<PAGE>
SIERRA TRUST FUNDS
SEMI-ANNUAL REPORT
for the six months ended
December 31, 1997
[Graphic Omitted]
Tradition
Experience
Innovation
---------------
SIERRA
TRUST FUNDS
---------------
A Family of Mutual Funds
<PAGE>
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 11
---------------------------------------------------------------------------
California Money Fund 14
---------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS:
Global Money Fund 17
---------------------------------------------------------------------------
U.S. Government Money Fund 19
---------------------------------------------------------------------------
California Money Fund 20
---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 22
- --------------------------------------------------------------------------------
----------------
SIERRA
TRUST FUNDS
----------------
A Family of Mutual Funds
<PAGE>
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
We are pleased to bring you the SIERRA TRUST MONEY FUNDS semi-annual report for
the six-months ended December 31, 1997.
I would like to take this opportunity to thank you, our shareholders, for your
support and trust in the momentous undertakings of the last six months. As you
know, the merger of GREAT WESTERN FINANCIAL CORPORATION, SIERRA'S former parent
company, and WASHINTGON MUTUAL, INC. on July 1, 1997, has provided opportunities
to benefit from increased assets under management while pursuing greater
operating efficiencies. I am confident that the results of these initiatives
will begin to be realized in the coming months. This year has proved a momentous
year also for the U.S. financial markets as well. Against a backdrop of
shrinking budget deficits, the lowest unemployment rate in a quarter of a
century, and continued moderate inflation, the U.S. stock market achieved its
third consecutive year of 20%+ returns.
Some market watchers suggest that the stock market's record-setting returns
may reflect a new reality in economic and corporate efficiency. Nevertheless, we
believe that the 10% to 12% annual return that stocks have produced during
longer periods will remain the rule rather than the exception. Investors should
realize that average annual returns in excess of 20% are exceptional and
unlikely to continue indefinitely. Future short-term volatility could be sparked
by a wide range of developments, including uncertainty in foreign markets and
non-financial events such as worldwide weather patterns and the so-called Year
2000 problem (when computer programs could be thrown off by a technical glitch).
MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
Throughout 1997, the U.S. financial markets turned in some of the best
perfomance around the globe. Stocks rose to record highs while bond yields fell
as bond values rose. More people than ever are investing in mutual funds. New
investment inflows into stock mutual funds continued to climb in 1997. During
1990, net new cash flow into stock mutual funds was $12.8 billion, according the
Investment Company Institute (ICI). In comparison, during 1996 net new
investment reached $221.60 billion, and totaled $176.85 billion through the
first nine months of 1997. Overall bond in-flows have also risen, to $24.13
billion through the first nine months of 1997, compared with $9.38 billion for
the same time period during 1996, according to ICI.
Returns from foreign markets reflected difficult times in some regions, and
showed the path to recovery in others. With the Asian market volatility as a
backdrop, the average emerging market fund in the Morningstar universe dropped
17.8% during the fourth quarter, down 7.1% on the year. Diversified foreign
funds dropped an average of 4.4% during the quarter, but rose 3.3% for the year.
Funds that invest solely in Japan were off 18.7% in 1997, while funds dedicated
to the emerging and newly emergent markets of the Pacific Rim dropped 35.4%.+
TAKE A LOOK AT TAX RELIEF
- --------------------------------------------------------------------------------
One of the major events of the year occurred in August, when President Clinton
signed The Taxpayer Relief Act of 1997. Among other things, this will reduce the
top long-term capital gains tax rate from 28% to 20%. Other provisions of this
important legislation introduced new IRA rules and several new types of IRAs.
One, called the Roth IRA, allows withdrawals of non-deductible contributions and
investment earnings tax and penalty free after five years.
The change in tax legislation may have a significant impact on your personal
financial plan and long-term strategy for achieving your financial goals. Your
investment professional can help you assess how the new capital gains rules may
affect your after-tax portfolio returns. He or she can also assist you in
evaluating new strategies for achieving long-term retirement and
education-related financial goals. Of course, should you have any questions
about your investments, particularly during periods of market volatility, I urge
you to speak with your investment professional before making changes to your
portfolio.
We at SIERRA AND COMPOSITE welcome the opportunity to continue to serve you in
the coming years -- years that we believe will present both challenges and
significant opportunities for wealth accumulation.
Sincerely,
KEITH B. PIPES
President
+ Source: Morningstar
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
SIERRA TRUST FUNDS
DECEMBER 31, 1997 (UNAUDITED)
<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) ........... $180,010,011 $36,780,635 $40,353,337
Cash (b) ....................................... 367,943 28,948 63,404
Interest receivable ............................ 1,049,538 41,351 301,681
Receivable for Fund shares sold ................ 4,598,205 387,200 158,286
Prepaid expenses and other assets .............. 7,689 1,413 6,338
------------ ----------- -----------
Total Assets ............................... 186,033,386 37,239,547 40,883,046
------------ ----------- -----------
LIABILITIES:
Payable for Fund shares redeemed ............... 3,482,892 58,686 100,703
Investment advisory fee payable (Note 3) ....... 15,815 1,486 4,339
Administration fee payable (Note 3) ............ 47,484 11,629 10,410
Shareholder servicing and distribution fees
payable (Note 5) ............................. 27,904 8,379 8,715
Dividends payable .............................. 770,385 2,436 97,049
Accrued legal and audit fees ................... 15,190 10,390 11,133
Accrued transfer agent fees .................... 76,115 9,940 7,924
Accrued Trustees' fees and expenses (Note 4) ... 2,286 560 501
Accrued registration and filing fees payable ... 1,837 1,823 498
Accrued expenses and other payables ............ 35,582 9,238 7,296
------------ ----------- -----------
Total Liabilities ......................... 4,475,490 114,567 248,568
------------ ----------- -----------
NET ASSETS ..................................... $181,557,896 $37,124,980 $40,634,478
============ =========== ===========
- ----------------
(a) INVESTMENTS, AT COST (NOTE 2) .............. $180,010,011 $36,780,635 $40,353,337
(b) CASH, AT COST (NOTE 2) ..................... $ 367,943 $ 28,948 $ 63,404
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
- --------------------------------------------------------------------------------------------
SIERRA TRUST FUNDS
DECEMBER 31, 1997 (UNAUDITED)
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income/
(distributions in excess of
net investment income) ................... $ (18,040) $ 7,450 $ 2,364
Accumulated net realized gain/(loss) on
investments sold ......................... 20,637 (14,400) (40,974)
Paid-in capital ............................ 181,555,299 37,131,930 40,673,088
------------ ------------ -----------
Total Net Assets ....................... $181,557,896 $ 37,124,980 $40,634,478
============ ============ ===========
NET ASSETS:
Class A Shares ............................. $ 97,095,640 $ 22,220,073 $40,569,917
============ ============ ===========
Class B Shares ............................. $ 1,082,408 $ 1,743,093 $ 62,352
============ ============ ===========
Class S Shares ............................. $ 7,200,375 $ 376,719 $ 1,165
============ ============ ===========
Class I Shares ............................. $ 76,179,473 $ 12,785,095 $ 1,044
============ ============ ===========
SHARES OUTSTANDING:
Class A Shares ............................. 97,195,667 22,226,785 40,611,655
============ ============ ===========
Class B Shares ............................. 1,081,148 1,743,619 62,417
============ ============ ===========
Class S Shares ............................. 7,191,990 376,832 1,166
============ ============ ===========
Class I Shares ............................. 76,090,756 12,788,957 1,045
============ ============ ===========
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.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
---------- -------- --------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest ................................... $5,427,732 $983,608 $768,512
---------- -------- --------
EXPENSES:
Investment advisory fee (Note 3) ........... 381,013 70,803 84,624
Administration fee (Note 3) ................ 285,760 53,102 63,468
Custodian fees ............................. 6,015 3,451 1,860
Legal and audit fees ....................... 18,482 7,469 10,109
Trustees' fees and expenses (Note 4) ....... 5,358 1,751 1,864
Registration and filing fees ............... 17,696 12,572 4,438
Transfer agent fees ........................ 132,418 16,544 11,933
Other ...................................... 23,198 7,356 5,935
Shareholder servicing and distribution fees
(Note 5):
Class A Shares ........................... 125,571 35,833 52,804
Class B Shares ........................... 6,377 7,084 330
Class S Shares ........................... 37,422 1,840 6
Fees waived by investment advisor (Note 3) . (293,029) (68,570) (57,056)
---------- -------- --------
Subtotal ............................... 746,281 149,235 180,315
Credits allowed by the custodian (Note 3) .. (5,601) (502) (160)
---------- -------- --------
Net expenses ........................... 740,680 148,733 180,155
---------- -------- --------
NET INVESTMENT INCOME ...................... 4,687,052 834,875 588,357
---------- -------- --------
NET REALIZED GAIN ON INVESTMENTS
(Notes 2 and 6):
Realized gains from security transactions .. 198 87 --
---------- -------- --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ............................... $4,687,250 $834,962 $588,357
========== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<CAPTION>
U.S.
GLOBAL GOVERNMENT CALIFORNIA
MONEY MONEY MONEY
FUND FUND FUND
------------ ----------- -----------
<S> <C> <C> <C>
Net investment income .............................................. $ 4,687,052 $ 834,875 $ 588,357
Net realized gain on investments sold during the period ............ 198 87 --
------------ ----------- -----------
Net increase in net assets resulting from operations ............... 4,687,250 834,962 588,357
Distributions to shareholders from:
Net investment income:
Class A Shares ................................................... (2,447,628) (676,033) (587,657)
Class B Shares ................................................... (26,508) (28,380) (673)
Class S Shares ................................................... (154,763) (7,287) (12)
Class I Shares ................................................... (2,076,561) (123,169) (14)
Net increase/(decrease) in net assets from Fund share transactions:
Class A Shares ................................................... (7,458,802) (8,302,350) (2,353,310)
Class B Shares ................................................... (227,639) (58,477) (5,256)
Class S Shares ................................................... 312,305 31,060 12
Class I Shares ................................................... (2,577,327) 12,787,911 16
------------ ----------- -----------
Net increase/(decrease) in net assets .............................. (9,969,673) 4,458,237 (2,358,537)
NET ASSETS:
Beginning of period ................................................ 191,527,569 32,666,743 42,993,015
------------ ----------- -----------
End of period ...................................................... $181,557,896 $37,124,980 $40,634,478
============ =========== ===========
Undistributed net investment income/
(distributions in excess of net investment
income) at end of period ......................................... $ (18,040) $ 7,450 $ 2,364
============ =========== ===========
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>
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
============ =========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
- ------------------------------------------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
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 ............................................................. $247,096,254 $168,843,699 $ 17,464,645
Issued as reinvestment of dividends .............................. 2,256,260 597,436 568,467
Redeemed ......................................................... (256,811,316) (177,743,485) (20,386,422)
------------ ------------ ------------
Net decrease ..................................................... $ (7,458,802) $ (8,302,350) $ (2,353,310)
============ ============ ============
CLASS B:
Sold ............................................................. $ 922,179 $ 16,411,036 $ 100
Issued as reinvestment of dividends .............................. 22,523 20,871 671
Redeemed ......................................................... (1,172,341) (16,490,384) (6,027)
------------ ------------ ------------
Net decrease ..................................................... $ (227,639) $ (58,477) $ (5,256)
============ ============ ============
CLASS S:
Sold ............................................................. $ 2,462,912 $ 408,432 $ --
Issued as reinvestment of dividends .............................. 147,234 7,995 12
Redeemed ......................................................... (2,297,841) (385,367) --
------------ ------------ ------------
Net increase ..................................................... $ 312,305 $ 31,060 $ 12
============ ============ ============
CLASS I:
Sold ............................................................. $ 8,096,073 $ 12,665,000 $ --
Issued as reinvestment of dividends .............................. -- 122,911 16
Redeemed ......................................................... (10,673,400) -- --
------------ ------------ ------------
Net increase/(decrease) .......................................... $ (2,577,327) $ 12,787,911 $ 16
============ ============ ============
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*
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.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.025 0.048 0.051 0.049 0.030 0.031
Net realized gain on investments .............. 0.000# 0.000# 0.000# 0.000# 0.000# --
------- -------- -------- -------- ------- -------
Total from investment operations .............. 0.025 0.048 0.051 0.049 0.030 0.031
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.025) (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 ........................... (0.025) (0.048) (0.051) (0.049) (0.030) (0.031)
------- -------- -------- -------- ------- -------
Net asset value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ======== ======== ======= =======
TOTAL RETURN+ ................................. 2.49% 4.88% 5.22% 5.06% 3.04% 3.17%
======= ======== ======== ======== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .......... $97,096 $104,302 $153,786 $110,012 $53,973 $48,283
Ratio of operating expenses to average net
assets ....................................... 0.85%** 0.75% 0.65% 0.54% 0.45% 0.41%
Ratio of net investment income to average net
assets ....................................... 4.85%** 4.78% 5.04% 5.08% 2.99% 3.15%
Ratio of operating expenses to average net
assets without credits allowed by the
custodian .................................... 0.86%**(a) 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 ...... 1.16%**(a) 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 ..................... $ 0.023(a) $ 0.044(a) $ 0.046(a) $ 0.043 $ 0.021 $ 0.022
- ----------------
** 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
---------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95*
----------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................... 0.021 0.040 0.043 0.042
Net realized gain on investments ......... 0.000# 0.000# 0.000# 0.000#
------ ------ ------ ------
Total from investment operations ......... 0.021 0.040 0.043 0.042
LESS DISTRIBUTIONS:
Dividends from net investment income ..... (0.021) (0.040) (0.043) (0.042)
Distributions from net realized gains .... -- (0.000)# (0.000)# (0.000)#
------ ------ ------ ------
Total distributions ...................... (0.021) (0.040) (0.043) (0.042)
------ ------ ------ ------
Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
TOTAL RETURN+ ............................ 2.11% 4.11% 4.40% 4.29%
====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) ..... $1,082 $1,314 $ 422 $ 241
Ratio of operating expenses to average net
assets .................................. 1.60%** 1.50% 1.40% 1.29%
Ratio of net investment income to average
net assets .............................. 4.10%** 4.03% 4.29% 4.33%
Ratio of operating expenses to average net
assets without credits allowed by the
custodian ............................... 1.61%**(a) 1.50%(a) 1.40%(a) N/A
Ratio of operating expenses to average net
assets without fee waivers, expenses
absorbed and/or credits allowed by the
custodian ............................... 1.91%**(a) 1.90%(a) 1.90%(a) 1.93%
Net investment income per share without
fee waivers, expenses absorbed and/or
credits allowed by the custodian ........ $0.019(a) $0.036(a) $0.038(a) $0.036
- ----------------
* On July 1, 1994 the Fund commenced selling Class B shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated. 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 includes custodian fees without credits allowed by the custodian as
required by amended disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
----------------------------------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------- ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............ 0.021 0.040 0.043 0.042 0.026 0.047
Net realized gain on investments . 0.000# 0.000# 0.000# 0.000# 0.000# 0.000#
------ ------ ------- ------ ------- -------
Total from investment operations . 0.021 0.040 0.043 0.042 0.026 0.047
LESS DISTRIBUTIONS:
Dividends from net investment
income .......................... (0.021) (0.040) (0.043) (0.042) (0.026) (0.047)
Distributions from net realized
gains ........................... -- (0.000)# (0.000)# (0.000)# -- (0.000)#
------ ------ ------- ------ ------- -------
Total distributions .............. (0.021) (0.040) (0.043) (0.042) (0.026) (0.047)
------ ------ ------- ------ ------- -------
Net asset value, end of period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======= ====== ======= =======
TOTAL RETURN+ .................... 2.11% 4.11% 4.40% 4.29% 2.61% 4.79%
====== ====== ======= ====== ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of period (in
000's) .......................... $7,200 $6,909 $20,848 $7,399 $76,179 $79,002
Ratio of operating expenses to
average net assets .............. 1.60%** 1.50% 1.40% 1.29% 0.60%** 0.50%**
Ratio of net investment income to
average net assets .............. 4.10%** 4.03% 4.29% 4.33% 5.10%** 5.03%**
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ....................... 1.61%**(a) 1.50%(a) 1.40%(a) N/A 0.61%**(a) 0.50%**(a)
Ratio of operating expenses to
average net assets without fee
waivers, expenses absorbed and/
or credits allowed by the
custodian ....................... 1.91%**(a) 1.90%(a) 1.90%(a) 1.93% 0.91%**(a) 0.90%**(a)
Net investment income per share
without fee waivers, expenses
absorbed and/ or credits
allowed by the custodian ........ $0.019(a) $0.036(a) $ 0.038(a) $0.036 $ 0.024(a) $ 0.043(a)
- ----------------
* On July 1, 1994 the Fund commenced selling 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
U.S.GOVERNMENT MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.024++ 0.046 0.047 0.046 0.027 0.027
------- ------- ------- ------- ------- -------
Total from investment operations ............... 0.024 0.046 0.047 0.046 0.027 0.027
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.024) (0.046) (0.047) (0.046) (0.027) (0.027)
------- ------- ------- ------- ------- -------
Total distributions ............................ (0.024) (0.046) (0.047) (0.046) (0.027) (0.027)
------- ------- ------- ------- ------- -------
Net asset value, end of period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL RETURN+ .................................. 2.40% 4.66% 4.81% 4.67% 2.67% 2.70%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ........... $22,220 $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% 0.85%
Ratio of net investment income to average net
assets ........................................ 4.72%** 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) 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 ...................... 1.24%**(a) 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 ..................................... $ 0.022++(a) $ 0.043(a) $ 0.043(a) $ 0.042 $ 0.022 $ 0.022
- ---------------
** 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.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
U.S GOVERNMENT MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
-------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95*
----------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.020++ 0.038 0.040 0.038
------ ------ ------ ------
Total from investment operations ........................ 0.020 0.038 0.040 0.038
LESS DISTRIBUTIONS:
Dividends from net investment income .................... (0.020) (0.038) (0.040) (0.038)
------ ------ ------ ------
Total distributions ..................................... (0.020) (0.038) (0.040) (0.038)
------ ------ ------ ------
Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
TOTAL RETURN+ ........................................... 2.01% 3.87% 4.02% 3.91%
====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $1,743 $1,801 $ 112 $ 123
Ratio of operating expenses to average net assets ....... 1.60%** 1.60% 1.60% 1.60%
Ratio of net investment income to average net assets .... 3.97%** 3.81% 3.95% 3.88%
Ratio of operating expenses to average net assets
without credits allowed by the custodian ............... 1.60%**(a) 1.60%(a) 1.60%(a) N/A
Ratio of operating expenses to average net assets
without fee waivers and/or credits allowed by the
custodian .............................................. 1.99%**(a) 1.94%(a) 1.97%(a) 2.00%
Net investment income per share without fee waivers
and/or credits allowed by the custodian ................ $0.018++(a) $0.035(a) $0.036(a) $0.034
- ----------------
* On July 1, 1994 the Fund commenced selling Class B shares in addition to Class A shares. Those shares in existence prior to July
1, 1994 were designated Class A shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated. 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
----------------------------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................... 0.020++ 0.038 0.040 0.038 0.025++ 0.045
------ ------ ------ ------ ------ ------
Total from investment operations .................... 0.020 0.038 0.040 0.038 0.025 0.045
LESS DISTRIBUTIONS:
Dividends from net investment income ................ (0.020) (0.038) (0.040) (0.038) (0.025) (0.045)
------ ------ ------ ------ ------ ------
Total distributions ................................. (0.020) (0.038) (0.040) (0.038) (0.025) (0.045)
------ ------ ------ ------ ------ ------
Net asset value, end of period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
TOTAL RETURN+ ....................................... 2.01% 3.87% 4.02% 3.91% 2.53% 4.60%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ................ $ 377 $ 346 $ 439 $ 737 $12,785 $ 1
Ratio of operating expenses to average net assets ... 1.60%** 1.60% 1.60% 1.60% 0.60%** 0.60%**
Ratio of net investment income to average net assets 3.97%** 3.81% 3.95% 3.88% 4.97%** 4.81%**
Ratio of operating expenses to average net assets
without credits allowed by the custodian .......... 1.60%**(a) 1.60%(a) 1.60%(a) N/A 0.60%**(a) 0.60%**(a)
Ratio of operating expenses to average net assets
without fee waivers and/or credits allowed by the
custodian .......................................... 1.99%**(a) 1.94%(a) 1.97%(a) 2.00% 0.99%**(a) 0.94%**(a)
Net investment income per share without fee waivers
and/or credits allowed by the custodian ............ $0.018++(a) $0.035(a) $0.036(a) $0.034 $0.023++(a) $0.042(a)
- ----------------
* On July 1, 1994 the Fund commenced selling 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.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.014++ 0.028 0.029 0.028 0.018 0.021
------- ------- ------- ------- ------- -------
Total from investment operations ................ 0.014 0.028 0.029 0.028 0.018 0.021
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.014) (0.028) (0.029) (0.028) (0.018) (0.021)
------- ------- ------- ------- ------- -------
Total distributions ............................. (0.014) (0.028) (0.029) (0.028) (0.018) (0.021)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL RETURN+ ................................... 1.41% 2.81% 3.00% 2.79% 1.81% 2.07%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ............ $40,570 $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% 0.85%
Ratio of net investment income to average net
assets ......................................... 2.78%** 2.75% 2.94% 2.73% 1.80% 2.06%
Ratio of operating expenses to average net
assets without credits allowed by the
custodian ...................................... 0.85%**(a) 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of operating expenses to average net assets
without fee waivers and/or credits allowed by
the custodian .................................. 1.12%**(a) 1.14% 1.14% 1.15% 1.27% 1.29%
Net investment income per share without fee
waivers and/or credits allowed by the custodian. $ 0.013++(a) $ 0.025 $ 0.026 $ 0.025 $ 0.014 $ 0.016
- ----------------
** 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.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS B SHARES
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95*
----------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................... 0.010++ 0.020 0.022 0.020
------ ------ ------ ------
Total from investment operations ......... 0.010 0.020 0.022 0.020
LESS DISTRIBUTIONS:
Dividends from net investment income ..... (0.010) (0.020) (0.022) (0.020)
------ ------ ------ ------
Total distributions ...................... (0.010) (0.020) (0.022) (0.020)
------ ------ ------ ------
Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
TOTAL RETURN+ ............................ 1.01% 2.03% 2.22% 2.04%
====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) ..... $ 62 $ 68 $ 147 $ 79
Ratio of operating expenses to average net
assets .................................. 1.60%** 1.60% 1.60% 1.60%
Ratio of net investment income to average
net assets .............................. 2.03%** 2.00% 2.19% 1.98%
Ratio of operating expenses to average net
assets without credits allowed by the
custodian ............................... 1.60%**(a) 1.60% 1.60% 1.60%
Ratio of operating expenses to average net
assets without fee waivers and/or credits
allowed by the custodian ................ 1.87%**(a) 1.89% 1.89% 1.90%
Net investment income per share without
fee waivers and/or credits allowed by the
custodian ............................... $0.009++(a) $0.017 $0.019 $0.017
- ----------------
* On July 1, 1994 the Fund commenced selling Class B shares in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares.
** Annualized.
+ Total return represents aggregate total return for the periods indicated. The total returns would have been lower if
certain fees had not been waived by the investment advisor and/or administrator.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number includes custodian fees without credits allowed by the custodian as required by
amended disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
CLASS S SHARES CLASS I SHARES
---------------------------------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.010++ 0.020 0.022 0.020 0.015++ 0.028
------ ------ ------ ------ ------ ------
Total from investment operations ................ 0.010 0.020 0.022 0.020 0.015 0.028
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.010) (0.020) (0.022) (0.020) (0.015) (0.028)
------ ------ ------ ------ ------ ------
Total distributions ............................. (0.010) (0.020) (0.022) (0.020) (0.015) (0.028)
------ ------ ------ ------ ------ ------
Net asset value, end of period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
TOTAL RETURN+ ................................... 1.01% 2.03% 2.22% 2.04% 1.54% 2.89%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ............ $ 1 $ 1 $ 10 $ 10 $ 1 $ 1
Ratio of operating expenses to average net
assets ......................................... 1.60%** 1.60% 1.60% 1.60% 0.60%** 0.60%**
Ratio of net investment income to average net
assets ......................................... 2.03%** 2.00% 2.19% 1.98% 3.03%** 3.00%**
Ratio of operating expenses to average net
assets without credits allowed by the
custodian ...................................... 1.60%**(a) 1.60% 1.60% 1.60% 0.60%**(a) 0.60%**
Ratio of operating expenses to average net
assets without fee waivers and/or credits
allowed by the custodian ....................... 1.87%**(a) 1.89% 1.89% 1.90% 0.87%**(a) 0.89%**
Net investment income per share without fee
waivers and/or credits allowed by the custodian. $0.009++(a) $0.017 $0.019 $0.017 $0.014++(a) $0.025
- ----------------
* On July 1, 1994 the Fund commenced selling 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.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GLOBAL MONEY FUND
DECEMBER 31, 1997 (UNAUDITED)
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
COMMERCIAL PAPER -- (DOMESTIC) - 29.0%
$8,000,000 American Express Credit Corporation,
6.450% due 01/02/1998++ .......................... $ 7,998,567
8,000,000 Associates Corporation of North America,
5.720% due 03/10/1998++ ......................... 7,913,564
9,000,000 Bayer Company,
5.750% due 02/24/1998++ ......................... 8,922,375
General Electric Capital Corporation:
3,000,000 5.700% due 01/23/1998++ ......................... 2,989,550
2,000,000 5.700% due 02/06/1998++ ......................... 1,988,600
9,000,000 NationsBank Corporation,
5.750% due 02/23/1998++ ......................... 8,923,812
9,000,000 Pfizer Inc.,
5.950% due 01/28/1998++ ......................... 8,959,837
5,000,000 Southern Corporation,
5.700% due 02/23/1998++ ......................... 4,958,042
------------
Total Commercial Paper -- (Domestic) (Cost
$52,654,347) ..................................... 52,654,347
------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 22.3%
40,513,000 Federal Home Loan Bank (FHLB):
4.500% due 01/02/1998++ (Cost $40,507,936) ....... 40,507,936
------------
CERTIFICATES OF DEPOSIT -- (YANKEE) -- 20.9%
9,000,000 Bank of Tokyo -- Mitsubishi Bank
6.500% due 03/04/1998 ........................... 9,000,000
3,000,000 Barclays Bank Plc,
5.940% due 06/19/1998 ........................... 2,999,389
5,000,000 Deutsche Bank,
5.700% due 02/06/1998 ........................... 4,999,811
5,000,000 Norinchukin Bank, New York,
6.020% due 02/13/1998 ........................... 5,000,059
2,000,000 Rabobank Nederland,
5.990% due 03/24/1998 ........................... 1,999,786
5,000,000 Swiss Bank Corporation,
5.980% due 03/19/1998 ........................... 4,999,799
9,000,000 Westdeutsche Landesbank Girozentra,
5.900% due 01/12/1998 ........................... 9,000,000
------------
Total Certificates of Deposit -- (Yankee) (Cost
$37,998,844) ..................................... 37,998,844
------------
MEDIUM-TERM NOTES -- 15.4%
$5,000,000 BankBoston,
6.140% due 10/06/1998+ .......................... $ 4,997,955
9,000,000 Bayerische Landesbank,
5.870% due 06/26/1998+ .......................... 8,996,624
5,000,000 CoreStates Bank,
6.009% due 03/16/1998+ .......................... 5,000,000
9,000,000 Key Bank,
6.120% due 07/31/1998+ .......................... 8,996,446
------------
Total Medium-Term Notes (Cost $27,991,025) ........ 27,991,025
------------
COMMERCIAL PAPER -- (FOREIGN) -- 9.3%
8,000,000 Abbey National North America Corporation,
5.735% due 03/10/1998++ ......................... 7,913,338
KFW International Finance Inc.:
7,000,000 5.700% due 02/12/1998++ ......................... 6,953,450
2,000,000 5.740% due 01/29/1998++ ......................... 1,991,071
------------
Total Commerical Paper -- (Foreign) (Cost
$16,857,859) ..................................... 16,857,859
------------
CERTIFICATES OF DEPOSIT -- (DOMESTIC) -- 2.2%
4,000,000 CoreStates Bank,
5.598% due 04/21/1998 (Cost $4,000,000) .......... 4,000,000
------------
TOTAL INVESTMENTS (COST $180,010,011*) ............... 99.1% 180,010,011
OTHER ASSETS AND LIABILITIES (NET) ................... 0.9% 1,547,885
---- ------------
NET ASSETS ........................................... 100.0% $181,557,896
===== ============
- ----------------
* Aggregate cost for federal tax purposes.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Rate represents annualized yield at date of purchase.
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
DECEMBER 31, 1997 (UNAUDITED)
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 99.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 52.9%
$ 520,000 Discount Note, 5.63% due 01/16/1998++ ..... $ 518,780
630,000 Discount Note, 5.64% due 01/26/1998++ ..... 627,533
2,000,000 Discount Note, 5.74% due 01/27/1998++ ..... 1,991,709
2,000,000 Discount Note, 5.66% due 02/17/1998++ ..... 1,985,221
2,000,000 Discount Note, 5.65% due 02/18/1998++ ..... 1,984,933
850,000 Discount Note, 5.65% due 02/24/1998++ ..... 843,051
1,800,000 Discount Note, 5.63% due 03/09/1998++ ..... 1,781,139
1,000,000 Discount Note, 5.63% due 03/13/1998++ ..... 988,896
1,500,000 Discount Note, 5.60% due 03/20/1998++ ..... 1,481,800
1,500,000 Discount Note, 5.59% due 03/27/1998++ ..... 1,480,202
2,000,000 Discount Note, 5.57% due 04/13/1998++ ..... 1,968,437
2,000,000 Floating Rate Note 5.894% due 10/20/1998+ . 1,999,304
2,000,000 Floating Rate Note 5.944% due 11/04/1998+ . 1,999,022
-----------
Total FNMAs (Cost $19,650,027) ............ 19,650,027
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) -- 40.2%
4,800,000 Discount Note, 6.00% due 01/02/1998++ ..... 4,799,200
1,525,000 Discount Note, 5.70% due 01/26/1998++ ....... 1,518,964
1,900,000 Discount Note, 5.70% due 01/30/1998++ ....... 1,891,276
1,500,000 Discount Note, 5.65% due 02/12/1998++ ....... 1,490,113
1,500,000 Discount Note, 5.65% due 02/19/1998++ ....... 1,488,465
1,000,000 Discount Note, 5.65% due 02/20/1998++ ....... 992,153
1,250,000 Discount Note, 5.65% due 02/23/1998++ ....... 1,239,602
1,500,000 Discount Note, 5.60% due 03/06/1998++ ....... 1,485,066
-----------
Total FHLMCs (Cost $14,904,839) ............. 14,904,839
-----------
FEDERAL HOME LOAN BANK (FHLB) -- 6.0%
2,241,000 5.69% due 02/13/1998 (Cost $2,225,769)++ .... 2,225,769
-----------
Total U.S. Government Agency Obligations
(Cost $36,780,635) ......................... 36,780,635
-----------
TOTAL INVESTMENTS (COST $36,780,635*) ................... 99.1% 36,780,635
OTHER ASSETS AND LIABILITIES (NET) ...................... 0.9 344,345
----- -----------
NET ASSETS .............................................. 100.0% $37,124,980
===== ===========
- ----------------
* Aggregate cost for federal tax purposes.
+ Variable rate securities payable upon not more than seven calendar days'
notice. The interest rate shown reflects the rate currently in effect.
++ Rate represents annualized yield at date of purchase.
See Notes to Financial Statements.
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- ----------------------------------------------------------------------------------------------
CALIFORNIA MONEY FUND
DECEMBER 31, 1997 (UNAUDITED)
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 99.3%
CALIFORNIA-99.3%
Alameda County, IDR:
$1,945,000 Heat and Control Inc., Series 95A,
3.700% due 11/01/2025++ .............................. $1,945,000
2,000,000 JMS Family Partnership, Series 95A,
3.700% due 10/01/2025++ .............................. 2,000,000
2,000,000 Berkley, GO, Unified School District, TRAN,
4.250% due 06/30/1998 ................................ 2,003,570
California Housing Finance Agency, SFMR, Home Mortgage
Revenue, Series 15A:
2,000,000 3.950% due 08/01/1998 ................................ 2,000,000
2,100,000 4.200% due 08/01/2025++ .............................. 2,100,000
California Pollution Control Financing Authority:
2,000,000 Pacific Gas & Electric, Series 96A,
3.450% due 12/01/2016++ .............................. 2,000,000
2,000,000 Sanifill Inc., Series 94A,
3.850% due 08/01/2007++ .............................. 2,000,000
2,000,000 Shell Oil Company-Martinez Project, Series 94A,
4.900% due 10/01/2024 ................................ 2,000,000
2,000,000 Southern California Edison Co., Series A,
4.200% due 02/28/2008+ ............................... 2,000,000
2,000,000 California State Economic Development Authority, IDR,
Tri-Valley Growers., Series 95F,
3.850% due 12/01/2010++ .............................. 2,000,000
500,000 California Statewide Communities Projects, Chevron Corp.,
Series 97G,
4.950% due 12/15/2024+ ............................... 500,000
1,200,000 California Statewide Communities Projects, MFHR, Sunrise
of Moraga, Series 97G,
3.950% due 07/01/2027++ .............................. 1,200,000
2,000,000 Irvine Ranch, Water District, Series B
4.750% due 08/01/2009+ ............................... 2,000,000
2,000,000 Livermore, MFHR, Portola Meadows Apartments, Series 89A,
3.800% due 05/01/2019++ .............................. 2,000,000
3,500,000 Los Angeles County, MFHR, Series 85K,
3.600% due 7/01/2010++ ............................... 3,500,000
800,000 Los Angeles County, Unified School District, Belmont
Learning Complex, Series 97A,
3.350% due 12/01/2017++ .............................. 800,000
2,000,000 Orange County, Apartment Development Revenue, Wood Canyon
Villas,
3.500% due 12/01/2021++ .............................. 2,000,000
$2,000,000 Orange County, Fire Authority, TRAN,
4.250% due 09/17/1998 ................................ 2,004,767
1,100,000 Orange County, Sanitation Districts,
5.000% due 08/01/2016+ ............................... 1,100,000
900,000 Palm Springs, Community Redevelopment Agency,
3.850% due 12/01/2014++ .............................. 900,000
300,000 San Bernardino County, IDR, Master Holco Inc.,
3.650% due 12/01/2006++ .............................. 300,000
2,000,000 San Leandro, MFHR, Carlton Plaza, Series 97A,
4.000% due 10/01/2027++ .............................. 2,000,000
2,000,000 Southern California Public Power Authority, Southern
Transmission Project,
3.350% due 07/01/2019++ .............................. 2,000,000
-----------
TOTAL INVESTMENTS (COST $40,353,337*) ............................. 99.3% 40,353,337
OTHER ASSETS AND LIABILITIES (NET) ................................ 0.7 281,141
----- -----------
NET ASSETS ........................................................ 100.0% $40,634,478
===== ===========
- ----------------
* 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
-------------------------------------------------------
IDR -- Industrial Development Revenue
MFHR -- Multi-family Housing Revenue
SFMR -- Single Family Mortgage Revenue
TRAN -- Tax and Revenue Anticipation Note
-------------------------------------------------------
See notes to Financial Statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
SIERRA TRUST FUNDS
1. ORGANIZATION AND BUSINESS
Sierra Trust Funds (the "Trust") was organized under the laws of the
Commonwealth of Massachusetts on February 22, 1989 as a business entity
commonly known as a "Massachusetts business trust." The Trust is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company. The Trust offers sixteen managed
investment funds: the 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.
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 represents 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 Washington Mutual,
Inc. ("Washington Mutual"), 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 six months ended December
31, 1997 are as follows:
NAME OF FUND FEES WAIVED
------------ -----------
Global Money Fund ......................................... $293,029
U.S. Government Money Fund ................................ 68,570
California Money Fund ..................................... 57,056
Sierra Administration, an indirect wholly-owned subsidiary of Washington
Mutual, 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 six month ended December 31, 1997 as follows:
CREDITS ALLOWED BY
NAME OF FUND THE CUSTODIAN
------------ ------------------
Global Money Fund .......................................... $5,601
U.S. Government Money Fund ................................. 502
California Money Fund ...................................... 160
For the six months ended December 31, 1997, Sierra Services and Funds
Distributor Inc. informed the Funds that they received $53,970 from CDSC fees.
4. TRUSTEES' FEES
No director, officer or employee of Washington Mutual or its subsidiaries, 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. The Trust pays each Trustee who is not a director,
officer or employee of Washington Mutual or its subsidiaries, 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. The Lead Trustee receives 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 six months ended December 31, 1997, Sierra Advisors reimbursed the
Funds for Trustees' fees paid in connection with all special meetings held
with regards to the contemplation of the sale of Sierra Capital Management
Corporation, as well as, to the proposed merger between GWFC and 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
the Plan are funded and any payments to Plan participants are paid solely out
of the Trust's assets.
5. DISTRIBUTION PLANS
Sierra Investment Services Corporation ("Sierra Services"), an indirect
wholly-owned subsidiary of Washington Mutual, 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 six months ended December 31, 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 ............. $125,571 $4,783 $1,594 $28,066 $9,356
U.S. Government Money Fund .... 35,833 5,313 1,771 1,380 460
California Money Fund ......... 52,804 247 83 5 1
</TABLE>
6. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
As of December 31, 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>
U.S. Government Money Fund ........................ -- 5,009,113 --% 39%
California Money Fund ............................. 1,166 1,045 100% 100%
</TABLE>
As of December 31, 1997, Sierra Advisors owned greater than five percent of
the following Fund:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
FUND SHARES TOTAL FUND SHARES
-------------------------- -------------------------
NAME OF FUND CLASS S CLASS I CLASS S CLASS I
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Government Money Fund ........................ -- 2,921,414 -- 23%
</TABLE>
As of December 31, 1997, Sierra Services owned greater than five percent of
the following Fund:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
FUND SHARES TOTAL FUND SHARES
-------------------------- -------------------------
NAME OF FUND CLASS S CLASS I CLASS S CLASS I
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
U.S. Government Money Fund ........................ -- 4,858,430 -- 38%
</TABLE>
7. CAPITAL LOSS CARRYFORWARDS
At December 31, 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 may invest at least 25% of its assets in
bank obligations. As a result of this concentration policy, the Fund's
investments may be subject to greater risk than a fund that does not
concentrate in the banking industry. In particular, bank obligations may be
subject to the risks associated with interest rate volatility, changes in
Federal and state laws and regulations governing the banking industry and the
inability of borrowers to pay principal and interest when due. In addition,
foreign banks present risks similar to those investing in foreign securities
generally and are not subject to the same reserve requirements and other
regulations as U.S. banks.
The 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.
<PAGE>
Message From The President 1
Yet Another Banner Year for U.S. Financial Markets 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 106
------------------------
SIERRA
TRUST FUNDS
------------------------
A Family of Mutual Funds
<PAGE>
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
We are pleased to bring you the SIERRA TRUST FUNDS semi-annual report for the
period ended December 31, 1997.
I would like to take this opportunity to thank you, our shareholders, for
your support and trust in the momentous undertakings of the last six months. As
you know, the merger of GREAT WESTERN FINANCIAL CORPORATION, SIERRA'S former
parent company, and WASHINTGON MUTUAL, INC. on July 1, 1997, has provided
opportunities to benefit from increased assets under management while pursuing
greater operating efficiencies. I am confident that the results of these
initiatives will begin to be realized in the coming months.
This year has been a momentous year also for the U.S. financial markets as
well. Against a backdrop of shrinking budget deficits, the lowest unemployment
rate in a quarter of a century, and continued moderate inflation, the U.S. stock
market achieved its third consecutive year of 20%+ returns.
Some market watchers suggest that the stock market's record-setting returns
may reflect a new reality in economic and corporate efficiency. Nevertheless, we
believe that the 10% to 12% annual return that stocks have produced during
longer periods will remain the rule rather than the exception. Investors should
realize that average annual returns in excess of 20% are exceptional and
unlikely to continue indefinitely. Future short-term volatility could be sparked
by a wide range of developments, including uncertainty in foreign markets and
non-financial events such as worldwide weather patterns and the so-called Year
2000 problem (when computer programs could be thrown off by a technical glitch).
MARKET HIGHLIGHTS
Throughout 1997, and particularly during the last six months, the U.S.
financial markets turned in some of the best perfomances around the globe.
Stocks rose to record highs while bond yields fell and bond values rose. More
people than ever are investing in mutual funds. New investments inflows into
stock mutual funds continued to climb in 1997. During 1990, net new cash flow
into stock mutual funds was $12.8 billion, according the Investment Company
Institute (ICI). In comparison, during 1996 net new investment reached $221.60
billion, and totaled $176.85 billion through the first nine months of 1997.
Overall bond in-flows have also risen, to $24.13 billion through the first nine
months of 1997, compared with $9.38 billion for the same time period during
1996, according to ICI.
Returns from foreign markets reflected difficult times in some regions, and
showed the path to recovery in others. With the Asian market volatility as a
backdrop, the average emerging market fund in the Morningstar universe dropped
17.8% during the fourth quarter, 7.1% on the year. Diversified foreign funds
dropped an average of 4.4% on the quarter, but rose 3.3% for the year. Funds
that invest solely in Japan were off 18.7% in 1997, while funds dedicated to the
emerging and newly emergent markets of the Pacific Rim dropped 35.4%.+
TAKE A LOOK AT TAX RELIEF
One of the major events of the year occurred in August, when President
Clinton signed The Taxpayer Relief Act of 1997. Among other things, this will
reduce the top long-term capital gains tax rate from 28% to 20%. Other
provisions of this important legislation introduced new IRA rules and several
new types of IRA. One, called the Roth IRAs, allows withdrawals of
non-deductible contributions and investment earnings tax and penalty free after
five years.
The change in tax legislation may have a significant impact on your
personal financial plan and long-term strategy for achieving your financial
goals. Your invest-ment professional can help you assess how the new capital
gains rules may affect your after-tax portfolio returns. He or she can also
assist you in evaluating new strategies for achieving long-term retirement and
education-related financial goals. Of course, should you have any questions
about your investments, particularly during periods of market volatility, I urge
you to speak with your investment professional before making changes to your
portfolio.
We at SIERRA AND COMPOSITE welcome the opportunity to continue to serve you
in the coming years -- years that we believe will present both challenges and
significant opportunities for wealth accumulation.
Sincerely,
KEITH B. PIPES
President
<PAGE>
YET ANOTHER BANNER YEAR FOR U.S. FINANCIAL MARKETS
U.S investors enjoyed another strong year. Solid economic growth and low
inflation helped give the blue-chip Dow Jones Industrial Average an
unprecedented third consecutive year of 20%-plus returns, while the broader
Standard & Poor's Composite Index of 500 Stocks (S&P 500) posted a 33.36% total
return for the year*+ . Meanwhile, government bond yields fell below 6%,
pushing bond prices higher.
Overshadowing these results was the well-watched "Asian contagion," a chaos
of falling currency values and stock prices throughout Asia, which sent the Dow
plummeting a record 554 points on October 27, 1997. The October decline marked
the first correction of more than 10% in the Dow Jones industrial average in
more than seven years. While the U.S. market quickly recovered, ongoing Asian
woes could mean investors face prospects for a more subdued 1998 - a year of
slower economic growth, lower investment returns, and higher market volatility.
LARGE CAP STOCKS LED THE MARKET
Investors favored the largest, most stable companies and the strongest, most
diverse global economies in 1997, in part due to higher market volatility.
Financial services firms, broadcasting companies, and advertisers turned in the
best performances during the year, while houseware, semiconductor, and paper
product firms did the worst.
Smaller company stocks did well for the year, but they did not fare as well
as the broader market after the October 27 correction. The small-cap companies
lagged the S&P 500, with the Russell 2000 up 22.37%.**+ Part of this under-
performance was due to investors fleeing smaller issues at year-end 1997 for the
perceived comfort of larger stocks as Asia's currency crisis broadened.
Sharp drops in technology stocks, which often dominate small-cap growth
portfolios, were also a factor. During the second week of December, the Pacific
Stock Exchange Technology Index+ dropped 9.8%, its second poorest one-week
performance on record.
RETURNS FOR MAJOR ASSET CLASSES
One-Year Period Ended December 31, 1997
LARGE COMPANY STOCKS 33.35%
SMALL COMPANY STOCKS 22.36%
INTERNATIONAL STOCKS 1.77%
LONG-TERM BONDS 14.52%
INTERMEDIATE-TERM BONDS 7.87%
TREASURY BILLS (30 DAY) 4.90%
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.
In the year ahead, the tide could turn back to smaller stocks. Market
analysts note that these issues' underlying values have been growing faster than
their prices, while many larger companies have become overpriced relative to
their underlying values. Smaller companies may also have better earnings
prospects. The Wall Street Journal (Dec. 29, 1997) reported that earnings for
companies in the Russell 2000 index were expected to rise more than 31% in 1998,
compared with 14% for S&P 500 firms. Also, Asia-wary investors may begin to
value the reduced overseas exposure of smaller stocks - at 26% compared with the
average 44% overseas exposure of large-cap stocks.
INTEREST RATE FLUCTUATIONS
30-Year U.S. Treasury Bond Yields (January 3, 1997 - December 31, 1997)
6.64%
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%
4-Jul.-97 6.63%
11-Jul.-97 6.63%
18-Jul.-97 6.63%
25-Jul.-97 6.46%
1-Aug.-97 6.46%
8-Aug.-97 6.63%
15-Aug.-97 6.55%
22-Aug.-97 6.66%
29-Aug.-97 6.61%
5-Sep.-97 6.64%
12-Sep.-97 6.59%
19-Sep.-97 6.38%
26-Sep.-97 6.37%
3-Oct.-97 6.29%
10-Oct.-97 6.43%
17-Oct.-97 6.44%
24-Oct.-97 6.27%
31-Oct.-97 6.15%
7-Nov.-97 6.16%
14-Nov.-97 6.11%
21-Nov.-97 6.03%
28-Nov.-97 6.05%
5-Dec.-97 6.08%
12-Dec.-97 5.92%
19-Dec.-97 5.92%
26-Dec.-97 5.90%
31-Dec.-97 5.92%
Source: Bloomberg Business News
BOND MARKETS RALLIED ON LOW INFLATION
The yield on the bellwether 30-year U.S. Treasury bond (a benchmark of the
broader bond market) fell to 5.92% as 1997 ended.* A continued absence of
inflation should keep bond yields and prices fairly steady in 1998. The Lehman
Brothers Aggregate Bond Index posted a total return of 9.68% for 1997, with much
of that return earned in the last six months of the year.*** Bond trading surged
during the October stock market correction as investors sought the relative
safety of fixed income investments.
Long-term yields fell through the psychologically important 6% "floor" in
December, and some market watchers are wondering, "How much lower can they go?"
Some analysts regard the current stock bull market as a natural "catch-up"
phenomenon following the high-inflation days of the 1970s and early 1980s.
Likewise, some experts believe the bond market is undergoing a comeback from an
extended slump that spanned four decades and only ended in 1981, when yields
peaked at 15.78%. Since then, the so-called "equity premium" between stock and
bond returns has been relatively narrow. From 1982 through 1997 bonds had a real
return of 9.4% compared with stocks' 12.5% real return according to Business
Week (1/19/98).
Among those buoying the U.S. bond market in 1997 have been Asia-wary
investors in stocks, high-yield, and emerging-market bonds, who have sought the
relative safety of government-backed U.S. Treasury securities in all maturities.
In addition, some investors who traditionally favor mortgage-backed securities
have shifted into Treasuries as concern builds that low rates will prompt a
buildup in mortgage refinancings, potentially resulting in lower returns on
mortgage securities. The move to U.S. Treasury securities has contributed to a
flattening "yield curve," with little difference between short-and long-term
interest rates.
Municipal bond markets closely watched emerging tax legislation in 1997.
The passage of The Taxpayer Relief Act of 1997 in August contained few surprises
and further reduced investor's concerns about a possible "flat tax." The Lehman
Brothers Municipal Bond Index posted a 9.2% total return for the year.***
INTERNATIONAL MARKETS POST MIXED RESULTS
Globally, markets mostly echoed similar bigger-is-better themes. In the
industrialized world, Germany's DAX index rose 47.1%, while in the United
Kingdom stocks gained 24.7%. Among the G-7 countries, only Japan's Nikkei index
dropped -- losing 21.19%.* The global weak spot in equity investing was the
smaller emerging markets of Asia. Morgan Stanley Capital International's EAFE
index, a composite of 22 national markets, squeezed out a 1.78% total return for
1997, as losses during the second half of the year erased much of its earlier
gains.***
DOW JONES INDUSTRIAL AVERAGE
(December 31, 1996 - December 31, 1997)
INTEREST RATE SPIKE
ASIAN CRISIS
INFLATION SCARE
6448
3-Jan.-97 6544
10-Jan.-97 6703
17-Jan.-97 6833
24-Jan.-97 6696
31-Jan.-97 6813
7-Feb.-97 6855
14-Feb.-97 6988
21-Feb.-97 6931
28-Feb.-97 6877
7-Mar.-97 7000
14-Mar.-97 6935
21-Mar.-97 6804
28-Mar.-97 6740
4-Apr.-97 6526
11-Apr.-97 6391
18-Apr.-97 6703
25-Apr.-97 6738
2-May -97 7071
9-May -97 7169
16-May -97 7194
23-May -97 7345
30-May -97 7331
6-Jun.-97 7435
13-Jun.-97 7782
20-Jun.-97 7796
27-Jun.-97 7687
4-Jul.-97 7895
11-Jul.-97 7921
18-Jul.-97 7890
25-Jul.-97 8113
1-Aug.-97 8194
8-Aug.-97 8031
15-Aug.-97 7694
22-Aug.-97 7887
29-Aug.-97 7622
5-Sep.-97 7622
12-Sep.-97 7742
19-Sep.-97 7917
26-Sep.-97 7922
3-Oct.-97 8038
10-Oct.-97 8045
17-Oct.-97 7847
24-Oct.-97 7716
31-Oct.-97 7442
7-Nov.-97 7581
14-Nov.-97 7572
21-Nov.-97 7881
28-Nov.-97 7823
5-Dec.-97 8149
12-Dec.-97 7838
19-Dec.-97 7768
26-Dec.-97 7679
31-Dec.-97 7908
Source: Bloomberg Business News
The currency turmoil in Asia may have more long-term effects on the world
economy and equity markets. The Organization for Economic Cooperation and
Development estimated that the situation in Asia will cause a reduction in
expected economic growth worldwide by nearly one-third in 1998.
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 diver-sify 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.
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% 31.23%
LOWEST ANNUAL RETURN -26.47% -12.45%
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.
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 -12% 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.
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. Inter-national 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.
OUTLOOK FOR A MORE SOBER ECONOMY
The "Goldilocks economy" - not too swift to trigger inflation, but growing
enough to keep businesses happy - continued in 1997, with Gross Domestic Product
(GDP) growing at an estimated annualized rate of 3.7%.* However, projections are
for GDP to slow to the 2.1% -2.4% range in 1998. Inflation (measured by the
consumer price index) could rise from its current 1.8% to an annual rate of 2.2%
to 2.5% by year-end 1998.
This slowdown in economic growth would likely stem from Asia's
difficulties. When a foreign currency drops in value in relation to the U.S.
dollar, it becomes relatively more expensive for people in that country to buy
American goods. As a result, demand for imports in that area of the world is
likely to cool, trimming earnings among multinational U.S. firms that depend on
these countries for a solid portion of their business. At the same time, the
strong dollar also makes exports from Asia cheaper for American consumers. That,
in turn, could threaten domestic sales of American companies who compete with
imports from abroad. Investors may react by driving down the stock prices of
those businesses, a factor which may have contributed to Wall Street's October
plummet.
On the flip side, it is possible that the troubles in Asia may be
insufficient to prevent domestic demands from accelerating. Some U.S. companies
report they expect much of their loss of business will be made up through strong
sales in Europe and Latin America. Should this scenario occur, it is quite
likely the Fed would be forced to take action to try to orchestrate a "soft
landing".
Investors should anticipate a less-enthusiastic stock market in most areas.
Consensus projections for the broad market's year-end 1998 returns are in the 8%
to 12% range with higher volatility across all stock sectors.
LOOK TO YOUR INVESTMENT PROFESSIONAL FOR HELP
Following last year's strong stock and bond market performances, now is a good
time to review your portfolio with your Sierra investment professional to make
sure that your portfolio remains on track toward your financial goals. Your
investment professional can assist you in evaluating whether your current asset
allocation is appropriate for your time frame and the current market
environment. An appropriate asset allocation strategy can help reduce the
negative impacts of market volatility on your overall investment returns.
The Composite Family of Mutual Funds offers an array of professionally
managed investments that may be appropriate for your portfolio. Speak with your
investment professional about how long-term investing and the Composite Family
of Mutual Funds can help you pursue your financial dreams.
- --------------------------------------------------------------------------------
* Source: The Wall Street Journal, Jan. 2, 1998. The S&P 500 is an unmanaged
index that is generally considered representative of large-capitalization
U.S. stocks. Past performance does not guarantee future results.
** Source: The Frank Russell Company. The Russell 2000 Index(R) is an unmanaged
index that is generally considered representative of small-capitalization
U.S. stocks. Past performance does not guarantee future results.
+ The performance of any index is not indicative of the performance of any
particular investment and does not take into account brokerage commissions
or other expenses associated with purchasing individual investments.
Individuals cannot invest directly in any index.
*** Source: Morningstar, Inc. Results include the reinvestment of dividends and
capital gains. If dividends and capital gains were not reinvested, the
performance results would have been lower.
++ Investors cannot invest directly in any index. Past performance does not
guarantee future results. Investments in international securities are
sometimes subject to somewhat higher taxation and higher currency risk, as
well as less liquidity, compared with investments in domestic securities.
<PAGE>
INDIVIDUAL FUND REVIEWS
- --------------------------------------------------------------------------------
SIERRA INVESTMENT
ADVISORS CORPORATION
- --------------------------------------------------------------------------------
SIERRA Investment Advisors Corporation ("SIERRA Advisors"), a registered
investment advisor, is the investment advisor to the SIERRA Trust Funds, and has
general oversight responsibility for the advisory services provided to the
Funds. These services include formulating the Funds' investment policies,
analyzing economic trends affecting the Funds, and directing and evaluating the
investment services provided by the Sub-Advisors and the individual Portfolio
Managers of each Fund. SIERRA Advisors supervises the Portfolio Managers'
day-to-day management of the Funds in the SIERRA Trust Funds family to ensure
that the policies and guidelines are met, and to determine appropriate
investment performance measures.
- --------------------------------------------------------------------------------
STEPHEN C. SCOTT
President and Chief Investment Officer
- --------------------------------------------------------------------------------
Mr. Scott received his B.A. and M.B.A. from California State University, Long
Beach. He joined the firm in 1988, and is responsible for providing economic
analysis, as well as conducting investment analysis and management for the
SIERRA Asset Management (SAM) Portfolios, 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 December 31, 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. |_|
- --------------------------------------------------------------------------------
TO OUR
SHAREHOLDERS:
We are pleased to provide you with an overview of the following Funds in the
SIERRA TRUST FUNDS family for the six-month period ended December 31, 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.
<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 December 31, 1997, the
SIERRA SHORT TERM HIGH QUALITY BOND FUND (Class A Shares) advanced 4.32% on an
average annual total return basis, or 3.43% adjusted for the maximum sales
charge. For the 12-month period ended December 31, 1997, the Fund's total return
was 5.77%, or 2.07% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC
YIELD AS OF DECEMBER 31, 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 SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
Interest rates during the second half of 1997 dropped dramatically, making it a
strong period for fixed income investments. Influenced by a steady flow of good
news on the inflation front, plus positive movements in unemployment, wages, and
corporate productivity, the bond market posted healthy gains during the period.
The Fund was impacted most significantly by the strong performance of the
corporate bond sector which despite a late-year sell-off that resulted from the
Asian currency crisis was still up nearly 10% for 1997. The Fund also benefited
from its focus on building a yield advantage over competitive funds in its peer
group.
Growth of a $10,000 Investment (Class A Shares)
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 9639 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 11560 11156 12284
11720 11310 12498
11727 11317 12460
Sep 11780 11368 12590
11840 11425 12678
11846 11431 12700
Dec 97 11925 11508 12783
* Index total returns were calculated from 10/31/93 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(November 1, 1993)
<S> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 3.15% 5.77% 4.32%
Fund (adjusted for the maximum 3.5% sales charge) -0.46% 2.07% 3.43%
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 4.06% 7.27% 6.07%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
Class B Shares
Fund (not adjusted for contingent deferred sales charge) 2.76% 4.98% 4.59%
Fund (adjusted for the maximum 4% contingent deferred sales charge) -1.24% 1.00% 4.34%++
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 4.06% 7.27% 7.84%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 2.76% 4.98% 4.59%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -2.24% 0.00% 3.84%++++
Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index* 4.06% 7.27% 7.84%
++ Adjusted for the maximum 1% 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?
As interest rates fell, the yield of the 30-year U.S. Treasury Bond ended the
year with a flourish, at 5.92%, a drop of 86 basis points or 0.86% from June 30,
1997. While bonds with the longest maturities performed the best in this
declining interest rate environment, shorter-term issues also benefited. With
benign inflation, slow economic growth, and a potential budget surplus in the
foreseeable future, we continue to focus on developing an income advantage in
the Fund. We maintained duration, or the Fund's relationship to interest rates
changes, in a fairly tight range, while continuing to emphasize the corporate,
mortgage and asset-backed sectors, all of which contributed to the Fund's
positive performance over the six months ended December 31, 1997.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We made slight shifts in the Fund's portfolio holdings in order to take
advantage of sectors that were performing well. These included mortgage- and
asset-backed securities, as well as corporate bonds. During the second half of
1997, we increased the Fund's exposure to these sectors and decreased our
commitment to U.S. Treasury obligations, a strategy which was in line with our
focus on building a yield advantage.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our intermediate and long-term outlook for interest rates is positive. The Fund
should benefit from stable to falling interest rates over the near term. From an
economic and market perspective, there is much to be optimistic about: inflation
remains low, corporate profit in major industries such as technology continues
to be strong, and excess capacity exists in virtually every industry. On the
shorter-term horizon, there is a possibility that the Pacific Rim currency
crisis may contribute to deflationary pressures in the U.S., a trend that would
help support the U.S. Treasury market.
However, some concerns still remain. On the risk side of the equation stands a
U.S. bond market that has rallied to new highs and is testing historic levels.
Wage pressure, an important component of inflation which has not been a factor
in the U.S. economy in recent years, will have a negative impact on the
financial markets when it does appear. Many economists have been confounded by
the absence of wage pressure this late in the economic cycle. Finally, and
perhaps most importantly, all the positive economic news that have surfaced
recently may result in strong Gross Domestic Product (GDP) growth. This could
add to inflationary forces and cause bond prices to drop.
HIGH-QUALITY PORTFOLIO FOR ADDED PRINCIPAL STABILITY
AAA 71.94%
BBB 28.06%
Note: Bond ratings provided by Standard & Poors.
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM GLOBAL GOVERNMENT FUND
- --------------------------------------------------------------------------------
- --------------------------
[Photo of Adam M. Greshin]
- --------------------------
Adam M. Greshin
PORTFOLIO MANAGER:
SCUDDER, STEVENS & CLARK, INC.
Adam M. Greshin is the lead portfolio manager for the SIERRA SHORT TERM GLOBAL
GOVERNMENT FUND. Mr. Greshin joined Scudder in 1986 as an international bond
analyst. Currently, he is Product Leader for Scudder's global and international
fixed-income investing. He was involved in the original design of the Fund and
has served as a member of the Fund's portfolio management team since 1992. Mr.
Greshin assumed responsibility for the Fund's day-to-day management and
investment strategies in November 1995.
PERFORMANCE REVIEW:
From the Fund's inception (February 11, 1992) through December 31, 1997, the
SIERRA SHORT TERM GLOBAL GOVERNMENT FUND (Class A Shares) advanced 6.07% on an
average annual total return basis, or 5.43% adjusted for the maximum sales
charge. For the 12-month period ended December 31, 1997, the Fund's total return
was 4.64% or 0.97% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC
YIELD AS OF DECEMBER 31, 1997, WAS 6.85%. For additional information, including
Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
The Fund benefited from a rally in the global bond markets which lasted through
most of 1997. By year-end, global bond yields were at or near their highs for
1997. High-yielding markets around the world were the destination of choice as
investors sought out yield. The primary beneficiaries of this trend were
lower-rated, higher-yield bonds issued in the United States, emerging markets,
and peripheral Europe. Remarkably, the U.S. is now considered a high-yield
market as interest rates in core Europe, Japan and Canada have dropped below
comparable rates in the U.S. While the robust U.S. economy has pushed the U.S.
Dollar higher, dampening global bond returns, returns for this asset class still
ended the year in positive territory.
Growth of a $10,000 Investment (Class A Shares)
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 13842 13358 14136
13917 13430 13962
13874 13388 14038
Sep 14013 13522 14264
14036 13545 14485
14062 13570 14346
Dec 97 14145 13650 14300
* Index total returns were calculated from 2/28/92 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(February 11, 1992)
<S> <C> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 2.18% 4.64% 5.82% 6.07%
Fund (adjusted for the maximum 3.5% sales charge) -1.40% 0.97% 5.07% 5.43%
Lehman Brothers Mutual Fund Short World Multimarket Index* 1.16% -0.74% 6.25% 6.42%
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
Class B Shares
Fund (not adjusted for contingent deferred sales charge) 1.80% 3.86% N/A 5.80%
Fund (adjusted for the maximum 4% contingent deferred
sales charge) -1.89% 0.20% N/A 5.58%++
Lehman Brothers Mutual Fund Short World Multimarket Index* 1.16% -0.74% N/A 6.07%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 1.80% 3.86% N/A 5.80%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -2.81% -0.71% N/A 5.12%++++
Lehman Brothers Mutual Fund Short World Multimarket Index* 1.16% -0.74% N/A 6.07%
++ Adjusted for the maximum 1% 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?
After a shaky start, bond markets in the developed world gained ground during
1997 (as measured in local currency terms). The strongest performing markets
were in peripheral Europe where relatively high interest rates trended lower in
anticipation of European Monetary Union (EMU). The largest gains were achieved
in the United Kingdom, where talk of eventual British participation in EMU led
to a dramatic rally in longer-term bonds. Core Europe did not fare as well, as
investors responded negatively to the prospect of higher short-term interest
rates in Germany. Elsewhere, in Japan, news that second quarter Gross Domestic
Product (GDP) declined by 11% on an annualized basis pushed Japanese bonds
higher.
In terms of currency valuations, the U.S. Dollar generally moved higher,
supported by a strong U.S. economy. In Europe, currencies were driven down by
the perception that the Euro Dollar would be weaker than anticipated to allow
more countries to join the first round of currency union. In August and
September, European currencies gained some ground, but still ended the year on a
down note. Japan's economic troubles sent the Yen lower despite a good second
quarter of 1997. The only pocket of currency strength was in Sweden where a
strong economy increased the probability of a rate hike and helped the Swedish
Kroner appreciate against the U.S. Dollar.
In response to these market conditions, the Fund's duration - a measure of the
Fund's price fluctuations when interest rates change was continually adjusted to
take advantage of economic and interest rate trends around the world. On the
currency front, we also continued to hedge the majority of the portfolio's
international exposure into U.S. Dollars in an effort to provide stability for
the Fund's net asset value. This tactic helped the Fund take advantage of the
renewed strength of the U.S. Dollar and contributed to overall returns.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Generally, bond funds with longer duration and average maturity achieve greater
price appreciation when interest rates fall. To take advantage of the declining
interest rate environment during most of 1997, the Fund's duration was extended
from approximately 1.8 years on June 30, 1997, to about 2 years at the end of
the year. In addition, we emphasized the dollar-bloc markets of Canada and New
Zealand, which benefited from the currency appreciation in this sector, while
reducing exposure to Europe where interest rates were trending higher. With our
hedging strategy and focus on dollar-denominated markets, the strength of the
U.S. Dollar was a positive factor contributing to the Fund's total return for
the six-month period ended December 31, 1997.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
On January 9, 1998, shareholders of the Short Term Global Government Fund
approved the merger into the Short Term High Quality Bond Fund. While the
investment objectives of these funds are substantially similar, there are
certain differences in management style. The Short Term High Quality Bond Fund
invests in a diversified portfolio of investment-grade U.S. Government,
investment-grade corporate debt, and mortgage-backed securities, with average
maturities between one and three years. These investments are used to seek a
high level of current income and a high degree of principal stability. The short
maturity and high quality bonds are intended to significantly reduce price
volatility. The domestic holdings avoid both the currency risks and political,
economic, and credit risks of foreign investing. Although some risks of foreign
investing can be averted by currency hedging, these techniques involve costs and
may not always produce sufficient net benefits for investors.
Because of the differences in the funds, there have been periods during which
the Short Term High Quality Bond Fund has both outperformed and underperformed
the Short Term Global Government Fund. We believe that, over time, the risks
associated with international investing outweigh any marginal gains in returns
generated by these investments. The risks associated with global investing have
been even more pronounced recently with the weakness of many currencies relative
to the U.S. Dollar.
We believe that the Short Term High Quality Bond Fund is an excellent fund for
shareholders seeking income with a high degree of principal stability from its
quality domestic holdings.
- --------------------------------------------------------------------------------
DIVERSIFICATION BY REGION
- --------------------------------------------------------------------------------
Europe 49.38%
Americas 39.68%
New Zealand 10.02%
Africa 0.92%
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
U.S. GOVERNMENT FUND (Class A Shares) advanced 7.55% on an average annual total
return basis, or 6.97% adjusted for the maximum sales charge. For the 12-month
period ended December 31, 1997, the Fund's total return was 9.74%, or 4.80%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
DECEMBER 31, 1997, WAS 6.49%. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
The Fund benefited from very strong economic conditions during the past six
months. The U.S. economy continued its steady growth during the second half of
1997, fueled by increased consumer spending and low unemployment. The primary
inflation indicators, the Consumer and Producer Price Indices, remained dormant
throughout the period, and the unemployment rate stayed low. This healthy
economic environment prompted the Federal Reserve to leave interest rates
unchanged at 5.50% in September. The positive momentum has continued into the
early days of 1998 based, in part, on the possibility of a balanced budget and
on comments by Federal Reserve Chairman Alan Greenspan that deflation might be
an issue. While low unemployment still threatens to exert wage pressures on the
economy, the bull market continued into the fourth quarter of 1997, leading
yields to finish the year near historic lows. New home sales recently hit a
cyclical peak, and consumer confidence and spending remain high. Despite strong
growth, inflation appears to be remarkably controlled with producer prices
continuing to decline and 1997's core CPI at a 30-year low.
Growth of a $10,000 Investment (Class A Shares)
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 17398 16615 18385 19043
17824 17022 18907 19401
17685 16889 18720 19355
17951 17143 19001 19556
18254 17433 19329 19773
18280 17457 19428 19838
Dec 97 18473 17642 19632 20065
* Index total returns were calculated from 7/31/89 to 12/31/97. The Lehman
Brothers U.S. Govern- ment Index represents all U.S. Government agency and
Treasury securities. The Lehman Brothers 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 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) 6.18% 9.74% 5.90% 7.55%
Fund (adjusted for the maximum 4.5% sales charge) 1.41% 4.80% 4.93% 6.97%
Lehman Brothers U.S. Government Index* 6.78% 9.59% 7.34% 8.34%
Lehman Brothers U.S. Mortgage Index* 5.36% 9.49% 7.21% 8.63%
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
Class B Shares
Fund (not adjusted for contingent deferred sales charge) 5.79% 8.93% N/A 7.62%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 0.79% 3.93% N/A 6.90%++
Lehman Brothers U.S. Government Index* 6.78% 9.59% N/A 8.79%
Lehman Brothers U.S. Mortgage Index* 5.36% 9.49% N/A 9.29%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 5.79% 8.93% N/A 7.62%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 0.79% 3.93% N/A 6.90%++
Lehman Brothers U.S. Government Index* 6.78% 9.59% N/A 8.79%
Lehman Brothers U.S. Mortgage Index* 5.36% 9.49% N/A 9.29%
++ 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?
While lower interest rates generally aided the fixed income market, they
adversely affected mortgage-backed securities (MBS). The MBS market
underperformed the broader investment-grade bond market for the six months ended
December 31, 1997, as declining interest rates began to ignite prepayment fears
and widen yield spreads. The fundamental factors that contribute to mortgage
valuations clearly worsened, particularly since the decline in interest rates
encouraged mortgage holders to refinance. For the period, the MBS market as
measured by the Lehman Brothers U.S. Mortgage Index posted a 5.36% total return
versus the 6.78% return of the Lehman Brothers U.S. Government Index.
The underperformance of the MBS sector versus U.S. Treasuries contributed
negatively to the Fund's performance, versus its benchmark Merrill Lynch 5-7
Year Treasury Index. To compensate, the Fund reduced its mortgage holdings and
maintained a conservative approach to duration and maturity to help protect
against interest rate risk. The Fund ended the six-month period with a neutral
duration relative to its benchmark, although our bias is to lengthen duration
once new opportunities emerge. The Fund's allocation to Treasury securities is
high due to our less favorable outlook for the mortgage sector.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAVE HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The Fund maintained a relatively low allocation to mortgage securities due to
our outlook on the sector. Of the mortgages the Fund does hold, we have remained
focused on seasoned issues that have weathered several refinancing cycles. These
are expected to provide more stable prepayment characteristics than new mortgage
issues.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
On December 23, 1997, the shareholders of the Sierra U.S. Government Fund
approved a merger of the Fund into the Composite U.S. Government Securities,
Inc. This merger is scheduled to be completed on March 20, 1998. The Composite
U.S. Government Securities Fund has a substantially similar investment
objective. The Fund is intended to provide a high level of current income,
consistent with safety and liquidity. Investments are made in U.S. Government
securities and collateralized mortgage obligations backed by U.S. Government
Securities.
The Fund will continue to hold a larger portion of assets in mortgage-backed
securities, focusing on controlling prepayments. The Fund is poised to take
advantage of the economic backdrop of low inflation and low interest rates. By
taking advantage of changing fundamentals between different segments of the
mortgage market and by anticipating broad changes in interest rates, the
portfolio manager strives to add additional income while continuing to meet the
safety and liquidity objective of the Fund.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
FHLMC 43.10%
U.S. Treasury 24.35%
GNMA 22.07%
CMO 5.57%
FNMA 4.91%
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
CORPORATE INCOME FUND (Class A Shares) advanced 9.50% on an average annual total
return basis, or 8.83% adjusted for the maximum sales charge. For the 12-month
period ended December 31, 1997, the Fund's total return was 12.03%, or 6.99%
adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
DECEMBER 31, 1997, WAS 5.84%. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
Duration and credit quality were the most significant factors affecting to the
Fund's performance over the six months ended December 31, 1997. Duration
measures the sensitivity of bonds to changes in interest rates. When interest
rates fall, bond funds with longer duration generally perform better than those
with shorter duration. For the period, the Fund maintained a duration that was
longer than that of its benchmark index. This long duration helped the Fund's
performance, as interest rates fell steadily during the six-month period. In
addition to its stance on duration, the Fund also benefited from strong bond
selection. Many of its holdings received credit rating upgrades during the
period.
Growth of a $10,000 Investment (Class A Shares)
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
16537 15793 17099
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 18057 17244 18566
18902 18051 19245
18554 17719 18961
18931 18079 19292
19273 18406 19537
19422 18548 19647
Dec 97 19661 18776 19855
* Index total returns were calculated from 7/31/90 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 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) 8.91% 12.03% 8.40% 9.50%
Fund (adjusted for the maximum 4.5% sales charge) 4.01% 6.99% 7.41% 8.83%
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 6.94% 10.23% 8.44% 9.69%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
Class B Shares
Fund (not adjusted for contingent deferred sales charge) 8.51% 11.19% N/A 9.88%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 3.51% 6.19% N/A 9.19%++
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 6.94% 10.23% N/A 10.27%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 8.51% 11.19% N/A 9.88%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 3.51% 6.19% N/A 9.20%++
Lehman Brothers Mutual Fund Corporate Debt BBB-Rated Index* 6.94% 10.23% N/A 10.27%
++ 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?
Interest rates played an important role in the Fund's performance. The Fund
continued to adjust duration and average maturity to take advantage of interest
rate trends. Interest rates fell during the second half of 1997, pushing bond
yields to one of their lowest points in years. By the end of the year, 10-year
Treasury notes interest rates were down 0.75%, ending the six-month period at
5.74% versus 6.49% on June 30, 1997. The bellwether 30-year U.S. Treasury bond
fell almost 1%, dropping to 5.92% on December 31, 1997. In light of the downward
trend in interest rates and the long-term nature of the Fund's investment
objectives, we maintained maturity and duration near the high end of our peer
group. Also, we focused our credit research on finding attractive corporate
issues that are likely to receive credit quality upgrades over the near and
intermediate term. Protection from early call was also stressed.
Were there any shifts in the Fund's portfolio holdings/sectors that had a
significant impact on Fund performance?
The Fund made several moves that affected performance from June 30, 1997 through
December 31, 1997. The Fund reduced its allocation to industrial issues during
the period. Sales included Caterpillar, Inc., Consolidated Rail Corp., May Dept.
Stores and Norfolk Southern Corp. Exposure to financial issues increased
slightly, while utility holdings remained essentially unchanged.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
On January 9, 1998, the shareholders of the Sierra Corporate Income Fund
approved a merger of the Fund into the Composite Income Fund. This merger is
scheduled to be completed on March 20, 1998. The Composite Income Fund has a
substantially similar investment objective. The objective for the Fund is to
provide a high level of current income that is consistent with protection of
shareholders' capital. It pursues this objective through careful investment in a
diversified pool of debt securities.
The Composite Income Fund is diversified in corporate, mortgage-backed, and
Treasury securities and will continue to target an average quality of "A to BBB"
as rated by Standard & Poors. Although rates have fallen and are low by recent
historical standards, the Fund manager believes that excess worldwide capacity,
fiscal austerity, and changing demographics will continue to keep inflation
under control. As a result, the Fund has been structured to take advantage of
interest rates trending downward.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------------
U.S. Mortgage-Backed 14.02%
Manufacturing 13.08%
Energy 9.45%
Industrial 9.20%
Transportation 9.18%
Yankee 7.75%
Financial 7.72%
Electric 7.60%
Regional Banks 6.62%
Media 4.21%
Forest Products 3.30%
U.S. Treasury 3.16%
Investment Company Security 2.71%
Gas 1.24%
Retail 0.76%
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
CALIFORNIA MUNICIPAL FUND (Class A Shares) advanced 7.63% on an average annual
total return basis, or 7.04% adjusted for the maximum sales charge. For the
12-month period ended December 31, 1997, the Fund's total return was 10.30% or
5.33% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS OF
DECEMBER 31, 1997, WAS 4.29%, OR 7.83% ON A TAX-EQUIVALENT BASIS.* For
additional information, including Class B and Class S Share performance, see the
accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
Several factors had a strong impact on the Fund's performance over the six-month
period ended December 31, 1997. Perhaps the most important was the downward
trend in interest rates over the second half of 1997. The declining interest
rate environment helped to create a powerful rally in the fixed-income market.
The Bond Buyer 40 Index, a municipal bond index composed of 40 securities with
an average maturity of 30 years, yielded 5.35% on December 31, 1997, declining
from 5.79% on June 30, 1997.
Credit quality also contributed to the Fund's overall returns. Nearly 60% of the
Fund's assets were triple-A rated, a characteristic that boosted performance and
price appreciation over the past six months. While the Fund benefited from the
strong demand for high-quality paper issued in California, it received less
favorable results from its stance on duration. Duration is a measure of a fund's
sensitivity to interest rate changes. When interest rates fall, funds with
longer duration show higher price appreciation than funds with shorter duration.
For the period, the Fund had a relatively short duration compared to its
benchmark index, 7.32 versus 8.25 years as of December 31, 1997. As a result,
the Fund did not take full advantage of lower interest rates during the second
half of 1997.
Growth of a %10,000 Investment (Class A Shares)
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 17414 16630 18089
17955 17147 18590
17810 17008 18415
18018 17207 18634
18146 17329 18754
18291 17468 18864
Dec 97 18584 17748 19140
*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.
A portion of income may be subject to some State and/or local taxes, and for
certain investors, may be subject to the federal alternative minimum tax (AMT).
** Index total returns were calculated from 7/31/89 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 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) 6.73% 10.30% 7.15% 7.63%
Fund (adjusted for the maximum 4.5% sales charge) 1.92% 15.33% 6.17% 7.04%
Lehman Brothers Municipal Bond Index** 5.81% 19.19% 7.36% 8.02%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
Class B Shares
Fund (not adjusted for contingent deferred sales charge) 6.33% 9.48% N/A 7.67%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 1.33% 4.48% N/A 6.95%++
Lehman Brothers Municipal Bond Index** 5.81% 9.19% N/A 8.47%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 6.33% 9.48% N/A 7.67%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) 1.33% 4.48% N/A 6.95%++
Lehman Brothers Municipal Bond Index** 5.81% 9.19% N/A 8.47%
++ 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?
The strong U.S. and California economies continue to play major roles in the
Fund's performance. With excellent fiscal results, a thriving service industry,
and some of the highest employment numbers in the nation, California municipal
issues have been very attractive to investors across the country. However, while
falling interest rates, benign inflation, and low unemployment have produced
consistent gains in bond prices, these trends have made it increasingly
difficult to maintain the income or yield component of the Fund. In recent
years, bond yields have declined along with interest rates. With 58 percent of
assets invested in triple-A rated insured securities, we can identify few
opportunities to increase yield without negatively impacting the credit quality
and dividend-paying ability of the Fund. In response, we continue to maintain
our core position of high-grade holdings, while using our expertise in municipal
research to find higher-yielding paper among lower-rated securities.
In terms of supply and demand, the tax-exempt supply in California ended the
year at $28.0 billion, up 12% over 1996's $25.0 billion. The heavy supply,
combined with declining yield levels, caused municipals to underperform compared
to the taxable bond market. As an example, 30-year general market municipal
yields declined 39 basis points, while 30-year U.S. Treasuries declined 86 basis
points over the period (prices increase when interest rates decline).
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
There were no changes in the Fund's portfolio holdings or sectors that had a
significant impact on the Fund. With falling interest rates, there were few
attractive opportunities to enhance yield. The Fund continues to be
well-diversified, with exposure to 16 industries, with the largest concentration
in the tax district sector. Due to the competitive yields of our current
holdings, the strong sector diversification, and the high credit quality of the
portfolio, we do not expect to make any significant changes over the near term.
WHAT IS OUR IMMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We continue to have a favorable outlook on both the Fund and the California
municipal market. In terms of the economy, we expect to see a continuation of
low inflation, stable to falling interest rates, little unemployment, and solid
corporate earnings growth, all of which should support the municipal bond
market. With interest rates at a 25-year low and coupon rates of new issues
falling below 5%, we do not anticipate making any dramatic changes to the Fund's
structure. While we will focus on lengthening duration to a level closer to our
benchmark index, we will not sacrifice yield or credit quality to make it
happen. With our commitment to research and analysis, and our disciplined
approach to municipal bond selection, we believe the Fund remains
well-positioned for the future. As always, we will continue to manage the
portfolio in a manner consistent with its objective: to provide shareholders
with a high level of current income exempt from federal and California state
income tax.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------------
Tax District 30.69%
Housing 16.93%
Waste Disposal 13.84%
Transportation 11.64%
General Purpose 7.54%
Higher Education 5.39%
Public Building 4.26%
Utilities 3.43%
Water/Sewer 3.18%
Health Care 2.16%
Short-Term Municipal Bonds 0.66%
Industrial Revenue 0.28%
Note: Bond ratings provided by Standard & Poors.
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
FLORIDA INSURED MUNICIPAL FUND (Class A Shares) advanced 6.06% on an average
annual total return basis, or 5.00% adjusted for the maximum sales charge. For
the 12-month period ended December 31, 1997, the Fund's total return was 10.01%,
or 5.06% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC YIELD AS
OF DECEMBER 31, 1997, WAS 4.07%, OR 6.74% ON A TAX-EQUIVALENT BASIS.* For
additional information, including Class B and Class S Share performance, see the
accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
Over the past six months ended December 31, 1997, interest rates had the biggest
impact on the Fund's performance. With falling interest rates, fixed income
prices were up significantly. Municipal bonds showed solid gains, with the Bond
Buyer 40 Index, an index often used to represent the overall municipal market,
yielding 5.79% on December 31, compared to a yield of 5.35% six months earlier.
Growth of a $10,000 Investment (Class A Shares)
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 12240 11689 12584
12647 12078 12932
12537 11973 12811
Sep 12688 12117 12963
12776 12202 13046
12877 12298 13123
Dec 97 13080 12491 13315
*Tax-equivalent yield is based on Federal income taxes at 39.6%.
A portion of income may be subject to some State and/or local taxes, and for
certain investors, may be subject to the federal alternative minimum tax (AMT).
** Index total returns were calculated from 6/30/93 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 7, 1993)
<S> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 6.87% 10.01% 6.06%
Fund (adjusted for the maximum 4.5% sales charge) 2.06% 5.06% 5.00%
Lehman Brothers Municipal Bond Index** 5.81% 9.19% 6.57%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
Class B Shares
Fund (not adjusted for contingent deferred sales charge) 6.47% 9.19% 7.48%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 1.47% 4.19% 6.76%++
Lehman Brothers Municipal Bond Index** 5.81% 9.19% 8.47%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 6.47% 9.19% 7.48%
Fund (adjusted for the maximum 5% contingent deferred sales charge) 1.47% 4.19% 6.76%++
Lehman Brothers Municipal Bond Index** 5.81% 9.19% 8.47%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
As interest rates fell, the Fund benefited from its relatively bullish duration
- -- a measurement that takes into account how a fund performs when interest rates
change. The longer the duration, the greater the price fluctuations. As of
December 31, 1997, the Fund had a duration of 7.72 years, in line with the
benchmark index at 7.70 years. Combined with the high percentage of triple-A
rated holdings and the 20% of high-yielding assets which had superior price
performance, the Fund posted impressive returns for the six-month period,
benefiting from the strong national and in-state demand for quality paper from
Florida municipal issuers.
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 an expanding U.S. economy, as well as a vigorous Florida
market. Demand for Florida securities was up significantly over 1996, due to
many positive developments in the state. Tourism was strong in 1997 and is
expected to increase by another 4.1% in 1998. Fueled by gains in the tourism and
construction industries, there was a noteworthy increase in new jobs across the
state. In addition, the expansion of the financial and import/export sectors
strengthened economic growth.
While these positive market conditions, along with declining interest rates,
helped to boost municipal bond prices, they also made it more difficult to build
the income component of the Fund. With approximately 81% of the Fund's assets
invested in triple-A rated issues, we focused on identifying securities that
could enhance the Fund's yield without negatively impacting its credit quality
and dividend-paying ability. Since insured paper represented over 60% of all new
municipal bonds issued in Florida, supply and demand appeared to favor
lower-rated issues. For the period, the Fund held approximately 20% of its
assets in triple-B or non-rated issues, and this position showed excellent price
appreciation over the fourth quarter of 1997.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
While there were no dramatic adjustments to the Fund's structure, we made some
moves to take advantage of changing market conditions. In particular, we
increased the percentage of higher-yielding housing bonds from 19% to 22% of
total assets, in an attempt to enhance the Fund's yield. We also reduced the
percentage of insured holdings slightly to 81% of assets, compared to 84% on
June 30, 1997. Of course, the vast majority of the Fund's assets remained
insured, and these high-quality issues contributed positively to the Fund's
performance over the past six months ended December 31, 1997. Overall, the Fund
remains well-diversified, with its assets allocated among eight different
sectors.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Our intermediate- and long-term outlook for the Fund is cautiously favorable. We
believe that interest rates, inflation, and unemployment will all remain near
current levels, a trend that is decidedly positive for both the Fund and the
general municipal market. In Florida, demand for tax-exempt issues should remain
high, and supply in 1998 is expected to be consistent with 1997 levels. However,
with interest rates at a 25-year low and Asia still feeling the effects of the
1997 currency crisis, we anticipate increased volatility in the U.S. municipal
bond market in 1998. In response to these market and economic conditions, we
have positioned the Fund with a neutral to slightly bullish duration and average
maturity.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------------
Housing 22.17%
Transportation 18.18%
Public Education 15.19%
Utilities 13.74%
Water/Sewer 9.57%
Industrial Revenue 8.60%
Health Care 6.18%
Public Building 5.74%
Note: Bond ratings provided by Standard & Poors.
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 AND SIERRA CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUNDS.
PERFORMANCE REVIEW:
From the Fund's inception (April 4, 1994) through December 31, 1997, the SIERRA
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND (Class A Shares) advanced 7.69%
on an average annual total return basis, or 6.37% adjusted for the maximum sales
charge. For the 12-month period ended December 31, 1997, the Fund's total return
was 7.14%, or 2.32% adjusted for the maximum sales charge. THE FUND'S 30-DAY SEC
YIELD AS OF DECEMBER 31, 1997, WAS 3.49%, OR 6.37% ON A TAX-EQUIVALENT BASIS.*
For additional information, including Class B and Class S Share performance, see
the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
The most significant factors affecting the Fund's performance over the past six
months were duration, credit quality, and the strong bond market rally that
began in the second quarter of 1997 and continued throughout the rest of the
year. Interest rates fell dramatically during this period, pushing bond yields
down as well. On June 30, 1997, the Bond Buyer 40 Index, a widely recognized
municipal bond index that consists of 40 securities with an average maturity of
30 years, had a current yield of 5.79%. By year-end, the yield had dropped to
5.35%.
In a fluctuating interest rate environment, the duration of a mutual fund is one
major determinant of overall performance. Duration, which is expressed in years,
is used to measure a fund's sensitivity to interest rate movements. When
interest rates decline, funds with longer duration tend to perform better, while
the opposite is true when interest rates rise. At the end of the reporting
period, the Fund's duration stood at 5.06 years, compared to a duration of 5.99
years for the Fund's benchmark index. With a relatively short duration, the Fund
was not able to take full advantage of the declining interest rate environment.
Growth of a $10,000 Investment (Class A Shares)
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 12634 12065 12594
12929 12347 12943
12836 12258 12821
Sep 12955 12372 12974
13005 12419 13057
13054 12467 13134
Dec 97 13191 12598 13326
*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.
A portion of income may be subject to some State and/or local taxes, and for
certain investors, may be subject to the federal alternative minimum tax (AMT).
** Index total returns were calculated from 4/30/94 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(April 4, 1994)
<S> <C> <C> <C>
Class A Shares
Fund (not adjusted for sales charge) 4.41% 7.14% 7.69%
Fund (adjusted for the maximum 4.5% sales charge) -0.29% 2.32% 6.37%
Lehman Brothers Municipal Bond Index** 5.81% 9.19% 8.15%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
Class B Shares
Fund (not adjusted for contingent deferred sales charge) 4.02% 6.34% 6.75%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.98% 1.34% 6.01%++
Lehman Brothers Municipal Bond Index** 5.81% 9.19% 8.47%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 4.02% 6.34% 6.75%
Fund (adjusted for the maximum 5% contingent deferred sales charge) -0.98% 1.34% 6.01%++
Lehman Brothers Municipal Bond Index** 5.81% 9.19% 8.47%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Offsetting the impact of duration, however, was the large percentage of triple-A
rated holdings in the Fund. As of December 31, 1997, 86% of the Fund's assets
were triple-A rated. These high-quality issues provided the Fund with solid
performance and superior price appreciation. Additionally, the Fund performed
well due to the extremely strong national and in-state demand for quality paper
from California. Finally, increased refunding volume in California significantly
boosted the price of select holdings in the portfolio.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
The U.S. economy, which continues to expand, has played an important role in the
strong performance of the Fund. While the downward trend in interest rates have
boosted bond prices, it has nonetheless created more difficulties in building
the income component of the Fund. With 86 percent of assets invested in triple-A
rated insured securities, much of which was acquired at levels significantly
exceeding current market yields, we can identify few opportunities to increase
yield without negatively affecting the credit quality and dividend-paying
ability of the Fund. We therefore have responded to this declining rate
environment by maintaining our core position of high-grade,
high-acquisition-yield holdings.
Among many investors, California municipal bonds remain particularly attractive.
The state's economy and service industries are thriving, its fiscal situation is
excellent, and California dominates the nation in employment gains. Although
demand continues to be very strong, the number of new insured issues has grown
substantially in California, increasing from 45% of total volume in 1996 to over
60% in 1997. With a rising supply of insured bonds and a tightening in yield
spreads between California insured and lower-rated paper, there is a growing
interest in lower-rated municipal bonds. Approximately 10% of assets in the Fund
are triple-B or non-rated, and this position showed excellent price appreciation
over the last quarter of 1997. With our expertise in municipal research, we have
been exploring additional opportunities to add yield through lower-rated issues.
Overall, the supply of California municipal bonds ended the year at $28.0
billion, up 12 percent over 1996's $25.0 billion. The heavy supply, combined
with declining yield levels, caused municipals to underperform when compared to
the taxable bond market. As an example, 30-year municipal yields declined 39
basis points, while that of 30-year Treasuries declined 86 basis points over the
period (prices increase when interest rates decline).
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We did not make any major shifts in sector concentration or credit rating
distribution that had a significant impact on the Fund. This is primarily due to
the continuing decline in interest rates, which are currently at levels
significantly below the acquisition yields of securities in the Fund. The Fund
has excellent diversification, with exposure to 11 industries, the largest of
which is higher education. Due to the attractive yields on our current holdings,
as well as the good balance between sectors, we do not expect significant
changes in the near future. The credit quality of the portfolio remains very
high, and we will maintain that level given the demand for quality California
securities.
WHAT IS YOUR IMMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Although the Fund's long-term prospects remain favorable, we anticipate some
volatility over the near term. Our general market supply estimate for 1998 is
over $200 billion, similar to 1997. We believe that retail demand will remain
near levels experienced in 1997 and that overall demand for municipals from
institutional buyers will be constant. However, with interest rates at 25-year
lows and new issues priced at coupon rates below 5%, we expect 1998 to be a more
challenging year. We are also concerned about the impact of the Asian economic
crisis. There are two camps on what effect this may have on the domestic
markets. The first camp says the Asian financial turmoil will dramatically slow
the U.S. economy, forcing the Federal Reserve ("Fed") to ease monetary policy as
early as February 1998. The other camp feels the Asian economic problems will
have little effect on the U.S. economy, allowing the Fed to let interest rates
remain at current levels or maybe even tighten due to continued strength. This
scenario would force a decline in the price of long-term municipal bonds. We
believe the first case has more creditability, and we are therefore staying
close to our benchmark index in terms of duration and average maturity and
watching the municipal buying trends very closely.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------------
Higher Education 20.61%
General Purpose 18.85%
Tax District 12.99%
Transportation 12.15%
Health Care 10.94%
Housing 8.60%
Utilities 6.33%
Waste Disposal 3.34%
Short Term Municipals 3.16%
Water/Sewer 1.63%
Other 1.40%
Note: Bond ratings provided by Standard & Poors.
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
NATIONAL MUNICIPAL FUND (Class A Shares) advanced 8.40% on an average annual
total return basis, or 7.73% adjusted for the maximum sales charge. On a basis
not adjusted for the maximum sales charge, the Fund outperformed the benchmark
Lehman Brothers Municipal Bond Index which advanced 8.17% on an average annual
total return basis for the same period.** For the 12-month period ended December
31, 1997, the Fund's total return was 9.02%, or 4.12% adjusted for the maximum
sales charge. THE FUND'S 30-DAY SEC YIELD AS OF DECEMBER 31, 1997, WAS 4.01%, OR
6.64% ON A TAX-EQUIVALENT BASIS.* For additional information, including Class B
and Class S Share performance, see the accompanying chart.
Growth of a $10,000 Investment (Class A Shares)
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 17305 16526 16918
17772 16973 17386
17556 16766 17223
17777 16977 17428
17905 17099 17540
18002 17191 17643
Dec 97 18241 17420 17901
*Tax-equivalent yield is based on Federal income taxes at 39.6%.
A portion of income may be subject to some State and/or local taxes, and for
certain investors, may be subject to the federal alternative minimum tax (AMT).
** Index total returns were calculated from 7/31/90 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 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) 5.40% 9.02% 7.07% 8.40%
Fund (adjusted for the maximum 4.5% sales charge) 0.65% 4.12% 6.09% 7.73%
Lehman Brothers Municipal Bond Index** 5.81% 9.19% 7.36% 8.17%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 5.00% 8.21% N/A 6.95%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) 0.00% 3.21% N/A 6.22%++
Lehman Brothers Municipal Bond Index** 5.81% 9.19% N/A 8.47%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 5.00% 8.21% N/A 6.95%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) 0.00% 3.21% N/A 6.22%++
Lehman Brothers Municipal Bond Index** 5.81% 9.19% N/A 8.47%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
One of the major factors affecting the Fund's performance was the strong U.S.
economy. Falling interest rates, low inflation, and slow economic growth all
combined to support municipal bond prices. As interest rates declined, municipal
bond prices surged. For example, the Bond Buyer 40 Index yielded 5.35% on
December 31, 1997, compared to a yield of 5.79% on June 30, 1997. The Bond Buyer
40 Index is a widely recognized municipal index that consists of 40 securities
with an average maturity of 30 years. Other factors that had an impact on
performance included the fund's relatively long duration, which helped to push
up prices as interest rates fell, and its large percentage of heath care issues,
a sector that performed particularly well over the past six months.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Duration was adjusted during the reporting period to take advantage of interest
rate trends. Duration measures how sensitive a fund is to changes in interest
rates: the longer the duration, the greater the fluctuation in share price, when
interest rates change. As of December 31, 1997, the Fund had a duration of 7.70
years, which is slightly longer than the duration of its benchmark index at 7.60
years. As interest rates fell throughout the second half of 1997, the Fund's
relatively long duration helped it generate strong price appreciation. Another
factor contributing to performance was the structure of the Fund. At the end of
the year, 23% of total assets were invested in the health care sector, one of
the best performing industries over the past six months.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
With lower interest rates, we discovered few opportunities that added value to
the attractive high yields already embedded in many of the Fund's existing
positions. As a result, there were no major shifts in sector concentration
during the period that had a significant impact on the Fund's performance. Our
largest sector concentration was health care, followed by industrial revenue.
Over the six-month period ended December 31, 1997, health care was the strongest
performing industry in the Lehman Brothers Revenue Bond Index (RBI), returning
6.88% versus the overall RBI return of 6.20%. We continue to focus on both these
industries, which we believe are undervalued and have outstanding growth
potential.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
On December 23, 1997, the shareholders of the Sierra National Municipal Fund
approved a merger of the Fund into the Composite Tax-Exempt Bond Fund. This
merger is scheduled to be completed on March 20, 1998. The Tax-Exempt Bond Fund
has a substantially similar investment objective. The Fund is designed to
provide a high level of income that is exempt from federal taxes and to protect
investors' capital. The Funds invest in a carefully selected portfolio of bonds
issued by states, counties, cities and other governmental bodies whose bonds
generate income exempt from federal income tax.
To meet these objectives, the Fund manager targets a longer average maturity
(12.5 years), and high average quality (Aa rating by Moody's Investors
Services). Given a vigilant Federal Reserve, a possible pan-Asian recession, and
low domestic inflation, the prospects of bond investments are good. If
municipals return to their historical relationship with Treasuries, municipal
yields could fall and their prices could rise significantly, even if Treasuries
remain unchanged. Our large position in non-callable bonds should again boost
performance in such an environment.
- -------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- -------------------------------------------------------------------------------
Health Care 27.25%
Transportation 17.37%
Transportation 17.37%
Waste Disposal 9.21%
General Purpose 8.74%
Higher Education 8.25%
Tax District 5.10%
Housing 4.08%
Public Building 3.50%
Water/Sewer 0.68%
Industrial Revenue 0.59%
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
GROWTH AND INCOME FUND (Class A Shares) advanced 13.46% on an average annual
total return basis, or 12.66% adjusted for the maximum sales charge. For the
12-month period ended December 31, 1997, the Fund's total return was 27.49%, or
20.16% adjusted for the maximum sales charge. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
The Fund outperformed the S&P 500 in the third quarter with positive stock
selection, and despite negative sector allocation. During the period, the market
began to broaden, enabling U.S. stock mutual funds to outperform the S&P 500.
This trend reversed in the fourth quarter, as the largest 50 stocks in the S&P
500 beat the rest of the index by 2.58%. The narrow market environment made it
difficult to keep pace with the S&P 500.
Across the market, the service sector was the largest contributor to
performance. The telephone sector began as a negative contributor, but
dramatically reversed itself in the latter part of 1997. AT&T announced a
restructuring and their shares gained nearly 40% in the fourth quarter alone.
MCI and GTE also rose in response to the acquisition agreement reached by MCI
and Worldcom.
The technology sector was very volatile during the period. Technology stocks
fared well in the third quarter with a return of 18.74%, yet gave back much of
that gain in the fourth quarter. This had a drag effect on Fund performance at
the close of the year.
Growth of a $10,000 Investment (Class A Shares)
Inception* 7/25/89 10000 10000 10000
10000 9425 10000
10030 9425 10000
10210 9453 10193
10170 9623 10153
9930 9585 9917
10110 9359 10123
Dec 89 10144 9529 10362
9630 9561 9667
9761 9076 9791
9973 9199 10049
9679 9399 9801
10450 9122 10756
Jun 10317 9849 10681
10103 9724 10647
9318 9522 9685
8909 8782 9209
8786 8396 9175
9452 8280 9766
Dec 90 9785 8908 10033
10315 9223 10477
10937 9722 11227
11103 10308 11494
11114 10465 11526
11625 10475 12019
Jun 11008 10956 11470
11532 10375 12007
11689 10868 12289
11511 11017 12088
11658 10849 12249
11100 10988 11755
Dec 91 12489 10462 13098
12510 11771 12855
12679 11791 13019
12235 11950 12764
12426 11532 13135
12331 11712 13206
Jun 11960 11622 13015
12310 11272 13539
12055 11603 13266
12236 11362 13418
12215 11532 13467
12716 11512 13920
Dec 92 12829 11985 14103
12904 12091 14206
12807 12162 14398
13178 12071 14707
12952 12420 14347
13329 12207 14734
Jun 13059 12562 14783
13005 12309 14713
13556 12258 15274
13502 12777 15161
13882 12726 15469
13904 13084 15323
Dec 93 14256 13104 15512
14808 13436 16039
14489 13957 15604
13894 13656 14924
14214 13095 15115
14287 13396 15363
Jun 13931 13466 14987
14375 13130 15478
14905 13548 16111
14607 14048 15716
14743 13767 16070
14038 13895 15485
Dec 94 14265 13231 15714
14557 13444 16121
15115 13720 16750
15639 14246 17244
15946 14740 17753
16505 15029 18463
Jun 16796 15556 18878
17396 15830 19504
17436 16396 19553
17882 16434 20377
17414 16854 20304
18377 16413 21195
Dec 95 18703 17321 21603
19280 17628 22338
19684 18172 22545
19987 18552 22762
20435 18838 23096
20680 19260 23692
Jun 20384 19212 23783
19285 18176 22731
19950 18803 23211
20890 19689 24518
21137 19921 25194
22990 21668 27096
Dec 96 22744 21436 26560
24161 22772 28218
24195 22804 28440
23346 22003 27273
24212 22820 28900
25863 24376 30658
Jun 26564 25037 32031
29082 27363 34575
28115 26498 32652
29389 27709 34442
28065 26451 33291
28598 26953 34833
Dec 97 28998 27331 35432
* Index total returns were calculated from 7/31/89 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 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) 9.16% 27.49% 17.71% 13.46%
Fund (adjusted for the maximum 5.75% sales charge) 2.88% 20.16% 16.33% 12.66%
Standard & Poor's 500 Composite Index* 10.62% 33.36% 20.27% 16.22%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 8.75% 26.60% N/A 22.40%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) 4.46% 21.60% N/A 21.88%++
Standard & Poor's 500 Composite Index* 10.62% 33.36% N/A 27.89%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 8.81% 26.67% N/A 22.41%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) 4.52% 21.67% N/A 21.89%++
Standard & Poor's 500 Composite Index* 10.62% 33.36% N/A 27.89%
++ 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?
The S&P 500 rose 7.56% in the third quarter. Several trends that have been
established over the last several years reversed course during the third
quarter. Cyclicals outperformed consumer stables, value outperformed growth, and
the largest fifty stocks, or "nifty fifty," underperformed the small-and
mid-caps by a wide margin. Throughout the period, we maintained our underweight
in the largest companies due to their excessive valuations. This strategy
benefited Fund performance as companies such as Coca Cola and Gillette,
announced that they would fall short of Wall Street expectations.
The fourth quarter brought a surge in large companies and the "nifty fifty"
resumed market leadership. We continue to view these and a number of the other
strongest performing stocks as overvalued, therefore, we did not hold them in
the Sierra Growth and Income Fund, which caused weaker performance in the fourth
quarter. We believe that this strategy will provide good relative results over
the long term.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
Our investment strategy for the past six months was to keep the Fund sector
neutral with an emphasis on individual stock selection and a highly diversified
selection of value stocks. Stock selection was a positive contributor in the
third quarter. Performance in the consumer stable sector was enhanced by our
position in Ralston Purina (+8.04%). Similarly, our large holdings in
Telecommunications Inc. (TCI) (+37.82%) in the service sector was the largest
positive contributor for the third quarter. The service industry bolstered Fund
performance in the fourth quarter as well. The Fund also gained ground with our
decision to underweight the energy stocks. This provided relative performance
strength due to weakening Asian energy demand, the El Nino winter, OPEC quota
increases, and the continuation of Iraqi oil sales.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
On December 23, 1997, the shareholders of the Sierra Growth and Income Fund
approved a merger of the Fund into the Composite Growth & Income Fund. This
merger is scheduled to be completed on March 20, 1998. The Composite Growth &
Income Fund has a substantially similar investment objective. The primary
objective of this Fund is to provide long-term capital growth by investing in
common stocks and other securities. Current income is a secondary consideration.
The basic strategy of the Composite Fund is to buy stocks of good businesses
when they are at "sale prices." Good businesses generate a high return on
investment and positive cash flows, have a competitive advantage, and have
barriers to entry. Given the current outlook for slower economic growth in 1998,
and the prospects for low inflation, the portfolio manager plans to use this
investment strategy to continue to add value and continue to meet the goals and
objectives of the Fund.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------------
Other 13.05%
Financial Services 12.11%
Technology 11.97%
Health Care 10.57%
Energy 8.47%
Telecommunications 8.00%
Materials & Processing 7.40%
Consumer Discretionary 7.18%
Consumer Staples 6.19%
Retail 5.20%
Treasury 3.98%
Computer Software and Services 2.72%
Producer Durables 1.17%
Autos & Transportation 1.02%
Utilities 0.97%
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
GROWTH FUND (Class A Shares) advanced 16.44% on an average annual total return
basis, or 14.99% adjusted for the maximum sales charge. For the 12-month period
ended December 31, 1997, the Fund had a total return of 9.78%, or 3.47% adjusted
for the maximum sales charge. For additional information, including Class B and
Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
As the year ended, Asia became the focal point of international markets,
injecting volatility into equities across the globe. Domestically, the growing
Asian downturn raised new concerns about corporate earnings, and selling became
pronounced. As a result, the Dow Jones experienced its worst single day point
decline, dropping over 550 points on October 27, 1997. Markets around the world
moved lower, and most established markets actually experienced a true
correction.
Despite the substantial, and at times unsettling fluctuations during the most
recent six month period, the S&P 500 Index gained 10.62% and the Fund gained
4.11%.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Asia's expanding financial crisis engulfed new victims, and South Korea, the
world's eleventh largest economy, became the latest to be infected with the
"Asian Contagion". Selling was particularly intense in the technology sector,
where growing fear of Asian deflationary pressures cast doubt on earnings
prospects. However, domestic and European equities proved resilient and we were
able to use this volatility to our advantage.
Growth of a $10,000 Investment (Class A Shares)
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 19747 18612 22323
21429 20197 24096
20277 19111 22756
Sep 21469 20234 24003
20872 19672 23201
20780 19585 24276
Dec 97 20558 19376 24693
* Index total returns were calculated from 4/30/93 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(April 5, 1993)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 4.11% 09.78% 16.44%
Fund (adjusted for the maximum 5.75% sales charge) 1.88% 03.47% 14.99%
Standard & Poor's 500 Composite Index* 10.62% 33.36% 21.37%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(June 30, 1994)
<S> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 3.72% 08.90% 19.55%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) -1.01% 03.93% 18.99%++
Standard & Poor's 500 Composite Index* 10.62% 33.36% 27.89%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) 3.72% 08.97% 19.56%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) -1.01% 04.00% 19.01%++
Standard & Poor's 500 Composite Index* 10.62% 33.36% 27.89%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
The market's gyrations created some attractive buying opportunities, and we
added or increased our positions in several high-quality technology companies,
such as Microsoft, Intel, and Cisco Systems. These stocks seldom become cheap
relative to their future earnings potential, so we used the opportunity to build
our positions. However, several of our existing technology positions, including
Philips Electronics and Parametric Technology, were off due to general
uncertainty in the technology sector.
During the period, we added to several cable operators. The cable industry is
transitioning into a new period where exciting new services over digital cable,
such as internet and telephony services, offer cable operators better financial
returns and an improving outlook for growth. Meanwhile, capital expenditures are
dropping off, so cash flows are rapidly improving. Our cable stocks, including
Time Warner, Comcast, and Tele-Communications, Inc., all performed extremely
well.
Among our pharmaceutical and life sciences stocks, we continue to own Monsanto
and Warner-Lambert. Monsanto, having divorced itself from its more cyclical
chemical business, is now building on its higher-margin pharmaceutical and
agri-biotech products. By next year, we expect that Monsanto will file with the
FDA for Cox II. This new anti-inflammatory drug promises to be a major
therapeutic breakthrough for arthritis and pain relief, with the potential to
become a blockbuster drug. Although Warner-Lambert enjoyed an incredible run in
1997, the stock price suffered a temporary setback during the quarter. One of
its two new blockbuster drugs (Rezulin) received negative press; however, due to
Rezulin's quality of life improvements for diabetics, we still believe that the
drug could eventually generate over a billion dollars in sales per year. During
the quarter, we increased our positions in Pfizer and Eli Lilly. Both companies
are considered to be among the blue chips of drug manufacturers and boast an
impressive product pipeline. In 1998, both Pfizer and Eli Lilly have new product
launches scheduled, and we are very positive on the prospects for the new
treatments.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Despite some setbacks, we remain confident in the long-term potential for
several other areas of the portfolio. Specifically, we hold positions in
deepwater offshore drilling and oil services stocks; this sector came under
pressure during the quarter. Fears of a global economic slowdown, lower oil and
natural gas prices, and the warmest year on record created a negative backdrop
for the group, which moved away from its recent peaks. Certainly, a further
decline in oil and natural gas prices may curtail exploration and slow
production spending. However, these companies have corrected to a point where
the stock prices appear to have factored in this risk. In addition, demand
remains strong for oil and gas service providers. New technologies developed by
the leading providers have enabled customers to significantly lower extraction
costs, making oil exploration and extraction much more feasible and profitable,
even at current prices.
We also increased our exposure to areas with less economic sensitivity. The
focus remains on a variety of high-quality companies, in which we are very
confident in the sustainability of future earnings. As a result, the portfolio
remains poised to seek strong earnings growth in the coming months.
- -------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- -------------------------------------------------------------------------------
Technology 18.22%
Financial services 13.44%
U.S. Government Agency 11.50%
Health Care 11.32%
Computer Software & Services 10.16%
Telecommunications 7.36%
Materials & Processing 7.32%
Energy 6.71%
Other 4.89%
Commercial Paper 4.22%
Consumer Discretionary 2.92%
Retail 1.08%
Consumer Staples 0.86%
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
EMERGING GROWTH FUND (Class A Shares) has advanced 13.77% on an average annual
total return basis, or 12.87% adjusted for the maximum sales charge. For the
12-month period ended December 31, 1997, the Fund's total return was 12.63%, or
6.15% adjusted for the maximum sales charge. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
During the last six months, we stayed true to our investment discipline and
continued to search for companies with solid fundamentals and rapid earnings
growth potential. With the prospects of slower global economic growth, the
market began to take notice of our companies towards year end. The result of
this was good relative performance in the fourth quarter as the Fund gained some
ground it lost in the early part of 1997.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
Domestic markets generally proved resilient and managed to sidestep much of the
downturn in Asia. Strength in the bond market, where long-term bond yields
dropped below 6%, helped bolster equities. After experiencing a dramatic
sell-off at the end of October, stocks rebounded to recoup most of their losses.
The rebound was fairly limited in its scope, however, and large stocks
outperformed their small and midsize counterparts.
Growth of a $10,000 Investment (Class A Shares)
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 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
20238 19074 25614
20317 19149 27142
22753 21445 28793
Jun 23945 22568 30082
24129 22742 32471
24366 22965 30666
25964 24471 32346
25466 24001 31266
25596 24124 32713
Dec 97 26156 24652 33276
* Index total returns were calculated from 7/31/90 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 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) 9.24% 12.63% 14.52% 13.77%
Fund (adjusted for the maximum 5.75% sales charge) 2.96% 06.15% 13.17% 12.87%
Standard & Poor's 500 Composite Index* 10.62% 33.36% 20.27% 17.60%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) 8.84% 11.78% N/A 17.01%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) 3.84% 06.78% N/A 16.43%++
Standard & Poor's 500 Composite Index* 10.62% 33.36% N/A 27.89%
Class S Shares
Fund (not adjusted for contingent deferred sales charge) 8.84% 11.78% N/A 17.01%
Fund (adjusted for the maximum 5% contingent
deferred sales charge) 3.84% 06.78% N/A 16.43%++
Standard & Poor's 500 Composite Index* 10.62% 33.36% N/A 27.89%
++ Adjusted for the maximum 3% CDSC for shares held since inception.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We had a number of standouts, including Outdoor Systems, Paychex, and Chancellor
Media--each gaining in excess of 40%. The fundamentals for all four companies
remained unchanged, but investors began to take notice of their underlying
growth. We also had several other strong performers that gained over 15%,
including Protective Life, UICI, and Pricellular. In each case, the fundamentals
did not change, but the market began to appreciate the potential of each
company.
We took advantage of market dips to add several positions, including some new
ideas in the technology sector. We are highly selective in this industry because
product cycles tend to be extremely short and earnings can be erratic. The only
technology firms added to the portfolio have very unique business franchises,
such as Cadence Design and Sipex. Cadence, a dominant force in the chip-design
business, was our largest addition during the period. The company boasts an
impressive client list, and continues to gain market share from the competition.
Sipex is pioneering new innovations for analog semiconductors; this type of
business tends to be more stable than digital chips. Additionally, Sipex is well
diversified for a smaller technology company, with no one customer accounting
for more than 2% of its revenues.
During the period, we sold a few positions at a profit. For example, Aspen
Technology, which was sold because it derives almost 20% of its revenues from
Asia, and positions with significant exposure to the region were sold to reduce
risk.
While we had many strong performers, we did encounter a problem with Fastenal.
Based strictly on internal growth, sales were up 38%, but earnings were
negatively impacted by short-term labor expenses. We are carefully monitoring
the situation, and trimmed the stock as a matter of discipline. However,
Fastenal appears poised for strong earnings gains and could potentially top Wall
Street's estimates, so the stock remains in the portfolio.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
We remain positive on our companies, and have begun to see some early
indications of their potential during the fourth quarter. In a less robust
economic environment, companies that can consistently deliver earnings well in
excess of their peer group should be awarded a premium or scarcity value. In our
research process, we try to emphasize companies that can grow profits in any
macroeconomic environment. The key in 1998 will be owning stocks that can
deliver excellent growth when earnings begin to dissipate. This plays to our
strength, because many of our companies have either met or exceeded earnings
estimates for many quarters. Owning companies with superior earnings growth has
always been our focus, and it will remain so going forward.
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------------
Consumer Discretionary 15.67%
Restaurants 15.00%
Financial Services 13.63%
Retail 12.19%
Health Care 7.80%
Other 7.59%
Materials & Processing 4.35%
U.S. Agency 4.23%
Technology 3.68%
Commercial Paper 3.22%
Warrant 2.63%
Consumer Staples 2.61%
Computer Software & Services 2.28%
Telecommunications 1.95%
Autos & Transportation 1.84%
Producer Durables 0.98%
Energy 0.35%
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER:
WARBURG PINCUS ASSET
MANAGEMENT, 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. 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 December 31, 1997, the SIERRA
INTERNATIONAL GROWTH FUND (Class A Shares) has advanced 2.51% on an average
annual total return basis, or 1.70% adjusted for the maximum sales charge. For
the 12-month period ended December 31, 1997, the Fund's total return was -2.49%,
or -8.10% adjusted for the maximum sales charge. For additional information,
including Class B and Class S Share performance, see the accompanying chart.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
Any and all Asian exposure proved a liability during the fourth quarter, given
the plunge in the region's stock markets and currencies. While in most cases our
stock picks fared better than local- market indices, they still suffered
significant losses.
The Fund benefited from both Europe's general strength and from good stock
selection during the period. Notwithstanding the fact that most of these markets
now stand at the upper end of their historical valuation ranges, we continue to
find good investment opportunities, and believe that the backdrop supporting
stocks remains largely favorable. European markets continue to benefit from a
tailwind of falling long-term interest rates, tame inflation, initial
merger and acquisition activity, and a pickup in corporate profits. All of these
provided a cushion against Asian-related concerns and an underpinning for stock
prices during the fourth quarter.
Growth of a $10,000 Investment (Class A Shares)
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 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 13951 13149 15839
14423 13594 16096
13199 12440 14693
13905 13105 15728
12363 11652 14518
12092 11397 14370
Dec 97 12031 11340 14495
* Index total returns were calculated from 7/31/90 to 12/31/97. 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.
The performance of the Class B Shares and Class S Shares will be less than
indicated by the lines shown above for the Class A Shares, based on the
differences in sales loads and fees paid by Class B and Class S shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 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) -13.77% -2.49% 7.61% 2.51%
Fund (adjusted for the maximum 5.75% sales charge) -18.73% -8.10% 6.34% 1.70%
Morgan Stanley Capital International EAFE Index* -08.49% 1.78% 11.37% 5.13%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/97 6 MONTH 1 YEAR 5 YEAR SINCE INCEPTION
------- ------ ------ ---------------
(June 30, 1994)
<S> <C> <C> <C> <C>
CLASS B SHARES
Fund (not adjusted for contingent deferred sales charge) -14.11% -3.19% N/A 1.55%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -17.99% -7.57% N/A 0.85%++
Morgan Stanley Capital International EAFE Index* -08.49% 1.78% N/A 5.05%
CLASS S SHARES
Fund (not adjusted for contingent deferred sales charge) -14.10% -3.26% N/A 1.53%
Fund (adjusted for the maximum 5% contingent deferred
sales charge) -18.00% -7.65% N/A 0.82%++
Morgan Stanley Capital International EAFE Index* -08.49% 1.78% N/A 5.05%
++ 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?
During the third quarter, we continued to trim the Fund's weighting in Spain,
selling stocks as they hit our price targets. In France, we are very encouraged
by the number of companies reporting earnings that surpass expectations. After
rallying strongly in the second quarter, Japan's equity market stumbled in the
third quarter, weighed down by signs of flagging economic growth (most notably,
a sharp contraction in second-quarter GDP). The market was also hurt by concerns
that Southeast Asia's currency turmoil would cut Japan's exports into the region
and by ongoing worries about the country's financial sector. Virtually all
Asian-Pacific markets suffered losses in the dollar terms for the quarter, with
the steepest declines obviously in Southeast Asia.
The fourth quarter saw declines in most foreign markets. The most severe
setbacks were in Asia, which continued to struggle. The region's crisis, which
previously had been confined largely to the relatively small economies of
Southeast Asia, took a decided turn for the worse during the quarter. South
Korea, one of
the world's largest economies, fell victim to the contagion, and its currency
and stock market plunged. The situation worsened when Japan stumbled, hurt by
heightened concerns over its faltering economy and deteriorating confidence in
its financial system. As the quarter closed, the still-evolving situation had
yet to stabilize, despite pledges of substantial monetary support from the
International Monetary and a Japanese government-announced economic-stimulus and
banking-sector-relief package. Not surprisingly, Asia's ripples were felt across
the world's stock markets. Virtually all fell in sympathy, as investors grappled
with a potentially significant slowdown in what has long been the world's
fastest-growing economic region.
WERE THERE ANY SHIFTS IN THE FUND'S PORTFOLIO HOLDINGS/SECTORS THAT HAD A
SIGNIFICANT IMPACT ON FUND PERFORMANCE?
We made few significant changes to the Fund's country allocations in Europe
during the three months of the third quarter. We did establish a presence in
Italy and added two German stocks (Hoechst, a large chemicals and
pharmaceuticals firm and Siemens, Europe's largest electronics-engineering
company).
We made a couple of adjustments in Japan during the quarter. One is the addition
of two banking stocks, Sumitomo Bank and Fuji Bank. Both have put their bad-debt
problems behind them and are among the better-positioned to benefit from
financial-sector deregulation. We also trimmed or sold a number stocks as they
approached or hit our price targets. We scaled back the Fund's exposure to
specific domestically oriented companies whose earnings prospects had dimmed.
Approximately 70% of the Fund's Yen exposure was hedged, a defensive stance
reflecting our view that the Yen would continue to weaken vs. the Dollar.
There were several noteworthy changes made to the portfolio during the fourth
quarter. We trimmed the Fund's Asian exposure, reallocating most of the proceeds
to Europe, where we continue to find good opportunity. We also reduced the
Fund's weighting in Japan. This reflects our growing concern over the lingering
weakness in the Japanese economy. In Europe, we significantly increased our
exposure to France and the United Kingdom.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
Japan's economy, particularly that portion represented by consumption, has
clearly slowed following the government's decision to raise taxes back in April.
But demand for certain goods remains strong, and the health of Japan's labor
market--both employment and incomes are rising--suggests the potential for a
significant upturn in consumption in the months ahead. In addition, the
prospects for Japan's housing market appear positive and while exports to
Southeast Asia will slow over the near to intermediate term, exports to other
countries (e.g., the U.S.) continue. In sum, there does exist grounds for
optimism regarding Japan's economy, despite its recent malaise.
We remain positive on the prospects for Southeast Asia, given the region's high
savings and investment rates and long-term growth potential. But currently, we
are reluctant to increase our weightings. Sentiment remains overwhelmingly
bearish, and given the absence of currency stability, it seems prudent to wait.
Outside Southeast Asia, we still find value in Australia and New Zealand.
Australia benefits from low inflation, falling interest rates and an improving
earnings picture. New Zealand's backdrop is similarly favorable, and valuations
remain attractive. European holdings also should provide stability and have the
opportunity for some strength in relative performance.
- --------------------------------------------------------------------------------
DIVERSIFICATION BY REGION
- --------------------------------------------------------------------------------
Europe 56.41%
Asia 23.93%
Americas 10.75%
Australia/New Zealand 6.09%
Middle East 2.82%
Allocation percentages are based on total investment
value of the portfolio as of 12/31/97.
<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 December 31, 1997, the SIERRA
TARGET MATURITY 2002 FUND advanced 8.61% on an average annual total return
basis, or 7.83% adjusted for the maximum sales charge. For the 12-month period
ended December 31, 1997, the Fund's total return was 8.27%, or 6.10% adjusted
for the maximum sales charge.
WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FUND'S PERFORMANCE
OVER THE SIX-MONTH PERIOD ENDED DECEMBER 31, 1997?
With 90% of its assets in zero coupon Treasury notes maturing in November 2002,
the Fund remains very sensitive to interest rate changes. As interest rates
fall, the Fund's share price increases, and vice versa. For the period, interest
rates declined, pushing up the Fund's net asset value.
WHAT MARKET CONDITIONS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD, AND
WHAT INVESTMENT TECHNIQUES WERE USED TO ADDRESS THOSE CONDITIONS?
According to its investment objective and guidelines, the Fund must maintain the
vast majority of its holdings in zero coupon Treasury notes with a November 2002
maturity. As a result, the Fund's performance is primarily affected by interest
rate trends, not by active management of the portfolio's holdings.
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 portfolio holdings. Consistent with the
Fund's investment objective, the Fund continues to hold 90% of its assets in
zero coupon Treasury notes maturing in November 2002.
WHAT IS OUR INTERMEDIATE- AND LONG-TERM OUTLOOK FOR THE FUND?
The Fund's performance will depend basically on interest rate fluctuations.
Given the objective of the Fund to remain invested in zero coupon Treasury
notes, the Fund's share price will move inversely to interest rates. Our short-
and longer-term outlook for interest rates is positive. Despite strong
fundamentals in the U.S., we believe that the financial crisis in the emerging
markets and Asia, including Japan, will slow U.S. economic growth and keep
inflation bottled up. The global currency devaluations should also lower demand
for U.S. exports and relieve the upward wage pressures in the labor markets.
Growth of a $10,000 Investment (Class A Shares)
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 11399 11632 11686
11497 11732 11787
Jun 11628 11865 11920
11748 11987 12258
Aug 11588 11824 12137
11758 11998 12319
Oct 11950 12194 12532
11950 12194 12596
Dec 97 12084 12330 12728
* Index total returns were calculated from 3/31/95 to 12/31/97. 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 12/31/97 6 MONTH 1 YEAR SINCE INCEPTION
------- ------ ---------------
(March 20, 1995)
<S> <C> <C> <C>
CLASS A SHARES
Fund (not adjusted for sales charge) 6.04% 8.27% 8.61%
Fund (adjusted for the maximum 2% sales charge) 3.92% 6.10% 7.83%
Lehman Brothers U.S. Government Index* 6.78% 9.59% 9.17%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
SIERRA TRUST FUNDS
SEMI-ANNUAL REPORT
----------------------------------------------
For the six months ended December 31, 1997
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
SIERRA TRUST FUNDS
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<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) .... $ 14,620,935 $ 39,056,352 $433,665,625 $226,562,706 $344,780,372
Cash and/or foreign currency (b) ....... 9,720 230,331 169,167 -- 39,003
Net unrealized appreciation of forward
foreign currency contracts (Note 2)
See portfolios of investments ........ -- 715,301 -- -- --
Dividends and/or interest receivable ... 108,459 989,932 3,712,717 5,248,908 5,308,272
Receivable for Fund shares sold ........ 667 -- 28,310 591,612 2,459,685
Receivable for investment securities sold 17,039 -- 3,299 -- --
Variation margin receivable (Note 2) ... -- -- 87,688 -- --
Unamortized organization costs (Note 8) 2,954 -- -- -- --
Receivable from investment advisor ..... 2,727 123 66,894 -- --
Prepaid expenses and other assets ...... 1,107 2,332 5,168 10,998 15,209
------------ ------------ ------------ ------------ ------------
Total Assets ....................... 14,763,608 40,994,371 437,738,868 232,414,224 352,602,541
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Net unrealized depreciation of forward
foreign currency contracts (Note 2)
See portfolios of investments ........ -- -- -- -- --
Options written, at value (Premiums
received $39,035) (Notes 2 and 6)
See portfolios of investments ........ -- 23,822 -- -- --
Payable for dollar roll transactions
(Notes 2 and 6) ...................... -- -- 106,765,171 29,079,215 --
Deferred income for dollar roll
transactions (Notes 2 and 6) ......... -- -- 42,464 2,177 --
Variation margin payable (Note 2) ...... 1,641 -- -- -- --
Payable for Fund shares redeemed ....... 667 28,859 245,685 177,699 113,912
Payable for investment securities
purchased ............................ -- -- -- -- 8,306,757
Investment advisory fee payable (Note 3) -- -- -- 50,755 108,554
Administration fee payable (Note 3) .... 4,442 11,875 99,917 60,406 100,977
Shareholder servicing and distribution
fees payable (Note 5) ................ 4,543 9,934 70,720 55,697 89,684
Dividends payable ...................... 36,398 1,135,494 995,237 1,159,059 530,088
Accrued legal and audit fees ........... 11,433 22,963 21,752 18,724 19,664
Accrued transfer agent fees ............ 8,904 15,779 71,315 58,619 30,844
Accrued Trustees' fees and expenses
(Note 4) ............................. 183 490 4,122 2,492 4,166
Accrued registration and filing fees
payable .............................. -- -- -- -- --
Due to Custodian ....................... -- -- -- 768 --
Accrued expenses and other payables .... 7,096 10,938 84,794 43,872 76,692
------------ ------------ ------------ ------------ ------------
Total Liabilities .................. 75,307 1,260,154 108,401,177 30,709,483 9,381,338
------------ ------------ ------------ ------------ ------------
NET ASSETS ............................. $ 14,688,301 $ 39,734,217 $329,337,691 $201,704,741 $343,221,203
============ ============ ============ ============ ============
- ----------------
(a) INVESTMENTS, AT COST (NOTE 2) ...... $ 14,416,341 $ 40,526,156 $425,335,672 $207,483,020 $315,606,585
(b) CASH AND/OR FOREIGN CURRENCY,
AT COST (NOTE 2) ................... $ 9,720 $ 71,147 $ 169,167 $ -- $ 39,003
</TABLE>
See Notes to Financial Statements.
<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>
$ 25,524,125 $ 66,270,548 $ 166,498,200 $ 408,575,055 $ 307,965,384 $ 235,479,270 $ 118,511,015 $ 2,590,081
104,220 37,465 -- 9,434 1,000,073 41,209 30,632 59,196
-- -- -- -- -- -- 1,410,664 --
482,272 1,104,540 2,795,510 429,270 67,998 110,835 175,789 --
588 606,263 424,488 134,878 69,229 259,386 3,731 --
-- -- -- 57,826 3,123,333 2,534,320 1,342,519 --
-- -- 150,813 -- -- -- -- --
5,886 2,028 -- -- 3,301 -- -- 26,452
-- -- -- -- -- -- -- 4,231
1,255 2,891 8,510 5,216 13,272 11,569 7,101 127
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
26,118,346 68,023,735 169,877,521 409,211,679 312,242,590 238,436,589 121,481,451 2,680,087
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
-- -- -- -- 130,958 187,524 -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
7,971 1,315 167,795 2,401,253 1,774,779 525,783 92,700 --
1,035,727 3,133,861 -- 577,881 27,221,389 1,818,192 581,360 --
4,480 9,535 127,329 234,240 206,780 174,663 99,307 --
7,529 18,870 50,346 110,750 79,315 70,171 39,753 785
8,620 27,049 39,795 82,316 56,481 63,296 19,486 560
48,309 58,239 743,087 -- 197 -- -- --
10,215 11,999 17,036 21,730 18,811 19,270 20,848 8,823
2,064 5,963 16,757 91,116 91,448 124,372 49,604 1,400
311 779 2,077 4,569 3,272 2,895 1,640 32
-- 302 -- 12,894 2,227 -- -- 499
-- -- 794,174 -- -- -- -- --
7,082 16,790 43,106 65,678 57,889 43,391 45,271 13,103
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,132,308 3,284,702 2,001,502 3,602,427 29,643,546 3,029,557 949,969 25,202
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 24,986,038 $ 64,739,033 $ 167,876,019 $ 405,609,252 $ 282,599,044 $ 235,407,032 $ 120,531,482 $ 2,654,885
============= ============= ============= ============= ============= ============= ============= =============
$ 23,285,933 $ 61,870,585 $ 148,652,211 $ 368,208,700 $ 280,061,396 $ 164,192,279 $ 115,272,408 $ 2,507,482
$ 104,220 $ 37,465 $ -- $ 9,434 $ 967,256 $ 41,209 $ 62,825 $ 59,196
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
- -------------------------------------------------------------------------------
SIERRA TRUST FUNDS
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<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) .................... $ 30,522 $ 566,942 $ 188,432 $ 19 $ 19
Accumulated net realized gain/ (loss) on
investments sold, futures contracts,
closed written options, forward foreign
currency contracts and foreign currency
transactions .......................... (1,744,489) (2,860,310) (69,188,275) (31,877,907) (3,505,758)
Net unrealized appreciation/(depreciation)
of investments, foreign currency, written
options, futures contracts, forward
foreign currency contracts and other
assets and liabilities ................ 201,925 (721,443) 8,254,473 19,079,686 29,173,787
Paid-in capital ......................... 16,200,343 42,749,028 390,083,061 214,502,943 317,553,155
------------ ------------ ------------ ------------ ------------
Total Net Assets .................... $ 14,688,301 $ 39,734,217 $329,337,691 $201,704,741 $343,221,203
============ ============ ============ ============ ============
NET ASSETS:
Class A Shares .......................... $ 9,436,038 $ 35,464,590 $223,401,637 $172,779,296 $315,549,776
============ ============ ============ ============ ============
Class B Shares .......................... $ 2,523,216 $ 2,202,276 $ 18,489,548 $ 20,081,356 $ 27,662,778
============ ============ ============ ============ ============
Class S Shares .......................... $ 399,099 $ 580,280 $ 8,084,718 $ 1,878,884 $ 7,491
============ ============ ============ ============ ============
Class I Shares .......................... $ 2,329,948 $ 1,487,071 $ 79,361,788 $ 6,965,205 $ 1,158
============ ============ ============ ============ ============
SHARES OUTSTANDING:
Class A Shares .......................... 4,063,756 16,744,345 22,746,004 15,937,846 27,802,785
============ ============ ============ ============ ============
Class B Shares .......................... 1,086,753 1,039,815 1,882,565 1,852,392 2,437,339
============ ============ ============ ============ ============
Class S Shares .......................... 171,887 273,957 823,151 173,316 660
============ ============ ============ ============ ============
Class I Shares .......................... 1,003,500 702,097 8,080,235 642,518 102
============ ============ ============ ============ ============
CLASS A SHARES:
Net asset value per share of
beneficial interest outstanding* ...... $ 2.32 $ 2.12 $ 9.82 $ 10.84 $ 11.35
============ ============ ============ ============ ============
Maximum sales charge .................... 3.50% 3.50% 4.50% 4.50% 4.50%
Maximum offering price per
share of beneficial interest
outstanding ........................... $ 2.40 $ 2.20 $ 10.28 $ 11.35 $ 11.88
============ ============ ============ ============ ============
CLASS B SHARES:
Net asset value and offering
price per share of beneficial
interest outstanding* ................. $ 2.32 $ 2.12 $ 9.82 $ 10.84 $ 11.35
============ ============ ============ ============ ============
CLASS S SHARES:
Net asset value and offering
price per share of beneficial
interest outstanding* ................. $ 2.32 $ 2.12 $ 9.82 $ 10.84 $ 11.35
============ ============ ============ ============ ============
CLASS I SHARES:
Net asset value, offering and
redemption price per share of
beneficial interest outstanding ....... $ 2.32 $ 2.12 $ 9.82 $ 10.84 $ 11.35
============ ============ ============ ============ ============
- --------------
* Redemption price per share is equal to Net Asset Value less any applicable contingent deferred sales charge.
+ Represents accumulated net investment loss.
</TABLE>
See Notes to Financial Statements.
<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>
$ 14 $ 3,225 $ 9 $ 165,196 $ (1,383,955)+ $ (1,855,018)+ $ (5,461,052) $ (2,592)
(2,558,596) 24,286 (5,162,446) 8,958,692 9,206,948 5,522,220 (5,989,170) (209)
2,238,192 4,399,963 18,097,939 40,366,355 27,806,809 71,099,452 4,598,098 82,599
25,306,428 60,311,559 154,940,517 356,119,009 246,969,242 160,640,378 127,383,606 2,575,087
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 24,986,038 $ 64,739,033 $ 167,876,019 $ 405,609,252 $ 282,599,044 $ 235,407,032 $ 120,531,482 $ 2,654,885
============= ============= ============= ============= ============= ============= ============= =============
$ 19,917,095 $ 43,353,589 $ 161,851,087 $ 176,081,455 $ 104,654,137 $ 164,440,923 $ 39,984,669 $ 2,654,885
============= ============= ============= ============= ============= ============= ============= =============
$ 5,066,094 $ 21,382,598 $ 6,022,379 $ 43,266,884 $ 29,233,474 $ 29,516,294 $ 4,200,930 --
============= ============= ============= ============= ============= ============= =============
$ 1,699 $ 1,727 $ 1,408 $ 13,932,207 $ 13,112,426 $ 6,692,916 $ 8,010,234 --
============= ============= ============= ============= ============= ============= =============
$ 1,150 $ 1,119 $ 1,145 $ 172,328,706 $ 135,599,007 $ 34,756,899 $ 68,335,649 --
============= ============= ============= ============= ============= ============= =============
1,922,448 3,993,831 14,134,141 12,786,855 7,373,742 8,725,098 4,353,768 253,168
============= ============= ============= ============= ============= ============= ============= =============
489,006 1,969,796 525,923 3,203,369 2,125,343 1,612,305 461,607 --
============= ============= ============= ============= ============= ============= =============
164 159 123 1,030,754 952,994 365,562 871,646 --
============= ============= ============= ============= ============= ============= =============
111 103 100 12,483,533 9,511,976 1,836,413 7,478,318 --
============= ============= ============= ============= ============= ============= =============
$ 10.36 $ 10.86 $ 11.45 $ 13.77 $ 14.19 $ 18.85 $ 9.18 $ 10.49
============= ============= ============= ============= ============= ============= ============= =============
4.50% 4.50% 4.50% 5.75% 5.75% 5.75% 5.75% 2.00%
$ 10.85 $ 11.37 $ 11.99 $ 14.61 $ 15.06 $ 20.00 $ 9.74 $ 10.70
============= ============= ============= ============= ============= ============= ============= =============
$ 10.36 $ 10.86 $ 11.45 $ 13.51 $ 13.75 $ 18.31 $ 9.10 --
============= ============= ============= ============= ============= ============= =============
$ 10.36 $ 10.86 $ 11.45 $ 13.52 $ 13.76 $ 18.31 $ 9.19 --
============= ============= ============= ============= ============= ============= =============
$ 10.36 $ 10.86 $ 11.45 $ 13.80 $ 14.26 $ 18.93 $ 9.14 --
============= ============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHORT TERM SHORT TERM
HIGH GLOBAL U.S. CORPORATE CALIFORNIA
QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
BOND FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends ............................... $ -- $ -- $ -- $ -- $ --
Foreign withholding tax on dividend income -- -- -- -- --
Interest ................................ 607,451 1,813,944 12,409,123 8,515,802 10,816,617
Fee income (Note 6) ..................... -- -- 881,760 278,370 --
------------ ------------ ------------ ------------ ------------
Total investment income ............. 607,451 1,813,944 13,290,883 8,794,172 10,816,617
------------ ------------ ------------ ------------ ------------
EXPENSES:
Investment advisory fee (Note 3) ........ 42,211 146,718 976,325 699,840 949,279
Administration fee (Note 3) ............. 29,548 79,002 621,298 376,837 604,087
Custodian fees .......................... 2,578 7,880 24,404 4,186 4,843
Legal and audit fees .................... 8,940 20,143 29,808 22,101 27,179
Trustees' fees and expenses (Note 4) .... 1,228 1,877 9,238 5,968 9,129
Amortization of organization costs
(Note 8) .............................. 1,773 -- -- -- --
Registration and filing fees ............ 11,283 9,942 7,977 7,821 7,028
Transfer agent fees ..................... 12,165 25,303 116,831 98,112 48,228
Other ................................... 221 5,943 74,994 38,108 61,903
------------ ------------ ------------ ------------ ------------
Subtotal .............................. 109,947 296,808 1,860,875 1,252,973 1,711,676
Shareholder servicing and distribution
fees (Note 5):
Class A Shares ........................ 13,794 50,594 302,400 231,085 398,130
Class B Shares ........................ 14,001 11,515 98,119 103,663 133,402
Class S Shares ........................ 2,363 3,154 43,563 10,041 37
Interest expense (Note 6) ............... -- -- 190,850 -- --
Fees waived and/or expenses absorbed
by investment advisor (Note 3) ........ (54,848) (149,171) (1,120,702) (319,695) (405,826)
------------ ------------ ------------ ------------ ------------
Subtotal ............................ 85,257 212,900 1,375,105 1,278,067 1,837,419
Fees reduced by credits allowed by
the custodian (Note 3) ................ -- (578) (486) (2,019) (4,843)
------------ ------------ ------------ ------------ ------------
Net expenses ........................ 85,257 212,322 1,374,619 1,276,048 1,832,576
------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME/(LOSS) ............ 522,194 1,601,622 11,916,264 7,518,124 8,984,041
------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
(Notes 2 and 6):
Realized gain/(loss) from:
Security transactions ................. (21,407) (2,224,446) 7,027,094 1,418,532 2,683,337
Forward foreign currency contracts and
foreign currency transactions ....... -- 1,147,786 -- -- --
Futures contracts ..................... (85,626) -- (3,054,403) -- 2,037,132
Written options ....................... -- 275,876 -- -- --
Net unrealized appreciation/
(depreciation) of:
Securities ............................ 103,478 (74,678) 4,839,759 9,512,108 8,541,473
Forward foreign currency contracts .... -- 214,712 -- -- --
Foreign currency, written options,
futures contracts and other assets
and liabilities ..................... 12,323 (455) 540,644 -- --
------------ ------------ ------------ ------------ ------------
Net Realized and Unrealized Gain/
(Loss) on Investments ................... 8,768 (661,205) 9,353,094 10,930,640 13,261,942
------------ ------------ ------------ ------------ ------------
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS ...... $ 530,962 $ 940,417 $ 21,269,358 $ 18,448,764 $ 22,245,983
============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<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>
$ -- $ -- $ -- $ 2,843,742 $ 654,436 $ 451,766 $ 1,060,520 $ --
-- -- -- -- (1,689) (24,422) (72,750) --
762,628 1,736,104 5,768,566 193,974 512,733 184,787 274,880 83,307
-- -- -- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
762,628 1,736,104 5,768,566 3,037,716 1,165,480 612,131 1,262,650 83,307
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
73,699 177,786 494,790 1,422,412 1,305,477 1,100,299 664,578 3,375
46,899 113,136 314,866 673,398 502,026 442,686 276,417 4,725
139 407 13,519 13,402 24,887 13,555 46,922 22
10,372 11,144 20,098 30,239 24,668 23,817 22,362 6,092
1,478 2,399 5,094 10,066 7,725 6,959 4,503 908
6,572 812 -- -- 5,809 -- -- 5,878
6,917 2,168 9,470 24,340 10,092 7,835 11,509 4,386
3,380 7,422 26,725 168,630 159,038 228,208 85,815 2,237
7,017 14,611 37,321 45,551 37,537 40,203 22,196 5,795
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
156,473 329,885 921,883 2,388,038 2,077,259 1,863,562 1,134,302 33,418
27,040 53,898 217,318 221,774 137,822 205,212 63,116 3,375
25,733 107,640 30,334 210,694 155,024 148,052 23,783 --
100 9 7 69,228 71,358 39,280 51,698 --
-- -- -- -- -- -- -- --
(67,643) (123,764) (134,558) -- -- -- -- (28,450)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
141,703 367,668 1,034,984 2,889,734 2,441,463 2,256,106 1,272,899 8,343
(139) (407) (10,209) (270) (6,122) (4,349) (455) (16)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
141,564 367,261 1,024,775 2,889,464 2,435,341 2,251,757 1,272,444 8,327
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
621,064 1,368,843 4,743,791 148,252 (1,269,861) (1,639,626) (9,794) 74,980
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
214,126 198,971 851,593 44,802,571 18,874,097 25,705,609 (9,642,384) 14,144
-- -- -- -- 744,932 (245,347) 5,168,405 --
(53,614) 14,414 (224,220) -- -- -- -- --
-- -- 2,075,229 -- -- -- -- --
965,236 1,102,356 1,723,728 (10,729,895) (4,836,551) (2,243,182) (16,474,192) 68,495
-- -- -- -- (426,450) 219,027 (1,336,985) --
-- -- 251,950 -- 35,499 2,519 (45,680) --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,125,748 1,315,741 4,678,280 34,072,676 14,391,527 23,438,626 (22,330,836) 82,639
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 1,746,812 $ 2,684,584 $ 9,422,071 $ 34,220,928 $ 13,121,666 $ 21,799,000 $ (22,340,630) $ 157,619
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<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) ............ $ 522,194 $ 1,601,622 $ 11,916,264 $ 7,518,124 $ 8,984,041
Net realized gain/(loss) on investments
sold, forward foreign currency
contracts, foreign currency
transactions, futures contracts and
closed written options during the
period ................................ (107,033) (800,784) 3,972,691 1,418,532 4,720,469
Net unrealized appreciation/
(depreciation) of investments,
forward foreign currency contracts,
foreign currency, futures contracts,
written options and other assets
and liabilities during the period ..... 115,801 139,579 5,380,403 9,512,108 8,541,473
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in net assets
resulting from operations ............. 530,962 940,417 21,269,358 18,448,764 22,245,983
Distributions to shareholders from:
Net investment income:
Class A Shares ........................ (338,740) (3,823,509) (8,009,162) (6,520,252) (8,413,881)
Class B Shares ........................ (74,767) (221,945) (576,193) (653,300) (603,422)
Class S Shares ........................ (12,681) (59,528) (256,068) (63,098) (340)
Class I Shares ........................ (82,363) (161,900) (2,912,619) (282,149) (70)
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 ........................ (4,264,467) (5,815,627) (41,639,247) (32,159,802) (14,910,696)
Class B Shares ........................ (473,691) 52,457 (2,406,965) (1,938,630) 1,424,702
Class S Shares ........................ (401,383) 155,454 (1,236,577) (342,804) 166
Class I Shares ........................ (424,543) (2,125,772) (4,826,851) (695,918) 31
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in net assets ... (5,541,673) (11,059,953) (40,594,324) (24,207,189) (257,527)
NET ASSETS:
Beginning of year ....................... 20,229,974 50,794,170 369,932,015 225,911,930 343,478,730
------------ ------------ ------------ ------------ ------------
End of period ........................... $ 14,688,301 $ 39,734,217 $329,337,691 $201,704,741 $343,221,203
============ ============ ============ ============ ============
Undistributed net investment
income/(accumulated net investment
loss/ distributions in excess of
net investment income) at
end of period ......................... $ 30,522 $ 566,942 $ 188,432 $ 19 $ 19
============ ============ ============ ============ ============
- --------------
+ Represents accumulated net investment loss.
</TABLE>
See Notes to Financial Statements.
<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>
$ 621,064 $ 1,368,843 $ 4,743,791 $ 148,252 $ (1,269,861) $ (1,639,626) $ (9,794) $ 74,980
160,512 213,385 2,702,602 44,802,571 19,619,029 25,460,262 (4,473,979) 14,144
965,236 1,102,356 1,975,678 (10,729,895) (5,227,502) (2,021,636) (17,856,857) 68,495
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,746,812 2,684,584 9,422,071 34,220,928 13,121,666 21,799,000 (22,340,630) 157,619
(518,928) (966,467) (4,667,392) -- -- -- (2,099,119) (170,982)
(104,578) (402,289) (140,284) -- -- -- (190,051) --
(408) (32) (32) -- -- -- (337,334) --
(28) (26) (31) -- -- -- (4,681,508) --
-- (403,151) -- (34,623,489) (8,274,232) (8,507,941) (1,992,183) (26,467)
-- (200,864) -- (8,942,314) (2,485,038) (372,058) (212,435) --
-- (16) -- (2,914,369) (1,125,283) (1,627,499) (403,997) --
-- (10) -- (30,385,817) (10,259,464) (2,639,418) (4,204,998) --
(3,751,343) (2,291,055) (24,870,556) 26,184,452 (3,677,859) (7,555,763) (7,325,716) (121,153)
(215,825) 166,381 (133,568) 10,549,797 76,646 (488,117) 433,657 --
(28,328) 49 33 1,911,875 (408,442) (1,917,878) (1,753,093) --
29 36 32 48,030,734 13,022,922 (18,665,903) (4,516,968) --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(2,872,597) (1,412,860) (20,389,727) 44,031,797 (9,084) (19,975,577) (49,624,375) (160,983)
27,858,635 66,151,893 188,265,746 361,577,455 282,608,128 255,382,609 170,155,857 2,815,868
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 24,986,038 $ 64,739,033 $ 167,876,019 $ 405,609,252 $ 282,599,044 $ 235,407,032 $ 120,531,482 $ 2,654,885
============= ============= ============= ============= ============= ============= ============= =============
$ 14 $ 3,225 $ 9 $ 165,196 $ (1,383,955)+ $ (1,855,018)+ $ (5,461,052) $ (2,592)
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<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
the 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 asset 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.
</TABLE>
See Notes to Financial Statements.
<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
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY
- -------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<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 .................................. $ 220,364 $ 1,690,934 $ 6,447,527 $ 4,310,499 $ 18,091,696
Issued as reinvestment of dividends ... 245,331 2,369,186 4,789,225 3,310,792 5,315,099
Redeemed .............................. (4,730,162) (9,875,747) (52,875,999) (39,781,093) (38,317,491)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ............... $ (4,264,467) $ (5,815,627) $(41,639,247) $(32,159,802) $(14,910,696)
============ ============ ============ ============ ============
CLASS B:
Sold .................................. $ 26,680 $ 114,695 $ 639,925 $ 631,297 $ 2,840,759
Issued as reinvestment of dividends ... 56,562 178,249 345,426 318,979 425,207
Redeemed .............................. (556,933) (240,487) (3,392,316) (2,888,906) (1,841,264)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ............... $ (473,691) $ 52,457 $ (2,406,965) $ (1,938,630) $ 1,424,702
============ ============ ============ ============ ============
CLASS S:
Sold .................................. $ 1,149 $ 285,341 $ 333,633 $ 102,021 $ --
Issued as reinvestment of dividends ... 8,936 34,728 238,973 51,759 166
Redeemed .............................. (411,468) (164,615) (1,809,183) (496,584) --
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ............... $ (401,383) $ 155,454 $ (1,236,577) $ (342,804) $ 166
============ ============ ============ ============ ============
CLASS I:
Sold .................................. $ 106,059 $ 159,611 $ 5,461,775 $ 1,143,858 $ --
Issued as reinvestment of dividends ... -- -- -- -- 31
Redeemed .............................. (530,602) (2,285,383) (10,288,626) (1,839,776) --
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ............... $ (424,543) $ (2,125,772) $ (4,826,851) $ (695,918) $ 31
============ ============ ============ ============ ============
SHARES
CLASS A:
Sold .................................. 94,593 737,587 663,279 405,442 1,622,240
Issued as reinvestment of dividends ... 105,423 1,092,880 491,804 309,694 474,807
Redeemed .............................. (2,034,336) (4,338,759) (5,449,379) (3,744,019) (3,440,844)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ............... (1,834,320) (2,508,292) (4,294,296) (3,028,883) (1,343,797)
============ ============ ============ ============ ============
CLASS B:
Sold .................................. 11,242 50,029 66,040 59,542 255,403
Issued as reinvestment of dividends ... 24,365 82,449 35,465 29,827 37,939
Redeemed .............................. (239,192) (106,957) (349,314) (272,245) (165,610)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ............... (203,585) 25,521 (247,809) (182,876) 127,732
============ ============ ============ ============ ============
CLASS S:
Sold .................................. 476 124,057 34,489 9,580 --
Issued as reinvestment of dividends ... 3,839 16,051 24,518 4,834 14
Redeemed .............................. (177,157) (72,189) (186,336) (46,873) --
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ............... (172,842) 67,919 (127,329) (32,459) 14
============ ============ ============ ============ ============
CLASS I:
Sold .................................. 45,520 72,990 563,439 108,865 --
Issued as reinvestment of dividends ... -- -- -- -- 3
Redeemed .............................. (227,898) (995,218) (1,050,619) (172,322) --
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ............... (182,378) (922,228) (487,180) (63,457) 3
============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<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>
$ 1,068,955 $ 4,137,466 $ 15,290,515 $137,417,351$ $ 83,320,008 $ 106,973,706 $ 57,129,411 $ 7,717
241,310 1,064,785 2,593,978 33,778,810 8,095,988 8,400,255 4,018,393 196,535
(5,061,608) (7,493,306) (42,755,049) (145,011,709) (95,093,855) (122,929,724) (68,473,520) (325,405)
------------- ------------- -------------- -------------- -------------- -------------- -------------- ------------
$ (3,751,343) $ (2,291,055) $ (24,870,556) $26,184,452$ $ (3,677,859) $ (7,555,763) $ (7,325,716) $ (121,153)
============= ============= ============== ============================= ============== ============== ============
$ 434,492 $ 1,118,510 $ 666,703 $ 15,178,282 $ 7,721,142 $ 6,099,835 $ 770,360 --
69,440 490,775 88,349 8,780,558 2,457,020 1,579,773 390,469 --
(719,757) (1,442,904) (888,620) (13,409,043) (10,101,516) (8,167,725) (727,172) --
------------- ------------- -------------- -------------- -------------- -------------- --------------
$ (215,825) $ 166,381 $ (133,568) $ 10,549,797 $ 76,646 $ (488,117) $ 433,657 --
============= ============= ============== ============== ============== ============== ==============
$ -- $ -- $ -- $ 1,740,977 $ 1,180,389 $ 179,150 $ 239,112 --
323 49 33 2,884,227 1,117,893 370,065 735,597 --
(28,651) -- -- (2,713,329) (2,706,724) (2,467,093) (2,727,802) --
------------- ------------- -------------- -------------- -------------- -------------- --------------
$ (28,328) $ 49 $ 33 $ 1,911,875 $ (408,442) $ (1,917,878) $ (1,753,093) --
============= ============= ============== ============== ============== ============== ==============
$ -- $ -- $ -- $ 58,640,927 $ 23,937,746 $ 1,687,256 $ 6,619,613 --
29 36 32 -- -- -- -- --
-- -- -- (10,610,193) (10,914,824) (20,353,159) (11,136,581) --
------------- ------------- -------------- -------------- -------------- -------------- --------------
$ 29 $ 36 $ 32 $ 48,030,734 $ 13,022,922 $ (18,665,903) $ (4,516,968) --
============= ============= ============== ============== ============== ============== ==============
104,918 380,201 1,353,788 8,212,508 5,347,880 5,585,731 5,464,015 713
23,608 97,961 228,585 2,515,107 590,733 466,702 438,682 18,789
(497,357) (689,474) (3,781,182) (8,531,404) (6,027,150) (6,394,007) (6,425,494) (29,700)
------------- ------------- -------------- -------------- -------------- -------------- -------------- ------------
(368,831) (211,312) (2,198,809) 2,196,211 (88,537) (341,574) (522,797) (10,198)
============= ============= ============== ============================= ============== ============== ============
43,013 102,503 59,270 909,546 500,456 327,614 67,653 --
6,809 45,157 7,764 666,200 184,875 90,322 43,146 --
(70,922) (132,756) (78,862) (807,566) (651,462) (437,193) (65,804) --
------------- ------------- -------------- -------------- -------------- -------------- --------------
(21,100) 14,904 (11,828) 768,180 33,869 (19,257) 44,995 --
============= ============= ============== ============== ============== ============== ==============
-- -- -- 103,510 79,306 9,867 21,258 --
32 4 3 218,668 83,953 21,107 80,569 --
(2,809) -- -- (162,805) (175,942) (132,634) (248,679) --
------------- ------------- -------------- -------------- -------------- -------------- --------------
(2,777) 4 3 159,373 (12,683) (101,660) (146,852) --
============= ============= ============== ============== ============== ============== ==============
-- -- -- 4,267,018 1,715,469 91,107 596,944 --
2 4 2 -- -- -- -- --
-- -- -- (618,008) (702,406) (1,103,068) (1,201,016) --
------------- ------------- -------------- -------------- -------------- -------------- --------------
2 4 2 3,649,010 1,013,063 (1,011,961) (604,072) --
============= ============= ============== ============== ============== ============== ==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- CAPITAL STOCK ACTIVITY (CONTINUED)
- -------------------------------------------------------------------------------
SIERRA TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1997*
<TABLE>
<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>
AMOUNT
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.
</TABLE>
See Notes to Financial Statements.
<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 --
============= ============= ============== ============== ============== ============== ==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
U.S. GOVERNMENT FUND
SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
Cash used for financing activities:
Proceeds from capital shares sold ........... $ 12,874,435
Payments on capital shares redeemed ......... (68,577,554)
------------
Cash used for capital share transactions .... (55,703,119)
Dividends and distributions paid in cash .... (6,483,827)
Net proceeds on dollar roll transactions .... 22,781,963
Net proceeds on reverse repurchase agreements (91,845,942)
Interest paid on reverse repurchase agreements (190,850)
------------
$(131,441,775)
CASH PROVIDED BY OPERATIONS:
Purchases of long-term portfolio securities . (310,887,879)
Net proceeds from sales of short-term
investments ............................... (17,408,160)
Proceeds from sales of long-term portfolio
securities ................................ 450,456,406
Net payments for futures transactions ....... (3,054,403)
Variation margin for futures transactions ... 749,832
------------
119,855,796
------------
Net investment income ....................... 11,916,264
Net change in receivables/payables related to
operations ................................ (321,827)
------------
11,594,437
------------
131,450,233
-------------
Net increase in cash .......................... 8,458
Cash at beginning of period ................... 160,709
-------------
Cash at end of period ......................... $ 169,167
=============
See Notes to Financial Statements.
<PAGE>
CORPORATE INCOME FUND
SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
Cash used for financing activities:
Proceeds from capital shares sold ............ $ 5,623,772
Payments on capital shares redeemed .......... (45,089,764)
------------
Cash used for capital share transactions ..... (39,465,992)
Dividends and distributions paid in cash ..... (3,371,042)
Net payments on dollar roll transactions ..... 331,236
------------
$(42,505,798)
------------
Cash provided by operations:
Purchases of long-term portfolio securities .. $ (7,124,219)
Net purchases of short-term investments ...... (828,454)
Proceeds from sales of long-term portfolio
securities ................................. 42,565,351
------------
34,612,678
------------
Net investment income ........................ 7,518,124
Net change in receivables/payables related to
operations ................................. 374,996
------------
7,893,120 42,505,798
------------
Net change in cash ............................. 0
Cash at beginning of period .................... 0
------------
Cash at end of period .......................... $ 0
============
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
12/31/97 ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94*
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 2.32 $ 2.32 $ 2.35 $ 2.39 $ 2.50
------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.07++ 0.14 0.15++ 0.08 0.09
Net realized and unrealized gain/(loss) on investments .. 0.00# 0.00# (0.03) 0.02 (0.11)
------- ------- -------- -------- --------
Total from investment operations ........................ 0.07 0.14 0.12 0.10 (0.02)
LESS DISTRIBUTIONS:
Dividends from netinvestment income ..................... (0.07) (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 ..................................... (0.07) (0.14) (0.15) (0.14) (0.09)
------- ------- -------- -------- --------
Net asset value, end of period .......................... $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.39
======= ======= ======== ======== ========
TOTAL RETURN+ 3.15% 6.15% 5.05% 4.42% (0.73)%
======= ======= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $ 9,436 $13,685 $ 32,440 $ 43,811 $ 21,771
Ratio of operating expenses to average net assets ....... 0.90%** 0.82% 0.75% 0.75% 0.00%**
Ratio of net investment income to average net assets .... 6.29%** 6.50% 6.22% 6.10% 5.70%**
Portfolio turnover rate ................................. 19% 51% 225% 137% 95%
Ratio of operating expenses to average net assets
without credits allowed by the custodian .............. 0.90%**(a) 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 ................ 1.55%**(a) 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 $ 0.07++(a) $ 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
See notes to financial statements.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------- ------------------------------------------ ----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
---------- -------- -------- -------- ----------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $ 2.32 $ 2.32 $ 2.35 $ 2.39 $ 2.32 $ 2.32 $ 2.35 $ 2.39 $ 2.32 $ 2.32
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income .......... 0.06++ 0.12 0.13++ 0.06 0.06++ 0.12 0.13++ 0.06 0.08++ 0.14
Net realized and
unrealized gain/
(loss) on
investments ..... 0.00# 0.00# (0.03) 0.02 0.00# 0.00# (0.03) 0.02 0.00# 0.00#
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ..... 0.06 0.12 0.10 0.08 0.06 0.12 0.10 0.08 0.08 0.14
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.06) (0.12) (0.13) (0.06) (0.06) (0.12) (0.13) (0.06) (0.08) (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 ... (0.06) (0.12) (0.13) (0.12) (0.06) (0.12) (0.13) (0.12) (0.08) (0.14)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.32 $ 2.32
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 2.76% 5.37% 4.27% 3.64% 2.76% 5.37% 4.27% 3.64% 3.28% 5.94%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE
NET ASSETS/
SUPPLEMENTAL
DATA:
Net assets, end of
period
(in 000's) ...... $2,523 $2,994 $3,437 $3,015 $399 $800 $3,531 $2,303 $2,330 $2,752
Ratio of operating
expenses to
average net
assets .......... 1.65%** 1.57% 1.50% 1.50% 1.65%** 1.57% 1.50% 1.50%** 0.65%** 0.57%**
Ratio of net
investment income
to average net
assets .......... 5.54%** 5.75% 5.47% 5.35% 5.54%** 5.75% 5.47% 5.35% 6.54%** 6.75%**
Portfolio turnover
rate ............ 19% 51% 225% 137% 19% 51% 225% 137% 19% 51%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 1.65%**(a) 1.57%(a) 1.50%(a) N/A 1.65%**(a) 1.57%(a) 1.50%(a) N/A 0.65%**(a) 0.57%**(a)
Ratio of operating
expenses to
average net
assets without
fee waivers,
expenses absorbed
and/or credits
allowed by the
custodian ....... 2.30%**(a) 2.20%(a) 2.17%(a) 2.14% 2.30%**(a) 2.20%(a) 2.17%(a) 2.14% 1.30%**(a) 1.20%**(a)
Net investment
income per share
without fee
waivers, expenses
absorbed and/or
credits allowed
by the custodian $ 0.06++(a) $ 0.11(a) $ 0.11++(a) $ 0.05 $ 0.06++(a) $ 0.11(a) $ 0.11++(a) $ 0.05 $ 0.08++(a) $ 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 includes 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
- -------------------------------------------------------------------------------
SHORT TERM GLOBAL GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .................. $ 2.30 $ 2.29 $ 2.24 $ 2.34 $ 2.48 $ 2.56
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ........ 0.08++ 0.15++ 0.15++ 0.17 0.17 0.19
Net realized and unrealized
gain/ (loss) on investments (0.03) 0.05 0.07 (0.12) (0.14) (0.04)
-------- -------- -------- -------- -------- --------
Total from investment
operations ................. 0.05 0.20 0.22 0.05 0.03 0.15
LESS DISTRIBUTIONS:
Dividends from net investment
income ..................... (0.23) (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 .......... (0.23) (0.19) (0.17) (0.15) (0.17) (0.23
-------- -------- -------- -------- -------- --------
Net asset value, end of
period ..................... $ 2.12 $ 2.30 $ 2.29 $ 2.24 $ 2.34 $ 2.48
======== ======== ======== ======== ======== ========
TOTAL RETURN+ ................ 2.18% 8.86% 10.16% 2.10% 1.10% 6.03%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) ................. $ 35,465 $ 44,256 $ 65,726 $103,986 $220,824 $215,348
Ratio of operating expenses
to average net assets ...... 0.90%** 0.90% 0.85% 0.85% 0.85% 0.73%
Ratio of net investment
income to average net assets 7.13%** 6.46% 6.75% 7.22% 6.87% 7.67%
Portfolio turnover rate ...... 47% 83% 87% 217% 222% 294%
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian ............... 0.90%**(a) 0.90%(a) 0.85%(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 ................... 1.56%**(a) 1.51%(a) 1.47%(a) 1.44% 1.52% 1.55%
Net investment income per
share without fee waivers,
expenses absorbed and/or
credits allowed by the
custodian ................... $ 0.07++(a) $ 0.14++(a) $ 0.14++(a) $ 0.16 $ 0.16 $ 0.17
- ----------------
+ 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 includes 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
- -------------------------------------------------------------------------------
SHORT TERM GLOBAL GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
---------------------------------------------- ------------------------------------------- ---------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- -------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ....... $ 2.30 $ 2.29 $ 2.24 $ 2.34 $ 2.30 $ 2.29 $ 2.24 $ 2.34 $ 2.30 $ 2.29
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income ....... 0.07++ 0.13++ 0.13++ 0.15 0.07++ 0.13++ 0.13++ 0.15 0.08++ 0.14++
Net realized
and unrealized
gain/(loss)
on investments (0.03) 0.05 0.07 (0.12) (0.03) 0.05 0.07 (0.12) (0.03) 0.05
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ... 0.04 0.18 0.20 0.03 0.04 0.18 0.20 0.03 0.05 0.19
LESS DISTRIBUTIONS:
Dividends from
net investment
income........ (0.22) (0.17) (0.14) (0.00)# (0.22) (0.17) (0.14) (0.00)# (0.23) (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 (0.22) (0.17) (0.15) (0.13) (0.22) (0.17) (0.15) (0.13) (0.23) (0.18)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset
value, end
of period ... $ 2.12 $ 2.30 $ 2.29 $ 2.24 $ 2.12 $ 2.30 $ 2.29 $ 2.24 $ 2.12 $ 2.30
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 1.80% 8.05% 9.33% 1.33% 1.80% 8.05% 9.33% 1.33% 2.30% 8.64%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets,
end of
period
(in 000's) ... $2,202 $2,331 $1,594 $1,297 $580 $474 $2,211 $2,286 $1,487 $3,734
Ratio of
operating
expenses to
average net
assets ....... 1.65%** 1.65% 1.60% 1.60% 1.65%** 1.65% 1.60% 1.60% 0.65%** 0.65%**
Ratio of net
investment
income to
average net
assets ....... 6.38** 5.71% 6.00% 6.47% 6.38%** 5.71% 6.00% 6.47% 7.38%** 6.71%**
Portfolio
turnover
rate ......... 47% 83% 87% 217% 47% 83% 87% 217% 47% 83%
Ratio of
operating
expenses to
average net
assets without
credits allowed
by the
custodian..... 1.65%**(a) 1.65%(a) 1.60%(a) N/A 1.65%**(a) 1.65%(a) 1.60%(a) N/A 0.65%**(a) 0.65%**(a)
Ratio of
operating
expenses to
average net
assets without
fee waivers and/
or credits
allowed by the
custodian .... 2.31%**(a) 2.26%(a) 2.22%(a) 2.19% 2.31%**(a) 2.26%(a) 2.22%(a) 2.19% 1.31%**(a) 1.26%**(a)
Net investment
income per
share without
fee waivers
and/or credits
allowed by the
custodian .... $ 0.06++(a) $ 0.12++(a) $ 0.12++(a) $ 0.14 $ 0.06++(a) $ 0.12++(a) $ 0.12++(a) $ 0.14 $ 0.07++(a) $ 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 includes 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
- -------------------------------------------------------------------------------
U.S. GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ...................... $ 9.56 $ 9.41 $ 9.67 $ 9.45 $ 10.65 $ 10.52
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........ 0.32 0.65 0.67 0.70 0.75 0.74
Net realized and unrealized
gain/(loss) on investments .. 0.26 0.15 (0.26) 0.22 (1.21) 0.16
-------- -------- -------- -------- -------- --------
Total from investment
operations .................. 0.58 0.80 0.41 0.92 (0.46) 0.90
LESS DISTRIBUTIONS:
Dividends from net investment
income ...................... (0.32) (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 .......... (0.32) (0.65) (0.67) (0.70) (0.74) (0.77)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period ...................... $ 9.82 $ 9.56 $ 9.41 $ 9.67 $ 9.45 $ 10.65
======== ======== ======== ======== ======== ========
TOTAL RETURN+ 6.18% 8.75% 4.34% 10.17% (4.59)% 8.87%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $223,402 $258,553 $423,282 $459,968 $666,566 $842,277
Ratio of operating expenses
to average net assets ....... 0.67%** 0.98% 0.70% 0.95% 1.05% 0.91%
Ratio of net investment
income to average net assets 6.71%** 7.04% 7.34% 7.58% 7.26% 6.98%
Portfolio turnover rate ...... 72% 389% 356% 226% 27% 67%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 0.67%**(a) 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) 1.30%(a) 1.45%(a) 1.59% 1.34% 1.34%
Ratio of operating expenses to
average net assets including
interest expense ............ 0.77%** 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 ................... $ 0.29(a) $ 0.62(a) $ 0.62(a) $ 0.66 $ 0.72 $ 0.70
- ----------------
+ 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 includes 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
- -------------------------------------------------------------------------------
U.S. GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------- ------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
---------- -------- ----- ----- ---------- -------- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $ 9.56 $ 9.41 $ 9.67 $ 9.45 $ 9.56 $ 9.41 $ 9.67 $ 9.45 $ 9.56 $ 9.35
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income .......... 0.29 0.58 0.60 0.63 0.29 0.58 0.60 0.63 0.34 0.63
Net realized and
unrealized gain/
(loss) on
investments ..... 0.26 0.15 (0.26) 0.22 0.26 0.15 (0.26) 0.22 0.26 0.21
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ...... 0.55 0.73 0.34 0.85 0.55 0.73 0.34 0.85 0.60 0.84
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.29) (0.58) (0.60) (0.63) (0.29) (0.58) (0.60) (0.63) (0.34) (0.63)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions ... (0.29) (0.58) (0.60) (0.63) (0.29) (0.58) (0.60) (0.63) (0.34) (0.63)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $ 9.82 $ 9.56 $ 9.41 $ 9.67 $ 9.82 $ 9.56 $ 9.41 $ 9.67 $ 9.82 $ 9.56
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 5.79% 7.94% 3.56% 9.36% 5.79% 7.94% 3.56% 9.36% 6.32% 9.21%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Net assets, end of
period
(in 000's) ...... $18,490 $20,370 $23,688 $10,646 $8,085 $9,088 $35,667 $6,839 $79,362 $81,920
Ratio of operating
expenses to
average net
assets .......... 1.42%** 1.73% 1.45% 1.70% 1.42%** 1.73% 1.45% 1.70% 0.42%** 0.73%**
Ratio of net
investment income
to average net
assets .......... 5.96%** 6.29% 6.59% 6.83% 5.96%** 6.29% 6.59% 6.83% 6.96%** 7.29%**
Portfolio turnover
rate ............ 72% 389% 356% 226% 72% 389% 356% 226% 72% 389%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 1.42%**(a) 1.73%(a) 1.46%(a) N/A 1.42%**(a) 1.73%(a) 1.46%(a) N/A 0.42%**(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) 2.05%(a) 2.20%(a) 2.34% 2.05%**(a) 2.05%(a) 2.20%(a) 2.34% 1.05%**(a) 1.05%**(a)
Ratio of operating
expenses to
average net
assets including
interest expense 1.52%** 1.92% 1.57% 1.97% 1.52%** 1.92% 1.57% 1.97% 0.52%** 0.92%**
Net investment
income per share
without fee
waivers, expenses
absorbed and/or
credits allowed
by the custodian $ 0.26(a) $ 0.55(a) $ 0.55(a) $ 0.59 $ 0.26(a) $ 0.55(a) $ 0.55(a) $ 0.59 $ 0.31(a) $ 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 includes 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
- -------------------------------------------------------------------------------
CORPORATE INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ...................... $ 10.31 $ 10.16 $ 10.52 $ 9.87 $ 11.33 $ 10.52
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........ 0.38 0.76 0.76 0.68 0.80 0.84
Net realized and unrealized
gain/(loss) on investments .. 0.53 0.15 (0.36) 0.78 (1.35) 0.84
-------- -------- -------- -------- -------- --------
Total from investment
operations .................. 0.91 0.91 0.40 1.46 (0.55) 1.68
LESS DISTRIBUTIONS:
Dividends from net investment
income ...................... (0.38) (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 .......... (0.38) (0.76) (0.76) (0.81) (0.91) (0.87)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period ...................... $ 10.84 $ 10.31 $ 10.16 $ 10.52 $ 9.87 $ 11.33
======== ======== ======== ======== ======== ========
TOTAL RETURN+ 8.91% 9.23% 3.81% 15.57% (5.32)% 16.64%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $172,779 $195,531 $298,518 $383,642 $472,519 $396,357
Ratio of operating expenses
to average net assets ....... 1.11%** 1.18% 0.95% 0.90% 1.35% 1.24%
Ratio of net investment
income to average net
assets ...................... 7.05%** 7.38% 7.23% 8.26% 7.19% 7.67%
Portfolio turnover rate ...... 3% 20% 25% 55% 30% 37%
Ratio of operating expenses
to average net assets
without credits allowed
by the custodian ............ 1.11%**(a) 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 ................... 1.41%**(a) 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 ............... $ 0.36(a) $ 0.74(a) $ 0.72(a) $ 0.64 $ 0.80 $ 0.82
- ----------------
** 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.
(a) The ratio and per share number includes 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
- -------------------------------------------------------------------------------
CORPORATE INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
----------------------------------------- ------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95*(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
-------- -------- ----- ----- ----------- -------- ----- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $10.31 $10.16 $10.52 $ 9.87 $10.31 $10.16 $10.52 $ 9.87 $10.31 $10.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income .......... 0.34 0.68 0.68 0.61 0.34 0.68 0.68 0.61 0.39 0.73
Net realized and
unrealized gain/
(loss) on
investments ..... 0.53 0.15 (0.36) 0.78 0.53 0.15 (0.36) 0.78 0.53 0.28
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ...... 0.87 0.83 0.32 1.39 0.87 0.83 0.32 1.39 0.92 1.01
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.34) (0.68) (0.68) (0.61) (0.34) (0.68) (0.68) (0.61) (0.39) (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 ... (0.34) (0.68) (0.68) (0.74) (0.34) (0.68) (0.68) (0.74) (0.39) (0.73)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $10.84 $10.31 $10.16 $10.52 $10.84 $10.31 $10.16 $10.52 $10.84 $10.31
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 8.51% 8.41% 3.04% 14.73% 8.51% 8.41% 3.04% 14.73% 9.05% 10.37%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) $20,081 $20,982 $24,606 $15,145 $1,879 $2,121 $12,011 $8,701 $6,965 $7,278
Ratio of operating
expenses to
average net
assets .......... 1.86%** 1.93% 1.70% 1.65% 1.86%** 1.93% 1.70% 1.65% 0.86%** 0.93%**
Ratio of net
investment income
to average net
assets .......... 6.30%** 6.63% 6.48% 7.51% 6.30%** 6.63% 6.48% 7.51% 7.30%** 7.63%**
Portfolio turnover
rate ............ 3% 20% 25% 55% 3% 20% 25% 55% 3% 20%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 1.86%**(a) 1.93%(a) 1.70%(a) N/A 1.86%**(a) 1.93%(a) 1.70%(a) N/A 0.86%**(a) 0.93%**(a)
Ratio of operating
expenses to
average net
assets without
fee waivers and/
or credits
allowed by the
custodian ....... 2.16%**(a) 2.14%(a) 2.13%(a) 2.15% 2.16%**(a) 2.14%(a) 2.13%(a) 2.15% 1.16%**(a) 1.14%**(a)
Net investment
income per share
without fee
waivers and/or
credits allowed
by the custodian $ 0.32(a) $ 0.66(a) $ 0.64(a) $ 0.57 $ 0.32(a) $ 0.66(a) $ 0.64(a) $ 0.57 $ 0.37(a) $ 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 includes 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
- -------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ...................... $ 10.92 $ 10.60 $ 10.53 $ 10.38 $ 11.22 $ 10.45
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net
investment income ........... 0.30++ 0.59 0.60++ 0.61 0.61 0.62
Net realized and unrealized
gain/(loss) on investments .. 0.43 0.32 0.07 0.15 (0.82) 0.77
-------- -------- -------- -------- -------- --------
Total from investment
operations .................. 0.73 0.91 0.67 0.76 (0.21) 1.39
LESS DISTRIBUTIONS:
Dividends from net
investment income ........... (0.30) (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 .......... (0.30) (0.59) (0.60) (0.61) (0.63) (0.62)
-------- -------- -------- -------- -------- --------
Net asset value, end
of period ................... $ 11.35 $ 10.92 $ 10.60 $ 10.53 $ 10.38 $ 11.22
======== ======== ======== ======== ======== ========
TOTAL RETURN+ 6.73% 8.83% 6.40% 7.57% (2.19)% 13.84%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $315,550 $318,251 $372,177 $405,967 $509,223 $511,364
Ratio of operating expenses
to average net assets ....... 1.00%** 0.97% 0.94% 0.85% 0.79% 0.80%
Ratio of net investment
income to average net
assets ...................... 5.26%** 5.51% 5.56% 5.89% 5.45% 5.74%
Portfolio turnover rate ...... 29% 36% 17% 22% 50% 41%
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian ............... 1.00%**(a) 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 ................... 1.24%**(a) 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 ............... $ 0.29++(a) $ 0.56(a) $ 0.56++(a) $ 0.56 $ 0.54 $ 0.56
- ----------------
+ 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------- ------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
---------- -------- ----- ----- ----------- -------- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $10.92 $10.60 $10.53 $10.38 $10.92 $10.60 $10.53 $10.38 $10.92 $10.62
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income .......... 0.25++ 0.51 0.51++ 0.53 0.25++ 0.51 0.51++ 0.53 0.31++ 0.58
Net realized and
unrealized gain
on investments .. 0.43 0.32 0.07 0.15 0.43 0.32 0.07 0.15 0.43 0.30
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ...... 0.68 0.83 0.58 0.68 0.68 0.83 0.58 0.68 0.74 0.88
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.25) (0.51) (0.51) (0.53) (0.25) (0.51) (0.51) (0.53) (0.31) (0.58)
Distributions from
net realized
gains ........... -- -- -- (0.00)# -- -- -- (0.00)# -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions ... (0.25) (0.51) (0.51) (0.53) (0.25) (0.51) (0.51) (0.53) (0.31) (0.58)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $11.35 $10.92 $10.60 $10.53 $11.35 $10.92 $10.60 $10.53 $11.35 $10.92
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 6.33% 8.02% 5.61% 6.78% 6.33% 8.02% 5.61% 6.78% 6.86% 8.49%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period
(in 000's) ...... $27,663 $25,219 $20,543 $7,230 $ 7 $ 7 $ 11 $ 11 $ 1 $ 1
Ratio of operating
expenses to
average net
assets .......... 1.75%** 1.72% 1.69% 1.60% 1.75%** 1.72% 1.69% 1.60% 0.75%** 0.72%**
Ratio of net
investment income
to average net
assets .......... 4.51%** 4.76% 4.81% 5.14% 4.51%** 4.76% 4.81% 5.14% 5.51%** 5.76%**
Portfolio turnover
rate ............ 29% 36% 17% 22% 29% 36% 17% 22% 29% 36%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 1.75%**(a) 1.72%(a) 1.69%(a) N/A 1.75%**(a) 1.72%(a) 1.69%(a) N/A 0.75%**(a) 0.72%**(a)
Ratio of operating
expenses to
average net
assets without
fee waivers and/
or credits
allowed by the
custodian ....... 1.99%**(a) 2.01%(a) 2.04%(a) 2.04% 1.99%**(a) 2.01%(a) 2.04%(a) 2.04% 0.99%**(a) 1.01%**(a)
Net investment
income per share
without fee
waivers and/or
credits allowed
by the custodian $ 0.24++(a) $ 0.48(a) $ 0.47++(a) $ 0.48 $ 0.24++(a) $ 0.48(a) $ 0.47++(a) $ 0.48 $ 0.30++(a) $ 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ......... $ 9.93 $ 9.64 $ 9.43 $ 9.40 $ 10.05 $ 10.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........ 0.25++ 0.49++ 0.50 0.52 0.52 0.00#
Net realized and unrealized
gain/(loss) on investments .. 0.43 0.30 0.21 0.03## (0.65) 0.05
-------- -------- -------- -------- -------- --------
Total from investment
operations .................. 0.68 0.79 0.71 0.55 (0.13) 0.05
LESS DISTRIBUTIONS:
Dividends from net
investment income ........... (0.25) (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 .......... (0.25) (0.50) (0.50) (0.52) (0.52) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.36 $ 9.93 $ 9.64 $ 9.43 $ 9.40 $ 10.05
======== ======== ======== ======== ======== ========
TOTAL RETURN+ 6.87% 8.43% 7.56% 6.01% (1.50)% 0.50%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $ 19,917 $ 22,761 $ 29,821 $ 33,714 $ 38,541 $ 4,837
Ratio of operating expenses
to average net assets ....... 0.91%** 0.82% 0.63% 0.39% 0.00% 0.00%**
Ratio of net investment
income to average net assets 4.78%** 5.01% 5.08% 5.53% 5.09% 0.48%**
Portfolio turnover rate ...... 3% 53% 52% 44% 83% 0%
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian ............... 0.91%**(a) 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 ................... 1.41%**(a) 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 ............... $ 0.22++(a) $ 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
FLORIDA INSURED MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
----------------------------------------- --------------------------------------------- ---------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95*(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- --------- ----- ----- --------- ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $ 9.93 $ 9.64 $ 9.43 $ 9.40 $ 9.93 $ 9.64 $ 9.43 $ 9.40 $ 9.93 $ 9.68
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income .......... 0.21++ 0.42++ 0.42 0.45 0.21++ 0.42++ 0.42 0.45 0.26++ 0.49++
Net realized and
unrealized gain
on investments .. 0.43 0.30 0.21 0.03## 0.43 0.30 0.21 0.03## 0.43 0.26
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ...... 0.64 0.72 0.63 0.48 0.64 0.72 0.63 0.48 0.69 0.75
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.21) (0.43) (0.42) (0.45) (0.21) (0.43) (0.42) (0.45) (0.26) (0.50)
Distributions in
excess of net
investment income -- (0.00)# -- -- -- (0.00)# -- -- -- (0.00)#
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions ... (0.21) (0.43) (0.42) (0.45) (0.21) (0.43) (0.42) (0.45) (0.26) (0.50)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $10.36 $ 9.93 $ 9.64 $ 9.43 $10.36 $ 9.93 $ 9.64 $ 9.43 $10.36 $ 9.93
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 6.47% 7.63% 6.76% 5.23% 6.47% 7.63% 6.76% 5.23% 7.00% 7.88%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period
(in 000's) ...... $5,066 $5,067 $5,428 $3,330 $ 2 $ 29 $ 11 $ 11 $ 1 $ 1
Ratio of operating
expenses to
average net
assets .......... 1.66%** 1.57% 1.38% 1.14% 1.66%** 1.57% 1.38% 1.14% 0.66%** 0.57%**
Ratio of net
investment income
to average net
assets .......... 4.03%** 4.26% 4.33% 4.78% 4.03%** 4.26% 4.33% 4.78% 5.03%** 5.26%**
Portfolio turnover
rate ............ 3% 53% 52% 44% 3% 53% 52% 44% 3% 53%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 1.66%**(a) 1.59%(a) 1.41%(a) N/A 1.66%**(a) 1.59%(a) 1.41%(a) N/A 0.66%**(a) 0.59%**(a)
Ratio of operating
expenses to
average net
assets without
fee waivers,
expenses absorbed
and/or credits
allowed by the
custodian ....... 2.16%**(a) 2.21%(a) 2.21%(a) 2.26% 2.16%**(a) 2.21%(a) 2.21%(a) 2.26% 1.16%**(a) 1.21%**(a)
Net investment
income per share
without fee
waivers, expenses
absorbed and/or
credits allowed
by the custodian $ 0.18++(a) $ 0.36++(a) $0.34(a) $ 0.35 $ 0.18++(a) $ 0.36++(a) $ 0.34(a) $ 0.35 $ 0.23++(a) $ 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/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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
12/31/97 ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94*
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .. $10.74 $10.56 $10.45 $10.10 $10.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . 0.25 0.49++ 0.49 0.50 0.11
Net realized and
unrealized gain on
investments .......... 0.22 0.23 0.15 0.35 0.11##
------ ------ ------ ------ ------
Total from investment
operations ........... 0.47 0.72 0.64 0.85 0.22
LESS DISTRIBUTIONS:
Dividends from net
investment income .... (0.25) (0.49) (0.49) (0.50) (0.11)
Distributions from net
realized gains ....... (0.10) (0.05) (0.04) -- (0.01)
------ ------ ------ ------ ------
Total distributions ... (0.35) (0.54) (0.53) (0.50) (0.12)
------ ------ ------ ------ ------
Net asset value, end of
period ............... $10.86 $10.74 $10.56 $10.45 $10.10
====== ====== ====== ====== ======
TOTAL RETURN+ 4.41% 6.97% 6.25% 8.71% 2.20%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) .... $43,354 $45,157 $54,518 $54,507 $34,147
Ratio of operating
expenses to average
net assets ........... 0.89%** 0.82% 0.73% 0.42% 0.00%**
Ratio of net investment
income to average net
assets ............... 4.48%** 4.61% 4.62% 4.95% 4.25%**
Portfolio turnover rate 5% 29% 27% 13% 17%
Ratio of operating
expenses to average
net assets without
credits allowed by the
custodian ............ 0.89%**(a) 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 ........... 1.27%**(a) 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 ............ $ 0.23(a) $ 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
----------------------------------------- ------------------------------------------ -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 6/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
--------- ----- ----- ----- ---------- ----- ----- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $10.74 $10.56 $10.45 $10.10 $10.74 $10.56 $10.45 $10.10 $10.74 $10.58
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income .......... 0.20 0.41++ 0.41 0.43 0.20 0.41++ 0.41 0.43 0.26 0.49++
Net realized and
unrealized gain
on investments .. 0.22 0.23 0.15 0.35 0.22 0.23 0.15 0.35 0.22 0.21
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ...... 0.42 0.64 0.56 0.78 0.42 0.64 0.56 0.78 0.48 0.70
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.20) (0.41) (0.41) (0.43) (0.20) (0.41) (0.41) (0.43) (0.26) (0.49)
Distributions from
net realized
gains ........... (0.10) (0.05) (0.04) -- (0.10) (0.05) (0.04) -- (0.10) (0.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions ... (0.30) (0.46) (0.45) (0.43) (0.30) (0.46) (0.45) (0.43) (0.36) (0.54)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $10.86 $10.74 $10.56 $10.45 $10.86 $10.74 $10.56 $10.45 $10.86 $10.74
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 4.02% 6.17% 5.46% 7.90% 4.02% 6.17% 5.46% 7.90% 4.54% 6.70%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period
(in 000's) ...... $21,383 $20,992 $20,948 $12,391 $ 2 $ 2 $ 11 $ 11 $ 1 $ 1
Ratio of operating
expenses to
average net
assets .......... 1.64%** 1.57% 1.48% 1.17% 1.64%** 1.57% 1.48% 1.17% 0.64%** 0.57%**
Ratio of net
investment income
to average net
assets .......... 3.73%** 3.86% 3.87% 4.20% 3.73%** 3.86% 3.87% 4.20% 4.73%** 4.86%**
Portfolio turnover
rate ............ 5% 29% 27% 13% 5% 29% 27% 13% 5% 29%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 1.64%**(a) 1.58%(a) 1.50%(a) N/A 1.64%**(a) 1.58%(a) 1.50%(a) N/A 0.64%**(a) 0.58%**(a)
Ratio of operating
expenses to
average net
assets without
fee waivers,
expenses absorbed
and/or credits
allowed by the
custodian ....... 2.02%**(a) 2.06%(a) 2.14%(a) 2.16% 2.02%**(a) 2.06%(a) 2.14%(a) 2.16% 1.02%**(a) 1.06%**(a)
Net investment
income per share
without fee
waivers, expenses
absorbed and/or
credits allowed
by the custodian $ 0.18(a) $0.36++(a) $ 0.34(a) $ 0.33 $ 0.18(a) $ 0.36++(a) $ 0.34(a) $ 0.33 $ 0.24(a) $ 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
NATIONAL MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ...................... $ 11.16 $ 10.83 $ 10.76 $ 10.85 $ 11.65 $ 10.96
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENTOPERATIONS:
Net investment income ........ 0.30 0.61++ 0.61 0.64 0.65 0.67
Net realized and unrealized
gain/(loss) on investments .. 0.29 0.33 0.07 0.01## (0.73) 0.75
-------- -------- -------- -------- -------- --------
Total from investment
operations .................. 0.59 0.94 0.68 0.65 (0.08) 1.42
LESS DISTRIBUTIONS:
Dividends from net investment
income ...................... (0.31) (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 .......... (0.31) (0.61) (0.61) (0.74) (0.72) (0.73)
-------- -------- -------- -------- -------- --------
Net asset value, end
of period ................... $ 11.44 $ 11.16 $ 10.83 $ 10.76 $ 10.85 $ 11.65
======== ======== ======== ======== ======== ========
TOTAL RETURN+ 5.40% 8.91% 6.41% 6.32% (0.90)% 13.41%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $161,851 $182,262 $233,359 $269,033 $354,501 $390,187
Ratio of operating expenses
to average net assets ....... 1.11%** 1.04% 1.04% 0.83% 0.87% 0.86%
Ratio of net investment
income to average net
assets ...................... 5.30%** 5.55% 5.58% 5.97% 5.60% 5.89%
Portfolio turnover rate ...... 21% 28% 25% 23% 44% 83%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 1.12%**(a) 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 ................... 1.27%**(a) 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 ............... $ 0.29(a) $ 0.58++(a) $ 0.58(a) $ 0.59 $ 0.59 $ 0.61
- ----------------
** Annualized.
+ Total return represents aggregate total return for the period 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
NATIONAL MUNICIPAL FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------- ------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- --------- --------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $11.16 $10.83 $10.76 $10.85 $11.16 $10.83 $10.76 $10.85 $11.16 $10.82
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income .......... 0.26 0.53++ 0.53 0.56 0.27 0.53++ 0.53 0.56 0.32 0.60++
Net realized and
unrealized gain
on investments .. 0.29 0.33 0.07 0.01## 0.29 0.33 0.07 0.01## 0.29 0.34
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ...... 0.55 0.86 0.60 0.57 0.56 0.86 0.60 0.57 0.61 0.94
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.26) (0.53) (0.53) (0.56) (0.26) (0.53) (0.53) (0.56) (0.32) (0.60)
Distributions from
net realized
gains ........... -- -- -- (0.01) -- -- -- (0.01) -- --
Distributions in
excess of net
realized gains .. -- -- -- (0.09) -- -- -- (0.09) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions ... (0.26) (0.53) (0.53) (0.66) (0.26) (0.53) (0.53) (0.66) (0.32) (0.60)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $11.45 $11.16 $10.83 $10.76 $11.46 $11.16 $10.83 $10.76 $11.45 $11.16
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 5.00% 8.10% 5.62% 5.54% 5.00% 8.10% 5.62% 5.54% 5.53% 8.87%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period
(in 000's) ...... $6,022 $6,001 $6,800 $4,786 $1 $1 $11 $11 $1 $1
Ratio of operating
expenses to
average net
assets .......... 1.86%** 1.79% 1.79% 1.58% 1.86%** 1.79% 1.79% 1.58% 0.86%** 0.79%**
Ratio of net
investment income
to average net
assets .......... 4.55%** 4.80% 4.83% 5.22% 4.55%** 4.80% 4.83% 5.22% 5.55%** 5.80%**
Portfolio turnover
rate ............ 21% 28% 25% 23% 21% 28% 25% 23% 21% 28%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 1.87%**(a) 1.79%(a) 1.79%(a) N/A 1.87%**(a) 1.79%(a) 1.79%(a) N/A 0.87%**(a) 0.79%**(a)
Ratio of operating
expenses to
average net
assets without
fee waivers and/
or credits
allowed by the
custodian ....... 2.02%**(a) 2.03%(a) 2.04%(a) 2.05% 2.02%**(a) 2.03%(a) 2.04%(a) 2.05% 1.02%**(a) 1.03%**(a)
Net investment
income per share
without fee
waivers
and/or credits
allowed by the
custodian ....... $ 0.25(a) $ 0.50++(a) $ 0.50(a) $ 0.51 $ 0.26(a) $ 0.50++(a) $ 0.50(a) $ 0.51 $ 0.31(a) $ 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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure requirements effective September 1, 1995.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
GROWTH AND INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................... $ 15.93 $ 14.10 $ 12.58 $ 11.30 $ 12.09 $ 11.25
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........ 0.00# 0.04++ 0.08++ 0.13 0.12 0.12
Net realized and unrealized
gain on investments ......... 1.37 3.88 2.51 2.04 0.72 0.91
-------- -------- -------- -------- -------- --------
Total from investment
operations .................. 1.37 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 .............. (3.53) (2.06) (0.99) (0.77) (1.51) (0.07)
-------- -------- -------- -------- -------- --------
Total distributions .......... (3.53) (2.09) (1.07) (0.89) (1.63) (0.19)
-------- -------- -------- -------- -------- --------
Net asset value, end
of period ................... $ 13.77 $ 15.93 $ 14.10 $ 12.58 $ 11.30 $ 12.09
======== ======== ======== ======== ======== ========
TOTAL RETURN+ 9.16% 30.30% 21.36% 20.47% 6.67% 9.20%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $176,081 $168,687 $183,084 $170,177 $125,249 $ 97,873
Ratio of operating expenses to
average net assets .......... 1.49%** 1.53% 1.54% 1.56% 1.50% 1.46%
Ratio of net investment
income to average net
assets ...................... 0.09%** 0.30% 0.60% 1.11% 1.04% 1.01%
Portfolio turnover rate ...... 61% 107% 90% 72% 127% 47%
Ratio of operating expenses to
average net assets without
credits allowed by the
custodian ................... 1.49%**(a) 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 .... 1.49%**(a) 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 ............... $ 0.00#(a) $ 0.04++(a) $ 0.08++(a) $ 0.13 $ 0.11 $ 0.12
Average commission rate
paid(b) ..................... $ 0.0446 $ 0.0476 N/A N/A N/A N/A
- ----------------
** 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 includes 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
- -------------------------------------------------------------------------------
GROWTH AND INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------- ------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- --------- --------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $15.75 $14.03 $12.55 $11.30 $15.75 $14.04 $12.55 $11.30 $15.94 $13.12
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income/(loss) ... (0.03) (0.06)++ (0.02)++ 0.05 (0.02) (0.06)++ (0.02)++ 0.05 0.02 0.07++
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net realized and
unrealized gain
on investments .. 1.32 3.84 2.50 2.04 1.32 3.83 2.51 2.04 1.37 4.87
Total from invest-
ment operations 1.29 3.78 2.48 2.09 1.30 3.77 2.49 2.09 1.39 4.94
LESS DISTRIBUTIONS:
Dividends from net
investment income -- -- (0.01) (0.07) -- -- (0.01) (0.07) -- (0.06)
Distributions from
net realized
gains ........... (3.53) (2.06) (0.99) (0.77) (3.53) (2.06) (0.99) (0.77) (3.53) (2.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions ... (3.53) (2.06) (1.00) (0.84) (3.53) (2.06) (1.00) (0.84) (3.53) (2.12)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $13.51 $15.75 $14.03 $12.55 $13.52 $15.75 $14.04 $12.55 $13.80 $15.94
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 8.75% 29.33% 20.53% 19.67% 8.81% 29.24% 20.51% 19.75% 9.28% 40.42%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) $43,267 $38,357 $23,924 $6,918 $13,932 $13,726 $29,481 $14,368 $172,329 $140,807
Ratio of operating
expenses to
average net
assets .......... 2.24%** 2.28% 2.29% 2.31% 2.24%** 2.28% 2.29% 2.31% 1.24%** 1.28%**
Ratio of net
investment
income/(loss) to
average net
assets .......... (0.66)%** (0.45)% (0.15)% 0.36% (0.66)%** (0.45)% (0.15)% 0.36% 0.34%** 0.55%**
Portfolio turnover
rate ............ 61% 107% 90% 72% 61% 107% 90% 72% 61% 107%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 2.24%**(a) 2.28%(a) 2.29%(a) N/A 2.24%**(a) 2.28%(a) 2.29%(a) N/A 1.24%** 1.28%**(a)
Net investment
income/(loss) per
share without fee
waivers and/or
credits allowed
by the custodian $(0.03)(a) $(0.06)++(a)$(0.02)++(a) N/A $(0.02)(a) $(0.06)++(a)$(0.02)++(a)N/A $ 0.02(a) $ 0.07++(a)
Average commission
rate paid (b) ... $0.0446 $0.0476 N/A N/A $0.0446 $0.0476 N/A N/A $0.0446 $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 includes custodian fees without credits allowed by the custodian as required by amended
disclosure 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
- -------------------------------------------------------------------------------
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ...................... $ 14.90 $ 15.69 $ 14.18 $ 10.73 $ 10.72 $ 10.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) . (0.07) (0.03)++ (0.07)++ 0.05++ (0.02) 0.00#
Net realized and unrealized
gain on investments ......... 0.64 1.58 3.47 3.42 0.03## 0.72
-------- -------- -------- -------- -------- --------
Total from investment
operations .................. 0.57 1.55 3.40 3.47 0.01 0.72
LESS DISTRIBUTIONS:
Dividends from net investment
income ...................... -- -- -- (0.02) -- --
Distributions from net
realized gains .............. (1.28) (2.34) (1.89) (0.00)# -- --
-------- -------- -------- -------- -------- --------
Total distributions .......... (1.28) (2.34) (1.89) (0.02) -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of
period ...................... $ 14.19 $ 14.90 $ 15.69 $ 14.18 $ 10.73 $ 10.72
======== ======== ======== ======== ======== ========
TOTAL RETURN+ 4.11% 10.88% 25.44% 32.33% 0.00% 7.30%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $104,654 $111,187 $179,720 $154,763 $126,808 $ 23,323
Ratio of operating expenses
to average net assets ....... 1.70%** 1.70% 1.70% 1.76% 1.75% 1.44%**
Ratio of net investment
income/(loss) to average
net assets .................. (0.88)%** (0.22)% (0.49)% 0.28% (0.35)% (0.63)%**
Portfolio turnover rate ...... 77% 156% 205% 233% 227% 13%
Ratio of operating expenses
to average net assets
without credits allowed
by the custodian ............ 1.70%**(a) 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) 1.70%(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 ............ $ (0.07)(a) $(0.03)++(a) $(0.07)++(a) $ 0.05++ $ (0.02) $ (0.01)
Average commission rate
paid(b) ..................... $ 0.0041 $ 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 includes custodian fees without credits 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
- -------------------------------------------------------------------------------
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------- ------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- --------- --------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $14.53 $15.47 $14.10 $10.73 $14.54 $15.47 $14.11 $10.73 $14.94 $14.21
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income/(loss) ... (0.12) (0.14)++ (0.19)++ (0.04)++ (0.13) (0.14)++ (0.19)++ (0.04)++ (0.05) 0.00#++
Net realized and
unrealized gain
on investments .. 0.62 1.54 3.45 3.42 0.63 1.55 3.44 3.42 0.65 3.07
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from invest-
ment operations 0.50 1.40 3.26 3.38 0.50 1.41 3.25 3.38 0.60 3.07
LESS DISTRIBUTIONS:
Dividends from net
investment
income .......... -- -- -- (0.01) -- -- -- (0.00)# -- --
Distributions from
net realized
gains ........... (1.28) (2.34) (1.89) (0.00)# (1.28) (2.34) (1.89) (0.00)# (1.28) (2.34)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions (1.28) (2.34) (1.89) (0.01) (1.28) (2.34) (1.89) (0.00) (1.28) (2.34)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period .. $13.75 $14.53 $15.47 $14.10 $13.76 $14.54 $15.47 $14.11 $14.26 $14.94
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 3.72% 9.99% 24.54% 31.46% 3.72% 10.06% 24.54% 31.44% 4.30% 22.73%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) $29,233 $30,397 $25,067 $6,928 $13,112 $14,038 $45,652 $18,730 $135,599 $126,986
Ratio of operating
expenses to
average net
assets .......... 2.45%** 2.45% 2.45% 2.51% 2.45%** 2.45% 2.45% 2.51% 1.45%** 1.45%**
Ratio of net
investment
income/(loss) to
average net
assets .......... (1.63)%** (0.97)% (1.24)% (0.47)% (1.63)%** (0.97)% (1.24)% (0.47)% (0.63)%** 0.03%**
Portfolio turnover
rate ............ 77% 156% 205% 233% 77% 156% 205% 233% 77% 156%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 2.45%**(a) 2.45%(a) 2.46%(a) N/A 2.45%**(a) 2.45%**(a) 2.46%(a) N/A 1.45%**(a) 1.45%**(a)
Net investment
income/(loss) per
share without fee
waivers and/or
credits allowed
by the custodian $(0.12)(a) $(0.14)++(a)$(0.19)++(a) N/A $(0.13)(a) $(0.14)++(a)$(0.19)++(a) N/A $(0.05)(a) $0.00#++(a)
Average commis-
sion rate
paid (b)......... $0.0041 $0.0433 N/A N/A $0.0041 $0.0433 N/A N/A $0.0041 $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 includes 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
- -------------------------------------------------------------------------------
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . $18.28 $20.17 $15.47 $13.02 $13.76 $11.67
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss .. (0.12)++ (0.21)++ (0.19)++ (0.00)++# (0.09) (0.02)
Net realized and
unrealized gain/
(loss) on investments 1.76 (0.18) 5.65 2.77 0.68 2.31
------ ------ ------ ------ ------ ------
Total from investment
operations .......... 1.64 (0.39) 5.46 2.77 0.59 2.29
LESS DISTRIBUTIONS:
Distributions from net
realized gains ...... (1.07) (1.50) (0.76) (0.32) (1.33) (0.20)
------ ------ ------ ------ ------ ------
Total distributions .. (1.07) (1.50) (0.76) (0.32) (1.33) (0.20)
------ ------ ------ ------ ------ ------
Net asset value, end
of period ........... $18.85 $18.28 $20.17 $15.47 $13.02 $13.76
====== ====== ====== ====== ====== ======
TOTAL RETURN+ 9.24% (1.50)% 35.93% 21.54% 3.40% 19.75%
====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) ... $164,441 $165,719 $283,747 $185,722 $124,941 $96,646
Ratio of operating
expenses to average
net assets .......... 1.72%** 1.64% 1.64% 1.68% 1.66% 1.59%
Ratio of net
investment loss to
average net assets .. (1.24)%** (1.17)% (1.02)% (0.31)% (0.68)% (0.32)%
Portfolio turnover
rate ................ 51% 81% 131% 181% 224% 28%
Ratio of operating
expenses to average
net assets without
credits allowed by
the custodian ....... 1.72%**(a) 1.64%(a) 1.65%(a) N/A N/A N/A
Net investment loss
per share without fee
waivers and/or
credits allowed by
the custodian ....... $(0.12)++(a) $(0.21)++(a) $(0.19)++(a) N/A N/A N/A
Average commission
rate paid (b) ....... $0.0353 $0.0330 N/A N/A N/A N/A
- ----------------
** 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 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 includes 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
- -------------------------------------------------------------------------------
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------- ------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- --------- --------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $17.85 $19.88 $15.37 $13.02 $17.85 $19.88 $15.37 $13.02 $18.33 $17.52
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
loss ............ (0.19)++ (0.34)++ (0.32)++ (0.10)++ (0.19)++ (0.34)++ (0.32)++ (0.10)++ (0.10)++ (0.16)++
Net realized and
unrealized gain/
(loss) on
investments ..... 1.72 (0.19) 5.59 2.77 1.72 (0.19) 5.59 2.77 1.77 2.47##
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations ...... 1.53 (0.53) 5.27 2.67 1.53 (0.53) 5.27 2.67 1.67 2.31
LESS DISTRIBUTIONS:
Distributions from
net realized
gains .......... (1.07) (1.50) (0.76) (0.32) (1.07) (1.50) (0.76) (0.32) (1.07) (1.50)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions ... (1.07) (1.50) (0.76) (0.32) (1.07) (1.50) (0.76) (0.32) (1.07) (1.50)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period .... $18.31 $17.85 $19.88 $15.37 $18.31 $17.85 $19.88 $15.37 $18.93 $18.33
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ 8.84% (2.26)% 34.93% 20.69% 8.84% (2.26)% 34.91% 20.76% 9.38% 13.69%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) $29,516 $29,123 $28,920 $10,208 $6,693 $8,341 $43,645 $11,840 $34,757 $52,199
Ratio of operating
expenses to
average net
assets .......... 2.47%** 2.39% 2.39% 2.43% 2.47%** 2.39% 2.39% 2.43% 1.47%** 1.39%**
Ratio of net
investment loss
to average net
assets .......... (1.99)%** (1.92)% (1.77)% (1.06)% (1.99)%** (1.92)% (1.77)% (1.06)% (0.99)%** (0.92)%**
Portfolio turnover
rate ............ 51% 81% 131% 181% 51% 81% 131% 181% 51% 81%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 2.47%**(a) 2.39%(a) 2.40%(a) N/A 2.47%**(a) 2.39%(a) 2.40%(a) N/A 1.47%**(a) 1.39%**(a)
Net investment
loss per share
without credits
allowed by the
custodian ....... $(0.19)++(a)$(0.34)++(a)$(0.32)++(a) N/A $(0.19)++(a)$(0.34)++(a)$(0.32)++(a) N/A $(0.10)++(a)$(0.16)++(a)
Average commis-
sion rate paid (b) $0.0353 $0.0330 N/A N/A $0.0353 $0.0330 N/A N/A $0.0353 $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 of
sales and redemptions of Fund shares.
(a) The ratio and per share number includes 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
- -------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
12/31/97 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95 06/30/94 06/30/93
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................... $ 11.85 $ 10.49 $ 9.78 $ 10.74 $ 9.80 $ 8.82
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) . (0.00)++ 0.04++ 0.05++ (0.11)++ 0.06 0.07
Net realized and unrealized
gain/(loss) on investments .. (1.64) 1.55 1.21 (0.31) 1.15 0.94
-------- -------- -------- -------- -------- --------
Total from investment
operations .................. (1.64) 1.59 1.26 (0.42) 1.21 1.01
LESS DISTRIBUTIONS:
Dividends from net investment
income ...................... (0.53) (0.13) (0.05) (0.04) (0.02) (0.03)
Distributions in excess of
net investment income ....... -- -- (0.04) -- -- --
Distributions from net
realized gains .............. (0.50) (0.10) (0.46) (0.44) (0.25) --
Distributions in excess of
net realized gains .......... -- -- -- (0.06) -- --
-------- -------- -------- -------- -------- --------
Total distributions .......... (1.03) (0.23) (0.55) (0.54) (0.27) (0.03)
-------- -------- -------- -------- -------- --------
Net asset value, end
of period ................... $ 9.18 $ 11.85 $ 10.49 $ 9.78 $ 10.74 $ 9.80
======== ======== ======== ======== ======== ========
TOTAL RETURN+ (13.77)% 15.50% 13.16% (4.01)% 12.39% 11.51%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) .................. $ 39,985 $ 57,776 $116,254 $ 91,763 $127,764 $ 56,962
Ratio of operating expenses
to average net assets ....... 1.69%** 1.65% 1.77% 1.69% 1.69% 1.80%
Ratio of net investment
income to average net assets (0.09)%** 0.35% 0.46% 0.62% 0.54% 1.07%
Portfolio turnover rate ...... 41% 67% 125% 81% 44% 63%
Ratio of operating expenses
to average net assets
without credits allowed by
the custodian ............... 1.69%**(a) 1.65%(a) 1.77%(a) N/A N/A N/A
Net investment income/(loss)
per share without credits
allowed by the custodian .... $(0.00)++(a) $ 0.04++(a) $ 0.05++(a) N/A N/A N/A
Average commission
rate paid(b) ................ $ 0.0185 $ 0.0057 N/A N/A N/A N/A
- ----------------
** 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 includes 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
- -------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS S SHARES CLASS I SHARES
------------------------------------------- ------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR ENDED YEAR YEAR YEAR ENDED PERIOD
12/31/97 ENDED ENDED ENDED 12/31/97 ENDED ENDED ENDED 12/31/97 ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97 06/30/96 06/30/95* (UNAUDITED) 06/30/97*
----------- -------- -------- --------- --------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $11.70 $10.39 $ 9.73 $10.74 $11.77 $10.38 $ 9.73 $10.74 $11.82 $ 9.88
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income/(loss) ... (0.05)++ (0.04)++ (0.03)++ (0.17)++ (0.05)++ (0.04)++ (0.03)++ (0.17)++ 0.01++ 0.06++
Net realized and
unrealized gain/
(loss) on
investments ..... (1.60) 1.53 1.21 (0.31) (1.61) 1.53 1.20 (0.31) (1.63) 2.15
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from invest-
ment operations . (1.65) 1.49 1.18 (0.48) (1.66) 1.49 1.17 (0.48) (1.62) 2.21
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.45) (0.08) (0.02) (0.03) (0.42) -- (0.02) (0.03) (0.56) (0.17)
Distributions in
excess of net
investment income -- -- (0.04) -- -- -- (0.04) -- -- --
Distributions from
net realized
gains ........... (0.50) (0.10) (0.46) (0.44) (0.50) (0.10) (0.46) (0.44) (0.50) (0.10)
Distributions in
excess of net
realized gains .. -- -- -- (0.06) -- -- -- (0.06) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions ... (0.95) (0.18) (0.52) (0.53) (0.92) (0.10) (0.52) (0.53) (1.06) (0.27)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $ 9.10 $11.70 $10.39 $ 9.73 $ 9.19 $11.77 $10.38 $ 9.73 $ 9.14 $11.82
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN+ (14.11)% 14.66% 12.34% (4.61)% (14.10)% 14.61% 12.29% (4.61)% (13.62)% 22.76%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's) $4,201 $4,876 $4,447 $2,268 $8,010 $11,991 $38,900 $11,120 $68,336 $95,512
Ratio of operating
expenses to
average net
assets .......... 2.44%** 2.40% 2.52% 2.44% 2.44%** 2.40% 2.52% 2.44% 1.44%** 1.40%**
Ratio of net
investment
income/(loss) to
average net
assets .......... (0.84)%** (0.40)% (0.29)% (0.13)% (0.84)%** (0.40)% (0.29)% (0.13)% 0.16%** 0.60%**
Portfolio turnover
rate ............ 41% 67% 125% 81% 41% 67% 125% 81% 41% 67%
Ratio of operating
expenses to
average net
assets without
credits allowed
by the custodian 2.44%**(a) 2.40%(a) 2.52%(a) N/A 2.44%**(a) 2.40%(a) 2.52%(a) N/A 1.44%**(a) 1.40%**(a)
Net investment
income/(loss) per
share without
credits allowed
by the custodian $(0.05)++(a)$(0.04)++(a)$(0.03)++(a)N/A $(0.05)++(a)$(0.04)++(a)$(0.03)++(a) N/A $0.01++(a) $0.06++(a)
Average commission
rate paid (b) ... $0.0185 $0.0057 N/A N/A $0.0185 $0.0057 N/A N/A $0.0185 $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 includes 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
- -------------------------------------------------------------------------------
TARGET MATURITY 2002 FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
12/31/97 ENDED ENDED ENDED
(UNAUDITED) 06/30/97 06/30/96 06/30/95*
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .. $10.69 $10.72 $10.78 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. 0.31++ 0.62++ 0.63 0.12
Net realized and unrealized gain/(loss)
on investments ....................... 0.33 0.11 (0.30) 0.66
------ ------ ------ ------
Total from investment operations ...... 0.64 0.73 0.33 0.78
LESS DISTRIBUTIONS:
Dividends from net investment income .. (0.73) (0.71) (0.39) --
Distributions from net realized gains . (0.11) (0.05) -- --
------ ------ ------ ------
Total distributions ................... (0.84) (0.76) (0.39) --
------ ------ ------ ------
Net asset value, end of period ........ $10.49 $10.69 $10.72 $10.78
====== ====== ====== ======
TOTAL RETURN+ 6.04% 6.95% 2.91% 7.80%
====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .. $2,655 $2,816 $3,125 $2,626
Ratio of operating expenses to average
net assets ........................... 0.62%** 0.64% 0.62% 0.74%**
Ratio of net investment income to
average net assets ................... 5.55%** 5.80% 5.66% 5.22%**
Portfolio turnover rate ............... 0% 0% 5% 0%
Ratio of operating expenses to average
net assets without credits allowed by
the custodian ........................ 0.62%**(a) 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 ............. 2.73%**(a) 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 ..... $ 0.19++(a) $ 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 includes 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
DECEMBER 31, 1997 (UNAUDITED)
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ---------- -------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 36.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 2.8%
(Cost $405,943)
$ 374,633 #A01226, Seasoned,
9.500% due 08/01/2016 ............................... $ 405,566
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 9.4%
215,349 #038720, Seasoned,
11.000% due 02/15/2010** ............................ 242,925
53,146 #130183, Seasoned,
11.000% due 05/15/2015** ............................ 60,637
173,098 #131917, Seasoned,
11.000% due 10/15/2015** ............................ 197,497
22,542 #132833, Seasoned,
11.000% due 12/15/2015** ............................ 25,767
72,375 #139704, Seasoned,
11.000% due 11/15/2015** ............................ 82,577
190,645 #140835, Seasoned,
11.000% due 11/15/2015** ............................ 216,556
102,234 #189482, Seasoned,
11.000% due 04/15/2020** ............................ 117,047
287,133 #291375, Seasoned,
11.000% due 08/15/2020** ............................ 329,629
104,492 #377550, Seasoned,
8.000% due 03/15/2012 ............................... 108,312
-----------
Total GNMAs (Cost $1,338,965) ......................... 1,380,947
-----------
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES (ARM) - 14.1%
470,618 Federal Home Loan Mortgage Corporation
(FHLMC), #845988,
7.897% due 11/01/2021+ .............................. 492,751
Federal National Mortgage Association (FNMA):
459,654 #82247, 6.125% due 04/01/2019+ ........................ 459,512
209,713 #124571, 7.641% due 11/01/2022+ ....................... 215,970
247,499 #152205, 7.460% due 01/01/2019+ ....................... 255,543
652,474 #313257, 6.174% due 11/01/2035 ........................ 652,271
-----------
Total ARMs (Cost $2,053,041) .......................... 2,076,047
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 10.3%
360,059 #250235, 7 Year Balloon,
8.500% due 02/01/2002 ............................... 369,463
370,798 #313030, Seasoned,
10.000% due 05/01/2022** ............................ 407,763
696,646 #313641,Seasoned
8.500% due 11/01/2017 ............................... 734,376
-----------
Total FNMAs (Cost $1,502,531) ......................... 1,511,602
-----------
Total U.S. Government Agency
Mortgage-Backed Securities
(Cost $5,300,480) ................................... 5,374,162
-----------
ASSET-BACKED SECURITIES - 15.7%
300,000 Conti-Mortgage Home Equity Loan Trust,
1996-4-A6,
6.710% due 06/15/2014 ............................... 301,967
300,000 Green Tree Financial Corporation:
1995-6-B1,
7.700% due 09/15/2026 ............................... 306,468
300,000 Green Tree Home Equity Loan Trust, 1997-B-A5,
7.150% due 04/15/2027 ............................... 303,843
300,000 H & T Master Trust,
8.430% due 08/15/2002++ ............................. 301,266
Merrill Lynch Mortgage Investors, Inc.:
54,951 1991-B-A, 9.200% due 04/15/2011 ..................... 55,208
337,752 1992-B-A4, 7.850% due 04/15/2012 .................... 339,546
699,032 World Omni Automobile Lease
Securitization, 1996-B,
6.850% due 11/15/2002++ ........................... 702,746
-----------
Total Asset-Backed Securities
(Cost $2,299,852) ................................... 2,311,044
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 17.5%
75,000 Chemical Mortgage Securities Inc.,
1993-1-A4,
7.450% due 02/25/2023 ............................... 75,045
100,427 Countrywide Funding Corporation,
1994-1-A3,
6.250% due 03/25/2024 ............................... 98,858
170,000 1994-C-A5,
6.375% due 03/25/2024 ............................. 168,458
526,902 Federal Home Loan Mortgage Corporation (FHLMC),
P/O, REMIC, #1719-C,
Zero coupon due 04/15/1999 .......................... 503,521
364,990 General Electric Capital Mortgage Association,
1994-27-A1,
6.500% due 07/25/2024 ............................... 363,889
617,840 Norwest Asset Securities Corporation,
1996-5-A13,
7.500% due 11/25/2026 ............................... 627,301
Prudential Home Mortgage Securities:
77,426 1992-47, 7.500% due 01/25/2023 ...................... 77,183
571,038 1993-43-A1,
5.400% due 10/25/2023 ............................. 564,255
91,274 Ryland Acceptance Corporation,
8.950% due 08/20/2019 ............................... 92,415
-----------
Total Collateralized Mortgage Obligations
(Cost $2,545,769)..................................... 2,570,925
-----------
CORPORATE NOTES - 19.0%
400,000 Colonial Realty, Sr. Note,
7.500% due 07/15/2001 ............................... 414,000
400,000 ERP Operating LP,
8.500% due 05/15/1999++ ............................. 411,212
500,000 Federated Department Stores,
6.790% due 07/15/2027 ............................... 513,385
500,000 Sun Communities Inc., Sr. Note,
7.625% due 05/01/2003 ............................... 522,875
Taubman Realty Corporation, MTN:
300,000 7.400% due 06/10/2002 ............................... 312,878
500,000 7.500% due 06/15/2002 ............................... 515,380
100,000 Time Warner Inc.,
7.950% due 02/01/2000 ............................... 103,074
-----------
Total Corporate Notes (Cost $2,698,240) ............... 2,792,804
-----------
COMMERCIAL PAPER - 10.7%
780,000 Ford Motor Company,
6.250% due 01/02/98 ................................. 780,000
792,000 General Electric Capital Corporation:
6.650% due 01/02/98 ................................. 792,000
-----------
Total Commercial Paper (Cost $1,572,000) .............. 1,572,000
-----------
TOTAL INVESTMENTS (COST $14,416,341*) .................. 99.5% 14,620,935
OTHER ASSETS AND LIABILITIES (NET) ..................... 0.5 67,366
----- -----------
NET ASSETS ............................................. 100.0% $14,688,301
===== ===========
- ------
* Aggregate cost for federal tax purposes.
** A portion or all of this security is pledged as collateral
for option 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
7 U.S. Treasury Note, Five Year,
March 1998 ................................ $ (2,669)
=========
- --------------------------------------------------------------------------------
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
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<C> <C> <S> <C>
FOREIGN BONDS AND NOTES - 61.2%
GREAT BRITAIN POUND STERLING NOTE - 21.3%
United Kingdom Treasury Notes,
GBP 1,685,000 6.000% due 08/10/1999 .......................... $ 2,737,955
1,525,000 13.000% due 07/14/2000 ......................... 2,858,159
1,710,000 7.000% due 06/07/2002 .......................... 2,868,973
------------
Total Great British Pound Sterling Bonds
(Cost $8,403,719) .............................. 8,465,087
------------
NEW ZEALAND DOLLAR BONDS - 9.8%
NZD 3,200,000 Government of New Zealand,
10.000% due 03/15/2002 ....................... 2,034,431
3,310,000 Federal National Mortgage Association (FNMA),
Global Note,
7.250% due 06/20/2002 ........................ 1,880,629
------------
Total New Zealand Dollar Bonds (Cost $4,717,896) . 3,915,060
------------
ITALIAN LIRA BONDS - 8.9%
(Cost $3,726,527)
Italian Treasury Bonds:
ITL 6,115,000,000 8.500% due 01/01/1999 ............................ 3,560,458
------------
SWEDISH KRONA BOND - 8.1%
SEK 11,600,000 Kingdom of Sweden,
11.000% due 01/21/1999 ......................... 1,546,705
12,000,000 Statens Bostadfinansier S.B. A.B., Series 114,
10.250% due 05/05/2000 ......................... 1,668,263
------------
Total Swedish Krona Bonds (Cost $3,301,169) ...... 3,214,968
------------
IRISH POUND BOND - 4.8%
(Cost $2,048,050)
IEP 1,310,000 Republic of Ireland,
6.250% due 04/01/1999 .......................... 1,888,761
------------
CANADIAN DOLLAR BONDS - 3.0%
Government of Canada:
CAD 1,170,000 6.500% due 09/01/1998 .......................... 826,585
485,000 6.500% due 08/01/1999 .......................... 345,869
------------
Total Canadian Dollar Bonds (Cost $1,210,233) .... 1,172,454
------------
SPANISH PESETA BOND - 2.7%
(Cost $1,306,096)
ESP 155,000,000 Government of Spain, 11.450% due 08/30/1998 ...... 1,060,430
------------
ARGENTINIAN PESO BOND - 2.6%
ARP 572,000 Republic of Argentina,
8.939% due 09/01/2000+ ......................... 544,006
500,000 Argentine Treasury Bill, Letras Del Tesoro, Zero
Coupon due 03/20/1998 .......................... 490,250
------------
Total Argentinian Peso Bonds (Cost $1,069,488) ... 1,034,256
------------
Total Foreign Bonds and Notes (Cost $25,783,178) . 24,311,474
------------
U.S. TREASURY NOTES - 10.4%
$ 1,300,000 5.125% due 03/31/1998 ............................ 1,299,376
750,000 6.875% due 07/31/1999 ............................ 763,658
2,000,000 6.250% due 04/30/2001 ............................ 2,032,100
------------
Total U.S. Treasury Notes
(Cost $4,083,382) .............................. 4,095,134
------------
ASSET-BACKED SECURITIES - 9.1%
2,198,036 Green Tree Security Mortgage Trust, 1994-A,
6.900% due 02/15/2004 .......................... 2,188,420
10,659 Household Finance Corporation, 1992-2-A3,
5.250% due 10/20/2007 .......................... 10,615
112,584 Merrill Lynch Mortgage Investors, Inc., 1992-B-A4,
7.850% due 04/15/2012 .......................... 113,182
85,190 Old Stone Credit Corporation, 1992-A4,
6.550% due 11/25/2007 .......................... 85,459
1,200,000 The Money Store Home Equity Trust, 1997-C-AF,
6.307% due 08/15/2012 .......................... 1,199,250
------------
Total Asset-Backed Securities (Cost $3,604,583) .. 3,596,926
------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES - 5.0%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 3.0% (Cost $1,157,105)
1,062,137 Pass-through certificates,
10.000% due 01/15/2019-
02/15/2019 ..................................... 1,181,861
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) - 1.0% (Cost $438,151)
430,044 #141461, 7.784%
due 11/01/2021+ ................................ 444,829
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(GNMA II) - 1.0% (Cost $363,827)
346,060 Pass-through certificates,
9.000% due 04/20/2025 .......................... 369,416
------------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost $1,959,083) ................... 1,996,106
------------
INDEXED NOTES - 1.8% (Cost $740,000)
740,000 (Value is directly linked to the Hungarian
Forint),
19.189% due 02/06/1998 ......................... 728,604
------------
TIME DEPOSITS - 1.8%
TRL 46,212,500,000 J.P. Morgan & Company,
81.000% due 01/12/1998 ......................... 222,979
TRL 27,577,500,000 J.P. Morgan & Company,
84.000% due 02/06/1998 ......................... 133,064
ZAR 1,753,693 Banker Trust & Company,
15.660% due 01/12/1998 ......................... 360,360
------------
Total Time Deposits
(Cost $761,405) ................................ 716,403
------------
COMMERCIAL PAPER - 5.9%
358,000 Ford Motor Credit Corporation,
6.250% due 01/02/1998 .......................... 358,000
2,000,000 General Electric Capital Corporation,
6.650% due 01/02/1998 .......................... 2,000,000
------------
Total Commercial Paper
(Cost $2,358,000) .............................. 2,358,000
------------
CORPORATE NOTE - 3.1%
200,000 Nabisco Inc., Industrial
Note, 144A,
6.300% due 08/26/1999 .......................... 200,010
1,000,000 Sun Communities Inc., Sr. Note,
7.625% due 05/01/2003 .......................... 1,045,750
------------
Total Corporate Notes
(Cost $1,197,490) .............................. 1,245,760
------------
EXPIRATION STRIKE
DATE PRICE
---------- ------
PUT OPTIONS PURCHASED ON FOREIGN
CURRENCY - 0.0%# (Cost $39,035)
GBP 1,850,000 Great British Pound
Sterling Put ............. 01/20/1998 $1.609 7,945
------------
TOTAL INVESTMENTS (COST $40,526,156*) ................................... 98.3% 39,056,352
------------
CALL OPTIONS WRITTEN ON FOREIGN
CURRENCY - (0.1)%
(Premiums received $39,035)
GBP 1,850,000 Great British Pound
Sterling Put ............. 01/20/1998 $1.648 (23,822)
------------
OTHER ASSETS AND LIABILITIES (NET) ...................................... 1.8% 701,687
----- ------------
NET ASSETS .............................................................. 100.0% $ 39,734,217
===== ============
- --------------
* Aggregate cost for federal tax purposes.
+ Floating rate security. The interest rate shown reflects the rate
currently in effect.
# Amount represents less than 0.1% of net assets.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
SHORT TERM GLOBAL GOVERNMENT FUND
DECEMBER 31, 1997 (UNAUDITED)
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
---------- ------------------------- ---------- ---------- ---------------
01/05/1998 ITL 5,600,000,000 3,165,581 3,185,800 $ (20,219)
01/05/1998 DEM 6,000,000 3,335,477 3,352,648 (17,171)
01/05/1998 GBP 2,350,000 3,859,615 3,896,418 (36,803)
01/23/1998 TRL 28,850,200,000 132,726 134,000 (1,274)
01/23/1998 DEM 118,885 66,177 68,736 (2,559)
02/17/1998 PLZ 1,014,910 280,593 277,252 3,341
03/23/1998 CAD 1,880,000 1,318,841 1,367,521 (48,680)
06/04/1998 MXN 2,488,083 308,294 285,921 22,373
-----------
$ (100,992)
-----------
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
---------- ------------------------- ---------- ---------- ---------------
01/05/1998 GBP 2,350,000 3,859,615 3,936,015 $ 76,400
01/05/1998 ITL 5,600,000,000 3,165,581 3,263,308 97,727
01/05/1998 DEM 6,000,000 3,335,477 3,412,969 77,492
01/07/1998 NZD 7,000,000 4,067,679 4,361,000 293,321
01/22/1998 SEK 13,700,000 1,726,585 1,804,293 77,708
01/23/1998 DEM 118,885 66,177 67,000 823
01/30/1998 DEM 6,000,000 3,341,287 3,357,582 16,295
01/30/1998 GBP 2,350,000 3,861,683 3,891,600 29,917
01/30/1998 ITL 5,600,000,000 3,164,736 3,184,713 19,977
02/09/1998 IEP 984,249 1,401,301 1,414,858 13,557
02/25/1998 SEK 9,354,600 1,180,026 1,167,865 (12,161)
03/23/1998 CAD 3,680,000 2,581,561 2,692,519 110,958
03/24/1998 CHF 2,849,200 1,968,187 1,982,466 14,279
-----------
$ 816,293
-----------
Net Unrealized Appreciation of Forward Foreign
Currency Contracts ............................ $ 715,301
===========
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
ARP -- Argentinian Peso
CAD -- Canadian Dollar
CHF -- Swiss Franc
DEM -- German Deutsche Mark
ESP -- Spanish Peseta
GBP -- Great Britain Pound Sterling
IEP -- Irish Pound
ITL -- Italian Lira
MXN -- Mexican Peso
NZD -- New Zealand Dollar
PLZ -- Polish Zloty
SEK -- Swedish Krona
TRL -- Turkish Lira
ZAR -- South African Rand
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
U.S. GOVERNMENT FUND
DECEMBER 31, 1997 (UNAUDITED)
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 86.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 51.4%
$ 2,527,000 5.500% due 11/15/2020 ............................. $ 2,436,963
22,629,478 6.500% due 02/01/2011-10/01/2025 .................. 22,738,419
1,946,607 7.000% due 07/01/2024-2/01/2026 ................... 1,973,373
34,417,175 7.500% due 05/01/2010-10/01/2012 .................. 35,371,741
3,464,609 8.500% due 04/01/2019 ............................. 3,630,737
1,049,848 8.750% due 01/01/2013 ............................. 1,104,776
1,779,273 9.000% due 12/01/2008-08/01/2022 .................. 1,904,240
703,996 9.500% due 06/01/2016-05/01/2017 .................. 756,556
95,300,000 TBA, GOLD,
7.500% due 04/01/2012 ........................... 97,801,625
1,500,000 TBA, GOLD,
6.500% due 10/14/2027 ........................... 1,481,250
------------
Total FHLMCs (Cost $167,762,544) .................. 169,199,680
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 28.7%
7,250,000 7.000% due 12/07/2027 ............................. 7,313,438
72,292,902 7.500% due 12/15/2022-12/15/2023 .................. 74,255,680
7,535,876 9.000% due 10/15/2008-06/15/2022 .................. 8,165,786
4,334,065 9.500% due 04/15/2016-12/20/2020 .................. 4,959,108
------------
Total GNMAs (Cost $92,404,797) .................... 94,694,012
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 6.5%
36,751 5.500% due 02/01/2009 ............................. 35,911
14,566,591 7.000% due 06/01/2010-06/01/2012 .................. 14,793,268
4,932,124 8.000% due 05/01/2022-01/01/2025 .................. 5,150,025
765,167 8.500% due 02/01/2023-09/01/2025 .................. 803,136
487,926 9.000% due 06/01/2016-06/01/2021 .................. 525,173
------------
Total FNMAs (Cost $20,805,561) .................... 21,307,513
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(GNMA II) - 0.3% (Cost $1,190,237)
1,166,993 9.500% due 02/20/2017-03/20/2021 .................. 996,362
------------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost $282,163,139) .................. 286,197,567
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 7.3%
Federal National Mortgage Association (FNMA),
REMIC, Pass-through certificates:
4,000,000 Trust 89-18, Class-C,
9.500% due 04/25/2004 ........................... 4,391,240
24,724 Trust 90-133, Class K,
(I/O), 1009.500% due 11/25/2020 ................. 657,194
1,467,971 Trust 92-83, Class X,
7.000% due 02/25/2022 ........................... 1,439,067
5,690,515 Trust 93-162,
Class E, 6.000% due 08/25/2023 .................. 5,445,083
14,862,173 Federal National Mortgage Association (FNMA),
Trust 96-274, Class 1, (P/O), Zero coupon
due 10/01/2025 .................................. 12,219,382
------------
Total Collateralized Mortgage Obligations (Cost
$22,399,444) .................................... 24,151,966
------------
U.S. TREASURY OBLIGATIONS - 32.1%
U.S. TREASURY NOTES - 28.3%
21,200,000 6.375% due 05/15/2000 ............................. 21,518,000
21,400,000 6.375% due 09/30/2001 ............................. 21,841,268
400,000 6.250% due 06/30/2002 ............................. 407,936
30,000,000 7.000% due 07/15/2006 ............................. 32,381,100
4,750,000 6.500% due 10/15/2006 ............................. 4,973,393
350,000 6.250% due 02/15/2007 ............................. 361,155
11,280,000 6.125% due 08/15/2007 ............................. 11,592,005
------------
Total U.S. Treasury Notes
(Cost $91,049,880) .............................. 93,074,857
------------
U.S. TREASURY BONDS - 3.8%
10,150,000 6.250% due 08/15/2023** ........................... 10,454,500
1,888,000 6.625% due 02/15/2027** ........................... 2,049,651
------------
Total U.S. Treasury Bonds
(Cost $11,986,124) .............................. 12,504,151
------------
Total U.S. Treasury Obligations
(Cost $103,036,004) ............................. 105,579,008
------------
DISCOUNT NOTES - 5.4%
6,000,000 Federal Home Loan Bank Discount Note,
due 1/2/98 ...................................... 5,999,042
11,740,000 Federal Home Loan Mortagage Corporation
Discount Note, due 1/2/98 ...................... 11,738,042
------------
Total Discount Notes (Cost $17,737,085) 17,737,084
------------
TOTAL INVESTMENTS (Cost $425,335,672*).................. 131.7% 433,665,625
OTHER ASSETS AND LIABILITIES (NET) ..................... (31.7) (104,327,934)
----- ------------
NET ASSETS ............................................. 100.0% $329,337,691
===== ============
- --------------
*Aggregate cost for federal tax purposes.
**A portion or all of these securities are pledged as collateral for futures
contracts and dollar roll transactions.
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
--------- --------------
FUTURES CONTRACTS - LONG POSITION
194 U.S. Treasury Note, Five Year,
March 1998 ...................................... $ 56,721
199 U.S. Treasury Bond, Thirty Year,
March 1998 ...................................... 45,205
------------
Net Unrealized Appreciation of Futures
Contracts - Long Position ....................... $ 101,926
============
UNREALIZED
(DEPRECIATION)
--------------
FUTURES CONTRACTS - SHORT POSITION
243 U.S. Treasury Note, Ten Year,
March 1998 ...................................... $ (177,406)
============
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
CORPORATE INCOME FUND
DECEMBER 31, 1997 (UNAUDITED)
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
CORPORATE BONDS AND NOTES - 90.0%
MANUFACTURING - 14.7%
$ 4,000,000 Boeing Company, Deb.,
8.750% due 08/15/2021** ........................ $ 5,050,000
3,750,000 Ford Motor Company, Deb.,
8.875% due 01/15/2022 .......................... 4,626,563
8,000,000 General Motors Corporation, Deb.,
9.400% due 07/15/2021 .......................... 10,200,000
7,800,000 Textron Inc., Deb.,
8.750% due 07/01/2022 .......................... 8,648,250
1,000,000 V.F. Corporation, Note,
9.500% due 05/01/2001 .......................... 1,098,750
-------------
29,623,563
-------------
ENERGY - 10.6%
2,850,000 BP America Inc., Guaranteed Deb.,
(British Petroleum Company),
10.000% due 07/01/2018 ......................... 3,024,562
8,700,000 Occidental Petroleum Corporation,
Sr. Deb.,
11.125% due 08/01/2010 ......................... 11,777,625
5,950,000 Phillips Petroleum Company, Deb.,
9.180% due 09/15/2021** ........................ 6,611,938
-------------
21,414,125
-------------
INDUSTRIAL - 10.3%
5,000,000 du Pont (E.I.) de Nemours & Company, Deb.,
8.250% due 01/15/2022** ........................ 5,406,250
6,500,000 Ogden Corporation, Deb.,
9.250% due 03/01/2022 .......................... 7,856,875
6,860,000 Praxair, Inc., Deb.,
8.700% due 07/15/2022 .......................... 7,580,300
-------------
20,843,425
-------------
TRANSPORTATION - 10.3%
3,030,000 Conrail Inc., Deb.,
9.750% due 06/15/2020 .......................... 3,995,813
United Air Lines Inc.:
5,000,000 Equipment Trust certificates,
10.850% due 07/05/2014 ......................... 6,606,250
Pass-through certificates:
3,000,000 9.080% due 10/26/2015 .......................... 3,480,000
5,500,000 9.560% due 10/19/2018 .......................... 6,723,750
-------------
20,805,813
-------------
YANKEE (U.S. DOLLAR DENOMINATED) - 8.7%
8,500,000 Petro-Canada, Deb.,
9.250% due 10/15/2021 .......................... 10,933,124
5,750,000 Trans-Canada Pipeline Corporation, Deb.,
8.500% due 03/20/2023 .......................... 6,619,688
-------------
17,552,812
-------------
FINANCIAL - 8.7%
2,000,000 American General Corporation,
9.625% due 02/01/2018 .......................... 2,097,500
9,000,000 Barclays North American Capital Corporation,
Capital Note, 9.750% due 05/15/2021** .......... 10,316,250
2,000,000 Ford Holdings, Inc., Deb.,
9.375% due 03/01/2020** ........................ 2,545,000
1,000,000 GATX Leasing Corporation, MTN,
10.000% due 03/21/2001 ......................... 1,106,250
1,300,000 Hartford Life Insurance Company,
7.650% due 06/15/2027 .......................... 1,417,000
-------------
17,482,000
-------------
ELECTRIC - 8.6%
5,000,000 Louisiana Power & Light Company, First Mortgage,
8.500% due 07/01/2022 .......................... 5,225,000
5,000,000 Mississippi Power & Light Company, First and
Refundable Mortgage,
8.650% due 01/15/2023 .......................... 5,256,250
2,000,000 Philadelphia Electric Company, First and
Refundable Mortgage, 8.250% due 09/01/2022 ..... 2,082,500
Texas Utilities Electric Company, First Mortgage:
1,200,000 8.875% due 02/01/2022 .......................... 1,336,500
3,000,000 8.750% due 11/01/2023 .......................... 3,326,250
-------------
17,226,500
-------------
REGIONAL BANKS - 7.4%
400,000 Banc One Corporation, Sub. Note,
10.000% due 08/15/2010 ......................... 514,500
1,000,000 Barnett Banks, Florida, Inc., Sub. Note,
10.875% due 03/15/2003 ......................... 1,197,500
1,100,000 First Interstate Bancorp, Sub. Note,
9.125% due 02/01/2004 .......................... 1,251,250
1,000,000 Mellon Financial Company, Sub. Deb.,
9.750% due 06/15/2001 .......................... 1,108,750
8,125,000 NCNB Corporation, Sub. Note,
10.200% due 07/15/2015** ....................... 10,928,125
-------------
15,000,125
-------------
MEDIA - 4.7%
7,760,000 Time Warner Inc., Deb.,
9.150% due 02/01/2023 .......................... 9,544,800
-------------
FOREST PRODUCTS - 3.7%
6,000,000 James River Corporation, Deb.,
9.250% due 11/15/2021 .......................... 7,477,500
-------------
GAS - 1.4%
2,500,000 Panhandle Eastern Pipe Line Company, Deb.,
8.625% due 04/15/2025 .......................... 2,818,750
-------------
RETAIL - 0.9%
1,500,000 May Department Stores Company, Deb.,
9.875% due 06/15/2021** ........................ 1,725,000
-------------
Total Corporate Bonds and Notes
(Cost $163,462,411) ............................ 181,514,413
-------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 15.7%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 8.5%
14,000,000 Commitment to Purchase,
8.000% due 01/01/2027 .......................... 14,455,000
GOLD:
1,745,002 #C00362,
9.000% due 06/01/2024 .......................... 1,856,790
876,458 #C80253,
9.000% due 01/01/2025 .......................... 932,606
-------------
Total FHLMCs (Cost $16,441,593) .................. 17,244,396
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 7.2% (Cost $14,319,375)
$14,000,000 Commitment to Purchase, GOLD,
8.000% due 01/01/2027 .......................... 14,503,125
-------------
Total U.S. Government Agency Mortgage-Backed
Securities (Cost $30,760,968) .................. 31,747,521
-------------
U.S. TREASURY BOND - 3.6% (Cost $7,124,219)
5,000,000 13.750% due 08/15/2004 ........................... 7,165,350
-------------
SHARES
------
INVESTMENT COMPANY SECURITY - 3.0% (Cost $6,135,422)
6,135,422 Lehman Provident Tempfund ........................ 6,135,422
-------------
TOTAL INVESTMENTS (COST $207,483,020*) ................ 112.3% 226,562,706
OTHER ASSETS AND LIABILITIES (NET) .................... (12.3) (24,857,965)
----- -------------
NET ASSETS ............................................ 100.0% $201,704,741
===== =============
- --------------
* 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 payment cycle
MTN -- Medium Term Note
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL FUND
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
MUNICIPAL BONDS AND NOTES - 99.8%
CALIFORNIA - 99.2%
<C> <S> <C>
$ 500,000 Alameda County, Certificate of Participation Refunding and
Capital Projects, (AMBAC Insured),
5.000% due 06/01/2022 .................................. $ 488,750
5,360,000 Alhambra, Improvement Board Act of 1915, Assessment
District No. 1, Public Works, (MBIA Insured),
6.125% due 09/02/2018 .................................. 5,762,000
2,000,000 Anaheim, Public Financing Authority Revenue, Residual
Interest Bond, (MBIA Insured),
6.450% due 12/28/2018 .................................. 2,527,500
1,000,000 Arcadia, Hospital Revenue Authority, (Methodist Hospital),
6.500% due 11/15/2012 .................................. 1,073,750
2,000,000 Barstow Redevelopment Agency, Central Redevelopment
Project, Tax Allocation, Series A, (MBIA Insured),
7.000% due 09/01/2014 .................................. 2,490,000
1,000,000 Brawley, Wastewater Treatment Facility, (AMBAC Insured),
5.000% due 07/01/2016 .................................. 1,001,250
1,000,000 Brea & Olinda, Unified School District, (High School
Refinancing Project), COP, Series A, (FSA Insured),
6.000% due 08/01/2009 .................................. 1,071,250
4,795,000 California Educational Facilities Authority Revenue,
(College of Osteopathic Medicine),
7.500% due 06/01/2018 .................................. 5,586,175
1,000,000 California Health Facilities Authority Revenue, (Kaiser
Permanent), Series A,
7.000% due 12/01/2010 .................................. 1,091,250
California Housing Finance Agency, Home Mortgage, AMT:
Series A, (Multi-family Housing III), (MBIA Insured):
1,000,000 5.850% due 08/01/2017 .................................. 1,052,500
3,000,000 5.950% due 08/01/2028 .................................. 3,142,500
Series B, (MBIA Insured):
1,000,000 6.000% due 08/01/2016 .................................. 1,058,750
2,000,000 6.100% due 02/01/2028 .................................. 2,117,500
1,000,000 Series N, (FHA/VA Insured),
6.375% due 02/01/2027 .................................. 1,067,500
California Housing Finance Agency, Home Ownership &
Improvement Revenue:
1,500,000 Series 1988G, AMT,
8.150% due 08/01/2019 .................................. 1,542,285
2,310,000 Series 1989D, AMT,
7.500% due 08/01/2020 .................................. 2,411,063
5,010,000 Series C, AMT,
6.650% due 08/01/2014 .................................. 5,423,325
665,000 Series D, AMT, (MBIA Insured),
6.300% due 08/01/2014 .................................. 709,056
2,630,000 Series F, AMT, (MBIA Insured),
6.800% due 08/01/2014 .................................. 2,893,000
3,385,000 Series F-2,
7.250% due 08/01/2016 .................................. 3,698,113
California, Pollution Control Financing Authority, PCR:
1,000,000 (Keller Canyon Landfill Company Project), AMT,
6.875% due 11/01/2027 .................................. 1,107,500
2,500,000 (San Diego Gas and Electric), Series A, AMT, (AMBAC
Insured),
5.850% due 06/01/2021 .................................. 2,609,375
(Southern California Edison Company):
4,000,000 Series A, AMT,
6.000% due 07/01/2027 .................................. 4,210,000
13,250,000 Series B, AMT, (AMBAC Insured),
6.400% due 12/01/2024 .................................. 14,475,625
5,000,000 Series B, AMT, (FGIC Insured),
6.400% due 12/01/2024 .................................. 5,462,500
6,565,000 (Tracy Material Recovery Project), Series A, AMT,
6.600% due 08/01/2014 .................................. 6,704,506
5,000,000 (Waste Management), Series A, AMT,
7.150% due 02/01/2011 .................................. 5,468,750
3,100,000 (Waste Removal Systems), Series A, AMT,
7.100% due 11/01/2009 .................................. 3,270,500
2,250,000 California Residential Efficiency Financing Authority,
(First Resource Efficiency), (AMBAC Insured),
6.000% due 07/01/2017 .................................. 2,413,125
1,420,000 California Rural Home Mortgage Finance Authority, SFMR,
Mortgage-Backed Securities Project, Series A-2, AMT,
(GNMA Insured),
7.950% due 12/01/2024 .................................. 1,629,450
California State, GO:
4,160,000 Series BH,
5.200% due 12/01/2011 .................................. 4,186,000
2,100,000 Series BH,
5.400% due 12/01/2015 .................................. 2,113,125
2,760,000 Series BH,
5.400% due 12/01/2016 .................................. 2,777,250
1,400,000 Series BH,
5.500% due 12/01/2024 .................................. 1,403,500
7,750,000 6.000% due 10/01/2014 .................................. 8,282,813
California Statewide Communities Development Authority,
COP:
3,000,000 (Cedars-Sinai Medical Center), (MBIA Insured),
6.500% due 08/01/2012 .................................. 3,480,000
735,000 (Childrens Campus),
6.500% due 09/01/2022 .................................. 791,044
1,000,000 (Huntington Valley Hospital),
5.350% due 12/01/2017 .................................. 1,013,750
20,000,000 (United Airlines),
5.625% due 10/01/2034 .................................. 20,125,000
5,715,000 Carson, Improvement Board Act of 1915, GO,
7.375% due 09/02/2022 .................................. 6,200,775
4,675,000 Chula Vista, IDR, (San Diego Gas and Electric), Series A,
AMT, (AMBAC Insured),
6.400% due 12/01/2027 .................................. 5,107,438
2,950,000 Chula Vista, Redevelopment Agency, Tax Allocation Revenue,
8.625% due 09/01/2024 .................................. 3,613,750
Contra Costa County, Finance Authority, Tax Allocation
Revenue, Series A:
1,595,000 7.000% due 08/01/2009 .................................. 1,754,500
1,000,000 7.100% due 08/01/2022 .................................. 1,100,000
7,749,000 Contra Costa County, MFHR, (Crescent Park Apartments
Project), Series B, (GNMA Insured),
7.800% due 06/20/2034 .................................. 8,746,684
2,500,000 Davis, Public Facilities Finance Authority, Mace Ranch
Area, Series A,
6.6000% due 09/01/2025 ................................. 2,640,625
3,245,000 Delano, COP, Series A,
9.250% due 01/01/2022 .................................. 3,784,481
1,985,000 El Cajon, COP, (Helix View Nursing Hospital), Limited
Obligation, Series 1990, AMT, (FHA Insured),
7.750% due 02/01/2029 .................................. 2,018,963
1,000,000 El Centro, Redevelopment Agency, Tax Allocation, (El
Centro Redevelopment Project), (MBIA Insured),
6.375% due 11/01/2017 .................................. 1,122,500
4,840,000 Fairfield Housing Authority Revenue, Mortgage Revenue,
(Creekside Estates Project),
7.875% due 02/01/2015 .................................. 5,051,750
5,000,000 Foothill Eastern Transportation Corridor Agency, Series A,
Zero coupon due 01/01/2008 ............................. 3,631,250
Gilroy, Unified School District, COP, (Measure J Capital
Projects), (FSA Insured):
1,135,000 6.000% due 09/01/2007 .................................. 1,262,688
2,000,000 6.250% due 09/01/2012 .................................. 2,205,000
2,000,000 Huntington Park, Public Financing Authority Lease Revenue,
(Waste Water System Project),
6.200% due 10/01/2025 .................................. 2,040,000
1,000,000 Irwindale, Community Redevelopment Agency, (City
Industrial Development Project),
5.000% due 08/01/2017 .................................. 985,000
1,250,000 Kings County, Waste Management Authority, Solid Waste
Revenue, AMT,
7.200% due 10/01/2014 .................................. 1,392,188
1,640,000 Lancaster, Redevelopment Agency Tax Allocation,
(Redevelopment Project #5),
5.000% due 02/01/2014 .................................. 1,629,750
1,500,000 La Verne, Public Financing Authority, Capital Improvement,
7.250% due 09/01/2026 .................................. 1,642,500
Los Angeles, Community Redevelopment Agency, AMT:
1,425,000 5.850% due 12/01/2026 .................................. 1,414,313
3,470,000 COP, (Allright Garage L.A.),
7.550% due 10/01/2008 .................................. 4,007,850
3,490,000 Series C, (AMBAC Insured),
6.750% due 07/01/2014 .................................. 3,808,463
1,000,000 Los Angeles County, Master Refunding Project, Inverse
Floating Rate Note, due 06/01/2015 ..................... 1,200,000
Los Angeles County, MFHR, AMT, (GNMA Insured):
3,000,000 (Park Parthenia Project),
7.400% due 01/20/2022 .................................. 3,076,560
1,000,000 (Ridgecroft Apartments Project), Series E,
6.250% due 09/20/2039 .................................. 1,055,000
Los Angeles County, Residual Interest Bond:
4,200,000 6.600% due 11/01/2011 .................................. 4,641,000
3,740,000 (Edmund D. Edelman Children's Center), COP, (AMBAC
Insured),
6.000% due 04/01/2012 .................................. 3,964,400
11,110,000 (Pension Obligation), COP, (MBIA Insured),
6.900% due 06/30/2008 .................................. 13,429,213
1,395,000 Los Angeles County, Single Family Housing Revenue, Series
B, (GNMA Insured),
7.600% due 08/01/2016 .................................. 1,555,425
455,000 Los Angeles Home Mortgage Revenue, Mortgage-Backed
Securities Project, (GNMA Insured),
8.100% due 05/01/2017 .................................. 514,719
490,000 Los Angeles, SFMR, Program 1990, Issue A, AMT, GNMA
collateralized,
7.550% due 12/01/2023 .................................. 513,888
7,000,000 National City Community Development Revenue, Series A,
(AMBAC Insured),
6.250% due 08/01/2012 .................................. 7,568,750
2,785,000 Needles, Public Utilities Authority Revenue, (Utilities
System Aquisition Project), Series A,
6.500% due 02/01/2022 .................................. 2,913,806
3,500,000 Novato, Special Tax Revenue, (Community Facilities
District),
7.200% due 08/01/2015 .................................. 3,810,625
2,000,000 Oakland, Revenue Bonds, (YMCA East Bay Project),
7.100% due 06/01/2010 .................................. 2,195,000
Oakland, Unified School District:
2,645,000 7.000% due 11/15/2011 .................................. 2,892,969
3,445,000 COP, Energy Retrofit,
6.750% due 11/15/2014 .................................. 3,703,375
4,500,000 Palm Desert, Financing Authority, Tax Allocation Revenue,
(MBIA Insured), (Inverse Floater),
8.355% due 04/01/2022+ ................................. 5,287,500
1,150,000 Palm Springs, Financing Authority, (Convention Center
Project), Series A, (MBIA Insured),
6.750% due 11/01/2021 .................................. 1,263,563
Port Oakland, AMT, (Mitsu Osk Lines Ltd.), Series A:
3,030,000 6.750% due 01/01/2012 .................................. 3,249,675
2,300,000 6.800% due 01/01/2019 .................................. 2,458,125
3,000,000 Rancho, Water District Financing Authority, Residual
Interest Bond, (AMBAC Insured), Pre-refunded,
8.824% due 08/17/2021+ ................................. 3,581,250
2,750,000 Redding, Electrical Systems Revenue, COP, (Inverse
Floater), (MBIA Insured),
8.396% due 07/08/2022+ ................................. 3,822,500
1,000,000 Redondo Beach, Public Financing Authority Revenue, (South
Bay Center Redevelopment Project),
7.125% due 07/01/2026 .................................. 1,120,000
1,500,000 Riverside, School District, Special Project,
7.250% due 09/01/2018 .................................. 1,640,625
6,500,000 Sacramento County, Airport System Revenue, Series 1989,
AMT, (AMBAC Insured),
7.000% due 07/01/2020 .................................. 6,881,875
10,000,000 San Bernardino County, COP, (MBIA Insured), Residual
Interest Bond,
6.950% due 07/01/2016+ ................................. 10,262,500
4,000,000 San Diego County, Residual Interest Bond, COP, Series B,
(MBIA Insured),
8.020% due 04/08/2021+ ................................. 4,915,000
San Diego County, Water Authority Revenue, Series A:
2,160,000 4.750% due 05/01/2018 .................................. 2,054,700
3,300,000 4.750% due 05/01/2020 .................................. 3,126,750
3,000,000 San Francisco, City and County, Airport Commission,
International Airport Revenue, Second Series, Issue 8A,
AMT, (FGIC Insured),
6.250% due 05/01/2020 .................................. 3,225,000
San Francisco, City and County, Multi-family Mortgage
Revenue, Series A, (FNMA Insured):
1,000,000 6.350% due 02/15/2012 .................................. 1,047,500
1,250,000 6.450% due 02/15/2024 .................................. 1,303,125
San Francisco, City and County, Redevelopment Agency,
Lease Revenue, Capital Appreciation, (George R. Moscone
Project):
3,750,000 Zero coupon due 07/01/2011 ............................. 1,870,313
4,250,000 Zero coupon due 07/01/2013 ............................. 1,880,625
270,000 San Francisco, City and County, SFMR, AMT, GNMA and FNMA
Mortgage-Backed Securities Program,
7.450% due 01/01/2024 .................................. 284,175
575,000 San Jose, Airport Revenue Authority, (San Jose Airport),
AMT, (AMBAC Insured), Unrefunded,
7.500% due 03/01/2018 .................................. 589,496
2,415,000 San Jose, Financing Authority Revenue, Series C,
7.000% due 09/02/2015 .................................. 2,466,850
1,000,000 Santa Clara, Improvement Board Act of 1915, Assessment
District 187, Series 1996-1,
7.000% due 09/02/2011 .................................. 1,031,040
3,000,000 Santa Clarita, Community Development Authority,
7.500% due 11/15/2012 .................................. 3,225,000
4,765,000 Santa Rosa, Mortgage Revenue, (Channate Lodge), (FHA
Insured),
6.700% due 12/01/2024 .................................. 5,134,282
2,000,000 Shasta Lake, COP, (FSA Insured),
6.000% due 04/01/2016 .................................. 2,155,000
5,000,000 South Orange County, Public Financing Authority, Special
Tax Revenue, Sr. Lien, Series A, (MBIA Insured),
6.200% due 09/01/2013 .................................. 5,462,500
Southern California, Housing Finance Agency, SFMR, GNMA
and FNMA Mortgage-Backed Securities Program:
1,075,000 Series 1988A, AMT, GNMA collateralized,
8.125% due 02/01/2021 .................................. 1,232,219
1,545,000 Series A,
7.350% due 09/01/2024 .................................. 1,629,975
200,000 Series B,
6.900% due 10/01/2024 .................................. 213,000
55,000 Stockton, Community Facilities Supplemental Tax #90-2,
SFMR, GNMA Mortgage-Backed Securities Program,
(Brookside Estates), AMT,
7.450% due 08/01/2010 .................................. 61,531
2,205,000 Stockton, East Water District, 1990 Project, Series A,
4.750% due 04/01/2017 .................................. 2,205,000
------------
340,607,222
------------
PUERTO RICO - 0.6%
1,768,663 Centro de Recaudaciones de Ingresos Municipales,
6.850% due 10/17/2003 .................................. 1,868,150
------------
Total Municipal Bonds and Notes
(Cost $313,301,585) .................................... 342,475,372
------------
SHORT-TERM MUNICIPAL BONDS - 0.7%
2,300,000 California, Pollution Control Financing Authority, PCR
(Southern California Edison Company), Series A,
2.600% due 02/28/2008 .................................. 2,300,000
5,000 Los Angeles, Regional Airports Improvement, Corporate
Lease Revenue, (Los Angeles International Airport),
5.000% due 12/01/2025+ ................................. 5,000
------------
Total Short-Term Municipal Bonds
(Cost $2,305,000) ...................................... 2,305,000
------------
TOTAL INVESTMENTS (COST $315,606,585*) ....................... 100.5% 344,780,372
OTHER ASSETS AND LIABILITES (NET) ............................ (0.5) (1,559,169)
----- ------------
NET ASSETS ................................................... 100.0% $343,221,203
===== ============
- --------------
* Aggregate cost for federal tax purposes.
+ Floating Rate Security. The interest rate shown reflects the rate currently in effect.
California Municipal Fund had the following insurance concentrations greater
than 10% at December 31, 1997 (as a percentage of net assets):
MBIA 19.1%
AMBAC 15.3%
</TABLE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
FLORIDA INSURED MUNICIPAL FUND
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -------
MUNICIPAL BONDS AND NOTES - 102.2%
FLORIDA - 102.2%
<C> <S> <C>
$1,000,000 Brevard County, School Board Authority, COP, Series B,
(AMBAC Insured),
5.500% due 07/01/2021 .................................... $ 1,032,500
1,200,000 Broward County, Educational Facilities Authority Revenue,
(Nova Southeastern University Project), (CONNIE LEE
Insured),
6.000% due 04/01/2008 .................................... 1,312,500
500,000 Clay County, Housing Finance Authority Revenue, SFMR, Multi-
County Program, GNMA/FNMA Collateral,
5.950% due 10/01/2019 .................................... 527,500
1,000,000 Collier County, Industrial Development Authority, IDR,
(Southern States Utilities Project), AMT,
6.500% due 10/01/2025 .................................... 1,076,250
1,690,000 Dade County, Aviation Revenue, Series B, AMT, (MBIA
Insured),
6.600% due 10/01/2022 .................................... 1,871,675
1,000,000 Dade County, School Board Authority, COP, Series A, (MBIA
Insured),
5.750% due 05/01/2008 .................................... 1,068,750
1,500,000 Escambia County, Health Facilities Revenue, Baptist
Hospital, Series B,
6.000% due 10/01/2014 .................................... 1,578,750
1,000,000 Escambia County, PCR, (Champion International Corporation
Project), AMT,
6.900% due 08/01/2022 .................................... 1,121,250
Florida Housing Finance Agency, AMT:
705,000 SFMR, Series A, (GNMA Insured),
6.650% due 01/01/2024 .................................... 764,925
1,000,000 Spinnaker Cove Apartments, Series G, (AMBAC Insured),
6.500% due 07/01/2036 .................................... 1,078,750
1,000,000 Florida State Turnpike Authority, Turnpike Revenue,
Department of Transportation, Series A, (FGIC Insured),
5.000% due 07/01/2016 .................................... 993,750
1,445,000 Hillsborough County, Capital Improvement Revenue, Criminal
Justice Facilities, (FGIC Insured),
5.250% due 08/01/2016 .................................... 1,466,675
1,000,000 Hillsborough County, PCR, (Tampa Electric Company Project),
(MBIA Insured),
6.250% due 12/01/2034 .................................... 1,111,250
1,500,000 Hillsborough County, School Board Authority, COP, (MBIA
Insured),
6.000% due 07/01/2012 .................................... 1,636,875
1,250,000 Jacksonville, Water & Sewer Revenue, (United Water Project),
AMT, (AMBAC Insured),
6.350% due 08/01/2025 .................................... 1,390,625
980,000 Manatee County, Housing Finance Authority, SFMR, Sub Series
4, AMT, (GNMA/FNMA Collateral),
6.875% due 11/01/2026 .................................... 1,103,725
800,000 Melbourne, Airport Revenue, AMT, (MBIA Insured),
6.250% due 10/01/2018 .................................... 895,000
1,000,000 Orange County, Housing Finance Authority, MFHR, (Hands Inc.
Project), Series A,
8.000% due 10/01/2025 .................................... 1,118,750
1,000,000 Orlando & Orange County, Expressway Authority, Expressway
Revenue, Jr. Lien, (FSA Insured),
5.950% due 07/01/2023 .................................... 1,042,500
1,000,000 Pasco County, Solid Waste Disposal & Resource Recovery
System, AMT,
6.000% due 04/01/2011# ................................... 1,091,250
1,000,000 Pinellas County, Housing Finance Authority Revenue, SFMR,
Series A, AMT,
6.000% due 09/01/2018 .................................... 1,067,500
1,050,000 Seminole County, School Board Authority, COP, Series A,
(MBIA Insured),
6.125% due 07/01/2014 .................................... 1,173,375
-----------
Total Municipal Bonds and Notes
(Cost $23,285,933) ....................................... 25,524,125
-----------
TOTAL INVESTMENTS (COST $23,285,933*) ......................... 102.2% 25,524,125
OTHER ASSETS AND LIABILITIES (NET) ............................ (2.2) (538,087)
----- -----------
NET ASSETS .................................................... 100.0% $24,986,038
===== ===========
- ----------------
* Aggregate cost for federal tax purposes.
+ Variable rate daily demand bonds are payable upon not more than one
business day's notice. The interest rate shown reflects the rate currently
in effect.
# Security purchased on a when-issued basis (Note 2)
Florida Insured Municipal Fund had the following insurance concentrations
greater than 10% at December 31, 1997 (as a percentage of net assets):
MBIA 31.0%
AMBAC 14.0%
</TABLE>
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ---------- --------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - 99.1%
CALIFORNIA - 97.7%
Alameda County:
$1,000,000 COP, (Santa Rita Jail Project), (MBIA Insured),
5.375% due 06/01/2009 .................................... $1,072,500
1,000,000 Public Financing Authority Revenue, Marina Village
Assesement District,
5.950% due 09/02/2007 .................................... 1,024,540
625,000 Berkeley, Unified School District, Series C, (AMBAC
Insured),
5.875% due 08/01/2006 .................................... 696,091
985,000 Brea & Olinda, School District, (High School Refinancing
Program), Series A, (FSA Insured),
6.000% due 08/01/2009 .................................... 1,055,180
1,000,000 Brea, Redevelopment Finance Agency, (Redevelopment Project
AB), (MBIA Insured),
5.500% due 08/01/2008 .................................... 1,060,000
1,000,000 California Health Facilities, Financing Authority Revenue,
(Catholic Health Corporation), Series A, (AMBAC Insured),
5.875% due 07/01/2009 .................................... 1,091,250
California Housing Finance Agency Revenue:
2,295,000 Home Mortgage, Series B1, AMT, (AMBAC Insured),
6.200% due 02/01/2007 .................................... 2,495,813
445,000 Series E, (MBIA Insured),
6.05% due 08/01/2006 ..................................... 477,263
California State, GO:
1,240,000 County Jail and School Building,
7.250% due 08/01/2003 .................................... 1,426,000
1,000,000 (FGIC Insured),
6.200% due 09/01/2005 .................................... 1,127,500
California State, Public Works Board, (Various California
University Projects), Series A:
1,000,000 5.900% due 10/01/2004 .................................... 1,090,000
1,500,000 (AMBAC Insured),
5.900% due 12/01/2003 .................................... 1,636,875
California State University Revenue:
200,000 Housing System, (FGIC Insured),
7.625% due 11/01/2003 .................................... 234,500
1,495,000 Series AJ, AL, AM, AN, AP, AQ, AR, (AMBAC Insured),
6.750% due 11/01/2007 .................................... 1,616,469
California Statewide Communities Development Authority:
1,600,000 (Children's Hospital), (MBIA Insured),
6.000% due 06/01/2007 .................................... 1,796,000
1,000,000 (St. Joseph Health Systems), (AMBAC Insured),
5.875% due 07/01/2005 .................................... 1,106,250
1,000,000 Castaic Lake, Water Agency, COP, (Water Systems Improvement
Project), Series A, (MBIA Insured),
5.600% due 08/01/2005 .................................... 1,083,750
1,000,000 Foothill Eastern Transportation Corridor Agency, Toll Road
Revenue, Capital Appreciation, Sr. Lien, Series A,
Zero coupon due 01/01/2004 ............................... 750,000
Gilroy, Unified School District, COP, (FSA Insured):
1,390,000 5.600% due 09/01/2003 .................................... 1,487,300
1,400,000 5.625% due 09/01/2004 .................................... 1,512,000
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 .................................... 1,097,500
Long Beach California, Harbor Revenue, Series A, (FGIC
Insured):
2,000,000 5.000% due 05/15/2003 .................................... 2,055,000
1,000,000 6.000% due 05/15/2009 .................................... 1,101,250
Los Angeles, Community Redevelopment Agency, MFHR, (AMBAC
Insured):
595,000 5.650% due 07/01/2000 .................................... 615,825
985,000 6.000% due 07/01/2004 .................................... 1,063,800
Los Angeles, Department of Water and Power, Electric Revenue
Bond, (MBIA Insured):
1,500,000 8.500% due 01/15/2002 .................................... 1,743,750
1,000,000 5.400% due 09/01/2006 .................................... 1,070,000
1,000,000 Los Angeles, GO, Series A, (FGIC Insured),
5.700% due 09/01/2008 .................................... 1,072,500
Los Angeles, Unified School District, COP:
1,000,000 (FSA Insured),
5.400% due 11/01/2009 .................................... 1,001,740
1,500,000 Series B, (AMBAC Insured),
6.000% due 12/01/2001 .................................... 1,612,500
2,500,000 Los Angeles County, Capital Asset Leasing Corporation,
Leasehold Revenue, (AMBAC Insured),
6.000% due 12/01/2006 .................................... 2,803,125
598,000 Modesto, Mortgage Revenue Bond, (GNMA Insured),
5.875% due 12/01/2004 .................................... 633,880
250,000 Oakland, Improvement Board Act of 1915, Medical Hill
Parking, Assessment District #3, (MBIA Insured),
6.000% due 09/02/2004 .................................... 258,138
750,000 Oakland Revenue Bonds, (YMCA East Bay Project),
6.250% due 06/01/2000 .................................... 771,563
1,000,000 Orange County, Recovery Project, Series A, (MBIA Insured),
6.000% due 06/01/2008 .................................... 1,123,750
Oxnard, Harbor District Revenue, (FSA Insured):
1,075,000 7.000% due 08/01/2001 .................................... 1,183,844
1,155,000 7.000% due 08/01/2002 .................................... 1,293,600
1,240,000 7.000% due 08/01/2003 .................................... 1,415,150
Paramount, Redevelopment Agency Tax Allocation,
(Redevelopment Project Area #1), (MBIA Insured):
1,610,000 6.100% due 08/01/2006 .................................... 1,785,088
1,700,000 6.100% due 08/01/2007 .................................... 1,876,375
560,000 Pioneers Memorial Hospital District, GO, (AMBAC Insured),
7.000% due 10/01/2005 .................................... 665,700
1,400,000 Redondo Beach, Public Financing Authority Revenue, (South
Bay Center Redevelopment Project),
6.750% due 07/01/2006 .................................... 1,510,250
1,300,000 Sacramento, Municipal Utility District, Electric Revenue,
(AMBAC Insured),
5.500% due 05/15/2007 .................................... 1,387,750
1,000,000 San Diego, Unified School District, COP, (Capital Projects),
Series B,
6.000% due 07/01/2003 .................................... 1,062,500
1,050,000 Santa Ana, COP, (Santa Ana Recycling Project), Series A,
AMT, (AMBAC Insured),
5.400% due 05/01/2007 .................................... 1,120,875
1,350,000 Solano County, (Solano Park Hospital Project), COP, (FSA
Insured),
6.500% due 08/01/2006 .................................... 1,532,250
1,000,000 Southern California, Home Financing Authority, MFHR, (The
Fountains Project), Series A, AMT, (FNMA Collateral),
5.400% due 01/01/2027 .................................... 1,040,000
1,000,000 Stanton, MFHR, (Continental Gardens Apartments), AMT,
5.625% due 08/01/2029 .................................... 1,056,250
University of California:
1,000,000 Housing Systems, Series A, (MBIA Insured),
5.300% due 11/01/2005 .................................... 1,062,500
1,000,000 (Multiple Purpose Review Projects), (MBIA Insured),
10.000% due 09/01/2001 ................................... 1,202,500
1,070,000 Series A, (CONNIE LEE Insured),
5.500% due 09/01/2006 .................................... 1,119,488
1,000,000 Valley Health Systems, California Hospital Revenue,
(Hospital Revenue Refunding & Improvement Project),
Series A,
6.125% due 05/15/2005 .................................... 1,058,750
-----------
63,236,472
-----------
PUERTO RICO - 1.4%
884,331 Centro de Recaudaciones de Ingresos Municipales, COP,
6.850% due 10/17/2003 .................................... 934,076
-----------
Total Municipal Bonds and Notes
(Cost $59,770,585) ....................................... 64,170,548
-----------
SHORT-TERM MUNICIPAL BONDS - 3.3%
(Cost $2,100,000)
2,100,000 California, Pollution Control Financing Authority, PCR:
(Pacific Gas and Electric),
4.90% due 11/01/2026 ..................................... 2,100,000
-----------
TOTAL INVESTMENTS (COST $61,870,585*) ......................... 102.4% 66,270,548
OTHER ASSETS AND LIABILITIES (NET) ............................ (2.4) (1,531,515)
----- -----------
NET ASSETS .................................................... 100.0% $64,739,033
===== ===========
- --------------
* 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 December 31, 1997 (as a percentage of net
assets):
AMBAC 27.7%
MBIA 21.3%
FSA 11.9%
</TABLE>
- -------------------------------------------------------------------------------
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
GO -- General Obligation Bonds
MBIA -- Municipal Bond Investors Assurance
MFHR -- Multi-family Housing Revenue
PCR -- Pollution Control Revenue
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
NATIONAL MUNICIPAL FUND
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- -------
<C> <S> <C>
MUNICIPAL BONDS AND NOTES - 99.2%
ALABAMA - 3.2%
$ 4,000,000 Courtland, Industrial Development Board of Solid Waste,
(Champion International Corporation Project), Disposal
Revenue, AMT,
7.750% due 01/01/2020 .................................. $ 4,310,000
1,000,000 Mobile, Industrial Development Board, Solid Waste Disposal
Revenue,
6.950% due 01/01/2020 .................................. 1,106,250
------------
5,416,250
------------
ARIZONA - 0.5%
740,000 Tucson, Airport Authority Inc., Supplemental Facilities
Revenue, AMT,
8.700% due 09/01/2019 .................................. 834,350
------------
CALIFORNIA - 0.4%
550,000 Los Angeles, Regional Airport Improvement, Series A, AMT,
6.700% due 01/01/2022 .................................. 591,250
------------
COLORADO - 11.0%
Denver City and County, Airport Revenue, AMT:
Series A:
2,000,000 8.750% due 11/15/2012 .................................. 2,342,138
1,140,000 8.500% due 11/15/2023** ................................ 1,283,213
2,000,000 8.000% due 11/15/2025** ................................ 2,223,943
1,920,000 Series C,
6.600% due 11/15/2004 .................................. 2,102,400
4,500,000 Meridian Metropolitan District, GO,
7.500% due 12/01/2011 .................................. 4,983,750
5,000,000 University of Colorado, Hospital Authority Revenue, Series
A, (AMBAC Insured),
6.250% due 11/15/2012** ................................ 5,525,000
------------
18,460,444
------------
CONNECTICUT - 1.3%
2,000,000 Mashantucket Western Pequot Tribe, Special Revenue,
Series A,
6.500% due 09/01/2005++ ................................ 2,227,500
------------
DISTRICT OF COLUMBIA - 1.7%
1,150,000 District of Columbia, COP,
6.875% due 01/01/2003 .................................. 1,262,125
1,500,000 Metropolitan District, Washington D.C., Airport Authority,
General Airport Revenue, Series A, AMT, (MBIA Insured),
6.625% due 10/01/2019** ................................ 1,648,125
------------
2,910,250
------------
FLORIDA - 4.6%
22,520,000 Dade County, Guaranteed Entitlement Revenue, Capital
Appreciation, Series A, (MBIA Insured),
Zero coupon due 02/01/2018 ............................. 7,290,850
425,000 Dade County, Seaport Authority, Refunding, (MBIA Insured),
6.500% due 10/01/2008 .................................. 500,429
------------
7,791,279
------------
GEORGIA - 6.5%
1,000,000 Atlanta, Airport Facilities Revenue, AMT,
7.250% due 01/01/2017 .................................. 1,092,500
Monroe, PCR, (Oglethorpe Power Company):
5,000,000 6.700% due 01/01/2009 .................................. 5,831,250
3,410,000 6.750% due 01/01/2010 .................................. 4,015,275
------------
10,939,025
------------
IDAHO - 1.4%
2,000,000 Idaho Health Facilities Authority Revenue, (Inverse
Floater),
7.820% due 02/15/2021+ ................................. 2,335,000
------------
ILLINOIS - 20.5%
Chicago, O'Hare Airport Supplemental Facilities, AMT:
6,000,000 International Term, (MBIA Insured),
6.750% due 01/01/2012** ................................ 6,547,500
700,000 American Airlines, Special Series A,
7.875% due 11/01/2025 .................................. 774,375
United Air Lines:
615,000 8.400% due 05/01/2004 .................................. 678,806
775,000 8.950% due 05/01/2018 .................................. 880,594
150,000 Special Series B,
8.500% due 05/01/2018 .................................. 165,750
Cook County, Community High School, Number 217, (AMBAC
Insured):
1,090,000 6.400% due 12/01/2003** ................................ 1,181,288
1,130,000 6.500% due 12/01/2004** ................................ 1,224,638
1,370,000 6.600% due 12/01/2005** ................................ 1,484,738
Cook County, School District, Number 026, (MBIA Insured):
1,445,000 Zero coupon due 12/01/2003 ............................. 1,123,488
1,020,000 Zero coupon due 12/01/2004 ............................. 754,800
2,000,000 Du Page County, General Obligation, FST Preservation,
5.000% due 10/01/2017 .................................. 1,987,500
Illinois Health Facilities Authority Revenue:
Glenoak Medical Center, Series D:
210,000 Pre-refunded,
9.500% due 11/15/2015 .................................. 244,125
260,000 Unrefunded,
9.500% due 11/15/2015 .................................. 300,950
4,570,000 Hindsdale Hospital, Series B,
9.000% due 11/15/2015 .................................. 5,226,938
5,000,000 Sister Services Hospital, Residual Interest Bond, (MBIA
Insured),
9.267% due 06/19/2015+ ................................. 6,075,000
300,000 Riverside Senior Living Center Project,
7.500% due 11/01/2020 .................................. 332,250
1,230,000 Servantcor, Series A,
8.000% due 08/15/2021 .................................. 1,406,813
3,000,000 Rush Presbyterian - St. Luke's Medical, Residual Interest
Bond, (MBIA Insured),
9.615% due 10/01/2024+ ................................. 3,607,500
365,000 Illinois Housing Development Authority, Series A, AMT,
7.350% due 08/01/2010 .................................. 390,550
------------
34,387,603
------------
INDIANA - 1.2%
2,000,000 Indianapolis, Public Improvement Board, Series D, (LOC INB
National Bank),
6.500% due 02/01/2022 .................................. 2,002,860
------------
KENTUCKY - 2.2%
3,000,000 Jefferson County, Hospital Revenue, Residual Interest
Bond, (MBIA Insured),
8.607% due 10/01/2008+ ................................. 3,622,500
------------
LOUISIANA - 0.3%
1,500,000 Louisiana Public Facility Authority Revenue, Series B,
ETM,
Zero coupon due 12/01/2019 ............................. 461,250
------------
MARYLAND - 0.6%
930,000 State of Maryland, Community Development Administration,
Department of Housing Revenue, Single Family Project,
AMT,
7.450% due 04/01/2032 .................................. 983,475
------------
MASSACHUSETTS - 2.9%
750,000 Commonwealth of Massachusetts, GO, Consolidated Loan,
Series A,
7.625% due 06/01/2008 .................................. 847,500
Commonwealth of Massachusetts, Health and Educational
Facilities Authority Revenue:
500,000 Framingham Union Hospital, Series B,
8.500% due 07/01/2010 .................................. 561,250
2,000,000 Saint Memorial Medical Center, Series A,
6.000% due 10/01/2023 .................................. 2,000,000
250,000 Commonwealth of Massachusetts, GO, Pre-refunded,
7.500% due 12/01/2007 .................................. 278,125
1,000,000 Plymouth County, COP, Series A,
7.000% due 04/01/2022 .................................. 1,116,250
------------
4,803,125
------------
MICHIGAN - 1.0%
1,500,000 Michigan State Hospital Finance Authority Revenue, Detroit
Medical, Series A,
7.500% due 08/15/2011 .................................. 1,695,000
------------
MISSISSIPPI - 3.8%
5,000,000 Lowndes County, Solid Waste Disposal, PCR, Residual
Interest Bond, (Weyerhauser Company),
8.200% due 04/01/2022+ ................................. 6,125,000
200,000 Warren County, Solid Waste Disposal Revenue,
(International Paper Project), Series A, AMT,
7.700% due 11/15/2009 .................................. 213,500
------------
6,338,500
------------
MISSOURI - 2.7%
1,000,000 Missouri State, Health and Educational Facilities
Authority Revenue, Bethesda Eye Institute,
6.800% due 11/01/2016** ................................ 1,113,750
3,000,000 St. Louis, Parking Facilities Revenue,
6.625% due 12/15/2021 .................................. 3,371,250
------------
4,485,000
------------
MONTANA - 0.7%
1,000,000 Forsyth, PCR, Series B, AMT, Puget Sound Power & Light,
(AMBAC Insured),
7.250% due 08/01/2021** ................................ 1,111,250
------------
NEBRASKA - 3.1%
Douglas County, Hospital Authority Revenue, Alegent
Health, Immanuel Medical Center:
3,175,000 5.125% due 09/01/2017 .................................. 3,182,938
1,250,000 5.250% due 09/01/2021 .................................. 1,251,563
650,000 Nebraska Investment Finance Authority, Single Family
Housing Revenue, Residual Interest Bond, AMT, (GNMA
Insured),
9.159% due 09/15/2024+ ................................. 735,313
------------
5,169,814
------------
NEVADA - 2.6%
4,000,000 Clark County, IDR, Series A, Nevada Power Company, AMT,
(FGIC Insured),
6.700% due 06/01/2022** ................................ 4,395,000
------------
NEW YORK - 3.2%
400,000 City of New York, IDR, Industrial Development Agency,
Supplemental Facilities, American Airlines, AMT,
8.000% due 07/01/2020 .................................. 420,252
1,265,000 Metropolitan Transportation Authority, Service Contract
Transportation Facilities, Series 7,
4.750% due 07/01/2019 .................................. 1,154,313
New York, GO, Unrefunded:
1,000,000 Series B, (FSA Insured),
7.000% due 06/01/2014 .................................. 1,098,750
160,000 8.250% due 11/15/2018 .................................. 183,000
275,000 New York State Medical Care Facilities Finance Agency
Revenue, Pre-refunded,
7.750% due 08/15/2011 .................................. 308,194
2,000,000 New York State Housing Finance Agency Revenue, Multi-
family Housing, Second Mortgage, Series F, AMT,
6.625% due 08/15/2012 .................................. 2,152,500
------------
5,317,009
------------
NORTH CAROLINA - 2.7%
4,300,000 North Carolina Eastern Municipal Power Agency, Power
Systems Revenue, Series A, (MBIA Insured),
5.700% due 01/01/2013 .................................. 4,601,000
------------
OHIO - 0.9%
1,240,000 Lorain County, Hospital Revenue, Series B, Humility of
Mary Health Care,
7.200% due 12/15/2011 .................................. 1,489,550
------------
OKLAHOMA - 1.4%
1,835,000 Oklahoma Housing and Finance Authority, Single Family
Revenue, Series B, AMT, (GNMA Insured),
7.997% due 08/01/2018** ................................ 2,153,831
200,000 Tulsa, Municipal Airport Revenue, American Airlines
Project, AMT,
7.600% due 12/01/2030 .................................. 222,000
------------
2,375,831
------------
PENNSYLVANIA - 10.1%
Allegheny County, Hospital Development Revenue, (Ohio
Valley General Hospital):
700,000 5.100% due 04/01/2001 .................................. 711,375
735,000 5.300% due 04/01/2002 .................................. 752,456
625,000 5.400% due 04/01/2003 .................................. 642,969
Beaver County, IDR, PCR, (Edison Project), Series A:
300,000 7.750% due 09/01/2024 .................................. 318,000
3,675,000 (FGIC Insured),
7.000% due 06/01/2021** ................................ 3,996,563
300,000 Lancaster County, Solid Waste Authority, Series A, AMT,
8.375% due 12/15/2004 .................................. 310,632
600,000 Lehigh County, General Purpose Authority, Muhlenberg
Hospital Center, Series A,
8.100% due 07/15/2010 .................................. 642,750
500,000 McKean County, Hospital Authority Revenue, Bradford
Hospital, Pottstown Memorial Medical Center,
8.875% due 10/01/2020 .................................. 570,000
1,250,000 Montgomery County, Higher Education Revenue,
6.875% due 11/15/2020 .................................. 1,335,938
Pennsylvania State Higher Education Revenue, Student Loan,
Residual Interest Bond, AMT:
3,000,000 (AMBAC Insured),
9.368% due 09/01/2026+ ................................. 3,412,500
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** ................................ 1,122,500
1,000,000 Philadelphia, Water and Sewer Revenue,
7.500% due 08/01/2010** ................................ 1,127,500
------------
17,038,721
------------
RHODE ISLAND - 1.4%
2,000,000 Rhode Island State Health and Education Revenue, Residual
Interest Bond, (FGIC Insured),
9.715% due 08/15/2021+ ................................. 2,415,000
------------
TEXAS - 4.3%
415,000 Brazos, Higher Educational Facilities Authority, Series
C-2, AMT,
7.100% due 11/01/2004 .................................. 455,463
5,000,000 Dallas-Fort Worth International Airport, (Facility
Improvement Corporate Revenue), (American Airlines,
Inc.), AMT,
7.500% due 11/01/2025 .................................. 5,462,500
624,000 Texas State, Higher Education Coordinating Board, Student
Loan, AMT,
7.700% due 10/01/2025 .................................. 666,900
500,000 West Side Calhoun County, Solid Waste Revenue Bond, (Union
Carbide Project), AMT,
8.200% due 03/15/2021 .................................. 558,125
------------
7,142,988
------------
VERMONT - 0.2%
Vermont Housing Finance Agency, Single Family, Series 1,
AMT:
140,000 6.800% due 05/01/2025 .................................. 145,950
220,000 8.150% due 05/01/2025 .................................. 230,175
------------
376,125
------------
WEST VIRGINIA - 2.2%
2,500,000 Harrison County, Solid Waste Disposal, (Monongahela
Power), Series A, AMT,
6.875% due 04/15/2022 .................................. 2,709,375
150,000 Kanawha County, IDR, (Union Carbide Project), Series A,
AMT,
8.000% due 08/01/2020 .................................. 164,063
750,000 South Charleston, IDR, (Union Carbide Project), Series A,
AMT,
8.000% due 08/01/2020 .................................. 820,313
------------
3,693,751
------------
WISCONSIN - 0.6%
1,000,000 Madison, IDR, (Madison Gas & Electric Company), (Project
A), AMT,
6.750% due 04/01/2027 .................................. 1,087,500
------------
Total Municipal Bonds and Notes
(Cost $148,652,211) .................................... 166,498,200
------------
TOTAL INVESTMENTS (COST $148,652,211*) ......................... 99.2% 166,498,200
OTHER ASSETS AND LIABILITIES (NET) ............................. 0.8 1,377,819
----- ------------
NET ASSETS ..................................................... 100.0% $167,876,019
===== ============
- --------------
* 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.
</TABLE>
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
--------- ------------
FUTURES CONTRACTS - LONG POSITION
254 U.S. Treasury Bond,
Twenty Year, March 1998 ........................ $ 251,950
==========
National Municipal Fund had the following insurance concentrations greater
than 10% at December 31, 1997 (as a percentage of net assets):
MBIA 21.0%
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
GROWTH AND INCOME FUND
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ -------
<C> <S> <C>
COMMON STOCKS - 95.2%
TECHNOLOGY - 12.1%
262,600 Bay Networks Inc.+ ....................................... $ 6,712,713
126,800 Cabletron Systems, Inc.+ ................................. 1,902,000
99,600 Dominion Resources Inc.+ ................................. 4,239,225
287,600 EMC Corporation+ ......................................... 7,891,025
72,225 General Semiconductor, Inc. .............................. 835,102
96,400 Input/Output, Inc.+ ...................................... 2,861,875
69,400 International Business Machines Corporation .............. 7,256,638
85,400 Perkin Elmer Corporation ................................. 6,068,738
263,600 Sensormatic Electronics Corporation ...................... 4,332,925
170,800 Sun Microsystems, Inc.+ .................................. 6,810,650
------------
48,910,891
------------
FINANCIAL SERVICES - 11.2%
118,400 AMBAC Financial Group Inc. ............................... 5,446,400
17,200 Chase Manhattan Corporation .............................. 1,883,400
14,500 Citicorp. ................................................ 1,833,334
148,200 Fannie Mae ............................................... 8,456,663
48,700 First Hawaiian Inc. ...................................... 1,935,825
198,200 First Union Corporation .................................. 10,157,750
64,100 Fleet Financial Group, Inc. .............................. 4,803,494
71,400 Marsh and McLennan Companies, Inc. ....................... 5,323,763
119,100 Providian Corporation .................................... 5,381,831
------------
45,222,460
------------
HEALTH CARE - 10.6%
129,400 ALZA Corporation+ ........................................ 4,116,538
98,200 Bristol-Myers Squibb Company ............................. 9,292,175
7,035 Crescendo Pharmaceuticals+ ............................... 81,342
42,500 Forest Labs Inc.+ ........................................ 2,095,781
40,691 Gensia Sicor Inc.+ ....................................... 236,516
350,500 Humana Inc.+ ............................................. 7,272,875
146,400 United Healthcare Corporation ............................ 7,274,250
103,400 Warner Lambert Company ................................... 12,821,600
------------
43,191,077
------------
ENERGY - 8.5%
72,400 Atlantic Richfield ....................................... 5,801,050
103,800 Enron Corporation ........................................ 4,314,188
127,700 Exxon Corporation ........................................ 7,813,644
49,500 Mobil Corporation ........................................ 3,573,281
346,400 Tosco Corporation ........................................ 13,098,250
------------
34,600,413
------------
TELECOMMUNICATIONS - 7.6%
96,566 Commscope, Inc.+ ......................................... 1,297,606
122,300 GTE Corporation .......................................... 6,390,175
289,600 NextLevel Systems, Inc.+ ................................. 5,176,600
94,500 SBC Communications, Inc. ................................. 6,922,125
82,300 Sprint Corporation ....................................... 4,824,838
202,800 WorldCom, Inc.+ .......................................... 6,134,700
------------
30,746,044
------------
MATERIALS & PROCESSING - 7.6%
100,600 Albemarle Corporation .................................... 2,401,825
274,200 Allegheny Teledyne Inc. .................................. 7,094,925
139,300 Allied Signal Inc. ....................................... 5,423,994
30,700 Cooper Cameron Corporation+ .............................. 1,872,700
126,500 Temple-Inland, Inc. ...................................... 6,617,531
158,900 Union Carbide Corporation ................................ 6,822,769
------------
30,233,744
------------
CONSUMER DISCRETIONARY - 7.2%
157,000 International Game Technology ............................ 3,964,250
132,700 Pepsico, Inc. ............................................ 4,835,256
72,600 Procter & Gamble Company ................................. 5,794,388
87,063 Tele-Communications Inc., TCI Group, Class A+ ............ 2,432,323
266,901 Tele-Communications TCI Ventures Group, Class A+ ......... 7,556,635
164,100 U.S. West Media Group .................................... 4,738,388
------------
29,321,240
------------
CONSUMER STAPLES - 6.2%
74,400 General Mills, Inc. ...................................... 5,328,900
173,200 Philip Morris Companies Inc. ............................. 7,848,125
80,400 Ralston Purina Company ................................... 7,472,175
74,200 Unilever NV .............................................. 4,632,863
------------
25,282,063
------------
RETAIL - 5.2%
175,200 Circuit City Stores, Inc., Circuit City Group ............ 6,230,550
86,900 Federated Department Stores, Inc.+ ....................... 3,742,131
213,700 Toys R Us Inc.+ .......................................... 6,718,194
115,700 Wal-Mart Stores Inc. ..................................... 4,562,919
------------
21,253,794
------------
COMPUTER SOFTWARE & SERVICES - 2.7%
85,700 Autodesk Inc. ............................................ 3,170,900
74,150 Cisco Systems, Inc.+ ..................................... 4,133,863
171,100 Oracle Corporation+ ...................................... 3,817,669
------------
11,122,432
------------
PRODUCER DURABLES - 1.2%
75,100 Anixter International Inc.+ .............................. 1,239,150
72,600 Boeing Company ........................................... 3,552,863
------------
4,792,013
------------
AUTOS & TRANSPORTATION - 1.0%
66,500 Union Pacific Corporation ................................ 4,152,094
------------
UTILITIES - 1.0%
71,900 Duke Energy Corporation .................................. 3,981,463
------------
OTHER - 13.1%
36,200 American International Group, Inc.+ ...................... 3,936,750
172,200 Anheuser-Busch Companies, Inc. ........................... 7,576,800
137,500 Cooper Industries, Inc. .................................. 6,737,500
120,519 Equity Office Properites Trust+ .......................... 3,803,881
79,500 Goodyear Tire & Rubber Company ........................... 5,058,188
90,700 Motorola, Inc. ........................................... 5,175,569
92,200 Starwood Lodging Trust ................................... 5,336,075
191,108 Tyco International Ltd. .................................. 8,611,804
258,000 Waste Management, Inc. ................................... 7,095,000
------------
53,331,567
------------
Total Common Stocks
(Cost $347,575,805) .................................... 386,141,295
------------
PREFERRED STOCK - 0.5%
(Cost $1,479,800)
30,200 TCI Communications Inc. Pfd. ............................. 1,936,575
------------
PRINCIPAL
AMOUNT
---------
CONVERTIBLE NOTE - 1.0%
(Cost $2,911,783)
$ 2,662,000 Berkshire Hathaway, Conv. Sr. Note,
1.000% due 12/03/2001 .................................. 4,255,873
------------
U.S. TREASURY BILL - 4.0%
(Cost $16,241,312)
16,289,000 5.270% due 01/22/1998++ .................................. 16,241,312
------------
TOTAL INVESTMENTS (COST $368,208,700*) ....................... 100.7% 408,575,055
OTHER ASSETS AND LIABILITIES (NET) ........................... (0.7) (2,965,803)
----- ------------
NET ASSETS ................................................... 100.0% $405,609,252
===== ============
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase (unaudited).
</TABLE>
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
GROWTH FUND
DECEMBER 31, 1997 (UNAUDITED)
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 91.2%
TECHNOLOGY - 19.9%
148,924 Analog Devices, Inc.+ .............................. $ 4,123,333
141,575 CBS Corporation+ ................................... 4,167,614
145,663 Cisco Systems, Inc.+ ............................... 8,120,684
77,762 Compaq Computer Corporation ........................ 4,388,693
46,275 Dell Computer Corporation+ ......................... 3,887,100
104,175 EMC Corporation+ ................................... 2,858,302
58,000 HBO & Company ...................................... 2,784,000
73,500 Intel Corporation .................................. 5,163,375
32,100 Maxim Integrated Products, Inc.+ ................... 1,107,450
142,300 Philips Electronics NV, NY Shares .................. 8,609,150
4,707 Philips Electronics NV, Ord ........................ 282,276
94,575 Pittway Corporation, Class A ....................... 6,584,785
33,979 Siebe Plc .......................................... 666,874
29,762 Technology Solutions Company+ ...................... 784,973
57,700 Texas Instruments, Inc. ............................ 2,596,500
------------
56,125,109
------------
FINANCIAL SERVICES - 14.7%
11,025 Ambanc Holding Company, Inc. ....................... 206,719
63,850 Associates First Capital Corporation, Class A ...... 4,541,331
5,000 Astoria Financial Corporation ...................... 278,750
612,306 Banca Commerciale Italiana+ ........................ 2,128,707
46,675 Bank of New York Company, Inc. ..................... 2,698,398
67,800 BankAmerica Corporation ............................ 4,949,400
8,525 Catskill Financial Corporation ..................... 160,909
68,325 Charles Schwab Corporation ......................... 2,865,380
11,125 Citicorp. .......................................... 1,406,617
15,325 Dime Bancorp, Inc. ................................. 463,581
12,700 First Defiance Financial Corporation ............... 203,200
2,925 First Savings Bancorp, Inc. ........................ 74,588
6,425 First Spartan Financial Corporation ................ 258,606
1,825 FSF Financial Corporation .......................... 37,641
4,375 GSB Financial Corporation+ ......................... 79,023
15,625 Klamath First Bancorp, Inc. ........................ 335,938
8,525 North Central Bancshares, Inc. ..................... 169,434
8,525 Peekskill Financial Corporation .................... 142,794
10,750 Provident Financial Holdings, Inc.+ ................ 235,156
9,487 Queens County Bancorp, Inc. ........................ 384,224
23,100 Reliance Group Holdings, Inc. ...................... 326,288
35,150 Roslyn Bancorp, Inc. ............................... 817,238
14,725 SLM Holding Corporation ............................ 2,048,616
47,175 Star Banc Corporation .............................. 2,706,666
40,275 SunAmerica, Inc. ................................... 1,721,751
10,200 TF Financial Corporation ........................... 306,000
176,875 UNUM Corporation ................................... 9,617,578
19,800 U.S. Bancorp+ ...................................... 2,216,363
------------
41,380,896
------------
HEALTH CARE - 12.3%
22,350 Cardinal Health, Inc. .............................. 1,679,044
39,050 Centocor, Inc.+ .................................... 1,298,413
78,300 Eli Lilly and Company+ ............................. 5,451,638
42,675 ESC Medical Systems Limited+ ....................... 1,653,656
121,475 Omnicare, Inc. ..................................... 3,765,725
35,775 Pfizer Inc.+ ....................................... 2,667,473
182,293 SmithKline Beecham ................................. 1,865,192
33,575 Sofamor Danek Group, Inc.+ ......................... 2,184,473
115,300 Warner Lambert Company ............................. 14,297,200
------------
34,862,814
------------
COMPUTER SOFTWARE & SERVICES - 11.1%
15,700 America Online, Inc.+ .............................. 1,400,244
106,300 Aspen Technology, Inc.+ ............................ 3,640,775
106,100 Cadence Design Systems Inc.+ ....................... 2,599,450
36,375 Ceridian Corporation+ .............................. 1,666,430
63,225 Microsoft Corporation+ ............................. 8,171,831
192,000 Parametric Technology Company+ ..................... 9,096,000
25,000 Peoplesoft, Inc.+ .................................. 975,000
29,850 Sapient Corporation+ ............................... 1,828,313
47,987 Wind River Systems+ ................................ 1,904,484
------------
31,282,527
------------
MATERIALS & PROCESSING - 8.0%
50,025 ASM Lithography Holdings, NV+ ...................... 3,376,688
84,978 Metra AB, Series B, Ord. ........................... 1,996,107
335,550 Monsanto Company ................................... 14,093,100
115,305 Solutia Inc. ....................................... 3,077,202
------------
22,543,097
TELECOMMUNICATIONS - 7.3%
116,450 Nokia Corporation, Class A, Sponsored ADR .......... 8,151,500
1 TCI Ventures, Class A+ ............................. 23
341,784 Tele-Communications, Inc. Class A+ ................. 9,548,593
479,164 Telecom Italia SPA+ ................................ 3,060,799
------------
20,760,915
------------
ENERGY - 7.3%
57,675 Diamond Offshore Drilling .......................... 2,775,609
7,415 Elf Aquitaine SA+ .................................. 862,209
100,000 Noble Drilling Corporation+ ........................ 3,062,500
2,084,932 Ocean Rig ASA+ ..................................... 2,205,081
28,875 Santa Fe International Corporation ................. 1,174,852
77,575 Schlumberger Limited ............................... 6,244,788
90,000 Transocean Offshore Inc. ........................... 4,336,875
------------
20,661,914
------------
CONSUMER DISCRETIONARY - 3.2%
60,000 Costco Companies, Inc.+ ............................ 2,677,500
42,825 Lamar Advertising Company+ ......................... 1,702,294
44,000 Outdoor Systems, Inc.+ ............................. 1,688,500
47,100 Time Warner Inc. ................................... 2,920,200
------------
8,988,494
------------
RETAIL - 1.2%
38,375 Linens 'N Things, Inc.+ ............................ 1,674,109
53,625 CompUSA Inc.+ ...................................... 1,662,375
------------
3,336,484
------------
CONSUMER STAPLES - 0.9%
12,834 Raisio Group Plc.+ ................................. 1,519,109
20,000 Sara Lee Corporation+ .............................. 1,126,250
------------
2,645,359
------------
OTHER - 5.3%
207,050 Comcast Corporation, Class A ....................... 6,535,016
27,402 Electrolux AB+ ..................................... 1,901,599
20,000 Equity Office Properties Trust ..................... 631,250
82,600 Sealed Air Corporation+ ............................ 5,100,550
40,362 Tomra Systems ASA+ ................................. 903,014
------------
15,071,429
------------
Total Common Stocks
(Cost $228,614,122) .............................. 257,659,038
------------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 12.5%
Federal Mortgage Coporation Discount Note:
$ 2,500,000 6.000% due 01/02/98++ ............................ 2,499,583
18,000,000 5.750% due 01/05/98++ ............................ 17,988,500
15,000,000 Federal National Mortgage Association Discount Note,
5.750% due 01/30/98++ ............................ 14,930,521
------------
Total U.S. Government Agency Discount Notes (Cost
$35,418,604) ..................................... 35,418,604
------------
COMMERCIAL PAPER - 4.6%
(Cost $12,997,581)
13,000,000 General Electric Capital Corporation,
6.700% due 01/02/1998++ .......................... 12,997,580
------------
PREFERRED STOCK - 0.7%
(Cost $3,031,089)
58,925,000 Ericsson Telecomunicacoes S.A., Pfd. ............... 1,890,162
------------
TOTAL INVESTMENTS (COST $280,061,396*) .................. 109.0% 307,965,384
OTHER ASSETS AND LIABILITIES (NET) ...................... (9.0) (25,366,340)
----- ------------
NET ASSETS .............................................. 100.0% $282,599,044
===== ============
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
++ Rate represents annualized yield at date of purchase (unaudited).
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
GROWTH FUND
DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
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
- -------------- ----------------------------------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
01/05/1998 FIM 198,732 36,473 36,699 $ (226)
01/06/1998 GBP 481,492 790,807 804,043 (13,236)
01/07/1998 ITL 513,576,120 290,310 292,077 (1,767)
01/07/1998 GBP 775,796 1,274,195 1,284,884 (10,689)
01/08/1998 ITL 2,091,702,240 1,182,369 1,188,692 (6,323)
01/09/1998 NLG 2,400,000 1,183,987 1,232,254 (48,267)
01/15/1998 FIM 3,250,000 596,979 611,159 (14,180)
01/20/1998 GBP 186,000 305,586 306,518 (932)
02/18/1998 DEM 6,800,000 3,790,763 3,918,677 (127,914)
02/18/1998 GBP 230,000 378,075 383,390 (5,315)
02/19/1998 GBP 189,000 310,684 312,060 (1,376)
02/25/1998 NLG 10,000,000 4,948,705 5,069,223 (120,518)
02/26/1998 FIM 1,300,000 239,418 244,361 (4,943)
03/04/1998 SEK 2,250,000 283,874 286,904 (3,030)
03/11/1998 ITL 1,470,000,000 830,674 856,929 (26,255)
03/11/1998 SEK 2,300,000 290,233 305,900 (15,667)
03/26/1998 FIM 7,750,000 1,429,603 1,501,677 (72,074)
05/11/1998 GBP 20,000 32,925 32,729 196
---------------
$ (472,516)
---------------
<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>
01/02/1998 SEK 782,932 98,608 100,988 $ 2,380
01/05/1998 NLG 942,843 465,023 467,768 2,745
01/05/1998 SEK 2,163,091 272,445 275,581 3,136
01/06/1998 NLG 276,380 136,320 137,008 688
01/07/1998 SEK 540,073 68,026 68,514 488
01/09/1998 ITL 4,450,000,000 2,515,404 2,527,170 11,766
01/09/1998 NLG 5,000,000 2,466,640 2,441,525 (25,115)
01/15/1998 FIM 3,821,000 701,864 737,143 35,279
01/20/1998 GBP 240,000 394,304 396,980 2,676
02/18/1998 GBP 230,000 378,075 373,107 (4,968)
02/18/1998 DEM 6,800,000 3,790,763 3,669,378 (121,385)
02/18/1998 GBP 225,000 369,862 376,875 7,013
02/25/1998 NLG 13,750,000 7,917,927 8,025,556 107,629
02/26/1998 FIM 2,460,000 453,053 444,846 (8,207)
03/04/1998 SEK 10,100,000 1,274,279 1,309,938 35,659
03/11/1998 ITL 1,800,000,000 1,017,151 1,013,913 (3,238)
03/11/1998 SEK 2,300,000 290,233 304,072 13,839
03/11/1998 GBP 200,000 328,884 329,800 916
03/26/1998 FIM 7,750,000 1,429,604 1,492,106 62,502
03/31/1998 FIM 18,500,000 3,413,568 3,546,387 132,819
03/31/1998 NLG 4,300,000 2,132,381 2,170,179 37,798
05/11/1998 GBP 45,000 74,082 75,375 1,293
05/11/1998 FIM 7,500,000 1,388,189 1,434,034 45,845
---------------
$ 341,558
---------------
Net Unrealized Depreciation of Forward Foreign Currency Contracts .. $ (130,958)
===============
</TABLE>
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
DEM -- German Deutsche Mark
FIM -- Finnish Markka
GBP -- Great Britain Pound Sterling
ITL -- Italian Lira
NLG -- Netherlands Guilder
SEK -- Swedish Krona
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
EMERGING GROWTH FUND
DECEMBER 31, 1997 (UNAUDITED)
VALUE
SHARES (NOTE 2)
------ --------
COMMON STOCKS - 89.9%
CONSUMER DISCRETIONARY - 15.7%
170,975 Apollo Group, Inc., Class A+ ...................... $ 8,078,569
61,325 Family Golf Centers, Inc.+ ........................ 1,924,072
56,800 Heftel Broadcasting Corporation, Class A+ ......... 2,655,400
79,325 Outdoor Systems, Inc.+ ............................ 3,044,097
221,625 Paychex, Inc. ..................................... 11,219,766
131,150 Premier Parks, Inc.+ .............................. 5,311,575
83,375 Profit Recovery Group International, Inc.+ ........ 1,479,906
45,525 Univision Communications, Inc.+ ................... 3,178,214
------------
36,891,599
------------
RESTAURANTS - 15.0%
2,860,447 J.D. Wetherspoon Plc Ord. ......................... 15,737,805
169,575 Papa John's International Inc.+ ................... 5,913,928
849,191 PizzaExpress Plc .................................. 10,460,010
213,700 PJ America Inc.+ .................................. 3,205,500
------------
35,317,243
------------
FINANCIAL SERVICES - 13.6%
250,025 American Capital Strategies, Ltd. ................. 4,531,703
346,163 Amvescap PLC+ ..................................... 2,964,834
54,275 Charles Schwab Corporation ........................ 2,276,158
3,975 First Empire State Corporation .................... 1,848,375
201,825 HealthCare Financial Partners, Inc.+ .............. 7,164,788
244,625 Insignia Financial Group, Inc., Class A+ .......... 5,626,375
121,475 Medallion Financial Corporation ................... 2,672,450
37,450 Protective Life Corporation ....................... 2,237,638
79,200 UICI+ ............................................. 2,762,100
------------
32,084,421
------------
RETAIL - 12.2%
165,250 Barnett, Inc.+ .................................... 3,635,500
71,025 CompUSA Inc.+ ..................................... 2,201,773
239,200 Fastenal Company .................................. 9,149,400
56,075 MSC Industrial Direct Company, Inc., Class A+ ..... 2,376,178
50,100 O'Reilly Automotive, Inc.+ ........................ 1,315,125
318,525 Petco Animal Supplies, Inc.+ ...................... 7,644,600
115,699 Renters Choice, Inc.+ ............................. 2,371,830
------------
28,694,406
------------
HEALTH CARE - 7.8%
8,600 AmeriPath, Inc.+ .................................. 146,200
63,600 Mentor Corporation ................................ 2,321,400
354,575 Omnicare Inc. ..................................... 10,991,825
61,625 Pediatrix Medical Group, Inc.+ .................... 2,634,469
34,950 Sofamor Danek Group, Inc.+ ........................ 2,273,935
------------
18,367,829
------------
MATERIALS & PROCESSING - 4.4%
62,000 Sealed Air Corporation+ ........................... 3,828,500
324,500 Trigen Energy Corporation ......................... 6,408,875
------------
10,237,375
------------
TECHNOLOGY - 3.7%
118,525 Berg Electronics Corporation+ ..................... 2,696,444
74,250 Maxim Integrated Products, Inc.+ .................. 2,561,625
112,400 Sipex Corporation+ ................................ 3,400,100
------------
8,658,169
------------
CONSUMER STAPLES - 2.6%
166,450 JP Foodservice Inc.+ .............................. 6,148,247
------------
COMPUTER SOFTWARE & SERVICES - 2.3%
144,750 Cadence Design Systems, Inc.+ ..................... 3,546,375
168,875 Tier Technologies, Inc.+ .......................... 1,815,406
------------
5,361,781
------------
TELECOMMUNICATIONS - 1.9%
439,107 Pricellular Corporation, Class A+ ................. 4,583,179
------------
AUTOS & TRANSPORTATION - 1.8%
63,050 OEA Systems, Inc. ................................. 1,824,509
99,775 Ryanair Holdings PLC-Sponsored ADR+ ............... 2,506,847
------------
4,331,356
------------
PRODUCER DURABLES - 1.0%
45,650 Culligan Water Technologies, Inc.+ ................ 2,305,325
------------
ENERGY - 0.3%
17,575 AES Corporation+ .................................. 819,434
------------
OTHER - 7.6%
83,375 Chancellor Media Corporation, Class A+ ............ 6,221,859
338,275 Cyberonics, Inc.+ ................................. 5,158,694
99,175 Hanover Compressor Company+ ....................... 1,983,500
53,375 Rental Service Corporation+ ....................... 1,311,023
129,150 Transcrypt International, Inc.+ ................... 3,212,606
------------
17,887,682
------------
Total Common Stocks
Cost $144,055,369) .............................. 211,688,046
------------
WARRANTS - 2.6%
(Cost $2,562,116)
282,565 Littelfuse Inc., Series A, expires 12/27/2001+ .... 6,216,430
------------
PRINCIPAL
AMOUNT
---------
COMMERCIAL PAPER - 3.2%
(Cost $7,598,586)
$ 7,600,000 General Electric Capital Corporation,
6.70% due 01/02/1998 ............................ 7,598,586
------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTE - 4.3%
(Cost $9,976,208)
10,000,000 Federal National Mortgage Association (FNMA),
5.71% due 01/16/1998 ............................ 9,976,208
------------
TOTAL INVESTMENTS (COST $164,192,279*) .................. 100.0% 235,479,270
OTHER ASSETS AND LIABILITIES (NET) ...................... 0.0 (72,238)
----- ------------
NET ASSETS .............................................. 100.0% $235,407,032
===== ============
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
<TABLE>
<CAPTION>
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
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>
01/20/1998 GBP 3,500,000 5,750,271 5,911,500 $ (161,229)
02/25/1998 GBP 1,100,000 1,808,393 1,797,075 11,318
02/26/1998 GBP 1,050,000 1,726,221 1,770,054 (43,833)
-----------
$ (193,744)
-----------
<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>
01/20/1998 GBP 3,500,000 5,750,271 5,887,000 $ 136,729
02/25/1998 GBP 1,750,000 2,876,988 2,759,000 (117,988)
02/26/1998 GBP 1,737,000 2,855,663 2,781,934 (73,729)
03/04/1998 GBP 3,500,000 5,754,686 5,589,500 (165,186)
03/11/1998 GBP 515,000 846,877 862,198 15,321
05/06/1998 GBP 6,050,000 9,959,077 10,127,058 167,981
05/11/1998 GBP 1,500,000 2,469,408 2,512,500 43,092
-----------
$ 6,220
-----------
Net Unrealized Depreciation of Forward Foreign Currency Contracts .. $ (187,524)
===========
</TABLE>
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipts
GBP -- Great Britain Pound Sterling
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
DECEMBER 31, 1997 (UNAUDITED)
VALUE
SHARES (NOTE 2)
------ ` ------
COMMON STOCKS - 93.4%
JAPAN - 16.3%
34,100 Advantest Corporation ............................. $ 1,932,899
55,000 Fuji Bank Ltd. .................................... 222,444
180,000 Fujikura Ltd. ..................................... 1,191,268
137,000 Fujitsu Ltd. ...................................... 1,469,163
86,000 Hankyu Realty ..................................... 401,838
140,000 NEC Corporation ................................... 1,490,617
5,300 Nichiei Company, Ltd.+ ............................ 564,305
50,000 Nomura Securities Company Ltd. .................... 666,411
36,000 Orix Corporation .................................. 2,509,383
700 Parco Company ..................................... 2,123
21,000 Rohm Company ...................................... 2,139,410
3,000 Shohkoh Fund & Company Ltd.+ ...................... 914,592
33,000 Sony Corporation .................................. 2,932,210
130,000 Sumitomo Bank Ltd. ................................ 1,483,723
24,000 TDK Corporation ................................... 1,808,962
50 Tohoku Electric & Power Company ................... 758
-----------
19,730,106
-----------
UNITED KINGDOM - 13.4%
35,200 Biocompatibles International plc+ ................. 284,718
190,952 British Airport Authority ......................... 1,561,777
488,403 Cookson Group Plc ................................. 1,568,161
69,000 Glaxo Wellcome Plc+ ............................... 1,631,838
98,913 Hanson Plc ........................................ 442,673
115,300 Imperial Chemical Industries ...................... 1,800,841
319,200 Medeva Plc ........................................ 846,644
226,300 Orange Plc+ ....................................... 981,192
4,900 Perpetual Plc+ .................................... 226,135
619,100 Pilkington Plc .................................... 1,301,476
350,000 Rolls Royce Plc ................................... 1,350,832
124,700 Royal & Sun Alliance Insurance Group Plc+ ......... 1,255,430
8,400 Safeway Inc.+ ..................................... 47,319
369,250 Thistle Hotels Plc ................................ 961,203
347,150 Williams Holdings Plc ............................. 1,927,078
-----------
16,187,317
-----------
FRANCE - 11.0%
27,650 Axa-UAP+ .......................................... 2,138,971
23,600 Banque Nationale de Paris+ ........................ 1,254,093
5,640 Copagnie de St. Gobain+ ........................... 801,030
15,400 Elf Aquitaine SA+ ................................. 1,790,698
57,363 La Gardere Groupe ................................. 1,896,219
51,700 Rhone-Poulenc Rorer, Inc.+ ........................ 2,315,336
64,400 Societe Generale Ord. ............................. 1,668,837
13,000 Total SA+ ......................................... 1,414,452
-----------
13,279,636
-----------
ITALY - 4.3%
41,000 Assicurazioni Generali, Spa+ ...................... 1,007,038
292,000 ENI, Spa+ ......................................... 1,655,602
801,700 Parmalat Finanziaria Spa+ ......................... 1,146,581
230,000 Telecom Italia Spa+ ............................... 1,469,192
-----------
5,278,413
-----------
SWEDEN - 4.2%
194,100 ABB AB, B Shares .................................. 2,285,715
1,900 Biora AB, ADR+ .................................... 39,425
32,300 Electrolux AB, B Shares ........................... 2,241,502
86,800 Nordbanken AB+ .................................... 490,853
-----------
5,057,495
-----------
GERMANY - 3.5%
14,000 Fresenius Medical Care AG+ ........................ 929,961
50,100 Hoechst AG+ ....................................... 1,754,475
3,115 Mannesmann AG+ .................................... 1,573,949
-----------
4,258,385
-----------
SWITZERLAND - 3.3%
1,180 Julius Baer Holdings AG, Series B ................. 2,187,801
12,690 Oerlikon-Buehrle Holding AG+ ...................... 1,779,804
-----------
3,967,605
-----------
NEW ZEALAND - 3.1%
2,262,500 Brierley Investments Ltd. Ord. .................... 1,615,876
228,700 Fletcher Challenge - Building Division ............ 467,437
500,348 Fletcher Challenge - Forest Division .............. 415,454
2,665,500 Wrightson Ltd. .................................... 1,238,178
-----------
3,736,945
-----------
NETHERLANDS - 3.1%
18,200 ASM Lithography Holding NV, ADR+ .................. 1,228,500
41,700 Philips Electronics NV ............................ 2,500,725
-----------
3,729,225
-----------
AUSTRALIA - 2.9%
134,400 Foodland Associates Ltd. .......................... 1,006,556
155,900 National Australia Bank Ltd. ...................... 2,177,455
163,000 Oil Search Ltd. ................................... 294,697
-----------
3,478,708
-----------
NORWAY - 2.9%
90,400 Fred Olsen Energy ASA+ ............................ 1,875,417
45,800 SAS Norske ASA+ ................................... 639,647
36,600 Smedvig ASA, B Shares ............................. 769,220
2,500 Smedvig ASA, B Shares, Sponsored ADR .............. 52,500
2,800 Transocean Offshore Inc.+ ......................... 134,925
-----------
3,471,709
-----------
ARGENTINA - 2.8%
27,300 Telefonica de Argentina, ADR ...................... 1,016,925
68,000 YPF Sociedad Anonima, Sponsored ADR ............... 2,324,750
-----------
3,341,675
-----------
ISRAEL - 2.8%
126,000 Blue Square-Israel Ltd., ADR ...................... 1,559,250
69,800 ECI Telecommunications Ltd., ADR .................. 1,779,900
-----------
3,339,150
-----------
SINGAPORE - 2.6%
261,000 D.B.S. Land Ltd. .................................. 399,514
231,800 Development Bank of Singapore (F) ................. 1,980,374
91,109 Jardine Matheson Holdings ......................... 464,656
212,000 Keppel Bank ....................................... 340,860
-----------
3,185,404
-----------
HONG KONG - 2.6%
444,000 Costco Pacific Ltd.+ .............................. 360,976
846,125 First Pacific Company ............................. 409,468
54,500 Guangshen Railway Ltd., ADR ....................... 732,344
67,200 HSBC Holdings Ord. ................................ 1,656,369
-----------
3,159,157
-----------
DENMARK - 2.3%
56,300 International Service Systems AS, Class B+ ........ 2,070,608
45,900 SAS Danmark A/S+ .................................. 669,887
-----------
2,740,495
-----------
PORTUGAL - 2.2%
21,000 Cimpor ............................................ 550,416
21,800 Portugal Telecommunications, ADR .................. 1,024,600
22,000 Portugal Telecommunications SA .................... 1,020,810
-----------
2,595,826
-----------
FINLAND - 1.8%
37,450 Huhtamaki Group, I Shares ......................... 1,546,328
36,475 Rauma Group+ ...................................... 568,960
-----------
2,115,288
-----------
INDIA - 1.7%
96,100 Reliance Industries Ltd., GDS ..................... 810,844
71,800 State Bank of India, GDR++ ........................ 1,283,425
-----------
2,094,269
-----------
BRAZIL - 1.6%
2,771,000 Cia Saneamento Basico Estado ...................... 657,959
2,800 Orbotech, Ltd.+ ................................... 89,250
9,900 Telebras, Sponsored ADR ........................... 1,152,731
-----------
1,899,940
-----------
AUSTRIA - 1.5%
11,518 VA Technologie AG ................................. 1,748,923
-----------
MEXICO - 1.4%
51,927 ALFA, S.A. de C.V.+ ............................... 349,376
40,988 Panamerican Beverages, Class A .................... 1,337,234
-----------
1,686,610
-----------
BELGUIM - 1.0%
9,221 Credit Communal Holdings+ ......................... 1,238,144
-----------
SPAIN - 0.6%
55,200 Iberdrola S.A ..................................... 726,459
-----------
IRELAND - 0.3%
77,800 Greencore Group Plc+ .............................. 365,418
-----------
INDONESIA - 0.2%
1,513,500 PT Lippo Securities ............................... 61,916
214,000 Semen Gresik (F) .................................. 125,482
-----------
187,398
-----------
Total Common Stocks
(Cost $109,197,555) ............................. 112,599,700
-----------
PREFERRED STOCKS - 0.5%
(Cost $610,304)
2,808,000 Petroleo Brasileiro SA ............................ 656,680
-----------
RIGHTS - 0.0%
(Cost $0)
9,150 Cia Saneamento Basico Estado Rights ............... 0
4,296 Housing & Commercial Bank Rights .................. 0
-----------
Total Rights (Cost $0) ............................ 0
-----------
WARRANTS - 0.1%
(Cost $4,549)
27,000 Rhone-Poulenc Rorer, Inc., expires 11/05/2001+ .... 94,635
-----------
PRINCIPAL
AMOUNT
---------
REPURCHASE AGREEMENT - 4.2%
(Cost $5,160,000)
$5,160,000 Agreement with State Street Bank & Trust Company,
5.750% dated 12/31/1997,
to be repurchased at $5,161,648 on
01/02/1998, collateralized by
$5,180,000 U.S. Treasury Note,
6.125% due 03/31/1998
(Market Value - $5,345,256) ..................... 5,160,000
-----------
<TABLE>
<CAPTION>
EXPIRATION STRIKE
DATE PRICE
------------ -------
CALL OPTIONS PURCHASED ON STOCK INDICES - 0.0%
<S> <C> <C> <C> <C> <C>
SGD 2,217 Singapore DBS 50 Index ................. 01/22/1998 402.713 0
SGD 2,153 Singapore DBS 50 Index ................. 01/23/1998 406.912 0
SGD 2,121 Singapore DBS 50 Index ................. 01/26/1998 407.393 0
SGD 410 Singapore DBS 50 Index ................. 02/26/1998 404.003 0
------------
Total Call Options Purchased on Stock Indices (Cost $300,000) ........ 0
------------
TOTAL INVESTMENTS (COST $115,272,408*) ............................................ 98.2% 118,511,015
OTHER ASSETS AND LIABILITIES (NET) ................................................ 1.8 2,020,467
----- ------------
NET ASSETS ........................................................................ 100.0% $120,531,482
===== ============
</TABLE>
- --------------
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
As of December 31, 1997, sector diversification was as follows:
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (NOTE 2)
---------------------- ------------ -------------
COMMON STOCKS:
Financial Services ............................ 27.8% $ 33,507,953
Producer Durables ............................. 12.6 15,175,307
Material & Processing ......................... 11.0 13,235,679
Energy ........................................ 8.6 10,312,260
Telecommunications ............................ 7.0 8,483,887
Health Care ................................... 5.0 6,047,922
Technology .................................... 4.9 5,881,271
Consumer Staples .............................. 4.2 5,093,966
Autos & Transportation ........................ 2.8 3,392,710
Utilities ..................................... 2.1 2,537,907
Consumer Discretionary ........................ 1.6 1,896,219
Retail ........................................ 1.3 1,608,692
Computer Software & Services .................. 0.1 89,250
Other ......................................... 4.4 5,336,677
----- ------------
TOTAL COMMON STOCKS ........................... 93.4 112,599,700
OTHER INVESTMENTS ............................. 4.8 5,911,315
----- ------------
TOTAL INVESTMENTS ............................. 98.2 118,511,015
OTHER ASSETS AND LIABILITIES (NET) ............ 1.8 2,020,467
----- ------------
NET ASSETS .................................... 100.0% $120,531,482
===== ============
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
U.S. FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
----------------------------------------------- NET UNREALIZED
EXPIRATION VALUE IN IN EXCHANGE DEPRECIATION
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- ----------- ---------------------- -------- ----------- --------------
02/27/1997 JPY 60,402,050 466,587 470,000 $ (3,413)
-----------
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
- ----------- ---------------------- -------- ----------- --------------
01/02/1998 MXN 106,949 13,252 13,252 $ 0
01/05/1998 THB 13,749,058 294,510 287,217 (7,293)
01/05/1998 MXN 378,248 46,868 46,895 27
02/27/1998 JPY 3,154,301,750 24,365,993 25,787,336 1,421,343
-----------
$ 1,414,077
-----------
Net Unrealized Appreciation of Forward Foreign
Currency Contracts .......................... $ 1,410,664
===========
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADR -- American Depositary Receipt
(F) -- Foreign or Alien Shares
GDR -- Global Depositary Receipt
GDS -- Global Depositary Share
JPY -- Japanese Yen
MXN -- Mexican Peso
SGD -- Singapore Dollar
THB -- Thai Baht
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
TARGET MATURITY 2002 FUND
DECEMBER 31, 1997 (UNAUDITED)
PRINCIPAL VALUE
AMOUNT (NOTE 2)
---------- -------
U.S. TREASURY OBLIGATION - 97.6%
U.S. TREASURY STRIP
$3,405,000 Zero coupon due 11/15/2002 ........................ $2,590,081
----------
TOTAL INVESTMENTS (COST $2,507,482*) .................... 97.6% 2,590,081
OTHER ASSETS AND LIABILITIES (NET) ...................... 2.4 64,804
----- ----------
NET ASSETS .............................................. 100.0% $2,654,885
===== ==========
- --------------
* Aggregate cost for federal tax purposes.
- -------------------------------------------------------------------------------
GLOSSARY OF TERMS
STRIP -- Separate trading of registered interest and principal of securities
- -------------------------------------------------------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SIERRA TRUST FUNDS
1. ORGANIZATION AND BUSINESS
Sierra Trust Funds (the "Trust") was organized under the laws of the
Commonwealth of Massachusetts on February 22, 1989 as a business entity commonly
known as a "Massachusetts business trust." The Trust is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Trust offers sixteen managed investment
funds: the 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. Class I Shares
of the Bond Funds and Equity Funds 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 December
31,1997. 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 December 31,
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 December 31, 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 December 31, 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.
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 Washington Mutual Inc.
("Washington Mutual"), a publicly held corporation, serves as investment
advisor to the Trust. Scudder Kemper Investments, Inc. (formerly Scudder,
Stevens & Clark, Inc.) ("Scudder"), a wholly-owned subsidiary of the Zurich
Group, 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 Asset Management (formerly 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%
=== === ===
</TABLE>
<TABLE>
<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%
=== === === === === ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EQUAL TO OR FEES ON ASSETS
LESS THAN EXCEEDING
$500 MILLION $500 MILLION
------------- --------------
<S> <C> <C>
Corporate Income Fund
Sierra Advisors ............................................................................. .35% .25%
Sub-advisor ................................................................................. .30% .25%
--- ---
Total fees paid to Sierra Advisors* ..................................................... .65% .50%
=== ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON
ASSETS EXCEEDING
FEES ON ASSETS $150 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $150 MILLION $500 MILLION $500 MILLION
------------ -------------- ---------------- ------------
<S> <C> <C> <C>
California Municipal Fund
Sierra Advisors ......................................................... .45% .50% .35%
Sub-advisor*** .......................................................... .20% .15% .15%
--- --- ---
Total fees paid to Sierra Advisors* ................................. .65% .65% .50%
=== === ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON
ASSETS EXCEEDING
FEES ON ASSETS $75 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$75 MILLION $500 MILLION $500 MILLION
-------------- ---------------- ------------
<S> <C> <C> <C>
Florida Insured Municipal Fund
Sierra Advisors ......................................................... .40% .475% .325%
Sub-advisor ............................................................. .20% .125% .125%
--- --- ---
Total fees paid to Sierra Advisors* ................................. .60% .600% .450%
=== === ===
California Insured Intermediate Municipal Fund
Sierra Advisors ......................................................... .45% .525% .375%
Sub-advisor ............................................................. .20% .125% .125%
--- --- ---
Total fees paid to Sierra Advisors* ................................. .65% .650% .500%
=== === ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON
ASSETS EXCEEDING
FEES ON ASSETS $150 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$150 MILLION $500 MILLION $500 MILLION
-------------- ---------------- ------------
<S> <C> <C> <C>
National Municipal Fund
Sierra Advisors ......................................................... .40% .45% .30%
Sub-advisor*** .......................................................... .20% .15% .15%
--- --- ---
Total fees paid to Sierra Advisors* ................................. .60% .60% .45%
=== === ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON
ASSETS FEES ON 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
$100 MILLION $200 MILLION $400 MILLION $500 MILLION $500 MILLION
------------ ------------ --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Growth and Income Fund
Sierra Advisors ........................... .35% .35% .35% .35% .275%
Sub-advisor ............................... .45% .40% .35% .30% .300%
--- --- --- --- ----
Total fees paid to Sierra Advisors* .80% .75% .70% .65% .575%
=== === === === ====
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $100 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$100 MILLION $200 MILLION $200 MILLION
-------------- -------------- ------------
<S> <C> <C> <C>
Growth Fund
Sierra Advisors ......................................................... .40% .40% .375%
Sub-advisor ............................................................. .55% .50% .500%
--- --- ----
Total fees paid to Sierra Advisors* ................................. .95% .90% .875%
=== === ====
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS
EXCEEDING
FEES ON ASSETS $100 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
NAME OF FUND $100 MILLION $500 MILLION $500 MILLION
------------ -------------- -------------- ------------
<S> <C> <C> <C>
Emerging Growth Fund
Sierra Advisors ......................................................... .35% .35% .25%
Sub-advisor ............................................................. .55% .50% .50%
--- --- ---
Total fees paid to Sierra Advisors* ................................. .90% .85% .75%
=== === ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON
ASSETS EXCEEDING
FEES ON ASSETS $50 MILLION FEES ON
EQUAL TO OR AND EQUAL TO ASSETS
LESS THAN OR LESS THAN EXCEEDING
$50 MILLION $125 MILLION $125 MILLION
-------------- ---------------- ------------
<S> <C> <C> <C>
International Growth Fund
Sierra Advisors ......................................................... .45% .35% .15%
Sub-advisor ............................................................. .50% .50% .50%
--- --- ---
Total fees paid to Sierra Advisors* ................................. .95% .85% .65%
=== === ===
</TABLE>
<TABLE>
<CAPTION>
FEES ON ASSETS 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 December 31, 1997 are as follows:
<TABLE>
<CAPTION>
NAME OF FUND FEES WAIVED EXPENSES ABSORBED
------------ ----------- -----------------
<S> <C> <C>
Short Term High Quality Bond Fund ........................................ $ 42,211 $ 12,637
Short Term Global Government Fund ........................................ 146,718 2,453
U.S. Government Fund ..................................................... 976,325 144,377
Corporate Income Fund .................................................... 319,695 --
California Municipal Fund ................................................ 405,826 --
Florida Insured Municipal Fund ........................................... 67,643 --
California Insured Intermediate Municipal Fund ........................... 123,764 --
National Municipal Fund .................................................. 134,558 --
Target Maturity 2002 Fund ................................................ 3,375 25,075
</TABLE>
Sierra Administration, an indirect wholly-owned subsidiary of Washington
Mutual, 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 six months ended December 31, 1997 as follows:
CREDITS ALLOWED
NAME OF FUND BY THE CUSTODIAN
------------ ----------------
Short Term Global Government Fund ...................... 578
U.S. Government Fund ................................... 486
Corporate Income Fund .................................. 2,019
California Municipal Fund .............................. 4,843
Florida Insured Municipal Fund ......................... 139
California Insured Intermediate Municipal Fund ......... 407
National Municipal Fund ................................ 10,209
Growth and Income Fund ................................. 270
Growth Fund ............................................ 6,122
Emerging Growth Fund ................................... 4,349
International Growth Fund .............................. 455
Target Maturity 2002 Fund .............................. 16
For the six months ended December 31, 1997, Great Western Financial Securities
Corporation ("GW Securities") and Sierra Investment Services Corporation
("Sierra Services"), both indirect wholly-owned subsidiaries of Washington
Mutual, have informed the Funds that they received $383,480 and $67,329,
respectively, representing commissions (front-end sales charges). In addition,
for the six months ended December 31, 1997, Sierra Services and Funds
Distributor Inc. informed the Funds that they received $572,823 from CDSC
fees.
4. TRUSTEES' FEES
No director, officer or employee of Washington Mutual or its subsidiaries, 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. The Trust pays each Trustee who is not a director,
officer or employee of Washington Mutual or its subsidiaries, 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 six months ended December 31, 1997, Sierra Advisors reimbursed the
Funds for Trustees' fees paid in connection with 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 six months ended December 31, 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 . $ 13,794 $ 10,501 $ 3,500 $ 1,772 $ 591
Short Term Global Government Fund . 50,594 8,636 2,879 2,366 788
U.S. Government Fund .............. 302,400 73,589 24,530 32,672 10,891
Corporate Income Fund ............. 231,085 77,747 25,916 7,531 2,510
California Municipal Fund ......... 398,130 100,052 33,350 28 9
Florida Insured Municipal Fund .... 27,040 19,300 6,433 75 25
California Insured Intermediate
Municipal Fund .................. 53,898 80,730 26,910 7 2
National Municipal Fund ........... 217,318 22,750 7,584 5 2
Growth and Income Fund ............ 221,774 158,021 52,673 51,921 17,307
Growth Fund ....................... 137,822 116,268 38,756 53,519 17,839
Emerging Growth Fund .............. 205,212 111,039 37,013 29,460 9,820
International Growth Fund ......... 63,116 17,837 5,946 38,774 12,924
Target Maturity 2002 Fund ......... 3,375 -- -- -- --
</TABLE>
6. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities,
excluding U.S. Government and short-term investments, for the six months ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
----------- --------- -----
<S> <C> <C>
Short Term High Quality Bond Fund ................................... $ 1,350,621 $ 4,897,011
Short Term Global Government Fund ................................... 15,429,527 22,198,792
Corporate Income Fund ............................................... -- 35,346,933
California Municipal Fund ........................................... 96,794,831 100,513,049
Florida Insured Municipal Fund ...................................... 681,585 4,690,354
California Insured Intermediate Municipal Fund ...................... 3,126,750 4,398,656
National Municipal Fund ............................................. 37,567,591 59,817,939
Growth and Income Fund .............................................. 229,172,010 232,298,121
Growth Fund ......................................................... 222,363,774 202,568,214
Emerging Growth Fund ................................................ 122,892,857 170,745,665
International Growth Fund ........................................... 57,977,535 78,854,106
</TABLE>
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities, excluding short-term investments, for the six months ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
NAME OF FUND PURCHASES SALES
------------ --------- -----
<S> <C> <C>
Short Term High Quality Bond Fund ................................... $ 1,727,288 $ 4,689,798
Short Term Global Government Fund ................................... 2,450,814 198,768
U.S. Government Fund ................................................ 262,226,172 420,770,050
Corporate Income Fund ............................................... 7,124,219 7,218,417
Target Maturity 2002 Fund ........................................... -- 291,186
</TABLE>
At December 31, 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 ................................... $ 214,979 $ 10,385
Short Term Global Government Fund ................................... 206,293 1,676,097
U.S. Government Fund ................................................ 8,611,982 282,029
Corporate Income Fund ............................................... 19,281,369 201,683
California Municipal Fund ........................................... 29,190,195 16,408
Florida Insured Municipal Fund ...................................... 2,238,192 --
California Insured Intermediate Municipal Fund ...................... 4,399,963 --
National Municipal Fund ............................................. 17,845,989 --
Growth and Income Fund .............................................. 48,786,604 8,420,249
Growth Fund ......................................................... 37,306,853 9,402,865
Emerging Growth Fund ................................................ 73,663,271 2,376,280
International Growth Fund ........................................... 13,662,895 10,424,288
Target Maturity 2002 Fund ........................................... 82,599 --
</TABLE>
Option activity for the Short Term Global Government Fund for the six months
ended December 31, 1997 was as follows:
WRITTEN OPTIONS ON FOREIGN CURRENCY: PREMIUMS
- ----------------------------------- --------
Options outstanding at June 30, 1997 ............................. $ 126,371
Options written .................................................. 200,940
Options expired .................................................. (68,915)
Options exercised ................................................ (70,325)
Options closed ................................................... (149,036)
--------
Options outstanding at December 31, 1997 ......................... $ 39,035
=========
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 period ..................... $113,371,817 $28,984,375
Average amount outstanding during the period* .................... $ 91,123,161 $28,861,399
Average monthly shares outstanding during the period ............. 36,249,592 20,119,371
Average debt per share outstanding during the period ............. $2.51 $1.43
- --------------
* 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 six months ended December 31, 1997.
</TABLE>
Fee income earned for the six months ended December 31, 1997 by the U.S.
Government and Corporate Income Funds for dollar roll transactions aggregated
$881,760 and $278,370, respectively.
Information regarding reverse repurchase agreement transactions by the U.S.
Government Fund is as follows:
REVERSE REPURCHASE AGREEMENTS:
-----------------------------
Maximum amount outstanding during the period .......... $94,457,163
Average amount outstanding during the period* ......... $11,572,139
Average monthly shares outstanding during the period .. 36,249,592
Average debt per share outstanding during the period .. $0.32
- --------------
* 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 six months ended December 31, 1997.
Interest rates ranged from 4.150% to 6.300% during the year. Interest paid for
the six months ended December 31, 1997, on borrowings by the Fund under
reverse repurchase agreements, aggregated $190,850.
7. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest, each
without par value.
As of December 31, 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 ................. 1,385,808 15.88%
As of December 31, 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 ................................. 156 102 24.00% 100.00%
Florida Insured Municipal Fund ............................ 164 111 100.00 100.00
California Insured Intermediate Municipal Fund ............ 159 103 100.00 100.00
National Municipal Fund ................................... 123 100 100.00 100.00
</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 December 31, 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 $ 761,531
Short Term Global Government Fund ............ -- 2,060,710 --
U.S. Government Fund ......................... 37,871,949 33,050,799 2,577,403
Corporate Income Fund ........................ 22,615,168 9,952,150 147,949
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 was signed extending the Agreement to October 28,
1997.
12. SUBSEQUENT EVENT
Effective January 17, 1998, Scudder resigned as Sub-advisor to the Short Term
High Quality Bond and Short Term Global Government Funds. Until a Sub-advisor
is selected and approved, the Advisor has made arrangements to have the Funds
Sub-advised by Composite Research & Management, an affiliate of Washington
Mutual.
On January 30, 1998, the Short Term High Quality Bond Fund acquired the assets
and liabilities of the Short Term Global Government Fund pursuant to an
Agreement and Plan of Reorganization approved by the Short Term Global
Government Fund's shareholders at a shareholder meeting held on January 9,
1998. As of December 31, 1997, the net assets of the Short Term Global
Government Fund were $39.7 million. The business combination was treated as a
taxable event.
