIA -- (CONTINUED)
$7,760,000 Time Warner Inc., Deb.,
9.150% due 02/01/2023.............. $ 8,429,300
------------
16,624,550
------------
YANKEE (U.S. DOLLAR DENOMINATED) -- 5.4%
8,500,000 Petro-Canada, Deb.,
9.250% due 10/15/2021.............. 10,316,875
5,750,000 Trans-Canada Pipeline Corporation,
Deb.,
8.500% due 03/20/2023.............. 6,087,813
------------
16,404,688
------------
TRANSPORTATION -- 5.0%
United Air Lines Inc.:
5,000,000 Equipment Trust certificates,
10.850% due 07/05/2014............. 6,037,500
Pass-through certificates:
3,000,000 9.080% due 10/26/2015.............. 3,142,500
5,500,000 9.560% due 10/19/2018.............. 6,036,250
------------
15,216,250
------------
RETAIL -- 2.3%
May Department Stores Company, Deb.:
1,500,000 9.875% due 06/15/2021**............ 1,726,875
5,100,000 8.375% due 10/01/2022**............ 5,335,875
------------
7,062,750
------------
TELECOMMUNICATIONS -- 0.4%
GTE Corporation:
250,000 Deb.,
10.300% due 11/15/2017............. 269,687
1,000,000 Sinking Fund Deb.,
10.750% due 09/15/2017............. 1,076,250
------------
1,345,937
------------
Total Corporate Bonds and Notes
(Cost $270,880,858)................ 283,816,962
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES -- 18.5%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) -- 7.7% (Cost $23,503,125)
23,000,000 Commitment to Purchase, GOLD,
8.000% due 01/01/2027............ 23,445,625
------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) -- 7.1%
$18,000,000 Commitment to Purchase,
8.000% due 01/01/2027.............. $ 18,315,000
GOLD:
2,125,606 #C00362,
9.000% due 06/01/2024.............. 2,246,500
1,132,835 #C80253,
9.000% due 01/01/2025.............. 1,197,265
------------
Total FHLMCs (Cost $21,779,622)...... 21,758,765
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 3.7% (Cost $11,154,688)
11,000,000 Commitment to Purchase,
7.500% due 01/01/2012.............. 11,158,125
------------
Total U.S. Government Agency
Mortgage-Backed Securities (Cost
$56,437,435)....................... 56,362,515
------------
U.S. TREASURY BOND -- 1.9% (Cost $5,658,750)
4,000,000 13.750% due 08/15/2004............... 5,756,480
------------
SHARES
- ------------
INVESTMENT COMPANY SECURITY -- 2.0%
(Cost $6,216,139)
6,216,139 Lehman Provident Tempfund............ 6,216,139
------------
TOTAL INVESTMENTS (COST $339,193,182*)..... 115.8% 352,152,096
OTHER ASSETS AND LIABILITIES (NET)......... (15.8) (48,056,692)
----- ------------
NET ASSETS................................. 100.0% $304,095,404
===== ============
</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 payment cycle
MTN -- Medium Term Note
</TABLE>
See Notes to Financial Statements.
94
<PAGE> 96
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CALIFORNIA MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- 97.3%
CALIFORNIA -- 96.8%
Alameda, Improvement Board Act of
1915, Marina Village Assessment
District, Series 89-1:
$ 3,075,000 7.650% due 09/02/2013.............. $ 3,168,542
3,310,000 7.650% due 09/02/2014.............. 3,410,425
5,360,000 Alhambra, Improvement Board Act of
1915, Assessment District No. 1,
Public Works, (MBIA Insured),
6.125% due 09/02/2018.............. 5,594,500
4,000,000 Anaheim, Public Financing Authority
Revenue, Residual Interest Bond,
(MBIA Insured),
6.450% due 12/28/2018+............. 4,305,000
1,000,000 Arcadia, Hospital Revenue Authority,
(Methodist Hospital),
6.500% due 11/15/2012.............. 1,031,250
2,000,000 Barstow Redevelopment Agency, Central
Redevelopment Project, Tax
Allocation, Series A, (MBIA
Insured),
7.000% due 09/01/2014.............. 2,385,000
1,000,000 Brea & Olinda, Unified School
District, (High School Refinancing
Project), COP, Series A, (FSA
Insured),
6.000% due 08/01/2009.............. 1,052,500
1,535,000 Brisbane, (Capital Improvement
Refinancing Project), COP,
6.000% due 04/01/2018.............. 1,517,731
4,795,000 California Educational Facilities
Authority Revenue, (College of
Osteopathic Medicine),
7.500% due 06/01/2018.............. 5,574,188
California Health Facilities
Authority Revenue:
1,540,000 (Aids Healthcare Foundation), Series
C,
6.250% due 09/01/2017.............. 1,580,425
1,000,000 (Kaiser Permanent), Series A,
7.000% due 12/01/2010.............. 1,083,750
1,000,000 California Housing Finance Agency,
Home Mortgage, Series N, AMT,
6.375% due 02/01/2027.............. 1,010,000
California Housing Finance Agency,
Home Ownership & Improvement
Revenue:
1,785,000 Series 1988G, AMT,
8.150% due 08/01/2019.............. 1,845,244
2,520,000 Series 1989D, AMT,
7.500% due 08/01/2020.............. 2,630,250
5,010,000 Series C, AMT,
6.650% due 08/01/2014.............. 5,241,713
665,000 Series D, (MBIA Insured), AMT,
6.300% due 08/01/2014.............. 681,625
2,630,000 Series F, (MBIA Insured), AMT,
6.800% due 08/01/2014.............. 2,787,800
4,370,000 Series F-2,
7.250% due 08/01/2016.............. 4,615,812
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
California, Pollution Control
Financing Authority, PCR:
$ 1,000,000 (Keller Canyon Landfill Company
Project), AMT,
6.875% due 11/01/2027.............. $ 1,071,250
2,900,000 (Mobile Oil Corporation), AMT,
5.500% due 12/01/2029.............. 2,813,000
5,000,000 (Pacific Gas and Electric), Series B,
(AMBAC Insured), AMT,
8.875% due 01/01/2010.............. 5,305,050
2,500,000 (San Diego Gas and Electric), Series
A, (AMBAC Insured), AMT,
5.850% due 06/01/2021.............. 2,503,125
(Southern California Edison Company):
13,250,000 Series B, (AMBAC Insured), AMT,
6.400% due 12/01/2024.............. 14,045,000
5,000,000 Series B, (FGIC Insured), AMT,
6.400% due 12/01/2024.............. 5,300,000
4,000,000 Series C, (AMBAC Insured),
6.000% due 07/01/2027+............. 4,050,000
6,565,000 (Tracy Material Recovery Project),
Series A, AMT,
6.600% due 08/01/2014.............. 6,679,888
5,000,000 (Waste Management), Series A, AMT,
7.150% due 02/01/2011.............. 5,437,500
3,100,000 (Waste Removal Systems), Series A,
AMT,
7.100% due 11/01/2009.............. 3,274,375
2,250,000 California Residential Efficiency
Financing Authority, (First
Resource Efficiency), (AMBAC
Insured),
6.000% due 07/01/2017.............. 2,323,125
1,425,000 California Rural Home Mortgage
Finance Authority, SFMR,
Mortgage-Backed Securities Project,
Series A-2,
(GNMA Insured), AMT,
7.950% due 12/01/2024.............. 1,556,812
7,750,000 California State, GO, (MBIA Insured),
6.000% due 10/01/2014.............. 8,089,063
California Statewide Communities
Development Authority, COP:
3,000,000 (Cedars-Sinai Medical Center),
(MBIA Insured),
6.500% due 08/01/2012.............. 3,292,500
2,235,000 (Childrens Campus),
6.500% due 09/01/2022.............. 2,327,194
2,000,000 (Huntington Memorial Hospital),
(CONNIE LEE Insured),
5.800% due 07/01/2026.............. 2,000,000
3,500,000 Capistrano Unified School District,
Community Facilities District,
Supplemental Tax, (Aliso Viejo),
#87-1, Pre-refunded,
8.375% due 10/01/2020.............. 4,051,250
5,795,000 Carson, Improvement Board Act of
1915, GO,
7.375% due 09/02/2022.............. 6,063,019
Centralia, School District, COP,
Pre-refunded:
775,000 Zero coupon due 06/01/2008......... 399,125
835,000 Zero coupon due 06/01/2009......... 400,800
890,000 Zero coupon due 06/01/2010......... 396,050
940,000 Zero coupon due 06/01/2011......... 390,100
1,010,000 Zero coupon due 06/01/2012......... 390,112
1,075,000 Zero coupon due 06/01/2013......... 387,000
</TABLE>
See Notes to Financial Statements.
95
<PAGE> 97
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 4,675,000 Chula Vista, IDR, (San Diego Gas
and Electric), Series A, AMT,
(AMBAC Insured),
6.400% due 12/01/2027.............. $ 4,955,500
2,980,000 Chula Vista, Redevelopment Agency,
Tax Allocation Revenue,
8.625% due 09/01/2024.............. 3,527,575
2,250,000 Contra Costa County, COP,
(Merrithew Memorial Hospital),
6.625% due 11/01/2022.............. 2,368,125
Contra Costa County, Finance
Authority, Tax Allocation Revenue,
Series A:
1,595,000 7.000% due 08/01/2009.............. 1,720,606
1,000,000 7.100% due 08/01/2022.............. 1,073,750
7,749,000 Contra Costa County, MFHR, (Crescent
Park Apartments Project), Series B,
(GNMA Insured),
7.800% due 06/20/2034.............. 8,543,273
3,270,000 Delano, COP, Series A,
9.250% due 01/01/2022.............. 3,670,575
1,985,000 El Cajon, COP, (Helix View Nursing
Hospital), Limited Obligation,
Series 1990, AMT, (FHA Insured),
7.750% due 02/01/2029.............. 2,026,943
1,000,000 El Centro, Redevelopment Agency, Tax
Allocation, (El Centro
Redevelopment Project), (MBIA
Insured),
6.375% due 11/01/2017.............. 1,073,750
4,935,000 Fairfield Housing Authority Revenue,
Mortgage Revenue,
(Creekside Estates Project),
7.875% due 02/01/2015.............. 5,058,375
5,000,000 Foothill Eastern Transportation
Corridor Agency, Series A,
Zero coupon due 01/01/2008........... 3,243,750
Gilroy, Unified School District, COP,
(Measure J Capital Projects),
(FSA Insured):
1,135,000 6.000% due 09/01/2007.............. 1,228,638
2,000,000 6.250% due 09/01/2012.............. 2,125,000
1,250,000 Kings County, Waste Management
Authority, Solid Waste Revenue,
AMT,
7.200% due 10/01/2014.............. 1,343,750
1,500,000 La Verne, Public Financing Authority,
Capital Improvement,
7.250% due 09/01/2026.............. 1,563,750
12,690,000 Long Beach, Harbor Revenue, Series
1989A, AMT, (MBIA Insured),
7.250% due 05/15/2019.............. 13,387,950
Los Angeles, Community Redevelopment
Agency, AMT:
1,425,000 5.850% due 12/01/2026................ 1,341,281
3,605,000 COP, (Allright Garage L.A.),
7.550% due 10/01/2008.............. 4,253,900
3,490,000 Series C, (AMBAC Insured),
6.750% due 07/01/2014.............. 3,686,312
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
$ 3,000,000 Los Angeles County, MFHR,
(GNMA Insured), AMT,
7.400% due 01/20/2022.............. $ 3,090,840
Los Angeles County, Residual Interest
Bond:
4,200,000 6.600% due 11/01/2011+............. 4,383,750
1,000,000 9.025% due 06/01/2015+............. 1,032,500
3,740,000 (Edmund D. Edelman Children's
Center), COP, (AMBAC Insured),
6.000% due 04/01/2012.............. 3,847,525
11,110,000 (Pension Obligation), COP,
(MBIA Insured),
6.900% due 06/30/2008.............. 12,929,262
1,475,000 Los Angeles County, Single Family
Housing Revenue, Series B,
(GNMA Insured),
7.600% due 08/01/2016.............. 1,557,969
660,000 Los Angeles Home Mortgage Revenue,
Mortgage-Backed Securities Project,
(GNMA Insured),
8.100% due 05/01/2017.............. 707,025
2,000,000 Los Angeles, Los Angeles Convention
and Exposition Center, Series 1990,
(AMBAC Insured),
Zero coupon due 08/15/2002......... 1,545,000
530,000 Los Angeles, SFMR, Program 1990,
Issue A, GNMA collateralized, AMT,
7.550% due 12/01/2023.............. 551,200
7,000,000 National City Community Development
Revenue, Series A, (AMBAC Insured),
6.250% due 08/01/2012.............. 7,358,750
3,500,000 Novato, Special Tax Revenue,
(Community Facilities District),
7.200% due 08/01/2015.............. 3,600,625
2,000,000 Oakland, Revenue Bonds,
(YMCA East Bay Project),
7.100% due 06/01/2010.............. 2,095,000
Oakland, Unified School District:
2,645,000 7.000% due 11/15/2011.............. 2,773,944
3,445,000 COP, Energy Retrofit,
6.750% due 11/15/2014.............. 3,505,287
3,000,000 Ontario, Redevelopment Agency, MFHR,
(Sunnyside III & Daisy XX-C),
FNMA collateralized,
5.300% due 01/01/2027.............. 3,000,000
1,400,000 Orange County, Airport Revenue, AMT,
(John Wayne International Airport),
6.625% due 07/01/2017.............. 1,405,292
4,500,000 Palm Desert, Financing Authority, Tax
Allocation Revenue, (MBIA Insured),
(Inverse Floater),
8.705% due 04/01/2022+............. 4,910,625
1,150,000 Palm Springs, Financing Authority,
(Convention Center Project), Series
A, (MBIA Insured),
6.750% due 11/01/2021.............. 1,254,938
3,000,000 Pasadena, Special Tax No. 1,
7.200% due 12/01/2012.............. 3,127,500
</TABLE>
See Notes to Financial Statements.
96
<PAGE> 98
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
Port Oakland, AMT:
(Mitsu Osk Lines Ltd.), Series A:
$ 3,030,000 6.750% due 01/01/2012.............. $ 3,185,287
2,300,000 6.800% due 01/01/2019.............. 2,406,375
12,500,000 Port Revenue, Series 1989A,
(MBIA/BIGI Insured),
7.600% due 11/01/2016.............. 12,869,750
3,000,000 Rancho, Water District Financing
Authority, Residual Interest Bond,
(AMBAC Insured), Pre-refunded,
8.874% due 08/17/2021+............. 3,603,750
2,750,000 Redding, Electrical Systems Revenue,
COP, (Inverse Floater), (MBIA
Insured),
8.751% due 07/08/2022+............. 3,341,250
1,000,000 Redondo Beach, Public Financing
Authority Revenue, (South Bay
Center Redevelopment Project),
7.125% due 07/01/2026.............. 1,030,000
2,705,000 Riverside County, Housing Authority,
MFHR, (Brandon Place Apartments),
Series B, AMT, (FNMA Insured),
5.625% due 07/01/2029.............. 2,694,856
1,500,000 Riverside, School District, Special
Project,
7.250% due 09/01/2018.............. 1,526,250
6,500,000 Sacramento County, Airport System
Revenue, Series 1989, AMT,
(AMBAC Insured),
7.000% due 07/01/2020.............. 6,955,000
10,000,000 San Bernardino County, Residual
Interest Bond, COP, (MBIA Insured),
7.650% due 07/01/2016+............. 9,750,000
4,000,000 San Diego County, Residual Interest
Bond, COP, Series B, (MBIA
Insured),
8.670% due 04/08/2021+............. 4,455,000
3,000,000 San Dimas, MFHR, (Sunnyside I
Apartments), Series A,
FNMA collateralized,
5.300% due 01/01/2027.............. 3,003,750
3,000,000 San Francisco, City and County,
Airport Commission, International
Airport Revenue, Second Series,
Issue 8A, AMT (FGIC Insured),
6.250% due 05/01/2020.............. 3,127,500
San Francisco, City and County,
Multi-family Mortgage Revenue,
Series A, (FNMA Insured):
1,000,000 6.350% due 02/15/2012.............. 1,022,500
1,250,000 6.450% due 02/15/2024.............. 1,271,875
San Francisco, City and County,
Redevelopment Agency, Lease
Revenue, Capital Appreciation,
(George R. Moscone Project):
3,500,000 Zero coupon due 07/01/2007......... 1,942,500
4,500,000 Zero coupon due 07/01/2010......... 2,030,625
3,750,000 Zero coupon due 07/01/2011......... 1,584,375
4,250,000 Zero coupon due 07/01/2013......... 1,572,500
275,000 San Francisco, City and County, SFMR,
AMT, GNMA and FNMA Mortgage-Backed
Securities Program,
7.450% due 01/01/2024.............. 287,375
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
$ 575,000 San Jose, Airport Revenue Authority,
(San Jose Airport), AMT, (AMBAC
Insured), Unrefunded,
7.500% due 03/01/2018.............. $ 605,187
2,645,000 San Jose, Financing Authority
Revenue, Series C,
7.000% due 09/02/2015.............. 2,698,720
1,000,000 Santa Clara, Improvement Board Act of
1915, Assessment District 187,
Series 1996-1,
7.000% due 09/02/2011.............. 1,017,500
3,000,000 Santa Clarita, Community Development
Authority,
7.500% due 11/15/2012.............. 3,135,000
4,765,000 Santa Rosa, Mortgage Revenue,
(Channate Lodge), (FHA Insured),
6.700% due 12/01/2024.............. 4,979,425
1,700,000 Shafter, Joint Powers Financing
Authority, Lease Revenue,
(Community Correctional Facilities
Project), Series A,
5.950% due 01/01/2011.............. 1,708,500
2,000,000 Shasta Lake, COP, (FSA Insured),
6.000% due 04/01/2016.............. 2,060,000
10,000 Sonoma County, Home Mortgage Revenue,
SFMR,
9.125% due 06/01/2015.............. 10,475
South Orange County, Public Financing
Authority, Special Tax Revenue, Sr.
Lien, Series A, (MBIA Insured):
5,000,000 7.000% due 09/01/2008.............. 5,868,750
5,000,000 6.200% due 09/01/2013.............. 5,218,750
2,000,000 Southern California, Home Financing
Authority, MFHR, (The Fountains
Project), Issue A, AMT, FNMA
collateralized,
5.400% due 01/01/2027.............. 1,997,500
Southern California, Housing Finance
Agency, SFMR, GNMA and FNMA
Mortgage-Backed Securities Program:
1,095,000 Series 1988A, AMT, GNMA
collateralized,
8.125% due 02/01/2021.............. 1,182,600
1,545,000 Series A,
7.350% due 09/01/2024.............. 1,608,731
200,000 Series B,
6.900% due 10/01/2024.............. 210,500
Stockton, Community Facilities
Supplemental Tax #90-2, SFMR, GNMA
Mortgage-Backed Securities Program:
55,000 (Brookside Estates), AMT,
7.450% due 08/01/2010.............. 58,988
4,000,000 Series A,
7.750% due 08/01/2015.............. 4,145,000
5,000,000 University of California, (Multiple
Purpose Review Projects), (MBIA
Insured),
6.300% due 09/01/2014.............. 5,293,750
-----------
370,390,822
-----------
</TABLE>
See Notes to Financial Statements.
97
<PAGE> 99
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
PUERTO RICO -- 0.5%
$ 2,000,000 Centro de Recaudaciones de Ingresos
Municipales,
6.850% due 10/17/2003.............. $ 2,072,500
-----------
Total Municipal Bonds and Notes (Cost
$350,273,153)...................... 372,463,322
-----------
SHORT-TERM MUNICIPAL BONDS -- 1.8%
California, Pollution Control
Financing Authority, PCR:
1,300,000 (Burney Forest Products Project), Series
4.800% due 09/01/2020+............. 1,300,000
(Southern California Edison Company):
2,800,000 Series C,
4.700% due 02/28/2008+............. 2,800,000
2,700,000 Series D,
4.700% due 02/28/2008+............. 2,700,000
-----------
Total Short-Term Municipal Bonds
(Cost $6,800,000).................. 6,800,000
-----------
TOTAL INVESTMENTS (COST $357,073,153*)....... 99.1% 379,263,322
OTHER ASSETS AND LIABILITIES (NET)........... 0.9 3,556,595
----- ------------
NET ASSETS................................... 100.0% $382,819,917
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ 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.
California Municipal Fund had the following insurance concentrations greater
than 10% at December 31, 1996 (as a percentage of net assets):
<TABLE>
<C> <S>
MBIA 28.1%
AMBAC 15.9%
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance
Corporation
AMT -- Alternative Minimum Tax
BIGI -- Bond Investors Guarantee Insurance
CONNIE LEE -- College Construction Loan Association
COP -- Certificates of Participation
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.
98
<PAGE> 100
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
FLORIDA INSURED MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- 96.1%
FLORIDA -- 96.1%
$1,000,000 Brevard County, School Board Authority,
COP, Series B, (AMBAC Insured),
5.500% due 07/01/2021................ $ 980,000
2,270,000 Broward County, Educational Facilities
Authority Revenue, (Nova Southeastern
University Project),
(CONNIE LEE Insured),
6.000% due 04/01/2008................ 2,409,038
1,000,000 Collier County, Industrial Development
Authority, IDR,
(Southern States Utilities Project),
AMT,
6.500% due 10/01/2025................ 1,005,000
1,940,000 Dade County, Aviation Revenue, Series
B, AMT, (MBIA Insured),
6.600% due 10/01/2022................ 2,090,350
1,690,000 Dade County, School Board Authority,
COP, Series A, (MBIA Insured),
5.750% due 05/01/2008................ 1,757,600
2,000,000 Escambia County, Health Facilities
Revenue, Baptist Hospital, Series B,
6.000% due 10/01/2014................ 2,002,500
1,000,000 Escambia County, PCR, (Champion
International Corporation Project),
AMT,
6.900% due 08/01/2022................ 1,058,750
Florida Housing Finance Agency, AMT:
715,000 SFMR, Series A, (GNMA Insured),
6.650% due 01/01/2024................ 746,281
1,000,000 Spinnaker Cove Apartments, Series G,
(AMBAC Insured),
6.500% due 07/01/2036................ 1,031,250
1,000,000 Florida State Turnpike Authority,
Turnpike Revenue, Department of
Transportation, Series A, (FGIC
Insured),
5.000% due 07/01/2016................ 938,750
1,445,000 Hillsborough County, Capital
Improvement Revenue, Criminal Justice
Facilities,
(FGIC Insured),
5.250% due 08/01/2016................ 1,390,813
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................ 1,065,000
1,500,000 Hillsborough County, PCR, (Tampa
Electric Company Project), (MBIA
Insured),
6.250% due 12/01/2034................ 1,588,125
2,000,000 Hillsborough County, School Board
Authority, COP, (MBIA Insured),
6.000% due 07/01/2012................ 2,072,500
1,500,000 Jacksonville, Water & Sewer Revenue,
(United Water Project), AMT,
(AMBAC Insured),
6.350% due 08/01/2025................ 1,580,625
990,000 Manatee County, Housing Finance
Authority, SFMR, Sub Series 4, AMT,
(GNMA/FNMA Collateral),
6.875% due 11/01/2026................ 1,053,112
2,000,000 Melbourne, Airport Revenue, AMT,
(MBIA Insured),
6.250% due 10/01/2018................ 2,127,500
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
$1,000,000 Orange County, Housing Finance
Authority, MFHR, (Hands Inc.
Project), Series A,
8.000% due 10/01/2025................ $ 1,007,500
1,000,000 Orlando & Orange County, Expressway
Authority, Expressway Revenue, Jr.
Lien, (FSA Insured),
5.950% due 07/01/2023................ 1,015,000
1,000,000 Palm Beach County, Health Facilities
Authority Revenue, Retirement
Community,
5.625% due 11/15/2020................ 958,750
1,750,000 Polk County, Industrial Development
Authority, Solid Waste Disposal
Facility Revenue, (Tampa Electric
Company Project), AMT,
5.850% due 12/01/2030................ 1,752,187
1,050,000 Seminole County, School Board
Authority, COP, Series A, (MBIA
Insured),
6.125% due 07/01/2014................ 1,094,626
-----------
Total Municipal Bonds and Notes
(Cost $29,474,652)................... 30,725,257
-----------
SHORT-TERM MUNICIPAL BOND -- 0.7%
(Cost $200,000)
200,000 Pinellas County, Health Facilities
Authority Revenue, Pooled Hospital
Loan Program, 4.800% due
12/01/2015+.......................... 200,000
-----------
TOTAL INVESTMENTS (COST $29,674,652*)......... 96.8% 30,925,257
OTHER ASSETS AND LIABILITIES (NET)............ 3.2 1,037,900
----- -----------
NET ASSETS.................................... 100.0% $31,963,157
===== ===========
</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.
<TABLE>
<S> <C> <C>
Florida Insured Municipal Fund had the following insurance
concentrations greater than 10% at December 31, 1996 (as a
percentage of net assets):
MBIA 36.9%
AMBAC 11.2%
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.
99
<PAGE> 101
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- 98.1%
CALIFORNIA -- 96.7%
$ 380,000 Adelanto, School District, Capital
Appreciation, GO, Series B, (FGIC
Insured), Zero coupon due
09/01/2002........................... $ 293,075
1,000,000 Alameda County, COP, (Santa Rita Jail
Project), (MBIA Insured), 5.375% due
06/01/2009........................... 1,023,750
595,000 Alta Loma, Elementary School District,
GO, Series 2, (AMBAC Insured), 7.250%
due 06/01/2002....................... 673,838
200,000 Alum Rock, Unified School District,
Series B, (FGIC Insured), Zero coupon
due 09/01/2002....................... 153,250
625,000 Berkeley, Unified School District,
Series C, (AMBAC Insured), 5.875% due
08/01/2006........................... 673,438
985,000 Brea & Olinda, School District, (High
School Refinancing Program), Series
A, (FSA Insured), 6.000% due
08/01/2009........................... 1,036,712
1,000,000 California Health Facilities Financing
Authority Revenue, (Catholic Health
Corporation), Series A, (AMBAC
Insured), 5.875% due 07/01/2009...... 1,045,000
California Housing Finance Agency
Revenue:
2,345,000 Home Mortgage, Series B1, (AMBAC
Insured), AMT, 6.200% due
02/01/2007........................... 2,465,181
445,000 Series E, (MBIA Insured), 6.050% due
08/01/2006........................... 477,818
California State, GO:
(AMBAC Insured):
1,000,000 6.200% due 09/01/2002................ 1,088,750
1,240,000 County Jail and School Building, 7.250%
due 08/01/2003....................... 1,422,900
(FGIC Insured):
200,000 7.100% due 05/01/2005................ 232,500
1,000,000 6.200% due 09/01/2005................ 1,105,000
California State, Public Works Board,
(Various California University
Projects), Series A:
1,000,000 5.900% due 10/01/2004................ 1,066,250
1,500,000 (AMBAC Insured), 5.900% due
12/01/2003........................... 1,612,500
California State University Revenue:
200,000 Housing System, (FGIC Insured), 7.625%
due 11/01/2003....................... 235,000
1,495,000 Series AJ, AL, AM, AN, AP, AQ, AR,
(AMBAC Insured), 6.750% due
11/01/2007........................... 1,614,600
California Statewide Communities
Development Authority:
1,600,000 (Children's Hospital), (MBIA Insured),
6.000% due 06/01/2007................ 1,734,000
1,000,000 MFHR, Series E, 5.500% due
12/01/2005........................... 1,008,750
1,255,000 (St. Joseph Health Systems), (AMBAC
Insured), 5.875% due 07/01/2005...... 1,342,850
$ 350,000 Campbell, Housing Facility Revenue,
(San Tomas Gardens Project), Series
A, (GNMA Insured), 5.750% due
10/20/2004........................... $ 358,750
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
1,000,000 Castaic Lake, Water Agency, COP, (Water
Systems Improvement Project), Series
A, (MBIA Insured), 5.600% due
08/01/2005........................... 1,062,500
1,000,000 Del Mar, Race Track Authority Revenue,
6.000% due 08/15/2001................ 1,010,000
1,000,000 Desert Hospital District, Hospital
Revenue, COP, (FSA Insured), 6.350%
due 07/01/2004....................... 1,091,250
1,000,000 Foothill Eastern Transportation
Corridor Agency, Toll Road Revenue,
Capital Appreciation, Sr. Lien,
Series A, Zero coupon due
01/01/2004........................... 673,750
Gilroy, Unified School District, COP,
(FSA Insured):
1,390,000 5.600% due 09/01/2003................ 1,468,188
1,400,000 5.625% due 09/01/2004................ 1,482,250
Inland Empire Solid Waste Financing
Authority Revenue, (Landfill
Improvement Financing Project),
Series B, AMT, (FSA Insured):
1,000,000 5.650% due 08/01/2003................ 1,046,250
1,000,000 6.000% due 02/01/2006................ 1,063,750
Los Angeles, Community Redevelopment
Agency, MFHR, (AMBAC Insured):
830,000 5.650% due 07/01/2000................ 852,825
1,085,000 6.000% due 07/01/2004................ 1,139,250
Los Angeles, Department of Water and
Power, Electric Revenue Bond, (MBIA
Insured):
1,500,000 8.500% due 01/15/2002................ 1,766,250
1,000,000 5.400% due 09/01/2006................ 1,037,500
1,000,000 Los Angeles, GO, Series A, (FGIC
Insured), 5.700% due 09/01/2008...... 1,040,000
1,500,000 Los Angeles, Unified School District,
Series B, (AMBAC Insured), 6.000% due
12/01/2001........................... 1,606,875
Los Angeles, Wastewater System Revenue:
775,000 Series A, (MBIA Insured), 8.500% due
06/01/2002........................... 919,344
1,000,000 Series C, 6.900% due 06/01/2009...... 1,075,000
2,500,000 Los Angeles County, Capital Asset
Leasing Corporation Leasehold
Revenue, (AMBAC Insured), 6.000% due
12/01/2006........................... 2,721,875
500,000 Los Angeles County, COP, Structured
Yield Curve Certificates, 6.100% due
11/01/2001........................... 529,375
663,000 Modesto, Mortgage Revenue Bond, (GNMA
Insured), 5.875% due 12/01/2004...... 680,404
1,000,000 Oakland, Health Facilities Revenue,
(Children's Hospital Project), Series
A, (CONNIE LEE Insured), 5.300% due
07/01/2008........................... 1,005,000
</TABLE>
See Notes to Financial Statements.
100
<PAGE> 102
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
Oakland, Improvement Board Act of 1915,
Medical Hill Parking Assessment
District #3, (MBIA Insured):
$ 150,000 5.500% due 09/02/1999................ $ 154,751
250,000 6.000% due 09/02/2004................ 257,905
1,000,000 Oakland Revenue Bonds, (YMCA East Bay
Project), 6.250% due 06/01/2000...... 1,022,500
500,000 Orange County, Local Transit Authority,
Sales Tax Revenue Bond, (FGIC
Insured), 5.600% due 02/15/2003...... 525,000
1,000,000 Orange County, Recovery Project, Series
A, (MBIA Insured), 6.000% due
06/01/2008........................... 1,081,250
Oxnard, Harbor District Revenue, (FSA
Insured):
1,075,000 7.000% due 08/01/2001................ 1,191,906
1,155,000 7.000% due 08/01/2002................ 1,297,931
1,240,000 7.000% due 08/01/2003................ 1,410,500
Paramount, Redevelopment Agency Tax
Allocation, (Redevelopment Project
Area #1), (MBIA Insured):
1,820,000 6.100% due 08/01/2006................ 1,976,975
1,925,000 6.100% due 08/01/2007................ 2,081,406
560,000 Pioneers Memorial Hospital District,
GO, (AMBAC Insured), 7.000% due
10/01/2005........................... 652,400
1,565,000 Redondo Beach, Public Financing
Authority Revenue, (South Bay Center
Redevelopment Project), 6.750% due
07/01/2006........................... 1,590,431
1,300,000 Sacramento, Municipal Utility District,
Electric Revenue, (AMBAC Insured),
5.500% due 05/15/2007................ 1,342,250
1,000,000 San Diego, Unified School District,
COP, (Capital Projects), Series B,
6.000% due 07/01/2003................ 1,057,500
100,000 San Francisco, Airports Commission, San
Francisco International Airport,
Second Series, (MBIA Insured), 6.350%
due 05/01/2004....................... 110,000
1,000,000 San Francisco, City and County, GO,
(Public Safety Improvement Project),
Series F, (FGIC Insured), 6.500% due
06/15/2006........................... 1,068,750
1,360,000 San Jose, Redevelopment Agency, (Merged
Area Redevelopment Project), Tax
Allocation Bond, (MBIA Insured),
6.000% due 08/01/2006................ 1,482,400
1,050,000 Santa Ana, COP, (Santa Ana Recycling
Project), Series A, AMT, (AMBAC
Insured), 5.400% due 05/01/2007...... 1,073,625
1,350,000 Solano County, (Solano Park Hospital
Project), COP, (FSA Insured), 6.500%
due 08/01/2006....................... 1,498,500
1,500,000 South Orange County, Public Financing
Authority, Special Tax Revenue, Sr.
Lien, Series A, (MBIA Insured),
5.400% due 09/01/2003................ 1,561,875
$1,000,000 Southern California, Home Financing
Authority, MFHR, (The Fountains
Project), Series A, AMT, (FNMA
Collateral), 5.400% due 01/01/2027... $ 998,750
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
University of California:
(MBIA Insured):
1,250,000 Housing Systems, Series A, 5.300% due
11/01/2005........................... 1,293,750
1,000,000 (Multiple Purpose Review Projects),
10.000% due 09/01/2001............... 1,230,000
1,070,000 Series A, (CONNIE LEE Insured), 5.500%
due 09/01/2006....................... 1,092,738
1,000,000 Valley Health Systems, California
Hospital Revenue, (Hospital Revenue
Refunding & Improvement Project),
Series A, 6.125% due 05/15/2005...... 1,008,750
-----------
71,997,391
-----------
PUERTO RICO -- 1.4%
1,000,000 Centro de Recaudaciones de Ingresos
Municipales, COP, 6.850% due
10/17/2003........................... 1,036,250
-----------
Total Municipal Bonds and Notes (Cost
$69,515,694)......................... 73,033,641
-----------
SHORT-TERM MUNICIPAL BOND -- 0.4% (Cost $300,000)
300,000 California, Pollution Control Financing
Authority, PCR, Southern California
Edison Company, Series C, 4.700% due
02/28/2008+.......................... 300,000
-----------
TOTAL INVESTMENTS (COST $69,815,694*)......... 98.5% 73,333,641
OTHER ASSETS AND LIABILITIES (NET)............ 1.5 1,096,017
----- -----------
NET ASSETS.................................... 100.0% $74,429,658
===== ===========
</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.
<TABLE>
<S> <C> <C>
California Insured Intermediate Municipal Fund had the following
insurance concentrations greater than 10% at December 31, 1996 (as
a percentage of net assets):
AMBAC 28.7%
MBIA 27.3%
FSA 16.9%
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
GO -- General Obligation Bonds
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
</TABLE>
See Notes to Financial Statements.
101
<PAGE> 103
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NATIONAL MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- 100.2%
ALABAMA -- 2.4%
$ 4,000,000 Courtland, Industrial Development
Board of Solid Waste, (Champion
International Corporation Project),
Disposal Revenue, AMT,
7.750% due 01/01/2020.............. $ 4,285,000
1,000,000 Mobile, Industrial Development Board,
Solid Waste Disposal Revenue,
6.950% due 01/01/2020.............. 1,055,000
------------
5,340,000
------------
ARIZONA -- 0.4%
740,000 Tucson, Airport Authority Inc.,
Supplemental Facilities Revenue,
AMT,
8.700% due 09/01/2019.............. 841,750
------------
CALIFORNIA -- 2.5%
5,000,000 California State Public Works Board,
(California State University
Project),
Series A, (AMBAC Insured),
5.375% due 10/01/2017.............. 4,887,500
550,000 Los Angeles, Regional Airport
Improvement, Series A, AMT,
6.700% due 01/01/2022.............. 563,062
------------
5,450,562
------------
COLORADO -- 8.4%
Denver City and County, Airport
Revenue, AMT:
Series A:
2,000,000 8.875% due 11/15/2012.............. 2,387,500
1,140,000 8.500% due 11/15/2023 **........... 1,312,425
2,000,000 8.000% due 11/15/2025 **........... 2,267,500
1,920,000 Series C,
6.600% due 11/15/2004.............. 2,052,000
4,500,000 Meridian Metropolitan District, GO,
7.500% due 12/01/2011.............. 4,865,625
5,000,000 University of Colorado, Hospital
Authority, Series A, (AMBAC
Insured),
6.250% due 11/15/2012 **........... 5,312,500
------------
18,197,550
------------
CONNECTICUT -- 1.0%
2,000,000 Mashantucket Western Pequot Tribe,
Special Revenue, Series A,
6.500% due 09/01/2005 ++........... 2,107,500
------------
DISTRICT OF COLUMBIA -- 2.0%
1,150,000 District of Columbia, COP,
6.875% due 01/01/2003.............. 1,184,500
1,500,000 District of Columbia, Land
Redevelopment Agency, Washington
D.C. Sports Arena, Special Tax,
5.625% due 11/01/2010.............. 1,470,000
1,500,000 Metropolitan District, Washington
D.C., Airport Authority, General
Airport
Revenue, Series A, AMT,
(MBIA Insured),
6.625% due 10/01/2019 **........... 1,614,375
------------
4,268,875
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
FLORIDA -- 3.6%
$22,520,000 Dade County, Guaranteed Entitlement
Revenue, Capital Appreciation,
Series A, (MBIA Insured),
Zero coupon due 02/01/2018......... $ 6,615,250
425,000 Dade County, Seaport Authority,
Refunding, (MBIA Insured),
6.500% due 10/01/2008.............. 479,188
610,000 Pinellas County, Health Facilities
Authority, (Sun Coast Health Care
Systems Project), Series A,
8.500% due 03/01/2020.............. 694,638
------------
7,789,076
------------
GEORGIA -- 5.9%
1,000,000 Atlanta, Airport Facilities Revenue,
AMT,
7.250% due 01/01/2017.............. 1,085,000
Monroe, PCR, (Oglethorpe Power
Company):
5,000,000 6.700% due 01/01/2009.............. 5,587,500
3,410,000 6.750% due 01/01/2010.............. 3,831,987
2,285,000 Municipal Electric Authority,
Sub-Series A, (AMBAC Insured),
5.375% due 01/01/2013.............. 2,253,581
------------
12,758,068
------------
IDAHO -- 1.7%
2,000,000 Idaho Health Facilities Authority
Revenue, (Inverse Floater),
8.900% due 02/15/2021 +............ 2,205,000
1,500,000 Idaho Housing and Finance
Association, SFHR, Series D, AMT,
6.450% due 07/01/2014.............. 1,526,250
------------
3,731,250
------------
ILLINOIS -- 18.6%
Chicago, O'Hare Airport Supplemental
Facilities, AMT:
6,000,000 International Term, (MBIA Insured),
6.750% due 01/01/2012 **........... 6,420,000
700,000 American Airlines, Special Series A,
7.875% due 11/01/2025.............. 754,250
United Air Lines:
615,000 8.400% due 05/01/2004.............. 675,731
790,000 8.950% due 05/01/2018.............. 895,662
150,000 United Air Lines, Special Series B,
8.500% due 05/01/2018.............. 165,000
Cook County, Community High School,
Number 217, (AMBAC Insured):
1,090,000 6.400% due 12/01/2003 **........... 1,171,750
1,130,000 6.500% due 12/01/2004 **........... 1,214,750
1,370,000 6.600% due 12/01/2005 **........... 1,472,750
Cook County, School District, Number
026, (MBIA Insured):
1,445,000 Zero coupon due 12/01/2003......... 1,018,725
1,020,000 Zero coupon due 12/01/2004......... 680,850
1,000,000 Decatur, Hospital Revenue, (Decatur
Memorial Hospital), Series B,
(MBIA Insured),
6.850% due 10/01/2016 **........... 1,115,000
</TABLE>
See Notes to Financial Statements.
102
<PAGE> 104
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIONAL MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
ILLINOIS -- (CONTINUED)
$ 2,000,000 Illinois Finance Authority, Solid
Waste Disposal Revenue, (Armstrong
World Industries Inc. Project),
AMT,
5.950% due 12/01/2024.............. $ 1,975,000
Illinois Health Facilities Authority
Revenue:
Glenoak Medical Center, Series D:
210,000 Pre-refunded,
9.500% due 11/15/2015.............. 251,213
270,000 Unrefunded,
9.500% due 11/15/2015.............. 308,812
4,675,000 Hindsdale Hospital, Series B,
9.000% due 11/15/2015.............. 5,288,594
5,000,000 Sister Services Hospital, Residual
Interest Bond, (MBIA Insured),
9.487% due 06/19/2015+............. 5,843,750
300,000 Riverside Senior Living Center
Project,
7.500% due 11/01/2020.............. 337,500
5,000,000 Sarah Bush Lincoln,
7.250% due 05/15/2022.............. 5,687,500
1,230,000 Servantcor, Series A,
8.000% due 08/15/2021.............. 1,422,188
3,000,000 Rush Presbyterian -- St. Luke's
Medical, Residual Interest Bond,
(MBIA Insured),
9.797% due 10/01/2024+............. 3,491,250
365,000 Illinois Housing Development
Authority, Series A, AMT,
7.350% due 08/01/2010.............. 386,900
------------
40,577,175
------------
INDIANA -- 0.9%
2,000,000 Indianapolis, Public Improvement
Board, Series D, (LOC INB National
Bank),
6.500% due 02/01/2022.............. 2,034,300
------------
KENTUCKY -- 1.6%
3,000,000 Jefferson County, Hospital Revenue,
Residual Interest Bond,
(MBIA Insured),
8.648% due 10/01/2008+............. 3,446,250
------------
LOUISIANA -- 1.9%
300,000 East Baton Rouge, Sewer Commission
Revenue,
9.125% due 09/01/2006.............. 319,569
1,500,000 Louisiana Public Facility Authority
Revenue, Series B, ETM,
Zero coupon due 12/01/2019......... 384,375
10,000,000 Orleans Parish, Louisiana, School
Board Revenue, (FGIC Insured),
Zero coupon due 02/01/2015......... 3,450,000
------------
4,153,944
------------
MARYLAND -- 0.4%
930,000 State of Maryland, Community
Development Administration,
Department of Housing, Single
Family Project, AMT,
7.450% due 04/01/2032.............. 970,687
------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
MASSACHUSETTS -- 2.5%
$ 750,000 Commonwealth of Massachusetts,
Consolidated Loan, Series A,
7.625% due 06/01/2008.............. $ 856,875
Commonwealth of Massachusetts, Health
and Educational Facilities
Authority:
500,000 Framingham Union Hospital, Series B,
8.500% due 07/01/2010.............. 574,375
3,000,000 Saint Memorial Medical Center, Series
A,
6.000% due 10/01/2023.............. 2,542,500
250,000 Massachusetts State, GO,
Pre-refunded,
7.500% due 12/01/2007.............. 282,812
1,000,000 Plymouth County, COP, Series A,
7.000% due 04/01/2022.............. 1,102,500
------------
5,359,062
------------
MICHIGAN -- 2.3%
2,670,000 Michigan Municipal Bond Authority,
Revenue Reference, Series A,
(FGIC Insured),
4.750% due 12/01/2009 **........... 2,519,813
1,500,000 Michigan State Hospital Finance
Authority Revenue, Detroit Medical,
Series A,
7.500% due 08/15/2011.............. 1,629,375
Reed City, Public Schools Revenue,
(AMBAC Insured):
590,000 Zero coupon due 05/01/2013......... 236,000
610,000 Zero coupon due 05/01/2014......... 227,988
615,000 Zero coupon due 05/01/2015......... 215,250
630,000 Zero coupon due 05/01/2016......... 208,688
------------
5,037,114
------------
MINNESOTA -- 0.2%
2,000,000 Southern Minnesota Municipal Power
Agency, (Capital Appreciation),
Series A, (MBIA Insured),
Zero coupon due 01/01/2024......... 427,500
------------
MISSISSIPPI -- 2.7%
5,000,000 Lowndes County, Solid Waste Disposal,
PCR, Residual Interest Bond,
(Weyerhauser Company),
Floating Rate Note,
8.900% due 04/01/2022+............. 5,593,750
200,000 Warren County, Solid Waste Disposal
Revenue, (International Paper
Project), Series A, AMT,
7.700% due 11/15/2009.............. 214,750
------------
5,808,500
------------
MISSOURI -- 1.9%
1,000,000 Missouri State, Health and
Educational Facilities Authority
Revenue,
Bethesda Eye Institute,
6.800% due 11/01/2016 **........... 1,118,750
3,000,000 St. Louis, Parking Facilities
Revenue,
6.625% due 12/15/2021.............. 3,116,250
------------
4,235,000
------------
</TABLE>
See Notes to Financial Statements.
103
<PAGE> 105
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIONAL MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
MONTANA -- 0.5%
$ 1,000,000 Forsyth, PCR, Series B, AMT, Puget
Sound Power & Light, (AMBAC
Insured),
7.250% due 08/01/2021 **........... $ 1,110,000
------------
NEBRASKA -- 0.3%
700,000 Nebraska Investment Finance
Authority, Single Family Housing,
Residual Interest Bond, AMT, (GNMA
Insured),
9.271% due 09/15/2024+............. 736,750
------------
NEVADA -- 4.5%
4,000,000 Clark County, IDR, Series A, Nevada
Power Company, AMT,
(FGIC Insured),
6.700% due 06/01/2022 **........... 4,250,000
5,425,000 Nevada Housing Division, Single
Family Program, Series A-2, AMT,
(FHA Insured),
6.700% due 10/01/2025.............. 5,567,406
------------
9,817,406
------------
NEW JERSEY -- 1.5%
3,000,000 Bergen County, Utilities Authority
Revenue, (FGIC Insured),
6.500% due 12/15/2012 **........... 3,213,750
------------
NEW YORK -- 10.5%
400,000 City of New York, IDR, Industrial
Development Agency,
Supplemental Facilities, American
Airlines, AMT,
8.000% due 07/01/2020.............. 426,500
3,000,000 Housing of New York Corporation
Revenue,
5.000% due 11/01/2013.............. 2,748,750
Metropolitan Transportation Authority
Revenue:
1,400,000 Commuter Facilities, Series O,
5.750% due 07/02/2007.............. 1,422,750
1,265,000 Transportation Facilities, Series 7,
4.750% due 07/01/2019.............. 1,067,344
1,000,000 New York, GO, Series B, (FSA
Insured),
7.000% due 06/01/2014 **........... 1,166,250
New York, GO:
995,000 Series A,
8.000% due 08/15/2020.............. 1,150,469
5,200,000 Series C,
6.500% due 08/01/2005.............. 5,518,500
Series F:
1,845,000 Pre-refunded,
8.250% due 11/15/2018.............. 2,165,569
160,000 Unrefunded,
8.250% due 11/15/2018.............. 184,200
2,500,000 Series G,
5.750% due 10/15/2013.............. 2,403,125
2,200,000 New York State Energy, Research &
Development Authority,
6.000% due 04/01/2000.............. 2,257,750
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
$ 275,000 New York State Medical Care
Facilities Finance Authority,
Mental Health Services,
7.750% due 08/15/2011.............. $ 306,625
2,000,000 New York State, Multi-family Mortgage
Revenue, AMT,
6.625% due 08/15/2012.............. 2,095,000
------------
22,912,832
------------
OHIO -- 1.4%
650,000 East Liverpool, Hospital Revenue,
Series B, Liverpool City Hospital,
8.125% due 10/01/2011.............. 695,500
1,240,000 Lorain County, Hospital Revenue,
Series B, Humility of Mary Health
Care,
7.200% due 12/15/2011.............. 1,340,750
900,000 Westerville, Minerva Place & Blendon
Joint Township Hospital District,
(AMBAC Insured),
6.800% due 09/15/2006.............. 956,250
------------
2,992,500
------------
OKLAHOMA -- 1.0%
1,860,000 Oklahoma Housing and Finance
Authority, Single Family Revenue,
Series B, AMT, (GNMA Insured),
7.997% due 08/01/2018 **........... 2,050,650
200,000 Tulsa, Municipal Airport Revenue,
American Airlines Project, AMT,
7.600% due 12/01/2030.............. 215,750
------------
2,266,400
------------
PENNSYLVANIA -- 9.3%
Allegheny County, Hospital
Development Revenue, (Ohio Valley
General Hospital):
700,000 5.100% due 04/01/2001.............. 698,250
735,000 5.300% due 04/01/2002.............. 735,000
625,000 5.400% due 04/01/2003.............. 622,656
Beaver County, IDR, PCR,
(Edison Project), Series A:
300,000 7.750% due 09/01/2024.............. 315,000
3,675,000 (FGIC Insured),
7.000% due 06/01/2021 **........... 3,969,000
300,000 Lancaster County, Solid Waste
Authority, Series A, AMT,
8.375% due 12/15/2004.............. 318,375
600,000 Lehigh County, General Purpose
Authority, Muhlenberg Hospital
Center, Series A,
8.100% due 07/15/2010.............. 636,750
500,000 McKean County, Hospital Authority
Revenue, Bradford Hospital,
Pottstown Memorial Medical Center,
8.875% due 10/01/2020.............. 583,750
1,250,000 Montgomery County, Higher Education
Revenue,
6.875% due 11/15/2020.............. 1,306,250
</TABLE>
See Notes to Financial Statements.
104
<PAGE> 106
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIONAL MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<C> <S> <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),
9.540% due 09/01/2026+............. $ 3,412,500
Medical College of Pennsylvania:
3,000,000 Series A,
7.250% due 03/01/2011.............. 3,352,500
1,890,000 Series B,
7.250% due 03/01/2005.............. 2,112,075
1,000,000 Philadelphia, Municipal Authority
Revenue, Series B, (FGIC Insured),
7.125% due 11/15/2018 **........... 1,130,000
1,000,000 Philadelphia, Water and Sewer
Revenue,
7.500% due 08/01/2010 **........... 1,138,750
------------
20,330,856
------------
PUERTO RICO -- 1.0%
2,000,000 Puerto Rico (Commonwealth of),
Public Improvement Revenue,
6.800% due 07/01/2021 **........... 2,250,000
------------
RHODE ISLAND -- 1.2%
200,000 Rhode Island Housing and Mortgage
Finance Corporation, AMT,
7.875% due 10/01/2022.............. 209,250
2,000,000 Rhode Island State Health and
Education Revenue, Residual
Interest Bond,
(FGIC Insured),
9.822% due 08/15/2021+............. 2,337,500
------------
2,546,750
------------
TEXAS -- 3.3%
445,000 Brazos, Higher Educational Facilities
Authority, Series C-2, AMT,
7.100% due 11/01/2004.............. 477,262
5,000,000 Dallas-Fort Worth International
Airport, (Facility Improvement
Corporate Revenue), (American
Airlines, Inc.), AMT,
7.500% due 11/01/2025.............. 5,356,250
709,000 Texas State, Higher Education
Coordinating Board, Student Loan,
AMT,
7.700% due 10/01/2025.............. 747,109
500,000 West Side Calhoun County, Solid Waste
Revenue Bond, (Union Carbide
Project), AMT,
8.200% due 03/15/2021.............. 554,375
------------
7,134,996
------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
VERMONT -- 0.2%
Vermont Housing Finance Agency,
Single Family, Series 1, AMT:
$ 140,000 6.800% due 05/01/2025................ $ 142,625
220,000 8.150% due 05/01/2025................ 232,375
------------
375,000
------------
WEST VIRGINIA -- 1.7%
2,500,000 Harrison County, Solid Waste
Disposal, (Monongahelea Power),
Series A, AMT,
6.875% due 04/15/2022.............. 2,684,375
150,000 Kanawha County, IDR, (Union Carbide
Project), Series A, AMT,
8.000% due 08/01/2020.............. 163,500
750,000 South Charleston, IDR, (Union Carbide
Project), Series A, AMT,
8.000% due 08/01/2020.............. 815,625
------------
3,663,500
------------
WISCONSIN -- 2.9%
1,000,000 Madison, IDR, (Madison Gas & Electric
Company), (Project A), AMT,
6.750% due 04/01/2027.............. 1,052,500
5,000,000 Wisconsin Housing and Economic
Development Authority, Home
Ownership Revenue, Series F, AMT,
6.200% due 03/01/2027.............. 5,043,750
250,000 Wisconsin State Health Facilities
Authority Revenue, Franciscan
Health Systems,
7.800% due 03/01/2014.............. 256,630
------------
6,352,880
------------
TOTAL INVESTMENTS (COST $201,282,880*)..... 100.2% 218,237,783
OTHER ASSETS AND LIABILITIES (NET)......... (0.2) (341,029)
----- ------------
NET ASSETS................................. 100.0% $217,896,754
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
** A portion or all of this security is pledged as collateral for futures
contracts.
+ Floating rate note. 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.
National Municipal Fund had the following insurance concentrations greater than
10% at December 31, 1996 (as a percentage of net assets):
MBIA 14.3%
AMBAC 10.4%
See Notes to Financial Statements.
105
<PAGE> 107
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
NATIONAL MUNICIPAL FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- ----------- --------------
<C> <S> <C>
FUTURES CONTRACTS -- SHORT POSITION
100 U.S. Treasury Bond, Twenty Year, June
1997............................... $ (13,304)
===========
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance
Corporation
AMT -- Alternative Minimum Tax
COP -- Certificates of Participation
ETM -- Escrowed to Maturity
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.
106
<PAGE> 108
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GROWTH AND INCOME FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 94.3%
FINANCIAL SERVICES -- 12.5%
62,200 AMBAC Inc. ........................... $ 4,136,300
57,100 Boatmen's Bancshares, Inc. ........... 3,682,950
40,100 Dean Witter, Discover & Company....... 2,656,625
73,100 First Chicago NBD Corporation......... 3,929,125
36,400 First Hawaiian Inc. .................. 1,274,000
75,600 First USA, Inc. ...................... 2,617,650
60,000 Firstar Corporation................... 3,150,000
78,900 Fleet Financial Group Inc. (New)...... 3,935,137
12,600 NationsBank Corporation............... 1,231,650
74,400 Providian Corporation................. 3,822,300
45,400 Salomon, Inc. ........................ 2,139,475
------------
32,575,212
------------
HEALTH CARE -- 10.9%
98,700 ALZA Corporation+..................... 2,553,862
46,100 Bausch & Lomb Inc. ................... 1,636,550
15,800 Bristol-Myers Squibb Company.......... 1,718,250
76,950 Columbia/HCA Healthcare Corporation... 3,135,713
107,500 Forest Labs Inc.+..................... 3,520,625
36,691 Gensia, Inc.+......................... 169,696
183,900 Humana Inc.+.......................... 3,517,088
18,400 Schering-Plough Corporation........... 1,191,400
35,100 SmithKline Beecham, ADR............... 2,386,800
95,700 United Healthcare Corporation......... 4,306,500
57,200 Warner Lambert Company................ 4,290,000
------------
28,426,484
------------
ENERGY -- 10.3%
36,900 Anadarko Petroleum Corporation........ 2,389,275
37,389 Cooper Cameron Corporation+........... 2,860,259
52,600 Enron Corporation..................... 2,268,375
86,300 Exxon Corporation..................... 8,457,400
20,400 Royal Dutch Petroleum Company, ADR.... 3,483,300
23,500 Texaco Inc. .......................... 2,305,938
38,000 Tosco Corporation..................... 3,006,750
63,184 Ultramar Diamond Shamrock
Corporation......................... 1,998,194
------------
26,769,491
------------
MATERIALS & PROCESSING -- 9.1%
2,800 Albemarle Corporation................. 50,750
245,200 Allegheny Teledyne Inc. .............. 5,639,600
48,600 Allied Signal Inc. ................... 3,256,200
76,000 Aluminum Company of America........... 4,845,000
25,700 du Pont (E.I.) de Nemours & Company... 2,425,437
20,600 Temple-Inland, Inc. .................. 1,114,975
93,500 Union Carbide Corporation............. 3,821,812
80,200 USG Corporation+...................... 2,716,775
------------
23,870,549
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
PRODUCER DURABLES -- 7.8%
79,000 Anixter International Inc.+........... $ 1,273,875
38,300 Boeing Company........................ 4,074,162
68,600 Coltec Industries, Inc.+.............. 1,294,825
173,900 General Instrument Corporation+....... 3,760,587
46,900 Grainger (W.W.) Inc. ................. 3,763,725
42,400 MagneTek Inc.+........................ 545,900
16,000 Rohr Inc.+............................ 362,000
164,000 WMX Technologies, Inc. ............... 5,350,500
------------
20,425,574
------------
TECHNOLOGY -- 7.8%
89,900 Advanced Micro Devices Inc.+.......... 2,314,925
45,600 Bay Networks Inc.+.................... 951,900
147,500 EMC Corporation+...................... 4,885,937
74,800 Input/Output, Inc.+................... 1,383,800
10,400 Intel Corporation..................... 1,361,750
21,800 International Business Machines
Corporation......................... 3,291,800
37,900 Perkin Elmer Corporation.............. 2,231,363
84,500 Quantum Corporation+.................. 2,418,812
20,300 Read-Rite Corporation+................ 512,575
59,800 Sensormatic Electronics Corporation... 1,001,650
------------
20,354,512
------------
CONSUMER DISCRETIONARY -- 7.3%
35,700 International Flavors & Fragrances
Inc. ............................... 1,606,500
57,100 Procter & Gamble Company.............. 6,138,250
122,100 TCI Satellite Entertainment, Inc.,
Class A+............................ 1,205,738
374,100 Tele-Communications Inc., TCI Group,
Class A+............................ 4,886,681
142,200 Time Warner, Inc. .................... 5,332,500
------------
19,169,669
------------
CONSUMER STAPLES -- 7.0%
12,700 CPC International Inc. ............... 984,250
32,500 Kellogg Company....................... 2,132,813
74,700 PepsiCo Inc. ......................... 2,184,975
66,800 Philip Morris Companies Inc. ......... 7,581,800
42,500 Ralston Purina Company................ 3,118,437
13,300 Unilever NV........................... 2,330,825
------------
18,333,100
------------
TELECOMMUNICATIONS -- 6.1%
64,600 AT&T Corporation...................... 2,810,100
35,400 Bell Atlantic Corporation............. 2,292,150
47,900 GTE Corporation....................... 2,179,450
118,900 MCI Communications Corporation........ 3,886,544
107,600 U.S. West Inc. ....................... 3,470,100
46,300 WorldCom, Inc.+....................... 1,206,694
------------
15,845,038
------------
</TABLE>
See Notes to Financial Statements.
107
<PAGE> 109
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH AND INCOME FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
AUTOS & TRANSPORTATION -- 5.1%
40,950 Consolidated Freightways
Corporation+........................ $ 363,431
75,500 Consolidated Freightways Inc. ........ 1,679,875
111,700 Cooper Tire & Rubber Company.......... 2,206,075
108,000 General Motors Corporation............ 6,021,000
51,700 Union Pacific Corporation............. 3,108,462
------------
13,378,843
------------
RETAIL -- 5.1%
95,400 Circuit City Stores Inc. ............. 2,873,925
44,900 Federated Department Stores, Inc.+.... 1,532,213
114,300 Toys R Us Inc.+....................... 3,429,000
238,600 Wal-Mart Stores Inc. ................. 5,457,974
------------
13,293,112
------------
UTILITIES -- 2.1%
53,000 Duke Power Company.................... 2,464,500
102,900 Pacific Gas & Electric Company........ 2,160,900
30,500 Pinnacle West Capital Corporation..... 968,375
------------
5,593,775
------------
COMPUTER SOFTWARE & SERVICES -- 1.9%
40,600 Autodesk Inc. ........................ 1,136,800
20,400 Broderbund Software Corporation+...... 606,900
53,900 First Data Corporation................ 1,967,350
91,900 Learning Company, Inc.+............... 1,321,063
------------
5,032,113
------------
OTHER -- 1.3%
79,100 Cooper Industries, Inc. .............. 3,332,088
------------
Total Common Stocks (Cost
$215,518,313)....................... 246,399,560
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCK -- 0.8%
(Cost $1,882,370)
36,500 Owens-Corning, Conv. Pfd.+++.......... $ 2,075,937
------------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
CONVERTIBLE NOTES -- 0.8%
$1,250,000 Berkshire Hathaway, Conv. Sr. Note,
1.000% due 12/03/2001............... 1,167,188
375,000 Rohr Inc., Conv. Sub. Note,
7.750% due 05/15/2004............... 799,219
------------
Total Convertible Notes (Cost
$1,582,868)......................... 1,966,407
------------
U.S. TREASURY BILL -- 2.6% (Cost $6,792,084)
6,853,000 5.120% due 03/06/1997++............... 6,792,084
------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTE -- 1.7%
(Cost $4,514,185)
4,515,000 Federal Home Loan Bank (FHLB),
6.590% due 01/02/1997++............. 4,514,185
------------
TOTAL INVESTMENTS (COST $230,289,820*)..... 100.2% 261,748,173
OTHER ASSETS AND LIABILITIES (NET)......... (0.2) (477,680)
----- ------------
NET ASSETS................................. 100.0% $261,270,493
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase.
+++ 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.
108
<PAGE> 110
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 96.7%
TECHNOLOGY -- 19.1%
8,600 Advanced Micro Devices Inc.+......... $ 221,450
316,937 Analog Devices Inc.+................. 10,736,241
158,500 Cisco Systems, Inc.+................. 10,084,563
42,625 Danka Business Systems, ADR.......... 1,507,859
13,700 Dell Computer Corporation+........... 727,813
6,925 Etec Systems, Inc.+.................. 264,881
152,375 HBO & Company........................ 9,047,266
29,025 Intel Corporation.................... 3,800,461
29,850 International Business Machines
Corporation........................ 4,507,350
83,025 Pittway Corporation, Class A......... 4,441,838
92,050 Sun Microsystems, Inc.+.............. 2,364,534
12,975 Technology Solutions Company+........ 538,462
97,375 Xylan Corporation+................... 2,750,844
------------
50,993,562
------------
TELECOMMUNICATIONS -- 16.9%
55,650 Ascend Communications Inc.+.......... 3,457,256
128,375 Cincinnati Bell, Inc. ............... 7,879,016
26,550 CommNet Cellular Inc.+............... 740,081
21,625 Lucent Technologies, Inc. ........... 1,000,156
226,049 MFS Communication Company, Inc.+..... 12,319,670
52,650 Millicom International Cellular
SA+................................ 1,691,381
67,483 NetCom Systems AB, Class B+.......... 1,093,519
43,825 Nokia Corporation, Class A, Sponsored
ADR................................ 2,519,938
101,650 Paging Network Inc.+................. 1,550,163
62,650 Palmer Wireless Inc., Class A+....... 657,825
2,400 Premiere Technologies, Inc.+......... 60,000
17,175 Telebras, Sponsored ADR.............. 1,313,888
579,464 Telecom Italia Mobile SPA............ 1,464,894
25,850 U.S. Robotics Corporation+........... 1,861,200
6,150 West TeleServices Corporation+....... 139,913
278,575 WorldCom, Inc.+...................... 7,260,361
------------
45,009,261
------------
COMPUTER SOFTWARE & SERVICES -- 13.8%
24,300 Aspen Technology Inc.+............... 1,950,075
4,450 Baan Company, NV+.................... 154,638
8,875 Black Box Corporation+............... 366,094
32,750 Concord EFS, Inc.+................... 925,188
9,725 Documentum, Inc.+.................... 328,219
44,375 ECsoft Group Plc+.................... 427,109
164,900 First Data Corporation............... 6,018,850
99,300 First USA Paymentech, Inc.+.......... 3,363,788
60,725 HNC Software, Inc.+.................. 1,897,656
70,400 Indus Group Inc.+.................... 1,812,800
9,600 Intelligroup, Inc.+.................. 105,600
59,550 JDA Software Group Inc.+............. 1,697,175
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
62,450 Keane Inc.+.......................... $ 1,982,787
17,700 Microsoft Corporation+............... 1,462,463
53,175 Netscape Communications
Corporation+....................... 3,024,328
15,550 Oracle Corporation+.................. 649,213
91,000 Parametric Technology Company+....... 4,675,125
104,350 Peoplesoft Inc.+..................... 5,002,278
850 Sapient Corporation+................. 35,806
27,325 VeriFone Inc.+....................... 806,087
------------
36,685,279
------------
FINANCIAL SERVICES -- 13.4%
64,750 Associates 1st Capital Corporation,
Class A+........................... 2,857,094
21,868 Banca Popolare Di Bergamo............ 360,382
30,900 Bank of New York Company, Inc. ...... 1,042,875
94,502 Barclays Bank Plc, Ord. ............. 1,619,155
8,900 Charles Schwab Corporation........... 284,800
30,800 Chase Manhattan Corporation.......... 2,748,900
34,013 Grupo Financiero Inbursa, Series B... 116,228
38,550 SunAmerica Inc. ..................... 1,710,656
84,800 UNUM Corporation..................... 6,126,800
70,141 Wells Fargo & Company................ 18,920,535
------------
35,787,425
------------
CONSUMER DISCRETIONARY -- 12.3%
66,525 Alco Standard Corporation............ 3,434,353
3,900 Cambridge Technology Partners,
Inc.+.............................. 130,894
51,900 Doubletree Corporation+.............. 2,335,500
16,625 Extended Stay America, Inc.+......... 334,578
78,900 Gucci Group+......................... 5,039,737
87,500 HFS, Inc.+........................... 5,228,125
62,050 IntelliQuest Information Group,
Inc.+.............................. 1,411,637
50,375 Lamar Advertising Company+........... 1,221,594
17,625 META Group, Inc.+.................... 475,875
64,325 National Processing, Inc.+........... 1,029,200
66,025 Nike Inc., Class B................... 3,944,994
52,150 Outdoor Systems, Inc.+............... 1,466,719
875 Quintiles Transnational
Corporation+....................... 57,969
362,679 Rentokil Group Plc................... 2,726,574
116,200 TeleTech Holdings Inc.+.............. 3,021,200
12,525 Tommy Hilfiger Corporation+.......... 601,200
8,675 Universal Outdoor Holdings, Inc.+.... 203,863
------------
32,664,012
------------
HEALTH CARE -- 11.9%
21,900 Bristol-Myers Squibb Company......... 2,381,625
207,700 Centocor, Inc.+...................... 7,425,275
61,200 CompDent Corporation+................ 2,157,300
69,250 Eli Lilly & Company.................. 5,055,250
39,475 Fresenius Medical Care, ADR+......... 1,110,234
22,475 Glaxo Wellcome Plc, ADR.............. 713,581
</TABLE>
See Notes to Financial Statements.
109
<PAGE> 111
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
HEALTH CARE -- (CONTINUED)
21,750 Glaxo Wellcome Plc, Ord.............. $ 353,100
115,500 Omnicare Inc......................... 3,710,438
46,850 Pharmaceutical Product Development,
Inc.+.............................. 1,182,963
43,175 SmithKline Beecham, ADR.............. 2,935,900
69,975 Target Therapeutics Inc.+............ 2,938,950
25,075 Warner Lambert Company............... 1,880,625
------------
31,845,241
------------
MATERIALS & PROCESSING -- 3.9%
49,003 Metra AB, Series B, Ord.............. 2,727,123
83,325 Monsanto Company..................... 3,239,259
31,865 Potash Corporation of Saskatchewan... 2,708,525
138,800 Rofin-Sinar Technologies Inc.+....... 1,630,900
------------
10,305,807
------------
RETAIL -- 2.1%
165,875 Abercrombie & Fitch Company, Class
A+................................. 2,736,938
8,875 Fastenal Company..................... 406,031
28,675 Galoob Toys, Inc.+................... 401,450
28,600 Linens 'N Things, Inc.+.............. 561,275
13,000 Nordstrom, Inc....................... 460,688
74,825 Renters Choice Inc.+................. 1,084,962
------------
5,651,344
------------
ENERGY -- 1.3%
72,100 Triton Energy Ltd.+.................. 3,496,850
------------
AUTOS & TRANSPORTATION -- 0.8%
50,775 Wisconsin Central Transportation
Corporation+....................... 2,011,959
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
OTHER -- 0.6%
56,065 Kinnevik Investment, Series B........ $ 1,545,679
------------
RESTAURANTS -- 0.3%
9,112 Papa John's International Inc.+...... 307,530
22,150 Planet Hollywood International,
Inc.+.............................. 437,462
------------
744,992
------------
CONSUMER STAPLES -- 0.3%
12,539 Cultor OY, Series 1.................. 681,467
------------
Total Common Stocks
(Cost $226,121,605)................ 257,422,878
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY DISCOUNT NOTE -- 2.6%
(Cost $6,944,140)
$ 7,000,000 Federal Home Loan Mortgage
Corporation (FHLMC), 5.320% due
02/24/1997++....................... 6,944,140
------------
COMMERCIAL PAPER -- 1.3% (Cost $3,499,363)
3,500,000 American Express Company,
6.550% due 01/02/1997.............. 3,499,363
------------
TOTAL INVESTMENTS (COST $236,565,108*)..... 100.6% 267,866,381
OTHER ASSETS AND LIABILITIES (NET)......... (0.6) (1,638,327)
----- ------------
NET ASSETS................................. 100.0% $266,228,054
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase.
See Notes to Financial Statements.
110
<PAGE> 112
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE NET UNREALIZED
--------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ---------------------- --------- ----------- --------------
<C> <S> <C> <C> <C> <C>
01/27/1997 ITL 1,300,000,000 855,632 845,859 $ 9,773
01/27/1997 SEK 1,000,000 146,816 145,913 903
02/10/1997 DEM 1,918,000 1,249,782 1,269,442 (19,660)
02/12/1997 DEM 1,270,000 827,643 840,962 (13,319)
03/11/1997 DEM 2,150,000 1,403,494 1,425,919 (22,425)
04/22/1997 SEK 6,995,000 1,030,949 1,024,346 6,603
05/27/1997 SEK 4,000,000 590,505 590,685 (180)
--------
$(38,305)
--------
</TABLE>
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER NET UNREALIZED
--------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ---------- ---------------------- --------- ----------- --------------
<C> <S> <C> <C> <C> <C>
01/02/1997 GBP 10,109 17,312 16,923 $ (389)
01/02/1997 SEK 2,614,082 383,346 380,092 (3,254)
01/03/1997 GBP 21,330 36,527 35,685 (842)
01/07/1997 GBP 51,592 88,347 87,234 (1,113)
01/07/1997 SEK 3,271,615 479,826 475,097 (4,729)
01/16/1997 GBP 1,070,000 1,831,822 1,669,200 (162,622)
01/27/1997 ITL 1,900,000,000 1,250,539 1,238,390 (12,149)
01/27/1997 SEK 2,000,000 293,632 304,090 10,458
02/10/1997 DEM 1,918,000 1,249,782 1,309,215 59,433
02/10/1997 ITL 325,000,000 213,766 211,533 (2,233)
02/12/1997 DEM 1,270,000 827,643 866,894 39,251
02/12/1997 FIM 2,460,000 536,367 552,437 16,070
03/11/1997 DEM 2,150,000 1,403,494 1,452,703 49,209
03/12/1997 ITL 175,000,000 114,965 114,484 (481)
04/22/1997 FIM 750,000 164,255 164,618 363
04/22/1997 GBP 100,000 170,767 158,500 (12,267)
04/22/1997 SEK 6,995,000 1,030,949 1,056,966 26,017
05/12/1997 FIM 2,221,000 487,077 493,885 6,808
05/12/1997 ITL 300,000,000 196,697 196,386 (311)
05/27/1997 FIM 7,500,000 1,646,483 1,673,547 27,064
05/27/1997 GBP 650,000 1,108,821 1,091,870 (16,951)
05/27/1997 ITL 1,100,000,000 720,954 727,465 6,511
05/27/1997 SEK 19,500,000 2,878,711 2,960,601 81,890
06/04/1997 GBP 400,000 682,182 669,920 (12,262)
--------------
$ 93,471
--------------
Net Unrealized Appreciation of Forward
Foreign Currency Contracts.......................... $ 55,166
==============
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
DEM -- German Deutsche Mark
FIM -- Finnish Markka
GBP -- Great Britain Pound Sterling
ITL -- Italian Lira
SEK -- Swedish Krona
</TABLE>
See Notes to Financial Statements.
111
<PAGE> 113
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
EMERGING GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 91.9%
RETAIL -- 19.6%
128,150 Barnett Inc.+......................... $ 3,492,088
53,316 Eurobike AG+.......................... 1,628,393
358,225 Fastenal Company...................... 16,388,794
245,825 Global DirectMail Corporation+........ 10,724,116
9,350 Grand Optical-Photoservices........... 1,515,534
86,500 MSC Industrial Direct Company, Class
A+.................................. 3,200,500
126,525 O'Reilly Automotive Inc.+............. 4,048,800
600,000 Petco Animal Supplies Inc.+........... 12,450,000
232,774 Renters Choice Inc.+.................. 3,375,223
84,700 Stage Stores, Inc.+................... 1,545,775
115,000 Viking Office Products, Inc.+......... 3,069,062
114,025 Wilmar Industries, Inc.+.............. 3,164,194
-----------
64,602,479
-----------
CONSUMER DISCRETIONARY -- 14.8%
38,000 American Residential Services,
Inc.+............................... 1,030,750
57,025 Apollo Group, Inc., Class A+.......... 1,906,773
294,600 Family Golf Centers Inc.+............. 8,874,825
9,720 Fotolabo SA........................... 3,776,167
83,650 HFS, Inc.+............................ 4,998,088
60,600 Labor Ready, Inc.+.................... 818,100
64,450 National Processing, Inc.+............ 1,031,200
242,850 Premier Parks Inc.+................... 7,801,556
195,775 Profit Recovery Group International,
Inc.+............................... 3,132,400
20,600 Regal Cinemas, Inc.+.................. 633,450
1,299,849 Rentokil Group Plc.................... 9,772,096
117,450 TeleTech Holdings Inc.+............... 3,053,700
42,500 Univision Communications Inc.+........ 1,572,500
-----------
48,401,605
-----------
RESTAURANTS -- 11.6%
891,827 J.D. Wetherspoon Plc Ord.............. 17,868,857
399,600 Papa John's International Inc.+....... 13,486,500
710,077 PizzaExpress Plc...................... 6,414,432
30,800 PJ America Inc.+...................... 554,400
-----------
38,324,189
-----------
TELECOMMUNICATIONS -- 10.2%
285,550 CommNet Cellular Inc.+................ 7,959,706
88,650 Millicom International Cellular SA+... 2,847,881
206,650 Omnipoint Corporation+................ 3,978,013
816,375 Paging Network Inc.+.................. 12,449,719
88,100 Premiere Technologies, Inc.+.......... 2,202,500
347,507 Pricellular Corporation, Class A+..... 3,996,330
-----------
33,434,149
-----------
MATERIALS & PROCESSING -- 8.1%
203,630 Minerals Technologies Inc............. 8,348,830
145,475 Sealed Air Corporation+............... 6,055,397
426,325 Trigen Energy Corporation............. 12,256,844
-----------
26,661,071
-----------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
FINANCIAL SERVICES -- 7.9%
650,000 Insignia Financial Group Inc., Class
A+.................................. $ 14,625,000
140,000 Medallion Financial Corporation....... 2,135,000
90,500 Protective Life Corporation........... 3,608,688
168,625 UICI +................................ 5,480,312
-----------
25,849,000
-----------
AUTOS & TRANSPORTATION -- 5.8%
317,275 APS Holding Corporation, Class A+..... 4,917,762
354,500 Wisconsin Central Transportation
Corporation+........................ 14,047,063
-----------
18,964,825
-----------
HEALTH CARE -- 5.6%
391,425 DepoTech Corporation+................. 6,409,584
55,750 Karrington Health, Inc.+.............. 696,875
39,950 Omnicare Inc.......................... 1,283,394
17,750 Steris Corporation+................... 772,125
87,525 Sunrise Assisted Living, Inc.+........ 2,439,759
163,750 Target Therapeutics, Inc.+............ 6,877,500
-----------
18,479,237
-----------
CONSUMER STAPLES -- 2.8%
328,125 JP Foodservice Inc.+.................. 9,146,484
-----------
TECHNOLOGY -- 2.7%
175,850 Safeguard Scientifics, Inc.+.......... 5,583,237
79,200 Technology Solutions Company+......... 3,286,800
-----------
8,870,037
-----------
PRODUCER DURABLES -- 2.2%
181,900 Culligan Water Technologies, Inc.+.... 7,366,950
-----------
COMPUTER SOFTWARE & SERVICES -- 0.3%
24,800 First USA Paymentech, Inc.+........... 840,100
17,585 Sanchez Computer Associates, Inc.+.... 138,482
-----------
978,582
-----------
OTHER -- 0.3%
32,675 Rental Service Corporation+........... 898,563
-----------
Total Common Stocks (Cost
$239,562,790)....................... 301,977,171
-----------
WARRANT -- 1.8% (Cost $2,716,035)
149,770 Littelfuse Inc., Series A,
expires 12/27/2001+................. 5,915,915
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
<C> <S> <C>
COMMERCIAL PAPER -- 4.7% (Cost $15,597,162)
$15,600,000 American Express Company,
6.550% due 01/02/1997.............. 15,597,162
-----------
U.S. GOVERNMENT AGENCY DISCOUNT NOTE -- 1.8%
(Cost $5,874,905)
5,900,000 Federal Home Loan Bank (FHLB),
5.280% due 01/30/1997++............ 5,874,905
-----------
</TABLE>
See Notes to Financial Statements.
112
<PAGE> 114
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
EMERGING GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(NOTE 2)
------------
<S> <C> <C>
TOTAL 100.2% $329,365,153
INVESTMENTS
(Cost
$263,750,892*)...
OTHER ASSETS AND LIABILITIES (NET)......... (0.2) (578,357)
----- ------------
NET ASSETS................................. 100.0% $328,786,796
===== ============
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER NET UNREALIZED
--------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ----------- ---------------- ---------- ----------- ----------------
<S> <C> <C> <C> <C>
01/02/1997 GBP 23,498 40,241 39,336 $ (905)
01/02/1997 DEM 405,102 263,252 260,248 (3,004)
01/03/1997 GBP 49,587 84,917 82,959 (1,958)
01/03/1997 THB 8,969,400 349,729 349,766 37
01/07/1997 DEM 402,110 261,357 258,492 (2,865)
01/07/1997 GBP 119,938 205,382 202,794 (2,588)
01/16/1997 GBP 3,500,000 5,991,940 5,460,000 (531,940)
01/24/1997 GBP 1,100,000 1,882,839 1,705,330 (177,509)
03/11/1997 GBP 1,337,000 2,285,806 2,198,229 (87,577)
05/27/1997 GBP 3,500,000 5,970,577 5,879,300 (91,277)
06/04/1997 GBP 515,000 878,309 860,204 (18,105)
----------------
Net Unrealized Depreciation of Forward
Foreign Currency Contracts................... $ (917,691)
==================
GLOSSARY OF TERMS
DEM -- German Deutsche Mark
GBP -- Great Britain Pound Sterling
THB -- Thai Baht
</TABLE>
See Notes to Financial Statements.
113
<PAGE> 115
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
INTERNATIONAL GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 90.5%
JAPAN -- 24.2%
31,000 Advantest Corporation................. $ 1,453,501
115,000 Anritsu Corporation................... 1,241,257
12,000 Bank of Tokyo-Mitsubishi Ltd.+........ 222,779
75,000 Canon Inc. ........................... 1,657,888
60,000 Cosmo Oil............................. 288,576
243 DDI Corporation....................... 1,607,271
122,000 Denki Kogyo Company Ltd. ............. 916,501
14,000 Diamond Lease Company................. 177,705
160 East Japan Railway Company............ 719,800
180,000 Fujikura Ltd. ........................ 1,442,362
86,000 Hankyu Realty......................... 631,206
130,000 Hitachi Ltd. ......................... 1,212,331
85,000 Honda Motor Company................... 2,429,410
300,000 Isuzu Motors Ltd. .................... 1,334,082
50 Japan Tobacco Inc. ................... 338,917
64,000 JUSCO Company......................... 2,171,833
355,000 Kawasaki Heavy Industries............. 1,468,310
110,000 Komatsu Forklift Company, Ltd. ....... 565,150
60,000 Matsushita Electric Industrial
Company............................. 979,190
117,000 Mitsubishi Estate Company............. 1,202,228
162,000 Mitsubishi Heavy Industrials Ltd. .... 1,286,936
100,000 Mycal Corporation..................... 1,450,652
5,000 Nitta Corporation..................... 64,761
560,000 NKK Corporation+...................... 1,262,067
50,000 Nomura Securities Company Ltd. ....... 751,230
23,000 Noritsu Koki Company Ltd. ............ 1,082,376
40 NTT Data Communication Systems
Corporation......................... 1,170,883
36,000 Orix Corporation...................... 1,498,316
700 Parco Company......................... 6,105
115,000 Pioneer Electric Corporation.......... 2,194,543
18,000 Rohm Company.......................... 1,181,245
107,000 Sharp Corporation..................... 1,524,480
33,000 Sony Corporation...................... 2,162,766
350,000 Sumitomo Metal Industries............. 861,325
55,000 Sumitomo Realty & Development......... 346,689
50,000 Takashimaya Company Ltd. ............. 600,121
40,000 TDK Corporation....................... 2,607,720
50 Tohoku Electric & Power Company....... 993
225,000 Toray Industries Inc.................. 1,389,129
30,000 Toyota Motor Corporation.............. 862,620
200 West Japan Railway Company............ 647,612
----------
45,012,866
----------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
UNITED STATES -- 19.3%
18,400 Alcan Aluminum Ltd. .................. $ 618,700
42,870 Asia Cement, GDS...................... 787,100
50,000 Banco de Edwards, ADR................. 893,750
37,950 Banco Frances del Rio de la Plata SA,
Sponsored ADR....................... 1,043,625
160,000 Biacore International AB, Sponsored
ADR+................................ 3,520,000
154,900 Blue Square-Israel Ltd., ADR+......... 2,207,325
90,900 Commercial International Bank of
Egypt, GDR+ ++...................... 1,288,962
74,200 ECI Telecommunications Ltd., ADR...... 1,576,750
47,000 Enersis SA, ADR....................... 1,304,250
92,600 Groupe AB SA, ADR+.................... 1,331,125
63,000 Guangshen Railway Ltd., ADR+.......... 1,299,375
19,500 Hansol Paper Company, GDS+............ 248,625
1,360,734 Hong Kong Land Holdings............... 3,782,841
25,400 Hyundai Motor Company Ltd., GDR+...... 184,150
155,017 Jardine Matheson Holdings............. 1,023,112
60,200 Kookmin Bank, Sponsored GDR ++........ 1,123,934
25,700 Korea Electric Power Corporation,
Sponsored ADR....................... 526,850
26,300 Millicom International Cellular SA+... 844,887
35,000 Panamerican Beverages, Class A........ 1,640,625
40,000 Portugal Telecommunications, ADR...... 1,130,000
18,700 PT Indosat, ADR....................... 511,912
43,000 Qantas Airways, ADR++................. 717,885
164,000 Reliance Industries Ltd., GDS......... 2,013,100
11,300 Repsol SA, ADR........................ 430,813
20,980 Samsung Electronics Company Ltd.,
GDS................................. 387,072
77,000 State Bank of India, GDR+ ++.......... 1,355,200
70,000 Telefonica de Argentina, ADR.......... 1,811,250
85,000 YPF Sociedad Anonima, Sponsored ADR... 2,146,250
----------
35,749,468
----------
UNITED KINGDOM -- 8.1%
221,087 British Airport Authority............. 1,841,944
639,403 Cookson Group Plc..................... 2,584,145
394,000 General Electric Company Plc Ord...... 2,577,448
520,000 Pace Micro Technology+ ++............. 2,052,601
350,000 Rolls Royce Plc....................... 1,543,390
35,000 RTZ Corporation....................... 561,314
503,000 Thistle Hotels Plc+................... 1,563,417
545,049 Vodafone Group........................ 2,300,821
----------
15,025,080
----------
NEW ZEALAND -- 5.7%
1,700,500 Fletcher Challenge -- Building
Division............................ 5,229,434
1,852,300 Fletcher Challenge -- Forest
Division............................ 3,103,476
2,665,500 Wrightson Ltd......................... 2,317,782
----------
10,650,692
----------
</TABLE>
See Notes to Financial Statements.
114
<PAGE> 116
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
FRANCE -- 4.9%
38,000 Assurance Generale de France.......... $ 1,226,751
12,536 AXA Company........................... 797,317
22,400 Chargeurs International+.............. 1,109,531
15,700 Compagnie Bancaire SA................. 1,857,916
11,100 Eaux (Cie Generale Des)............... 1,375,600
76,863 La Gardere Groupe..................... 2,109,529
39,892 Usinor Sacilor........................ 580,486
----------
9,057,130
----------
AUSTRALIA -- 3.6%
635,800 Boral Ltd. ........................... 1,809,209
94,400 CSR Ltd. ............................. 330,149
92,600 Lend Lease Corporation................ 1,795,916
52,800 National Australia Bank Ltd. ......... 621,127
941,800 Oil Search Ltd. ...................... 1,834,045
182,392 Qantas Airways Ltd. .................. 304,446
----------
6,694,892
----------
GERMANY -- 2.9%
800 Ava Allgemeine Handels Der Verbr
AG+................................. 230,302
16,100 BASF AG............................... 620,209
1,800 Bayerische Motoren Werke AG........... 1,255,093
1,200 GEA AG................................ 367,287
7,000 SGL Carbon AG......................... 882,477
36,450 Veba AG............................... 2,108,100
----------
5,463,468
----------
SPAIN -- 2.8%
5,100 Banco Popular de Espanol.............. 1,001,733
300,600 Iberdrola SA.......................... 4,260,381
----------
5,262,114
----------
HONG KONG -- 2.7%
479,000 Cheung Kong Infrastructure
Holdings+........................... 1,269,572
102,000 Henderson China....................... 232,103
110,000 Hong Kong Electric Holdings........... 365,505
283,600 Hong Kong Telecommunications.......... 456,503
34,500 HSBC Holdings Ord. ................... 738,218
57,000 Hutchison Whampoa Ltd. ............... 447,702
35,500 New World Development Company......... 239,818
95,500 Swire Pacific Ltd., Class A........... 910,612
72,000 Television Broadcasts Ltd. ........... 287,646
----------
4,947,679
----------
FINLAND -- 2.2%
39,400 Metra AB, Class B..................... 2,192,696
111,800 Valmet Corporation, Class A........... 1,954,069
----------
4,146,765
----------
SINGAPORE -- 1.9%
281,000 D.B.S. Land Ltd....................... 1,034,196
101,000 Development Bank of Singapore (F)..... 1,364,182
72,000 Singapore International Airlines Ltd.
(F)................................. 653,470
28,000 Singapore Press Holdings (F).......... 552,276
----------
3,604,124
----------
VALUE
SHARES (NOTE 2)
- ----------- ------------
SWEDEN -- 1.8%
23,790 ABB AB, B Shares...................... $ 2,693,280
11,000 Astra AB, Class B..................... 530,711
----------
3,223,991
----------
SWITZERLAND -- 1.4%
2,315 Novartis AG+.......................... 2,651,013
----------
NORWAY -- 1.2%
582,000 Den Norske Bank, Series A............. 2,238,426
----------
THAILAND -- 1.1%
72,200 Bangkok Bank Public Company Ltd.
(F)................................. 698,183
40,000 Siam Cement Public Company Ltd. (F)... 1,253,997
55,400 Thai Military Bank Public Company
Ltd. ............................... 109,089
----------
2,061,269
----------
MALAYSIA -- 1.1%
110,500 Commerce Asset Holdings Berhad........ 831,321
190,000 New Straits Time Press Berhad......... 1,098,396
----------
1,929,717
----------
SOUTH KOREA -- 1.0%
41,300 Korea Electric Power Corporation...... 1,202,343
12,300 Samsung Electronics Company Ltd. ..... 662,308
----------
1,864,651
----------
PORTUGAL -- 1.0%
64,000 Portugal Telecommunications SA........ 1,824,444
----------
INDONESIA -- 0.9%
121,500 PT Bank International of Indonesia
(F)+................................ 119,597
200,000 PT Inco............................... 450,889
219,000 PT Indosat............................ 602,667
171,500 Semen Gresik (F)...................... 551,821
----------
1,724,974
----------
DENMARK -- 0.9%
64,300 International Service Systems AS,
Class B............................. 1,691,890
----------
POLAND -- 0.7%
14,300 Bank Przemyslcowo-Handlowy SA......... 922,582
75,500 Polifarb-Cieszyn SA................... 418,640
----------
1,341,222
----------
AUSTRIA -- 0.6%
6,425 VA Technologie AG..................... 1,008,384
----------
NETHERLANDS -- 0.5%
23,600 Philips Electronics NV................ 956,240
----------
Total Common Stocks (Cost
$157,857,953)....................... 168,130,499
----------
</TABLE>
See Notes to Financial Statements.
115
<PAGE> 117
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<C> <S> <C>
PREFERRED STOCK -- 0.1% (Cost $184,608)
565 GEA AG, Pfd. ......................... $ 177,888
----------
WARRANT -- 0.0%# (Cost $155,125)
120 Dowa Mining Company,
expires 12/09/1997+................. 47,250
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ---------------
<C> <S> <C>
CORPORATE BONDS -- 2.1%
$ 55,000 Bangkok Bank, Convertible,
3.250% due 03/03/2004........... 53,625
JPY 80,000,000 BTM Cayman Finance,
4.250% due 03/29/1999........... 892,842
JPY 46,000,000 Daido Hoxan Inc., Convertible,
1.600% due 03/29/2002........... 395,216
CHF 790,000 Sandoz Capital Ltd., Convertible,
1.250% due 10/23/2002........... 877,942
$ 940,000 Telekom Malaysia Berhad,
4.000% due 10/03/2004........... 963,500
JPY 50,000,000 Toyota Motor Corporation,
1.200% due 01/28/1998........... 734,824
------------
Total Corporate Bonds
(Cost $3,883,417)............... 3,917,949
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- -----------
<C> <S> <C>
INVESTMENT COMPANY SECURITY -- 1.8%
(Cost $3,019,191)
3,270,000 General Pacific Securities Taiwan
Index Fund.......................... 3,302,700
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
REPURCHASE AGREEMENT -- 4.3% (Cost $8,055,000)
$8,055,000 Agreement with State Street Bank &
Trust Company, 5.000% dated
12/31/1996, to be repurchased at
$8,057,238 on 01/02/1997,
collateralized by: $1,655,000 U.S.
Treasury Note, 6.000% due 08/31/1997
(Market Value -- $1,692,238) and
$6,480,000 U.S. Treasury Note,
6.250% due 06/30/1998 (Market
Value -- $6,528,600)................ 8,055,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL EXPIRATION STRIKE VALUE
AMOUNT DATE PRICE (NOTE 2)
- --------------- ---------- --------- ------------
<C> <S> <C> <C> <C>
CALL OPTIONS PURCHASED ON STOCK INDICES -- 0.0%#
KRW 12,968,621 Kospi 200 Stock $ 0.11 $ 13
Index......... 02/07/1997
JPY 141,697 Tokyo Price 1,539.20 22,799
Index
(TOPIX)....... 03/14/1997
-----------
22,812
Total Call Options Purchased on Stock
Indices (Cost $250,000)................
-----------
TOTAL INVESTMENTS (COST $173,405,294*)....... 98.8% 183,654,098
OTHER ASSETS AND LIABILITIES (NET)........... 1.2 2,215,357
----- -----------
NET ASSETS................................... 100.0% $185,869,455
===== ===========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
+ 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 December 31, 1996, sector diversification was as follows:
<TABLE>
<CAPTION>
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (NOTE 2)
- -------------------------------------- ---------- ------------
<S> <C> <C>
COMMON STOCKS:
Material & Processing................. 17.6% $ 32,670,637
Financial Services.................... 13.9 25,897,862
Producer Durables..................... 13.0 24,137,769
Telecommunications.................... 8.7 16,097,769
Consumer Discretionary................ 8.0 14,857,712
Autos & Transportation................ 6.8 12,623,628
Utilities............................. 4.6 8,566,080
Technology............................ 4.4 8,123,047
Consumer Staples...................... 3.2 5,830,589
Energy................................ 2.5 4,699,683
Health Care........................... 1.7 3,181,725
Retail................................ 1.6 3,043,853
Computer Software & Services.......... 0.6 1,170,883
Other................................. 3.9 7,229,262
----- ------------
TOTAL COMMON STOCKS................... 90.5 168,130,499
OTHER INVESTMENTS..................... 8.3 15,523,599
----- ------------
TOTAL INVESTMENTS..................... 98.8 183,654,098
OTHER ASSETS AND LIABILITIES (Net).... 1.2 2,215,357
----- ------------
NET ASSETS............................ 100.0% $185,869,455
===== ============
</TABLE>
See Notes to Financial Statements.
116
<PAGE> 118
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
INTERNATIONAL GROWTH FUND
DECEMBER 31, 1996 (UNAUDITED)
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U. S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE NET
--------------------------------------- UNREALIZED
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ------------------- ---------- ----------- --------------
<C> <S> <C> <C> <C> <C>
03/05/1997 JPY 2,846,126,700 24,796,880 27,000,000 $ (2,203,120)
03/05/1997 JPY 1,114,712,531 9,711,933 10,629,673 (917,740)
04/02/1997 DEM 11,111,322 7,264,225 7,476,717 (212,492)
10/24/1997 JPY 1,661,363,650 14,970,025 15,599,659 (629,634)
--------------
$ (3,962,986)
--------------
</TABLE>
U. S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<TABLE>
<CAPTION>
NET
CONTRACTS TO DELIVER UNREALIZED
--------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ------------------- ---------- ----------- --------------
<C> <S> <C> <C> <C> <C>
01/02/1997 PHP 2,741,389 104,234 104,156 $ (78)
01/03/1997 FRF 4,000,000 770,936 768,935 (2,001)
01/06/1997 JPY 1,220,453 10,542 10,530 (12)
03/05/1997 JPY 3,960,839,231 34,508,813 38,117,572 3,608,759
03/07/1997 FRF 43,731,583 8,460,728 8,613,666 152,938
04/02/1997 DEM 11,111,322 7,264,225 7,370,000 105,775
10/24/1997 JPY 2,249,967,300 20,273,747 21,000,000 726,253
10/24/1997 JPY 1,072,760,000 9,666,303 10,000,000 333,697
--------------
$ 4,925,331
--------------
Net Unrealized Appreciation of Forward
Foreign Currency Contracts.................... $ 962,345
=============
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
CHF -- Swiss Franc
DEM -- German Deutsche Mark
(F) -- Foreign or Alien Shares
FRF -- French Franc
GDR -- Global Depositary Receipt
GDS -- Global Depositary Share
JPY -- Japanese Yen
KRW -- South Korean Won
PHP -- Philippine Peso
</TABLE>
See Notes to Financial Statements.
117
<PAGE> 119
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
TARGET MATURITY 2002 FUND
DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ----------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATION -- 97.0%
U.S. TREASURY STRIP
$4,405,000 Zero coupon due 11/15/2002............... $3,067,289
----------
TOTAL INVESTMENTS (COST $3,012,112*)........... 97.0% 3,067,289
OTHER ASSETS AND LIABILITIES (NET)............. 3.0 93,251
----- ----------
NET ASSETS..................................... 100.0% $3,160,540
===== ==========
</TABLE>
- ---------------------
* Aggregate cost for federal tax purposes.
<TABLE>
<S> <C>
GLOSSARY OF TERMS
STRIP -- Separate trading of registered interest and
principal of securities
</TABLE>
See Notes to Financial Statements.
118
<PAGE> 120
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SIERRA TRUST FUNDS
1. ORGANIZATION AND BUSINESS
Sierra Trust Funds (the "Trust") 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 Trust is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Trust 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, consists of four
classes of shares, Class A Shares, Class B Shares, Class S Shares and Class I
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.
As of July 25, 1996, the Global Money, U.S. Government Money, Short Term High
Quality Bond, Short Term Global Government, U.S. Government, Corporate Income,
Growth and Income, Growth, Emerging Growth and International Growth Funds began
offering Class I Shares. Sale of Class I Shares are made exclusively to the
various investment portfolios of Sierra Asset Management Portfolios, an open-end
management investment company and are not available for direct purchase by
investors. Class I Shares are not subject to an initial sales charge or CDSC,
but are subject to other annual operating expenses of the Funds.
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 Trust'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
119
<PAGE> 121
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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
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 Trust'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 "Put Option Written on U.S. Treasury
Bond," "Options Purchased," "Put Options Purchased on Foreign Currency," "Call
Options Written on Foreign Currency" and "Call Options Purchased on Stock
Indices." These amounts reflect each contract's exposure to the underlying
instrument at December 31, 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.
120
<PAGE> 122
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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
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 December 31, 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
121
<PAGE> 123
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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) from 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 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 include foreign
currency gains and losses resulting from changes in exchange rates 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 security
transactions.
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 December 31, 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
122
<PAGE> 124
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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.
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 December 31, 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
123
<PAGE> 125
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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 various investment
securities held by the Funds, timing differences and differing characterization
of distributions made by each Fund as a whole.
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 Trust 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 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. Warburg, Pincus Counsellors, Inc. ("Warburg"), a privately held
corporation, serves as the Sub-advisor to the International Growth Fund. Van
Kampen American Capital Management Inc. ("Van Kampen"), a wholly-owned
subsidiary of VK/AC Holding, Inc., which in turn is a wholly-owned subsidiary of
Morgan Stanley Group Inc., serves as the Sub-advisor to the California
Municipal, Florida Insured Municipal, California Insured Intermediate Municipal
and National Municipal Funds. BlackRock
124
<PAGE> 126
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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. ("Scudder"), 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%
=== === ===
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>
125
<PAGE> 127
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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>
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>
<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>
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>
126
<PAGE> 128
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
<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
NAME OF FUND $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>
<TABLE>
<CAPTION>
FEES ON ASSETS
EQUAL TO OR FEES ON ASSETS
LESS THAN EXCEEDING
$500 MILLION $500 MILLION
-------------- --------------
<S> <C> <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.
+ 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.
127
<PAGE> 129
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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 six
months ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
NAME OF FUND FEES WAIVED EXPENSES ABSORBED
--------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
Global Money Fund.............................................. $ 350,278 $43,951
U.S. Government Money Fund..................................... 58,069 --
California Money Fund.......................................... 69,963 --
Short Term High Quality Bond Fund.............................. 89,234 21,924
Short Term Global Government Fund.............................. 205,723 --
U.S. Government Fund........................................... 591,067 --
Corporate Income Fund.......................................... 245,306 --
California Municipal Fund...................................... 470,331 --
Florida Insured Municipal Fund................................. 92,908 8,347
California Insured Intermediate Municipal Fund................. 180,191 --
National Municipal Fund........................................ 206,671 --
Target Maturity 2002 Fund...................................... 3,988 23,493
</TABLE>
Sierra Fund Administration Corporation ("Sierra Administration"), an indirect
wholly-owned subsidiary of GWFC, serves as administrator to each Fund. First
Data Investor Services Group, Inc., ("FDISG"), a wholly-owned subsidiary of
First Data Corporation, serves as sub-administrator and transfer agent to each
Fund. For its services as administrator 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
average daily net assets. Out of its fee, Sierra Administration pays FDISG for
its services as sub-administrator and 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 Trust, plus fees at the
annual rate of .0452% on the next $1.3 billion aggregate average daily net
assets of the Trust, .0429% on the next $1.7 billion aggregate average daily net
assets of the Trust and .0362% on the next $3.1 billion aggregate average daily
net assets of the Trust. The Trust pays FDISG certain out-of-pocket expenses as
transfer agent.
The Trust also pays Boston Safe Deposit and Trust Company ("Boston Safe"), the
Trust's custodian, certain custodial transaction charges. 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 six months ended December 31, 1996 as follows:
<TABLE>
<CAPTION>
CREDITS ALLOWED
BY THE
NAME OF FUND CUSTODIAN
---------------------------------------------------------------------------- ---------------
<S> <C>
Global Money Fund........................................................... $ 458
U.S. Government Money Fund.................................................. 84
Short Term High Quality Bond Fund........................................... 135
Short Term Global Government Fund........................................... 1,153
U.S. Government Fund........................................................ 11,580
Corporate Income Fund....................................................... 110
Florida Insured Municipal Fund.............................................. 1,389
California Insured Intermediate Municipal Fund.............................. 2,057
Growth and Income Fund...................................................... 965
Growth Fund................................................................. 7,047
Emerging Growth Fund........................................................ 2,777
International Growth Fund................................................... 6,313
Target Maturity 2002 Fund................................................... 683
</TABLE>
128
<PAGE> 130
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
For the six months ended December 31, 1996, GW Securities and Sierra Services
have informed the Funds that they received $1,459,712 and $229,411,
respectively, representing commissions (front-end sales charges). In addition,
for the six months ended December 31, 1996, Sierra Services informed the Funds
that they received $743,737 from CDSCs.
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 Trust for
serving as an officer or Trustee of the Trust. GW Securities is a wholly-owned
subsidiary and Sierra Services is an indirect wholly-owned subsidiary of GWFC.
The Trust 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.
Pursuant to an exemptive order granted by the Securities and Exchange
Commission, the Trust'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 Trust's assets.
5. DISTRIBUTION PLANS
Sierra Services serves as distributor for Class A Shares, Class B Shares and
Class S Shares of the Funds.
The Trust 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 Trust 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 Trust, 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.
Class I Shares are not subject to a Rule 12b-1 distribution plan.
129
<PAGE> 131
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
For the six months ended December 31, 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........................................... $178,217 $ 2,701 $ 901 $ 71,434 $23,811
U.S. Government Money Fund.................................. 46,435 1,640 546 1,288 429
California Money Fund....................................... 62,080 271 91 40 13
Short Term High Quality Bond Fund........................... 34,086 12,905 4,302 10,227 3,409
Short Term Global Government Fund........................... 76,581 6,886 2,295 5,751 1,917
U.S. Government Fund........................................ 490,169 88,154 29,384 121,947 40,649
Corporate Income Fund....................................... 350,715 92,002 30,667 36,489 12,163
California Municipal Fund................................... 462,052 85,958 28,653 43 15
Florida Insured Municipal Fund.............................. 35,749 19,399 6,467 43 15
California Insured Intermediate Municipal Fund.............. 67,949 81,368 27,122 43 15
National Municipal Fund..................................... 277,722 26,231 8,744 43 14
Growth and Income Fund...................................... 225,490 101,343 33,781 104,776 34,925
Growth Fund................................................. 206,602 101,936 33,979 157,421 52,473
Emerging Growth Fund........................................ 304,234 113,160 37,720 128,936 42,978
International Growth Fund................................... 134,876 17,126 5,709 138,640 46,213
Target Maturity 2002 Fund................................... 3,988 -- -- -- --
</TABLE>
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 six months ended December
31, 1996 were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Short Term High Quality Bond Fund............................... $ 5,115,962 $ 12,152,203
Short Term Global Government Fund............................... 14,782,230 29,257,334
U.S. Government Fund............................................ 261,314,251 112,132,176
Corporate Income Fund........................................... -- 34,396,388
California Municipal Fund....................................... 85,814,136 110,442,742
Florida Insured Municipal Fund.................................. 9,718,941 14,168,234
California Insured Intermediate Municipal Fund.................. 11,336,169 11,815,017
National Municipal Fund......................................... 31,384,752 51,141,864
Growth and Income Fund.......................................... 106,759,851 117,902,377
Growth Fund..................................................... 167,690,853 131,101,305
Emerging Growth Fund............................................ 102,182,204 125,309,559
International Growth Fund....................................... 51,752,217 32,407,545
</TABLE>
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the six months ended December
31, 1996 were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Short Term High Quality Bond Fund............................ $ 6,040,977 $ 8,729,206
Short Term Global Government Fund............................ 4,573,828 3,203,195
U.S. Government Fund......................................... 1,459,685,480 1,692,007,519
Corporate Income Fund........................................ 5,658,750 46,323,297
Target Maturity 2002 Fund.................................... -- 170,178
</TABLE>
130
<PAGE> 132
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
At December 31, 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.................................. $ 317,316 $ 109,175
Short Term Global Government Fund.................................. 2,029,017 524,377
U.S. Government Fund............................................... 7,403,972 3,067,480
Corporate Income Fund.............................................. 14,719,097 1,760,183
California Municipal Fund.......................................... 22,385,720 195,551
Florida Insured Municipal Fund..................................... 1,280,373 29,768
California Insured Intermediate Municipal Fund..................... 3,525,482 7,535
National Municipal Fund............................................ 17,334,677 379,774
Growth and Income Fund............................................. 37,530,621 6,072,268
Growth Fund........................................................ 39,416,280 8,115,007
Emerging Growth Fund............................................... 78,300,657 12,686,396
International Growth Fund.......................................... 20,736,624 10,487,820
Target Maturity 2002 Fund.......................................... 55,177 --
</TABLE>
Option activity for the Short Term High Quality Bond Fund for the six months
ended December 31, 1996 was as follows:
<TABLE>
<CAPTION>
WRITTEN OPTIONS ON FOREIGN CURRENCY: PREMIUMS
-------------------------------------------------------------------- --------
<S> <C> <C>
Options outstanding at June 30, 1996................................ $ 31,854
Options written..................................................... 53,041
Options expired..................................................... (31,854)
Options closed...................................................... (43,363)
--------
Options outstanding at December 31, 1996............................ $ 9,678
========
</TABLE>
Option activity for the Short Term Global Government Fund for the six months
ended December 31, 1996 was as follows:
<TABLE>
<CAPTION>
WRITTEN OPTIONS ON FOREIGN CURRENCY: PREMIUMS
------------------------------------------------------------------- ---------
<S> <C> <C>
Options outstanding at June 30, 1996............................... $ 194,487
Options written.................................................... 442,624
Options expired.................................................... (319,935)
Options closed..................................................... (215,711)
---------
Options outstanding at December 31, 1996........................... $ 101,465
=========
</TABLE>
Option activity for the U.S. Government Fund for the six months ended December
31, 1996 was as follows:
<TABLE>
<CAPTION>
NUMBER OF
WRITTEN OPTIONS: PREMIUMS CONTRACTS
------------------------------------------------------------ --------------- ----------------
<S> <C> <C>
Options outstanding at June 30, 1996........................ $ 0 0
Options written............................................. 171,953 17,750
-------- ------
Options outstanding at December 31, 1996.................... $ 171,953 17,750
======== ======
</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 period................ $ 154,779,187 $ 53,206,875
Average amount outstanding during the period*............... $ 136,835,448 $ 51,277,365
Average monthly shares outstanding during the period........ 49,891,999 31,371,701
Average debt per share outstanding during the period........ $ 2.74 $ 1.63
</TABLE>
- ---------------------
* The average amount outstanding during the period was calculated by adding the
borrowings at the end of each day and dividing the sum by the number of days
in the six months ended December 31, 1996.
Fee income earned for the six months ended December 31, 1996 by the U.S.
Government and Corporate Income Funds for dollar roll transactions aggregated
$1,561,550 and $644,482, respectively.
131
<PAGE> 133
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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 period................................ $ 35,113,875
Average amount outstanding during the period*............................... $ 1,123,629
Average monthly shares outstanding during the period........................ 49,891,999
Average debt per share outstanding during the period........................ $ 0.02
</TABLE>
- ---------------------
* The average amount outstanding during the period was calculated by summing
borrowings at the end of each day and dividing the sum by the number of days
in the six months ended December 31, 1996.
Interest rates ranged from 4.125% to 5.500% during the period. Interest paid for
the six months ended December 31, 1996, on borrowings by the Fund under reverse
repurchase agreements, aggregated $27,078.
7. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
As of December 31, 1996, Chase Manhattan 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............................................. 1,646,622 14.25%
</TABLE>
As of December 31, 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 S CLASS I CLASS S CLASS I
-------------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Government Money Fund.................................... -- 1,021 -- 100%
California Money Fund......................................... 10,532 1,012 100% 100
California Municipal Fund..................................... 1,090 97 100 100
Florida Insured Municipal Fund................................ 1,193 106 100 100
California Insured Intermediate Municipal Fund................ 1,103 97 100 100
National Municipal Fund....................................... 1,055 95 100 100
</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
straightline 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>
132
<PAGE> 134
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
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.
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.
133
<PAGE> 135
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SIERRA TRUST FUNDS
11. LINE OF CREDIT
The Trust, 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; and (ii) any borrower limitations described
for such borrowers in the Trust's prospectus. During the six months ended
December 31, 1996, no Fund borrowed under the Agreement.
134
<PAGE> 136
- --------------------------------------------------------------------------------
MEETING OF SHAREHOLDERS (UNAUDITED)
SIERRA TRUST FUNDS
On October 29, 1996 a Special Meeting of Shareholders of the Sierra Trust
California Municipal, Florida Insured Municipal, California Insured Intermediate
Municipal and National Municipal Funds (the "Funds") was held. The purpose of
the meeting was to approve a new Investment Sub-Advisory Agreement by and among
the Sierra Trust Funds, Sierra Investment Advisors Corporation and Van Kampen
American Capital Management, Inc. with respect to the Funds.
At the meeting 35,371,770 votes were cast in favor of the proposal and 634,436
votes were cast against the proposal. In addition, there were 3,936,043
abstentions with respect to the proposal.
135
