<PAGE>
THE MONEY FUNDS
Annual Report
for the year ended June 30, 1997
[GRAPHIC OMITTED]
------------------------
SIERRA
TRUST FUNDS
------------------------
A Family of Mutual Funds
<PAGE>
- --------------------------------------------------------------------------------
------------------------
SIERRA
TRUST FUNDS
------------------------
A Family of Mutual Funds
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES 1
- ------------------------------------------------------
STATEMENTS OF OPERATIONS 3
- -------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 4
- ------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY 6
- -------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
Global Money Fund 8
U.S. Government Money Fund 10
California Money Fund 12
- -------------------------------------------------------
PORTFOLIO OF INVESTMENTS:
Global Money Fund 14
U.S. Government Money Fund 16
California Money Fund 18
- -------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 20
- ----------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 25
- --------------------------------------------------
TAX INFORMATION (UNAUDITED) 26
- ----------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
[PHOTO OF JAMES H. OVERHOLT]
WE ARE PLEASED to provide you with the SIERRA TRUST MONEY FUNDS Annual Report
for the year ended June 30, 1997.
The past 12 months have seen a continuation of favorable economic trends.
Low unemployment, low inflation, and sustained consumer confidence were all
factors that resulted in a positive environment for stocks and bonds. Despite a
correction of nearly 10% in the Dow Jones Industrial Average (the "Dow") in the
first quarter of 1997, many stock market indices including the Dow, Standard &
Poor's Composite Index of 500 Stocks ("S&P 500"), and the Nasdaq Composite Index
posted net annual returns well above average for the period.
The S&P 500 rose 34.7% for the year, and on June 30, 1997, was up 104%
since December 31, 1994. Such rapid gains are unusual considering the stock
market's history. Over the last 70 years, the S&P 500 posted an average annual
return of 10.8%. Since 1919, there have also been 47 years in which the market
has fallen 10% or more from the previous year's highs. With the market showing
signs of volatility in 1997, we continue to advise investors to maintain a
long-term perspective when making investment decisions and to seek the
assistance of a qualified professional.
The pattern of mutual fund purchases and sales during the first half of
1997 may suggest, however, that many investors are basing their investment
decisions on short-term performance. When stock and bond markets fell sharply in
March 1997, net new cash flow into mutual funds fell 77.4% during the one-month
period (according to the Investment Company Institute). Net inflows into stock
mutual funds, while still positive in March, fell to their lowest level since
July 1996, while bond and income funds experienced a net outflow. Unfortunately,
investors who curtailed fund purchases or even exited the market during the
downturn in March missed out on the recovery and subsequent net gains during the
second quarter of 1997.
At SIERRA TRUST FUNDS, we strive to pursue long-term performance consistent
with the stated objectives of each fund, without exposing investors to excessive
risks. We believe that, over the long-term, mutual fund investors are best
served by: 1) applying the principles of asset allocation and diversification in
building a portfolio of mutual funds; 2) periodically adjusting their portfolio
to take advantage of changing market conditions; and 3) remaining invested or
even adding to their positions during periods of uncertainty. These general
guidelines can help investors not only reduce the risks inherent in a
single-fund approach, but also earn potentially higher returns.
As a fund family, SIERRA TRUST FUNDS has been recognized by independent
research firms such as Lipper Analytical Services for its competitive fund
returns. For example, for the year ended June 30, 1997, the SIERRA NATIONAL
MUNICIPAL FUND was ranked 26th out of 226 funds, or in the top 15%. For the
three- and five-year periods ended June 30, the Fund ranked 79th out of 176
funds and 37th out of 107 funds, respectively.*
- -------------
* Lipper rankings exclude sales charges. Rankings represent past performance and
is not a guarantee of future results.
In evaluating fund performance, we encourage investors to look beyond the
short term, and especially, to assess the relative investment risks different
funds may represent. Your Investment Representative can provide in-depth
information about the risk and return profiles of the SIERRA TRUST FUNDS, which
include money market, taxable and tax-exempt fixed-income, and domestic and
international stock funds.
For investors seeking an institutional approach to managing money and a
longer-term focus on balancing risk and return goals, the SIERRA ASSET
MANAGEMENT (SAM) PORTFOLIOS offer an answer: active asset management. SAM
investors receive effective diversification, asset allocation, strategic
flexibility, and convenience. For each SAM Portfolio, we continually monitor the
markets and adjust the portfolio allocation among various asset classes to take
advantage of market conditions and forecasts. Active asset allocation helps
investors reduce risk and thereby more effectively reach their long-term
investment goals.
To meet the needs of investors interested in active asset allocation, but
who also want the advantages of tax-deferred growth and estate planning, we
introduced the SIERRA ASSET MANAGER VARIABLE ANNUITY in May of this year. SIERRA
ASSET MANAGER combines all the risk management tools of diversification and
asset allocation with the power of tax deferral and estate planning.
Additional SIERRA ASSET MANAGER benefits include low investment minimums,
tax-free transfers among investment options, and a "stepped-up" death benefit
that protects your family against market risk. Of course, keep in mind that like
all securities, there are risks associated with investing in variable annuities,
including the fact that investment returns and principal value will fluctuate
with market conditions. For more complete information, including charges and
expenses, please contact your Investment Representative to obtain a SIERRA ASSET
MANAGER prospectus and related SIERRA VARIABLE TRUST prospectus. Please read the
prospectuses carefully before you invest or send money.
As we move into the 21st century, we at SIERRA TRUST FUNDS appreciate the
confidence you have placed in us and will continue to demonstrate our commitment
to you through product innovation and the pursuit of disciplined investment
management strategies. Thank you for choosing SIERRA TRUST FUNDS.
Sincerely,
/s/ James H. Overholt
James H. Overholt
President
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
SIERRA TRUST FUNDS
JUNE 30, 1997
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Note 2)
See portfolios of investments (a) ............ $190,219,001 $33,653,549 $40,085,484
Cash (b) ....................................... 109,268 -- 3,539,772
Interest receivable............................. 1,286,324 13,864 302,361
Receivable for Fund shares sold................. 1,408,081 659,746 1,000,717
Receivable for investment securities sold....... -- -- 200,136
Receivable from investment advisor.............. -- 2,217 --
Prepaid expenses and other assets............... 6,013 1,664 5,411
------------ ----------- -----------
Total Assets................................ 193,028,687 34,331,040 45,133,881
------------ ----------- -----------
LIABILITIES:
Payable for Fund shares redeemed................ 954,082 1,491,557 79,914
Payable for investment securities purchased..... -- -- 2,000,000
Investment advisory fee payable (Note 3)........ 6,310 -- 1,575
Administration fee payable (Note 3)............. 46,780 6,981 10,424
Shareholder servicing and distribution fees
payable (Note 5).............................. 28,048 7,190 8,727
Dividends payable............................... 341,928 2,989 3,133
Accrued legal and audit fees.................... 20,799 16,989 17,332
Accrued transfer agent fees..................... 62,642 7,284 8,587
Accrued Trustees' fees and expenses (Note 4).... 1,560 227 346
Accrued registration and filing fees payable.... 11,014 5,277 4,299
Due to Custodian................................ -- 121,449 --
Accrued expenses and other payables............. 27,955 4,354 6,529
------------ ----------- -----------
Total Liabilities .......................... 1,501,118 1,664,297 2,140,866
------------ ----------- -----------
NET ASSETS...................................... $191,527,569 $32,666,743 $42,993,015
============ =========== ===========
- --------------
(A) INVESTMENTS, AT COST (NOTE 2)............... $190,219,001 $33,653,549 $40,085,484
(B) CASH, AT COST (NOTE 2)...................... $ 109,268 $ -- $ 3,539,772
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
SIERRA TRUST FUNDS
JUNE 30, 1997
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income ......... $ 368 $ 7,444 $ 2,363
Accumulated net realized gain/(loss) on
investments sold .......................... 20,439 (14,487) (40,974)
Paid-in capital ............................. 191,506,762 32,673,786 43,031,626
------------ ----------- -----------
Total Net Assets ........................ $191,527,569 $32,666,743 $42,993,015
============ =========== ===========
NET ASSETS:
Class A Shares .............................. $104,301,904 $30,518,573 $42,923,227
============ =========== ===========
Class B Shares .............................. $ 1,314,349 $ 1,801,472 $ 67,607
============ =========== ===========
Class S Shares .............................. $ 6,908,921 $ 345,652 $ 1,153
============ =========== ===========
Class I Shares .............................. $ 79,002,395 $ 1,046 $ 1,028
============ =========== ===========
SHARES OUTSTANDING:
Class A Shares .............................. 104,654,469 30,529,135 42,964,966
============ =========== ===========
Class B Shares .............................. 1,308,787 1,802,096 67,673
============ =========== ===========
Class S Shares .............................. 6,879,685 345,772 1,154
============ =========== ===========
Class I Shares .............................. 78,668,083 1,045 1,029
============ =========== ===========
CLASS A SHARES:
Net asset value and offering price per share
of beneficial interest outstanding* ....... $1.00 $1.00 $1.00
============ =========== ===========
CLASS B SHARES:
Net asset value and offering price per share
of beneficial interest outstanding* ....... $1.00 $1.00 $1.00
============ =========== ===========
CLASS S SHARES:
Net asset value and offering price per share
of beneficial interest outstanding* ....... $1.00 $1.00 $1.00
============ =========== ===========
CLASS I SHARES:
Net asset value, offering and redemption
price per share of beneficial interest
outstanding ............................... $1.00 $1.00 $1.00
============ =========== ===========
- --------------
* Redemption price per share is equal to Net Asset Value less any applicable contingent deferred sales charge.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1997
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
--------------- --------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest ........................................ $9,691,001 $1,835,588 $1,683,921
---------- ---------- ----------
EXPENSES:
Investment advisory fee (Note 3) ................ 701,336 135,916 187,084
Administration fee (Note 3) ..................... 526,002 101,937 140,313
Custodian fees .................................. 12,287 2,092 3,640
Legal and audit fees ............................ 33,214 17,502 20,224
Trustees' fees and expenses (Note 4) ............ 7,331 1,511 1,998
Registration and filing fees .................... 49,519 27,159 16,485
Transfer agent fees ............................. 203,370 25,988 34,240
Other ........................................... 46,965 8,661 12,302
Shareholder servicing and distribution fees
(Note 5):
Class A Shares ................................ 314,557 81,799 116,737
Class B Shares ................................ 8,822 8,891 689
Class S Shares ................................ 130,113 3,693 64
Fees waived by investment advisor (Note 3) ...... (695,889) (118,128) (135,495)
---------- ---------- ----------
Subtotal .................................... 1,337,627 297,021 398,281
Credits allowed by the custodian (Note 3) ....... (5,351) (110) --
---------- ---------- ----------
Net expenses ................................ 1,332,276 296,911 398,281
---------- ---------- ----------
NET INVESTMENT INCOME ........................... 8,358,725 1,538,677 1,285,640
---------- ---------- ----------
NET REALIZED GAIN ON INVESTMENTS (Notes 2 and 6):
Realized gains from security transactions ....... 28,755 1,221 --
---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .................................... $8,387,480 $1,539,898 $1,285,640
========== ========== ==========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1997
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
----------------- ---------------- ----------------
<S> <C> <C> <C>
Net investment income ....................... $ 8,358,725 $ 1,538,677 $ 1,285,640
Net realized gain on investments sold during
the year .................................... 28,755 1,221 --
------------ ----------- -----------
Net increase in net assets resulting from
operations ................................ 8,387,480 1,539,898 1,285,640
Distributions to shareholders from:
Net investment income:
Class A Shares............................. (6,014,055) (1,489,830) (1,284,111)
Class B Shares............................. (35,704) (34,499) (1,373)
Class S Shares............................. (524,764) (14,303) (125)
Class I Shares............................. (1,791,867) (45) (31)
Net realized gains on investments:
Class A Shares............................. (6,663) -- --
Class B Shares............................. (47) -- --
Class S Shares............................. (689) -- --
Class I Shares............................. (1,886) -- --
Net increase/(decrease) in net assets from
Fund share transactions:
Class A Shares............................. (49,022,567) (8,514,104) (8,287,958)
Class B Shares............................. 887,004 1,690,377 (79,592)
Class S Shares............................. (14,073,140) (93,121) (9,276)
Class I Shares............................. 78,668,083 1,045 1,029
------------ ----------- -----------
Net increase/(decrease) in net assets ....... 16,471,185 (6,914,582) (8,375,797)
NET ASSETS:
Beginning of year ........................... 175,056,384 39,581,325 51,368,812
------------ ----------- -----------
End of year ................................. $191,527,569 $32,666,743 $42,993,015
============ =========== ===========
Undistributed net investment income at end of
year ...................................... $ 368 $ 7,444 $ 2,363
============ =========== ===========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1996
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
----------------- ---------------- ----------------
<S> <C> <C> <C>
Net investment income ....................... $ 7,744,947 $ 2,059,511 $ 1,519,495
Net realized gain/(loss) on investments sold
during the year ........................... 1,087 (4,208) 87
------------ ------------ ------------
Net increase in net assets resulting from
operations ................................ 7,746,034 2,055,303 1,519,582
Distributions to shareholders from:
Net investment income:
Class A Shares............................. (7,159,606) (2,041,798) (1,517,163)
Class B Shares............................. (11,198) (3,454) (2,251)
Class S Shares............................. (592,142) (12,141) (914)
Net realized gains on investments:
Class A Shares............................. (15,528) -- --
Class B Shares............................. (29) -- --
Class S Shares............................. (1,523) -- --
Net increase/(decrease) in net assets from
Fund share transactions:
Class A Shares............................. 43,695,697 (8,459,449) 2,376,197
Class B Shares............................. 181,339 (11,021) 68,438
Class S Shares............................. 13,562,225 (298,215) 227
------------ ------------ ------------
Net increase/(decrease) in net assets ....... 57,405,269 (8,770,775) 2,444,116
NET ASSETS:
Beginning of year ........................... 117,651,115 48,352,100 48,924,696
------------ ------------ ------------
End of year ................................. $175,056,384 $39,581,325 $51,368,812
============ =========== ===========
Undistributed net investment income at end of
year ...................................... $ 8,033 $ 7,444 $ 2,363
============ =========== ===========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
- --------------------------------------------------------------------------------
<TABLE>
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1997*
Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net
asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions
is the same as the amounts shown below for such transactions.
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
------------------ ------------------ ------------------
<S> <C> <C> <C>
AMOUNT
CLASS A:
Sold ................................. $ 432,669,575 $195,434,265 $ 33,810,325
Issued as reinvestment of dividends .. 5,643,238 1,372,176 1,243,547
Redeemed.............................. (487,335,380) (205,320,545) (43,341,830)
-------------- ------------ -------------
Net decrease.......................... $ (49,022,567) $ (8,514,104) $ (8,287,958)
============== ============ =============
CLASS B:
Sold ................................. $ 2,657,885 $ 28,086,537 $ 2,200
Issued as reinvestment of dividends .. 29,526 25,185 1,341
Redeemed.............................. (1,800,407) (26,421,345) (83,133)
-------------- ------------ -------------
Net increase/(decrease)............... $ 887,004 $ 1,690,377 $ (79,592)
============== ============ =============
CLASS S:
Sold.................................. $ 7,644,275 $ 4,927,941 $ --
Issued as reinvestment of dividends .. 506,468 13,781 124
Redeemed.............................. (22,223,883) (5,034,843) (9,400)
-------------- ------------ -------------
Net decrease.......................... $ (14,073,140) $ (93,121) $ (9,276)
============== ============ =============
CLASS I:
Sold.................................. $ 81,006,393 $ 1,000 $ 1,000
Issued as reinvestment of dividends... -- 45 29
Redeemed.............................. (2,338,310) -- --
-------------- ------------ -------------
Net increase.......................... $ 78,668,083 $ 1,045 $ 1,029
============== ============ =============
- --------------
* The Funds began selling Class I shares, in addition to Class A, Class B and Class S shares, on
July 25, 1996.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
- --------------------------------------------------------------------------------
<TABLE>
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1996
Since the Funds have sold, issued as reinvestment of dividends and redeemed shares only at a constant net
asset value of $1.00 per share, the number of shares represented by such sales, reinvestments and redemptions
is the same as the amounts shown below for such transactions.
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
------------------ ------------------ -----------------
<S> <C> <C> <C>
AMOUNT
CLASS A:
Sold .................................. $ 489,604,814 $ 472,714,088 $ 46,329,303
Issued as reinvestment of dividends ... 6,822,621 1,946,590 1,482,501
Redeemed............................... (452,731,738) (483,120,127) (45,435,607)
------------- ------------- -------------
Net increase/(decrease)................ $ 43,695,697 $ (8,459,449) $ 2,376,197
============= ============= =============
CLASS B:
Sold .................................. $ 411,746 $ 216,238 $ 617,620
Issued as reinvestment of dividends ... 10,385 2,681 1,524
Redeemed............................... (240,792) (229,940) (550,706)
------------- ------------- -------------
Net increase/(decrease)................ $ 181,339 $ (11,021) $ 68,438
============= ============= =============
CLASS S:
Sold .................................. $ 25,004,949 $ 28,107,716 $ --
Issued as reinvestment of dividends ... 593,654 8,198 227
Redeemed............................... (12,036,378) (28,414,129) --
------------- ------------- -------------
Net increase/(decrease)................ $ 13,562,225 $ (298,215) $ 227
============= ============= =============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........ 0.048 0.051 0.049 0.030 0.031
Net realized gain on
investments ................ 0.000# 0.000# 0.000# 0.000# --
------ ------ ------ ------ ------
Total from investment
operations ................. 0.048 0.051 0.049 0.030 0.031
LESS DISTRIBUTIONS:
Dividends from net investment
income ..................... (0.048) (0.051) (0.049) (0.030) (0.031)
Distributions from net
realized gains ............. (0.000)# (0.000)# (0.000)# (0.000)# --
------ ------ ------ ------ ------
Total distributions .......... (0.048) (0.051) (0.049) (0.030) (0.031)
------ ------ ------ ------ ------
Net asset value, end of year . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN+ 4.88% 5.22% 5.06% 3.04% 3.17%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) ................. $104,302 $153,786 $110,012 $53,973 $48,283
Ratio of operating expenses to
average net assets .......... 0.75% 0.65% 0.54% 0.45% 0.41%
Ratio of net investment income
to average net assets ....... 4.78% 5.04% 5.08% 2.99% 3.15%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 0.75%(a) 0.65%(a) N/A N/A N/A
Ratio of operating expenses to
average net assets without
fee waivers, expenses
absorbed and/or credits
allowed by the custodian .... 1.15%(a) 1.15%(a) 1.18% 1.35% 1.32%
Net investment income per
share without fee waivers,
expenses absorbed and/or
credits allowed by the
custodian .................. $0.044(a) $0.046(a) $0.043 $0.021 $0.022
- ----------------
+ Total return represents aggregate total return for the years indicated. 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 without credits allowed
by the custodian.
# Amount represents less than $0.001 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
--------------------------------------- -------------------------------------- -------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income ...... 0.040 0.043 0.042 0.040 0.043 0.042 0.047
Net realized gain on
investments ............... (0.000)# (0.000)# (0.000)# (0.000)# (0.000)# (0.000)# (0.000)#
------ ------ ------ ------ ------ ------ ------
Total from investment
operations ................ 0.040 0.043 0.042 0.040 0.043 0.042 0.047
LESS DISTRIBUTIONS:
Dividends from net
investment income ......... (0.040) (0.043) (0.042) (0.040) (0.043) (0.042) (0.047)
Distributions from net
realized gains ............ (0.000)# (0.000)# (0.000)# (0.000)# (0.000)# (0.000)# (0.000)#
------ ------ ------ ------ ------ ------ ------
Total distributions ........ (0.040) (0.043) (0.042) (0.040) (0.043) (0.042) (0.047)
------ ------ ------ ------ ------ ------ ------
Net asset value,end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 4.11% 4.40% 4.29% 4.11% 4.40% 4.29% 4.79%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) ................ $1,314 $ 422 $ 241 $6,909 $20,848 $7,399 $79,002
Ratio of operating expenses
to average net assets ..... 1.50% 1.40% 1.29% 1.50% 1.40% 1.29% 0.50%**
Ratio of net investment
income to average net
assets .................... 4.03% 4.29% 4.33% 4.03% 4.29% 4.33% 5.03%**
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian ............. 1.50%(a) 1.40%(a) N/A 1.50%(a) 1.40%(a) N/A 0.50%**(a)
Ratio of operating
expenses to average
net assets without fee
waivers, expenses
absorbed and/or credits
allowed by the custodian .. 1.90%(a) 1.90%(a) 1.93% 1.90%(a) 1.90%(a) 1.93% 0.90%**(a)
Net investment income per
share without fee waivers,
expenses absorbed and/or
credits allowed by the
custodian ................. $0.036(a) $0.038(a) $0.036 $0.036(a) $0.038(a) $0.036 $0.043(a)
- ----------------
* 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/or administrator or without credits allowed
by the custodian.
# Amount represents less than $0.001 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
U.S. GOVERNMENT MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.046 0.047 0.046 0.027 0.027
------ ------ ------ ------ ------
Total from investment operations 0.046 0.047 0.046 0.027 0.027
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.046) (0.047) (0.046) (0.027) (0.027)
------ ------ ------ ------ ------
Total distributions ............ (0.046) (0.047) (0.046) (0.027) (0.027)
------ ------ ------ ------ ------
Net asset value, end of year ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN+ 4.66% 4.81% 4.67% 2.67% 2.70%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) .................... $30,519 $39,031 $47,492 $30,180 $36,802
Ratio of operating expenses to
average net assets ............ 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income
to average net assets ......... 4.56% 4.70% 4.63% 2.68% 2.69%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ..................... 0.85%(a) 0.85%(a) N/A N/A N/A
Ratio of operating expenses to
average net assets without fee
waivers, and/or credits allowed
by the custodian .............. 1.19%(a) 1.22%(a) 1.25% 1.32% 1.34%
Net investment income per share
without fee waivers, and/or
credits allowed by the
custodian ..................... $0.043(a) $0.043(a) $0.042 $0.022 $0.022
- ----------------
+ Total return represents aggregate total return for the years indicated. The total returns would have been lower if certain
fees had not been waived by the investment advisor and/or administrator or without credits allowed by the custodian.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
U.S. GOVERNMENT MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
-------------------------------------- --------------------------------- --------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .. 0.038 0.040 0.038 0.038 0.040 0.038 0.045
------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............ 0.038 0.040 0.038 0.038 0.040 0.038 0.045
LESS DISTRIBUTIONS:
Dividends from net
investment income ..... (0.038) (0.040) (0.038) (0.038) (0.040) (0.038) (0.045)
------ ------ ------ ------ ------ ------ ------
Total distributions .... (0.038) (0.040) (0.038) (0.038) (0.040) (0.038) (0.045)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 3.87% 4.02% 3.91% 3.87% 4.02% 3.91% 4.60%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year
(in 000's) ............ $1,801 $ 112 $ 123 $ 346 $ 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 ................ 3.81% 3.95% 3.88% 3.81% 3.95% 3.88% 4.81%**
Ratio of operating
expenses to average net
assets without
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 credits
allowed by the
custodian ............. 1.94%(a) 1.97%(a) 2.00% 1.94%(a) 1.97%(a) 2.00% 0.94%**(a)
Net investment income
per share without fee
waivers and/or credits
allowed by the
custodian ............. $0.035(a) $0.036(a) $0.034 $0.035(a) $0.036(a) $0.034 $0.042(a)
- ----------------
* 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 without credits allowed by the custodian.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........... 0.028 0.029 0.028 0.018 0.021
------ ------ ------ ------ ------
Total from investment operations 0.028 0.029 0.028 0.018 0.021
LESS DISTRIBUTIONS:
Dividends from net investment
income ......................... (0.028) (0.029) (0.028) (0.018) (0.021)
------ ------ ------ ------ ------
Total distributions ............. (0.028) (0.029) (0.028) (0.018) (0.021)
------ ------ ------ ------ ------
Net asset value, end of year .... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN+ 2.81% 3.00% 2.79% 1.81% 2.07%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $42,923 $51,211 $48,836 $62,500 $68,404
Ratio of operating expenses to
average net assets ............. 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income to
average net assets ............. 2.75% 2.94% 2.73% 1.80% 2.06%
Ratio of operating expenses to
average net assets without
fee waivers .................... 1.14% 1.14% 1.15% 1.27% 1.29%
Net investment income per share
without fee waivers ............ $ 0.025 $ 0.026 $ 0.025 $ 0.014 $ 0.016
- ----------------
+ Total return represents aggregate total return for the years indicated. The total returns would have been lower if certain
fees had not been waived by the investment advisor and/or administrator.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
-------------------------------------- --------------------------------- --------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .. 0.020 0.022 0.020 0.020 0.022 0.020 0.028
------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............ 0.020 0.022 0.020 0.020 0.022 0.020 0.028
LESS DISTRIBUTIONS:
Dividends from net
investment income ..... (0.020) (0.022) (0.020) (0.020) (0.022) (0.020) (0.028)
------ ------ ------ ------ ------ ------ ------
Total distributions .... (0.020) (0.022) (0.020) (0.020) (0.022) (0.020) (0.028)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 2.03% 2.22% 2.04% 2.03% 2.22% 2.04% 2.89%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year
(in 000's) ............ $ 68 $ 147 $ 79 $ 1 $ 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 ................ 2.00% 2.19% 1.98% 2.00% 2.19% 1.98% 3.00%**
Ratio of operating
expenses to average net
assets without
fee waivers ........... 1.89% 1.89% 1.90% 1.89% 1.89% 1.90% 0.89%**
Net investment income
per share without fee
waivers ............... $0.017 $0.019 $0.017 $0.017 $0.019 $0.017 $0.025
- ----------------
* 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.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GLOBAL MONEY FUND
JUNE 30, 1997
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
CERTIFICATES OF DEPOSIT -- (YANKEE) -- 34.3%
$5,000,000 Banque Nationale de Paris,
5.700% due 08/04/1997 ............................ $ 5,000,000
3,000,000 Barclays Bank Plc,
5.940% due 06/19/1998 ............................ 2,998,725
8,000,000 Dai-Ichi Kangyo Bank Ltd.,
5.810% due 07/10/1997++ .......................... 8,000,019
Deutsche Bank:
2,000,000 5.560% due 07/21/1997 ............................ 2,000,011
2,000,000 5.690% due 10/28/1997 ............................ 1,999,688
5,000,000 5.700% due 02/06/1998 ............................ 4,998,845
Industrial Bank of Japan:
6,000,000 5.670% due 07/11/1997 ............................ 6,000,017
2,500,000 5.840% due 08/18/1997 ............................ 2,500,033
2,000,000 Rabobank Nederland,
5.990% due 03/24/1998 ............................ 1,999,304
9,200,000 Sanwa Bank Ltd.,
5.650% due 07/07/1997 ............................ 9,199,969
Societe Generale, New York:
7,000,000 5.720% due 08/06/1997 ............................ 7,000,069
2,000,000 5.840% due 10/06/1997 ............................ 1,999,847
Sumitomo Bank Ltd.:
5,000,000 5.660% due 07/03/1997 ............................ 5,000,011
2,000,000 5.750% due 08/19/1997 ............................ 2,000,000
5,000,000 Swiss Bank Corporation,
5.980% due 03/19/1998 ............................ 4,999,317
------------
Total Certificates of Deposit -- (Yankee) (Cost
$65,695,855) ..................................... 65,695,855
------------
COMMERCIAL PAPER -- (DOMESTIC) -- 20.2%
Associates Corporation of North America:
5,000,000 5.635% due 07/15/1997++ .......................... 4,989,247
4,000,000 5.653% due 07/24/1997++ .......................... 3,985,817
8,000,000 Banc One Corporation,
5.631% due 07/01/1997++ .......................... 8,000,000
8,000,000 BBL-North America, Inc.,
5.780% due 07/01/1997++ .......................... 8,000,000
9,000,000 Ford Motor Credit Company,
5.884% due 12/02/1997++ .......................... 8,782,860
3,000,000 General Electric Capital Corporation,
6.000% due 01/23/1998++ .......................... 2,902,150
1,979,000 Koch Industries,
6.165% due 07/01/1997++ .......................... 1,979,000
------------
Total Commercial Paper -- (Domestic) (Cost
$38,639,074) ..................................... 38,639,074
------------
MEDIUM-TERM NOTES -- 17.2%
$3,000,000 Abbey National Treasury Services,
5.640% due 11/03/1997 ............................ $ 2,999,602
9,000,000 Bayerische Landesbank,
5.558% due 06/26/1998+ ........................... 8,993,095
5,000,000 CoreStates Bank,
5.648% due 03/16/1998+ ........................... 5,000,000
5,000,000 John Deere Capital,
5.850% due 07/03/1997 ............................ 4,999,981
6,000,000 Korea Development Bank,
5.843% due 06/16/1998+ ........................... 5,998,884
5,000,000 Society National Bank,
5.580% due 07/08/1997+ ........................... 4,999,935
------------
Total Medium-Term Notes (Cost $32,991,497) ......... 32,991,497
------------
COMMERCIAL PAPER -- (FOREIGN) -- 16.6%
Abbey National North America Corporation:
3,000,000 5.771% due 08/01/1997++ .......................... 2,985,508
2,000,000 5.522% due 08/11/1997++ .......................... 1,987,928
5,000,000 ABN Amro Bank, N.V.,
5.776% due 08/19/1997++ .......................... 4,961,787
5,000,000 Barclays U.S. Funding Corporation,
5.825% due 08/22/1997++ .......................... 4,959,122
8,000,000 Den Danske Corporation,
5.789% due 07/02/1997++ .......................... 7,998,749
9,000,000 UBS Finance, Inc.,
6.135% due 07/01/1997++ .......................... 9,000,000
------------
Total Commerical Paper -- (Foreign) (Cost
$31,893,094) ..................................... 31,893,094
------------
CERTIFICATES OF DEPOSIT -- (DOMESTIC) -- 11.0%
Bank of America:
3,000,000 5.570% due 11/07/1997 ............................ 2,999,481
3,000,000 5.850% due 11/03/1997 ............................ 3,000,000
8,000,000 Bankers Trust Corporation,
5.700% due 07/10/1997 ............................ 8,000,000
7,000,000 NationsBank Corporation,
5.540% due 07/15/1997 ............................ 7,000,000
------------
Total Certificates of Deposit -- (Domestic) (Cost
$20,999,481) ..................................... 20,999,481
------------
TOTAL INVESTMENTS (COST $190,219,001*) ............... 99.3% 190,219,001
OTHER ASSETS AND LIABILITIES (NET) ................... 0.7 1,308,568
----- ------------
NET ASSETS ........................................... 100.0% $191,527,569
===== ============
- ----------------
* Aggregate cost for federal tax purposes.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Rate represents annualized yield at date of purchase (unaudited).
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
JUNE 30, 1997
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 103.0%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 40.7%
$3,000,000 Discount Note, 5.604% due 07/08/1997++ ............. $ 2,996,779
1,480,000 Discount Note, 5.538% due 07/10/1997++ ............. 1,477,986
900,000 Discount Note, 5.659% due 07/18/1997++ ............. 897,658
2,530,000 Discount Note, 5.599% due 07/21/1997++ ............. 2,522,270
2,430,000 Discount Note, 5.545% due 07/23/1997++ ............. 2,421,907
1,000,000 Discount Note, 5.529% due 08/04/1997++ ............. 994,881
2,000,000 Discount Note, 5.576% due 09/16/1997++ ............. 1,976,772
------------
Total FNMAs (Cost $13,288,253) ..................... 13,288,253
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 29.6%
1,200,000 Discount Note, 5.527% due 07/07/1997++ ............. 1,198,914
3,000,000 Discount Note, 5.604% due 07/09/1997++ ............. 2,996,320
985,000 Discount Note, 5.649% due 07/15/1997++ ............. 982,893
325,000 Discount Note, 5.631% due 07/24/1997++ ............. 323,854
730,000 Discount Note, 5.558% due 07/25/1997++ ............. 727,348
300,000 Discount Note, 5.683% due 08/01/1997++ ............. 298,571
2,000,000 Discount Note, 5.683% due 08/07/1997++ ............. 1,988,633
445,000 Discount Note, 5.638% due 08/15/1997++ ............. 441,941
700,000 Discount Note, 5.582% due 09/18/1997++ ............. 691,659
------------
Total FHLMCs (Cost $9,650,133) ..................... 9,650,133
------------
FEDERAL FARM CREDIT BANK (FFCB) -- 21.5%
1,645,000 Discount Note, 5.512% due 07/02/1997++ ............. 1,644,752
1,605,000 Discount Note, 5.538% due 07/02/1997++ ............. 1,604,758
2,000,000 Discount Note, 5.519% due 07/22/1997++ ............. 1,993,677
1,800,000 Discount Note, 5.526% due 07/31/1997++ ............. 1,791,870
------------
Total FFCBs (Cost $7,035,057) ...................... 7,035,057
------------
FEDERAL HOME LOAN BANK (FHLB) -- 11.2%
710,000 Discount Note, 5.675% due 07/08/1997++ ............. 709,238
305,000 Discount Note, 5.666% due 07/18/1997++ ............. 304,205
375,000 Discount Note, 5.671% due 07/24/1997++ ............. 373,678
295,000 Discount Note, 5.677% due 07/30/1997++ ............. 293,688
2,000,000 Floating Rate Note, 5.623% due 12/04/1997+ ......... 1,999,297
-----------
Total FHLBs (Cost $3,680,106) ...................... 3,680,106
-----------
Total U.S. Government Agency Obligations (cost
$33,653,549) ..................................... 33,653,549
-----------
TOTAL INVESTMENTS (COST $33,653,549*) ................. 103.0% 33,653,549
OTHER ASSETS AND LIABILITIES (NET) .................... (3.0) (986,806)
----- -----------
NET ASSETS ............................................ 100.0% $32,666,743
===== ===========
- ----------------
* Aggregate cost for federal tax purposes.
+ Variable rate securities payable upon not more than seven calendar days'
notice. The interest rate shown reflects the rate currently in effect.
++ Rate represents annualized yield at date of purchase (unaudited).
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
CALIFORNIA MONEY FUND
JUNE 30, 1997
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
MUNICIPAL BONDS AND NOTES -- 93.2%
CALIFORNIA -- 93.2%
Alameda County, IDR:
$2,000,000 Heat and Control Inc., Series 95A,
4.200% due 11/01/2025++ .......................... $ 2,000,000
2,100,000 JMS Family Partnership, Series 95A,
4.200% due 10/01/2025++ .......................... 2,100,000
2,120,000 California Housing Finance Agency, SFMR, Home
Mortgage Revenue, Series 15A,
4.350% due 08/01/2025++ .......................... 2,120,000
California Pollution Control Financing Authority:
2,000,000 Pacific Gas & Electric, Series 96A,
4.050% due 12/01/2016++ .......................... 2,000,000
2,000,000 Sanifill Inc., Series 94A,
3.900% due 08/01/2007++ .......................... 2,000,000
700,000 Shell Oil Company-Martinez Project, Series 94A,
3.850% due 10/01/2024+ ........................... 700,000
2,000,000 Western Waste Industries, Series 94A,
3.900% due 10/01/2006+ ........................... 2,000,000
1,000,000 California State Economic Development Authority,
IDR, National R.V. Inc., Series 95,
4.350% due 12/01/2020+ ........................... 1,000,000
2,500,000 California State Housing Finance Agency, SFMR, Home
Mortgage Revenue, Series 96J,
4.000% due 08/01/2028 ............................ 2,500,000
California Statewide Communities Projects:
1,500,000 IDR, K.U.M. Ltd.,
4.150% due 06/01/2022++ .......................... 1,500,000
2,000,000 MFHR, Plaza Club Apartments Project, Series 97A,
4.150% due 9/01/2031++ ........................... 2,000,000
2,000,000 Irvine Ranch, Water District, Series 85,
3.750% due 10/01/2000+ ........................... 2,000,000
2,000,000 Los Angeles County, MFHR, Series 85K,
3.750% due 7/01/2010++ ........................... 2,000,000
2,000,000 Los Angeles County, MFHR, Malibu Meadows,
Series 91,
4.100% due 12/01/2005++ .......................... 2,000,000
300,000 Oceanside, MFHR, Riverview Springs, Series 90A,
4.350% due 07/01/2020++ .......................... 300,000
2,000,000 Riverside County, GO, School Financing Authority,
RAN, Series 96,
4.625% due 07/17/1997 ............................ 2,000,484
2,000,000 Sacramento County, MFHR, Briarwood Apartments,
Series 85A,
4.250% due 04/15/2007++ .......................... 2,000,000
800,000 San Diego, MFHR, La Serena Apartments, Series 92A,
3.750% due 02/01/2009++ .......................... 800,000
1,980,000 San Francisco City and County, IDR, Hoefer
Scientific, Series 92A,
4.700% due 08/01/2007++ .......................... 1,980,000
1,800,000 Santa Ana, MFHR, Vintage Apartments, Series 96A,
3.850% due 12/01/2022++ .......................... 1,800,000
1,700,000 Santa Clara County, Electric Revenue, Series 85C,
4.000% due 07/01/2010++ .......................... 1,700,000
785,000 Santa Clara County, MFHR, Avenida Espana Gardens,
Series 91A,
3.850% due 10/01/2021++ .......................... 785,000
800,000 Simi Valley, MFHR, Creekside Village, Series 93A,
3.750% due 07/01/2023++ .......................... 800,000
2,000,000 Vallejo, IDR, Meyer Cookware, Series 93A,
4.350% due 12/01/2023++ .......................... 2,000,000
-----------
TOTAL INVESTMENTS (COST $40,085,484*) ................. 93.2% 40,085,484
OTHER ASSETS AND LIABILITIES (NET) .................... 6.8 2,907,531
----- -----------
NET ASSETS ............................................ 100.0% $42,993,015
===== ===========
- ----------------
* 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.
--------------------------------------------------------
GLOSSARY OF TERMS
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue
MFHR -- Multi-family Housing Revenue
RAN -- Revenue Anticipation Note
SFMR -- Single Family Mortgage Revenue
--------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 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 and Corporate Income Funds (the "Bond Funds"); the California
Municipal, Florida Insured Municipal, California Insured Intermediate Municipal
and National Municipal Funds (the "Municipal Funds"); the Growth and Income,
Growth, Emerging Growth and International Growth Funds (the "Equity Funds"); and
the Target Maturity 2002 Fund. Information presented in these financial
statements pertains only to the Money Funds, hereafter referred to as the
"Funds." The financial statements for the Bond Funds, Municipal Funds, Equity
Funds and Target Maturity 2002 Fund are presented in a separate report.
Each of the Funds consists of four classes of shares, Class A Shares, Class B
Shares, Class S Shares and Class I Shares. Class A Shares of the Funds are not
subject to an initial sales charge; however, certain Class A Shares 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 and Class S Shares are subject to a CDSC if redeemed
within six years of purchase. Class B Shares of the Funds are not available for
purchase directly and may be purchased only by exchange for Class B Shares of
the Bond Funds, the Municipal Funds or the Equity Funds.
As of July 25, 1996, the Global Money Fund began offering Class I Shares. Class
I Shares are sold 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. Class I Shares for the U.S. Government Money and
California Money Funds represent seed shares owned by Sierra Fund Administration
Corporation ("Sierra Administration").
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:
The investments of each 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 Fund
attempts to maintain a constant net asset value of $1.00 per share.
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.
ILLIQUID INVESTMENTS:
Up to 10% of the assets of each 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) certain variable rate demand notes having a demand period of more than
seven days; and (4) 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 10%
limitation on investments in illiquid securities.
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. Each Fund's investment income and realized gains
and losses are allocated among the classes of that Fund based upon the relative
average net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income of each Fund are declared daily and paid
monthly. Distributions of any net long-term capital gains earned by a Fund are
made annually. Distributions of any net short-term capital gains earned by a
Fund are distributed no less frequently than annually at the discretion of the
Board of Trustees. Additional distributions of net investment income and capital
gains for each Fund may be made at the discretion of the Board of Trustees in
order to avoid the application of a 4% non-deductible excise tax on certain
undistributed amounts of ordinary income and capital gains. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to 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.
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 Trust. 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 Fund.
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.
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:
FEES ON ASSETS
EQUAL TO OR FEES ON ASSETS
LESS THAN EXCEEDING
$500 MILLION $500 MILLION
------------ ------------
Sierra Advisors+ ........................... .35% .25%
Sub-advisor ................................ .15% .15%
--- ---
Total fees paid to Sierra Advisors* .... .50% .40%
=== ===
- ---------------
*Sierra Advisors retains only the net amount of the fees after sub-advisory fees
have been paid.
+Fees paid to Sierra Advisors are based on aggregate assets in the three
Funds.
For each Fund, Sierra Advisors has contractually agreed to limit the annual
management fees that are payable under the investment advisory agreements with
the Funds to .40%.
Fees voluntarily waived by Sierra Advisors for the year ended June 30, 1997 are
as follows:
NAME OF FUND FEES WAIVED
------------ -----------
Global Money Fund ........................................... $695,889
U.S. Government Money Fund .................................. 118,128
California Money Fund ....................................... 135,495
Sierra Administration, an indirect wholly-owned subsidiary of GWFC, serves as
administrator to each Fund. First Data Investor Services Group, Inc., 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 .30% of
each Fund's average daily net assets. Out of its fee, Sierra Administration pays
First Data Investor Services Group, Inc. for its services as sub-administrator
and transfer agent. First Data Investor Services Group, Inc., 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 First Data Investor Services Group, Inc.
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 a
wholly-owned subsidiary of Mellon Bank Corporation.
Custodian fees for certain Funds have been reduced by credits allowed by Boston
Safe for the year ended June 30, 1997 as follows:
CREDITS ALLOWED BY
NAME OF FUND THE CUSTODIAN
------------ -------------
Global Money Fund .............................................. $5,351
U.S. Government Money Fund ..................................... 110
For the year ended June 30, 1997, Sierra Services and Funds Distributor Inc.
informed the Funds that they received $123,792 from CDSC fees.
4. TRUSTEES' FEES
No director, officer or employee of Great Western Financial Securities
Corporation ("GW Securities"), a registered broker-dealer, Sierra Investment
Services Corporation ("Sierra Services"), a registered investment adviser and
broker-dealer, Sierra Advisors, Sierra Administration, the Sub-advisors or First
Data Investor Services Group, Inc., 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 First Data Investor Services Group, Inc., 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. Since December 1996, the Lead Trustee has
been receiving one and a half times the normal Trustee's compensation. The
Chairman of the Audit Committee receives $1,500 per audit committee meeting
attended.
For the year ended June 30, 1997, Sierra Advisors paid Trustees' fees in the
amount of $80,500 for all special meetings held with regard to the contemplation
of the sale of Sierra Capital Management Corporation, as well as, to the
proposed merger between GWFC and Washington Mutual, Inc. ("Washington Mutual").
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.) Class B
Shares and Class S Shares of the Trust have 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.
For the year ended June 30, 1997, 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 ............. $314,557 $6,617 $2,205 $97,585 $32,528
U.S. Government Money Fund .... 81,799 6,668 2,223 2,770 923
California Money Fund ......... 116,737 517 172 48 16
</TABLE>
6. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
As of June 30, 1997, Sierra Administration owned greater than five percent of
the following Funds:
NUMBER OF PERCENTAGE OF
FUND SHARES TOTAL FUND SHARES
---------------- -----------------
NAME OF FUND CLASS S CLASS I CLASS S CLASS I
------------ ------- ------- ------- -------
U.S. Government Money Fund .... -- 1,045 -- 100.00%
California Money Fund ......... 1,154 1,029 100.00% 100.00
7. CAPITAL LOSS CARRYFORWARDS
At June 30, 1997, the following Funds had available for federal income tax
purposes unused capital losses as follows:
<TABLE>
<CAPTION>
EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING
NAME OF FUND IN 2000 IN 2001 IN 2002 IN 2003 IN 2004 IN 2005
------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government Money Fund ...................... $ -- $ -- $9,246 $1,367 $ 2,404 $1,470
California Money Fund ........................... 7,635 5,715 7,549 1,294 18,781 --
</TABLE>
8. GEOGRAPHIC AND INDUSTRY CONCENTRATION
There are certain risks arising from the California Money Fund's 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 invests 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 Global Money Fund invests 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.
9. SUBSEQUENT EVENT
Effective July 1, 1997, the merger of GWFC into Washington Mutual was completed.
As a result, Sierra Advisors, Sierra Administration, Sierra Services and GW
Securities are now indirect wholly-owned subsidiaries of Washington Mutual.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
SIERRA TRUST FUNDS
TO THE TRUSTEES AND SHAREHOLDERS
OF THE SIERRA TRUST FUNDS
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations, of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the Global Money Fund, U.S.
Government Money Fund and California Money Fund (the "Funds"), each a series of
the Sierra Trust Funds (the "Trust") at June 30, 1997, and the results of each
of their operations, the changes in each of their net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at June 30, 1997 by correspondence with the
custodian and the application of alternative auditing procedures where
investments purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 12, 1997
<PAGE>
TAX INFORMATION (UNAUDITED)
SIERRA TRUST FUNDS
FISCAL YEAR ENDED JUNE 30, 1997 (UNAUDITED)
The following tax information represents fiscal year end disclosures of various
tax benefits passed through to shareholders at calendar year end.
Of the distributions made from investment income the following percentages are
tax exempt for regular Federal income tax purposes.
NAME OF FUND
- ------------
California Money Fund ............................................... 100.00%
A portion of this income may be subject to alternative minimum tax.
Of the distributions made by the following Funds from investment income the
corresponding percentage represents the portion of each distribution derived
from investments in U.S. Government and Agency Obligations. All or a portion of
the distributions made from this income may be exempt from taxation at the state
level. Please consult your tax advisor for state specific information.
NAME OF FUND
- ------------
Global Money Fund ................................................... 14.61%
U.S. Government Money Fund .......................................... 66.49%
The above figures may differ from those cited elsewhere in this report due to
differences in the calculations of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax) purposes.
<PAGE>
This Annual Report is published for the general information of the
shareholders of the Sierra Trust Funds. It is authorized for distribution
to prospective investors only when preceded or accompanied by a current
Sierra Trust Funds prospectus. A mutual fund's share price and investment
return will vary with market conditions, and the principal value of an
investment when you sell your shares may be more or less than the original
cost.
The Sierra Trust Funds are not insured by the FDIC. They are not
deposits or obligations of, nor are they guaranteed by the depository
institution. These securities are subject to investment risks,
including possible loss of principal amount invested.
------------------------
SIERRA
TRUST FUNDS
------------------------
A Family of Mutual Funds
Distributed by SIERRA INVESTMENT SERVICES CORPORATION
Member NASD
SIERRA TRUST FUNDS -----------------
P.O. Box 5118 Bulk Rate
Westboro, MA 01581-5118 U.S. Postage
PAID
North Reading, MA
Permit No. 105
-----------------
[recycle symbol] Printed on recycled paper with soy-based inks
6349 (8/97) 30K
<PAGE>
SIERRA TRUST FUNDS
ANNUAL REPORT
for the year ended June 30, 1997
[GRAPHIC OMITTED]
Tradition
[GRAPHIC OMITTED]
Expertise
[GRAPHIC OMITTED]
Innovation
------------------------
SIERRA
TRUST FUNDS
------------------------
A Family of Mutual Funds
<PAGE>
[Graphic Omitted]
MESSAGE FROM THE PRESIDENT 1
- --------------------------------------------------------------------------------
THE YEAR IN REVIEW AND OUR OUTLOOK FOR 1997 - 1998 2
- --------------------------------------------------------------------------------
INDIVIDUAL FUND REVIEWS 7
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES 34
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS 38
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 40
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS-- CAPITAL STOCK ACTIVITY 44
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS 48
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 50
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS 75
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 107
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 123
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED) 124
- --------------------------------------------------------------------------------
MEETING OF SHAREHOLDERS 125
- --------------------------------------------------------------------------------
<PAGE>
- -----------------
DEAR SHAREHOLDER:
- ----------------------------
[Photo of James H. Overholt]
- ----------------------------
WE ARE PLEASED to provide you with the SIERRA TRUST FUNDS Annual Report for the
year ended June 30, 1997.
The past 12 months have seen a continuation of favorable economic trends.
Low unemployment, low inflation, and sustained consumer confidence were all
factors that created a positive environment for both stocks and bonds. Despite a
correction of nearly 10% in the Dow Jones Industrial Average (the "Dow") in the
first quarter of 1997, many stock market indices including the Dow, Standard &
Poor's Composite Index of 500 Stocks ("S&P 500"), and the Nasdaq Composite Index
posted net annual returns well above average for the period.
The S&P 500 rose 34.7% for the year, and on June 30, 1997 was up 104% since
December 31, 1994. Such rapid gains are unusual considering the stock market's
history. Over the last 70 years, the S&P 500 posted an average annual return of
10.8%. Since 1919, there have also been 47 years in which the market has fallen
10% or more from the previous year's highs. With the market showing signs of
volatility in 1997, we continue to advise investors to maintain a long-term
perspective when making investment decisions and to seek the assistance of a
qualified professional.
The pattern of mutual fund purchases and sales during the first half of 1997
may suggest, however, that many investors' mutual fund investment decisions are
affected by short-term performance. When stock and bond markets fell sharply in
March 1997, net new cash flow into mutual funds fell 77.4%, in February,
according to the Investment Company Institute. Net inflows into stock mutual
funds, while still positive in March, fell to their lowest level since July
1996, while bond and income funds experienced a net outflow. Unfortunately,
investors who curtailed fund purchases or even exited the market during the
downturn in March missed out on the recovery and subsequent net gains during the
second quarter of 1997.
At SIERRA TRUST FUNDS, we strive to pursue long-term performance consistent
with the stated objectives of each fund, with-out exposing investors to
excessive risks. We believe that, over the long run, mutual fund investors are
best served by: 1) applying the principles of asset allocation and
diversification in building a portfolio of mutual funds; 2) periodically
adjusting their portfolio to take advantage of changing market conditions; and
3) remaining invested or even adding to their positions during periods of
uncertainty. These general guidelines can help investors not only reduce the
risks inherent in a single-fund approach, but also earn potentially higher
returns.
As a fund family, SIERRA has been recognized by independent research firms
such as Lipper Analytical Services for its solid, above-average fund returns.
For example, for the year ended June 30, 1997, the SIERRA NATIONAL MUNICIPAL
FUND was ranked 26th out of 226 funds, or in the top 15%, in its General
Municipal Debt Funds category. For the three- and five-year period ended June
30, the Fund ranked 79th out of 176 funds and 37th out of 107 funds,
respectively.*
In evaluating fund performance, we encourage investors to look beyond the
short term, and especially to assess the relative investment risks different
funds may represent. Your Investment Representative can provide in-depth
information about the risk and return profiles of the SIERRA TRUST FUNDS.
For investors seeking an institutional approach to managing money and a
longer-term focus on balancing risk and return goals, the SIERRA ASSET
MANAGEMENT (SAM) PORTFOLIOS offer an answer: active investment management. SAM
investors receive effective diversification, asset allocation, strategic
flexibility and convenience. For each SAM Portfolio, we continually monitor the
markets and adjust the portfolio allocation among various investment asset
classes to take advantage of market conditions and forecasts. Active asset
allocation helps investors reduce risk and thereby more effectively reach their
long-term investment goals.
To meet the needs of investors interested in active asset allocation, but
who also want the advantages of tax-deferred growth and estate planning, we
introduced the SIERRA ASSET MANAGER VARIABLE ANNUITY in May of this year. SIERRA
ASSET MANAGER combines all the risk management tools of diversification and
asset allocation with the power of tax deferral and estate planning.
Additional SIERRA ASSET MANAGER benefits include low investment minimums,
tax-free transfers among investment options, and a "stepped-up" death benefit
that protects your family against market risk. Of course, keep in mind that like
all securities, there are risks associated with investing in variable annuities,
including the fact that investment returns and principal value will fluctuate
with market conditions. For more complete information, including charges and
expenses, please contact your Investment Representative to obtain a SIERRA ASSET
MANAGER prospectus and related SIERRA VARIABLE TRUST prospectus. Please read the
prospectuses carefully before you invest or send money.
As we move into the 21st century, we at SIERRA TRUST FUNDS appreciate the
confidence you have placed in us and will continue to demonstrate our commitment
to you through product innovation and the pursuit of disciplined investment
management strategies. Thank you for choosing SIERRA TRUST FUNDS.
Sincerely,
/s/ James H. Overholt
James H. Overholt
President
*Lipper rankings exclude sales charges. Rankings
represent past performance and is not a guarantee
of future results.
<PAGE>
THE YEAR IN REVIEW
AND
OUR
OUTLOOK
FOR
1997-1998
Note: Unless otherwise noted, the source for all performance figures is Standard
& Poor's. Past performance is not a guarantee of future results. Individuals
cannot invest directly in any index.
A strong, though sometimes bumpy, market environment prevailed during the last
12 months, with stock market indices posting double-digit gains and many
fixed-income investments returning upwards of 8%.
- --------------------------------------------------------------------------------
STOCKS CONTINUE TO
BREAK NEW RECORDS
With a growing economy and low inflation, the stock market continued to surge to
new heights. Over the 12 months ended June 30, 1997, large capitalization stocks
turned in the best performance, with the Standard & Poor's Composite Index of
500 Stocks (S&P 500) up 34.7%. The S&P Mid Cap 400 returned 23.33%, while
small-cap stocks, represented by the Russell 2000 Stock Index, returned 16.33%.
Although overall gains were impressive, the U.S. stock market experienced
increased volatility during the period, with the S&P 500 falling 8% in mid-1996
and then nearly 10% in early 1997. After generating only single-digit returns in
1996, the international stock markets rebounded in 1997, with Morgan Stanley
Capital International's Europe, Australasia and Far East (EAFE) Index returning
12.84% for the year ended June 30, 1997.
[BAR GRAPH]
RETURNS FOR MAJOR ASSET CLASSES
One-Year Period Ended June 30, 1997
Large
Company
Stocks 34.70%
Small
Company
Stocks 16.33%
International
Stocks 12.84%
Long-Term
Bonds 9.19%
Intermediate-
Term Bonds 7.22%
Treasury
Bills
(30-Day) 4.89%
Source: Ibbotson Associates. T-bills represent 30-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 Russell 2000 Stock Index; Large Company Stocks are represented by
S&P 500 Composite Index; and International Stocks are represented by MSCI EAFE
Index. Indices 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 of the
Sierra Trust Funds.
(1)International investors may be subject to higher taxation and additional
risks compared to domestic investors, including currency, liquidity, and
political risks. Emerging markets may pose higher liquidity and political
risks than other international markets.
Emerging-market stocks also posted gains in the first half of 1997,
returning 16.55% from January to June and 10.19% over the 12 months. Returns on
international investments were tempered by the strength of the U.S. Dollar
against the Japanese Yen and many European currencies. By early July 1997 the
Dollar had risen to a six-year high against the German Mark and a two-year high
against the Japanese Yen.(1)
- --------------------------------------------------------------------------------
BONDS POST
POSITIVE RESULTS
The second half of 1996 saw falling interest rates and positive returns for
the fixed-income market. Although economic growth raised concerns about
inflation, price pressures never surfaced, and yields on the 30-year U.S.
Treasury bond dropped to the 6.4%-6.8% level during the second half of 1996. In
the first quarter of 1997, U.S. gross domestic product rose a stunning 4.9%,
creating renewed concerns about rising inflation. Bond prices fell in March in
anticipation of the Federal Reserve's 0.25% hike in short-term rates on March
25, pushing yields on long-term government bonds above 7%.
With a slowing economy and benign inflation in the second quarter of 1997,
the Federal Reserve did not raise interest rates further. The fixed-income
markets reacted with solid performance, rebounding to generate their highest
quarterly returns since the fourth quarter of 1995. For the 12 months ended June
30, long-term U.S. Treasury bonds generated overall total returns of 8.55%, as
measured by the Lehman Long Term T-Bond Index.
Investment-grade corporate bonds and mortgage-backed securities also
performed well for the period. According to the Lehman Mortgage-Backed
Securities Index and Lehman Corporate Investment Grade Index, corporate bonds
returned 8.79%, while mortgage-backed securities were one of the strongest
performers among fixed-income securities with a gain of 9.10%.
In the municipal bond market, yields on many health care related issues rose
as legislators continue to focus on reducing health care costs. The Lehman
Brothers Long Muni Bond Index posted an annual return of 8.27% through June 30,
1997.
- -------------------------------------------------------------------------------
[LINE GRAPH]
INTEREST RATE FLUCTUATIONS
30-YEAR U.S. TREASURY BOND YIELD
(JUNE 30, 1996 - JUNE 30, 1997)
High 7.19%
July 5, 1996
30 Jun 96 6.87
5 Jul 96 7.19
12 Jul 96 7.03
19 Jul 96 6.97
26 Jul 96 7.01
2 Aug 96 6.74
9 Aug 96 6.69
16 Aug 96 6.77
23 Aug 96 6.96
30 Aug 96 7.12
6 Sep 96 7.11
13 Sep 96 6.95
20 Sep 96 7.04
27 Sep 96 6.91
4 Oct 96 6.74
11 Oct 96 6.84
18 Oct 96 6.80
25 Oct 96 6.82
1 Nov 96 6.68
8 Nov 96 6.51
15 Nov 96 6.46
22 Nov 96 6.44
29 Nov 96 6.35
6 Dec 96 6.51
13 Dec 96 6.57
20 Dec 96 6.61
27 Dec 96 6.56
3 Jan 97 6.73
10 Jan 97 6.84
17 Jan 97 6.82
24 Jan 97 6.89
31 Jan 97 6.79
7 Feb 97 6.70
14 Feb 97 6.52
21 Feb 97 6.64
28 Feb 97 6.80
7 Mar 97 6.81
14 Mar 97 6.94
21 Mar 97 6.97
28 Mar 97 7.09
4 Apr 97 7.12
11 Apr 97 7.17
18 Apr 97 7.05
25 Apr 97 7.14
2 May 97 6.87
9 May 97 6.89
16 May 97 6.90
23 May 97 6.99
30 May 97 6.91
6 Jun 97 6.77
13 Jun 97 6.72
20 Jun 97 6.66
27 Jun 97 6.74
30 Jun 97 6.78
Low 6.35%
Nov. 29, 1996
- -------------------------------------------------------------------------------
Source: Bloomberg Business News
MARKET SHOWS SIGNS OF INCREASED VOLATILITY
Continued economic growth and low inflation have led to strong
performance in both the stock and bond markets. At the same time, however,
uncertainty over the future direction of interest rates and sustainable coporate
earnings growth has produced higher market volatility. Bond prices have
fluctuated due to changing interest rates, and equities have also been impacted.
From March 11 to April 11, for example, the Dow Jones Industrial Average dropped
9.8%, and many individual stocks experienced steeper drops.
These declines resulted in many mutual funds reporting negative returns for
the first quarter of 1997, before rebounding in May and June. According to
Lipper Analytical Services, which tracks mutual fund performance, the average
equity mutual fund lost 1.98% in value, the first quarterly decline since 1994.
Large-cap growth funds averaged a decline of 1.28%, while small-cap stock funds
fell 6.91% on average in the first quarter.
Individuals who began investing only in the last few years may find the
market ups and downs disconcerting because the volatility of the stock market
has been unusually low in recent years. From January 1991 through December 1996,
the S&P 500 rose or fell more than 1% in a single day on average about once
every eight trading days. In the first six months of 1997, a 1% move has
occurred once every three trading days, on average. The chart to the right
shows, however, that the market's current volatility is more in line with its
longer-term averages. The period from 1990 to 1996 was an exceptionally quiet
one compared to previous periods.
- --------------------------------------------------------------------------------
CONSIDER
ASSET ALLOCATION
TO MANAGE RISK
Maintaining a diversified, well- allocated portfolio of investment assets
can help investors weather periods of market turbulence.
Asset allocation refers to the way in which your portfolio is divided among
different asset categories, which may include money market, fixed-income, and
stock investments. An effective asset allocation strategy reflects your personal
financial circumstances, such as your investment time horizon, need for current
income versus long-term growth, and your tolerance for short-term market
fluctuations. You can further diversify your portfolio by investing in a
variety of investment subcategories. For example, the stock portion of your
portfolio may be diversified among stocks of small, medium, and large companies.
The strong performance of the U.S. stock market since 1994 means that your
investment portfolio may have a higher allocation in stocks than you originally
intended. Fixed-income investments such as bonds and bond funds can help reduce
variability in portfolio returns. While stocks have historically provided higher
returns over time and therefore can add important growth potential to your
portfolio, bonds can provide steady income even as market values fluctuate. In
addition, bond prices can move independently from stock prices over time,
helping to reduce investment risk.
For example, the graph on the next page compares the highest and lowest
annual returns for stocks and a diversified portfolio of stocks and bonds over
the last 25 years. While the range of returns for a portfolio of 100% stocks
varied from 37% to -26%, the variation was only 31% to -8% in a diversified
portfolio. In other words, during this period, a diversified portfolio captured
much of the upside potential of stocks, but with dramatically less downside
risk. Of course, past performance is not a guarantee of future results.
- -------------------------------------------------------------------------------
HOW MUCH MARKET VOLATILITY SHOULD INVESTORS EXPECT? [BAR GRAPH]
- -------------------------------------------------------------------------------
Standard Deviation (Daily)
Past 20 Years 0.93%
Past 10 Years 0.98%
From 1990-1996, the stock
market was unusually calm.
1990's Thru 12/31/96 0.73
1997 Year To Date 0.97
This bar chart compares daily volatility (as measured by the daily standard
deviation) of the S&P 500 Index for the indicated periods.
Source: Standard & Poor's. The S&P 500 is an unmanaged index representative of
the U.S. stock market. Standard deviation is a volatility measurement that
describes the range of performance within which an investment's (e.g., an index)
total return has fallen. A higher standard deviation means a wider range of
returns. A lower standard deviation means less volatility. Past performance is
not a guarantee of future results.
Including international investments can also help smooth out fluctuations in
portfolio returns, since domestic and international stock markets tend to move
out of synch over various periods. International securities can pose higher
currency and liquidity risks relative to domestic issues. However, higher risks
can produce higher returns. Over the 20 years ended December 31, 1996, a
portfolio allocated 80% to the S&P 500 and 20% to international stocks
represented by the EAFE Index earned slightly higher returns with less
variability than a portfolio allocated 100% to the S&P 500. Of course, past
performance does not guarantee future results.
- --------------------------------------------------------------------------------
THE SIERRA ASSET
MANAGEMENT (SAM)
SOLUTION
Building an asset allocation strategy that meets investor needs and their
specific risk and return goals requires careful planning and knowledge of the
financial markets. As an investor, you may not have the time or energy to keep
track of the markets and actively manage your investments. Sierra specializes in
active investment management. Our dedication to research, plus our focus on
diversification and asset allocation to help investors control risk, are the
core elements of Sierra's investment philosophy.
For effective asset allocation and risk management, SIERRA offers a choice
of SIERRA ASSET MANAGEMENT (SAM) investments:
1 SAM Portfolios are a family of mutual funds that provide asset allocation
strategies designed to help you manage risk and achieve your long-term financial
goals.
2 Introduced in May 1997, SIERRA ASSET MANAGER is a tax-deferred variable
annuity that combines the benefits of active asset allocation with the power of
tax deferral. It is one of the first variable annuities that takes advantage of
the "fund of funds" concept.
All of our SAM investments offer actively managed diversification, with a
focus on regular portfolio monitoring and periodic reallocations. SAM
continually monitors the markets, adjusting your portfolio to take advantage of
market opportunities. Such active asset allocation helps reduce risk and ensures
that your portfolio remains properly positioned in today's quickly changing
environment.
[BAR GRAPH]
DIVERSIFICATION CAN HELP REDUCE DOWNSIDE RISK
Variability in Investment Returns (for the 25-year period ended 12/31/96)
STOCKS DIVERSIFIED PORTFOLIO
Highest Annual Return 37.43% Highest Annual Return 30.89%
Lowest Annual Return -26.47% Lowest Annual Return -8.42%
Source: Ibbotson Associates. STOCKS are represented by the Standard & Poor's
Index of 500 Stocks (S&P 500). DIVERSIFIED PORTFOLIO represents a portfolio
consisting of 40% stocks (S&P 500), 40% long-term bonds (Lehman Brothers
Long-Term Government and Corporate Bond Index), and 20% intermediate-term bonds
(Lehman Brothers Intermediate-Term Government and Corporate Bond Index). Past
performance is not a guarantee of future results. For a more complete discussion
about the risks associated with investing in stocks, bonds and other asset
classes, please refer to the footnotes for the graph on page 2.
(2)Withdrawals prior to the age of 59 1/2 may be subject to a 10% IRS tax
penalty. Any gains on withdrawals are taxed as ordinary income.
- --------------------------------------------------------------------------------
AN EXCELLENT CHOICE
FOR TAX DEFERRAL
PLUS RISK MANAGEMENT
The SIERRA ASSET MANAGER variable annuity not only provides active asset
allocation, but it also offers the added benefits of tax-deferred growth. By
investing in an annuity, an individual makes up-front payments in return for a
future stream of income. The money you invest in the SIERRA ASSET MANAGER
accumulates tax-deferred as long as it remains in the annuity.2 Your money can
be allocated among five asset allocation Portfolios, each structured to achieve
specific performance objectives while managing risk. A fixed rate account is
also available. Once you begin the payout phase, you can choose from a number of
income payout options, including income guaranteed to last your entire life!
Additional benefits of the SIERRA ASSET MANAGER include estate planning
advantages, tax-free transfers among investment options, and beneficiary
protection in case of death. To find out more about how SAM can help you reduce
taxes, manage risk and reach your long-term investment goals, please contact
your Investment Representative for the appropriate prospectuses which contains
more complete information, including charges and expenses. Please read the
prospectuses carefully before you invest or send money.(3)
To keep your entire investment portfolio on track for 1997 and beyond, we
encourage you to consult with your Investment Representative. Your Investment
Representative can help you reevaluate your financial objectives, discuss
whether the SAM investments are appropriate for your unique investment needs,
and ensure that your portfolio remains on track to meet your long-term goals.
- --------------------------------------------------------------------------------
OUTLOOK FOR
1997-1998
Looking ahead, we expect economic growth to continue slowing to a more
healthy, sustainable level, while inflation pressures moderate. In recent
months, the Federal Reserve has taken a more neutral approach to interest rates,
allowing the markets to dictate their current levels. Interest rates should
remain relatively stable if growth does not rebound significantly and if
inflation remains benign. Recent inflation reports suggest that this trend
should continue, as the Consumer Price Index has been rising only moderately,
while the Producer Price Index has actually been falling so far in 1997.
Another component of inflation, which is closely watched by the Federal
Reserve, is the Employment Cost Index, which on average represents two-thirds of
the final cost of a product. There have been concerns that the current economy
is heading towards full employment which will force manufacturers to raise wages
and subsequently prices, as they compete for skilled workers. Recent reports,
however, suggest that wage pressures remain under control. Slowing has become
evident in the manufacturing sector as new orders for durable goods have
recently tapered off. In addition, strong retail sales witnessed in the first
quarter of 1997 have somewhat slowed, demonstrating the unwillingness of
consumers to pay higher prices for goods and services in what is currently a
very competitive environment.
Furthermore, the strength of the U.S. Dollar and productivity gains
experienced by U.S. corporations have also helped to hold down prices and costs.
These factors all point to a continuation of the currently low inflation
environment and have led to suggestions by Federal Reserve Chairman Alan
Greenspan that an interest rate increase may not be necessary over the near
term.
The markets have performed well in response to current economic conditions.
Since early 1997, bond yields have dropped and equity markets have rallied back
to new highs.
Given the favorable economic outlook, we remain positive on both bonds and
stocks. Overseas, there has been continued strength in core Europe and selected
emerging-market countries. Global bond prices have been strengthening,
reflecting the view that worldwide inflation should remain benign. Of course,
while our overall outlook for the financial markets is decidedly positive, we
continue to believe that, regardless of any outlook, risk and risk control
should always remain an important consideration when making investment
decisions.
OUTLOOK SUMMARY:
o Continued economic growth, but at a slower, more sustainable rate than in
the first quarter of 1997
o Continued low levels of worldwide inflation
o Positive outlook for equity markets, although volatility seen in the first
half of 1997 may continue
o Positive outlook for fixed-income investments as interest rates should
remain relatively steady or fall with slow growth and benign inflation. o
(3)Like all variable annuities, there are risks associated with investing in
the SIERRA ASSET MANAGER, such as the fact that the investment return and
principal value will fluctuate, that liquidity may be limited by surrender
charges and tax penalties if withdrawn before the age of 59 1/2, and that
insurance-related fees and charges may affect the annuity performance.
- --------------------------------------------------------------------------------
INDIVIDUAL FUND REVIEWS
- --------------------------------------------------------------------------------
TO OUR
SHAREHOLDERS:
We are pleased to provide you with an overview of the following Funds in the
SIERRA TRUST FUNDS family for the 12-month period ended June 30, 1997. 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.
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, Sierra Asset Manager, 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 June 30, 1997, 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.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM HIGH QUALITY BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
SCUDDER, STEVENS & CLARK, INC.
- -------------------------
[Photo of Thomas M. Poor]
- -------------------------
Thomas M. Poor
Mr. Poor, Managing Director of Scudder, is the portfolio manager for the SIERRA
SHORT TERM HIGH QUALITY BOND FUND. He is a Chartered Financial Analyst and has
been with Scudder since 1970. Mr. Poor has had primary investment management
responsibility for the Fund since its inception.
PERFORMANCE REVIEW:
From the Fund's inception (November 1, 1993) through June 30, 1997, the SIERRA
SHORT TERM HIGH QUALITY BOND FUND (Class A Shares) advanced 4.04% on an average
annual total return basis, or 3.03% adjusted for the maximum sales charge. For
the 12-month period ended June 30, 1997, the Fund's total return was 6.15%, or
2.44% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
JUNE 30, 1997, WAS 5.86%. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
The most significant factors contributing to the Fund's performance over the
past 12 months were the generation of income combined with the strong
performance of the Fund's corporate and mortgage-backed holdings. Although rates
over the last six months rose slightly, interest rates over the entire 12-month
period fell. Our focus on producing consistent income for the Fund played an
important role in generating positive total returns over the 12-month period.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Short Term High Quality Bond Fund
--------------------------------- Lehman Brothers Mutual
(adjusted Fund Short (1-5)
(not adjusted for the maximum Investment Grade
for sales charge) 3.5% sales charge) Debt Index*
------------------ ------------------ ------------------
Inception*
11/1/93 10005 9655 10000
10052 9700 9904
10098 9745 10046
10063 9711 9944
Mar 9946 9599 9831
9907 9561 9772
9915 9568 9788
Jun 9927 9580 9816
9981 9632 9944
9989 9539 9988
Sep 9993 9644 9933
9997 9647 9945
10002 9652 9888
Dec 94 9842 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
11278 10884 11979
11337 10940 12010
Mar 11349 10952 11956
11404 11005 12080
11507 11104 12177
Jun 97 11561 11156 12284
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 6/30/97. 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 credits were
allowed by the Custodian. In the absence of the waivers and absorption of other
expenses or Custodian credits, yield and total return would have been lower.
<TABLE>
<CAPTION>
Average Annual Total Returns as of 6/30/97 6 Month 1 Year Since Inception
-----------------------------------------------
(November 1, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 2.54% 6.15% 4.04%
Fund (adjusted for the maximum 3.5% sales charge) -1.05% 2.44% 3.03%
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 3.07% 7.41% 5.77%
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Returns as of 6/30/97 6 Month 1 Year Since Inception
-----------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 2.16% 5.37% 4.42%
Fund (adjusted for the maximum 4% contingent deferred sales charge) -1.82% 1.37% 3.83%++
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 3.07% 7.41% 7.76%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 2.16% 5.37% 4.42%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -2.81% 0.37% 3.52%++++
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 3.07% 7.41% 7.76%
++ Adjusted for the maximum 2% CDSC for shares held since inception. ++++Adjusted for the maximum 3% CDSC for shares held
since inception.
</TABLE>
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Over the last 12 months, the U.S. bond market exhibited moderate volatility. On
June 30, 1997, the yield on the 30-year Treasury Bond was 6.78%, compared to a
yield of 6.89% for the previous year. The 0.11% decrease in rates masked the
price movement during the 12-month period, as rates actually experienced an
increase in the first two quarters of 1997. With the uncertainty reflecting the
direction of interest rates, we held the duration of the Fund within a
relatively tight range. The Fund's focus on duration, along with its sizable
positions in high-income producing corporate bonds, asset-backed securities, and
mortgages, all had a positive impact on performance.
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 portfolio holdings that significantly impacted
performance. However, we should note the performance of various sectors.
Corporates, mortgages, and asset-backed securities were important components of
the Fund's portfolio construction. Over the past 12 months, these sectors
performed very well relative to Treasuries. The best performing sector was
mortgages, largely due to strong price performance and high yields. The Fund's
holdings in this sector increased in both value and overall portfolio weighting.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
With slow economic growth and low inflation, we expect strength in the
bond market to continue over the intermediate term. Should economic growth be
stronger than expected, inflation concerns may reappear, causing higher interest
rates and lower bond prices. To help protect the Fund against potential price
volatility, we expect to maintain the Fund's duration at slightly below two
years.
Over the longer term, we anticipate continued growth in the economy but have
concerns regarding how long this expansion can last, especially with little to
no inflation. Credit excesses, profit disappointments, and the unpredictability
of foreign capital flows may cause short-term volatility in the bond market, but
over the long run, we continue to believe that fixed income investors will be
rewarded in terms of both total returns and income.
- --------------------------------------------------------------------------------
HIGH-QUALITY PORTFOLIO FOR ADDED PRINCIPAL STABILITY [PIE CHART]
- --------------------------------------------------------------------------------
BBB 23.26%
AAA 69.00%
A 7.74%
Allocation percentages are based on total investment value of the portfolio as
of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM GLOBAL GOVERNMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
SCUDDER, STEVENS & CLARK, INC.
- --------------------------
[Photo of Adam M. Greshin]
- --------------------------
Adam M. Greshin
Adam M. Greshin is the lead portfolio manager for the SIERRA SHORT TERM GLOBAL
GOVERNMENT FUND. Mr. Greshin joined Scudder in 1986 as an international bond
analyst. Currently, he is Product Leader for Scudder's global and international
fixed-income investing. He was involved in the original design of the Fund and
has served as a member of the Fund's portfolio management team since 1992. Mr.
Greshin assumed responsibility for the Fund's day-to-day management and
investment strategies in November 1995.
PERFORMANCE REVIEW:
From the Fund's inception (February 11, 1992) through June 30, 1997, the SIERRA
SHORT TERM GLOBAL GOVERNMENT FUND (Class A Shares) advanced 6.22% on an average
annual total return basis, or 5.52% adjusted for the maximum sales charge. For
the 12-month period ended June 30, 1997, the Fund's total return was 8.86% or
5.05% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
JUNE 30, 1997, WAS 4.83%. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
Global bond prices increased overall for the year ended June 30, 1997. The
latter half of 1996 was very favorable for fixed-income investors. Aided by weak
economic growth and low inflationary pressures most major markets experienced,
falling interest rates and rising bond prices. The Fund benefited from the solid
bond market gains in Europe, the U.S. and the dollar-bloc markets of Canada,
Australia and New Zealand. The majority of the Fund's underlying foreign
currency exposure was hedged into U.S. Dollars in an effort to stabilize the
Fund's net asset value, and therefore was not adversely affected by the overall
depreciation of the major reserve currencies (i.e., strength of the U.S.
Dollar).
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Short Term Global Government Fund
--------------------------------- Lehman Brothers Mutual
(adjusted Fund Short World
(not adjusted for the maximum Multimarket
for sales charge) 3.5% sales charge) Index*
------------------ ------------------ ------------------
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
13529 13056 14086
13534 13061 13922
Mar 13551 13076 13904
13628 13151 13847
13704 13225 14076
Jun 97 13841 13357 14136
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 6/30/97. 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 manage- ment or distribution fees, the Administrator absorbed
other expenses, and credits were allowed by the Custodian. In the absence of the
waivers, absorption of other expenses, or Custodian credits, yield and total
return would have been lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(February 11, 1992)
CLASS A SHARES
<S> <C> <C> <C> <C>
Fund (not adjusted for sales charge) 2.40% 8.86% 5.58% 6.22%
Fund (adjusted for the maximum 3.5% sales charge) -1.18% 5.05% 4.83% 5.52%
Lehman Brothers Mutual Fund Short World Multimarket Index* -1.87% 2.54% 6.02% 6.82%
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 2.02% 8.05% N/A 6.17%++
Fund (adjusted for the maximum 4% contingent
deferred sales charge) -1.94% 4.05% N/A 5.88%++
Lehman Brothers Mutual Fund Short World Multimarket Index* -1.87% 2.54% N/A 5.86%++
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 2.02% 8.05% N/A 6.17%++++
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -2.94% 3.05% N/A 5.29%++++
Lehman Brothers Mutual Fund Short World Multimarket Index* -1.87% 2.54% N/A 5.86%++++
++ Adjusted for the maximum 2% CDSC for shares held since inception.
++++Adjusted for the maximum 3% CDSC for shares held since inception.
</TABLE>
During the first half of 1997, bond prices exhibited notable price swings, due
in part to anticipation of central bank monetary policy activities. Despite rate
increases by the U.S., Canada and the United Kingdom so far this year, investors
did not appear to be overly concerned. Weak growth in Europe has allowed for
rate reductions in Spain, France and Italy, reinforcing the market consensus
that a general round of rate increases is unlikely.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The main driving force behind the strength in bond prices during 1996 was low
inflation, subdued economic activity, and increased liquidity from the world's
main providers of capital in search of yield. The main beneficiaries were
higher-yielding bond markets such as Italy, Australia and the United Kingdom.
Europe's higher-yielding markets, however, were battered as holdings in Spain
and Sweden came under heavy selling pressure due to skepticism over the
direction of interest rates and delays in European Monetary Union. The first
quarter of 1997 saw France and Germany performing strongly as perceived "safe
havens." The second quarter saw bond markets heading higher, aided by favorable
inflation data, and employment figures.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We redeployed proceeds from core European holdings in Germany and the
Netherlands, placing them in short-term emerging markets. These emerging market
assets provided additional yield and diversification, due to the relative
stability of their underlying currencies. Returns from emerging market bonds
have been very favorable, and the low price correlations with developed bond
markets provided additional long-term stability without altering the risk/reward
characteristics for this fund.
The Fund continued to be well-diversified between the U.S. and dollar-bloc
markets of Australia, Canada and New Zealand. This provided higher income
potential and required only limited currency hedging due to their high price
correlations with the U.S. Dollar. While growth is higher in the dollar-bloc
countries, inflation remains subdued and investors have not yet fully recognized
the excellent valuations offered by these markets. The Fund's exposure to
European bonds remains significant in light of the weak economic recovery there.
Its European holdings provide liquidity, yield and the potential for gains from
active currency management.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
By 1998 we expect to see signs of a recovery in Europe and Japan, potentially
exerting upward pressure on global bond yields. The first round of participants
for European Monetary Union will be selected by late spring of 1998, as soon as
full year 1997 data is available for all countries. Thus some market volatility
can be expected as the roster of countries entering the first round solidifies.
We have some concern that interest rate increases will dampen enthusiasm for
bonds around the world, given the recent rate increases in the U.S., Canada, and
the U.K. Continued strength of the U.S. Dollar looks likely, with further
increases expected in U.S. interest rates. The majority of the Fund's underlying
foreign currency is hedged into U.S. dollars so as to reduce risk to U.S.
shareholders. We will also continue to overweight the dollar-bloc bond markets
where we find excellent valuations and monitor European currencies, particularly
the Deutschemark, whose recent weakness we feel may continue.
- --------------------------------------------------------------------------------
DIVERSIFICATION BY REGION [PIE CHART]
- --------------------------------------------------------------------------------
Europe 50.79%
Americas 27.66%
Australia/New Zealand 13.81%
Africa 4.57%
Asia 3.17%
Allocation percentages are based on total investment value of the portfolio as
of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
BlackRock Financial
Management, Inc.
- -----------------------------
[Photo of Keith Anderson]
- -----------------------------
Keith Anderson
- -----------------------------
[Photo of Andrew J. Phillips]
- -----------------------------
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 June 30, 1997, the SIERRA U.S.
GOVERNMENT FUND (Class A Shares) advanced 7.23% on an average annual total
return basis, or 6.61% adjusted for the maximum sales charge. For the 12-month
period ended June 30, 1997, the Fund's total return was 8.75%, or 3.85% adjusted
for the maximum sales charge. The Fund's 30-day SEC yield as of June 30, 1997,
was 6.53%, and its 30-day average yield was 6.89%. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
Stronger economic data and accompanying inflation fears caused U.S. Treasury
yields to rise in early 1997. Although inflationary measures such as commodity,
producer, and consumer prices remained relatively stable, labor markets
continued to strengthen. After expanding at a blistering pace of 5.9% during the
first quarter, the U.S. economy's growth rate slowed to a more moderate 2-2.5%
during the second quarter of 1997.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
<TABLE>
<CAPTION>
U.S. Government Fund Lehman Brothers
------------------------------------ ----------------------------------
(adjusted for the Mutual Fund Mutual Fund
(not adjusted maximum 4.5% U.S. General U.S. Mortgage
for sales charge) sales charge) Government Index* Index*
------------------ -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Inception*
7/23/89 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
12193 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
16930 16168 17934 18461
17025 16259 17959 18522
16783 16928 17769 18348
17023 16257 18025 18640
17192 16418 18181 18822
Jun 97 17401 16618 18385 19043
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>
* Index total returns were calculated from 7/31/89 to 6/30/97. 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 credits were allowed by the Custodian. In the
absence of the waivers, absorption of other expenses, or Custodian credits,
yield and total return would have been lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(July 25, 1989)
CLASS A SHARES
<S> <C> <C> <C> <C>
Fund (not adjusted for sales charge) 3.35% 8.75% 5.36% 7.23%
Fund (adjusted for the maximum 4.5% sales charge) -1.30% 3.85% 4.39% 6.61%
Lehman Brothers Mutual Fund U.S. General Government Index* 2.63% 7.40% 6.98% 8.00%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 3.92% 9.10% 6.87% 8.48%
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 2.97% 7.94% N/A 6.93%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) -2.03% 2.94% N/A 6.04%++
Lehman Brothers Mutual Fund U.S. General Government Index* 2.63% 7.40% N/A 7.95%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 3.92% 9.10% N/A 9.01%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 2.97% 7.94% N/A 6.93%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) -2.03% 2.94% N/A 6.04%++
Lehman Brothers Mutual Fund U.S. General Government Index* 2.63% 7.40% N/A 7.95%
Lehman Brothers Mutual Fund U.S. Mortgage Index* 3.92% 9.10% N/A 9.01%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
The market for mortgage-backed securities (MBS) significantly outperformed the
broader investment-grade bond market for the 12 months ended June 30, 1997.
Investors sought higher-yielding spreads and subsequently boosted prices in the
mortgage sector. For the period, the MBS market as measured by the Lehman
Brothers Mortgage Index posted a 9.10% total return versus the 8.16% 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 excellent total return performance was primarily a result of the
Fund's concentration on mortgage-backed securities (MBS). Except for one brief
decline in October 1996, the Fund maintained approximately a 75% allocation to
mortgage pass-through securities between June 30, 1996 through the middle of the
second quarter of 1997. Additionally, the Fund's minor stake in adjustable-rate
mortgages (ARMs) and commercial mortgage-backed securities (CMBS) increased the
Fund's overall mortgage exposure, enhancing performance versus Treasuries. Due
to the strong price performance and tighter yield spreads of these securities,
the Fund sold its ARMs and CMBS and reduced its pass-through allocation to
approximately 67% as of June 30, 1997.
The Fund's duration, or price sensitivity to interest rate movements, was
continually adjusted to reflect our market bias. The Fund ended the period with
a neutral duration, which reflects our cautiously optimistic view of the
domestic bond market.
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 took advantage of the strong performance of the
mortgage sector by selling its ARMs and CMBS holdings and significantly reducing
its pass-through holdings. This move was made in response to our concerns of
increased mortgage refinancing, which we believe is likely should mortgage rates
decline and the number of prepayments rise.
Additionally, the Fund eliminated its exposure to 10- and 20-year Small Business
Administration Loans (SBAs). The cash raised by the sale of these securities was
primarily invested in Treasury securities, which will allow the Fund to redeploy
these assets back into various sectors of the mortgage market when yield spreads
versus Treasuries become more attractive.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
In our view, the Federal Reserve has managed to achieve a soft landing for the
economy. The economy's growth rate seems to be sustainable, and although data
points towards an economic slowdown, consumer confidence numbers reached a
28-year high at the end of June. As a result, we expect the Fund to maintain its
neutral duration stance as of June 30, 1997 versus the Merrill Lynch 5-7 Year
Treasury Index. However, we believe consumer spending may increase during the
second half of the year, and the tight labor market should exert wage pressures
on the economy. If this should occur, we may be biased to shorten the duration
due to a potential pick-up in the economy. The Fund will also seek opportunities
to re-enter the mortgage market should prices fall and provide higher yield
advantages versus Treasuries.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION [PIE CHART]
- --------------------------------------------------------------------------------
U.S. Treasury Notes 15.38%
U.S. Treasury Bonds 9.22%
U.S. Treasury Inflation Index Bond 3.64%
FNMA 9.68%
GNMA 21.22%
FHLMC 40.86%
Allocation percentages are based on total investment value of the portfolio as
of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
CORPORATE INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
TCW FUNDS MANAGEMENT, INC.
- ----------------------------
[Photo of James M. Goldberg]
- ----------------------------
James M. Goldberg
Mr. Goldberg, a Chartered Financial Analyst and Chartered Investment Counselor,
has been Managing Director of TCW Management since 1989, and Managing Director
of the Trust Company of the West, the parent corporation of TCW Management,
since 1984. He has had primary portfolio management responsibility for the
SIERRA CORPORATE INCOME FUND since its inception.
PERFORMANCE REVIEW:
From the Fund's inception (July 18, 1990) through June 30, 1997, the SIERRA
CORPORATE INCOME FUND (Class A Shares) advanced 8.87% on an average annual total
return basis, or 8.16% adjusted for the maximum sales charge. For the 12-month
period ended June 30, 1997, the Fund's total return was 9.23%, or 4.31% adjusted
for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF JUNE 30, 1997,
WAS 6.72%. For additional information, including Class B and Class S Share
performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
The most significant factor contributing to performance over the past 12 months
was the Fund's longer duration, relative to its benchmark index.
Duration, which is expressed in years, is used to measure a fund's sensitivity
to interest rate movements. In a declining interest rate environment, a fund
with a longer duration is more likely to have stronger performance. In a rising
interest rate environment, funds with shorter durations tend to perform better.
While the market experienced some volatility over the past 12 months, interest
rates have decreased overall. At the end of the period, the Fund's duration was
7.5 years. The longer duration relative to the Fund's benchmark index allowed
the Fund to take advantage of the declining rate environment.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Corporate Income Fund
--------------------------------- Lehman Brothers Mutual
(adjusted Fund Corporate
(not adjusted for the maximum Debt BBB-Rated
for sales charge) 4.5% sales charge) Index*
------------------ ------------------ ------------------
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
Dec90 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
16378 15641 17046
16812 16056 17407
17381 16599 17882
17854 17050 18265
Dec 96 17557 16767 18013
17494 16707 18038
17583 16792 18114
17263 16486 17831
17560 16770 18102
17773 16973 18307
Jun 97 18059 17246 18566
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 6/30/97. The Lehman
Brothers Mutual Fund Corporate Debt BBB-Rated Index represents all
investment-grade, corporate debt securities, assumes reinvestment of all
dividend/distributions, and does not reflect any asset-based charges for
investment management or other expenses. Past investment performance does not
guarantee future performance. The returns shown for the Fund assume reinvestment
of all dividends/distributions by the shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation),
Administrator (SIERRA Fund Administration Corporation) and Distributor waived a
portion of their management or distribution fees, and credits were allowed by
the Custodian. In the absence of the waivers, or Custodian credits, yield and
total return would have been lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 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) 2.86% 9.23% 7.67% 8.87%
Fund (adjusted for the maximum 4.5% sales charge) -1.77% 4.31% 6.68% 8.16%
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 3.07% 8.79% 8.03% 9.36%
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 2.48% 8.41% N/A 8.62%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -2.48% 3.41% N/A 7.76%++
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 3.07% 8.79% N/A 9.60%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 2.48% 8.41% N/A 8.62%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -2.48% 3.41% N/A 7.77%++
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 3.07% 8.79% N/A 9.60%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Over the past year, interest rate volatility affected Fund performance the most.
Interest rates trended downward, and 10-year Treasury Bond yields experienced an
overall decline of 22 basis points -- ending the period at 6.49% versus 6.71% in
June 1996. The bellwether 30-year U.S. Treasury Bond yield declined 11 basis
points during the same period, falling from 6.89% to 6.78% in June 1997.
Improving corporate profitability and benign inflation contributed to the
interest rate decline. Due to the long-term nature of the Fund's investment
objectives, maturity and duration were maintained throughout the period and
allowed the Fund to participate in the overall market strength.
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 the Fund's holdings, and none of the minor changes
had a significant impact on Fund performance. The Fund increased its exposure to
industrial issues slightly during the period, reflecting the purchase of Norfolk
Southern Corporation. Other issues, including Amax, Boise Cascade Corporation,
Ford Motor Company, General Motors Corporation, Georgia Pacific Corporation,
Northrop Grumman Corporation and Tyco Laboratories, Inc., were sold, reduced or
tendered during the period. Holdings in the financial sector varied somewhat as
a result of our purchase of Hartford Life Insurance Company, as well as the
reduction of American General Corporation and NationsBank.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Overall, our outlook is positive. We forecast corporate profitability to be
reasonably maintained in the near future, and a benign inflation environment to
persist. Although corporate bond spreads are at historically tight levels, as
compared to U.S. Treasuries, demand for corporate bonds remains strong among
investors, with new issues easily absorbed by the market.
After posting spectacularly high growth rates from the end of 1996 through early
1997, we expect Gross Domestic Product (GDP) growth to slow to an average of
2.0% to 2.5% for the next 12 months. Despite this slowdown, we anticipate a
modest re-acceleration later in 1997 and expect a slight increase in the Federal
Funds rate prior to year-end. We continue to believe that risk remains for
short-term interest rates to increase. However, if the economy proceeds exactly
as forecast, or actually grows below trend, a Fed tightening would be unlikely.
Only a below-trend GDP growth rate over the next few quarters is likely to
produce further declines in short or intermediate rates.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION [PIE CHART]
- --------------------------------------------------------------------------------
Manufacturing ............................................ 17.25%
U.S. Mortgage-Backed ..................................... 12.65%
Transportation ........................................... 10.82%
Energy ................................................... 8.30%
Industrial ............................................... 7.94%
Financial ................................................ 7.25%
Electric ................................................. 6.78%
Yankee ................................................... 6.48%
Regional Banks ........................................... 5.66%
Forest Products .......................................... 4.15%
Media .................................................... 3.42%
U.S. Treasury ............................................ 2.81%
Retail ................................................... 2.78%
Investment Company Security .............................. 2.12%
Gas ...................................................... 1.06%
Telecommunications ....................................... 0.53%
Allocation percentages are based on total investment value of the
portfolio as of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
- ---------------------------
[Photo of Joseph A. Piraro]
- ---------------------------
Joseph A. Piraro
Mr. Piraro, Vice President of Van Kampen, joined the company in 1992, and serves
as Vice President and portfolio manager of Van Kampen American Capital
Investment Advisory Corp., an affiliate of Van Kampen. He has had primary
portfolio management responsibility for the SIERRA CALIFORNIA MUNICIPAL FUND
since May 1992.
PERFORMANCE REVIEW:
From the Fund's inception (July 25, 1989) through June 30, 1997, the SIERRA
CALIFORNIA MUNICIPAL FUND (Class A Shares) advanced 7.24% on an average annual
total return basis, or 6.62% adjusted for the maximum sales charge. For the
12-month period ended June 30, 1997, the Fund's total return was 8.83% or 3.94%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF JUNE
30, 1997, WAS 4.91%, AND ITS 30-DAY AVERAGE YIELD WAS 5.51% OR 10.06% ON A
TAX-EQUIVALENT BASIS.* For additional information, including Class B and Class S
Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
The Fund exhibited strong performance over the past 12 months, returning 8.83%
percent and ranking in the top third of its peer group. The Fund's duration had
the most significant impact on its performance during this time period.
A fund's duration, which is measured in years, determines how a fund will
perform during periods of interest rate fluctuations. In a declining interest
rate environment, a fund with a longer duration is more likely to perform well.
Funds with a shorter duration tend to perform better in rising interest rate
environments. At the end of the period, the Fund's duration was 7.22 years,
compared to the benchmark's 8.53 years. The shorter duration restricted the Fund
from benefiting from the declining rate environment, but helped reduce risks
during the interest rate hike in March 1997.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
California Municipal Fund
-------------------------------------- Lehman
(adjusted Brothers
(not adjusted for the maximum Municipal
for sales charge) 4.5% sales charge) Bond Index**
----------------- ------------------ ------------
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
10497 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
16882 16122 17561
17020 16254 17723
16847 16088 17487
16971 16208 17634
17192 16418 17898
Jun 97 17414 16630 18089
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 6/30/97. 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 credits were allowed by the Custodian. In the absence of the
waivers and absorption of other expenses, or Custodian credits, yield and total
return would have been lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 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) 3.35% 8.83% 6.76% 7.24%
Fund (adjusted for the maximum 4.5% sales charge) -1.31% 3.94% 5.78% 6.62%
Lehman Brothers Municipal Bond Index** 3.20% 8.25% 7.09% 7.77%
- ----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 2.96% 8.02% N/A 6.80%
Fund (adjusted for the maximum 5% contingent deferred sales charge)-2.04% 3.02% N/A 5.92%++
Lehman Brothers Municipal Bond Index** 3.20% 8.25% N/A 7.90%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 2.96% 8.02% N/A 6.80%
Fund (adjusted for the maximum 5% contingent deferred sales charge)-2.04% 3.02% N/A 5.92%++
Lehman Brothers Municipal Bond Index** 3.20% 8.25% N/A 7.90%
</TABLE>
++ Adjusted for the maximum 3% CDSC for shares held since inception.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The Fund benefited from a strong economy in both California and the U.S. With
few signs of inflation and unemployment at a 27-year low, the U.S. experienced a
period of unequalled economic prosperity. While California dominated the nation
in employment gains, service-related industries also thrived and investments in
the state became more attractive.
Interest rates also had a major impact on the Fund's performance. With rates
showing increased volatility, but declining over the 12-month period, the Fund
benefited from a boost in California bond prices. Another factor affecting Fund
performance was the increased percentage of triple-A insured issues coming into
the market. In California, the percentage of these issues increased from 45% in
1996 to 55% of total volume in 1997. This increase in insured issues, combined
with the scarcity of uninsured investment-grade bonds, tightened the yield
spreads between the two. In response to this narrowing, we continued to stress
quality in our acquisitions.
One other factor affecting the Fund was the passage of Proposition 218 in
November 1996. Proposition 218 requires a majority of voters to approve
increases in general taxes. This move made it much more difficult for
municipalities to gain approval for newly-issued bonds, as evidenced by the 26%
decline in issues thus far in 1997. The greater demand and diminished supply
resulted in strong price appreciation within the California market.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
No major shifts in sector concentration or rating distribution were made that
had a significant impact on the Fund. The Fund is well-diversified, with
exposure to nine industries. The largest sector weighting is that of General
Purpose. The majority of bonds in the portfolio were purchased at very
attractive yields as compared to those currently available in the market. As
such, we do not expect significant changes in the near future.
WHAT IS OUR IMMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
In recent years, the downward trend in interest rates has had a positive impact
on bond prices. With lower yields, however, it is increasingly difficult to
build the income component of the Fund. To compensate, we continue to carefully
monitor and evaluate the direction of interest rates and to adjust the Fund's
duration to reflect our interest rate outlook.
Our outlook for the economy, as well as the Fund, remains positive. Inflation
continues to remain in check, and growth continues without the threat of a
recession. In addition, the U.S. deficit has been dramatically reduced. Low
inflation and a declining deficit could bring about lower interest rates,
thereby creating a bullish environment for the fixed-income markets. Under this
scenario, we do not expect to make any significant changes in the Fund's
structure. Municipal credit quality remains high, California's economy is
recovering reasonably well after years of weakness and related fiscal
shortfalls, and demand for the state's paper remains strong. Considering the
Fund's high credit quality and the demand for quality California securities, we
expect the Fund to remain an attractive investment over the coming year.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION [PIE CHART]
- --------------------------------------------------------------------------------
General Purpose 22.95%
Housing 18.24%
Industrial Revenue 15.51%
Water Disposal 14.20%
Transportation 9.64%
Health Care 6.28%
Education 5.56%
Utilities 4.87%
Tax District 2.75%
Allocation percentages are based on total investment value of the portfolio as
of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
FLORIDA INSURED MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
- --------------------------
[Photo of Thomas M. Byron]
- --------------------------
Thomas M. Byron
Mr. Byron, Vice President of Van Kampen has over 15 years of experience with the
Company. He has been with Van Kampen since 1981 and held the position of Head
Buyer and Manager, with responsibility for all tax-exempt and taxable UITs. Mr.
Byron has had primary portfolio management responsibility for the SIERRA FLORIDA
INSURED MUNICIPAL FUND since January 1997.
PERFORMANCE REVIEW:
From the Fund's inception (June 7, 1993) through June 30, 1997, the SIERRA
FLORIDA INSURED MUNICIPAL FUND (Class A Shares) advanced 5.10% on an average
annual total return basis, or 3.91% adjusted for the maximum sales charge. For
the 12-month period ended June 30, 1997, the Fund's total return was 8.43%, or
3.55% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
JUNE 30, 1997, WAS 4.77%, AND ITS 30-DAY AVERAGE YIELD WAS 5.02% OR 8.30% ON A
TAX-EQUIVALENT BASIS.* For additional information, including Class B and Class S
Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
The Fund exhibited strong performance over the past 12 months, returning 8.43%
and ranking in the top quartile of its peer group. The most significant factor
affecting performance was the Fund's duration, which determines how the Fund's
price, or net asset value (NAV), will react to interest rate fluctuations.
While interest rates experienced some volatility over the past 12 months,
interest rates decreased overall for the period. In a declining interest rate
environment, a fund with a longer duration--measured in years--is more likely to
increase in value. Funds with shorter durations tend to perform better in rising
rate environments. Between February and April, the Fund's duration was 7.76
years, shorter than the benchmark. As rates started to fall in the second
quarter, we lengthened duration to 8.97 years--longer than the benchmark--to
capture full price appreciation in the Fund.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Florida Insured Municipal Fund
-------------------------------------- Lehman
(adjusted Brothers
(not adjusted for the maximum Municipal
for sales charge) 4.5% sales charge) Bond Index**
----------------- ------------------ ------------
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 12193
11881 11346 12216
12002 11462 12329
Mar 11882 11347 12165
11944 11406 12267
12104 11559 12451
Jun 97 12240 11689 12584
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 6/30/97. 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 credits were
allowed by the Custodian. In the absence of the waivers and absorption of other
expenses, or Custodian credits, yield and total return would have been lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR SINCE INCEPTION
-----------------------------------------------
(June 7, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 2.94% 8.43% 5.10%
Fund (adjusted for the maximum 4.5% sales charge) -1.69% 3.55% 3.91%
Lehman Brothers Municipal Bond Index** 3.20% 8.25% 5.91%
- ----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR SINCE INCEPTION
-----------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 2.56% 7.63% 6.53%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -2.44% 2.63% 5.65%++
Lehman Brothers Municipal Bond Index** 3.20% 8.25% 7.90%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 2.56% 7.63% 6.53%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -2.44% 2.63% 5.65%++
Lehman Brothers Municipal Bond Index** 3.20% 8.25% 7.90%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
FLORIDA INSURED MUNICIPAL FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Both interest rates and the state of the economy played major roles in the
Fund's performance during this period. The U.S. economy has been expanding for
several periods. This economic prosperity is unequaled in history-- with
unemployment at a 27-year low and few signs of inflation. The downward trend of
interest rates in recent years has generated price appreciation but has also
made it somewhat more difficult to build the income component of the Fund.
Another factor affecting the Fund was the percentage of AAA insured issues
introduced into the market. Similar to national trends, the percentage of AAA
insured issuance in Florida continues to increase. The increasing supply of
these high-quality issues combined with substantial cuts in insurance costs over
the past four years have allowed insured yields to remain attractive. In
addition, the yield advantage of uninsured bonds over AAA-rated insured bonds
has recently decreased. Therefore, we continue to emphasize quality in our
acquisitions, as we feel the current yield spread does not adequately reward
investors for the additional risks of uninsured bonds.
Our investment technique was also affected by overall supply and demand in the
Florida municipal market. At times, demand for Florida paper exceeded supply,
causing Florida securities to become "expensive" compared to national levels and
generally moderating current yields.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We increased our percentage of insured holdings from 81% to 84% as yield spreads
continued to narrow--a strategy that worked extremely well during the period.
Holdings subject to the Alternative Minimum Tax (AMT) increased 11% to 44% of
assets, as we adopted a defensive stance and purchased higher-yielding housing
bonds (up 9% to 18% of assets). Health care holdings were reduced by 9%.
Although health care was one of the best performing sectors over the past year,
we felt that many of these positions had reached their upside potential.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our economic outlook for the second half of the year is strong. Overall,
municipal credit quality remains high, with state reserves showing their highest
levels in years. Florida retail demand continues to be strong, and the Fund has
shown stable performance over the past year. We expect this trend to continue,
as the Fund is positioned to perform well in the upcoming months. The Fund's
duration of 8.97 years is slightly longer than the Lehman Florida Municipal
Index duration of 8.17 years.
The average coupon and acquisition yield of the Fund is above current market
levels. If rates rise in the coming months, or if yield spreads between AAA
insured and uninsured investment-grade securities widen, we would increase the
percent of uninsured holdings to add yield to the Fund. In spite of Miami's
financial problems, Florida's economy remains healthy and higher levels of debt
issuance should be easily absorbed. In this environment, we expect the municipal
market and the Fund to remain attractive investments over the next 12 months.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION [PIE CHART]
- --------------------------------------------------------------------------------
Higher Education ......................................... 29.53%
Housing .................................................. 19.07%
Transportation ........................................... 18.89%
Waste Disposal ........................................... 13.10%
Utilities ................................................ 5.57%
Health Care .............................................. 5.32%
General Purpose .......................................... 4.92%
Industrial Revenue ....................................... 3.60%
Allocation percentages are based on total investment value of the
portfolio as of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
- --------------------------
[Photo of Joseph A. Piraro]
- --------------------------
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 June 30, 1997, the SIERRA
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND (Class A Shares) advanced 7.49%
on an average annual total return basis, or 5.97% adjusted for the maximum sales
charge. For the 12-months ended June 30, 1997, THE FUND'S TOTAL RETURN WAS
6.97%, OR 2.15% ADJUSTED FOR THE MAXIMUM SALES CHARGE. THE FUND'S 30-DAY SEC
YIELD AS OF JUNE 30, 1997, WAS 4.06%, AND ITS 30-DAY AVERAGE YIELD WAS 4.63% OR
8.46% ON A TAX-EQUIVALENT BASIS.* For additional information, including Class B
and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
The Fund performed exceptionally well over the past 12 months, returning 6.97%
and ranking in the top third of its peer group. The most significant factor
affecting performance was the Fund's duration.
Duration, which is expressed in years, is used to measure a fund's sensitivity
to interest rate movements. In a declining interest rate environment, a fund
with a longer duration is more likely to have stronger performance. In a rising
interest rate environment, funds with shorter durations tend to perform better.
While the market experienced some volatility over the past 12 months, interest
rates have decreased overall. At the end of the period, the Fund's duration was
5.52 years, compared to the benchmark's 6.08 years. The shorter duration
prevented the Fund from taking full advantage of the declining rate environment.
However, shorter duration would help reduce risk if interest rates were to rise.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
California
Insured Intermediate Municipal Fund
-------------------------------------- Lehman
(adjusted Brothers
(not adjusted for the maximum Municipal
for sales charge) 4.5% sales charge) Bond Index**
----------------- ------------------ ------------
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 12203
12347 11791 12227
12417 11859 12339
Mar 12291 11738 12175
12350 11794 12277
12503 11940 12461
Jun 97 12633 12064 12594
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 6/30/97. 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 credits were
allowed by the Custodian. In the absence of the waivers and absorption of other
expenses, or Custodian credits, yield and total return would have been lower.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR SINCE INCEPTION
-----------------------------------------------
(April 4, 1994)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 2.62% 6.97% 7.49%
Fund (adjusted for the maximum 4.5% sales charge) -2.00% 2.15% 5.97%
Lehman Brothers Municipal Bond Index** 3.20% 8.25% 7.56%
- ----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR SINCE INCEPTION
-----------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 2.24% 6.17% 6.51%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -2.76% 1.17% 5.62%++
Lehman Brothers Municipal Bond Index** 3.20% 8.25% 7.90%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 2.24% 6.17% 6.50%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -2.76% 1.17% 5.62%++
Lehman Brothers Municipal Bond Index** 3.20% 8.25% 7.90%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Interest rates and the continued expansion of the U.S. economy were major
contributors to the Fund's performance. This economic prosperity is unequaled in
history -- with unemployment at its lowest level in 27 years. Inflation remains
in check, and investors have demonstrated confidence in the Federal Reserve's
efforts to monitor the interest-rate environment by continuing to invest new
money into the markets.
California's fiscal situation has taken excellent shape, with the state
dominating the nation in employment gains. In addition, service-related
industries are thriving. As a result, investments in the state have become more
attractive.
One factor affecting the Fund was the increase in AAA insured issues
entering the market. The increase in these issues and the scarcity of uninsured,
investment-grade bonds served to tighten yield spreads between AAA-rated insured
securities and lower-rated bonds. Since we felt that investors were not
adequately rewarded for the additional risk on uninsured bonds, we placed
greater emphasis on the quality of our acquisitions.
Another factor affecting the Fund was the passage of Proposition 218 in November
1996. Proposition 218 restricts local governments from collecting existing
property-related fees, assessments, and taxes to pay for local public services.
The enactment of this law has resulted in a 26% decline of California issues
thus far in 1997, and the diminished supply has caused prices to rise in the
California market.
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 or rating distribution, and
minor changes had no significant impact on the Fund. The Fund has excellent
diversification, and the majority of bonds in the portfolio were purchased at
yields more attractive than those currently available in the market. As such, we
do not expect significant changes in the near future.
WHAT IS YOUR IMMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The economic outlook is positive for the following reasons. First, inflation
continues to be held in check. We do see some warning signs of increased
inflation, such as strong job growth, high consumer confidence, and a mild
upturn in wages. However, the rally in stock prices suggests that investors
believe the Federal Reserve Board will succeed in slowing down growth -- without
tipping the economy into a recession. In addition, the days of deficit spending
appear to be gone, and the U.S. deficit has been dramatically reduced. This
combination of low inflation and a declining deficit could bring about lower
interest rates, and create a positive environment for municipal bond prices.
The downward trend in interest rates in recent years has caused a boost in price
appreciation, but it also makes it more difficult to build the income component
of the Fund. To compensate, we will continue to carefully monitor and evaluate
the direction of interest rates, and adjust the Fund's duration to best take
advantage of these trends.
Our outlook for the Fund is quite positive. Municipal credit quality should
remain high overall, with state reserves showing their best levels in years.
California's economy is recovering reasonably well following years of weakness
and fiscal shortfalls, and the demand for the state's paper remains very high.
We expect the municipal market and the Fund to remain attractive investments
over the coming year.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION [PIE CHART]
- --------------------------------------------------------------------------------
Education ................................................ 25.20%
Industrial Revenue ....................................... 15.65%
General Purpose .......................................... 15.18%
Housing .................................................. 14.53%
Health Care .............................................. 11.90%
Utilities ................................................ 7.98%
Transportation ........................................... 7.92%
Waste Disposal ........................................... 1.64%
Allocation percentages are based on total investment value of the
portfolio as of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
NATIONAL MUNICIPAL FUND
PORTFOLIO MANAGER:
VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT, INC.
- --------------------------
[Photo of David C. Johnson]
- --------------------------
David C. Johnson
Mr. Johnson, Senior Vice President of Van Kampen, has over 14 years experience
in the tax-free municipal sector of the fixed-income market. He has been with
Van Kampen since 1989 and has had primary portfolio management responsibility
for the SIERRA NATIONAL MUNICIPAL FUND since its inception.
PERFORMANCE REVIEW:
From the Fund's inception (July 18, 1990) through June 30, 1997, the SIERRA
NATIONAL MUNICIPAL FUND (Class A Shares) advanced 8.21% on an average annual
total return basis, or 7.50% 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 7.90% on an average annual
total return basis for the same period.** For the 12-month period ended June 30,
1997, the Fund's total return was 8.91%, or 4.01% adjusted for the maximum sales
charge. THE FUND'S 30-DAY SEC YIELD AS OF JUNE 30, 1997, WAS 4.58%, AND ITS
30-DAY AVERAGE YIELD WAS 5.56% OR 9.20% ON A TAX-EQUIVALENT BASIS.* For
additional information, including Class B and Class S Share performance, see the
accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
The Fund returned 8.91% and ranked in the top quartile of its peer group during
the past 12 months. Its duration was the most significant factor affecting
performance. Duration which is measured in years determines how a fund will
react to interest rate movements. While the market has experienced some
volatility over the past 12 months, overall interest rates have decreased. A
fund with a longer duration is more likely to perform well in a declining
interest rate environment, while funds with shorter durations tend to perform
better in rising rate environments. At the end of the period, the Fund's
duration was 6.81 years, compared to the benchmark's 7.98 years.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
National Municipal Fund
-------------------------------------- Lehman
(adjusted Brothers
(not adjusted for the maximum Municipal
for sales charge) 4.5% sales charge) Bond Index**
----------------- ------------------ ------------
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 16393
16807 16050 16424
16975 16211 16575
16793 16037 16355
16932 16170 16492
17134 16363 16740
Jun 97 17305 16526 16918
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 6/30/97. 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 credits were allowed by the Custodian. In the absence of the
waivers and absorption of other expenses, or Custodian credits, yield and total
return would have been lower.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 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) 3.44% 8.91% 6.73% 8.21%
Fund (adjusted for the maximum 4.5% sales charge) -1.21% 4.01% 5.75% 7.50%
Lehman Brothers Municipal Bond Index** 3.20% 8.25% 7.09% 7.90%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 3.06% 8.10% N/A 6.41%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -1.94% 3.10% N/A 5.52%++
Lehman Brothers Municipal Bond Index** 3.20% 8.25% N/A 7.90%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 3.06% 8.10% N/A 6.41%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -1.94% 3.10% N/A 5.52%++
Lehman Brothers Municipal Bond Index** 3.20% 8.25% N/A 7.90%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NATIONAL MUNICIPAL FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Interest rates and the state of the economy played major roles in the Fund's
performance. The expansion of the U.S. economy and the downward trend in
interest rates in recent years have produced significant price appreciation in
the Fund.
Tax-exempt supply and demand also impacted our investment technique. Supply this
year was lower than anticipated, although it rose slightly toward the end of the
period. This was primarily due to interest rates remaining in the same range
throughout much of the 1990s, significantly decreasing the volume of refunding
issues coming into the market. More importantly, the percentage of AAA insured
issues entering the market has steadily increased, currently near 52% of total
volume. These yields tend to be more attractive than those of riskier
lower-rated securities.
AAA-rated securities comprise 47% of assets and have experienced excellent price
appreciation over the past year. Most of these securities were acquired at
yields significantly higher than current market levels. One of our continuing
concerns has been the tightening of yield spreads between insured and uninsured
investment-grade bonds. Lower-rated securities have traditionally provided
additional yield to compensate the investor for the additional credit risk. But
as a larger percentage of insured issues are being brought to the market, this
yield spread continues to narrow, making uninsured investment-grade bonds less
attractive.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The Fund is well-diversified, with exposure to a total of nine sectors. Given
the attractive high yields imbedded in many of these positions, there were no
major shifts in sector concentration during the period that had a significant
impact on performance.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We are optimistic about the second half of 1997 for the following reasons.
First, inflation continues to be held in check, despite strong job growth, high
consumer confidence, and a mild upturn in wages. The rally in stock prices
suggests that investors are confident the Federal Reserve Board will
successfully slow down growth without tipping the economy into a recession. In
addition, the U.S. deficit has been dramatically reduced, and this combination
of low inflation and a declining deficit could bring about lower interest rates.
In turn, lower rates should increase the supply of municipal securities.
We do not expect to make any significant changes in the Fund's structure. We
feel confident that the Fund is positioned for solid, consistent performance. We
will continue to manage it consistent with the philosophy we have applied over
the past year, as we seek to provide shareholders with a higher level of current
income exempt from federal income tax.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION [PIE CHART]
- --------------------------------------------------------------------------------
Health Care .............................................. 21.06%
Transportation ........................................... 16.92%
Education ................................................ 14.17%
Waste Disposal ........................................... 13.81%
General Purpose .......................................... 11.31%
Utilities ................................................ 9.93%
Industrial Revenue ....................................... 6.31%
Housing .................................................. 5.39%
Bond Bank ................................................ 1.10%
Allocation percentages are based on total investment value of the
portfolio as of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND
PORTFOLIO MANAGER:
J.P. MORGAN INVESTMENT
MANAGEMENT INC.
- ----------------------------
[Photo of Henry D. Cavanna]
- ----------------------------
Henry D. Cavanna
- ----------------------------
[Photo of William M. Riegel]
- ----------------------------
William M. Riegel
Mr. Cavanna is a senior portfolio manager in the J.P. Morgan Equity and Balanced
Accounts Group, and has been with J.P. Morgan since 1971. Mr. Riegel is a senior
equity portfolio manager in the Equity and Balanced Accounts Group, and has been
with J.P. Morgan since 1979. They have had primary portfolio management
responsibility for the SIERRA GROWTH AND INCOME FUND since September 1993.
PERFORMANCE REVIEW:
From the Fund's inception (July 25, 1989) through June 30, 1997, the SIERRA
GROWTH AND INCOME FUND (Class A Shares) advanced 13.11% on an average annual
total return basis, or 12.26% adjusted for the maximum sales charge. For the
12-month period ended June 30, 1997, the Fund's total return was 30.30%, or
22.81% 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 12-MONTH PERIOD ENDED JUNE 30, 1997?
The stock market continued its record-setting pace in 1997 after returning 8.4%
in the last quarter of 1996. Interest rates, the economy, and strong corporate
earnings news underpinned the market's strength. In this near perfect
environment, the Fund posted 30.3% for the year, outperforming the Lipper Growth
& Income Average by nearly 200 basis points, but lagging the S&P 500 INDEX. The
most significant factors contributing to the Fund's performance were stock
selection and solid corporate earnings growth.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Growth and Income Fund
--------------------------------------- Standard
(adjusted & Poor's 500
(not adjusted for the maximum Composite
for sales charge) 5.75% sales charge) Index*
----------------- ------------------- ------------
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
15646 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
24161 22772 28218
24195 22804 28440
23346 22003 27273
24212 22820 28900
25863 24376 30658
Jun 97 26562 25034 32031
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 6/30/97. The Standard &
Poor's 500 Composite Index (S&P 500) represents an unmanaged weighted index of
500 industrial, transportation, utility, and financial companies widely regarded
by investors as representative of the stock market. The index assumes
reinvestment of all dividends/distributions, and does not reflect any
asset-based charges for investment management or other expenses. Past investment
performance does not guarantee future performance. The returns shown for the
Fund assume reinvestment of all dividends/distributions by the shareholder.
During the period noted, the Advisor (SIERRA Investment Advisors Corporation),
Administrator (SIERRA Fund Administration Corporation) and Distributor waived a
portion of their management or distribution fees, and credits were allowed by
the Custodian. In the absence of the waivers, or Custodian credits, yield and
total return would have been lower.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 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) 16.79% 30.30% 17.30% 13.11%
Fund (adjusted for the maximum 5.75% sales charge) 10.07% 22.81% 15.92% 12.26%
Standard & Poor's 500 Composite Index* 20.61% 34.70% 19.78% 15.84%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 16.41% 29.33% N/A 23.10%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 11.41% 24.33% N/A 22.44%++
Standard & Poor's 500 Composite Index* 20.61% 34.70% N/A 28.83%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 16.41% 29.24% N/A 23.09%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 11.41% 24.24% N/A 22.43%++
Standard & Poor's 500 Composite Index* 20.61% 34.70% N/A 28.83%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The Fund benefited from the U.S. stock market's impressive gains over the last
year. According to Lipper Analytical Services, Inc., the second quarter of 1997
was the best quarter for U.S. stock-fund performance since 1991. The environment
in the last half of 1996 centered around strong corporate profits and weaker
economic data, which helped alleviate inflation and interest rate fears. Market
volatility increased in March 1997 as investors feared rising interest rates. In
response, we slightly underweighted interest rate sensitive
sectors--specifically, finance, telephone, utility and insurance sectors--as
compared to the benchmark. However, in the second quarter, as interest rates
steadied, these sectors rebounded, and we readjusted our weightings to a more
neutral stance while concentrating on stock selection. This strategy, combined
with identifying undervalued stocks that are fundamentally attractive for the
long term, contributed to the Fund's strong one-year return.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Over the past year, we maintained an overall sector-neutral approach and focused
on individual stock selection. The Fund holds a highly diversified selection of
value stocks. The Fund's outperforming sectors included telephone, finance,
drugs, energy, and transportation. First USA rose 121.5% during the year,
largely due to a proposed takeover by Banc One. The drug sector benefited from
several developments over the past year, gaining over 56%. Warner Lambert
Company contributed most positively to performance, gaining 130.5% over the past
year, as a result of FDA approvals of two new drugs. In technology, strong
performance was not limited to the largest companies. EMC Corporation rose
110.8% for the year while Applied Micro Devices surged 164.2% in only eight
months. Finally, the Fund's energy sector gained 36.1% for the year as Tosco
Corporation and Cooper Cameron Corporation rose 61% and 113.7% respectively.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our economic outlook calls for strong growth in 1997 (GDP +3.5%) and below-trend
growth in 1998 (GDP +1.75%). Inflation is expected to tick up above 3% in 1998,
and the low unemployment rate of 4.8% should impact wage growth and eventually
spill over to the general inflation rate. We anticipate corporate profit growth
of 10% in 1997 and 4% in 1998, showing a strong correlation with economic
growth.
In order to manage the Fund in this environment, we will continue to focus on
finding attractive stocks rather than attempting the risky practice of market
timing. As such, the Fund will be fully invested in a diverse selection of
stocks and remain sector neutral. On a sector basis, we have positioned our
technology holdings away from the PC industry and towards the data networking
areas. We believe the environment in these two subsectors is about to reverse--
with the PC industry slowing due to a lack of significant new products. On the
other hand, data networking companies plan to release a number of new products
to assist corporations with intranet capabilities and upgrade communication
equipment.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION [PIE CHART]
- --------------------------------------------------------------------------------
Financial Services ....................................... 12.55%
Consumer Discretionary ................................... 11.84%
Technology ............................................... 10.79%
Energy ................................................... 10.69%
Materials & Processing ................................... 9.90%
Health Care .............................................. 8.31%
Consumer Staples ......................................... 7.70%
Telecommunications ....................................... 6.18%
Producer Durables ........................................ 5.81%
Other .................................................... 5.25%
Retail ................................................... 4.70%
Auto & Transportation .................................... 2.95%
Utilities ................................................ 1.79%
Computer Software & Services ............................. 1.54%
Allocation percentages are based on total investment value of the
portfolio as of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
GROWTH FUND
PORTFOLIO MANAGER:
JANUS CAPITAL CORPORATION
- ----------------------------
[Photo of Warren B. Lammert]
- ----------------------------
Warren B. Lammert
Mr. Lammert is a graduate of Yale University and the London School of Economics.
He first joined Janus in January 1987 and has been portfolio manager of the
SIERRA GROWTH FUND since its inception. He is a Chartered Financial Analyst.
PERFORMANCE REVIEW:
From the Fund's inception (April 5, 1993) through June 30, 1997, the SIERRA
GROWTH FUND (Class A Shares) advanced 17.43% on an average annual total return
basis, or 15.80% adjusted for the maximum sales charge. For the 12-month period
ended June 30, 1997, the Fund had a total return of 10.88%, or 4.50% adjusted
for the maximum sales charge. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
For the past year, the stock market has put up very impressive numbers. With
increased investor focus on large-cap stocks, the S&P 500 Index gained 34.70%.
In this environment, the Fund returned 10.88%. While the market's breadth
improved somewhat, large-capitalization stocks continued to lead their smaller
siblings. The Fund's concentration in mid- and small-cap stocks hurt its overall
performance, as compared to the stellar returns of the S&P 500 Index.
Although the first quarter of 1997 proved to be a difficult period for the Fund,
we are pleased with its most recent performance. The Fund gained some momentum
in the second quarter of 1997 as many stocks in the portfolio bounced back
nicely. While we remain somewhat concerned that the economy's underlying
strength may push up interest rates, our research efforts have successfully
uncovered compelling, individual ideas.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Growth Fund
--------------------------------------
(adjusted Standard & Poor's
(not adjusted for the maximum 500
for sales charge) 5.75% sales charge) Composite Index*
----------------- ------------------- -----------------
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
19643 18514 19666
18769 17690 19820
Mar 17536 16527 19007
17801 16777 20141
19020 17926 21367
Jun 97 19749 18613 22323
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 6/30/97. 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 credits
were allowed by the Custodian. In the absence of the waivers and absorption of
other expenses, or Custodian credits, yield and total return would have been
lower.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR SINCE INCEPTION
-----------------------------------------------
(April 5, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 5.45% 10.88% 17.43%
Fund (adjusted for the maximum 5.75% sales charge) -0.61% 4.50% 15.80%
Standard & Poor's 500 Composite Index* 20.61% 34.70% 21.26%
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR SINCE INCEPTION
-----------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 4.99% 9.99% 21.66%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.01% 5.30% 20.98%++
Standard & Poor's 500 Composite Index* 20.61% 34.70% 28.83%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 5.06% 10.06% 21.68%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 0.06% 5.36% 21.00%++
Standard & Poor's 500 Composite Index* 20.61% 34.70% 28.83%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
GROWTH FUND
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The large-stock indices continued to be tough competitors for active managers. A
growing trend toward indexing served to bolster the stocks that comprise the S&P
500 Index. New money continued to chase returns, and the "hot" sector of the
market was the large, liquid stocks of the major market indices. Although small-
to mid-sized stocks rallied back to new records, larger stocks maintained their
impressive lead in performance, and have dominated domestic equities for over a
year. In fact, when the second quarter of 1997 began, the dichotomy in returns
between large and small stocks had reached its highest point since 1937.
In addition, "value" stocks outperformed growth stocks in small-, mid-, and
large-cap stock categories. Value stocks are categorized as those issued by
companies with stock prices considered below market value. They have the
potential to increase their value based on market perception--not increased
growth. Historically within both the large- and small-cap asset sectors, value
and growth stocks have performed consistently in line with each other. However,
during this reporting period, there was greater divergence in their performance
than during any other period in history. Despite this gap, May and June
witnessed a recovery by growth stocks, and--due to their cyclical nature--we
expect them to more closely track value stock performance for the rest of 1997.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The portfolio is somewhat more varied than in the past, but several broad themes
still remain. These include health care and pharmaceuticals, technology and
telecommunications, financials, and selected retail and consumer products
companies.
Among our drug and health care holdings, Warner Lambert Company had an excellent
second quarter, up over 43%. We also own Rhone-Poulenc Rorer, Inc., which gained
some 23% this quarter. Finally, Sofamor Danek Group, Inc., a maker of surgical
spinal implants, was up. The company's products are capturing market share, and
it is bringing new products to market at a faster clip due to streamlined
approval procedures at the U.S. Food and Drug Administration.
On the technology front, we did well with a wide variety of stocks, from
equipment manufacturers Cisco Systems Inc. and Lucent Technologies, Inc., to
software developers Wind River Systems and Aspen Technology, Inc., to PC
retailer Compaq Computer Corporation.
Among our financial stocks, UNUM Corporation and Associates First Capital
Corporation turned in good performances. We also continue to own a number of
small thrifts, such as Rosyln Bancorp, Inc., Ambanc Holding Company Inc., and
Provident Financial Holdings, Inc. Finally, we reduced Wells Fargo & Company at
a significant profit after the integration of First Interstate proved more
problematic than expected.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Although we have trimmed positions that were fully priced or out of alignment
with previous earnings estimates, our commitment to exceptional earnings
potential has not wavered. This discipline served us well recently, and we
believe it will continue to serve us well going forward. Much of our concern
over the year has been that economic growth would pick up and interest rates
would have to move higher. However, low levels of inflation have helped to
maintain a positive environment for interest rates and corporate profitability.
Given this positive economic backdrop, the Fund should continue to provide
strong opportunities for growth investors.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION [PIE CHART]
- --------------------------------------------------------------------------------
Financial Services ....................................... 13.43%
Health Care .............................................. 12.47%
Technology ............................................... 12.11%
Computer Software & Services ............................. 10.96%
U.S. Government Agency ................................... 10.60%
Commercial Paper ......................................... 9.44%
Telecommunications ....................................... 8.82%
Materials & Processing ................................... 6.61%
Consumer Discretionary ................................... 5.42%
Auto & Transportation .................................... 4.32%
Energy ................................................... 2.66%
Retail ................................................... 1.61%
Other .................................................... 1.31%
Consumer Staples ......................................... 0.24%
Allocation percentages are based on total investment value of the
portfolio as of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
PORTFOLIO MANAGER:
JANUS CAPITAL CORPORATION
- ----------------------------
[Photo of James P. Goff]
- ----------------------------
James P. Goff
Mr. Goff has a degree from Yale University and is a Chartered Financial Analyst.
He has been with Janus since 1988, and has had primary portfolio management
responsibility for the SIERRA EMERGING GROWTH FUND since September 1993.
PERFORMANCE REVIEW:
From the Fund's inception (July 18, 1990) through June 30, 1997, the SIERRA
EMERGING GROWTH FUND (Class A Shares) has advanced 13.38% on an average annual
total return basis, or 12.42% adjusted for the maximum sales charge. For the
12-month period ended June 30, 1997, the Fund's total return was -1.50%, or
- -7.17% adjusted for the maximum sales charge. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
Domestic equities made strong gains over the past year, and the indices remain
at or near record levels. However, large-capitalization stocks paced the
market's returns, and small- to mid-sized stocks continued to trail the overall
market. During the period, the S&P 500 Index gained 34.70%, and the Standard &
Poor's MidCap 400 Index was up 23.37%. Meanwhile, the Sierra Emerging Growth
Fund was down 1.50%, underperforming the S&P 400 Index.
Small- and mid-capitalization stocks staged a rebound in the second quarter of
1997. The month of May, especially, saw a reversal in investor focus, as small-
and mid-sized stocks outperformed their larger counterparts by a wide margin. In
June, however, large caps were once again back on top. While the market's
additional breadth during the second quarter was a welcome change, the equity
markets continue to display a growing affinity for large, liquid stocks--as
evidenced by the Fund's underperformance during this period.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
For over a year, a major market dichotomy has persisted, with large-
capitalization stocks dominating smaller issues. At one point early in the
second quarter, the disparity in performance was the largest we have seen since
1937. A number of factors have contributed to this large-cap stock dominance,
including a long stretch of above- average corporate earnings, an affinity among
investors for liquidity, and "hot" money chasing a limited number of stocks.
This narrow focus on large-cap stocks has had a major negative impact on the
Fund, which invests primarily in smaller issues.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Emerging Growth Fund
--------------------------------------
(adjusted Standard & Poor's
(not adjusted for the maximum 500
for sales charge) 5.75% sales charge) Composite Index*
----------------- ------------------- -----------------
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 15689 15733
16627 15667 16197
16476 15526 16675
16499 15548 17342
Jun 17887 16855 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
22505 21211 26501
21967 20704 26709
Mar 20238 19074 25614
20317 19149 27142
22753 21445 28793
Jun 97 23944 22567 30082
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 6/30/97. 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 credits were allowed by the
Custodian. In the absence of the waivers, or Custodian credits, yield and total
return would have been lower.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 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) 3.10% -1.50% 15.04% 13.38%
Fund (adjusted for the maximum 5.75% sales charge) -2.83% -7.17% 13.68% 12.42%
Standard & Poor's 500 Composite Index* 20.61% 34.70% 19.78% 17.26%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 2.70% -2.26% N/A 16.78%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -2.30% -6.75% N/A 16.04%++
Standard & Poor's 500 Composite Index* 20.61% 34.70% N/A 28.83%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 2.70% -2.26% N/A 16.77%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -2.30% -6.75% N/A 16.03%++
Standard & Poor's 500 Composite Index* 20.61% 34.70% N/A 28.83%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
Another trend in the market that contributed to the Fund's underperformance was
that of value stocks outperforming their growth stock counterparts. Companies
with stock prices considered below market value are called value stocks, as they
have the potential to increase their value based on market perception--not
increased growth. Historically, value and growth stocks have performed
consistently in line with each other, within both the large- and small-cap asset
sectors. However, during this reporting period, there was a far greater
divergence in their performance than during any other period in history. Despite
this gap, May and June witnessed a recovery by growth stocks, and--due to their
cyclical nature--we expect them to more closely track value stock performance
for the rest of 1997.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Consistent with the Fund's investment strategy to identify emerging companies
with high-growth potential, the Fund owned a number of stocks that gained over
35% in the second quarter. These included Fastenal Company, Papa John's
International Inc., Premier Parks Inc., Omnicare Inc., and the Apollo Group,
Inc. Our research efforts continued to generate new investment ideas, and we
added positions in the media industry, including Evergreen Media Corporation,
Outdoor Systems Inc., Heftel Advertising Corporation, and Univision
Communications, Inc.
Even though the Fund registered strong gains across a broad spectrum of
holdings, we did experience some mild disappointments. Both HFS and Insignia
Financial Group, Inc., which have been great performers, were basically
unchanged. In both cases, we remain positive about the companies' prospects, and
the positions were maintained.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Despite the recent market volatility, we continue to be optimistic about the
intermediate- and long-term outlook for the Fund. A sign of the turnaround in
the Fund's performance is the above-average, double-digit returns achieved
during the second quarter of 1997. We believe that investors are only beginning
to be rewarded for their patience, and that, over the long term, the Fund will
continue to provide excellent capital appreciation in an investment portfolio.
In terms of the Fund's strategy, we remain squarely focused on individual stock
selection. We continue to search for companies that can grow their earnings in
any market environment. Ultimately, stock prices will follow superior earnings
growth. We remain enthusiastic about the Fund's current prospects and continue
to search for compelling investment ideas where our research can add value.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION [PIE-CHART]
- --------------------------------------------------------------------------------
Retail ................................................... 19.48%
Financial Services ....................................... 17.38%
Consumer Discretionary ................................... 16.19%
Restaurants .............................................. 14.86%
Health Care .............................................. 10.06%
Materials & Processing ................................... 5.68%
Commercial Paper ......................................... 3.89%
Autos & Transportation ................................... 2.70%
Producer Durables ........................................ 2.64%
Other .................................................... 2.69%
Consumer Staples ......................................... 1.99%
Telecommunication ....................................... 1.72%
Computer Software & Services ............................. 0.61%
Technology ............................................... 0.11%
Allocation percentages are based on total investment value of the
portfolio as of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
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 31 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, Managing Director, has 13 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, Managing Director, has 14 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 16 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,
Senior Vice President, has 10 years of investment experience. Prior to joining
Warburg, Mr. McBride was an international equity analyst at Smith Barney Inc.
from 1993 to 1994. He was an international equity analyst at General Electric
Investments from 1992 to 1993 and a portfolio manager/analyst at United Jersey
Bank from 1989 to 1992.
PERFORMANCE REVIEW:
From the Fund's inception (July 18, 1990) through June 30, 1997, the SIERRA
INTERNATIONAL GROWTH FUND (Class A Shares) has advanced 4.91% on an average
annual total return basis, or 4.02% adjusted for the maximum sales charge. For
the 12-month period ended June 30, 1997, the Fund's total return was 15.50%, or
8.86% adjusted for the maximum sales charge. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
Beginning April 8, 1996, Warburg, the Fund's portfolio manager, worked to bring
the portfolio in line with its International Equity discipline. In the third
quarter of 1996, the Fund saw strong performance from many of its holdings,
particularly in Europe. Despite the current weakness in Japan and South Korea,
we continue to view the long-term prospects of both of these markets favorably.
The fourth quarter of 1996 was a positive one for most foreign stock markets.
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.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
International Growth Fund
-------------------------------------- Morgan Stanley
(adjusted Capital
(not adjusted for the maximum International
for sales charge) 5.75% sales charge) EAFE Index*
----------------- ------------------- --------------
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 8360 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
12396 11684 13744
12502 11783 13967
12408 11695 14015
12597 11872 14088
13385 12616 15003
Jun 97 13950 13148 15829
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 6/30/97. 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 credits were allowed by
the Custodian. In the absence of the waivers, or Custodian credits, yield and
total return would have been lower.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(July 18, 1990)
<S> <C> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 13.07% 15.50% 9.47% 4.91%
Fund (adjusted for the maximum 5.75% sales charge) 6.57% 8.86% 8.19% 4.02%
Morgan Stanley Capital International EAFE Index* 11.21% 12.84% 12.83% 6.88%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
--------------------------------------------------------
(June 30, 1994)
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 12.70% 14.66% N/A 7.11%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 7.70% 9.66% N/A 6.23%++
Morgan Stanley Capital International EAFE Index* 11.21% 12.84% N/A 9.10%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 12.62% 14.61% N/A 7.08%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 7.62% 9.61% N/A 6.20%++
Morgan Stanley Capital International EAFE Index* 11.21% 12.84% N/A 9.10%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
The first three months of 1997 saw mixed performance for international stock
markets. Most European markets advanced in local-currency terms, though the
strong U.S. currency tempered those gains in dollar terms. Japan's equity market
struggled, hurt by ongoing concerns over the banking sector and the potential
impact higher taxes might have on Japan's economic recovery. Among emerging
markets, the most noteworthy performance belonged to Latin America -- led by
Brazil, whose market rose over 25% in both local currency and dollar terms.
During the second quarter of 1997, the turnaround in Japan's broad-market
averages reflected renewed bullishness for its economic prospects. Asian-Pacific
markets and Japan had varied results for the second quarter. Strong gainers
included Australia, a market that we have overweighted for the past several
quarters to good effect. European markets continued to show broad strength in
the second quarter, and the Fund's Latin American exposure continues to have a
favorable impact on its performance. Through the second quarter, the bulk of our
weighting remained concentrated in two countries, Argentina and Brazil. Both had
strong performance during the quarter, particularly Brazil.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The second half of 1996 provided positive, but geographically mixed results.
European markets were boosted by easier monetary policy while Asian-Pacific
markets generally fell. As 1997 opened, the strength of the U.S. Dollar tempered
gains in European markets and Japan's market struggled. Latin American markets
rose, led by Brazil's 25% increase in both local-currency and U.S. Dollar terms.
This performance continued into the second quarter as optimism for progress
continued to drive Latin American equities. European markets also flourished in
the second quarter and Asian-Pacific markets were led by a strong recovery in
Japan.
Throughout the period, the Fund continued to use a consistent bottom-up process
of evaluating companies while maintaining a top-down view of economies and
regions. The Fund also continued to look for value on a longer-term basis.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
During the first quarter of 1997, we trimmed the Fund's weightings in the
peripheral European markets, specifically Spain and Portugal. Spain rallied with
the decline in bond yields, but with our holdings approaching their target
prices, and given the increased potential for a delay in the launch of monetary
union, we decided to take some profits and redeploy those assets elsewhere.
We continue to find good opportunities in the U.K. and have increased the
Fund's weighting there. We had reduced our Japanese exposure to 17% as of the
end of March, taking profits on stocks that had met our target prices. Looking
ahead, we believe that the market has the potential to maintain its upward
momentum for at least since the next several quarters, and have increased
weighting in Japan to 25.8% as June 30, 1997. We have also increased the Fund's
weighting in Brazil in recent months. This has worked to the Fund's advantage
year to date, as the market has been the region's strongest performer.
By country, the Fund's largest European weighting was the U.K, which performed
particularly well in U.S. Dollar terms due to the strengthening Pound. The
Fund's largest weighting in continental Europe during the quarter was France,
which continued to perform well.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We feel that European holdings will continue to perform well. Germany has
performed particularly well for the Fund, motivating us to increase its
exposure. British companies have enjoyed strong profit growth in recent
quarters, and therefore, we remain underweighted in the U.K. Australian stocks
have grown increasingly positive given signs of a recovery in corporate
earnings. We are optimistic about South Korea--currently one of the cheapest
markets in the world--as its economy has been sufficiently discounted. We are
encouraged by the earnings outlook for many Hong Kong companies in 1997, and are
keeping a close watch on stock valuations. In Japan, our own estimate calls for
a higher growth rate and continued expansion in corporate earnings. This
combination should lead to a rebound in investor sentiment and a recovery in
share price.
We believe non-U.S. equities will continue to provide excellent long-term growth
opportunities. That said, we will continue to research those companies we feel
may provide long-term growth. We continue to find value in many markets and
believe 1997 stands to be a very rewarding year for international investors.
- --------------------------------------------------------------------------------
DIVERSIFICATION BY REGION [PIE CHART]
- --------------------------------------------------------------------------------
Asia ..................................................... 36.10%
Europe ................................................... 32.21%
Americas ................................................. 23.84%
Australia/New Zealand .................................... 7.32%
Africa ................................................... 0.53%
Allocation percentages are based on total investment value of the
portfolio as of 6/30/97.
<PAGE>
- --------------------------------------------------------------------------------
TARGET MATURITY 2002 FUND
PORTFOLIO MANAGER:
BLACKROCK FINANCIAL
MANAGEMENT, INC.
- ----------------------------
[Photo of Keith Anderson]
- ----------------------------
Keith Anderson
- ----------------------------
[Photo of Andrew J. Phillips]
- ----------------------------
Andrew J. Phillips
The day-to-day management of the SIERRA TARGET MATURITY 2002 FUND'S portfolio is
the responsibility of a committee composed of individuals who are officers of
BlackRock. This committee has managed the Fund since December 1994, and is
supervised by Keith Anderson and Andrew J. Phillips. Mr. Anderson, a Managing
Director of BlackRock, has been co-head of the Portfolio Management Group since
1988. Mr. Phillips has been a portfolio manager of BlackRock since 1991 and a
Principal of BlackRock since 1996.
PERFORMANCE REVIEW:
From the Fund's inception (March 20, 1995) through June 30, 1997, the SIERRA
TARGET MATURITY 2002 FUND advanced 7.79% on an average annual total return
basis, or 6.84% adjusted for the maximum sales charge. For the 12-month period
ended June 30, 1997, the Fund's total return was 6.95%, or 4.81% adjusted for
the maximum sales charge.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE 12-MONTH PERIOD ENDED JUNE 30, 1997?
The Fund's investment objective is to hold 90% of its assets in zero coupon
Treasury Notes of November 2002 maturity. Therefore its net asset value (NAV)
posted a minimal net change due to the small net change in the Treasury market
yields over the 12-month period.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Due to the small net change in the Treasury market yields over the 12-month
period, the Fund's NAV posted a minimal net change. However, interest rate
fluctuations during the period caused occasional price volatility. Based on the
fund's objectives and policies-- basically to provide the growth benefits of
long-term zero-coupon bonds maturing in 2002, we expect to remain neutral to
interim market conditions.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Consistent with the Fund's investment objective, we consistently held 90% of its
assets in November 2002 zero coupon Treasury STRIPs. Other than transactions to
accommodate subscriptions, liquidations, and annual dividends, there were no
shifts in holdings, and Fund performance was not impacted by these transactions.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
In our view, the Federal Reserve has managed to achieve a soft landing for the
economy. The economy's growth rate appears moderate, as indicated by recently
released lower retail sales and factory orders in May. Although data points
towards an economic slowdown, consumer confidence numbers reached a 28-year high
at the end of June. We anticipate that these high confidence levels will
increase consumer spending for the second half of the year. In addition, the
tight labor market should exert wage pressures on the economy, potentially
causing inflation. Consequently, the economy should continue to expand through
the end of the year. We expect the Federal Reserve to maintain the current
interest rate levels in the near term, but feel that strong economic growth
towards the end of the year may force interest rates higher.
Given the objective of the Fund to remain invested in Treasury STRIPS maturing
at its termination date, the Fund's NAV will move inversely to interest rates.
Should interest rates continue to fall in the second half of 1997, the Fund's
NAV is expected to rise. Over time, as its termination date approaches, the
duration of the Fund will shorten, lessening the impact on NAV of changes in
interest rates. When the termination date is reached, the November 2002 Treasury
STRIP will mature at par.
[LINE GRAPH]
GROWTH OF A $10,000 INVESTMENT (CLASS A SHARES)
Target Maturity 2002 Fund
-------------------------------------- Lehman Brothers
(adjusted Mutual Fund
(not adjusted for the maximum U.S. General
for sales charge) 5.75% sales charge) Government Index*
----------------- ------------------- -----------------
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 96 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
11643 11410 11627
Feb 11631 11399 11644
11443 11214 11520
Apr 11632 11399 11686
11732 11497 11787
Jun 97 11865 11628 11920
* Index total returns were calculated from 3/31/95 to 6/30/97. 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 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 credits were
allowed by the Custodian. In the absence of the waivers and absorption of other
expenses, or Custodian credits, yield and total return would have been lower.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(March 20, 1995)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 2.10% 6.95% 7.79%
Fund (adjusted for the maximum 2% sales charge) 0.06% 4.81% 6.84%
Lehman Brothers Mutual Fund U.S. General Government Index* 2.63% 7.40% 8.12%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SIERRA TRUST FUNDS
ANNUAL REPORT
------------------------------------
For the year ended June 30, 1997
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
SIERRA TRUST FUNDS
JUNE 30, 1997
<CAPTION>
SHORT TERM SHORT TERM
HIGH GLOBAL U.S. CORPORATE CALIFORNIA
QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
BOND FUND FUND FUND FUND FUND
---------- ---------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Note 2)
See portfolios of
investments (a) .. $20,156,215 $49,424,551 $478,326,512 $250,239,423 $338,604,972
Cash and/or foreign
currency (b) ...... 21,550 165,642 160,709 -- 41,769
Net unrealized
appreciation of
forward
foreign currency
contracts (Note 2)
See portfolios of
investments ....... -- 500,588 -- -- --
Dividends and/or
interest receivable 149,480 1,048,920 3,845,500 5,644,356 5,881,277
Receivable for Fund
shares sold ....... 13,624 33,739 19,885 27,709 46,253
Receivable for
investment
securities sold ... 12,772 -- 29,689,655 -- --
Variation margin
(Note 2) .......... 6,750 -- 296,875 -- --
Unamortized
organization costs
(Note 8) .......... 4,727 -- -- -- --
Receivable from
investment advisor 5,611 6,473 -- -- --
Prepaid expenses and
other assets ...... 1,527 5,086 81,353 11,990 14,119
----------- ----------- ------------ ------------ ------------
Total Assets .... 20,372,256 51,184,999 512,420,489 255,923,478 344,588,390
----------- ----------- ------------ ------------ ------------
LIABILITIES:
Net unrealized
depreciation of
forward
foreign currency
contracts (Note 2)
See portfolios of
investments ....... -- -- -- -- --
Options written, at
value (Premiums
received $126,371)
(Notes 2 and 6)
See portfolios of
investments ....... -- 86,510 -- -- --
Payable for dollar
roll transactions
(Notes 2 and 6) ... -- -- -- 28,747,979 --
Deferred income for
dollar roll
transactions
(Notes 2 and 6) ... -- -- -- 28,985 --
Reverse repurchase
agreements (Notes 2
and 6) ............ -- -- 91,789,563 -- --
Payable for Fund
shares redeemed ... 42,015 96,524 457,115 261,104 224,680
Payable for
investment
securities
purchased ......... -- -- 48,661,707 -- --
Investment advisory
fee payable (Note
3) ................ -- -- 23,322 32,695 43,389
Administration fee
payable (Note 3) .. 5,953 14,830 107,732 66,115 99,621
Shareholder servicing
and distribution
fees payable (Note
5) ................ 6,048 11,552 78,292 60,081 86,734
Dividends payable ... 37,812 109,897 1,098,646 692,832 539,985
Accrued legal and
audit fees ........ 16,836 39,791 28,950 26,009 24,136
Accrued transfer
agent fees ........ 10,230 16,628 71,986 59,374 31,795
Accrued Trustees'
fees and expenses
(Note 4) .......... 175 431 3,082 1,898 2,826
Accrued registration
and filing fees
payable ........... 3,630 2,926 -- -- --
Due to Custodian .... -- -- -- -- --
Accrued expenses and
other payables .... 19,583 11,740 168,079 34,476 56,494
----------- ----------- ------------ ------------ ------------
Total Liabilities 142,282 390,829 142,488,474 30,011,548 1,109,660
----------- ----------- ------------ ------------ ------------
NET ASSETS .......... $20,229,974 $50,794,170 $369,932,015 $225,911,930 $343,478,730
=========== =========== ============ ============ ============
- ----------------
(a) INVESTMENTS, AT
COST (NOTE 2) ..... $20,055,099 $50,819,677 $474,836,318 $240,671,845 $317,972,658
(b) CASH AND/OR
FOREIGN CURRENCY,
AT COST (NOTE 2) $ 21,550 $ 164,948 $ 160,709 $ -- $ 41,769
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA
FLORIDA INSURED
INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL TARGET
MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH MATURITY
FUND FUND FUND FUND FUND FUND FUND 2002 FUND
- ----------------- -------------- --------------- --------------- --------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$28,357,781 $65,290,463 $183,056,048 $362,914,978 $282,299,244 $252,094,857 $166,678,163 $2,715,324
66,100 47,750 -- 1,505 318,973 76,974 881,351 92,242
-- -- -- -- 295,493 -- 2,747,649 --
541,628 1,125,332 2,771,861 229,082 118,900 51,193 411,294 --
12,345 16,316 294 249,110 1,770,305 1,112,566 108,761 --
-- -- 3,076,721 475,677 1,103,300 4,587,148 2,399,567 --
-- -- -- -- -- -- -- --
12,457 2,840 -- -- 9,110 -- -- 32,330
3,776 -- -- -- -- -- -- 888
1,239 2,629 8,497 9,101 10,626 18,915 5,614 115
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
28,995,326 66,485,330 188,913,421 363,879,453 285,925,951 257,941,653 173,232,399 2,840,899
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
-- -- -- -- -- 406,520 -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- 186,180 59,137 382,788 232,232 806,651 859,111 --
1,035,727 -- -- 1,316,364 2,568,967 862,734 1,905,389 --
-- 75 36,336 223,311 208,078 181,939 115,551 --
8,104 19,149 54,802 105,491 79,944 73,224 48,943 832
9,000 26,638 42,927 78,490 58,099 64,998 26,022 594
53,110 59,361 370,321 -- -- -- -- --
14,997 17,405 24,436 26,076 22,210 22,958 31,529 12,884
4,008 8,094 17,411 82,296 82,919 94,917 49,288 980
232 540 1,568 2,901 2,214 1,915 1,352 24
5,162 2,904 230 30,964 19,989 4,969 8,983 1,728
-- -- 4,680 -- -- -- -- --
6,351 13,091 35,827 53,317 43,171 38,219 30,374 7,989
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
1,136,691 333,437 647,675 2,301,998 3,317,823 2,559,044 3,076,542 25,031
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
$27,858,635 $66,151,893 $188,265,746 $361,577,455 $282,608,128 $255,382,609 $170,155,857 $2,815,868
=========== =========== ============ ============ ============ ============ ============ ==========
$27,084,825 $61,992,856 $166,933,787 $311,818,728 $249,558,705 $178,564,684 $146,965,364 $2,701,220
$ 66,100 $ 47,750 $ -- $ 1,505 $ 319,739 $ 79,539 $ 876,523 $ 92,242
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
SIERRA TRUST FUNDS
JUNE 30, 1997
<CAPTION>
SHORT TERM SHORT TERM
HIGH GLOBAL U.S. CORPORATE CALIFORNIA
QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
BOND FUND FUND FUND FUND FUND
--------------- --------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
NET ASSETS
CONSIST OF:
Undistributed
net investment
income/
(accumulated
net investment
loss/
distributions
in excess of
net investment
income) ...... $ 16,879 $ 3,232,202 $ 26,210 $ 694 $ 33,691
Accumulated net
realized gain/
(loss) on
investments
sold, futures
contracts,
closed written
options,
forward foreign
currency
contracts
and foreign
currency
transactions . (1,637,456) (2,059,526) (73,160,966) (33,296,439) (8,226,227)
Net unrealized
appreciation/
(depreciation)
of investments,
foreign
currency,
written options,
futures
contracts,
forward foreign
currency
contracts and
other assets
and
liabilities .. 86,124 (861,022) 2,874,070 9,567,578 20,632,314
Paid-in capital 21,764,427 50,482,516 440,192,701 249,640,097 331,038,952
----------- ----------- ------------ ------------ ------------
Total Net
Assets ... $20,229,974 $50,794,170 $369,932,015 $225,911,930 $343,478,730
=========== =========== ============ ============ ============
NET ASSETS:
Class A Shares . $13,685,006 $44,255,652 $258,553,449 $195,530,521 $318,251,461
=========== =========== ============ ============ ============
Class B Shares . $ 2,993,682 $ 2,331,382 $ 20,370,022 $ 20,981,782 $ 25,219,136
=========== =========== ============ ============ ============
Class S Shares . $ 799,784 $ 473,579 $ 9,088,294 $ 2,121,394 $ 7,052
=========== =========== ============ ============ ============
Class I Shares . $ 2,751,502 $ 3,733,557 $ 81,920,250 $ 7,278,233 $ 1,081
=========== =========== ============ ============ ============
SHARES OUTSTANDING:
Class A Shares . 5,898,076 19,252,637 27,040,300 18,966,729 29,146,582
=========== =========== ============ ============ ============
Class B Shares . 1,290,338 1,014,294 2,130,374 2,035,268 2,309,607
=========== =========== ============ ============ ============
Class S Shares . 344,729 206,038 950,480 205,775 646
=========== =========== ============ ============ ============
Class I Shares . 1,185,878 1,624,325 8,567,415 705,975 99
=========== =========== ============ ============ ============
CLASS A SHARES:
Net asset value
per share of
beneficial
interest
outstanding* . $2.32 $2.30 $9.56 $10.31 $10.92
=========== =========== ============ ============ ============
Maximum sales
charge ......... 3.50% 3.50% 4.50% 4.50% 4.50%
Maximum offering
price per
share of
beneficial
interest
outstanding .. $2.40 $2.38 $10.01 $10.80 $11.43
=========== =========== ============ ============ ============
CLASS B SHARES:
Net asset value
and offering
price per
share of
beneficial
interest
outstanding* . $2.32 $2.30 $9.56 $10.31 $10.92
=========== =========== ============ ============ ============
CLASS S SHARES:
Net asset value
and offering
price per
share of
beneficial
interest
outstanding* . $2.32 $2.30 $9.56 $10.31 $10.92
=========== =========== ============ ============ ============
CLASS I SHARES:
Net asset value,
offering and
redemption
price per
share of
beneficial
interest
outstanding .. $2.32 $2.30 $9.56 $10.31 $10.92
=========== =========== ============ ============ ============
- --------------
* 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.
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA
FLORIDA INSURED
INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL TARGET
MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH MATURITY
FUND FUND FUND FUND FUND FUND FUND 2002 FUND
- --------------- ------------- -------------- -------------- -------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,892 $ 3,196 $ 63,957 $ 16,944 $ (114,094)+ $ (215,392)+ $ 1,856,754 $ 93,410
(2,719,108) 414,942 (7,865,048) 41,022,110 11,731,936 (6,791,126) 5,298,422 12,114
1,272,956 3,297,607 16,122,261 51,096,250 33,034,311 73,121,088 22,454,955 14,104
29,301,895 62,436,148 179,944,576 269,442,151 237,955,975 189,268,039 140,545,726 2,696,240
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
$27,858,635 $66,151,893 $188,265,746 $361,577,455 $282,608,128 $255,382,609 $170,155,857 $2,815,868
=========== =========== ============ ============ ============ ============ ============ ==========
$22,761,049 $45,156,682 $182,262,402 $168,687,115 $111,186,791 $165,719,142 $ 57,776,390 $2,815,868
=========== =========== ============ ============ ============ ============ ============ ==========
$ 5,067,286 $20,992,484 $ 6,000,911 $ 38,356,895 $ 30,396,646 $ 29,123,427 $ 4,875,995 --
============ =========== ============ ============= ============= ============= ============
$ 29,218 $ 1,664 $ 1,339 $ 13,726,113 $ 14,038,462 $ 8,340,761 $ 11,991,449 --
============ =========== ============ ============= ============= ============= ============
$ 1,082 $ 1,063 $ 1,094 $ 140,807,332 $ 126,986,229 $ 52,199,279 $ 95,512,023 --
============ =========== ============ ============= ============= ============= ============
2,291,279 4,205,143 16,332,950 10,590,644 7,462,279 9,066,672 4,876,565 263,366
=========== =========== ============ ============ ============ ============ ============ ==========
510,106 1,954,892 537,751 2,435,189 2,091,474 1,631,562 416,612 --
============ =========== ============ ============= ============= ============= ============
2,941 155 120 871,381 965,677 467,222 1,018,498 --
============ =========== ============ ============= ============= ============= ============
109 99 98 8,834,523 8,498,913 2,848,374 8,082,390 --
============ =========== ============ ============= ============= ============= ============
$9.93 $10.74 $11.16 $15.93 $14.90 $18.28 $11.85 $10.69
=========== =========== ============ ============ ============ ============ ============ ==========
4.50% 4.50% 4.50% 5.75% 5.75% 5.75% 5.75% 2.00%
$10.40 $11.25 $11.69 $16.90 $15.81 $19.40 $12.57 $10.91
=========== =========== ============ ============ ============ ============ ============ ==========
$9.93 $10.74 $11.16 $15.75 $14.53 $17.85 $11.70 --
============ =========== ============ ============= ============= ============= ============
$9.93 $10.74 $11.16 $15.75 $14.54 $17.85 $11.77 --
============ =========== ============ ============= ============= ============= ============
$9.93 $10.74 $11.16 $15.94 $14.94 $18.33 $11.82 --
============ =========== ============ ============= ============= ============= ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1997
<CAPTION>
SHORT TERM SHORT TERM
HIGH GLOBAL U.S. CORPORATE CALIFORNIA
QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
BOND FUND FUND FUND FUND FUND
--------------- --------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........... $ -- $ -- $ -- $ -- $ --
Foreign withholding
tax on dividend
income ............ -- -- -- -- --
Interest ............ 2,245,073 4,545,622 33,188,270 23,923,775 24,303,666
Foreign withholding
tax on interest
income ............ -- (73,700) -- -- --
Fee income (Note 6) . -- -- 2,724,218 1,144,852 --
---------- ---------- ----------- ----------- -----------
Total investment
income ........ 2,245,073 4,471,922 35,912,488 25,068,627 24,303,666
---------- ---------- ----------- ----------- -----------
EXPENSES:
Investment advisory
fee (Note 3) ...... 153,348 394,684 2,407,855 1,901,382 2,063,242
Administration fee
(Note 3) .......... 107,344 212,522 1,532,271 1,023,821 1,312,972
Custodian fees ...... 8,172 15,844 57,314 8,973 10,881
Legal and audit fees 17,832 41,538 65,551 51,272 55,347
Trustees' fees and
expenses (Note 4) . 1,297 2,563 17,555 11,669 15,132
Amortization of
organization costs
(Note 8) ......... 3,546 1,295 -- -- --
Registration and
filing fees ....... 25,995 20,883 13,426 14,742 7,397
Transfer agent fees 26,123 57,268 320,162 244,401 201,699
Other ............... 25,281 20,977 181,614 89,945 127,052
Shareholder servicing
and distribution
fees (Note 5):
Class A Shares .... 54,612 137,471 846,580 621,478 878,770
Class B Shares .... 32,976 20,862 223,698 232,463 236,173
Class S Shares .... 18,171 10,022 212,853 62,793 84
Interest expense
(Note 6) .......... -- -- 807,494 -- --
Fees waived and/or
expenses absorbed
by investment
advisor (Note 3) .. (194,184) (369,426) (1,373,736) (604,172) (1,080,813)
---------- ---------- ----------- ----------- -----------
Subtotal ........ 280,513 566,503 5,312,637 3,658,767 3,827,936
Credits allowed by
the custodian (Note
3) ................ (1,186) (2,250) (17,193) (92) (10,881)
---------- ---------- ----------- ----------- -----------
Net expenses .... 279,327 564,253 5,295,444 3,658,675 3,817,055
---------- ---------- ----------- ----------- -----------
NET INVESTMENT
INCOME/(LOSS) ..... 1,965,746 3,907,669 30,617,044 21,409,952 20,486,611
---------- ---------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
(Notes 2 and 6):
Realized gain/(loss) from:
Security
transactions ...... (86,136) (2,953) 4,408,451 1,712,345 4,949,142
Forward foreign
currency
contracts and
foreign
currency
transactions .... (92,271) 4,004,144 -- -- --
Futures contracts . (307,448) -- (3,087,615) -- 1,046,768
Written options ... 25,492 776,517 138,672 -- --
Net unrealized
appreciation/
(depreciation) of:
Securities ........ 194,806 (3,013,281) 3,595,919 1,997,323 4,909,399
Forward foreign
currency contracts -- (472,822) -- -- --
Foreign currency,
written options,
futures contracts
and other assets
and liabilities . 113,589 111,225 1,167,886 -- 272,682
---------- ---------- ----------- ----------- -----------
Net Realized and
Unrealized Gain/
(Loss) on
Investments ......... (151,968) 1,402,830 6,223,313 3,709,668 11,177,991
---------- ---------- ----------- ----------- -----------
NET INCREASE/
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS ... $1,813,778 $5,310,499 $36,840,357 $25,119,620 $31,664,602
========== ========== =========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA
FLORIDA INSURED
INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL TARGET
MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH MATURITY
FUND FUND FUND FUND FUND FUND FUND 2002 FUND
- ---------------- ------------- -------------- -------------- -------------- --------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ 4,762,283 $ 1,759,067 $ 794,726 $ 3,395,854 $ --
-- -- -- (41,209) (62,809) (66,298) (360,479) --
1,840,152 3,938,439 14,153,167 414,173 2,221,092 675,267 490,767 199,829
-- -- -- -- -- -- (546) --
-- -- -- -- -- -- -- --
---------- ---------- ----------- ----------- ----------- ------------ ----------- --------
1,840,152 3,938,439 14,153,167 5,135,247 3,917,350 1,403,695 3,525,596 199,829
---------- ---------- ----------- ----------- ----------- ------------ ----------- --------
173,618 398,681 1,179,610 2,121,809 2,418,645 2,600,399 1,444,004 7,756
110,484 253,706 750,661 985,905 927,458 1,050,164 616,002 10,859
5,346 6,644 545 32,554 49,075 22,869 60,812 2,502
18,775 23,359 42,459 43,351 44,327 51,349 57,447 14,762
1,396 3,018 8,711 11,545 10,503 11,433 7,132 249
13,143 1,622 -- -- 11,618 -- -- 11,757
21,617 14,066 19,455 62,400 49,357 34,794 35,608 12,468
20,860 38,901 117,313 260,567 268,219 333,648 179,343 3,166
16,962 31,186 83,676 83,973 75,990 79,092 73,257 18,671
65,937 127,645 519,329 427,815 351,870 515,021 210,904 7,756
51,822 214,209 67,347 306,944 281,050 290,649 46,201 --
87 73 70 201,470 282,990 220,213 248,013 --
-- -- -- -- -- -- -- --
(195,811) (350,384) (498,457) -- -- -- -- (67,474)
---------- ---------- ----------- ----------- ----------- ------------ ----------- --------
304,236 762,726 2,290,719 4,538,333 4,771,102 5,209,631 2,978,723 22,472
(5,346) (6,644) (545) (3,015) (11,084) (7,558) (5,631) (2,489)
---------- ---------- ----------- ----------- ----------- ------------ ----------- --------
298,890 756,082 2,290,174 4,535,318 4,760,018 5,202,073 2,973,092 19,983
---------- ---------- ----------- ----------- ----------- ------------ ----------- --------
1,541,262 3,182,357 11,862,993 599,929 (842,668) (3,798,378) 552,504 179,846
---------- ---------- ----------- ----------- ----------- ------------ ----------- --------
261,329 497,263 3,772,158 48,582,245 20,744,710 (6,711,277) 7,477,752 20,427
-- -- -- -- 384,143 (1,263,417) 1,306,240 --
81,975 32,447 (822,399) -- 2,725,995 -- -- --
-- -- -- -- -- -- -- --
678,418 1,035,421 2,986,951 30,882,635 4,160,670 (3,059,994) 13,539,911 6,041
-- -- -- -- 311,851 (83,949) 2,141,794 --
-- -- 576,614 -- 453,024 8,511 (40,820) --
---------- ---------- ----------- ----------- ----------- ------------ ----------- --------
1,021,722 1,565,131 6,513,324 79,464,880 28,780,393 (11,110,126) 24,424,877 26,468
---------- ---------- ----------- ----------- ----------- ------------ ----------- --------
$2,562,984 $4,747,488 $18,376,317 $80,064,809 $27,937,725 $(14,908,504) $24,977,381 $206,314
========== ========== =========== =========== =========== ============ =========== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1997
<CAPTION>
SHORT TERM SHORT TERM
HIGH GLOBAL U.S. CORPORATE CALIFORNIA
QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
BOND FUND FUND FUND FUND FUND
------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss).. $ 1,965,746 $ 3,907,669 $ 30,617,044 $ 21,409,952 $ 20,486,611
Net realized gain/(loss)
on investments sold, forward
foreign currency contracts,
foreign currency
transactions,futures
contracts and closed
written options during
year ....................... (460,363) 4,777,708 1,459,508 1,712,345 5,995,910
Net unrealized appreciation/
(depreciation) of
investments, forward foreign
currency contracts, foreign
currency, futures contracts,
written options and other
assets and liabilities
during the year ........... 308,395 (3,374,878) 4,763,805 1,997,323 5,182,081
----------- ----------- ------------ ------------ ------------
Net increase/(decrease) in
net assets resulting from
operations ................ 1,813,778 5,310,499 36,840,357 25,119,620 31,664,602
Distributions to shareholders
from:
Net investment income:
Class A Shares ............ (1,327,651) (4,366,746) (23,090,174) (18,329,881) (19,363,780)
Class B Shares ............ (173,000) (147,613) (1,358,038) (1,539,683) (1,122,377)
Class S Shares ............ (97,246) (64,154) (1,289,588) (414,635) (398)
Class I Shares ............ (227,346) (236,676) (3,934,658) (1,101,212) (56)
Distributions in excess of
net investment income:
Class A Shares ............ -- (66,521) -- -- --
Class B Shares ............ -- (2,524) -- -- --
Class S Shares ............ -- (1,212) -- -- --
Class I Shares ............ -- (3,198) -- -- --
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 ............ (18,780,368) (21,914,003) (171,112,508) (107,005,388) (64,410,300)
Class B Shares ............ (447,758) 732,523 (3,658,433) (3,964,149) 3,983,769
Class S Shares ............ (2,738,794) (1,766,241) (27,343,709) (10,100,174) (4,601)
Class I Shares ............ 2,800,633 3,788,648 82,261,445 8,113,113 1,056
----------- ----------- ------------ ------------ ------------
Net increase/(decrease) in
net assets ................ (19,177,752) (18,737,218) (112,685,306) (109,222,389) (49,252,085)
NET ASSETS:
Beginning of year ........... 39,407,726 69,531,388 482,617,321 335,134,319 392,730,815
----------- ----------- ------------ ------------ ------------
End of year ................. $20,229,974 $50,794,170 $369,932,015 $225,911,930 $343,478,730
=========== =========== ============ ============ ============
Undistributed
net investment income/
(accumulated net
investment
loss/distributions
in excess of net
investment income) at
end of year ............... $ 16,879 $ 3,232,202 $ 26,210 $ 694 $ 33,691
=========== =========== ============ ============ ============
- --------------
+ Represents accumulated net investment loss.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA
FLORIDA INSURED
INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL TARGET
MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH MATURITY
FUND FUND FUND FUND FUND FUND FUND 2002 FUND
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,541,262 $ 3,182,357 $ 11,862,993 $ 599,929 $ (842,668) $ (3,798,378) $ 552,504 $ 179,846
343,304 529,710 2,949,759 48,582,245 23,854,848 (7,974,694) 8,783,992 20,427
678,418 1,035,421 3,563,565 30,882,635 4,925,545 (3,135,432) 15,640,885 6,041
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
2,562,984 4,747,488 18,376,317 80,064,809 27,937,725 (14,908,504) 24,977,381 206,314
(1,349,518) (2,354,600) (11,539,149) (365,513) -- -- (944,934) (200,615)
(226,428) (827,004) (323,451) -- -- -- (33,752) --
(386) (278) (336) -- -- -- -- --
(107) (47) (57) (217,472) -- -- (1,421,219) --
(7,232) -- -- -- -- -- -- --
(1,421) -- -- -- -- -- -- --
(3) -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- (231,272) -- (21,832,444) (19,083,057) (16,295,524) (740,078) (14,491)
-- (96,670) -- (4,043,990) (4,239,788) (2,456,114) (45,566) --
-- (52) -- (1,738,013) (2,712,699) (1,158,776) (157,954) --
-- (5) -- (8,369,768) (13,384,790) (5,828,460) (867,959) --
(7,880,857) (10,241,881) (57,409,222) (37,112,908) (62,908,925) (91,171,361) (65,266,118) (300,042)
(517,149) (312,536) (999,356) 10,202,559 6,890,521 3,406,635 (148,620) --
17,772 (9,871) (10,065) (18,552,284) (31,340,022) (31,941,983) (28,119,034) --
1,052 1,052 1,056 127,053,764 131,010,126 59,424,781 83,322,919 --
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
(7,401,293) (9,325,676) (51,904,263) 125,088,740 32,169,091 (100,929,306) 10,555,066 (308,834)
35,259,928 75,477,569 240,170,009 236,488,715 250,439,037 356,311,915 159,600,791 3,124,702
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
$27,858,635 $66,151,893 $188,265,746 $361,577,455 $282,608,128 $255,382,609 $170,155,857 $2,815,868
=========== =========== ============ ============ ============ ============ ============ ==========
$ 2,892 $ 3,196 $ 63,957 $ 16,944 $ (114,094)+ $ (215,392)+ $ 1,856,754 $ 93,410
=========== =========== ============ ============ ============= ============ ============ ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1996
<CAPTION>
SHORT TERM SHORT TERM
HIGH GLOBAL U.S. CORPORATE CALIFORNIA
QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
BOND FUND FUND FUND FUND FUND
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss) ...... $ 3,201,796 $ 5,710,992 $ 34,192,850 $ 26,520,261 $22,489,074
Net realized gain/(loss) on
investments sold, forward foreign
currency contracts, foreign
currency transactions, futures
contracts and closed written
options during year ............. (377,672) (970,087) (3,778,455) (4,000,643) 1,611,235
Net unrealized appreciation/
(depreciation) of investments,
forward foreign currency
contracts, foreign currency,
futures contracts, written
options and other assets and
liabilities during the year ....... (666,604) 3,610,468 (10,375,539) (8,362,491) 1,135,084
----------- ----------- ------------ ------------ ------------
Net increase in net assets
resulting from operations ....... 2,157,520 8,351,373 20,038,856 14,157,127 25,235,393
Distributions to shareholders from:
Net investment income:
Class A Shares .................. (2,639,086) (5,494,977) (30,531,601) (24,434,855) (21,866,901)
Class B Shares .................. (174,411) (86,193) (1,121,623) (1,340,683) (626,640)
Class S Shares .................. (298,588) (129,822) (880,081) (571,737) (533)
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 .................. -- -- -- -- --
Class B Shares .................. -- -- -- -- --
Class S Shares .................. -- -- -- -- --
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 .................. (10,594,238) (40,267,647) (25,372,120) (74,157,839) (36,668,868)
Class B Shares .................. 482,280 271,396 13,704,112 10,428,783 13,450,075
Class S Shares .................. 1,409,207 (127,202) 29,327,645 3,739,025 550
----------- ----------- ------------ ------------ ------------
Net increase/(decrease) in net
assets .......................... (9,721,139) (38,038,028) 5,165,188 (72,353,165) (20,476,924)
NET ASSETS:
Beginning of year ................. 49,128,865 107,569,416 477,452,133 407,487,484 413,207,739
----------- ----------- ------------ ------------ ------------
End of year ....................... $39,407,726 $69,531,388 $482,617,321 $335,134,319 $392,730,815
=========== =========== ============ ============ ============
Undistributed net investment
income/(accumulated net
investment loss/distributions
in excess of net investment
income) at end of year .......... $ (60,622) $ (209,594) $ 5,733 $ (1,086,967) $ 11,641
=========== =========== ============ ============ ============
- -----------
+ Represents accumulated net investment loss.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA
FLORIDA INSURED
INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL TARGET
MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH MATURITY
FUND FUND FUND FUND FUND FUND FUND 2002 FUND
- --------------- ------------- -------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,828,604 $ 3,180,851 $ 14,341,162 $ 1,072,309 $(1,431,171) $(3,226,481) $ 367,672 $ 179,239
165,899 440,760 576,065 38,695,166 45,403,726 38,607,083 6,536,009 6,184
688,756 381,603 1,676,780 4,454,639 3,794,146 48,527,972 7,897,590 (105,710)
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
2,683,259 4,003,214 16,594,007 44,222,114 47,766,701 83,908,574 14,801,271 79,713
(1,628,539) (2,545,490) (14,065,960) (1,085,188) -- -- (342,384) (116,707)
(207,585) (635,016) (281,673) (3,403) -- -- (3,408) --
(480) (435) (529) (6,969) -- -- (21,880) --
-- -- -- -- -- -- (387,700) --
-- -- -- -- -- -- (12,636) --
-- -- -- -- -- -- (85,984) --
-- (228,143) -- (13,503,328) (21,692,930) (9,918,927) (3,697,036) --
-- (63,002) -- (940,597) (1,672,535) (667,520) (128,323) --
-- (47) -- (1,874,729) (3,964,701) (1,150,942) (780,562) --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
(4,691,281) (534,327) (37,924,473) (9,476,108) 7,653,290 36,111,196 16,833,441 535,878
2,048,994 8,572,391 2,018,598 15,589,484 16,910,255 14,676,449 1,980,810 --
500 495 554 12,104,463 25,017,241 25,583,609 26,294,322 --
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
(1,795,132) 8,569,640 (33,659,476) 45,025,739 70,017,321 148,542,439 54,449,931 498,884
37,055,060 66,907,929 273,829,485 191,462,976 180,421,716 207,769,476 105,150,860 2,625,818
----------- ----------- ------------ ------------ ------------ ------------ ------------ ----------
$35,259,928 $75,477,569 $240,170,009 $236,488,715 $250,439,037 $356,311,915 $159,600,791 $3,124,702
=========== =========== ============ ============ ============ ============ ============ ==========
$ 35,177 $ 2,768 $ 39,645 $ -- $ (165,570)+ $ 322,571 $ 1,605,235 $ 102,422
=========== =========== ============ ============ ============ ============ ============ ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1997*
<CAPTION>
SHORT TERM SHORT TERM
HIGH GLOBAL U.S. CORPORATE CALIFORNIA
QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
BOND FUND FUND FUND FUND FUND
-------------- -------------- --------------- --------------- --------------
AMOUNT
<S> <C> <C> <C> <C> <C>
CLASS A:
Sold ..................... $ 2,416,682 $ 2,594,512 $ 22,504,342 $ 15,865,121 $ 24,072,942
Issued as reinvestment of
dividends .............. 854,246 2,804,953 14,092,927 9,639,881 12,279,190
Redeemed ................. (22,051,296) (27,313,468) (207,709,777) (132,510,390) (100,762,432)
-------------- -------------- --------------- --------------- --------------
Net decrease ............. $ (18,780,368) $ (21,914,003) $ (171,112,508) $ (107,005,388) $ (64,410,300)
============== ============== =============== =============== ==============
CLASS B:
Sold ..................... $ 589,127 $ 1,321,413 $ 3,401,300 $ 2,748,226 $ 7,989,764
Issued as reinvestment of
dividends .............. 129,765 115,352 835,967 765,216 790,210
Redeemed ................ (1,166,650) (704,242) (7,895,700) (7,477,591) (4,796,205)
-------------- -------------- --------------- --------------- --------------
Net increase/(decrease) .. $ (447,758) $ 732,523 $ (3,658,433) $ (3,964,149) $ 3,983,769
============== ============== =============== =============== ==============
CLASS S:
Sold ..................... $ 252,492 $ 292,873 $ 8,342,190 $ 2,112,787 $ 6,710
Issued as reinvestment of
dividends .............. 70,056 47,981 1,204,537 362,342 398
Redeemed ................. (3,061,342) (2,107,095) (36,890,436) (12,575,303) (11,709)
-------------- -------------- --------------- --------------- --------------
Net increase/(decrease) .. $ (2,738,794) $ (1,766,241) $ (27,343,709) $ (10,100,174) $ (4,601)
============== ============== =============== =============== ==============
CLASS I:
Sold ..................... $ 7,949,206 $ 5,360,254 $ 95,097,314 $ 29,452,642 $ 1,000
Issued as reinvestment of
dividends .............. -- -- -- -- 56
Redeemed ................. (5,148,573) (1,571,606) (12,835,869) (21,339,529) --
-------------- -------------- --------------- --------------- --------------
Net increase ............. $ 2,800,633 $ 3,788,648 $ 82,261,445 $ 8,113,113 $ 1,056
============== ============== =============== =============== ==============
SHARES
CLASS A:
Sold ..................... 1,042,539 1,126,127 2,386,050 1,552,541 2,233,283
Issued as reinvestment of
dividends .............. 368,009 1,215,442 1,481,664 941,638 1,138,174
Redeemed (9,497,646) (11,829,475) (21,821,064) (12,913,788) (9,335,254)
-------------- -------------- --------------- --------------- --------------
Net decrease ............. (8,087,098) (9,487,906) (17,953,350) (10,419,609) (5,963,797)
============== ============== =============== =============== ==============
CLASS B:
Sold ..................... 254,315 571,754 359,307 269,118 742,146
Issued as reinvestment of
dividends .............. 55,922 49,992 87,699 74,739 73,182
Redeemed ................. (502,572) (304,570) (832,090) (730,698) (443,547)
-------------- -------------- --------------- --------------- --------------
Net increase/(decrease) .. (192,335) 317,176 (385,084) (386,841) 371,781
============== ============== =============== =============== ==============
CLASS S:
Sold ..................... 108,858 127,421 897,373 208,078 629
Issued as reinvestment of
dividends .............. 30,150 20,838 116,865 35,484 37
Redeemed ................. (1,316,825) (909,052) (3,856,138) (1,219,937) (1,085)
-------------- -------------- --------------- --------------- --------------
Net increase/(decrease) .. (1,177,817) (760,793) (2,841,900) (976,375) (419)
============== ============== =============== =============== ==============
CLASS I:
Sold ..................... 3,412,404 2,307,924 9,933,369 2,833,815 95
Issued as reinvestment of
dividends .............. -- -- -- -- 4
Redeemed ................. (2,226,526) (683,599) (1,365,954) (2,127,840) --
-------------- -------------- --------------- --------------- --------------
Net increase ............. 1,185,878 1,624,325 8,567,415 705,975 99
============== ============== =============== =============== ==============
- --------------
*The Funds, with the exception of the Target Maturity 2002 Fund, began selling
Class I shares, in addition to Class A, Class B and Class S shares, on July 25,
1996.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA
FLORIDA INSURED
INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL TARGET
MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH MATURITY
FUND FUND FUND FUND FUND FUND FUND 2002 FUND
------------- -------------- -------------- -------------- -------------- --------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,152,770 $ 6,433,077 $ 21,456,182 $ 162,867,677 $ 106,289,081 $ 174,380,122 $ 111,215,761 $ 198,410
663,299 1,935,689 6,634,902 21,805,761 18,433,017 16,032,518 1,660,481 214,280
(10,696,926) (18,610,647) (85,500,306) (221,786,346) (187,631,023) (281,584,001) (178,142,360) (712,732)
------------- -------------- -------------- -------------- -------------- --------------- -------------- ---------
$ (7,880,857) $ (10,241,881) $ (57,409,222) $ (37,112,908) $ (62,908,925) $ (91,171,361) $ (65,266,118) $(300,042)
============= ============== ============== ============== ============== ============== ============== =========
$ 920,129 $ 3,085,841 $ 1,102,857 $ 15,152,340 $ 19,851,498 $ 23,017,303 $ 1,321,751 --
151,321 705,578 185,464 3,980,455 4,183,527 2,398,228 77,717 --
(1,588,599) (4,103,955) (2,287,677) (8,930,236) (17,144,504) (22,008,896) (1,548,088) --
------------- -------------- -------------- -------------- -------------- -------------- --------------
$ (517,149) $ (312,536) $ (999,356) $ 10,202,559 $ 6,890,521 $ 3,406,635 $ (148,620) --
============= ============== ============== ============== ============== ============== ==============
$ 27,586 $ -- $ -- $ 11,162,915 $ 11,228,550 $ 8,285,980 $ 12,591,343 --
386 329 335 1,686,456 2,644,251 1,126,275 154,429 --
(10,200) (10,200) (10,400) (31,401,655) (45,212,823) (41,354,238) (40,864,806) --
------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,772 $ (9,871) $ (10,065) $ (18,552,284) $ (31,340,022) $ (31,941,983) $ (28,119,034) --
============= ============== ============== ============== ============== ============== ==============
$ 1,000 $ 1,000 $ 1,000 $133,923,342 $131,408,441 $ 98,759,210 $102,400,555 --
52 52 56 -- -- -- -- --
-- -- -- (6,869,578) (398,315) (39,334,429) (19,077,636) --
------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 1,052 $ 1,052 $ 1,056 $ 127,053,764 $ 131,010,126 $ 59,424,781 $ 83,322,919 --
============= ============== ============== ============== ============== ============== ==============
219,446 603,408 1,958,051 11,215,500 7,003,738 9,426,433 10,541,386 18,881
67,495 181,346 601,785 1,595,364 1,319,471 928,883 159,831 20,369
(1,088,997) (1,743,747) (7,769,898) (15,206,678) (12,312,534) (15,355,631) (16,902,883) (67,265)
------------- -------------- -------------- -------------- -------------- --------------- -------------- ---------
(802,056) (958,993) (5,210,062) (2,395,814) (3,989,325) (5,000,315) (6,201,666) (28,015)
============= ============== ============== ============== ============== ============== ============== =========
93,965 289,579 100,499 1,051,658 1,352,409 1,294,271 127,312 --
14,770 66,108 16,815 293,544 305,813 141,655 7,547 --
(161,649) (385,086) (207,225) (615,030) (1,187,173) (1,259,280) (146,269) --
------------- -------------- -------------- -------------- -------------- -------------- --------------
(52,914) (29,399) (89,911) 730,172 471,049 176,646 (11,410) --
============= ============== ============== ============== ============== ============== ==============
2,774 -- -- 791,910 735,121 444,186 1,237,033 --
39 32 30 124,370 193,152 66,525 14,891 --
(1,039) (954) (940) (2,145,414) (2,912,975) (2,238,511) (3,980,047) --
------------- -------------- -------------- -------------- -------------- -------------- --------------
1,774 (922) (910) (1,229,134) (1,984,702) (1,727,800) (2,728,123) --
============= ============== ============== ============== ============== ============== ==============
103 95 93 9,288,164 8,525,955 5,305,292 9,883,459 --
6 4 5 -- -- -- -- --
-- -- -- (453,641) (27,042) (2,456,918) (1,801,069) --
------------- -------------- -------------- -------------- -------------- -------------- --------------
109 99 98 8,834,523 8,498,913 2,848,374 8,082,390 --
============= ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY (CONTINUED)
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1996
<CAPTION>
SHORT TERM SHORT TERM
HIGH GLOBAL U.S. CORPORATE CALIFORNIA
QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
BOND FUND FUND FUND FUND FUND
------------- ------------- ------------- -------------- --------------
AMOUNT
CLASS A:
<S> <C> <C> <C> <C> <C>
Sold .................... $ 45,305,421 $ 6,434,828 $ 91,110,162 $ 47,008,825 $ 34,069,875
Issued as reinvestment of
dividends ............. 1,923,361 3,769,772 18,152,728 13,378,553 14,076,628
Redeemed ................ (57,823,020) (50,472,247) (134,635,010) (134,545,217) (84,815,371)
------------- ------------- ------------- -------------- --------------
Net increase/(decrease).. $ (10,594,238) $ (40,267,647) $ (25,372,120) $ (74,157,839) $ (36,668,868)
============= ============= ============= ============== ==============
CLASS B:
Sold .................... $ 1,843,435 $ 517,070 $ 16,616,782 $ 15,286,512 $ 15,440,023
Issued as reinvestment of
dividends ............. 130,535 65,051 696,997 661,629 454,106
Redeemed ................ (1,491,690) (310,725) (3,609,667) (5,519,358) (2,444,054)
------------- ------------- ------------- -------------- --------------
Net increase ............ $ 482,280 $ 271,396 $ 13,704,112 $ 10,428,783 $ 13,450,075
============= ============= ============= ============== ==============
CLASS S:
Sold .................... $ 17,113,179 $ 2,340,079 $ 30,599,063 $ 9,973,109 $ --
Issued as reinvestment of
dividends ............. 256,069 116,648 833,015 509,009 550
Redeemed ................ (15,960,041) (2,583,929) (2,104,433) (6,743,093) --
------------- ------------- ------------- -------------- --------------
Net increase/(decrease) . $ 1,409,207 $ (127,202) $ 29,327,645 $ 3,739,025 $ 550
============= ============= ============= ============== ==============
SHARES
CLASS A:
Sold .................... 19,279,499 2,823,498 9,500,727 4,439,689 3,184,417
Issued as reinvestment of
dividends ............. 820,274 1,650,964 1,882,759 1,270,593 1,312,377
Redeemed ................ (24,720,148) (22,088,752) (13,977,794) (12,778,541) (7,935,718)
------------- ------------- ------------- -------------- --------------
Net increase/(decrease) . (4,620,375) (17,614,290) (2,594,308) (7,068,259) (3,438,924)
============= ============= ============= ============== ==============
CLASS B:
Sold .................... 782,937 226,638 1,718,996 1,447,368 1,438,143
Issued as reinvestment of
dividends ............. 55,691 28,488 72,444 63,015 42,376
Redeemed ................ (637,527) (136,155) (377,363) (527,389) (229,223)
------------- ------------- ------------- -------------- --------------
Net increase ............ 201,101 118,971 1,414,077 982,994 1,251,296
============= ============= ============= ============== ==============
CLASS S:
Sold .................... 7,296,744 1,025,154 3,217,067 944,929 --
Issued as reinvestment of
dividends ............. 109,688 51,009 86,865 48,653 50
Redeemed ................ (6,864,612) (1,128,546) (219,071) (638,205) --
------------- ------------- ------------- -------------- --------------
Net increase/(decrease) . 541,820 (52,383) 3,084,861 355,377 50
============= ============= ============= ============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA
FLORIDA INSURED
INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL TARGET
MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH MATURITY
FUND FUND FUND FUND FUND FUND FUND 2002 FUND
------------ ------------- ------------- -------------- -------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5,527,723 $ 11,767,777 $ 67,171,006 $ 130,758,528 $ 264,718,419 $ 386,925,069 $ 176,648,351 $ 966,053
801,560 2,095,380 8,267,671 14,421,399 21,025,657 9,724,107 4,387,392 116,033
(11,020,564) (14,397,484) (113,363,150) (154,656,035) (278,090,786) (360,537,980) (164,202,302) (546,208)
------------ ------------- ------------- ------------- ------------- ------------- ------------- ----------
$ (4,691,281) $ (534,327) $ (37,924,473) $ (9,476,108) $ 7,653,290 $ 36,111,196 $ 16,833,441 $ 535,878
============ ============= ============= ============= ============= ============= ============= ==========
$ 3,000,149 $ 10,742,428 $ 3,192,343 $ 16,894,093 $ 17,217,291 $ 16,434,061 $ 2,649,861 --
135,115 526,187 163,852 928,373 1,658,263 663,089 142,345 --
(1,086,270) (2,696,224) (1,337,597) (2,232,982) (1,965,299) (2,420,701) (811,396)
------------- ----------- -------------- ------------- ------------ ------------- -------------
$ 2,048,994 $ 8,572,391 $ 2,018,598 $ 15,589,484 $ 16,910,255 $ 14,676,449 $ 1,980,810 --
============ ============= ============= ============= ============= ============= =============
$ -- $ -- $ -- $ 27,192,294 $ 36,970,622 $ 31,956,992 $ 28,886,599 --
500 495 554 1,868,391 3,938,760 1,144,027 881,574 --
-- -- -- (16,956,222) (15,892,141) (7,517,410) (3,473,851) --
------------ ------------- ------------- ------------- ------------- ------------- -------------
$ 500 $ 495 $ 554 $ 12,104,463 $ 25,017,241 $ 25,583,609 $ 26,294,322 --
============ ============= ============= ============= ============= ============= =============
567,167 1,101,756 6,132,609 9,665,189 17,410,639 20,858,749 17,342,075 88,006
82,376 195,402 753,398 1,108,522 1,490,125 547,529 442,357 10,379
(1,132,188) (1,346,623) (10,348,331) (11,315,736) (18,359,717) (19,340,963) (16,086,838) (50,572)
------------ ------------- ------------- -------------- -------------- ------------- ------------- ----------
(482,645) (49,465) (3,462,324) (542,025) 541,047 2,065,315 1,697,594 47,813
============ ============= ============= ============= ============= ============= ============= ==========
307,542 1,002,766 290,339 1,245,754 1,139,184 884,594 260,653 --
13,875 49,129 14,933 71,847 118,787 37,761 14,437 --
(111,655) (252,784) (122,487) (163,885) (128,776) (131,591) (80,125) --
------------- ----------- -------------- ------------- ------------- ------------- -------------
209,762 799,111 182,785 1,153,716 1,129,195 790,764 194,965 --
============ ============= ============= ============= ============= ============= =============
-- -- -- 2,011,945 2,421,489 1,767,771 2,856,688 --
50 44 49 144,483 282,148 65,113 89,685 --
-- -- -- (1,200,570) (1,081,090) (407,997) (342,566) --
------------- ----------- -------------- ------------- ------------- ------------- -------------
50 44 49 955,858 1,622,547 1,424,887 2,603,807 --
============ ============= ============= ============= ============= ============= =============
See Notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
U.S. GOVERNMENT FUND
YEAR ENDED JUNE 30, 1997
Cash used for financing activities:
Proceeds from capital shares sold .............. $ 130,097,379
Payments on capital shares redeemed ............ (265,485,615)
-------------
Cash used for capital share transactions ....... (135,388,236)
Dividends and distributions paid in cash ....... (13,378,497)
Net proceeds on dollar roll transactions ....... 10,115,981
Net proceeds on reverse repurchase agreements .. 91,789,563
Interest paid on reverse repurchase agreements . (751,115)
-------------
$(47,612,304)
CASH PROVIDED BY OPERATIONS:
Purchases of long-term portfolio securities ....(1,651,711,684)
Net proceeds from sales of short-term
investments .................................. 36,442,928
Proceeds from sales of long-term portfolio
securities ................................... 1,635,318,656
Net payments for futures transactions .......... (3,087,615)
Variation margin for futures transactions ...... 52,041
Premiums received for written options .......... 138,672
-------------
17,152,998
-------------
Net investment income .......................... 30,617,044
Net change in receivables/payables to related
to operations ................................ (305,665)
-------------
30,311,379 47,464,377
------------- ------------
Net decrease in cash ............................. (147,927)
Cash at beginning of year ........................ 308,636
------------
Cash at end of year .............................. $ 160,709
============
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
CORPORATE INCOME FUND
YEAR ENDED JUNE 30, 1997
Cash used for financing activities:
Proceeds from capital shares sold .............. $ 50,324,737
Payments on capital shares redeemed ............ (175,175,733)
-------------
Cash used for capital share transactions ....... (124,850,996)
Dividends and distributions paid in cash ....... (10,827,157)
Net payments on dollar roll transactions ....... (17,517,334)
-------------
$(153,195,487)
CASH PROVIDED BY OPERATIONS:
Purchases of long-term portfolio securities .... (55,844,418)
Net purchases of short-term investments ........ (4,923,686)
Proceeds from sales of long-term portfolio
securities ................................... 190,421,807
-------------
129,653,703
-------------
Net investment income .......................... 21,409,952
Net change in receivables/payables to related
to operations ................................ 2,131,832
-------------
23,541,784 153,195,487
------------
Net change in cash ............................... 0
Cash at beginning of year ........................ 0
------------
Cash at end of year .............................. $ 0
============
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94*
----- ----- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year ..... $ 2.32 $ 2.35 $ 2.39 $ 2.50
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.14 0.15++ 0.08 0.09
Net realized and unrealized gain/(loss)
on investments ........................ 0.00# (0.03) 0.02 (0.11)
------ ------ ------ ------
Total from investment operations ....... 0.14 0.12 0.10 (0.02)
LESS DISTRIBUTIONS:
Dividends from net investment income ... (0.14) (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 .................... (0.14) (0.15) (0.14) (0.09)
------ ------ ------ ------
Net asset value, end of year ........... $ 2.32 $ 2.32 $ 2.35 $ 2.39
====== ====== ====== ======
TOTAL RETURN+ 6.15% 5.05% 4.42% (0.73)%
====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ..... $13,685 $32,440 $43,811 $21,771
Ratio of operating expenses to average
net assets ............................ 0.82% 0.75% 0.75% 0.00%**
Ratio of net investment income to
average net assets .................... 6.50% 6.22% 6.10% 5.70%**
Portfolio turnover rate ................ 51% 225% 137% 95%
Ratio of operating expenses to average
net assets without credits allowed by
the custodian ......................... 0.82%(a) 0.75%(a) N/A N/A
Ratio of operating expenses to average
net assets without fee waivers,
expenses absorbed and/or credits
allowed by the custodian .............. 1.45%(a) 1.42%(a) 1.39% 1.61%**
Net investment income per share without
fee waivers, expenses absorbed and/or
credits allowed by the custodian ...... $ 0.13(a) $ 0.13++(a) $ 0.07 $ 0.06
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS I
CLASS B SHARES CLASS S SHARES SHARES
----------------------------------------- ------------------------------------- -------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
----------- ----- ----- --------- ----- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $ 2.32 $ 2.35 $ 2.39 $ 2.32 $ 2.35 $ 2.39 $ 2.32
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.12 0.13++ 0.06 0.12 0.13++ 0.06 0.14
Net realized and unrealized
gain/(loss) on investments .... 0.00# (0.03) 0.02 0.00# (0.03) 0.02 0.00#
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.12 0.10 0.08 0.12 0.10 0.08 0.14
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.12) (0.13) (0.06) (0.12) (0.13) (0.06) (0.14)
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 ............ (0.12) (0.13) (0.12) (0.12) (0.13) (0.12) (0.14)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year ... $ 2.32 $ 2.32 $ 2.35 $ 2.32 $ 2.32 $ 2.35 $ 2.32
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 5.37% 4.27% 3.64% 5.37% 4.27% 3.64% 5.94%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ........................ $2,994 $3,437 $3,015 $800 $3,531 $2,303 $2,752
Ratio of operating expenses to
average net assets ............ 1.57% 1.50% 1.50% 1.57% 1.50% 1.50% 0.57%**
Ratio of net investment income
to average net assets 5.75% 5.47% 5.35% 5.75% 5.47% 5.35% 6.75%**
Portfolio turnover rate ........ 51% 225% 137% 51% 225% 137% 51%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ..................... 1.57%(a) 1.50%(a) N/A 1.57%(a) 1.50%(a) N/A 0.57%**(a)
Ratio of operating expenses to
average net assets without fee
waivers, expenses absorbed and/
or credits allowed by the
custodian ..................... 2.20%(a) 2.17%(a) 2.14% 2.20%(a) 2.17%(a) 2.14% 1.20%**(a)
Net investment income per share
without fee waivers, expenses
absorbed and/or credits allowed
by the custodian .............. $ 0.11(a) $ 0.11++(a) $ 0.05 $ 0.11(a) $ 0.11++(a) $ 0.05 $ 0.13(a)
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
SHORT TERM GLOBAL GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ..... $ 2.29 $ 2.24 $ 2.34 $ 2.48 $ 2.56
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .. 0.15++ 0.15++ 0.17 0.17 0.19
Net realized and
unrealized gain/(loss)
on investments ........ 0.05 0.07 (0.12) (0.14) (0.04)
----- ----- ----- ----- -----
Total from investment
operations ............ 0.20 0.22 0.05 0.03 0.15
LESS DISTRIBUTIONS:
Dividends from net
investment income ..... (0.19) (0.16) (0.02) (0.13) (0.20)
Distributions in excess
of net investment
income ................ (0.00)# (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 .... (0.19) (0.17) (0.15) (0.17) (0.23)
------ ------ ------ ------ ------
Net asset value, end of
year .................. $ 2.30 $ 2.29 $ 2.24 $ 2.34 $ 2.48
====== ====== ====== ====== ======
TOTAL RETURN+ 8.86% 10.16% 2.10% 1.10% 6.03%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) ............ $44,256 $65,726 $103,986 $220,824 $215,348
Ratio of operating
expenses to average net
assets ................ 0.90% 0.85% 0.85% 0.85% 0.73%
Ratio of net investment
income to average net
assets ................ 6.46% 6.75% 7.22% 6.87% 7.67%
Portfolio turnover rate 83% 87% 217% 222% 294%
Ratio of operating
expenses to average net
assets without credits
allowed by the custodian 0.90%(a) 0.85%(a) N/A N/A N/A
Ratio of operating
expenses to average net
assets without fee
waivers and/or credits
allowed by the custodian 1.51%(a) 1.47%(a) 1.44% 1.52% 1.55%
Net investment income
per share without fee
waivers and/or credits
allowed by the custodian $ 0.14++(a) $ 0.14++(a) $ 0.16 $ 0.16 $ 0.17
- ----------------
+ Total return represents aggregate total return for the years 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 without cr edits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
SHORT TERM GLOBAL GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS I
CLASS B SHARES CLASS S SHARES SHARES
--------------------------------------- --------------------------------------- -------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $ 2.29 $ 2.24 $ 2.34 $ 2.29 $ 2.24 $ 2.34 $ 2.29
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.13++ 0.13++ 0.15 0.13++ 0.13++ 0.15 0.14++
Net realized and unrealized
gain/(loss) on investments .... 0.05 0.07 (0.12) 0.05 0.07 (0.12) 0.05
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.18 0.20 0.03 0.18 0.20 0.03 0.19
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.17) (0.14) (0.00)# (0.17) (0.14) (0.00)# (0.18)
Distributions in excess of net
investment income ............. (0.00)# (0.01) (0.00)# (0.00)# (0.01) (0.00)# (0.00)#
Distributions in excess of net
realized gains ................ -- -- (0.01) -- -- (0.01) --
Distributions from capital (Note 2) -- -- (0.12) -- -- (0.12) --
------ ------ ------ ------ ------ ------ ------
Total distributions ............ (0.17) (0.15) (0.13) (0.17) (0.15) (0.13) (0.18)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year ... $ 2.30 $ 2.29 $ 2.24 $ 2.30 $ 2.29 $ 2.24 $ 2.30
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 8.05% 9.33% 1.33% 8.05% 9.33% 1.33% 8.64%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $2,331 $1,594 $1,297 $474 $2,211 $2,286 $3,734
Ratio of operating expenses to
average net assets ............ 1.65% 1.60% 1.60% 1.65% 1.60% 1.60% 0.65%**
Ratio of net investment income
to average net assets ......... 5.71% 6.00% 6.47% 5.71% 6.00% 6.47% 6.71%**
Portfolio turnover rate ........ 83% 87% 217% 83% 87% 217% 83%
Ratio of operating expenses to
average net assets without
credits allowed by the custodian 1.65%(a) 1.60%(a) N/A 1.65%(a) 1.60%(a) N/A 0.65%**(a)
Ratio of operating expenses to
average net assets without fee
waivers and/or credits allowed
by the custodian .............. 2.26%(a) 2.22%(a) 2.19% 2.26%(a) 2.22%(a) 2.19% 1.26%**(a)
Net investment income per share
without fee waivers and/or
credits allowed by the custodian $ 0.12++(a) $ 0.12++(a) $ 0.14 $ 0.12++(a) $ 0.12++(a) $ 0.14 $ 0.13++(a)
- ----------------
* 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
without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
U.S. GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ................... $ 9.41 $ 9.67 $ 9.45 $10.65 $10.52
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...... 0.65 0.67 0.70 0.75 0.74
Net realized and unrealized
gain/(loss) on investments 0.15 (0.26) 0.22 (1.21) 0.16
------ ------ ------ ------ ------
Total from investment
operations ................ 0.80 0.41 0.92 (0.46) 0.90
LESS DISTRIBUTIONS:
Dividends from net
investment income ......... (0.65) (0.67) (0.70) (0.64) (0.74)
Distributions in excess of
net realized gains ........ -- -- -- (0.10) --
Distributions from capital
(Note 2) .................. -- -- -- -- (0.03)
------ ------ ------ ------ ------
Total distributions ........ (0.65) (0.67) (0.70) (0.74) (0.77)
------ ------ ------ ------ ------
Net asset value, end of year $ 9.56 $ 9.41 $ 9.67 $ 9.45 $10.65
====== ====== ====== ====== ======
TOTAL RETURN+ 8.75% 4.34% 10.17% (4.59)% 8.87%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) ................ $258,553 $423,282 $459,968 $666,566 $842,277
Ratio of operating expenses
to average net assets ..... 0.98% 0.70% 0.95% 1.05% 0.91%
Ratio of net investment
income to average net
assets .................... 7.04% 7.34% 7.58% 7.26% 6.98%
Portfolio turnover rate .... 389% 356% 226% 27% 67%
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian ............. 0.98%(a) 0.71%(a) N/A N/A N/A
Ratio of operating expenses
to average net assets
without fee waivers,
expenses absorbed and/or
credits allowed by the
custodian ................. 1.30%(a) 1.45%(a) 1.59% 1.34% 1.34%
Ratio of operating expenses
to average net assets
including interest expense 1.17% 0.82% 1.22% 1.06% 0.91%
Net investment income per
share without fee waivers,
expenses absorbed and/or
credits allowed by the
custodian ................. $ 0.62(a) $ 0.62(a) $ 0.66 $ 0.72 $ 0.70
- ----------------
+ Total return represents aggregate total return for the years 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 without credits allowed by the custodian.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
U.S. GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------- -------------------------------- --------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .......... $ 9.41 $ 9.67 $ 9.45 $ 9.41 $ 9.67 $ 9.45 $ 9.35
------- ------- ---------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........ 0.58 0.60 0.63 0.58 0.60 0.63 0.63
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 0.73 0.34 0.85 0.73 0.34 0.85 0.84
LESS DISTRIBUTIONS:
Dividends from net investment
income ..................... (0.58) (0.60) (0.63) (0.58) (0.60) (0.63) (0.63)
------- ------- ---------- ------- ------- ------- -------
Total distributions .......... (0.58) (0.60) (0.63) (0.58) (0.60) (0.63) (0.63)
------- ------- ---------- ------- ------- ------- -------
Net asset value, end of year $ 9.56 $ 9.41 $ 9.67 $ 9.56 $ 9.41 $ 9.67 $ 9.56
======= ======= ========== ======= ======= ======= =======
TOTAL RETURN+ ................ 7.94% 3.56% 9.36% 7.94% 3.56% 9.36% 9.21%
======= ======= ========== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $20,370 $23,668 $ 10,646 $ 9,088 $ 35,667 $ 6,839 $81,920
Ratio of operating expenses to
average net assets ......... 1.73% 1.45% 1.70% 1.73% 1.45% 1.70% 0.73%**
Ratio of net investment income to
average net assets ........ 6.29% 6.59% 6.83% 6.29% 6.59% 6.83% 7.29%**
Portfolio turnover rate ...... 389% 356% 226% 389% 356% 226% 389%
Ratio of operating expenses to
average net assets without
credits allowed by
the custodian ............. 1.73%(a) 1.46%(a) N/A 1.73%(a) 1.46%(a) N/A 0.73%**(a)
Ratio of operating expenses to
average net assets
without fee waivers, expenses
absorbed and/or 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 . 1.92% 1.57% 1.97% 1.92% 1.57% 1.97% 0.92%**
Net investment income per share
without fee waivers, expenses
absorbed and/or credits
allowed by the custodian ... $ 0.55(a) $ 0.55(a) $ 0.59 $ 0.55(a) $ 0.55(a) $ 0.59 $ 0.60(a)
- ----------------
* 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 without credits allowed by the custodian.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
CORPORATE INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ................... $10.16 $10.52 $ 9.87 $11.33 $10.52
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...... 0.76 0.76 0.68 0.80 0.84
Net realized and unrealized
gain/(loss) on investments 0.15 (0.36) 0.78 (1.35) 0.84
------ ------ ------ ------ ------
Total from investment
operations ................ 0.91 0.40 1.46 (0.55) 1.68
LESS DISTRIBUTIONS:
Dividends from net
investment income ......... (0.76) (0.76) (0.68) (0.78) (0.84)
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 ........ (0.76) (0.76) (0.81) (0.91) (0.87)
------ ------ ------ ------ ------
Net asset value, end of year $10.31 $10.16 $10.52 $ 9.87 $11.33
====== ====== ====== ====== ======
TOTAL RETURN+ 9.23% 3.81% 15.57% (5.32)% 16.64%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) .................... $195,531 $298,518 $383,642 $472,519 $396,357
Ratio of operating expenses
to average net assets ..... 1.18% 0.95% 0.90% 1.35% 1.24%
Ratio of net investment
income to average net
assets .................... 7.38% 7.23% 8.26% 7.19% 7.67%
Portfolio turnover rate .... 20% 25% 55% 30% 37%
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian ............. 1.18%(a) 0.95%(a) N/A N/A N/A
Ratio of operating expenses
to average net assets
without fee waivers and/or
credits allowed by the
custodian ................. 1.39%(a) 1.38%(a) 1.40% 1.42% 1.42%
Net investment income per
share without fee waivers
and/or credits allowed by
the custodian ............. $ 0.74(a) $ 0.72(a) $ 0.64 $ 0.80 $ 0.82
- ----------------
+ Total return represents aggregate total return for the years 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 without credits allowed by the custodian.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
CORPORATE INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------ ------------------------------- --------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ........... $10.16 $10.52 $ 9.87 $10.16 $10.52 $ 9.87 $10.03
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........ 0.68 0.68 0.61 0.68 0.68 0.61 0.73
Net realized and unrealized
gain/(loss)on investments ... 0.15 (0.36) 0.78 0.15 (0.36) 0.78 0.28
------ ------ ------ ------ ------ ------ ------
Total from investment
operations ................. 0.83 0.32 1.39 0.83 0.32 1.39 1.01
LESS DISTRIBUTIONS:
Dividends from net
investment income ........... (0.68) (0.68) (0.61) (0.68) (0.68) (0.61) (0.73)
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 .......... (0.68) (0.68) (0.74) (0.68) (0.68) (0.74) (0.73)
------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year . ............... $10.31 $10.16 $10.52 $10.31 $10.16 $10.52 $10.31
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ ................ 8.41% 3.04% 14.73% 8.41% 3.04% 14.73% 10.37%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) ................. $20,982 $24,606 $15,145 $2,121 $12,011 $8,701 $7,278
Ratio of operating expenses to
average net assets .......... 1.93% 1.70% 1.65% 1.93% 1.70% 1.65% 0.93%**
Ratio of net investment income
to average net assets ....... 6.63% 6.48% 7.51% 6.63% 6.48% 7.51% 7.63%**
Portfolio turnover rate ...... 20% 25% 55% 20% 25% 55% 20%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 1.93%(a) 1.70%(a) N/A 1.93%(a) 1.70%(a) N/A 0.93%**(a)
Ratio of operating expenses to
average net assets without
fee waivers and/or 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
credits allowed by the
custodian ................... $ 0.66(a) $ 0.64(a) $ 0.57 $ 0.66(a) $ 0.64(a) $ 0.57 $ 0.71(a)
- ----------------
* 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 without credits allowed by the custodian.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ................. $10.60 $10.53 $10.38 $11.22 $10.45
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .... 0.59 0.60++ 0.61 0.61 0.62
Net realized and
unrealized gain/(loss) on
investments ............. 0.32 0.07 0.15 (0.82) 0.77
------ ------ ------ ------ ------
Total from investment
operations .............. 0.91 0.67 0.76 (0.21) 1.39
LESS DISTRIBUTIONS:
Dividends from net
investment income ....... (0.59) (0.60) (0.61) (0.61) (0.62)
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 ...... (0.59) (0.60) (0.61) (0.63) (0.62)
------ ------ ------ ------ ------
Net asset value, end of
year .................... $10.92 $10.60 $10.53 $10.38 $11.22
====== ====== ====== ====== ======
TOTAL RETURN+ 8.83% 6.40% 7.57% (2.19)% 13.84%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) .............. $318,251 $372,177 $405,967 $509,223 $511,364
Ratio of operating
expenses to average net
assets .................. 0.97% 0.94% 0.85% 0.79% 0.80%
Ratio of net investment
income to average net
assets .................. 5.51% 5.56% 5.89% 5.45% 5.74%
Portfolio turnover rate .. 36% 17% 22% 50% 41%
Ratio of operating
expenses to average net
assets without credits
allowed by the custodian 0.97%(a) 0.94%(a) N/A N/A N/A
Ratio of operating
expenses to average net
assets without fee
waivers and/or credits
allowed by the custodian 1.26%(a) 1.29%(a) 1.29% 1.39% 1.41%
Net investment income per
share without fee waivers
and/or credits allowed by
the custodian ........... $ 0.56(a) $ 0.56++(a) $ 0.56 $ 0.54 $ 0.56
- ----------------
+ Total return represents aggregate total return for the years 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS I
CLASS B SHARES CLASS S SHARES SHARES
------------------------------------------ ------------------------------------ -------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $10.60 $10.53 $10.38 $10.60 $10.53 $10.38 $10.62
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.51 0.51++ 0.53 0.51 0.51++ 0.53 0.58
Net realized and unrealized gain
on investments ................ 0.32 0.07 0.15 0.32 0.07 0.15 0.30
------ ------ ------ ------ ------ ------ ------
Total from investment operations
............................... 0.83 0.58 0.68 0.83 0.58 0.68 0.88
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.51) (0.51) (0.53) (0.51) (0.51) (0.53) (0.58)
Distributions from net realized
gains ......................... -- -- (0.00)# -- -- (0.00)# --
------ ------ ------ ------ ------ ------ ------
Total distributions ............ (0.51) (0.51) (0.53) (0.51) (0.51) (0.53) (0.58)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year ... $10.92 $10.60 $10.53 $10.92 $10.60 $10.53 $10.92
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 8.02% 5.61% 6.78% 8.02% 5.61% 6.78% 8.49%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ........................ $25,219 $20,543 $7,230 $7 $11 $11 $1
Ratio of operating expenses to
average net assets ............ 1.72% 1.69% 1.60% 1.72% 1.69% 1.60% 0.72%**
Ratio of net investment income
to average net assets ......... 4.76% 4.81% 5.14% 4.76% 4.81% 5.14% 5.76%**
Portfolio turnover rate ........ 36% 17% 22% 36% 17% 22% 36%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ..................... 1.72%(a) 1.69%(a) N/A 1.72%(a) 1.69%(a) N/A 0.72%**(a)
Ratio of operating expenses to
average net assets without fee
waivers and/or credits allowed
by the custodian .............. 2.01%(a) 2.04%(a) 2.04% 2.01%(a) 2.04%(a) 2.04% 1.01%**(a)
Net investment income per share
without fee waivers
and/or credits allowed by the
custodian ..................... $ 0.48(a) $ 0.47++(a) $ 0.48 $ 0.48(a) $ 0.47++(a) $ 0.48 $ 0.55(a)
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ........................ $ 9.64 $ 9.43 $ 9.40 $10.05 $10.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........ 0.49++ 0.50 0.52 0.52 0.00#
Net realized and unrealized
gain/(loss) on investments .. 0.30 0.21 0.03## (0.65) 0.05
------ ------ ------ ------ ------
Total from investment
operations .................. 0.79 0.71 0.55 (0.13) 0.05
LESS DISTRIBUTIONS:
Dividends from net investment
income ...................... (0.50) (0.50) (0.52) (0.52) --
Distributions in excess of net
investment income ........... (0.00)# -- -- (0.00)# --
Distributions in excess of net
realized gains .............. -- -- -- (0.00)# --
------ ------ ------ ------ ------
Total distributions .......... (0.50) (0.50) (0.52) (0.52) --
------ ------ ------ ------ ------
Net asset value, end of year . $ 9.93 $ 9.64 $ 9.43 $ 9.40 $10.05
====== ====== ====== ====== ======
TOTAL RETURN+ 8.43% 7.56% 6.01% (1.50)% 0.50%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ...................... $22,761 $29,821 $33,714 $38,541 $4,837
Ratio of operating expenses to
average net assets .......... 0.82% 0.63% 0.39% 0.00% 0.00%**
Ratio of net investment income
to average net assets ....... 5.01% 5.08% 5.53% 5.09% 0.48%**
Portfolio turnover rate ...... 53% 52% 44% 83% 0%
Ratio of operating expenses to
average net assets without
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 credits
allowed by the custodian .... 1.46%(a) 1.46%(a) 1.51% 1.55% 5.59%**
Net investment income/(loss)
per share without fee
waivers, expenses absorbed
and/or credits allowed by the
custodian ................... $ 0.43++(a) $ 0.42(a) $ 0.42 $ 0.36 $(0.02)
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# 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 and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS I
CLASS B SHARES CLASS S SHARES SHARES
------------------------------------------ ------------------------------------ -------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $ 9.64 $ 9.43 $ 9.40 $ 9.64 $ 9.43 $ 9.40 $ 9.68
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.42++ 0.42 0.45 0.42++ 0.42 0.45 0.49++
Net realized and unrealized gain
on investments ................ 0.30 0.21 0.03## 0.30 0.21 0.03## 0.26
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.72 0.63 0.48 0.72 0.63 0.48 0.75
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.43) (0.42) (0.45) (0.43) (0.42) (0.45) (0.50)
Distributions in excess of net
investment income ............. (0.00)# -- -- (0.00)# -- -- (0.00)#
------ ------ ------ ------ ------ ------ ------
Total distributions ............ (0.43) (0.42) (0.45) (0.43) (0.42) (0.45) (0.50)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year ... $ 9.93 $ 9.64 $ 9.43 $ 9.93 $ 9.64 $ 9.43 $ 9.93
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 7.63% 6.76% 5.23% 7.63% 6.76% 5.23% 7.88%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ........................ $5,067 $5,428 $3,330 $29 $11 $11 $1
Ratio of operating expenses to
average net assets ............ 1.57% 1.38% 1.14% 1.57% 1.38% 1.14% 0.57%**
Ratio of net investment income
to average net assets ......... 4.26% 4.33% 4.78% 4.26% 4.33% 4.78% 5.26%**
Portfolio turnover rate ........ 53% 52% 44% 53% 52% 44% 53%
Ratio of operating expenses to
average net assets without
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 credits allowed by the
custodian ..................... 2.21%(a) 2.21%(a) 2.26% 2.21%(a) 2.21%(a) 2.26% 1.21%**(a)
Net investment income per share
without fee waivers, expenses
absorbed and/or credits allowed
by the
custodian ..................... $ 0.36++(a) $ 0.34(a) $ 0.35 $ 0.36++(a) $ 0.34(a) $ 0.35 $ 0.43++(a)
- ----------------
* 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 administratoror without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# 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 and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94*
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of year ...... $10.56 $10.45 $10.10 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................... 0.49++ 0.49 0.50 0.11
Net realized and unrealized gain on
investments ........................... 0.23 0.15 0.35 0.11##
------ ------ ------ ------
Total from investment operations ........ 0.72 0.64 0.85 0.22
LESS DISTRIBUTIONS:
Dividends from net investment income .... (0.49) (0.49) (0.50) (0.11)
Distributions from net realized
gains ................................. (0.05) (0.04) -- (0.01)
------ ------ ------ ------
Total distributions ..................... (0.54) (0.53) (0.50) (0.12)
------ ------ ------ ------
Net asset value, end of year ............ $10.74 $10.56 $10.45 $10.10
====== ====== ====== ======
TOTAL RETURN+ 6.97% 6.25% 8.71% 2.20%
====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ...... $45,157 $54,518 $54,507 $34,147
Ratio of operating expenses to
average net assets .................... 0.82% 0.73% 0.42% 0.00%**
Ratio of net investment income to
average net assets .................... 4.61% 4.62% 4.95% 4.25%**
Portfolio turnover rate ................. 29% 27% 13% 17%
Ratio of operating expenses to average
net assets without credits allowed by
the custodian ......................... 0.83%(a) 0.75%(a) N/A N/A
Ratio of operating expenses to average
net assets without fee waivers,
expenses absorbed and/or credits
allowed by the custodian .............. 1.31%(a) 1.39%(a) 1.41% 1.95%**
Net investment income per share
without fee waivers, expenses absorbed
and/or credits allowed by the custodian
....................................... $ 0.44++(a) $ 0.42(a) $ 0.40 $ 0.06
- --------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
## 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 and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS I
CLASS B SHARES CLASS S SHARES SHARES
------------------------------------------ ------------------------------------ -------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $10.56 $10.45 $10.10 $10.56 $10.45 $10.10 $10.58
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.41++ 0.41 0.43 0.41++ 0.41 0.43 0.49++
Net realized and unrealized gain
on investments ................ 0.23 0.15 0.35 0.23 0.15 0.35 0.21
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.64 0.56 0.78 0.64 0.56 0.78 0.70
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.41) (0.41) (0.43) (0.41) (0.41) (0.43) (0.49)
Distributions from net realized
gains ......................... (0.05) (0.04) -- (0.05) (0.04) -- (0.05)
------ ------ ------ ------ ------ ------ ------
Total distributions ............ (0.46) (0.45) (0.43) (0.46) (0.45) (0.43) (0.54)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year ... $10.74 $10.56 $10.45 $10.74 $10.56 $10.45 $10.74
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 6.17% 5.46% 7.90% 6.17% 5.46% 7.90% 6.70%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ........................ $20,992 $20,948 $12,391 $2 $11 $11 $1
Ratio of operating expenses to
average net assets ............ 1.57% 1.48% 1.17% 1.57% 1.48% 1.17% 0.57%**
Ratio of net investment income
to average net assets ......... 3.86% 3.87% 4.20% 3.86% 3.87% 4.20% 4.86%**
Portfolio turnover rate ........ 29% 27% 13% 29% 27% 13% 29%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ..................... 1.58%(a) 1.50%(a) N/A 1.58%(a) 1.50%(a) N/A 0.58%**(a)
Ratio of operating expenses to
average net assets without fee
waivers, expenses absorbed and/
or credits allowed by the
custodian ..................... 2.06%(a) 2.14%(a) 2.16% 2.06%(a) 2.14%(a) 2.16% 1.06%**(a)
Net investment income per share
without fee waivers, expenses
absorbed and/or credits allowed
by the
custodian ..................... $ 0.36++(a) $ 0.34(a) $ 0.33 $ 0.36++(a) $ 0.34(a) $ 0.33 $ 0.44++(a)
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
NATIONAL MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ................. $10.83 $10.76 $10.85 $11.65 $10.96
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .... 0.61++ 0.61 0.64 0.65 0.67
Net realized and
unrealized gain/(loss) on
investments ............. 0.33 0.07 0.01## (0.73) 0.75
------ ------ ------ ------ ------
Total from investment
operations .............. 0.94 0.68 0.65 (0.08) 1.42
LESS DISTRIBUTIONS:
Dividends from net
investment income ....... (0.61) (0.61) (0.64) (0.65) (0.67)
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 ...... (0.61) (0.61) (0.74) (0.72) (0.73)
------ ------ ------ ------ ------
Net asset value, end of
year .................... $11.16 $10.83 $10.76 $10.85 $11.65
====== ====== ====== ====== ======
TOTAL RETURN+ 8.91% 6.41% 6.32% (0.90)% 13.41%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) .............. $182,262 $233,359 $269,033 $354,501 $390,187
Ratio of operating
expenses to average net
assets .................. 1.04% 1.04% 0.83% 0.87% 0.86%
Ratio of net investment
income to average net
assets .................. 5.55% 5.58% 5.97% 5.60% 5.89%
Portfolio turnover rate .. 28% 25% 23% 44% 83%
Ratio of operating
expenses to average net
assets without credits
allowed by the custodian 1.04%(a) 1.04%(a) N/A N/A N/A
Ratio of operating
expenses to average net
assets without fee
waivers and/or credits
allowed by the custodian 1.28%(a) 1.29%(a) 1.30% 1.36% 1.37%
Net investment income per
share without fee waivers
and/or credits allowed by
the custodian ........... $ 0.58++(a) $ 0.58(a) $ 0.59 $ 0.59 $ 0.61
- ----------------
+ Total return represents aggregate total return for the years 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# 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 and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
NATIONAL MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS I
CLASS B SHARES CLASS S SHARES SHARES
------------------------------------------ ------------------------------------ -------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year .......................... $10.83 $10.76 $10.85 $10.83 $10.76 $10.85 $10.82
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......... 0.53++ 0.53 0.56 0.53++ 0.53 0.56 0.60++
Net realized and unrealized gain
on investments ................ 0.33 0.07 0.01## 0.33 0.07 0.01## 0.34
------ ------ ------ ------ ------ ------ ------
Total from investment operations
............................... 0.86 0.60 0.57 0.86 0.60 0.57 0.94
LESS DISTRIBUTIONS:
Dividends from net investment
income ........................ (0.53) (0.53) (0.56) (0.53) (0.53) (0.56) (0.60)
Distributions from net realized
gains ......................... -- -- (0.01) -- -- (0.01) --
Distributions in excess of net
realized gains ................ -- -- (0.09) -- -- (0.09) --
------ ------ ------ ------ ------ ------ ------
Total distributions ............ (0.53) (0.53) (0.66) (0.53) (0.53) (0.66) (0.60)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year ... $11.16 $10.83 $10.76 $11.16 $10.83 $10.76 $11.16
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 8.10% 5.62% 5.54% 8.10% 5.62% 5.54% 8.87%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ........................ $6,001 $6,800 $4,786 $1 $11 $11 $1
Ratio of operating expenses to
average net assets ............ 1.79% 1.79% 1.58% 1.79% 1.79% 1.58% 0.79%**
Ratio of net investment income
to average net assets ......... 4.80% 4.83% 5.22% 4.80% 4.83% 5.22% 5.80%**
Portfolio turnover rate ........ 28% 25% 23% 28% 25% 23% 28%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ..................... 1.79%(a) 1.79%(a) N/A 1.79%(a) 1.79%(a) N/A 0.79%**(a)
Ratio of operating expenses to
average net assets without fee
waivers and/or credits allowed
by the custodian .............. 2.03%(a) 2.04%(a) 2.05% 2.03%(a) 2.04%(a) 2.05% 1.03%**(a)
Net investment income per share
without fee waivers
and/or credits allowed by the
custodian ..................... $ 0.50++(a) $ 0.50(a) $ 0.51 $ 0.50++(a) $ 0.50(a) $ 0.51 $ 0.57++(a)
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
## 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 and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
GROWTH AND INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ...... $14.10 $12.58 $11.30 $12.09 $11.25
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ... 0.04++ 0.08++ 0.13 0.12 0.12
Net realized and
unrealized gain on
investments ............ 3.88 2.51 2.04 0.72 0.91
------ ------ ------ ------ ------
Total from investment
operations ............. 3.92 2.59 2.17 0.84 1.03
LESS DISTRIBUTIONS:
Dividends from net
investment income ...... (0.03) (0.08) (0.12) (0.12) (0.12)
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)
------ ------ ------ ------ ------
Net asset value, end of
year ................... $15.93 $14.10 $12.58 $11.30 $12.09
====== ====== ====== ====== ======
TOTAL RETURN+ 30.30% 21.36% 20.47% 6.67% 9.20%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) ............. $168,687 $183,084 $170,177 $125,249 $97,873
Ratio of operating
expenses to average net
assets ................. 1.53% 1.54% 1.56% 1.50% 1.46%
Ratio of net investment
income to average net
assets ................. 0.30% 0.60% 1.11% 1.04% 1.01%
Portfolio turnover rate . 107% 90% 72% 127% 47%
Ratio of operating
expenses to average net
assets without credits
allowed by the custodian 1.53%(a) 1.54%(a) N/A N/A N/A
Ratio of operating
expenses to average net
assets without fee
waivers and/or credits
allowed by the custodian 1.53%(a) 1.54%(a) 1.56% 1.59% 1.46%
Net investment income per
share without fee
waivers and/or credits
allowed by the custodian $ 0.04++(a) $ 0.08++(a) $ 0.13 $ 0.11 $ 0.12
Average commission rate
paid (b) ............... $0.0476 N/A N/A N/A N/A
- ----------------
+ Total return represents aggregate total return for the years 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number include custodian fees without 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>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
GROWTH AND INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS I
CLASS B SHARES CLASS S SHARES SHARES
----------------------------------------- ----------------------------------------- --------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ........................ $14.03 $12.55 $11.30 $14.04 $12.55 $11.30 $13.12
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) . (0.06)++ (0.02)++ 0.05 (0.06)++ (0.02)++ 0.05 0.07++
Net realized and unrealized
gain on investments ......... 3.84 2.50 2.04 3.83 2.51 2.04 4.87
------ ------ ------ ------ ------ ------ ------
Total from investment
operations .................. 3.78 2.48 2.09 3.77 2.49 2.09 4.94
LESS DISTRIBUTIONS:
Dividends from net investment
income ...................... -- (0.01) (0.07) -- (0.01) (0.07) (0.06)
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) (2.12)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year . $15.75 $14.03 $12.55 $15.75 $14.04 $12.55 $15.94
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 29.33% 20.53% 19.67% 29.24% 20.51% 19.75% 40.42%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ...................... $38,357 $23,924 $6,918 $13,726 $29,481 $14,368 $140,807
Ratio of operating expenses to
average net assets .......... 2.28% 2.29% 2.31% 2.28% 2.29% 2.31% 1.28%**
Ratio of net investment
income/(loss) to average net
assets ...................... (0.45)% (0.15)% 0.36% (0.45)% (0.15)% 0.36% 0.55%**
Portfolio turnover rate ...... 107% 90% 72% 107% 90% 72% 107%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 2.28%(a) 2.29%(a) N/A 2.28%(a) 2.29%(a) N/A 1.28%**(a)
Net investment income/(loss)
per share without credits
allowed by the custodian .... $(0.06)++(a) $(0.02)++(a) N/A $(0.06)++(a) $(0.02)++(a) N/A $ 0.07++(a)
Average commission rate paid(b) $0.0476 N/A N/A $0.0476 N/A N/A $0.0476
- -------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number include custodian fees without 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>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93*
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .... $15.69 $14.18 $10.73 $10.72 $10.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/
(loss) ............... (0.03)++ (0.07)++ 0.05++ (0.02) 0.00#
Net realized and
unrealized gain on
investments .......... 1.58 3.47 3.42 0.03## 0.72
------ ------ ------ ------ ------
Total from investment
operations ........... 1.55 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
year ................. $14.90 $15.69 $14.18 $10.73 $10.72
====== ====== ====== ====== ======
TOTAL RETURN+ 10.88% 25.44% 32.33% 0.00% 7.30%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) ........... $111,187 $179,720 $154,763 $126,808 $23,323
Ratio of operating
expenses to average
net assets ........... 1.70% 1.70% 1.76% 1.75% 1.44%**
Ratio of net investment
income/(loss) to
average net assets ... (0.22)% (0.49)% 0.28% (0.35)% (0.63)%**
Portfolio turnover rate 156% 205% 233% 227% 13%
Ratio of operating
expenses to average
net assets without
credits allowed by the
custodian ............ 1.70%(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
credits allowed the
custodian ............ 1.70%(a) 1.71%(a) 1.76% 1.75% 2.52%**
Net investment income/
(loss) per share
without fee waivers,
expenses absorbed
and/or credits allowed
by the custodian ..... $(0.03)++(a) $(0.07)++(a) $ 0.05++ $(0.02) $(0.01)
Average commission rate
paid (b) ............. $0.0433 N/A N/A N/A N/A
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# 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 and per share number include custodian fees without 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>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------- -------------------------------------- --------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $15.47 $14.10 $10.73 $15.47 $14.11 $10.73 $14.21
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) . (0.14)++ (0.19)++ (0.04)++ (0.14)++ (0.19)++ (0.04)++ 0.00#++
Net realized and unrealized
gain on investments ......... 1.54 3.45 3.42 1.55 3.44 3.42 3.07
------ ------ ------ ------ ------ ------ ------
Total from investment
operations .................. 1.40 3.26 3.38 1.41 3.25 3.38 3.07
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 year . $14.53 $15.47 $14.10 $14.54 $15.47 $14.11 $14.94
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 9.99% 24.54% 31.46% 10.06% 24.54% 31.44% 22.73%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ...................... $30,397 $25,067 $6,928 $14,038 $45,652 $18,730 $126,986
Ratio of operating expenses to
average net assets .......... 2.45% 2.45% 2.51% 2.45% 2.45% 2.51% 1.45%**
Ratio of net investment
income/(loss) to average net
assets ...................... (0.97)% (1.24)% (0.47)% (0.97)% (1.24)% (0.47)% 0.03%**
Portfolio turnover rate ...... 156% 205% 233% 156% 205% 233% 156%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 2.45%(a) 2.46%(a) N/A 2.45%(a) 2.46%(a) N/A 1.45%**(a)
Net investment income/(loss)
per share without credits
allowed by the custodian .... $(0.14)++(a) $(0.19)++(a) N/A $(0.14)++(a) $(0.19)++(a) N/A $ 0.00#++(a)
Average commission rate
paid (b) .................... $0.0433 N/A N/A $0.0433 N/A N/A $0.0433
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without 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>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
--------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .. $20.17 $15.47 $13.02 $13.76 $11.67
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ................. (0.21)++ (0.19)++ (0.00)++# (0.09) (0.02)
Net realized and unrealized gain/
(loss) on investments .............. (0.18) 5.65 2.77 0.68 2.31
------ ------ ------ ------ ------
Total from investment operations .... (0.39) 5.46 2.77 0.59 2.29
LESS DISTRIBUTIONS:
Distributions from net realized gains (1.50) (0.76) (0.32) (1.33) (0.20)
------ ------ ------ ------ ------
Total distributions ................. (1.50) (0.76) (0.32) (1.33) (0.20)
------ ------ ------ ------ ------
Net asset value, end of year ........ $18.28 $20.17 $15.47 $13.02 $13.76
====== ====== ====== ====== ======
TOTAL RETURN+ ....................... (1.50)% 35.93% 21.54% 3.40% 19.75%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) .. $165,719 $283,747 $185,722 $124,941 $96,646
Ratio of operating expenses to
average net assets ................. 1.64% 1.64% 1.68% 1.66% 1.59%
Ratio of net investment loss
to average net assets .............. (1.17)% (1.02)% (0.31)% (0.68)% (0.32)%
Portfolio turnover rate ............. 81% 131% 181% 224% 28%
Ratio of operating expenses to
average net assets without credits
allowed by the custodian ........... 1.64%(a) 1.65%(a) N/A N/A N/A
Net investment loss per share without
credits allowed by the custodian ... $(0.21)++(a) $(0.19)++(a) N/A N/A N/A
Average commission rate paid (b) .... $0.0330 N/A N/A N/A N/A
- ----------------
+ Total return represents aggregate total return for the years indicated and does not reflect any applicable sales charges.
The total returns would have been lower without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
# Amount represents less than $0.01 per share.
(a) The ratio and per share number include custodian fees without 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>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
-------------------------------------- ---------------------------------------- --------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ........................ $19.88 $15.37 $13.02 $19.88 $15.37 $13.02 $17.52
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss .......... (0.34)++ (0.32)++ (0.10)++ (0.34)++ (0.32)++ (0.10)++ (0.16)++
Net realized and unrealized
gain/(loss) on investments .. (0.19) 5.59 2.77 (0.19) 5.59 2.77 2.47##
------ ------ ------ ------ ------ ------ ------
Total from investment
operations .................. (0.53) 5.27 2.67 (0.53) 5.27 2.67 2.31
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 year . $17.85 $19.88 $15.37 $17.85 $19.88 $15.37 $18.33
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ (2.26)% 34.93% 20.69% (2.26)% 34.91% 20.76% 13.69%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ...................... $29,123 28,920 $10,208 $8,341 $43,645 $11,840 $52,199
Ratio of operating expenses to
average net assets .......... 2.39% 2.39% 2.43% 2.39% 2.39% 2.43% 1.39%**
Ratio of net investment loss
to average net assets ....... (1.92)% 1.77)% (1.06)% (1.92)% (1.77)% (1.06)% (0.92)%**
Portfolio turnover rate ...... 81% 131% 181% 81% 131% 181% 81%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 2.39%(a) 2.40%(a) N/A 2.39%(a) 2.40%(a) N/A 1.39%**(a)
Net investment loss per share
without credits allowed by
the custodian ............... $(0.34)++(a) $(0.32)++(a) N/A $(0.34)++(a) $(0.32)++(a) N/A $(0.16)++(a)
Average commission rate paid(b) $0.0330 N/A N/A $0.0330 N/A N/A $0.0330
- ---------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
## The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing o
sales and redemptions of Fund shares.
(a) The ratio and per share number include custodian fees without 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>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ...... $10.49 $ 9.78 $10.74 $ 9.80 $ 8.82
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/
(loss) ................. 0.04++ 0.05++ (0.11)++ 0.06 0.07
Net realized and
unrealized gain/(loss)
on investments ......... 1.55 1.21 (0.31) 1.15 0.94
------ ------ ------ ------ ------
Total from investment
operations ............. 1.59 1.26 (0.42) 1.21 1.01
LESS DISTRIBUTIONS:
Dividends from net
investment income ...... (0.13) (0.05) (0.04) (0.02) (0.03)
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)
------ ------ ------ ------ ------
Net asset value, end of
year ................... $11.85 $10.49 $ 9.78 $10.74 $ 9.80
====== ====== ====== ====== ======
TOTAL RETURN+ 15.50% 13.16% (4.01)% 12.39% 11.51%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year
(in 000's) ............. $57,776 $116,254 $91,763 $127,764 $56,962
Ratio of operating
expenses to average net
assets ................. 1.65% 1.77% 1.69% 1.69% 1.80%
Ratio of net investment
income to average net
assets ................. 0.35% 0.46% 0.62% 0.54% 1.07%
Portfolio turnover rate . 67% 125% 81% 44% 63%
Ratio of operating
expenses to average net
assets without credits
allowed by the custodian 1.65%(a) 1.77%(a) N/A N/A N/A
Net investment income per
share without credits
allowed by the
custodian .............. $ 0.04++(a) $ 0.05++(a) N/A N/A N/A
Average commission rate
paid (b) ............... $0.0057 N/A N/A N/A N/A
- ----------------
+ Total return represents aggregate total return for the years indicated and does not reflect any applicable sales charges. The
total returns would have been lower without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number include custodian fees without 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>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS I
CLASS B SHARES CLASS S SHARES SHARES
------------------------------------- -------------------------------------- -------------
YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95* 06/30/97 06/30/96 06/30/95* 06/30/97*
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year ........................ $10.39 $ 9.73 $10.74 $10.38 $ 9.73 $10.74 $ 9.88
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) . (0.04)++ (0.03)++ (0.17)++ (0.04)++ (0.03)++ (0.17)++ 0.06++
Net realized and unrealized
gain/(loss) on investments .. 1.53 1.21 (0.31) 1.53 1.20 (0.31) 2.15
------ ------ ------ ------ ------ ------ ------
Total from investment
operations .................. 1.49 1.18 (0.48) 1.49 1.17 (0.48) 2.21
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 year . $11.70 $10.39 $ 9.73 $11.77 $10.38 $ 9.73 $11.82
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 14.66% 12.34% (4.61)% 14.61% 12.29% (4.61)% 22.76%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's) ...................... $4,876 $4,447 $2,268 $11,991 $38,900 $11,120 $95,512
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 ...................... (0.40)% (0.29)% (0.13)% (0.40)% (0.29)% (0.13)% 0.60%**
Portfolio turnover rate ...... 67% 125% 81% 67% 125% 81% 67%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 2.40%(a) 2.52%(a) N/A 2.40%(a) 2.52%(a) N/A 1.40%**(a)
Net investment income/(loss)
per share without credits
allowed by the custodian .... $(0.04)++(a) $(0.03)++(a) N/A $(0.04)++(a) $(0.03)++(a) N/A $ 0.06++(a)
Average commission rate paid(b) $0.0057 N/A N/A $0.0057 N/A N/A $0.0057
- ----------------
* 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 without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number include custodian fees without 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>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
TARGET MATURITY 2002 FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
------------------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
06/30/97 06/30/96 06/30/95*
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of year ................ $10.72 $10.78 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.62++ 0.63 0.12
Net realized and unrealized gain/(loss) on
investments ...................................... 0.11 (0.30) 0.66
------ ------ ------
Total from investment operations .................. 0.73 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 year ...................... $10.69 $10.72 $10.78
====== ====== ======
TOTAL RETURN+ 6.95% 2.91% 7.80%
====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ................ $2,816 $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 ........................................... 5.80% 5.66% 5.22%**
Portfolio turnover rate ........................... 0% 5% 0%
Ratio of operating expenses to average net assets
without credits allowed by the custodian ......... 0.72%(a) 0.70%(a) N/A
Ratio of operating expenses to average net assets
without fee waivers, expenses absorbed and/or
credits
allowed by the custodian ......................... 2.89%(a) 2.55%(a) 4.71%**
Net investment income per share without fee
waivers, expenses absorbed and/or credits allowed
by the custodian ................................. $ 0.39++(a) $ 0.41(a) $ 0.03
- ----------------
* The Fund commenced operations on March 20, 1995.
** Annualized.
+ Total return represents aggregate total return for the period indicated and does not reflect any applicable sales charges.
The total return would have been lower if certain fees had not been waived and expenses absorbed by the investment advisor
and administrator or without credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number include custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
SHORT TERM HIGH QUALITY BOND FUND
JUNE 30, 1997
PRINCIPAL VALUE
AMOUNT (NOTE 2)
------ --------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 32.4%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 16.6%
$ 237,660 #038720, Seasoned,
11.000% due 02/15/2010** ......................... $ 266,110
129,168 #130183, Seasoned,
11.000% due 05/15/2015 ........................... 145,184
190,267 #131917, Seasoned,
11.000% due 10/15/2015** ......................... 214,197
22,725 #132833, Seasoned,
11.000% due 12/15/2015 ........................... 25,583
81,669 #139704, Seasoned,
11.000% due 11/15/2015 ........................... 91,795
194,202 #140835, Seasoned,
11.000% due 11/15/2015 ........................... 217,889
117,398 #189482, Seasoned,
11.000% due 04/15/2020 ........................... 132,349
1,049,990 #267824, Seasoned,
10.000% due 04/15/2018** ......................... 1,156,102
312,427 #291375, Seasoned,
11.000% due 08/15/2020** ......................... 353,374
106,489 #377550, Seasoned,
8.000% due 03/15/2012 ............................ 109,915
629,383 #400224, Seasoned,
8.000% due 06/15/2009 ............................ 650,423
-----------
Total GNMAs (Cost $3,327,489) ....................... 3,362,921
-----------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES
(ARM) - 11.4%
Federal Home Loan Mortgage Corporation (FHLMC),
545,048 #845988,
7.807% due 11/01/2021+ ........................... 571,194
Federal National Mortgage Association (FNMA):
474,155 #82247,
6.125% due 04/01/2019+ ........................... 468,674
256,606 #124571,
7.847% due 11/01/2022+ ........................... 268,915
294,356 #152205,
7.498% due 01/01/2019+ ........................... 305,255
701,514 #313257,
6.056% due 11/01/2035+ ........................... 693,405
-----------
Total ARMs (Cost $2,288,130) ....................... 2,307,443
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) - 4.4%
425,175 #250235, 7 Year Balloon,
8.500% due 02/01/2002 ............................ 436,498
408,149 #313030, Seasoned,
10.000% due 05/01/2022** ......................... 444,658
-----------
Total FNMAs (Cost $880,098) ................. 881,156
-----------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $6,495,717) ................................ 6,551,520
-----------
ASSET-BACKED SECURITIES - 23.9%
300,000 Conti-Mortgage Home Equity Loan Trust, 1996-4-A6,
6.710% due 06/15/2014 ............................ 296,154
19,611 EquiCredit, 1993-4-B1,
5.650% due 12/15/2008 ............................ 19,045
Green Tree Financial Corporation:
450,000 1993-2-B2,
8.000% due 07/15/2018 ............................ 460,688
900,000 1995-1-B2,
9.200% due 06/15/2025 ............................ 974,529
300,000 1995-6-B1,
7.700% due 09/15/2026 ............................ 304,500
300,000 Green Tree Home Equity Loan Trust,
1997-B-A5,
7.150% due 05/15/2028 ............................ 301,688
280,885 Green Tree NIM, 1994-B, Class A,
7.850% due 07/15/2004 ............................ 282,374
257,915 Green Tree Security Mortgage Trust,
1994-A,
6.900% due 02/15/2004 ............................ 257,432
300,000 H & T Master Trust,
8.430% due 08/15/2002++ .......................... 300,420
Merrill Lynch Mortgage Investors, Inc.:
111,013 1991-B-A,
9.200% due 04/15/2011 ............................ 112,469
200,037 1991-I-A,
7.650% due 01/15/2012 ............................ 202,599
490,577 1992-B-A4,
7.850% due 04/15/2012 ............................ 495,483
125,000 Standard Credit Card Trust, 90-3B,
9.850% due 07/10/1998 ............................ 125,077
700,000 World Omni Automobile Lease Securitization,
1996-B,
6.850% due 11/15/2002++ .......................... 698,469
-----------
Total Asset-Backed Securities
(Cost $4,839,362) ................................. 4,830,927
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 17.5%
75,000 Chemical Mortgage Securities Inc.,
1993-1-A4,
7.450% due 02/25/2023 ............................ 75,445
106,187 Countrywide Funding Corporation,
1994-1-A3,
6.250% due 03/25/2024 ............................ 101,441
Countrywide Mortgage-Backed Securities, Inc.:
75,000 1994-A-A3,
6.750% due 03/25/2024 ............................ 75,015
170,000 1994-C-A5,
6.375% due 03/25/2024 ............................ 165,058
617,448 Federal Home Loan Mortgage Corporation (FHLMC),
P/O, REMIC, #1719-C,
Zero coupon due 04/15/1999 ....................... 572,876
222,600 Fund America Investors Corporation,
1991-1-H,
7.950% due 02/20/2020 ............................ 224,826
451,309 General Electric Capital Mortgage Association,
1994-27-A1,
6.500% due 07/25/2024 ............................ 449,467
653,989 Norwest Asset Securities Corporation,
1996-5-A13,
7.500% due 11/25/2026 ............................ 659,814
Prudential Home Mortgage Securities:
193,624 1992-47,
7.500% due 01/25/2023 ............................ 193,200
787,316 1993-43-A1,
5.400% due 10/25/2023 ............................ 777,474
149,945 Ryland Acceptance Corporation,
8.950% due 08/20/2019 ............................ 152,428
100,000 Sears Mortgage Securities Corporation,
1993-11-T4,
7.125% due 11/25/2020 ............................ 99,437
-----------
Total Collateralized Mortgage Obligations (Cost $3,538,086)
........................................... 3,545,481
-----------
CORPORATE NOTES - 14.1%
400,000 Colonial Realty, Sr. Note,
7.500% due 07/15/2001 .......................... 403,500
400,000 ERP Operating LP,
8.500% due 05/15/1999++ ........................ 412,640
500,000 Sun Communities Inc., Sr. Note,
7.625% due 05/01/2003 .......................... 510,790
Taubman Realty Corporation, MTN:
300,000 7.400% due 06/10/2002 .......................... 304,995
500,000 7.500% due 06/15/2002 .......................... 508,315
600,000 The Money Store, Inc.,
9.160% due 09/09/1997++ ........................ 602,400
100,000 Time Warner Inc.,
7.950% due 02/01/2000 .......................... 102,809
-----------
Total Corporate Notes (Cost $2,800,688) ............ 2,845,449
-----------
U.S. TREASURY NOTE - 6.2% (Cost $1,268,921)
1,250,000 6.750% due 04/30/2000 .............................. 1,266,400
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.1%
(Cost $428,325)
425,000 Federal National Mortgage Association
(FNMA), (Inverse Floater),
9.781% due 12/29/1997+ .......................... 432,438
-----------
COMMERCIAL PAPER - 3.4% (Cost $684,000)
684,000 General Electric Capital Corporation,
6.100% due 07/01/1997 ............................ 684,000
-----------
TOTAL INVESTMENTS (COST $20,055,099*) ................... 99.6% 20,156,215
OTHER ASSETS AND LIABILITIES (NET) ...................... 0.4 73,759
----- -----------
NET ASSETS .............................................. 100.0% $20,229,974
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
** A portion or all of this security is pledged as collateral for futures
contracts.
+ Floating rate security. The interest rate shown reflects the rate currently
in effect.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
FUTURES CONTRACTS - SHORT POSITION
27 U.S. Treasury Note, Five Year,
September 1997 .................................... $ (14,992)
==========
- --------------------------------------------------------------------------------
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
P/O -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS
SHORT TERM GLOBAL GOVERNMENT FUND
JUNE 30, 1997
PRINCIPAL VALUE
AMOUNT (NOTE 2)
------ --------
FOREIGN BONDS AND NOTES - 67.2%
ITALIAN LIRA BONDS - 12.7%
Italian Treasury Bonds:
ITL 4,680,000,000 8.500% due 08/01/1997 .................... $ 2,742,366
6,115,000,000 8.500% due 01/01/1999 .................... 3,709,865
-----------
Total Italian Lira Bonds
(Cost $6,625,547) ........................ 6,452,231
-----------
GERMAN DEUTSCHE MARK BONDS - 11.8%
Federal Republic of Germany:
DEM 4,830,000 6.000% due 02/20/1998 .................... 2,818,042
5,380,000 5.250% due 10/20/1998 .................... 3,158,065
-----------
Total German Deutsche Mark Bonds
(Cost $6,478,642) ........................ 5,976,107
-----------
NEW ZEALAND DOLLAR BONDS - 9.3%
NZD 3,200,000 Government of New Zealand,
10.000% due 03/15/2002 ................... 2,448,547
3,310,000 Federal National Mortgage Association
(FNMA), Global Note,
7.250% due 06/20/2002 .................... 2,273,049
-----------
Total New Zealand Dollar Bonds
(Cost $4,744,063) ........................ 4,721,596
-----------
DANISH KRONER BOND - 6.3%
(Cost $3,757,647)
DKK 20,000,000 Kingdom of Denmark,
9.000% due 11/15/1998 .................... 3,214,807
-----------
GREAT BRITAIN POUND STERLING NOTE - 5.6%
(Cost $2,793,767)
GBP 1,710,000 United Kingdom Treasury Note,
7.000% due 06/07/2002 .................... 2,836,986
-----------
CANADIAN DOLLAR BONDS - 5.1%
Government of Canada:
CAD 1,170,000 6.500% due 09/01/1998 .................... 867,661
2,285,000 6.500% due 08/01/1999 .................... 1,706,118
-----------
Total Canadian Dollar Bonds
(Cost $2,530,371) ...................... 2,573,779
-----------
AUSTRALIAN DOLLAR BOND - 3.9%
(Cost $1,981,344)
AUD 2,560,000 International Finance Corporation,
7.750% due 06/24/1999 .................... 1,998,391
-----------
IRISH POUND BOND - 3.9%
(Cost $2,051,187)
IEP 1,310,000 Republic of Ireland,
6.250% due 04/01/1999 .................... 1,991,868
-----------
SPANISH PESETA BOND - 3.7%
(Cost $2,150,124)
ESP 255,000,000 Government of Spain,
11.450% due 08/30/1998 ................... 1,850,156
-----------
SWEDISH KRONA BOND - 3.2%
(Cost $1,609,755)
SEK 11,600,000 Kingdom of Sweden,
11.000% due 01/21/1999 ................... 1,639,619
-----------
MEXICAN PESO BOND - 1.3%
(Cost $680,137)
MXN 6,532,000 Mexican Cetes,
Zero coupon due 06/04/1998 ............... 682,976
-----------
ARGENTINIAN PESO BOND - 0.4%
(Cost $232,023)
ARP 238,159 Republic of Argentina,
5.625% due 04/01/2000+ ................... 217,052
-----------
Total Foreign Bonds and Notes
(Cost $35,634,607) ....................... 34,155,568
-----------
ASSET-BACKED SECURITIES - 5.5%
$2,456,338 Green Tree Security Mortgage Trust,
1994-A, 6.900% due 02/15/2004 ............ 2,451,732
83,629 Household Finance Corporation, 1992-2-A3,
5.250% due 10/20/2007 .................... 83,211
163,526 Merrill Lynch Mortgage Investors, Inc.,
1992-B-A4, 7.850% due 04/15/2012 ......... 165,161
103,663 Old Stone Credit Corporation, 1992-A4,
6.550% due 11/25/2007 .................... 102,714
-----------
Total Asset-Backed Securities
(Cost $2,804,661) ........................ 2,802,818
-----------
U.S. TREASURY NOTES - 4.1%
1,300,000 5.125% due 03/31/1998 ...................... 1,295,346
750,000 6.875% due 07/31/1999 ...................... 760,980
-----------
Total U.S. Treasury Notes
(Cost $2,051,769) ........................ 2,056,326
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 3.5%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 2.5% (Cost $1,233,649)
1,130,413 Pass-through certificates,
10.000% due 01/15/2019-02/15/2019 ........ 1,242,660
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) - 1.0% (Cost $516,348)
506,596 #141461,
7.784% due 11/01/2021+ ................... 530,422
-----------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $1,749,997) ........................ 1,773,082
-----------
CORPORATE NOTE - 2.0% (Cost $997,412)
1,000,000 Sun Communities Inc., Sr. Note, 7.625%
due 05/01/2003 ........................... 1,021,580
-----------
TIME DEPOSITS - 5.2%
GRD 285,583,384 Bankers Trust Corporation, 9.020%
due 08/14/1997 ........................... 1,039,468
EGP 900,000 Citibank,
9.000% due 07/07/1997 .................... 900,000
ZAR 3,247,688 J.P. Morgan & Company, 15.750%
due 09/11/1997 ........................... 715,823
-----------
Total Time Deposits
(Cost $2,674,577) ........................ 2,655,291
-----------
INDEXED NOTES - 4.4%
650,000 Citibank, (Value is directly linked to
the Morrocan Dirham),
8.000% due 12/01/1997 .................... 641,225
J.P. Morgan & Company:
908,249 (Value is directly linked to the
Indonesia Rupiah),
11.20% due 08/11/1997 .................... 906,631
660,000 (Value is directly linked to the
Philippine Peso),
10.450% due 07/29/1997 ................... 659,165
-----------
Total Indexed Notes
(Cost $2,218,249) ........................ 2,207,021
-----------
COMMERCIAL PAPER - 5.0%
$1,270,000 Ford Motor Credit Company,
6.000% due 07/01/1997 .................... 1,270,000
1,269,000 General Electric Capital Corporation,
6.100% due 07/01/1997 .................... 1,269,000
-----------
Total Commercial Paper
(Cost $2,539,000) ........................ 2,539,000
-----------
EXPIRATION STRIKE
DATE PRICE
PUT OPTIONS PURCHASED ON FOREIGN
CURRENCY - 0.4%
AUD 2,750,000 Australian Dollar Put ...... 07/16/1997 0.762 27,010
CAD 3,920,000 Canadian Dollar Put ........ 08/01/1997 1.396 3,773
NZD 7,000,000 New Zealand Dollar Put ..... 09/15/1997 0.686 79,800
DEM 6,000,000 German Deutsche Mark Put ... 11/26/1997 1.700 103,282
-----------
Total Put Options Purchased on Foreign Currency
(Cost $149,405) .......................... 213,865
-----------
TOTAL INVESTMENTS (COST $50,819,677*) ..................... 97.3% 49,424,551
-----------
CALL OPTIONS WRITTEN ON FOREIGN
CURRENCY - (0.2)%
AUD 2,750,000 Australian Dollar Call ..... 07/16/1997 0.777 (1,056)
CAD 3,920,000 Canadian Dollar
Call ..................... 08/01/1997 1.366 (6,864)
GBP 1,715,000 Great Britain Pound Sterling
Call ..................... 08/07/1997 1.637 (55,490)
NZD 7,000,000 New Zealand Dollar Call .... 09/15/1997 0.692 (23,100)
-----------
Total Call Options Written
on Foreign Currency
(Premiums received $126,371) ................ (86,510)
-----------
OTHER ASSETS AND LIABILITIES (NET) ........................ 2.9% 1,456,129
----- -----------
NET ASSETS ................................................ 100.0% $50,794,170
===== ===========
- --------------
* Aggregate cost for federal tax purposes.
+ Floating rate security. The interest rate shown reflects the rate
currently in effect.
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
SHORT TERM GLOBAL GOVERNMENT FUND
JUNE 30, 1997
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> <C> <C> <C> <C> <C>
07/07/1997 IEP 330,303 500,088 500,000 $ 88
08/12/1997 DKK 7,320,720 1,105,402 1,147,448 (42,046)
08/25/1997 SEK 3,845,400 498,238 500,000 (1,762)
09/15/1997 CHF 3,821,077 2,640,401 2,643,429 (3,028)
12/01/1997 DEM 229,852 133,324 134,517 (1,193)
12/01/1997 ESP 145,310,000 988,465 1,000,000 (11,535)
----------
$ (59,476)
----------
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
<CAPTION>
CONTRACTS TO RECEIVE NET UNREALIZED
-------------------------------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---- -------------- ------ ---------- ------------
<C> <C> <C> <C> <C> <C>
07/07/1997 IEP 1,314,552 1,990,268 1,979,979 $ (10,289)
08/07/1997 FRF 6,972,931 1,189,709 1,268,036 78,327
08/12/1997 DKK 31,102,450 4,696,356 4,921,274 224,918
08/25/1997 BEF 41,306,140 1,152,162 1,199,017 46,855
08/25/1997 SEK 13,200,000 1,710,288 1,792,139 81,851
09/15/1997 CHF 3,821,077 2,640,401 2,621,306 (19,095)
09/18/1997 NLG 4,198,294 2,151,094 2,230,762 79,668
09/24/1997 CHF 2,849,200 1,970,910 2,000,000 29,090
11/06/1997 DEM 4,587,251 2,655,731 2,692,049 36,318
12/01/1997 DEM 229,852 133,325 136,500 3,175
12/01/1997 ESP 5,994,976 40,781 41,600 819
12/01/1997 FRF 1,406,043 241,772 246,350 4,578
12/01/1997 GBP 36,183 60,358 59,150 (1,208)
12/01/1997 ITL 64,069,265 37,548 37,700 152
12/01/1997 ITL 5,600,000 3,281,866 3,286,771 4,905
----------
$ 560,064
----------
Net Unrealized Appreciation of Forward Foreign Currency Contracts .. $ 500,588
==========
</TABLE>
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ARP -- Argentinian Peso
AUD -- Australian Dollar
BEF -- Belgian Franc
CAD -- Canadian Dollar
CHF -- Swiss Franc
DEM -- German Deutsche Mark
DKK -- Danish Kroner
EGP -- Egyptian Pound
ESP -- Spanish Peseta
FRF -- French Franc
GBP -- Great Britain Pound Sterling
GRD -- Greek Drakma
IEP -- Irish Pound
ITL -- Italian Lira
MXN -- Mexican Peso
NLG -- Netherlands Guilder
NZD -- New Zealand Dollar
SEK -- Swedish Krona
ZAR -- South African Rand
- --------------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS
U.S. GOVERNMENT FUND
JUNE 30, 1997
PRINCIPAL VALUE
AMOUNT (NOTE 2)
------ --------
U.S. GOVERNMENT AGENCY MORTAGE-BACKED
SECURITIES - 85.7%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) - 52.2%
$ 25,532,203 6.500% due 02/01/2011-10/01/2025 ................ $ 24,999,381
2,214,362 7.000% due 07/01/2024-12/01/2026 ................ 2,184,982
134,064,871 7.500% due 05/01/2010-06/01/2027 ................ 135,926,367
3,856,148 8.500% due 04/01/2019 ........................... 4,046,526
1,161,849 8.750% due 01/01/2013 ........................... 1,215,096
1,978,160 9.000% due 12/01/2008-08/01/2022 ................ 2,104,158
741,900 9.500% due 06/01/2016-05/01/2017 ................ 797,577
21,500,000 TBA, GOLD,
7.500% due 04/01/2012# ........................ 21,822,500
-------------
Total FHLMCs (Cost $192,177,862) ................ 193,096,587
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 27.1%
7,804,082 7.000% due 01/15/2024-05/15/2026 ................ 7,662,836
77,568,492 7.500% due 12/15/2022-12/15/2023 ................ 78,144,230
8,476,674 9.000% due 10/15/2008-06/15/2022 ................ 9,060,610
4,894,157 9.500% due 04/15/2016-11/15/2017 ................ 5,308,363
-------------
Total GNMAs (Cost $99,568,949) .................. 100,176,039
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) - 6.0%
39,698 5.500% due 02/01/2009 ........................... 37,992
15,465,681 7.000% due 06/01/2010-06/01/2012 ................ 15,444,158
5,409,647 8.000% due 05/01/2022-01/01/2025 ................ 5,576,593
850,585 8.500% due 02/01/2023-09/01/2025 ................ 888,062
516,573 9.000% due 06/01/2016-06/01/2021 ................ 550,507
-------------
Total FNMAs (Cost $22,311,780) .................. 22,497,312
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(GNMA II) - 0.4% (Cost $1,274,608)
1,249,343 9.500% due 02/20/2017-03/20/2021 ................ 1,342,549
-------------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost $315,333,199) ................ 317,112,487
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 7.1%
2,500,000 Federal Home Loan Mortgage Corporation (FHLMC),
REMIC, Pass-through certificates, Series 1288,
Class HA,
5.500% due 11/15/2020 ......................... 2,328,900
Federal National Mortgage Association (FNMA),
REMIC, Pass-through certificates:
4,000,000 Trust 89-18, Class-C,
9.500% due 04/25/2004 ......................... 4,300,000
27,420 Trust 90-133, Class K, (I/O),
1009.500% due 11/25/2020 ...................... 835,635
1,417,625 Trust 92-83, Class X,
7.000% due 02/25/2022 ......................... 1,284,269
5,690,515 Trust 93-162, Class E,
6.000% due 08/25/2023 ......................... 5,165,906
16,697,334 Federal National Mortgage Association (FNMA),
Trust 96-274, Class 1, (P/O),
Zero coupon due 10/01/2025 .................... 12,209,925
-------------
Total Collateralized Mortgage Obligations
(Cost $25,950,425) .......................... 26,124,635
-------------
U.S. TREASURY OBLIGATIONS - 36.5%
U.S. TREASURY NOTES - 19.9%
5,500,000 6.250% due 03/31/1999** ......................... 5,518,920
3,700,000 6.375% due 05/15/2000 ........................... 3,713,283
21,400,000 6.375% due 09/30/2001** ......................... 21,403,424
42,600,000 6.625% due 05/15/2007** ......................... 42,952,728
-------------
Total U.S. Treasury Notes
(Cost $72,761,568) ..................... 73,588,355
-------------
U.S. TREASURY BONDS - 11.9%
25,570,000 6.500% due 11/15/2026** ......................... 24,523,165
20,000,000 6.625% due 02/15/2027** ......................... 19,568,800
-------------
Total U.S. Treasury Bonds
(Cost $43,469,001) ..................... 44,091,965
-------------
U.S. TREASURY INFLATION INDEX BOND - 4.7%
(Cost $17,322,125)
17,838,259 3.375% due 01/15/2007 ........................... 17,409,070
-------------
Total U.S. Treasury Obligations
(Cost $133,552,694) .................... 135,089,390
-------------
TOTAL INVESTMENTS (COST $474,836,318*) 129.3% 478,326,512
OTHER ASSETS AND LIABILITIES (NET).................... (29.3) (108,394,497)
----- ------------
NET ASSETS ........................................... 100.0% $369,932,015
===== ============
- --------------
*Aggregate cost for federal tax purposes is $475,114,500 (Note 6).
**A portion or all of these securities are pledged as collateral for reverse
repurchase agreements.
#Security purchased on a when-issued basis (Note 2).
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
--------- ------------
FUTURES CONTRACTS - LONG POSITION
194 U.S. Treasury Note, Five Year,
September 1997 .......................... $ 120,377
==========
UNREALIZED
(DEPRECIATION)
--------------
FUTURES CONTRACTS - SHORT POSITION
317 U.S. Treasury Bond, Thirty Year,
September 1997 ........................... (233,127)
317 U.S. Treasury Note, Ten Year,
September 1997 ........................... (503,374)
----------
Net Unrealized Depreciation of Futures
Contracts - Short Position ........... $ (736,501)
==========
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
GOLD -- Payments are on an accelerated 45-day payment cycle
instead of 75-day cycle
I/O -- Interest Only
P/O -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
CORPORATE INCOME FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
CORPORATE BONDS AND NOTES - 91.3%
MANUFACTURING - 19.1%
<C> <S> <C>
$ 4,000,000 Boeing Company, Deb.,
8.750% due 08/15/2021** ................................ $ 4,660,000
5,000,000 Caterpillar Inc., Sinking Fund Deb.,
9.750% due 06/01/2019** ................................ 5,468,750
3,750,000 Ford Motor Company, Deb.,
8.875% due 01/15/2022 .................................. 4,293,750
8,000,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021 .................................. 9,480,000
7,800,000 Textron Inc., Deb.,
8.750% due 07/01/2022 .................................. 8,453,250
8,450,000 Tyco Laboratories, Inc., Deb.,
9.500% due 05/01/2022 .................................. 9,717,500
1,000,000 V.F. Corporation, Note,
9.500% due 05/01/2001 .................................. 1,091,250
------------
43,164,500
------------
TRANSPORTATION - 12.0%
6,030,000 Conrail Inc., Deb.,
9.750% due 06/15/2020 .................................... 7,401,825
3,800,000 Norfolk Southern Corporation,
7.800% due 05/15/2027 .................................... 3,895,000
United Air Lines Inc.:
5,000,000 Equipment Trust certificates,
10.850% due 07/05/2014 ................................... 6,237,500
Pass-through certificates:
3,000,000 9.080% due 10/26/2015 .................................... 3,266,250
5,500,000 9.560% due 10/19/2018 .................................... 6,283,750
------------
27,084,325
------------
ENERGY - 9.2%
2,850,000 BP America Inc., Guaranteed Deb.,
(British Petroleum Company),
10.000% due 07/01/2018 ................................... 3,049,500
8,700,000 Occidental Petroleum Corporation,
Sr. Deb.,
11.125% due 08/01/2010 ................................... 11,233,875
5,950,000 Phillips Petroleum Company, Deb.,
9.180% due 09/15/2021** .................................. 6,500,375
------------
20,783,750
------------
INDUSTRIAL - 8.8%
5,000,000 du Pont (E.I.) de Nemours & Company, Deb.,
8.250% due 01/15/2022** .................................. 5,162,500
6,500,000 Ogden Corporation, Deb.,
9.250% due 03/01/2022 .................................... 7,304,375
6,860,000 Praxair, Inc., Deb.,
8.700% due 07/15/2022 .................................... 7,400,225
------------
19,867,100
------------
FINANCIAL - 8.0%
2,000,000 American General Corporation,
9.625% due 02/01/2018 .................................... $ 2,120,000
Barclays North American Capital Corporation, Capital Note:
1,000,000 10.500% due 12/15/2017** ................................. 1,066,250
9,000,000 9.750% due 05/15/2021** .................................. 10,181,250
2,000,000 Ford Holdings, Inc., Deb.,
9.375% due 03/01/2020** .................................. 2,367,500
1,000,000 GATX Leasing Corporation, MTN,
10.000% due 03/21/2001 ................................... 1,100,000
1,300,000 Hartford Life Insurance Company,
7.650% due 06/15/2027 .................................... 1,295,125
------------
18,130,125
------------
ELECTRIC - 7.5%
5,000,000 Louisiana Power & Light Company,
First Mortgage,
8.500% due 07/01/2022 .................................... 5,025,000
5,000,000 Mississippi Power & Light Company,
First and Refundable Mortgage,
8.650% due 01/15/2023 .................................... 5,325,000
2,000,000 Philadelphia Electric Company, First and Refundable
Mortgage,
8.250% due 09/01/2022 .................................... 2,100,000
Texas Utilities Electric Company,
First Mortgage:
1,200,000 8.875% due 02/01/2022 .................................... 1,269,000
3,000,000 8.750% due 11/01/2023 .................................... 3,255,000
------------
16,974,000
------------
YANKEE (U.S. DOLLAR DENOMINATED) - 7.2%
8,500,000 Petro-Canada, Deb.,
9.250% due 10/15/2021 .................................... 10,136,250
5,750,000 Trans-Canada Pipeline Corporation, Deb.,
8.500% due 03/20/2023 .................................... 6,073,438
------------
16,209,688
------------
REGIONAL BANKS - 6.2%
400,000 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010 ................................... 490,500
1,000,000 Barnett Banks, Florida, Inc., Sub. Note,
10.875% due 03/15/2003 ................................... 1,181,250
1,100,000 First Interstate Bancorp, Sub. Note,
9.125% due 02/01/2004 .................................... 1,222,375
1,000,000 Mellon Financial Company, Sub. Deb.,
9.750% due 06/15/2001 .................................... 1,101,250
8,125,000 NCNB Corporation, Sub. Note,
10.200% due 07/15/2015** ................................. 10,176,562
------------
14,171,937
------------
FOREST PRODUCTS - 4.6%
3,010,000 Federal Paper Board Company, Deb.,
10.000% due 04/15/2011 ................................... 3,698,537
6,000,000 James River Corporation, Deb.,
9.250% due 11/15/2021 .................................... 6,690,000
------------
10,388,537
------------
MEDIA - 3.8%
7,760,000 Time Warner Inc., Deb.,
9.150% due 02/01/2023 .................................... 8,545,700
------------
RETAIL - 3.1%
May Department Stores Company, Deb.:
1,500,000 9.875% due 06/15/2021** .................................. 1,704,375
5,100,000 8.375% due 10/01/2022** .................................. 5,240,250
------------
6,944,625
------------
GAS - 1.2%
2,500,000 Panhandle Eastern Pipe Line Company, Deb.,
8.625% due 04/15/2025 .................................... 2,662,500
------------
TELECOMMUNICATIONS - 0.6%
GTE Corporation:
250,000 Deb., 10.300% due 11/15/2017 ............................. 265,625
1,000,000 Sinking Fund Deb.,
10.750% due 09/15/2017 ................................... 1,057,500
------------
1,323,125
------------
Total Corporate Bonds and Notes
(Cost $197,403,515) ...................................... 206,249,912
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 14.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) - 7.7%
$ 14,000,000 Commitment to Purchase,
8.000% due 01/01/2027 .................................... $ 14,310,625
GOLD:
1,875,918 #C00362,
9.000% due 06/01/2024 .................................... 1,983,784
988,121 #C80253,
9.000% due 01/01/2025 .................................... 1,044,938
------------
Total FHLMCs (Cost $17,019,194) ............................ 17,339,347
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 6.3% (Cost $13,991,328)
14,000,000 Commitment to Purchase, GOLD,
8.000% due 01/01/2027 .................................... 14,306,250
------------
Total U.S. Government Agency Mortgage-Backed Securities
(Cost $31,010,522) ....................................... 31,645,597
------------
U.S. TREASURY BOND - 3.1% (Cost $6,952,344)
5,000,000 13.750% due 08/15/2004 ..................................... 7,038,450
------------
SHARES
------
INVESTMENT COMPANY SECURITY - 2.4%
(Cost $5,305,464)
5,305,464 Lehman Provident Tempfund ........................... 5,305,464
------------
TOTAL INVESTMENTS (COST $240,671,845*)............................. 110.8% 250,239,423
OTHER ASSETS AND LIABILITIES (NET) ................................ (10.8) (24,327,493)
----- ------------
NET ASSETS ........................................................ 100.0% $225,911,930
===== ============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes.
** Security is pledged as collateral for dollar roll transactions.
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
GOLD -- Payments are on an accelerated 45-day payment cycle
instead of 75-day cycle
MTN -- Medium Term Note Note
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
MUNICIPAL BONDS AND NOTES - 97.5%
CALIFORNIA - 96.9%
<C> <S> <C>
$ 5,360,000 Alhambra, Improvement Board Act of 1915, Assessment
District No. 1, Public Works, (MBIA Insured),
6.125% due 09/02/2018 .................................. $ 5,601,200
4,000,000 Anaheim, Public Financing Authority Revenue, Residual
Interest Bond, (MBIA Insured),
6.450% due 12/28/2018 .................................. 4,380,000
1,000,000 Arcadia, Hospital Revenue Authority, (Methodist Hospital),
6.500% due 11/15/2012 .................................. 1,036,250
2,000,000 Barstow Redevelopment Agency, Central Redevelopment
Project, Tax Allocation, Series A, (MBIA Insured),
7.000% due 09/01/2014 .................................. 2,367,500
1,000,000 Brea & Olinda, Unified School District, (High School
Refinancing Project), COP, Series A, (FSA Insured),
6.000% due 08/01/2009 .................................. 1,057,500
4,795,000 California Educational Facilities Authority Revenue,
(College of Osteopathic Medicine),
7.500% due 06/01/2018 .................................. 5,550,212
1,000,000 California Health Facilities Authority Revenue, (Kaiser
Permanent), Series A, 7.000% due 12/01/2010 ............ 1,087,500
California Housing Finance Agency, Home Mortgage, AMT:
Series A, (Multi-family Housing III), (MBIA Insured):
1,000,000 5.850% due 08/01/2017 .................................. 1,015,000
3,000,000 5.950% due 08/01/2028 .................................. 3,033,750
Series B, (MBIA Insured):
1,000,000 6.000% due 08/01/2016 .................................. 1,016,250
2,000,000 6.100% due 02/01/2028 .................................. 2,032,500
1,000,000 Series N, (FHA/VA Insured),
6.375% due 02/01/2027 .................................. 1,026,250
California Housing Finance Agency, Home Ownership &
Improvement Revenue:
1,660,000 Series 1988G, AMT,
8.150% due 08/01/2019 .................................. 1,711,277
2,430,000 Series 1989D, AMT,
7.500% due 08/01/2020 .................................. 2,533,275
5,010,000 Series C, AMT,
6.650% due 08/01/2014 .................................. 5,279,288
665,000 Series D, AMT, (MBIA Insured),
6.300% due 08/01/2014 .................................. 687,444
2,630,000 Series F, AMT, (MBIA Insured),
6.800% due 08/01/2014 .................................. 2,817,386
3,825,000 Series F-2,
7.250% due 08/01/2016 .................................. 4,068,844
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 (Mobil Oil Corporation), AMT,
5.500% due 12/01/2029 ................................. 2,798,500
5,000,000 (Pacific Gas and Electric), Series B, AMT, (AMBAC
Insured),
8.875% due 01/01/2010 ................................. 5,194,600
2,500,000 (San Diego Gas and Electric), Series A, AMT, (AMBAC
Insured),
5.850% due 06/01/2021 ................................. 2,506,250
(Southern California Edison Company):
13,250,000 Series B, AMT, (AMBAC Insured),
6.400% due 12/01/2024 ................................. 13,796,562
5,000,000 Series B, AMT, (FGIC Insured),
6.400% due 12/01/2024 ................................. 5,206,250
4,000,000 Series C, (AMBAC Insured),
6.000% due 07/01/2027+ ................................ 4,060,000
6,565,000 (Tracy Material Recovery Project),
Series A, AMT,
6.600% due 08/01/2014 ................................. 6,671,681
5,000,000 (Waste Management), Series A, AMT, 7.150% due 02/01/2011
....................................................... 5,418,750
3,100,000 (Waste Removal Systems), Series A, AMT,
7.100% due 11/01/2009 ................................. 3,262,750
2,250,000 California Residential Efficiency Financing Authority,
(First Resource Efficiency), (AMBAC Insured),
6.000% due 07/01/2017 ................................. 2,320,312
1,405,000 California Rural Home Mortgage Finance Authority, SFMR,
Mortgage-Backed Securities Project, Series A-2, AMT,
(GNMA Insured),
7.950% due 12/01/2024 ................................. 1,584,137
7,750,000 California State, GO, (MBIA Insured),
6.000% due 10/01/2014 ................................. 8,060,000
California Statewide Communities Development Authority,
COP:
3,000,000 (Cedars-Sinai Medical Center),
(MBIA Insured),
6.500% due 08/01/2012 ................................. 3,303,750
735,000 (Childrens Campus),
6.500% due 09/01/2022 ................................. 769,912
5,795,000 Carson, Improvement Board Act
of 1915, GO,
7.375% due 09/02/2022 ................................. 6,135,456
4,675,000 Chula Vista, IDR, (San Diego Gas and Electric), Series A,
AMT, (AMBAC Insured),
6.400% due 12/01/2027 ................................. 4,879,531
2,980,000 Chula Vista, Redevelopment Agency,
Tax Allocation Revenue,
8.625% due 09/01/2024 ................................. 3,531,300
3,690,000 Contra Costa County, COP, (Merrithew Memorial Hospital),
(MBIA Insured),
5.500% due 11/01/2022 ................................. 3,620,812
Contra Costa County, Finance Authority, Tax Allocation
Revenue, Series A:
1,595,000 7.000% due 08/01/2009 .................................. 1,726,588
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 .................................. 8,582,017
3,245,000 Delano, COP, Series A,
9.250% due 01/01/2022 .................................. 3,739,863
1,985,000 El Cajon, COP, (Helix View Nursing Hospital), Limited
Obligation, Series 1990, AMT, (FHA Insured),
7.750% due 02/01/2029 .................................. 2,027,380
1,000,000 El Centro, Redevelopment Agency, Tax Allocation, (El
Centro Redevelopment Project), (MBIA Insured),
6.375% due 11/01/2017 .................................. 1,077,500
4,900,000 Fairfield Housing Authority Revenue, Mortgage Revenue,
(Creekside Estates Project),
7.875% due 02/01/2015 .................................. 5,034,750
5,000,000 Foothill Eastern Transportation Corridor Agency, Series A,
Zero coupon due 01/01/2008 ............................. 3,356,250
Gilroy, Unified School District, COP, (Measure J Capital
Projects), (FSA Insured):
1,135,000 6.000% due 09/01/2007 .................................. 1,234,313
2,000,000 6.250% due 09/01/2012 .................................. 2,137,500
1,250,000 Kings County, Waste Management Authority, Solid Waste
Revenue, AMT,
7.200% due 10/01/2014 .................................. 1,353,125
1,500,000 La Verne, Public Financing Authority, Capital Improvement,
7.250% due 09/01/2026 .................................. 1,573,125
Long Beach, Harbor Revenue, AMT:
2,550,000 5.125% due 05/15/2018 .................................. 2,374,688
12,690,000 Series 1989A, (MBIA Insured),
7.250% due 05/15/2019 .................................. 13,232,117
Los Angeles County, Community Redevelopment Agency, AMT:
1,425,000 5.850% due 12/01/2026 .................................. 1,323,469
3,605,000 COP, (Allright Garage L.A.),
7.550% due 11/01/2008 .................................. 4,033,094
3,490,000 Series C, (AMBAC Insured),
6.750% due 07/01/2014 .................................. 3,712,488
Los Angeles County, MFHR, AMT,
(GNMA Insured):
3,000,000 (Park Parthenia Project),
7.400% due 01/20/2022 .................................. 3,091,230
1,000,000 (Ridgecroft Apartments Project), Series E, 6.250% due
09/20/2039 ............................................. 1,011,250
Los Angeles County, Residual Interest Bond, COP:
4,200,000 6.600% due 11/01/2011+ ................................. 4,383,750
1,000,000 8.873% due 06/01/2015+ ................................. 1,048,750
3,740,000 (Edmund D. Edelman Children's Center), (AMBAC Insured),
6.000% due 04/01/2012 .................................. 3,852,200
11,110,000 (Pension Obligation), (MBIA Insured),
6.900% due 06/30/2008 .................................. 12,998,700
1,460,000 Los Angeles County, Single Family Housing Revenue, Series
B, (GNMA Insured), 7.600% due 08/01/2016 ............... 1,560,375
530,000 Los Angeles County, SFMR, Program 1990, Issue A, AMT, GNMA
collateralized,
7.550% due 12/01/2023 .................................. 552,525
660,000 Los Angeles Home Mortgage Revenue, Mortgage-Backed
Securities Project, (GNMA Insured),
8.100% due 05/01/2017 .................................. 716,100
7,000,000 National City Community Development Revenue, Series A,
(AMBAC Insured), 6.250% due 08/01/2012 ................. 7,385,000
2,785,000 Needles, Public Utilities Authority Revenue, (Utilities
System Aquisition Project), Series A,
6.500% due 02/01/2022 .................................. 2,743,225
3,500,000 Novato, Special Tax Revenue, (Community Facilities
District),
7.200% due 08/01/2015 .................................. 3,618,125
2,000,000 Oakland, Revenue Bonds,
(YMCA East Bay Project),
7.100% due 06/01/2010 .................................. 2,117,500
Oakland, Unified School District:
2,645,000 7.000% due 11/15/2011 .................................. 2,793,781
3,445,000 COP, Energy Retrofit,
6.750% due 11/15/2014 .................................. 3,539,738
4,500,000 Palm Desert, Financing Authority, Tax Allocation Revenue,
(MBIA Insured),
(Inverse Floater),
8.665% due 04/01/2022+ ................................. 4,995,000
1,150,000 Palm Springs, Financing Authority, (Convention Center
Project), Series A, (MBIA Insured),
6.750% due 11/01/2021 .................................. 1,247,750
3,000,000 Pasadena, Special Tax No. 1,
7.200% due 12/01/2012 .................................. 3,135,000
Port Oakland, AMT, (Mitsu Osk Lines Ltd.), Series A:
3,030,000 6.750% due 01/01/2012 .................................. 3,189,075
2,300,000 6.800% due 01/01/2019 .................................. 2,409,250
3,000,000 Rancho, Water District Financing Authority, Residual
Interest Bond, (AMBAC Insured), Pre-refunded,
8.784% due 08/17/2021+ ................................. 3,540,000
2,750,000 Redding, Electrical Systems Revenue, COP, (Inverse
Floater), (MBIA Insured), 8.467% due 07/08/2022+ ....... 3,406,563
1,000,000 Redondo Beach, Public Financing Authority Revenue, (South
Bay Center Redevelopment Project),
7.125% due 07/01/2026 .................................. 1,077,500
1,500,000 Riverside, School District, Special Project,
7.250% due 09/01/2018 .................................. 1,537,500
6,500,000 Sacramento County, Airport System Revenue, Series 1989,
AMT, (AMBAC Insured),
7.000% due 07/01/2020 .................................. 6,898,125
San Bernardino County, COP,
(MBIA Insured):
2,000,000 (Medical Center Financing Project),
5.000% due 08/01/2028 .................................. 1,810,000
10,000,000 Residual Interest Bond,
6.570% due 07/01/2016+ ................................. 9,987,500
4,000,000 San Diego County, Residual Interest Bond, COP, Series B,
(MBIA Insured),
8.450% due 04/08/2021+ ................................. 4,520,000
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 .................................. 3,112,500
San Francisco, City and County,
Multi-family Mortgage Revenue,
Series A, (FNMA Insured):
1,000,000 6.350% due 02/15/2012 .................................. 1,027,500
1,250,000 6.450% due 02/15/2024 .................................. 1,278,125
San Francisco, City and County,
Redevelopment Agency, Lease
Revenue, Capital Appreciation,
(George R. Moscone Project):
3,500,000 Zero coupon due 07/01/2007 ............................. 2,043,125
4,500,000 Zero coupon due 07/01/2010 ............................. 2,165,625
3,750,000 Zero coupon due 07/01/2011 ............................. 1,682,813
4,250,000 Zero coupon due 07/01/2013 ............................. 1,662,813
270,000 San Francisco, City and County, SFMR, AMT, GNMA and FNMA
Mortgage-Backed Securities Program,
7.450% due 01/01/2024 .................................. 282,488
575,000 San Jose, Airport Revenue Authority, (San Jose Airport),
AMT, (AMBAC Insured),
7.500% due 03/01/2018 .................................. 597,419
2,560,000 San Jose, Financing Authority Revenue, Series C,
7.000% due 09/02/2015 .................................. 2,612,557
1,000,000 Santa Clara, Improvement Board Act
of 1915, Assessment District 187,
Series 1996-1, Special Assessment Revenue,
7.000% due 09/02/2011 .................................. 1,030,050
3,000,000 Santa Clarita, Community Development Authority, Special
Tax Revenue,
7.500% due 11/15/2012 .................................. 3,142,500
4,765,000 Santa Rosa, Mortgage Revenue, (Channate Lodge), (FHA
Insured),
6.700% due 12/01/2024 .................................. 5,009,206
2,000,000 Shasta Lake, COP, (FSA Insured),
6.000% due 04/01/2016 .................................. 2,067,500
5,000,000 South Orange County, Public Financing Authority, Special
Tax Revenue, Sr. Lien, Series A, (MBIA Insured),
6.200% due 09/01/2013 .................................. 5,243,750
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 .................................. 1,199,025
1,545,000 Series A,
7.350% due 09/01/2024 .................................. 1,614,525
200,000 Series B,
6.900% due 10/01/2024 .................................. 209,750
Stockton, Community Facilities Supplemental Tax #90-2,
SFMR, GNMA Mortgage-Backed Securities Program:
55,000 (Brookside Estates), AMT,
7.450% due 08/01/2010 .................................. 59,537
4,000,000 Series A,
7.750% due 08/01/2015 .................................. 4,165,000
5,000,000 University of California, (Multiple Purpose Review
Projects), (MBIA Insured),
6.300% due 09/01/2014 .................................. 5,293,750
------------
332,750,316
------------
PUERTO RICO - 0.6%
1,886,279 Centro de Recaudaciones de Ingresos Municipales,
6.850% due 10/17/2003 .................................. 1,954,656
------------
Total Municipal Bonds and Notes
(Cost $314,072,658) .................................... 334,704,972
------------
SHORT-TERM MUNICIPAL BONDS - 1.1%
California, Pollution Control Financing Authority, PCR:
200,000 (Burney Forest Products Project),
Series A,
3.950% due 09/01/2020++ ................................ 200,000
600,000 (Southern California Edison Company), Series C,
5.200% due 02/28/2008++ ................................ 600,000
Los Angeles, Regional Airports Improvement, Corporate
Lease Revenue:
200,000 (American Airlines-Los Angeles International Airport),
Series G,
4.100% due 12/01/2024++ ................................ 200,000
2,900,000 (Los Angeles International Airport),
4.100% due 12/01/2025++ ................................ 2,900,000
------------
Total Short-Term Municipal Bonds
(Cost $3,900,000) ...................................... 3,900,000
------------
TOTAL INVESTMENTS (COST $317,972,658*) ....................... 98.6% 338,604,972
OTHER ASSETS AND LIABILITES (NET) ............................ 1.4 4,873,758
----- ------------
NET ASSETS ................................................... 100.0% $343,478,730
===== ============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes.
+ Floating rate security. The interest rate shown reflects the rate
currently in effect.
++Floating 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 folowing insurance concentrations greater than
10% at June 30, 1997 (as a percentage of net assets):
MBIA 29.6%
AMBAC 17.1%
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
COP -- Certificates of Participation
FGIC -- Financial 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
VA -- Veterans' Administration
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
FLORIDA INSURED MUNICIPAL FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
MUNICIPAL BONDS AND NOTES - 101.8%
FLORIDA - 101.8%
<C> <S> <C>
$ 1,000,000 Brevard County, School Board Authority, COP, Series B,
(AMBAC Insured),
5.500% due 07/01/2021 .................................... $ 987,500
2,270,000 Broward County, Educational Facilities Authority Revenue,
(Nova Southeastern University Project), (CONNIE LEE
Insured),
6.000% due 04/01/2008 .................................... 2,423,225
500,000 Clay County, Housing Finance Authority Revenue, SFMR, Multi-
County Program, GNMA/FNMA collateralized,
5.950% due 10/01/2019 .................................... 505,625
1,000,000 Collier County, Industrial Development Authority, IDR,
(Southern States
Utilities Project), AMT,
6.500% due 10/01/2025 .................................... 1,022,500
1,690,000 Dade County, Aviation Revenue, Series B, AMT, (MBIA
Insured),
6.600% due 10/01/2022 .................................... 1,808,300
1,500,000 Dade County, School Board Authority, COP, Series A, (MBIA
Insured),
5.750% due 05/01/2008 .................................... 1,569,375
1,500,000 Escambia County, Health Facilities Revenue, Baptist
Hospital, Series B,
6.000% due 10/01/2014 .................................... 1,507,500
1,000,000 Escambia County, PCR, (Champion International Corporation
Project), AMT,
6.900% due 08/01/2022 .................................... 1,087,500
Florida Housing Finance Agency, AMT:
715,000 SFMR, Series A, (GNMA Insured),
6.650% due 01/01/2024 .................................... 751,644
1,000,000 Spinnaker Cove Apartments, Series G, (AMBAC Insured),
6.500% due 07/01/2036 .................................... 1,038,750
1,000,000 Florida State Turnpike Authority, Turnpike Revenue,
Department of Transportation, Series A, (FGIC Insured),
5.000% due 07/01/2016 .................................... 937,500
1,445,000 Hillsborough County, Capital Improvement Revenue, Criminal
Justice Facilities,
(FGIC Insured),
5.250% due 08/01/2016 .................................... 1,394,425
1,500,000 Hillsborough County, PCR, (Tampa Electric Company Project),
(MBIA Insured),
6.250% due 12/01/2034 .................................... 1,586,250
1,500,000 Hillsborough County, School Board Authority, COP, (MBIA
Insured),
6.000% due 07/01/2012 .................................... 1,567,500
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 collateralized,
6.875% due 11/01/2026 .................................... 1,076,625
1,500,000 Melbourne, Airport Revenue, AMT,
(MBIA Insured),
6.250% due 10/01/2018 .................................... 1,595,625
1,000,000 Orange County, Housing Finance Authority, MFHR, (Hands Inc.
Project), Series A,
8.000% due 10/01/2025 .................................... 1,011,250
750,000 Orange County, School Board Authority, COP, Series A, (MBIA
Insured), 5.375% due 08/01/2002 .......................... 727,500
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 Pasco County, Solid Waste Disposal & Resource Recovery
System, AMT,
6.000% due 04/01/2011# ................................... 1,041,250
1,000,000 Pinellas County, Housing Finance Authority Revenue, SFMR,
Series A, AMT,
6.000% due 09/01/2018 .................................... 1,023,750
1,050,000 Seminole County, School Board Authority, COP, Series A,
(MBIA Insured),
6.125% due 07/01/2014 .................................... 1,098,562
-----------
Total Municipal Bonds and Notes
(Cost $27,084,825) ....................................... 28,357,781
-----------
TOTAL INVESTMENTS (COST $27,084,825*) ........................... 101.8% 28,357,781
OTHER ASSETS AND LIABILITIES (NET) .............................. (1.8) (499,146)
----- -----------
NET ASSETS ...................................................... 100.0% $27,858,635
===== ===========
</TABLE>
- --------------
*Aggregate cost for federal tax purposes.
#Security purchased on a when-issued basis (Note 2).
Florida Insured Municipal Fund had the following insurance concentrations
greater than 10% at June 30, 1997 (as a percentage of net assets):
MBIA 35.7%
AMBAC 12.9%
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
CONNIE LEE -- College Construction Loan Association
COP -- Certificates of Participation
FGIC -- Financial 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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
MUNICIPAL BONDS AND NOTES - 97.0%
CALIFORNIA - 95.5%
Alameda County:
<C> <S> <C>
$ 1,000,000 COP, (Santa Rita Jail Project),
(MBIA Insured),
5.375% due 06/01/2009 .................................... $ 1,021,250
1,000,000 Public Financing Authority Revenue, Marina Village
Assesement District,
5.950% due 09/02/2007 .................................... 1,021,300
625,000 Berkeley, Unified School District, Series C,
GO, (AMBAC Insured),
5.875% due 08/01/2006 .................................... 676,563
985,000 Brea & Olinda, School District, (High School Refinancing
Program), Series A, COP,
(FSA Insured),
6.000% due 08/01/2009 .................................... 1,041,637
1,525,000 Brea, Redevelopment Finance Agency, (Redevelopment Project
AB), Tax Allocation Revenue, (MBIA Insured),
5.500% due 08/01/2008 .................................... 1,576,469
1,000,000 California Health Facilities, Financing Authority Revenue,
(Catholic Health Corporation), Series A, (AMBAC Insured),
5.875% due 07/01/2009 .................................... 1,053,750
California Housing Finance Agency Revenue:
2,295,000 Home Mortgage, Series B1, AMT,
(AMBAC Insured),
6.200% due 02/01/2007 .................................... 2,429,831
445,000 Series E, (MBIA Insured),
6.050% due 08/01/2006 .................................... 462,800
California State, GO:
1,240,000 County Jail and School Building,
7.250% due 08/01/2003 .................................... 1,413,600
1,000,000 (FGIC Insured),
6.200% due 09/01/2005 .................................... 1,105,000
California State, Public Works Board Lease Revenue, (Various
California University Projects), Series A:
1,000,000 5.900% due 10/01/2004 .................................... 1,065,000
1,500,000 (AMBAC Insured),
5.900% due 12/01/2003 .................................... 1,608,750
California State University Revenue:
200,000 Housing System, (FGIC Insured),
7.625% due 11/01/2003 .................................... 233,000
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
Revenue, COP:
1,600,000 (Children's Hospital), (MBIA Insured),
6.000% due 06/01/2007 .................................... 1,740,000
1,255,000 (St. Joseph Health Systems),
(AMBAC Insured),
5.875% due 07/01/2005 .................................... 1,345,988
1,000,000 Castaic Lake, Water Agency, COP, (Water Systems Improvement
Project), Series A, (MBIA Insured),
5.600% due 08/01/2005 .................................... 1,065,000
1,000,000 Desert Hospital District, Hospital Revenue, COP, (FSA
Insured),
6.350% due 07/01/2004 .................................... 1,102,500
1,000,000 Escondido, MFHR, (Morning View Terrace Apartments),
Series B,
5.400% due 01/01/2027 .................................... 1,017,500
1,000,000 Foothill Eastern Transportation Corridor Agency, Toll Road
Revenue, Capital Appreciation, Sr. Lien, Series A,
Zero coupon due 01/01/2004 ............................... 701,250
Gilroy, Unified School District, COP,
(FSA Insured):
1,390,000 5.600% due 09/01/2003 .................................... 1,464,712
1,400,000 5.625% due 09/01/2004 .................................... 1,484,000
1,000,000 Inland Empire Solid Waste Financing Authority Revenue,
(Landfill Improvement Financing Project), Series B, AMT,
(FSA Insured),
6.000% due 02/01/2006 .................................... 1,070,000
Los Angeles, Community Redevelopment Agency, MFHR, (AMBAC
Insured):
720,000 5.650% due 07/01/2000 .................................... 739,800
1,085,000 6.000% due 07/01/2004 .................................... 1,144,675
Los Angeles, Department of Water and Power, Electric Revenue
Bond, (MBIA Insured):
1,500,000 8.500% due 01/15/2002 .................................... 1,745,625
1,000,000 5.400% due 09/01/2006 .................................... 1,045,000
1,000,000 Los Angeles, GO, Series A, (FGIC Insured),
5.700% due 09/01/2008 .................................... 1,050,000
Los Angeles, Unified School District, COP:
1,000,000 (FSA Insured),
5.400% due 11/01/2009 .................................... 1,000,390
1,500,000 Series B, (AMBAC Insured),
6.000% due 12/01/2001 .................................... 1,603,125
2,500,000 Los Angeles County, Capital Asset Leasing Corporation,
Leasehold Revenue,
(AMBAC Insured),
6.000% due 12/01/2006 .................................... 2,728,125
500,000 Los Angeles County, COP, Structured Yield Curve
Certificates,
6.100% due 11/01/2001 .................................... 525,625
631,000 Modesto, Mortgage Revenue Bond,
(GNMA Insured),
5.875% due 12/01/2004 .................................... 651,508
Oakland, Improvement Board Act of 1915, Medical Hill
Parking, Assessment District #3, (MBIA Insured):
150,000 5.500% due 09/02/1999 .................................... 154,125
250,000 6.000% due 09/02/2004 .................................... 257,962
750,000 Oakland Revenue Bonds, (YMCA East Bay Project),
6.250% due 06/01/2000 .................................... 765,938
1,000,000 Orange County, Recovery Project Revenue Bonds, Series A,
(MBIA Insured),
6.000% due 06/01/2008 .................................... 1,090,000
Oxnard, Harbor District Revenue,
(FSA Insured):
1,075,000 7.000% due 08/01/2001 .................................... 1,181,156
1,155,000 7.000% due 08/01/2002 .................................... 1,286,381
1,240,000 7.000% due 08/01/2003 .................................... 1,401,200
Paramount, Redevelopment Agency Tax Allocation,
(Redevelopment Project
Area #1), (MBIA Insured):
1,610,000 6.100% due 08/01/2006 .................................... 1,754,900
1,700,000 6.100% due 08/01/2007 .................................... 1,842,375
560,000 Pioneers Memorial Hospital District, GO, (AMBAC Insured),
7.000% due 10/01/2005 .................................... 651,000
1,565,000 Redondo Beach, Public Financing Authority Revenue, (South
Bay Center Redevelopment Project),
6.750% due 07/01/2006 .................................... 1,635,425
1,300,000 Sacramento, Municipal Utility District, Electric Revenue,
(AMBAC Insured),
5.500% due 05/15/2007 .................................... 1,352,000
1,000,000 San Diego, Unified School District, COP, (Capital Projects),
Series B,
6.000% due 07/01/2003 .................................... 1,056,250
1,050,000 Santa Ana, COP, (Santa Ana Recycling Project), Series A,
AMT, (AMBAC Insured),
5.400% due 05/01/2007 .................................... 1,084,125
1,350,000 Solano County, (Solano Park Hospital Project), COP, (FSA
Insured),
6.500% due 08/01/2006 .................................... 1,501,875
1,000,000 Southern California, Home Financing Authority, MFHR, (The
Fountains Project), Series A, AMT, FNMA collateralized,
5.400% due 01/01/2027 .................................... 1,007,500
1,000,000 Stanton, MFHR, (Continental Gardens Apartments), AMT,
5.625% due 08/01/2029 .................................... 1,012,500
University of California:
1,000,000 (Multiple Purpose Review Projects),
(MBIA Insured),
10.000% due 09/01/2001 ................................... 1,211,250
1,250,000 Revenue Housing Systems, Series A,
(MBIA Insured),
5.300% due 11/01/2005 .................................... 1,296,875
1,070,000 Series A, (CONNIE LEE Insured),
5.500% due 09/01/2006 .................................... 1,099,425
1,000,000 Valley Health Systems, California Hospital Revenue,
(Hospital Revenue Refunding & Improvement Project),
Series A,
6.125% due 05/15/2005 .................................... 1,022,500
---------------
63,213,135
---------------
PUERTO RICO - 1.5%
943,139 Centro de Recaudaciones de Ingresos Municipales, COP,
6.850% due 10/17/2003 .................................... 977,328
--------------
Total Municipal Bonds and Notes
(Cost $60,892,856) ....................................... 64,190,463
--------------
SHORT-TERM MUNICIPAL BONDS - 1.7%
500,000 California, Pollution Control Financing Authority, PCR,
Southern California Edison Company, Series B,
5.200% due 02/28/2008+ ................................... 500,000
Los Angeles, Regional Airports Improvement, (American
Airlines-L.A. International Airport):
300,000 4.100% due 12/01/2025+ ................................... 300,000
300,000 Series B,
4.100% due 12/01/2024+ ................................... 300,000
--------------
Total Short-Term Municipal Bonds
(Cost $1,100,000) ........................................ 1,100,000
--------------
TOTAL INVESTMENTS (COST $61,992,856*) ............................. 98.7% 65,290,463
OTHER ASSETS AND LIABILITIES (NET) ................................ 1.3 861,430
----- --------------
NET ASSETS ........................................................ 100.0% $ 66,151,893
===== ==============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes.
+ Floating 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.
California Insured Intermediate Municipal Fund had the following insurance
concentrations greater than 10% at June 30, 1997 (as a percentage of net
assets):
AMBAC 27.3%
MBIA 24.6%
FSA 18.9%
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
CGIC -- Capital Guaranty Insurance Corporation
CONNIE LEE -- College Construction Loan Association
COP -- Certificates of Participation
FGIC -- Financial 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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NATIONAL MUNICIPAL FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
MUNICIPAL BONDS AND NOTES - 97.2%
ALABAMA - 2.8%
<C> <S> <C>
$ 4,000,000 Courtland, Industrial Development Board of Solid Waste,
(Champion International Corporation Project), Disposal
Revenue, AMT,
7.750% due 01/01/2020 .................................. $ 4,290,000
1,000,000 Mobile, Industrial Development Board,
Solid Waste Disposal Revenue,
6.950% due 01/01/2020 .................................. 1,067,500
------------
5,357,500
------------
ARIZONA - 0.4%
740,000 Tucson, Airport Authority Inc.,
Supplemental Facilities Revenue,
AMT,
8.700% due 09/01/2019 .................................. 833,425
------------
CALIFORNIA - 0.3%
550,000 Los Angeles, Regional Airport Improvement, Series A, AMT,
6.700% due 01/01/2022 .................................. 570,625
------------
COLORADO - 9.6%
Denver City and County, Airport
Revenue, AMT:
Series A:
2,000,000 8.875% due 11/15/2012 .................................. 2,335,000
1,140,000 8.500% due 11/15/2023 .................................. 1,285,350
2,000,000 8.000% due 11/15/2025 .................................. 2,225,000
1,920,000 Series C,
6.600% due 11/15/2004 .................................. 2,071,200
4,500,000 Meridian Metropolitan District, GO,
7.500% due 12/01/2011 .................................. 4,933,125
5,000,000 University of Colorado, Hospital Authority Revenue, Series
A, (AMBAC Insured),
6.250% due 11/15/2012 .................................. 5,337,500
------------
18,187,175
------------
CONNECTICUT - 1.1%
2,000,000 Mashantucket Western Pequot Tribe,
Special Revenue, Series A,
6.500% due 09/01/2005++ ................................ 2,137,500
------------
DISTRICT OF COLUMBIA - 2.2%
1,150,000 District of Columbia, COP,
6.875% due 01/01/2003 .................................. 1,210,375
1,420,000 District of Columbia, Land Redevelopment Agency,
Washington D.C. Sports Arena, Special Tax,
5.625% due 11/01/2010 .................................. 1,395,150
1,500,000 Metropolitan District, Washington D.C., Airport Authority,
General Airport Revenue, Series A, AMT, (MBIA Insured),
6.625% due 10/01/2019 .................................. 1,620,000
------------
4,225,525
------------
FLORIDA - 3.9%
22,520,000 Dade County, Guaranteed Entitlement Revenue, Capital
Appreciation,
Series A, (MBIA Insured),
Zero coupon due 02/01/2018 ............................. 6,812,300
425,000 Dade County, Seaport Authority, Refunding, (MBIA Insured),
6.500% due 10/01/2008 .................................. 481,844
------------
7,294,144
------------
GEORGIA - 6.8%
1,000,000 Atlanta, Airport Facilities Revenue, AMT,
7.250% due 01/01/2017 .................................. 1,078,750
Monroe, PCR, (Oglethorpe Power Company):
5,000,000 6.700% due 01/01/2009 .................................. 5,612,500
3,410,000 6.750% due 01/01/2010 .................................. 3,849,038
2,285,000 Municipal Electric Authority, Sub Series A, (AMBAC
Insured),
5.375% due 01/01/2013 .................................. 2,273,575
------------
12,813,863
------------
IDAHO - 1.2%
2,000,000 Idaho Health Facilities Authority
Revenue, (Inverse Floater),
7.820% due 02/15/2021+ ................................. 2,217,500
------------
ILLINOIS - 17.5%
Chicago, O'Hare Airport Supplemental Facilities, AMT:
6,000,000 International Term, (MBIA Insured),
6.750% due 01/01/2012 .................................. 6,427,500
700,000 American Airlines, Special Series A,
7.875% due 11/01/2025 .................................. 760,375
United Air Lines:
615,000 8.400% due 05/01/2004 .................................. 671,119
775,000 8.950% due 05/01/2018 .................................. 873,812
150,000 United Air Lines, Special Series B,
8.500% due 05/01/2018 .................................. 164,062
Cook County, Community High School, Number 217, (AMBAC
Insured):
1,090,000 6.400% due 12/01/2003 .................................. 1,170,387
1,130,000 6.500% due 12/01/2004 .................................. 1,213,337
1,370,000 6.600% due 12/01/2005 .................................. 1,471,037
Cook County, School District, Number 026, (MBIA Insured):
1,445,000 Zero coupon due 12/01/2003 ............................. 1,049,431
1,020,000 Zero coupon due 12/01/2004 ............................. 701,250
1,000,000 Decatur, Hospital Revenue, (Decatur Memorial Hospital),
Series B,
(MBIA Insured),
6.850% due 10/01/2016 .................................. 1,107,500
Illinois Health Facilities Authority Revenue:
Glenoak Medical Center, Series D:
210,000 Pre-refunded,
9.500% due 11/15/2015 .................................. 246,750
270,000 Unrefunded,
9.500% due 11/15/2015 .................................. 315,225
4,675,000 Hindsdale Hospital, Series B,
9.000% due 11/15/2015 .................................. 5,387,937
5,000,000 Sister Services Hospital, Residual
Interest Bond, (MBIA Insured),
9.207% due 06/19/2015+ ................................. 5,800,000
300,000 Riverside Senior Living Center Project,
7.500% due 11/01/2020 .................................. 333,000
1,230,000 Servantcor, Series A,
8.000% due 08/15/2021 .................................. 1,409,887
3,000,000 Rush Presbyterian - St. Luke's Medical, Residual
Interest Bond, (MBIA Insured), 9.615% due 10/01/2024+ .. 3,457,500
365,000 Illinois Housing Development Authority, Series A, AMT,
7.350% due 08/01/2010 .................................. 387,356
------------
32,947,465
------------
INDIANA - 1.8%
2,000,000 Indianapolis, Public Improvement Board, Series D, (LOCINB
National Bank), 6.500% due 02/01/2022 .................. 2,018,920
1,300,000 Purdue University, Series E,
4.150% due 07/01/2011+ ................................. 1,300,000
------------
3,318,920
------------
KENTUCKY - 1.8%
3,000,000 Jefferson County, Hospital Revenue, Residual Interest
Bond, (MBIA Insured),
8.496% due 10/09/2008+ ................................. 3,461,250
------------
LOUISIANA - 2.4%
300,000 East Baton Rouge, Sewer Commission Revenue,
9.125% due 09/01/2006 .................................. 311,439
1,500,000 Louisiana Public Facility Authority
Revenue, Series B, ETM,
Zero coupon due 12/01/2019 ............................. 418,125
10,000,000 Orleans Parish, Louisiana, School Board Revenue,
(FGIC Insured),
Zero coupon due 02/01/2015 ............................. 3,712,500
------------
4,442,064
------------
MARYLAND - 0.5%
930,000 State of Maryland, Community Development Administration,
Department of Housing, Single Family Project, AMT,
7.450% due 04/01/2032 .................................. 973,012
------------
MASSACHUSETTS - 2.4%
750,000 Commonwealth of Massachusetts, Consolidated Loan,
Series A, GO, 7.625% due 06/01/2008 .................... 848,438
250,000 Commonwealth of Massachusetts, GO,
Pre-refunded,
7.500% due 12/01/2007 .................................. 279,063
Commonwealth of Massachusetts, Health and Educational
Facilities Authority:
500,000 Framingham Union Hospital, Series B,
8.500% due 07/01/2010 .................................. 565,625
2,000,000 Saint Memorial Medical Center, Series A,
6.000% due 10/01/2023 .................................. 1,795,000
1,000,000 Plymouth County, COP, Series A,
7.000% due 04/01/2022 .................................. 1,096,250
------------
4,584,376
------------
MICHIGAN - 0.9%
1,500,000 Michigan State Hospital Finance Authority Revenue, Detroit
Medical, Series A,
7.500% due 08/15/2011 .................................. 1,625,625
------------
MINNESOTA - 0.5%
1,000,000 Minnesota Agriculture and Economic Development Board,
Health Care Systems, (Fairview Hospital Project), Series
A, (MBIA Insured),
5.750% due 11/15/2026 .................................. 1,007,500
------------
MISSISSIPPI - 3.2%
5,000,000 Lowndes County, Solid Waste Disposal, PCR, Residual
Interest Bond, (Weyerhauser
Company), Floating Rate Note,
7.820% due 04/01/2022+ ................................. 5,718,750
200,000 Warren County, Solid Waste Disposal Revenue,
(International Paper Project), Series A, AMT,
7.700% due 11/15/2009 .................................. 213,500
------------
5,932,250
------------
MISSOURI - 2.4%
1,000,000 Missouri State, Health and Educational Facilities
Authority Revenue, Bethesda
Eye Institute,
6.800% due 11/01/2016 .................................. 1,111,250
3,000,000 St. Louis, Parking Facilities Revenue,
6.625% due 12/15/2021 .................................. 3,348,750
------------
4,460,000
------------
MONTANA - 0.6%
1,000,000 Forsyth, PCR, Series B, AMT, Puget Sound Power & Light,
(AMBAC Insured),
7.250% due 08/01/2021 .................................. 1,103,750
------------
NEBRASKA - 0.4%
650,000 Nebraska Investment Finance Authority, SFHR, Residual
Interest Bond, AMT, (GNMA Insured),
9.312% due 09/15/2024+ ................................. 727,188
------------
NEVADA - 2.3%
4,000,000 Clark County, IDR, Series A, Nevada Power Company, AMT,
(FGIC Insured),
6.700% due 06/01/2022 .................................. 4,275,000
------------
NEW YORK - 9.0%
400,000 City of New York, IDR, Industrial Development Agency,
Supplemental Facilities, American Airlines, AMT,
8.000% due 07/01/2020 .................................. 422,500
3,000,000 Housing of New York Corporation Revenue,
5.000% due 11/01/2013 .................................. 2,808,750
1,265,000 Metropolitan Transportation Authority Revenue, Service
Contract Transportation
Facilities, Series 7,
4.750% due 07/01/2019 .................................. 1,097,388
New York, GO:
995,000 Series A,
8.000% due 08/15/2020 .................................. 1,140,519
1,000,000 Series B, (FSA Insured),
7.000% due 06/01/2014 .................................. 1,098,750
5,200,000 Series C,
6.500% due 08/01/2005 .................................. 5,570,500
Series F:
1,845,000 Pre-refunded,
8.250% due 11/15/2018 .................................. 2,147,119
160,000 Unrefunded,
8.250% due 11/15/2018 .................................. 182,000
275,000 New York State Medical Care Facilities, Finance Agency
Revenue, Pre-refunded, 7.750% due 08/15/2011 ........... 308,488
2,000,000 New York State, Housing Finance Agency Revenue, Multi-
family Housing Revenue, Second Mortgage, Series F, AMT,
6.625% due 08/15/2012 .................................. 2,107,500
------------
16,883,514
------------
NORTH CAROLINA - 2.7%
5,000,000 North Carolina Eastern Municipal Power Agency, Power
Systems Revenue, Series A, (MBIA Insured),
5.700% due 01/01/2013 .................................. 5,131,250
------------
OHIO - 0.8%
1,240,000 Lorain County, Hospital Revenue, Series B, Humility of
Mary Health Care,
7.200% due 12/15/2011 .................................. 1,446,150
------------
OKLAHOMA - 1.2%
1,855,000 Oklahoma Housing and Finance Authority, SFHR, Series B,
AMT, (GNMA Insured),
7.997% due 08/01/2018 .................................. 2,072,963
200,000 Tulsa, Municipal Airport Revenue, American Airlines
Project, AMT,
7.600% due 12/01/2030 .................................. 217,500
------------
2,290,463
------------
PENNSYLVANIA - 10.7%
Allegheny County, Hospital Development Revenue, (Ohio
Valley General Hospital):
700,000 5.100% due 04/01/2001 .................................. 700,000
735,000 5.300% due 04/01/2002 .................................. 736,837
625,000 5.400% due 04/01/2003 .................................. 625,781
Beaver County, IDR, PCR, (Edison Project), Series A:
300,000 7.750% due 09/01/2024 .................................. 317,250
3,675,000 (FGIC Insured),
7.000% due 06/01/2021 .................................. 3,955,219
300,000 Lancaster County, Solid Waste Authority, Series A, AMT,
8.375% due 12/15/2004 .................................. 314,418
600,000 Lehigh County, General Purpose Authority, Muhlenberg
Hospital Center, Series A,
8.100% due 07/15/2010 .................................. 633,000
500,000 McKean County, Hospital Authority Revenue, Bradford
Hospital, Pottstown Memorial Medical Center,
8.875% due 10/01/2020 .................................. 574,375
1,250,000 Montgomery County, Higher Education Revenue,
6.875% due 11/15/2020 .................................. 1,309,375
Pennsylvania State Higher Education Revenue, Student Loan
Revenue, Residual Interest Bond, AMT:
3,000,000 (AMBAC Insured),
9.317% due 09/01/2026+ ................................. 3,378,750
Medical College of Pennsylvania:
3,000,000 Series A,
7.250% due 03/01/2011 .................................. 3,326,250
1,890,000 Series B,
7.250% due 03/01/2005 .................................. 2,095,538
1,000,000 Philadelphia, Municipal Authority Revenue, Series B, (FGIC
Insured),
7.125% due 11/15/2018 .................................. 1,121,250
1,000,000 Philadelphia, Water and Sewer Revenue,
7.500% due 08/01/2010 .................................. 1,128,750
------------
20,216,793
------------
RHODE ISLAND - 1.3%
2,000,000 Rhode Island State Health and Education Revenue, Residual
Interest Bond,
(FGIC Insured),
9.487% due 08/15/2021+ ................................. 2,385,000
------------
TEXAS - 3.8%
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),
AMT,
7.500% due 11/01/2025 .................................. 5,393,750
669,000 Texas State, Higher Education Coordinating Board, Student
Loan, AMT,
7.700% due 10/01/2025 .................................. 704,959
500,000 West Side Calhoun County, Solid Waste Revenue Bond, (Union
Carbide Project), AMT,
8.200% due 03/15/2021 .................................. 553,750
------------
7,129,721
------------
VERMONT - 0.2%
Vermont Housing Finance Agency, Single Family, Series 1,
AMT:
140,000 6.800% due 05/01/2025 .................................. 143,325
220,000 8.150% due 05/01/2025 .................................. 227,425
------------
370,750
------------
WEST VIRGINIA - 1.9%
2,500,000 Harrison County, Solid Waste Disposal, (Monongahelea
Power), Series A, AMT,
6.875% due 04/15/2022 .................................. 2,671,875
150,000 Kanawha County, IDR, (Union Carbide Project),
Series A, AMT,
8.000% due 08/01/2020 .................................. 163,313
750,000 South Charleston, IDR, (Union Carbide Project),
Series A, AMT,
8.000% due 08/01/2020 .................................. 816,562
------------
3,651,750
------------
WISCONSIN - 0.6%
$1,000,000 Madison, IDR, (Madison Gas & Electric Company),
(Project A), AMT,
6.750% due 04/01/2027 .................................. $ 1,055,000
------------
Total Municipal Bonds and Notes
(Cost $166,933,787) ............................. 183,056,048
------------
TOTAL INVESTMENTS (COST $166,933,787*) .......................... 97.2% 183,056,048
OTHER ASSETS AND LIABILITIES (NET) .............................. 2.8 5,209,698
----- ------------
NET ASSETS ...................................................... 100.0% $188,265,746
===== ============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes.
+ Floating rate security. The interest rate shown reflects the rate currently
in effect.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
National Municipal Fund had the following insurance concentrations greater than
10% at June 30, 1997 (as percentage of net assets):
MBIA 19.7%
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
COP -- Certificates of Participation
ETM -- Escrowed to Maturity
FGIC -- Financial Guaranty Insurance Corporation
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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 98.3%
FINANCIAL SERVICES - 12.6%
<C> <C> <C>
53,512 Aegon NV, ADR ............................................. $ 3,749,184
59,100 AMBAC Inc. ................................................ 4,513,763
60,627 Banc One Corporation ...................................... 2,936,611
25,000 Chase Manhattan Corporation ............................... 2,426,562
119,700 Dime Bancorp, Inc. ........................................ 2,094,750
102,400 First Chicago NBD Corporation ............................. 6,195,200
106,100 First Hawaiian Inc. ....................................... 3,620,662
73,800 Marsh and McLennan Companies, Inc. ........................ 5,267,475
134,599 NationsBank Corporation ................................... 8,681,652
123,200 Providian Corporation+ .................................... 3,957,800
35,400 Washington Mutual, Inc. ................................... 2,115,150
------------
45,558,809
------------
CONSUMER DISCRETIONARY - 11.9%
119,100 ADT Ltd.+ ................................................. 3,930,300
165,800 Circus Circus Enterprises, Inc.+ .......................... 4,082,825
268,300 International Game Technology ............................. 4,762,325
84,200 Procter & Gamble Company .................................. 11,893,250
168,000 TCI Satellite Entertainment, Inc., Class A+ ............... 1,323,000
715,800 Tele-Communications Inc.,
TCI Group, Class A+ ..................................... 10,647,525
131,500 Time Warner, Inc. ......................................... 6,344,875
------------
42,984,100
------------
TECHNOLOGY - 10.8%
207,300 Bay Networks Inc.+ ........................................ 5,506,406
128,800 Cabletron Systems, Inc.+ .................................. 3,646,650
34,700 Cisco Systems, Inc.+ ...................................... 2,329,238
98,900 Dominion Resources Inc. ................................... 3,622,213
204,300 EMC Corporation+ .......................................... 7,967,700
108,300 Input/Output, Inc.+ ....................................... 1,962,937
62,500 International Business Machines
Corporation ............................................. 5,636,719
22,300 Perkin Elmer Corporation .................................. 1,774,244
272,600 Sensormatic Electronics Corporation ....................... 3,509,725
85,600 Sun Microsystems, Inc.+ ................................... 3,185,925
------------
39,141,757
------------
ENERGY - 10.8%
58,500 Anadarko Petroleum Corporation ............................ 3,510,000
72,346 British Petroleum Company Plc, ADR ........................ 5,416,907
2,200 Cooper Cameron Corporation+ ............................... 102,850
105,300 Enron Corporation ......................................... 4,297,556
149,900 Exxon Corporation ......................................... 9,218,850
51,200 Mobil Corporation ......................................... 3,577,600
112,400 Royal Dutch Petroleum Company, ADR ........................ 6,111,750
156,800 Tosco Corporation ......................................... 4,694,200
56,984 Ultramar Diamond Shamrock Corporation ..................... 1,859,103
------------
38,788,816
------------
MATERIALS & PROCESSING - 9.9%
3,900 Albemarle Corporation ..................................... 82,144
337,000 Allegheny Teledyne Inc. ................................... 9,099,000
99,600 Allied Signal Inc. ........................................ 8,366,400
49,000 Aluminum Company of America ............................... 3,693,375
71,000 du Pont (E.I.) de Nemours & Company ....................... 4,464,125
60,100 Temple-Inland, Inc. ....................................... 3,245,400
148,500 Union Carbide Corporation ................................. 6,988,781
------------
35,939,225
------------
HEALTH CARE - 8.4%
142,500 ALZA Corporation+ ......................................... 4,123,594
63,200 Bausch & Lomb Inc. ........................................ 2,978,300
86,200 Forest Labs Inc.+ ......................................... 3,571,912
42,091 Gensia, Inc.+ ............................................. 186,779
145,700 Humana Inc.+ .............................................. 3,369,313
97,100 Schering-Plough Corporation ............................... 4,648,662
90,800 Warner Lambert Company .................................... 11,281,900
------------
30,160,460
------------
CONSUMER STAPLES - 7.7%
16,700 CPC International Inc. .................................... 1,541,619
136,300 General Mills, Inc. ....................................... 8,876,537
136,100 Philip Morris Companies Inc. .............................. 6,039,437
83,100 Ralston Purina Company .................................... 6,829,781
21,800 Unilever NV ............................................... 4,666,562
------------
27,953,936
------------
TELECOMMUNICATIONS - 6.2%
66,500 Aware, Inc.+ .............................................. 980,875
63,900 Bell Atlantic Corporation ................................. 4,848,413
47,100 GTE Corporation ........................................... 2,066,512
97,700 SBC Communications, Inc. .................................. 6,045,188
67,600 Sprint Corporation ........................................ 3,557,450
154,500 WorldCom, Inc. ............................................ 4,944,000
------------
22,442,438
------------
PRODUCER DURABLES - 5.8%
75,000 Anixter International Inc.+ ............................... 1,289,063
165,300 Boeing Company ............................................ 8,771,231
299,400 General Instrument Corporation+ ........................... 7,485,000
86,100 Johnson Controls, Inc. .................................... 3,535,481
------------
21,080,775
------------
RETAIL - 4.7%
91,900 Circuit City Stores, Inc., CarMax Group+ .................. 1,315,319
181,200 Circuit City Stores, Inc., Circuit City Group ............. 6,443,925
149,600 Toys R Us Inc.+ ........................................... 5,236,000
119,700 Wal-Mart Stores Inc. ...................................... 4,047,356
------------
17,042,600
------------
OTHER - 3.2%
138,500 Cooper Industries, Inc. ................................... 6,890,375
145,700 Waste Management, Inc. .................................... 4,680,613
------------
11,570,988
------------
AUTOS & TRANSPORTATION - 3.0%
133,800 CSX Corporation ........................................... 7,425,900
59,000 General Motors Corporation ................................ 3,285,562
------------
10,711,462
------------
UTILITIES - 1.8%
59,100 Consolidated Edison Company of New York ................... 1,739,756
72,800 Duke Power Company ........................................ 3,489,850
41,900 Pinnacle West Capital Corporation ......................... 1,259,619
------------
6,489,225
------------
COMPUTER SOFTWARE & SERVICES - 1.5%
93,200 Autodesk Inc. ............................................. 3,570,725
45,800 First Data Corporation .................................... 2,012,337
------------
5,583,062
------------
Total Common Stocks
(Cost $304,525,387) ..................................... 355,447,653
------------
CONVERTIBLE NOTE - 1.1%
(Cost $3,863,146)
3,700,000 Berkshire Hathaway, Conv. Sr. Note,
1.000% due 12/03/2001 ........................... 3,857,250
------------
CONVERTIBLE PREFERRED STOCK - 0.6%
(Cost $1,882,370)
36,500 Owens-Corning, Conv. Pfd.+++ ............................. 2,062,250
------------
PRINCIPAL
AMOUNT
U.S. TREASURY BILL - 0.4%
(Cost $1,547,825)
$1,559,000 5.080% due 08/21/1997++ ................................... 1,547,825
------------
TOTAL INVESTMENTS (COST $311,818,728*) ......................... 100.4% 362,914,978
OTHER ASSETS AND LIABILITIES (NET) ............................. (0.4) (1,337,523)
----- ------------
NET ASSETS ..................................................... 100.0% $361,577,455
===== ============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes is $312,753,496 (Note 6).
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase (unaudited).
+++ Security exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in transactions
exempt from registration, normally to qualified institutional
buyers.
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GROWTH FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 79.9%
FINANCIAL SERVICES - 13.4%
<C> <S> <C>
11,025 Ambanc Holding Company, Inc.+ ............................ $ 179,156
16,100 AMRESCO, Inc.+ ........................................... 346,150
67,550 Associates First Capital Corporation,
Class A ................................................ 3,749,025
6,400 Astoria Financial Corporation ............................ 304,000
44,000 Bank of New York Company, Inc. ........................... 1,914,000
50,750 BankAmerica Corporation .................................. 3,276,547
8,525 Catskill Financial Corporation ........................... 132,137
45,550 Charles Schwab Corporation ............................... 1,853,316
27,625 Citicorp ................................................. 3,330,539
15,325 Dime Bancorp, Inc. ....................................... 268,187
88,125 Equifax, Inc. ............................................ 3,277,148
12,700 First Defiance Financial Corporation ..................... 180,975
2,925 First Savings Bancorp, Inc. .............................. 65,081
8,725 Fleet Financial Group, Inc. .............................. 551,856
1,825 FSF Financial Corporation ................................ 31,709
2,725 Household International, Inc. ............................ 320,017
15,625 Klamath First Bancorp, Inc. .............................. 298,828
67,300 Nationwide Financial Services, Inc.,
Class A ................................................ 1,787,656
8,525 North Central Bancshares, Inc. ........................... 132,138
8,525 Peekskill Financial Corporation .......................... 127,875
17,050 PFF Bancorp, Inc.+ ....................................... 319,688
10,750 Provident Financial Holdings, Inc.+ ...................... 178,719
6,325 Queens County Bancorp, Inc. .............................. 287,788
23,100 Reliance Group Holdings, Inc. ............................ 274,313
45,150 Roslyn Bancorp, Inc. ..................................... 1,032,806
22,144 Skandia Forsakrings AB ................................... 815,854
34,250 State Street Corporation ................................. 1,584,063
10,200 TF Financial Corporation ................................. 200,175
22,400 Travelers Group, Inc. .................................... 1,412,600
169,600 UNUM Corporation ......................................... 7,123,200
8,541 Wells Fargo & Company .................................... 2,301,800
9,425 Western National Corporation ............................. 252,708
------------
37,910,054
------------
HEALTH CARE - 12.5%
47,675 ESC Medical Systems Limited+ ............................. 1,215,713
32,400 Fresenius Medical Care AG, ADR+ .......................... 943,650
58,675 IDEXX Laboratories, Inc.+ ................................ 729,770
129,925 Omnicare, Inc. ........................................... 4,076,397
11,125 PacifiCare Health Systems, Inc.,
Series B+ .............................................. 710,609
17,225 Protein Design Labs, Inc.+ ............................... 490,913
52,225 Rhone-Poulenc Rorer, Inc. ................................ 4,745,947
81,725 Rhone-Poulenc Rorer, Inc., Ord. .......................... 3,337,587
35,475 Sofamor Danek Group, Inc.+ ............................... 1,622,981
96,000 Teva Pharmaceutical Industries Ltd., ..................... 6,216,000
89,525 Warner Lambert Company ................................... 11,123,481
------------
35,213,048
------------
TECHNOLOGY - 12.1%
130,424 Analog Devices, Inc.+ .................................... 3,464,387
57,275 Cisco Systems, Inc.+ ..................................... 3,844,584
27,075 Compaq Computer Corporation+ ............................. 2,687,194
53,100 EMC Corporation+ ......................................... 2,070,900
62,375 HBO & Company ............................................ 4,296,078
33,825 Intel Corporation ........................................ 4,796,808
16,650 KLA-Tencor Corporation+ .................................. 811,688
62,125 Philips Electronics NV, NY Shares ........................ 4,465,234
10,313 Philips Electronics NV, Ord .............................. 738,707
90,025 Pittway Corporation, Class A ............................. 4,478,744
15,475 Technology Solutions Company+ ............................ 611,263
82,575 Westinghouse Electric Corporation ........................ 1,909,547
------------
34,175,134
------------
COMPUTER SOFTWARE & SERVICES - 11.0%
103,150 Aspen Technology, Inc.+ .................................. 3,881,019
94,725 First Data Corporation ................................... 4,161,980
38,175 First USA Paymentech, Inc.+ .............................. 1,104,689
57,825 Indus Group Inc.+ ........................................ 1,170,956
9,600 Intelligroup, Inc.+ ...................................... 92,400
9,300 JDA Software Group, Inc.+ ................................ 317,363
8,675 Microsoft Corporation+ ................................... 1,096,303
299,750 Parametric Technology Company+ ........................... 12,758,109
35,700 Peoplesoft, Inc.+ ........................................ 1,883,175
17,200 Rational Software Corporation+ ........................... 289,175
28,100 Sapient Corporation+ ..................................... 1,390,950
72,762 Wind River Systems+ ...................................... 2,783,147
------------
30,929,266
------------
TELECOMMUNICATIONS - 8.8%
33,600 Ascend Communications, Inc.+ ............................. 1,323,000
278,950 Cincinnati Bell, Inc. .................................... 8,786,925
57,825 Lucent Technologies, Inc. ................................ 4,167,014
40,200 Millicom International Cellular SA+ ...................... 1,919,550
83,775 Nokia Corporation, Class A,
Sponsored ADR .......................................... 6,178,406
78,927 WorldCom, Inc.+ .......................................... 2,525,664
------------
24,900,559
------------
MATERIALS & PROCESSING - 6.6%
9,031 AKZO Nobel NV+ ........................................... 1,237,627
17,325 ASM Lithography Holdings, NV+ ............................ 1,013,513
34,275 Chicago Bridge & Iron Company, NV ........................ 758,334
104,882 Metra AB, Series B, Ord. ................................. 3,160,952
179,400 Monsanto Company ......................................... 7,725,413
20,894 Potash Corporation of
Saskatchewan, Inc. ..................................... 1,568,356
70,175 UCAR International, Inc.+ ................................ 3,210,506
------------
18,674,701
------------
CONSUMER DISCRETIONARY - 5.4%
90,325 Costco Companies, Inc.+ .................................. 2,969,434
30,275 Gucci Group .............................................. 1,948,953
36,150 Industrie Natuzzi Spa, Sponsored ADR ..................... 926,344
50,025 IntelliQuest Information Group, Inc.+ .................... 1,125,562
57,775 Lamar Advertising Company+ ............................... 1,473,263
29,850 Outdoor Systems, Inc.+ ................................... 1,141,763
812,292 Rentokil Group Plc+ ...................................... 2,854,220
24,375 Scholastic Corporation+ .................................. 853,125
76,975 TeleTech Holdings, Inc.+ ................................. 2,020,594
------------
15,313,258
------------
AUTOS & TRANSPORTATION - 4.3%
78,275 Caliber System, Inc. ..................................... 2,915,744
10,374 Volkswagen AG, ADR ....................................... 7,953,231
35,450 Wisconsin Central Transportation Corporation+ ............ 1,320,513
------------
12,189,488
------------
ENERGY - 2.7%
130,975 Noble Drilling Corporation+ .............................. 2,955,123
48,550 Santa Fe International Corporation+ ...................... 1,650,700
12,125 Texaco, Inc. ............................................. 1,318,594
34,475 Triton Energy Corporation+ ............................... 1,579,386
------------
7,503,803
------------
RETAIL - 1.6%
116,325 Abercrombie & Fitch Company,
Class A+ ............................................... 2,152,012
51,975 Linens 'N Things, Inc.+ .................................. 1,539,759
17,275 Nordstrom, Inc. .......................................... 847,555
------------
4,539,326
------------
OTHER - 1.3%
25,025 Minnesota Mining & Manufacturing Company ................. 2,552,550
24,600 Redwood Trust, Inc. ...................................... 1,150,050
------------
3,702,600
------------
CONSUMER STAPLES - 0.2%
12,539 Cultor OY, Series 1 ...................................... 664,046
------------
Total Common Stocks
(Cost $192,974,744) .................................... 225,715,283
------------
PRINCIPAL
AMOUNT
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 10.6%
Federal Home Loan Bank (FHLB):
$ 6,000,000 5.384% due 07/02/1997++ ................................ 5,999,108
5,000,000 5.569% due 08/04/1997++ ................................ 4,974,122
------------
10,973,230
------------
Federal Home Loan Mortgage
Corporation (FHLMC):
4,000,000 5.366% due 07/03/1997++ ................................ 3,998,809
10,000,000 5.435% due 07/10/1997++ ................................ 9,986,500
5,000,000 5.611% due 07/31/1997++ ................................ 4,976,958
------------
18,962,267
------------
Total U.S. Government Agency Discount Notes (Cost
$29,935,497) ........................................... 29,935,497
------------
COMMERCIAL PAPER - 9.4%
10,000,000 General Electric Capital Corporation,
5.508% due 07/03/1997 .................................. 9,996,944
10,000,000 NationsBank Corporation,
5.713% due 08/01/1997 .................................. 9,951,520
6,700,000 Prudential Insurance Company,
6.001% due 07/01/1997 .................................. 6,700,000
------------
Total Commercial Paper
(Cost $26,648,464) ..................................... 26,648,464
------------
TOTAL INVESTMENTS (COST $249,558,705*) ................................. 99.9% 282,299,244
OTHER ASSETS AND LIABILITIES (NET) ..................................... 0.1 308,884
----- ------------
NET ASSETS ............................................................. 100.0% $282,608,128
===== ============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes is $250,481,839 (Note 6).
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase (unaudited).
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO 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> <C>
07/15/1997 GBP 400,000 666,214 654,660 $ 11,554
07/18/1997 GBP 930,000 1,548,998 1,520,299 28,699
08/11/1997 DEM 1,500,000 862,886 896,307 (33,421)
09/11/1997 NLG 500,000 256,315 265,168 (8,853)
---------
$ (2,021)
---------
</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
---------- ------------------------------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
07/15/1997 FIM 2,000,000 385,604 432,106 $ 46,502
07/15/1997 GBP 400,000 666,214 673,813 7,599
07/18/1997 GBP 1,070,000 1,782,181 1,783,802 1,621
08/11/1997 DEM 1,600,000 920,411 975,253 54,842
08/11/1997 DEM 1,200,000 690,309 719,942 29,633
08/12/1997 FIM 2,460,000 475,372 507,426 32,054
08/13/1997 DEM 1,200,000 690,407 723,415 33,008
08/13/1997 DEM 1,000,000 575,339 595,593 20,254
09/25/1997 NLG 3,800,000 1,947,998 2,025,262 77,264
10/22/1997 FIM 750,000 145,688 147,551 1,863
10/22/1997 GBP 100,000 166,739 162,800 (3,939)
10/23/1997 DEM 300,000 173,497 179,124 5,627
11/12/1997 FIM 2,221,000 432,108 439,758 7,650
11/28/1997 FIM 7,500,000 1,460,910 1,490,106 29,196
11/28/1997 GBP 650,000 1,084,250 1,053,065 (31,185)
12/04/1997 GBP 400,000 667,275 652,800 (14,475)
----------
$ 297,514
----------
Net Unrealized Appreciation of Forward
Foreign Currency Contracts ..................................... $ 295,493
==========
</TABLE>
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
ADR -- American Depositary Receipt
DEM -- German Deutsche Mark
FIM -- Markka
GBP -- Great Britain Pound Sterling
NLG -- Netherlands Guilder
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 92.2%
RETAIL - 19.2%
<C> <S> <C>
198,800 Barnett, Inc.+ ............................................ $ 4,870,600
388,700 Fastenal Company .......................................... 19,046,300
70,025 MSC Industrial Direct Company, Inc.,
Class A+ ................................................ 2,809,753
124,925 O'Reilly Automotive, Inc.+ ................................ 4,809,613
509,075 Petco Animal Supplies, Inc.+ .............................. 15,272,250
115,699 Renters Choice, Inc.+ ..................................... 2,299,518
------------
49,108,034
------------
FINANCIAL SERVICES - 17.2%
12,250 Affiliated Community Bancorp, Inc. ........................ 287,875
7,800 Ambanc Holding Company, Inc.+ ............................. 126,750
7,375 Anchor Bancorp Wisconsin, Inc. ............................ 359,531
16,800 Avondale Financial Corporation+ ........................... 243,600
15,375 Catskill Financial Corporation ............................ 238,312
62,700 Charles Schwab Corporation ................................ 2,551,106
21,200 Chester Bancorp, Inc. ..................................... 312,700
21,000 Citizens First Financial Corporation+ ..................... 325,500
51,475 Credit Acceptance Corporation+ ............................ 662,741
21,750 Empire Federal Bancorp, Inc. .............................. 312,656
17,275 Fed One Bancorp, Inc. ..................................... 349,819
13,200 FFVA Financial Corporation ................................ 359,700
12,775 Fidelity Bancorp, Inc. .................................... 236,338
22,300 First Bell Bancorp, Inc. .................................. 373,525
24,450 First Defiance Financial Corporation ...................... 348,412
3,975 First Empire State Corporation ............................ 1,339,575
16,650 Flushing Financial Corporation ............................ 372,544
17,900 GA Financial, Inc. ........................................ 340,100
34,825 Hartford Life, Inc.,Class A+ .............................. 1,305,938
201,825 HealthCare Financial Partners, Inc.+ ...................... 4,112,184
16,775 HMN Financial, Inc.+ ...................................... 385,825
20,475 Home Bancorp of Elgin, Inc. ............................... 337,838
490,300 Insignia Financial Group, Inc., Class A+ .................. 8,886,687
1 IBS Financial Corporation ................................. 18
13,575 ISB Financial Corporation ................................. 352,950
147,800 Medallion Financial Corporation ........................... 2,826,675
17,750 MFB Corporation ........................................... 337,250
42,800 Park Bancorp, Inc.+ ....................................... 695,500
8,525 Penn-America Group, Inc. .................................. 124,678
21,200 PFF Bancorp, Inc.+ ........................................ 397,500
17,275 Philadelphia Consolidated Holding Corporation+ ............ 587,350
119,600 Protective Life Corporation ............................... 6,009,900
14,375 Reliance Bancorp, Inc. .................................... 423,164
96,650 Roslyn Bancorp, Inc. ...................................... 2,210,869
14,725 Standard Financial, Inc. .................................. 360,762
17,900 Sterling Bancorp .......................................... 333,388
168,625 UICI+ ..................................................... 4,974,438
------------
43,803,698
------------
CONSUMER DISCRETIONARY - 16.0%
61,675 American Residential Services, Inc.+ ...................... 1,433,944
153,700 Apollo Group, Inc., Class A+ .............................. 5,417,925
250 Cox Radio, Inc., Class A+ ................................. 6,406
148,300 Educational Medical, Inc.+ ................................ 1,204,937
54,188 Ekornes ASA ............................................... 458,393
32,250 Evergreen Media Corporation, Class A+ ..................... 1,439,156
187,875 Family Golf Centers, Inc.+ ................................ 4,321,125
53,025 Fred Meyer, Inc.+ ......................................... 2,740,730
25,675 Heftel Broadscasting Corporation,
Class A+ ................................................ 1,418,544
55,300 Outdoor Systems, Inc.+ .................................... 2,115,225
126,475 Paychex, Inc. ............................................. 4,806,050
13,975 Pierce Leahy Corporation+ ................................. 251,550
182,650 Premier Parks, Inc.+ ...................................... 6,735,219
54,475 Profit Recovery Group International, Inc.+ ................ 755,841
116,300 Regal Cinemas, Inc.+ ...................................... 3,837,900
62,975 Royal Carribean Cruises, Ltd. ............................. 2,200,189
42,500 Univision Communications, Inc.+ ........................... 1,662,813
------------
40,805,947
------------
RESTAURANTS - 14.7%
728,911 J.D. Wetherspoon Plc Ord .................................. 16,538,792
285,575 Papa John's International Inc.+ ........................... 10,494,881
980,948 PizzaExpress Plc .......................................... 10,275,179
8,550 PJ America Inc.+ .......................................... 145,350
------------
37,454,202
------------
HEALTH CARE - 9.9%
13,575 Dentsply International, Inc. .............................. 665,175
108,725 DepoTech Corporation+ ..................................... 1,481,378
63,600 ESC Medical Systems Limited, Inc.+ ........................ 1,621,800
68,800 Karrington Health, Inc.+ .................................. 1,032,000
44,650 Mentor Corporation ........................................ 1,322,756
134,500 Omnicare Inc. ............................................. 4,219,938
157,475 Sofamor Danek Group, Inc.+ ................................ 7,204,481
53,475 Sunrise Assisted Living, Inc.+ ............................ 1,871,625
82,525 Teva Pharmaceutical Industries Ltd., Sponsored ADR ........ 5,343,494
38,325 Weider Nutrition International, Inc.,
Class A ................................................. 608,409
------------
25,371,056
------------
MATERIALS & PROCESSING - 5.6%
30,880 Minerals Technologies Inc. ................................ 1,158,000
78,325 Sealed Air Corporation+ ................................... 3,720,438
377,400 Trigen Energy Corporation ................................. 9,435,000
------------
14,313,438
------------
AUTOS & TRANSPORTATION - 2.6%
183,000 Wisconsin Central Transportation Corporation+ ............. 6,816,750
------------
PRODUCER DURABLES - 2.6%
148,600 Culligan Water Technologies, Inc.+ ........................ 6,649,850
------------
CONSUMER STAPLES - 2.0%
124,400 JP Foodservice Inc.+ ...................................... 3,568,725
38,200 Quality Food Centers, Inc.+ ............................... 1,451,600
------------
5,020,325
------------
TELECOMMUNICATIONS - 1.7%
13,550 CommNet Cellular Inc.+ .................................... 470,862
433,482 Pricellular Corporation, Class A+ ......................... 3,901,338
------------
4,372,200
------------
COMPUTER SOFTWARE & SERVICES - 0.6%
36,400 Computer Learning Centers, Inc.+ .......................... 1,528,800
------------
TECHNOLOGY - 0.1%
30,825 Amdahl Corporation+ ....................................... 271,645
------------
Total Common Stocks
(Cost $166,048,649) ..................................... 235,515,945
------------
WARRANTS - 2.7%
299,540 Littelfuse Inc., Series A,
expires 12/27/2001+ ..................................... 6,777,092
968 Stevens International Inc.,
expires 10/00/1997+ ..................................... 1,820
------------
Total Warrants (Cost $2,716,035) .......................... 6,778,912
------------
PRINCIPAL
AMOUNT
---------
COMMERCIAL PAPER - 3.8%
(Cost $9,800,000)
$9,800,000 Prudential Insurance Company,
6.084% due 07/01/1997 ................................... 9,800,000
------------
TOTAL INVESTMENTS (COST $178,564,684*) ................................. 98.7% 252,094,857
OTHER ASSETS AND LIABILITIES (NET) ..................................... 1.3 3,287,752
----- ------------
NET ASSETS ............................................................. 100.0% $255,382,609
===== ============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes is $179,140,288 (Note 6).
+ Non-income producing security.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE
-------------------------------------------------------------------- NET REALIZED
EXPIRATION VALUE IN IN EXCHANGE APPRECIATION
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- ------------------------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
07/24/1997 GBP 700,000 1,165,996 1,144,150 $ 21,846
07/24/1997 GBP 2,500,000 4,164,272 4,086,125 78,147
---------
$ 99,993
---------
<CAPTION>
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
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> <C>
07/01/1997 GBP 809,884 1,348,701 1,349,299 $ 598
07/18/1997 GBP 3,500,000 5,829,564 5,834,868 5,304
07/24/1997 GBP 1,100,000 1,832,280 1,822,656 (9,624)
07/24/1997 GBP 2,500,000 4,164,272 4,096,000 (68,272)
08/20/1997 GBP 3,500,000 5,831,827 5,580,068 (251,759)
09/11/1997 GBP 1,337,000 2,228,296 2,135,189 (93,107)
11/28/1997 GBP 1,500,000 2,502,114 2,430,150 (71,964)
12/04/1997 GBP 515,000 859,117 841,428 (17,689)
---------
$(506,513)
---------
Net Unrealized Depreciation of Forward Foreign Currency Contracts ............ $(406,520)
=========
</TABLE>
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipts
GBP -- Great Britain Pound Sterling
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 92.7%
JAPAN - 25.4%
<C> <S> <C>
34,100 Advantest Corporation ................................... $ 2,618,156
12,000 Bank of Tokyo-Mitsubishi Ltd.+ .......................... 240,806
243 DDI Corporation ......................................... 1,793,640
55,000 Fuji Bank Ltd. .......................................... 825,371
180,000 Fujikura Ltd. ........................................... 1,680,408
137,000 Fujitsu Ltd. ............................................ 1,900,537
86,000 Hankyu Realty ........................................... 691,812
300,000 Isuzu Motors Ltd. ....................................... 1,033,896
58,000 JUSCO Company ........................................... 1,958,382
124,000 Kao Corporation ......................................... 1,720,194
355,000 Kawasaki Heavy Industries ............................... 1,650,875
60,000 Matsushita Electric Industrial Company .................. 1,209,266
100,000 Matsushita Electric Works Ltd. .......................... 1,134,232
147,000 Mitsubishi Heavy Industrials Ltd. ....................... 1,127,365
80,000 Mycal Corporation ....................................... 1,151,682
100,000 NEC Corporation ......................................... 1,395,978
5,000 Nitta Corporation ....................................... 61,510
50,000 Nomura Securities Company Ltd. .......................... 689,264
40 NTT Data Communication Systems Corporation .............. 1,546,045
36,000 Orix Corporation ........................................ 2,666,667
700 Parco Company ........................................... 5,894
70,000 Pioneer Electric Corporation ............................ 1,697,858
21,000 Rohm Company ............................................ 2,162,021
70,000 Sankyo Company Ltd. ..................................... 2,351,350
97,000 Sharp Corporation ....................................... 1,337,172
3,000 Shohkoh Fund & Company Ltd. ............................. 908,258
33,000 Sony Corporation ........................................ 2,876,325
50,000 Sumitomo Bank Ltd. ...................................... 820,137
50 Tohoku Electric & Power Company ......................... 890
225,000 Toray Industries Inc. ................................... 1,603,848
85,000 Yamanouchi Pharmaceutical Company Ltd. .................. 2,284,169
------------
43,144,008
------------
UNITED KINGDOM - 9.0%
190,952 British Airport Authority ............................... 1,760,089
639,403 Cookson Group Plc ....................................... 2,252,049
93,730 Energy Group Plc ........................................ 1,000,528
293,113 Hanson Plc .............................................. 1,457,040
83,200 Imperial Chemical Industries ............................ 1,157,611
266,200 Medeva Plc .............................................. 1,137,073
226,300 Orange Plc+ ............................................. 748,062
289,000 Pace Micro Technology ................................... 322,452
35,000 Rio Tinto Plc ........................................... 609,958
350,000 Rolls Royce Plc ......................................... 1,337,653
369,250 Thistle Hotels Plc ...................................... 974,636
374,049 Vodafone Group .......................................... 1,821,995
144,488 Williams Holdings Plc ................................... 777,190
------------
15,356,336
------------
FRANCE - 5.3%
29,000 Chargeurs International ................................. 1,670,904
14,000 Eaux (Cie Generale Des) ................................. 1,793,864
76,863 La Gardere Groupe ....................................... 2,232,633
15,000 Marine-Wendel SA ........................................ 1,531,472
16,400 Societe Generale Ord. ................................... 1,830,687
------------
9,059,560
------------
NEW ZEALAND - 4.3%
2,262,500 Brierley Investments Ltd. Ord. .......................... 2,212,997
228,700 Fletcher Challenge - Building Division .................. 688,176
1,861,448 Fletcher Challenge - Forest Division .................... 2,705,791
2,665,500 Wrightson Ltd. .......................................... 1,701,908
------------
7,308,872
------------
NETHERLANDS - 4.0%
4,000 ASM Lithography Holdings, NV+ ........................... 809,517
30,200 ASM Lithography Holdings, NV, ADR+ ...................... 1,766,700
60,000 Philips Electronics NV .................................. 4,297,723
------------
6,873,940
------------
HONG KONG - 3.5%
431,100 Cheung Kong Infrastructure Holdings ..................... 1,249,234
427,125 First Pacific Company ................................... 545,808
54,500 Guangshen Railway Ltd., ADR ............................. 1,192,188
50,900 Henderson China ......................................... 85,739
672,734 Hong Kong Land Holdings ................................. 1,789,472
34,500 HSBC Holdings Ord. ...................................... 1,037,587
296,000 Jiangsu Expressway Company Ltd.+ ........................ 105,069
------------
6,005,097
------------
SWEDEN - 3.5%
237,900 ABB AB, B Shares ........................................ 3,321,466
36,300 Electrolux AB, B Shares ................................. 2,618,499
------------
5,939,965
------------
SOUTH KOREA - 3.5%
15,500 Hanil Banks ............................................. 87,275
25,400 Hyundai Motor Company Ltd., GDR ......................... 260,350
625 Kookmin Bank, Ord. ...................................... 8,942
66,300 Kookmin Bank, Sponsored GDR++ ........................... 1,433,748
46,900 Korea Electric Power Corporation, Ord. .................. 1,399,606
25,700 Korea Electric Power Corporation, Sponsored ADR ......... 480,269
12,544 Samsung Electronics Company Ltd., Ord. 985,220
15,023 Samsung Electronics Company Ltd.,
GDS++ ................................................. 404,658
36,000 Yukong Ltd. ............................................. 871,622
------------
5,931,690
------------
AUSTRALIA - 3.5%
341,800 Boral Ltd. .............................................. 1,077,602
180,200 National Australia Bank Ltd. ............................ 2,584,476
292,000 Oil Search Ltd. ......................................... 794,760
43,000 Qantas Airways Ltd., ADR++ .............................. 1,007,815
182,392 Qantas Airways Ltd. ..................................... 427,482
------------
5,892,135
------------
SINGAPORE - 3.4%
281,000 D.B.S. Land Ltd. ........................................ 888,382
108,000 Development Bank of Singapore (F) ....................... 1,359,726
158,909 Jardine Matheson Holdings ............................... 1,128,254
212,000 Keppel Bank ............................................. 545,681
31,750 Keppel Corporation Ltd., Class A ........................ 137,686
127,000 Keppel Corporation Ltd., Ord. ........................... 564,069
72,000 Singapore International Airlines Ltd. (F)................ 644,611
28,000 Singapore Press Holdings (F) ............................ 564,034
------------
5,832,443
------------
INDIA - 3.3%
160,400 Reliance Industries Ltd., GDS ........................... 3,689,200
71,800 State Bank of India, GDR+ ++ ............................ 1,899,110
------------
5,588,310
------------
ARGENTINA - 3.2%
79,700 Telefonica de Argentina, ADR ............................ 2,759,613
85,000 YPF Sociedad Anonima, Sponsored ADR...................... 2,613,750
------------
5,373,363
------------
ISRAEL - 2.8%
126,000 Blue Square-Israel Ltd., ADR+ ........................... 2,173,500
88,800 ECI Telecommunications Ltd., ADR ........................ 2,641,800
------------
4,815,300
------------
GERMANY - 2.5%
1,600 Ava Allgemeine Handels Der Verbr AG+ .................... 455,059
1,414 Bayerische Motoren Werke AG ............................. 1,169,989
37,400 Deutsche Bank AG ........................................ 2,185,303
1,080 G.E.A. AG ............................................... 425,448
------------
4,235,799
------------
FINLAND - 2.1%
31,550 Huhtamaki Group, I Shares ............................... 1,357,936
36,475 Rauma Group ............................................. 835,882
60,100 UPM-Kymmene Corporation ................................. 1,412,007
------------
3,605,825
------------
SWITZERLAND - 1.8%
1,350 Julius Baer Holdings AG, Series B ....................... 2,065,619
650 Novartis AG ............................................. 1,038,612
------------
3,104,231
------------
INDONESIA - 1.6%
200,000 PT Inco ................................................. 394,737
488,500 PT Indosat .............................................. 1,461,282
18,700 PT Indosat, ADR ......................................... 559,831
171,500 Semen Gresik (F) ........................................ 384,324
------------
2,800,174
------------
DENMARK - 1.4%
64,300 International Service Systems AS, Class B 2,304,764
------------
MEXICO - 1.4%
70,000 Panamerican Beverages, Class A .......................... 2,301,250
------------
PORTUGAL - 1.3%
21,000 Cimpor .................................................. 489,471
21,800 Portugal Telecommunications, ADR ........................ 874,725
22,000 Portugal Telecommunications SA .......................... 887,550
------------
2,251,746
------------
BRAZIL - 1.2%
13,300 Telebras, Sponsored ADR ................................. 2,018,275
------------
AUSTRIA - 0.9%
4,105 Boehler-Uddeholm ........................................ 318,331
6,425 VA Technologie AG ....................................... 1,175,790
------------
1,494,121
------------
ITALY - 0.7%
212,100 ENI, Spa ................................................ 1,200,931
------------
LUXEMBOURG - 0.7%
23,400 Millicom International Cellular SA+ ..................... 1,117,350
------------
THAILAND - 0.6%
43,600 Bangkok Bank Public
Company Ltd. (F) ...................................... 311,679
40,000 Siam Cement Public
Company Ltd. (F) ...................................... 719,679
55,400 Thai Military Bank Public
Company Ltd. .......................................... 64,522
------------
1,095,880
------------
NORWAY - 0.6%
36,600 Smedvig ASA, B Shares ................................... 898,870
2,500 Smedvig ASA, B Shares, Sponsored ADR .................... 63,750
------------
962,620
------------
SOUTH AFRICA - 0.5%
23,000 De Beers Centenary AG ................................... 849,130
------------
CHILE - 0.4%
35,500 Banco de Edwards, ADR ................................... 741,063
------------
SPAIN - 0.3%
11,300 Repsol SA, ADR .......................................... 479,544
------------
Total Common Stocks
(Cost $136,847,667) ................................... 157,683,722
------------
WARRANTS - 0.1%
120 Dowa Mining Company,
expires 12/09/1997+ ................................... 36,000
14,000 Eaux (Cie Generale Des),
expires 05/02/2001+ ................................... 8,386
11,000 PT Bank International of Indonesia, expires 01/17/2000+ . 4,319
------------
Total Warrants (Cost $159,162) .......................... 48,705
------------
PRINCIPAL
AMOUNT
CORPORATE BONDS - 1.5%
$ 1,004,000 Bangkok Bank, Convertible,
3.250% due 03/03/2004 ................................. 768,060
JPY 80,000,000 BTM Cayman Finance,
4.250% due 03/29/2049 ................................. 940,540
$ 940,000 Telekom Malaysia Berhad,
4.000% due 10/03/2004 ................................. 855,400
------------
Total Corporate Bonds
(Cost $2,974,838) ..................................... 2,564,000
------------
REPURCHASE AGREEMENT - 3.7%
(Cost $6,334,000)
6,334,000 Agreement with State Street Bank & Trust Company, 5.800%
dated 06/30/1997,
to be repurchased at $6,335,020 on
07/01/1997, collateralized by
$6,350,000 U.S. Treasury Note,
6.125% due 03/31/1998
(Market Value - $6,461,125) ........................... 6,334,000
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL EXPIRATION STRIKE VALUE
AMOUNT DATE PRICE (NOTE 2)
--------- ---------- ------ -------
CALL OPTIONS PURCHASED ON STOCK INDICES - 0.0%#
<S> <C> <C> <C> <C> <C>
THB 301,589 Thailand SET 50 Index .................01/22/1998 2.142 $ 1,641
SGD 2,217 Singapore DBS 50 Index ................01/22/1998 402.713 14,162
THB 300,650 Thailand SET 50 Index .................01/23/1998 2.114 2,862
SGD 2,153 Singapore DBS 50 Index ................01/23/1998 406.912 12,224
SGD 2,121 Singapore DBS 50 Index ................01/26/1998 407.393 12,162
THB 299,837 Thailand SET 50 Index .................01/26/1998 2.478 378
THB 307,189 Thailand SET 50 Index .................01/30/1998 2.363 1,069
SGD 410 Singapore DBS 50 Index ................02/26/1998 404.003 3,238
-----------
Total Call Options Purchased on Stock Indices (Cost $649,697) ..... 47,736
-----------
TOTAL INVESTMENTS (COST $146,965,364*) ................................. 98.0% 166,678,163
OTHER ASSETS AND LIABILITIES (NET) ..................................... 2.0 3,477,694
----- ------------
NET ASSETS ............................................................. 100.0% $170,155,857
===== ============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes is $148,308,984 (Note 6).
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
# Amount represents less than 0.1% of net assets.
As of June 30, 1997, sector diversification was as follows:
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (NOTE 2)
---------------------- ---------- --------
COMMON STOCKS:
Financial Services ............................ 17.5% $ 29,730,298
Material & Processing ......................... 15.4 26,247,958
Producer Durables ............................. 13.1 22,236,890
Telecommunications ............................ 9.6 16,346,256
Consumer Discretionary ........................ 6.9 11,775,932
Autos & Transportation ........................ 6.7 11,311,800
Technology .................................... 5.2 8,912,501
Health Care ................................... 5.0 8,531,397
Energy ........................................ 4.1 6,923,226
Consumer Staples .............................. 2.6 4,397,895
Utilities ..................................... 2.1 3,633,666
Retail ........................................ 1.6 2,634,453
Computer Software & Services .................. 0.9 1,546,045
Other ......................................... 2.0 3,455,405
----- ------------
TOTAL COMMON STOCKS ........................... 92.7 157,683,722
OTHER INVESTMENTS ............................. 5.3 8,994,441
----- ------------
TOTAL INVESTMENTS ............................. 98.0 166,678,163
OTHER ASSETS AND LIABILITIES (NET) ............ 2.0 3,477,694
----- ------------
100.0% $170,155,857
===== ============
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE NET UNREALIZED
----------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- -------------------- -------- ----------- -------------
07/01/1997 ZAR 1,131,024 249,289 250,559 $ (1,270)
07/23/1997 DEM 4,662,682 2,677,371 2,786,810 (109,439)
10/24/1997 JPY 3,008,189,300 26,699,540 26,937,316 (237,776)
10/24/1997 JPY 167,188,000 1,483,897 1,400,000 83,897
10/24/1997 JPY 1,589,150,000 14,104,689 12,992,699 1,111,990
----------
$ 847,402
----------
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER NET UNREALIZED
----------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
---------- -------------------- -------- ----------- -------------
07/23/1997 DEM 2,408,850 1,383,192 1,500,000 $ 116,808
07/23/1997 DEM 2,253,832 1,294,179 1,400,000 105,821
08/26/1997 JPY 1,289,911,820 11,350,285 11,260,000 (90,285)
08/26/1997 JPY 359,153,200 3,160,287 3,140,000 (20,287)
09/08/1997 FRF 43,730,000 7,476,361 7,552,677 76,316
10/24/1997 JPY 2,249,967,300 19,969,851 21,000,000 1,030,149
10/24/1997 JPY 2,514,560,000 22,318,275 23,000,000 681,725
----------
$1,900,247
----------
Net Unrealized Appreciation of Forward Foreign
Currency Contracts ..........................
$2,747,649
==========
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
CHF -- Swiss Franc
DEM -- German Deutsche Mark
(F) -- Foreign or Alien Shares
FRF -- French Franc
GBP -- Great Britain Pound Sterling
GDR -- Global Depositary Receipt
GDS -- Global Depositary Share
JPY -- Japanese Yen
KRW -- South Korean Won
PHP -- Philippine Peso
SGD -- Singapore Dollar
THB -- Thai Baht
ZAR -- South African Rand
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
TARGET MATURITY 2002 FUND
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
U.S. TREASURY OBLIGATION - 96.4%
U.S. TREASURY STRIP
<S> <C> <C>
$ 3,805,000 Zero coupon due 11/15/2002 ..................................... $2,715,324
----------
TOTAL INVESTMENTS (COST $2,701,220*) ..................................... 96.4% 2,715,324
OTHER ASSETS AND LIABILITIES (NET) ....................................... 3.6 100,544
----- ----------
NET ASSETS ............................................................... 100.0% $2,815,868
===== ==========
</TABLE>
- --------------
*Aggregate cost for federal tax purposes.
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
STRIP -- Separate trading of registered interest and principal of securities
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 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 and Corporate Income Funds (the "Bond Funds"); the California
Municipal, Florida Insured Municipal, California Insured Intermediate Municipal
and National Municipal Funds (the "Municipal Funds"); the Growth and Income,
Growth, Emerging Growth and International Growth Funds (the "Equity Funds"); and
the Target Maturity 2002 Fund. Information presented in these financial
statements pertains only to the Bond Funds, Municipal Funds, Equity Funds and
Target Maturity 2002 Fund, hereafter referred to as the "Funds." The financial
statements for the Money Funds are presented in a separate report.
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 the Funds are subject to an initial sales charge at the time of purchase.
Certain Class A Shares of the Funds purchased without an initial sales charge
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 S Shares
are subject to a CDSC if redeemed within six years of purchase.
As of July 25, 1996, the 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.
Class I Shares are sold 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. Class I Shares of the Municipal Funds represent
seed shares owned by Sierra Fund Administration Corporation ("Sierra
Administration").
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:
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. The
value of a futures contract equals the unrealized gain or loss on the contract,
which is determined by marking the contract to the current settlement price for
a like contract acquired on the day on which the futures contract is being
valued. A settlement price may not be issued if the market makes a limited move
with respect to the security or index underlying the futures contract. In such
event, the futures contract will be valued at a fair market value to be
determined by or under the direction of the Board of Trustees. Short-term
investments that mature in 60 days or less are valued at amortized cost; such
investments denominated in foreign currencies are stated at amortized cost as
determined in the foreign currency, translated to U.S. dollars at the current
day's exchange rate.
Corporate debt securities and debt securities of U.S. issuers (other than U.S.
Government securities and short-term investments), including municipal
securities, are valued by an independent pricing service which utilizes market
quotations and transactions, quotations from dealers and various relationships
among securities in determining value. If not valued by a pricing service, such
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:
Each Fund 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, 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 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 June 30, 1997. Writing puts and buying
calls tends to increase the Funds' exposure to the underlying instrument. Buying
puts and writing calls tends to decrease the Funds' exposure to the underlying
instruments or to hedge other Fund investments.
Upon the purchase of a put option or a call option by the Funds, the premium
paid is recorded as an investment, the value of which is marked-to-market daily.
When a purchased option expires, the Funds will realize a loss in the amount of
the cost of the option. When the Funds enter into a closing sale transaction,
the Funds will realize a gain or loss depending on whether the sales proceeds
from the closing sale transaction are greater or less than the cost of the
option. When the Funds exercise a put option, they will realize a gain or loss
from the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Funds exercise a call option,
the cost of the security which the Funds purchase upon exercise will be
increased by the premium originally paid.
When the Funds write a call option or a put option, an amount equal to the
premium received by the Funds is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Funds realize a gain
equal to the amount of the premium received. When the Funds enter into a closing
purchase transaction, the Funds realize a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When a written call
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, Growth and
International Growth Funds may engage in options on foreign currency and options
on interest rate futures as a hedge to provide protection against adverse
movements in the value of foreign securities in the portfolio.
Certain risks are associated with the use of options on foreign currency and
options on interest rate futures contracts as hedging devices. The predominant
risk is that the movement in the price of the instrument underlying such options
may not correlate perfectly with the movement in the prices of the assets being
hedged. The lack of correlation could render the Funds' hedging strategy
unsuccessful and could result in a loss to the Funds. In addition, there is the
risk the Funds may not be able to enter into a closing transaction because of an
illiquid secondary market or, for over-the-counter options, because of the
counterparty's inability to perform. Options written by a Fund involve, to
varying degrees, risk of loss in excess of the option value reflected in the
Statements of Assets and Liabilities.
FUTURES CONTRACTS:
The Short Term High Quality Bond, Short Term Global Government, U.S. Government,
Corporate Income, California Municipal, Florida Insured Municipal, California
Insured Intermediate Municipal, National Municipal, Growth and Income, Growth,
Emerging Growth and International Growth Funds may engage in futures
transactions. The Funds may use futures contracts to manage their exposure to
the stock and bond markets and to fluctuations in interest rates and currency
values. The underlying value of a futures contract is incorporated within the
unrealized appreciation/(depreciation) shown in the Portfolio of Investments
under the caption "Futures Contracts." This amount reflects each contract's
exposure to the underlying instrument at June 30, 1997. Buying futures contracts
tends to increase the Fund's exposure to the underlying instrument. Selling
futures contracts tends to either decrease the Fund's exposure to the underlying
instrument, or to hedge other Fund investments.
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin." Subsequent payments
("variation margin") are made or received by the Fund each day, depending on the
daily fluctuation of the value of the contract. The daily changes in contract
value are recorded as unrealized gains or losses and the Fund recognizes a
realized gain or loss when the contract is closed. Futures contracts are valued
at the settlement price established by the board of trade or exchange on which
they are traded.
There are several risks in connection with the use of futures contracts as a
hedging device. Futures contracts involve, to varying degrees, risk of loss in
excess of the futures variation margin reflected in the Statements of Assets and
Liabilities. The change in the value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in the value of the hedged instruments. In addition, there is the risk
that the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FOREIGN CURRENCY:
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period, and
purchases and sales of investment securities, income and expenses are translated
on the respective dates of such transactions. It is not practicable to isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the portion that arises from changes in market
prices of investments during the period. Accordingly, all such changes have been
reflected as net gain/(loss) 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 June 30, 1997. Forward foreign currency contracts are
reflected as both a forward foreign currency contract to buy and a forward
foreign currency contract to sell. Forward foreign currency contracts to buy
generally are used to acquire exposure to foreign currencies, while forward
foreign currency contracts to sell are used to hedge the Funds' investments
against currency fluctuations. Also, a forward foreign currency contract to buy
or sell can offset a previously acquired opposite forward foreign currency
contract.
Forward foreign currency contracts are marked-to-market daily using foreign
currency exchange rates supplied by an independent pricing service. The change
in a contract's market value is recorded by the Funds as an unrealized gain or
loss. When the contract is closed or delivery is taken, the Funds record a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. These forward foreign currency
contracts involve market risk in excess of the unrealized
appreciation/(depreciation) of forward foreign currency contracts reflected in
the Funds' Statements of Assets and Liabilities. Although forward foreign
currency contracts used for hedging purposes limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Funds could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts. The Fund's Sub-advisor will enter
into forward foreign currency contracts only with parties approved by the Board
of Trustees because there is a risk of loss to the Funds if the counterparties
do not complete the transaction.
DOLLAR ROLL TRANSACTIONS:
The Short Term High Quality Bond, U.S. Government and Corporate Income Funds, in
order to seek a high level of current income, may enter into dollar roll
transactions with financial institutions to take advantage of opportunities in
the mortgage market. The value of the dollar roll transactions are reflected in
the Funds' Statements of Assets and Liabilities. A dollar roll transaction
involves a sale by the Funds of securities that they hold with an agreement by
the Funds to repurchase similar securities at an agreed upon price and date. The
securities repurchased will bear the same interest as those sold, but generally
will be collateralized at time of delivery by different pools of mortgages with
different prepayment histories than those securities sold. The Funds are paid a
fee for entering into a dollar roll transaction, that is accrued as income over
the life of the dollar roll contract. During the period between the sale and
repurchase, the Funds will not be entitled to receive interest and principal
payments on the securities sold. Management anticipates that the proceeds of the
sale will be invested in additional instruments for the Funds, and the income
from these investments, together with any additional fee income received on the
dollar roll transaction will generate income for the Funds exceeding the
interest that would have been earned on the securities sold. Dollar roll
transactions involve the risk that the market value of the securities sold by
the Funds may decline below the repurchase price of those similar securities
which the Fund is obligated to purchase or that the return earned by the Fund
with the proceeds of a dollar roll may not exceed transaction costs.
INDEXED SECURITIES:
Each of the Funds may invest in indexed securities whose value is linked either
directly or inversely to changes in foreign currencies, interest rates,
commodities, inflation, 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 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) except for the Short Term Global Government Fund, 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 the 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%
limitation, as applicable, on investment in illiquid securities.
CASH FLOW INFORMATION:
Cash, as used in the Statements of Cash Flows for the U.S. Government Fund and
Corporate Income Fund, is the amount reported in the Statements of Assets and
Liabilities and represents cash on hand at the Fund's custodian bank account and
does not include any short term investments as of June 30, 1997. 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 Bond Funds and Municipal Funds are
declared daily and paid monthly. Dividends from the net investment income of the
Growth and Income Fund are declared and paid quarterly. Dividends from the net
investment income of the Growth Fund are declared and paid semiannually.
Dividends from the net investment income of the Emerging Growth, International
Growth and Target Maturity 2002 Funds are declared and paid annually.
Distributions of any net long-term capital gains earned by a Fund are made
annually. Distributions of any net short-term capital gains earned by a Fund are
distributed no less frequently than annually at the discretion of the Board of
Trustees. Additional distributions of net investment income and capital gains
for each Fund may be made at the discretion of the Board of Trustees in order to
avoid the application of a 4% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains on
various investment securities held by the Funds, timing differences,
organizational costs, dividends payable, redesignated distributions and
differing characterization of distributions made by each Fund as a whole.
For the year ended June 30, 1997, permanent differences resulting from book and
tax accounting for organizational costs and redesignated distributions were
reclassified to paid-in capital at year end as stated in the table to follow.
Certain reclassification adjustments were also made between undistributed net
investment income and realized gains due to different book and tax accounting
for currency gains and losses, market discounts, net operating losses, and
paydowns of certain debt instruments. Per share information in the Financial
Highlights reflects the effect of these reclassifications.
<TABLE>
<CAPTION>
INCREASE/(DECREASE) INCREASE/(DECREASE)
UNDISTRIBUTED NET ACCUMULATED
DECREASE INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
------------------- ----------------------- --------------------
<S> <C> <C> <C>
Short Term High Quality Bond Fund ......................... $ (62,965) $ (63,002) $ 125,967
Short Term Global Government Fund ......................... (263,372) 4,422,771 (4,159,399)
U.S. Government Fund ...................................... -- (924,109) 924,109
Corporate Income Fund ..................................... (1,086,967) 1,063,120 23,847
California Municipal Fund ................................. -- 22,050 (22,050)
Florida Insured Municipal Fund ............................ (2,700) 11,548 (8,848)
National Municipal Fund ................................... -- 24,312 (24,312)
Growth Fund ............................................... (1,102) 894,144 (893,042)
Emerging Growth Fund ...................................... (4,527,470) 3,260,415 1,267,055
International Growth Fund ................................. -- 2,098,920 (2,098,920)
Target Maturity 2002 Fund ................................. (11,757) 11,757 --
</TABLE>
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 Trust. Scudder, Stevens & Clark, Inc. ("Scudder"), a
privately held corporation, serves as the Sub-advisor to the Short Term High
Quality Bond and Short Term Global Government Funds. BlackRock Financial
Management, Inc. ("BlackRock"), an indirect wholly-owned subsidiary of PNC
Bank, N.A., an indirect wholly-owned subsidiary of PNC Bank Corp. ("PNC"), a
publicly traded multi-bank holding company, serves as the Sub-advisor to the
U.S. Government and Target Maturity 2002 Funds. TCW Funds Management, Inc.
("TCW"), a wholly-owned subsidiary of The TCW Group, Inc., a privately held
company, serves as the Sub-advisor to the Corporate Income Fund. 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, Dean Witter, Discover & Co., serves as the Sub-advisor to the
California Municipal, Florida Insured Municipal, California Insured
Intermediate Municipal and National Municipal 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
Growth and Income Fund. 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. Warburg, Pincus Counsellors, Inc. ("Warburg"), a
privately held corporation, serves as the Sub-advisor to the International
Growth Fund. 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
EXCEEDING
FEES ON $200 MILLION FEES ON
ASSETS EQUAL TO AND EQUAL TO ASSETS
OR LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $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%
==== ==== ====
<CAPTION>
WHEN "COMBINED ASSETS"**
WHEN "COMBINED ASSETS"** EXCEED $650 MILLION AND
ARE EQUAL TO OR LESS THAN ARE EQUAL TO OR LESS THAN WHEN "COMBINED ASSETS"**
$650 MILLION $1 BILLION EXCEED $1 BILLION
----------------------------- -------------------------------- ------------------------------
FEES ON FEES ON FEES ON
ASSETS EQUAL ASSETS EQUAL ASSETS EQUAL
TO OR LESS FEES ON TO OR LESS FEES ON TO OR LESS FEES ON
THAN ASSETS EXCEEDING THAN ASSETS EXCEEDING THAN ASSETS EXCEEDING
NAME OF FUND $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%
===== ===== ==== ==== ==== ====
<CAPTION>
FEES ON ASSETS
EQUAL TO OR FEES ON ASSETS
LESS THAN EXCEEDING
$500 MILLION $500 MILLION
------------- --------------
Corporate Income Fund
Sierra Advisors ....................................................................... .35% .25%
Sub-advisor ........................................................................... .30% .25%
--- ---
Total fees paid to Sierra Advisors* ............................................... .65% .50%
=== ===
<CAPTION>
FEES ON
ASSETS EXCEEDING
FEES ON ASSETS $150 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$150 MILLION $500 MILLION $500 MILLION
-------------- ----------------- --------------
<S> <C> <C> <C>
California Municipal Fund
Sierra Advisors ......................................................... .45% .50% .35%
Sub-advisor*** .......................................................... .20% .15% .15%
---- ---- ----
Total fees paid to Sierra Advisors* ................................. .65% .65% .50%
==== ==== ====
<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%
==== ===== =====
<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%
==== ===== =====
<CAPTION>
FEES ON
ASSETS FEES ON FEES ON
FEES ON EXCEEDING ASSETS EXCEEDING ASSETS EXCEEDING
ASSETS $100 MILLION $200 MILLION $400 MILLION FEES ON
EQUAL TO AND EQUAL TO AND EQUAL TO AND EQUAL TO ASSETS
OR LESS THAN OR LESS THAN OR LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $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%
==== ==== ==== ==== =====
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $100 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $200 MILLION $200 MILLION
-------------- ---------------- -------------
<S> <C> <C> <C>
Growth Fund
Sierra Advisors ......................................................... .40% .40% .375%
Sub-advisor ............................................................. .55% .50% .500%
---- ----- -----
Total fees paid to Sierra Advisors* ................................. .95% .90% .875%
==== ===== =====
<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%
==== ===== =====
<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%
==== ===== =====
<CAPTION>
FEES ON ASSETS FEES ON
EQUAL TO OR ASSETS
LESS THAN EXCEEDING
$500 MILLION $500 MILLION
---------------- -------------
<S> <C> <C>
Target Maturity 2002 Fund
Sierra Advisors ........................................................................... .20% .15%
Sub-advisor ............................................................................... .05%++ .05%
----- -----
Total fees paid to Sierra Advisors* ................................................... .25% .20%
===== =====
- --------------
* 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.
+ The Sub-advisor receives a minimum annual fee of $137,500.
++ The Sub-advisor receives a minimum annual fee of $25,000.
</TABLE>
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.
NAME OF FUND
------------
U.S. Government Fund .................................... .55%
California Municipal Fund ............................... .55%
Florida Insured Municipal Fund .......................... .55%
California Insured Intermediate Municipal Fund .......... .55%
National Municipal Fund ................................. .55%
Fees voluntarily waived and expenses absorbed by Sierra Advisors for the year
ended June 30, 1997 are as follows:
NAME OF FUND FEES WAIVED EXPENSES ABSORBED
------------ ----------- -----------------
Short Term High Quality Bond Fund ............. $ 153,348 $40,836
Short Term Global Government Fund ............. 369,426 --
U.S. Government Fund .......................... 1,373,736 --
Corporate Income Fund ......................... 604,172 --
California Municipal Fund ..................... 1,080,813 --
Florida Insured Municipal Fund ................ 173,618 22,193
California Insured Intermediate Municipal Fund 350,384 --
National Municipal Fund ....................... 498,457 --
Target Maturity 2002 Fund ..................... 7,756 59,718
Sierra Administration, an indirect wholly-owned subsidiary of GWFC, serves as
administrator to each Fund. First Data Investor Services Group, Inc., 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 Fund's average daily net assets. Out of its fee, Sierra Administration pays
First Data Investor Services Group, Inc. for its services as sub-administrator
and transfer agent. First Data Investor Services Group, Inc., 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 First Data Investor Services Group, Inc.
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 a
wholly-owned subsidiary of Mellon Bank Corporation.
Custodian fees for certain Funds have been reduced by credits allowed by Boston
Safe for the year ended June 30, 1997 as follows:
CREDITS ALLOWED
NAME OF FUND BY THE CUSTODIAN
------------ ----------------
Short Term High Quality Bond Fund .................... $ 1,186
Short Term Global Government Fund .................... 2,250
U.S. Government Fund ................................. 17,193
Corporate Income Fund ................................ 92
California Municipal Fund ............................ 10,881
Florida Insured Municipal Fund ....................... 5,346
California Insured Intermediate Municipal Fund ....... 6,644
National Municipal Fund .............................. 545
Growth and Income Fund ............................... 3,015
Growth Fund .......................................... 11,084
Emerging Growth Fund ................................. 7,558
International Growth Fund ............................ 5,631
Target Maturity 2002 Fund ............................ 2,489
For the year ended June 30, 1997, GW Securities and Sierra Services have
informed the Funds that they received $1,915,751 and $303,490, respectively,
representing commissions (front-end sales charges). In additon, for the year
ended June 30, 1997, Sierra Services and Funds Distributor Inc. informed the
Funds that they received $1,433,856 from CDSC fees.
4. TRUSTEES' FEES
No director, officer or employee of Great Western Financial Securities
Corporation ("GW Securities"), a registered broker-dealer, Sierra Investment
Services Corporation ("Sierra Services"), a registered investment adviser and
broker-dealer, Sierra Advisors, Sierra Administration, the Sub-advisors or First
Data Investor Services Group, Inc., 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 First Data Investor Services Group, Inc., 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. Since December 1996, the Lead Trustee has
been receiving one and a half times the normal Trustee's compensation. The
Chairman of the Audit Committee receives $1,500 per audit committee meeting
attended.
For the year ended June 30, 1997, Sierra Advisors paid Trustees' fees in the
amount $80,500 for all special meetings held with regard to the contemplation of
the sale of Sierra Capital Management Corporation, as well as, to the proposed
merger between GWFC and Washington Mutual, Inc. ("Washington Mutual").
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 no 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.
For the year ended June 30, 1997, 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>
Short Term High Quality Bond Fund . $ 54,612 $ 24,732 $ 8,244 $ 13,628 $ 4,543
Short Term Global Government Fund . 137,471 15,647 5,215 7,516 2,506
U.S. Government Fund .............. 846,580 167,774 55,924 159,640 53,213
Corporate Income Fund ............. 621,478 174,347 58,116 47,095 15,698
California Municipal Fund ......... 878,770 177,130 59,043 63 21
Florida Insured Municipal Fund .... 65,937 38,866 12,956 65 22
California Insured Intermediate
Municipal Fund .................. 127,645 160,657 53,552 55 18
National Municipal Fund ........... 519,329 50,510 16,837 52 18
Growth and Income Fund ............ 427,815 230,208 76,736 151,102 50,368
Growth Fund ....................... 351,870 210,788 70,262 212,243 70,747
Emerging Growth Fund .............. 515,021 217,987 72,662 165,160 55,053
International Growth Fund ......... 210,904 34,651 11,550 186,010 62,003
Target Maturity 2002 Fund ......... 7,756 -- -- -- --
</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 year ended June 30, 1997
were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
------------ --------- -----
<S> <C> <C>
Short Term High Quality Bond Fund ................................... $ 5,115,961 $ 13,437,433
Short Term Global Government Fund ................................... 39,650,476 57,684,769
U.S. Government Fund ................................................ 43,350,080 93,807,380
Corporate Income Fund ............................................... 5,094,887 113,259,595
California Municipal Fund ........................................... 135,358,442 200,113,390
Florida Insured Municipal Fund ...................................... 16,166,992 23,092,566
California Insured Intermediate Municipal Fund ...................... 20,374,471 29,768,858
National Municipal Fund ............................................. 58,587,538 114,755,258
Growth and Income Fund .............................................. 346,994,837 298,369,287
Growth Fund ......................................................... 347,546,949 356,796,249
Emerging Growth Fund ................................................ 232,172,778 323,218,527
International Growth Fund ........................................... 109,967,364 124,129,938
</TABLE>
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the year ended June 30, 1997
were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
------------ --------- -----
<S> <C> <C>
Short Term High Quality Bond Fund ................................... $ 9,929,450 $ 21,711,464
Short Term Global Government Fund ................................... 4,573,826 7,100,577
U.S. Government Fund ................................................ 1,635,060,098 1,553,278,808
Corporate Income Fund ............................................... 50,749,531 90,522,542
Target Maturity 2002 Fund ........................................... -- 590,489
</TABLE>
At June 30, 1997, 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 ................................... $ 152,711 $ 51,595
Short Term Global Government Fund ................................... 289,228 1,684,354
U.S. Government Fund ................................................ 4,273,898 1,061,886
Corporate Income Fund ............................................... 11,103,547 1,535,969
California Municipal Fund ........................................... 20,931,625 299,311
Florida Insured Municipal Fund ...................................... 1,272,956 --
California Insured Intermediate Municipal Fund ...................... 3,297,607 --
National Municipal Fund ............................................. 16,273,061 150,800
Growth and Income Fund .............................................. 54,109,765 3,948,283
Growth Fund ......................................................... 36,360,587 4,543,182
Emerging Growth Fund ................................................ 74,291,320 1,336,751
International Growth Fund ........................................... 25,785,239 7,416,060
Target Maturity 2002 Fund ........................................... 14,104 --
</TABLE>
Option activity for the Short Term High Quality Bond Fund for the year ended
June 30, 1997 was as follows:
WRITTEN OPTIONS ON FOREIGN CURRENCY: PREMIUMS
- ----------------------------------- --------
Options outstanding at June 30, 1996 ....................... $31,854
Options written ............................................ 62,816
Options expired ............................................ (41,630)
Options closed ............................................. (53,040)
-------
Options outstanding at June 30, 1997 ....................... $ 0
=======
Option activity for the Short Term Global Government Fund for the year ended
June 30, 1997 was as follows:
WRITTEN OPTIONS ON FOREIGN CURRENCY: PREMIUMS
- ----------------------------------- --------
Options outstanding at June 30, 1996 ........................$ 194,487
Options written ............................................. 893,039
Options expired ............................................. (507,340)
Options closed .............................................. (453,815)
---------
Options outstanding at June 30, 1997 ........................$ 126,371
=========
Option activity for the U.S. Government Fund for the year ended June 30, 1997
was as follows:
NUMBER OF
WRITTEN OPTIONS: PREMIUMS CONTRACTS
- --------------- -------- ---------
Options outstanding at June 30, 1996 ...... $ 0 0
Options written ........................... 171,953 17,750
Options closed ............................ (171,953) (17,750)
-------- -------
Options outstanding at June 30, 1997 ...... $ 0 0
======== =======
Information regarding dollar roll transactions by the U.S. Government and
Corporate Income Funds is as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT CORPORATE
DOLLAR ROLL TRANSACTIONS: FUND INCOME FUND
- ------------------------ --------------- -----------
<S> <C> <C>
Maximum amount outstanding during the year ....................... $184,779,672 $53,206,875
Average amount outstanding during the year* ...................... $135,537,068 $43,749,345
Average monthly shares outstanding during the year ............... 46,491,718 28,521,681
Average debt per share outstanding during the year ............... $2.92 $1.53
- --------------
* The average amount outstanding during the year was calculated by adding the
borrowings at the end of each day and dividing the sum by the number of days
in the year ended June 30, 1997.
</TABLE>
Fee income earned for the year ended June 30, 1997 by the U.S. Government and
Corporate Income Funds for dollar roll transactions aggregated $2,724,218 and
$1,144,852, respectively.
Information regarding reverse repurchase agreement transactions by the U.S.
Government Fund is as follows:
<TABLE>
<CAPTION>
REVERSE REPURCHASE AGREEMENTS:
-----------------------------
FACE MARKET
VALUE VALUE
----- -------
<C> <S> <C>
$ 407,000 Reverse Repurchase Agreement with Lehman Brothers, Inc.,
5.550% dated 06/20/1997, to be repurchased at $407,690 on
07/01/1997, collateralized by $401,376 U.S. Treasury
Note, 6.250% due 03/31/1999 ............................. $ 407,000
24,770,938 Reverse Repurchase Agreement with Lehman Brothers, Inc.,
5.400% dated 06/27/1997, to be repurchased at $24,785,800
on 07/01/1997, collateralized by $24,523,165 U.S.
Treasury Bond, 6.500% due 11/15/2026 .................... 24,770,938
2,528,125 Reverse Repurchase Agreement with Lehman Brothers, Inc.,
5.450% dated 06/30/1997, to be repurchased at $2,530,804
on 07/07/1997, collateralized by $2,500,400 U.S. Treasury
Note, 6.375% due 09/30/2001 ............................. 2,528,125
406,500 Reverse Repurchase Agreement with Merrill Lynch &
Company, 5.450% dated 06/19/1997, to be repurchased at
$407,238 on 07/01/1997, collateralized by $401,376 U.S.
Treasury Note, 6.250% due 03/31/1999 .................... 406,500
20,225,000 Reverse Repurchase Agreement with Merrill Lynch &
Company, 3.400% dated 06/25/1997, to be repurchased at
$20,236,461 on 07/01/1997, collateralized by $19,568,800
U.S. Treasury Bond, 6.625% due 02/15/2027 ............... 20,225,000
43,452,000 Reverse Repurchase Agreement with Merrill Lynch &
Company, 3.900% dated 06/25/1997, to be repurchased at
$43,480,244 on 07/01/1997, collateralized by $42,952,728
U.S. Treasury Note, 6.625% due 05/15/2007 ............... 43,452,000
-----------
$91,789,563
===========
Maximum amount outstanding during the year ........................................... $102,193,688
Average amount outstanding during the year* .......................................... $16,576,084
Average monthly shares outstanding during the year ................................... 46,491,718
Average debt per share outstanding during the year ................................... $0.36
- --------------
* The average amount outstanding during the year was calculated by summing borrowings at the end of each day and
dividing the sum by the number of days in the year ended June 30, 1997.
</TABLE>
Interest rates ranged from 3.40% to 5.70% during the year. Interest incurred for
the year ended June 30, 1997, on borrowings by the Fund under reverse repurchase
agreements, aggregated $807,494.
7. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
As of June 30, 1997, Chase Manhattan Bank, as Trustee for Great Western Employee
Savings Plan - Aggressive Fund, owned the following Class A Shares:
NUMBER OF PERCENTAGE OF
NAME OF FUND FUND SHARES TOTAL FUND SHARES
------------ ----------- -----------------
Emerging Growth Fund .................... 1,233,568 8.80%
As of June 30, 1997, 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>
California Municipal Fund ................................. 153 99 23.66% 100.00%
Florida Insured Municipal Fund ............................ 161 109 5.46 100.00
California Insured Intermediate Municipal Fund ............ 155 99 100.00 100.00
National Municipal Fund ................................... 120 98 100.00 100.00
</TABLE>
8. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Funds, including
the fees and expenses of registering and qualifying its shares for distribution
under Federal and state securities regulations, are being amortized on a
straight-line basis over a period of five years from commencement of operations
of each Fund, respectively. In the event any of the initial shares of a Fund are
redeemed by any holder thereof during the amortization period, the proceeds of
such redemptions will be reduced by an amount equal to the pro-rata portion of
unamortized deferred organizational expenses in the same proportion as the
number of shares being redeemed bears to the number of initial shares of such
Fund outstanding at the time of such redemption.
9. CAPITAL LOSS CARRYFORWARDS
At June 30, 1997, the following Funds had available for federal income tax
purposes unused capital losses as follows:
<TABLE>
<CAPTION>
EXPIRING IN EXPIRING IN EXPIRING IN
NAME OF FUND 2003 2004 2005
------------ ----------- ----------- -----------
<S> <C> <C> <C>
Short Term High Quality Bond Fund ............ $ 206,653 $ 672,111 $ 773,684
Short Term Global Government Fund ............ -- 2,059,526 --
U.S. Government Fund ......................... 37,871,949 33,050,799 2,576,160
Corporate Income Fund ........................ 22,615,168 9,952,150 729,121
California Municipal Fund .................... 3,724,260 4,501,967 --
Florida Insured Municipal Fund ............... 1,256,413 1,462,695 --
National Municipal Fund ...................... -- 7,865,048 --
Emerging Growth Fund ......................... -- -- 3,871,227
</TABLE>
Under current tax law, capital losses realized after October 31 may be deferred
and treated as occurring on the first day of the following fiscal year.
For the fiscal year ended June 30, 1997, the following Funds have elected to
defer losses occurring between November 1, 1996 and June 30, 1997 under these
rules, as follows:
CAPITAL CURRENCY
LOSSES LOSSES
NAME OF FUND DEFERRED DEFERRED
------------ -------- --------
Emerging Growth Fund ......................... $2,344,295 $616,740
Such deferred losses will be treated as arising on the first day of the fiscal
year ending June 30, 1998.
10. GEOGRAPHIC AND INDUSTRY CONCENTRATION
There are certain risks arising from the California Municipal 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.
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 Short Term Global Government, Corporate Income, Growth, Emerging Growth and
International Growth Funds invest in securities of foreign companies and foreign
governments. There are certain risks involved in investing in foreign securities
that are in addition to the usual risks inherent in domestic investments. These
risks include those resulting from future adverse political and economic
developments and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions.
11. LINE OF CREDIT
The Trust, on behalf of the Bond Funds, the Municipal 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.
This Agreement expired on May 21, 1997. For the period from July 1, 1996 through
May 21, 1997, no Fund borrowed under the Agreement. On July 30, 1997, a first
amendment to the Agreement was signed extending the Agreement to October 28,
1997.
12. SUBSEQUENT EVENT
Effective July 1, 1997, the merger of GWFC into Washington Mutual was completed.
As a result, Sierra Advisors, Sierra Administration, Sierra Services and GW
Securities are now indirect wholly-owned subsidiaries of Washington Mutual.
On June 27, 1997 Scudder announced that it had entered into an agreement with
The Zurich Group, pursuant to which Scudder would be combined with Zurich Kemper
Investments, Inc. to form Scudder Kemper Investments, Inc. Subject to various
regulatory and other approvals, it is currently anticipated that the transaction
will close in the fourth quarter of 1997.
<PAGE>
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REPORT OF INDEPENDENT ACCOUNTANTS
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SIERRA TRUST FUNDS
TO THE TRUSTEES AND SHAREHOLDERS
OF THE SIERRA TRUST FUNDS
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations, of
changes in net assets, the financial highlights and, for U.S. Government Fund
and Corporate Income Fund, the statements of cash flows, present fairly, in all
material respects, the financial position of each of the thirteen fund series
constituting a portion of Sierra Trust Funds (the "Trust") at June 30, 1997, and
the results of each of their operations, the changes in each of their net
assets, the financial highlights and, for U.S. Government Fund and Corporate
Income Fund, each of their cash flows for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at June 30, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where investments purchased were not yet received by the custodian,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 12, 1997
<PAGE>
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TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FISCAL YEAR ENDED JUNE 30, 1997 (UNAUDITED)
The following tax information represents fiscal year end disclosures of various
tax benefits passed through to shareholders at calendar year end.
The amount of long term capital gain paid as follows:
NAME OF FUND
------------
California Insured Intermediate Municipal Fund ............ $ 321,350
Growth and Income Fund .................................... 23,666,709
Growth Fund ............................................... 9,626,875
Emerging Growth Fund ...................................... 6,263,824
International Growth Fund ................................. 3,462
Target Maturity 2002 Fund ................................. 14,491
Of the distributions made from investment income the following percentages are
tax exempt for regular Federal income tax purposes.
NAME OF FUND
------------
California Municipal Fund ................................. 99.91%
Florida Insured Municipal Fund ............................ 99.53%
California Insured Intermediate Municipal Fund ............ 100.00%
National Municipal Fund ................................... 99.83%
A portion of this income may be subject to alternative minimum tax.
Of the distributions made by the following Funds the corresponding percentages
represent the amount of each distribution which will qualify for the dividends
received deduction available to corporate shareholders.
NAME OF FUND
------------
Growth and Income Fund .................................... 34.67%
International Growth Fund ................................. 0.35%
Of the distributions made by the following Funds from investment income the
corresponding percentages represent the portion of each distribution derived
from investments in U.S. Government and Agency Obligations. All or a portion of
the distributions made from this income may be exempt from taxation at the state
level. Please consult your tax advisor for state specific information.
NAME OF FUND
------------
Short Term High Quality Bond Fund ......................... 2.76%
Short Term Global Government Fund ......................... 4.34%
U.S. Government Fund ...................................... 13.68%
Corporate Income Fund ..................................... 3.39%
Growth and Income Fund .................................... 1.40%
Growth Fund ............................................... 7.86%
Emerging Growth Fund ...................................... 0.44%
Target Maturity 2002 Fund ................................. 100.00%
The above figures may differ from those cited elsewhere in this report due to
differences in the calculations of income and capital gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax) purposes.
<PAGE>
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MEETING OF SHAREHOLDERS
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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.
<PAGE>
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NOTES
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<PAGE>
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NOTES
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<PAGE>
------------------------
SIERRA
TRUST FUNDS
------------------------
A Family of Mutual Funds
DISTRIBUTED BY
SIERRA
INVESTMENT SERVICES
CORPORATION
MEMBER
NASD
This Annual Report is published for the general information of the shareholders
of Sierra Trust Funds. It is authorized for distribution to prospective
investors only when preceded or accompanied by a current Sierra Trust Funds
prospectus. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of an investment when you sell your
shares may be more or less than the original cost.
The Sierra Trust Funds are not insured by the FDIC. They are not deposits or
obligations of, nor are they guaranteed by the depository institution. These
securities are subject to investment risks, including possible loss of principal
amount invested.
SIERRA TRUST FUNDS Bulk Rate
Post Office Box 5118 U.S. Postage
Westboro, Massachusetts 01581-5118 P A I D
North Reading, MA
Permit No. 105
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