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The Govett Funds, Inc.
[logo]
Nationally Distributed by Van Kampen American Capital Distributors, Inc.
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LETTER TO SHAREHOLDERS
February 16, 1996
Dear Shareholder:
1995 was an interesting year for investors worldwide, as financial markets in
the United States experienced significant growth and overseas economies faced
challenges.
In the United States, the market had anticipated an overheating of the economy
and a possible "hard landing" which drove down long bond prices. As it turned
out, bond prices rallied in the U.S. and overseas, as investors recognized that
a hard landing was not occurring and that, in fact, deflation rather than
inflation was likely. As the global markets enter 1996, bond prices have
apparently stabilized under this scenario, while the equity markets have not yet
fully reflected these conditions.
In the United Kingdom, Chancellor of the Exchequer Kenneth Clarke continued to
take a tough fiscal stance, matching a L3.1 billion tax cut by a L3.25 billion
spending cut. During most of the year, the British economy slowed: inventories
rose, housing construction stagnated, and exports to Europe remained in the
doldrums. However, consumer spending appeared to strengthen during the third
quarter. This development tends to confirm the continued integrity of the U.K.
economy and to reinforce the possibility that short-term interest rates can be
further eased without weakening the pound Sterling. We expect gross domestic
product (GDP) growth of around 2.7 percent in 1996.
In order to meet the deficit targets set by the Maastricht Treaty, European
fiscal policies in 1995 were generally too tight to allow significant economic
growth. Monetary conditions were also tied to the tight policy of the German
Bundesbank, driven by fears about wage inflation in Germany. The German
third-quarter GDP was flat, as domestic sales fell and inventories rose. Then,
at the beginning of 1996, the Bundesbank cut the discount rate by fifty basis
points to 3 percent. The GDP news may reinforce the Bundesbank's confidence in
its ability to reduce short term interest rates further in 1996. These cuts,
together with income tax cuts that became effective this January, should result
in an economic growth rate in Germany of about 2 percent in 1996.
In Japan, there are signs that economic activity is bottoming out. Retail
sales have begun to grow at an annual rate of one percent, showing some
improvement in consumer confidence. Similarly, profits are beginning to
1
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turn around as the weakening yen begins to make Japanese products more
competitive worldwide. We believe that GDP in Japan could grow by approximately
2.5 percent in 1996.
Elsewhere in the Pacific Rim, stock market performance has been lackluster.
The latest selloff occurred largely in response to tighter domestic monetary
policies, although the circumstances conducive to a selloff -- budget deficits
and fears of the economy overheating -- have been present since last year.
Although interest rates in some countries, such as Malaysia and the Philippines,
may rise further, interest rates may have peaked elsewhere, Hong Kong and
Singapore in particular.
Recent news from Latin America suggests that these economies may see some
revival in 1996. The unemployment rate in Argentina has dropped, while the
Mexican trade surplus came close to a record high in October. There are also
signs that growth rates in Brazil and Chile are slowing to levels more
compatible with lower inflation. Therefore we are hopeful that monetary
conditions in this region will ease in 1996. However, unlike the Pacific Rim
markets, capital flows in Latin America are dominated by short-term speculative
needs. As a result, these countries are less able to pursue independent monetary
policies and are more susceptible to the direction of U.S. monetary policy.
Peter Pejacsevich
CHIEF INVESTMENT OFFICER
JOHN GOVETT & CO. LIMITED
2
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PORTFOLIO MANAGEMENT REVIEW
GOVETT INTERNATIONAL
EQUITY FUND
THE FOLLOWING IS AN INTERVIEW WITH GARETH L. WATTS, PORTFOLIO MANAGER OF THE
GOVETT INTERNATIONAL EQUITY FUND.
Q. WHAT MARKET CONDITIONS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
DURING 1995?
A. 1995 was a relatively mixed year for overseas markets. As measured by the
Morgan Stanley Capital International EAFE Index, a broad-based, unmanaged index
that reflects the performance of major world equity markets, these markets moved
ahead by 8.1 percent overall, a return significantly behind the 37.45 percent in
the U.S. market as measured by the Standard & Poor's 500 Composite Stock Price
Index. In general, while some markets moved ahead strongly--although none
approached the vigor of the U.S. market--others experienced significant
declines.
European markets rose overall by 18.5 percent over the year (adjusted for U.S.
dollars), led by a gain of 42.9 percent in Switzerland, 25.8 percent in the
Netherlands, and 25.2 percent in Spain. The French market, by contrast, managed
a gain of only 9.7 percent, while in Italy, equities actually lost ground by
falling 1.6 percent.
The Japanese market (which at year-end made up 40.9 percent of the EAFE
Index), lost 2.1 percent over the year, as the economy failed to show any
tangible signs of recovery. The yen roared ahead in the early part of 1995, at
one time reaching around 80 yen to the dollar before falling back to 103 yen to
the dollar at year-end.
Emerging markets generally lost ground, partly as a result of the Mexican
crisis earlier in the year. Although the Mexican market actually advanced by
17.0 percent in local currency terms, the collapse of the peso translated these
returns to a dollar-adjusted loss of 25.2 percent. Over the same period, the
Brazilian market fell by 14.0 percent (dollar-adjusted), while the Argentinian
market rose by a modest 2.4 percent. Far Eastern markets were mixed, with
returns ranging from advances of 23.1 percent in Hong Kong (by far the best
performing market in the region), and 6.0 percent in Indonesia, to a decline of
30.1 percent in Taiwan.
3
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Q. HOW DID YOU POSITION THE FUND IN RESPONSE TO THESE EVENTS?
A. The Fund benefited from its general overweighting in European markets,
particularly Netherlands and Switzerland earlier in the year. The Fund also
benefited from a partial currency hedge taken out at 82 yen to the dollar at
mid-year. This hedge protected the Fund from currency depreciation while taking
advantage of a recovery in the domestic Japanese market.
We eliminated the Fund's exposure to Latin America at the time of the Mexican
crisis, avoiding these markets' underperformance. Later in the year, we invested
cautiously in Latin American stocks.
The emerging markets content of the Fund -- particularly Far Eastern stocks --
increased towards year-end, and further additions were made in the early days of
1996. These markets appear set to benefit from anticipated monetary easing in
the U.S. and from international investors seeking to find attractive markets
that had lagged in 1995. At December 31, the Fund's weighting in the Far East
(excluding Japan) had risen to 18.7 percent of its total assets, and in Latin
America to 1.9 percent. In addition, 0.3 percent was held in other emerging
markets.
We reduced the U.K. content of the Fund to 18.0 percent toward year-end as a
result of increasing political uncertainty, while making modest reductions in
holdings of stocks in other European countries. Exposure to the Japanese market
rose to 27 percent, with a proportion of the resulting yen exposure hedged back
to U.S. dollars.
At year-end, the Fund's largest holdings included Overseas Union Bank in
Singapore (1.79 percent of the Fund's total net assets), Commerzbank in Germany
(1.37 percent), and Philips Electronics in the Netherlands (1.26 percent).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND'S COUNTRY ALLOCATIONS
<S> <C>
Percentage of Total Net Assets
as of December 31, 1995
Japan 27.0%
Far East (ex-Japan) 18.0%
United Kingdom 18.0%
Germany 7.2%
Switzerland 5.8%
Netherlands 5.7%
France 5.4%
Sweden 5.0%
Other 7.9%
</TABLE>
4
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Q. HOW DID THE FUND PERFORM DURING THE PERIOD?
A. The Fund achieved a total return at net asset value (without a Class A
front-end sales charge) of 11.01 percent. When maximum front-end sales charges
of 4.95 percent are taken into consideration, the Fund achieved a total return
of 5.51 percent. Both total return calculations include reinvestment of a
capital gains distribution of $0.01 per share. By comparison, the EAFE Index
achieved a total return of 11.55 percent for the same period. The Index does not
include any commission or fees that would be paid by an investor purchasing the
securities it represents. From inception on January 7, 1992 through December 31,
1995, the Fund had an average annual total return of 10.46 percent at net asset
value and 9.07 percent when maximum front-end sales charges are taken into
account. As described in the financial statements and the accompanying notes, in
1995 the Manager (and in prior years the Distributor) absorbed a portion of the
Fund's expenses. If these expenses had not been absorbed, the reported total
returns of the Fund would have been lower.
The Fund benefited during the year from its relatively high European
weighting, the yen hedge and from individual stock performance. Technology
stocks fared well across the globe, for instance, and a number of the Fund's
holdings in this area moved ahead strongly as a result.
5
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C> <C>
Govett International Equity Fund vs.
MSCI EAFE Index
1/7/92-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = 5.51%
3 Year Avg. Annual = 14.30%
Inception Avg. Annual = 9.07%
Govett International Equity Fund Morgan Stanley Capital
at Maximum Offering Price International EAFE Index
1/7/92 9,506 10,000
6/92 9,582 8,730
12/92 9,000 8,437
6/93 11,108 10,311
12/93 13,905 11,215
6/94 13,285 12,114
12/94 12,732 12,481
6/95 13,221 12,835
12/95 14,134 13,936
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C>
Govett International Equity Fund vs.
MSCI EAFE Index
1/7/92-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = 5.51%
3 Year Avg. Annual = 14.30%
Inception Avg. Annual = 9.07%
Govett International Equity Fund
at Net Asset Value
1/7/92 10,000
6/92 10,080
12/92 9,468
6/93 11,685
12/93 14,628
6/94 13,976
12/94 13,394
6/95 13,908
12/95 14,869
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. THE MORGAN STANLEY
CAPITAL INTERNATIONAL EAFE INDEX IS A BROAD-BASED UNMANAGED INDEX THAT
REPRESENTS THE GENERAL PERFORMANCE OF INTERNATIONAL EQUITY MARKETS. IT DOES NOT
INCLUDE ANY COMMISSIONS OR FEES THAT WOULD BE PAID BY AN INVESTOR PURCHASING THE
SECURITIES IT REPRESENTS. ALL SALES CHARGES AND ALL OTHER FEES AND EXPENSES ARE
INCLUDED IN THE PERFORMANCE SHOWN FOR GOVETT INTERNATIONAL EQUITY FUND SHARES
WITH ENDING VALUE OF $14,134. IN ADDITION, SINCE INVESTORS PURCHASE SHARES OF
THE FUND WITH VARYING SALES CHARGES DEPENDING PRIMARILY ON VOLUME PURCHASED, THE
FUND'S PERFORMANCE AT NET ASSET VALUE ALSO IS SHOWN. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
Q. LOOKING TOWARD 1996, WHAT IS YOUR OUTLOOK FOR THE GLOBAL EQUITY MARKETS AND
FOR THE FUND?
A. Assuming that monetary policymakers around the world continue to focus on
controlling inflation, equity markets should benefit from a stable interest rate
environment and ongoing growth. Barring negative surprises, international
markets, having lagged the U.S. growth rate in 1995, should again become the
focus of attention for many investors.
Gareth L. Watts
PORTFOLIO MANAGER
GOVETT INTERNATIONAL EQUITY FUND
6
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GOVETT EMERGING
MARKETS FUND
THE FOLLOWING IS AN INTERVIEW WITH RACHAEL MAUNDER, PORTFOLIO MANAGER OF THE
GOVETT EMERGING MARKETS FUND.
Q. WHAT MARKET CONDITIONS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
DURING 1995?
A. Once again, the dominant force driving emerging markets' performance in 1995
was the trend in U.S. interest rates. Fears of excessive economic growth fueling
inflationary pressure resulted in a tight monetary stance in the U.S. during the
first quarter. This position contributed to poor performance in virtually all
Asian and Latin American markets which are sensitive to U.S. interest rates, and
to the relative strength of markets in Africa and the Middle East, which are not
sensitive to U.S. interest rates.
The other major force contributing to first quarter weakness in emerging
markets was the effect of the devaluation of the Mexican peso on December 20,
1994. This event continued to negatively affect investor sentiment not only
towards Mexico but towards other Latin American markets, particularly Brazil and
Argentina.
During the year it became increasingly apparent that the pace of U.S. economic
activity had been overestimated. This realization paved the way for a more
relaxed monetary policy in the U.S. and in Europe. The turnaround in U.S.
interest rates, combined with U.S.-led aid packages for Mexico and Argentina,
triggered significant rallies in both Latin American and Asian markets.
Although there was some consolidation during the third and fourth quarters,
investors began to focus on stronger prospects for emerging markets in 1996.
Much of the developing positive picture centered on the more supportive interest
rate environment, as the U.S. bond market rallied to the levels of late 1993.
The very attractive valuation levels of the equity markets boosted this new set
of perceptions.
Q. HOW DID YOU POSITION THE FUND IN RESPONSE TO THESE EVENTS?
A. The Fund held an underweight position in Latin America for much of the first
half of 1995, when the problems associated with the Mexican devaluation
continued to undermine confidence in these markets. Investments were focused
instead on markets such as South Africa and
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Turkey which are not sensitive to the U.S. dollar. We also favored Israel, where
improvements in the domestic economy and progress in Middle East peace talks
drove performance. Toward the end of the first quarter, however, the exposure to
some U.S. dollar-sensitive markets which had fallen to oversold levels, was
increased. Most notably, we made further investments in Thailand and Malaysia.
Towards the end of the second quarter, the Turkish positions were sold
completely, after nearly doubling in value. These assets were redeployed in
Latin American markets, particularly Mexico, Argentina and Colombia, as prices
grew more attractive and the economic outlook improved.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND...S COUNTRY ALLOCATIONS
<S> <C>
Percentage of Total Net Assets
as of December 31, 1995
Brazil 12.8%
Hong Kong 8.8%
Mexico 8.1%
Thailand 6.5%
Argentina 6.5%
Singapore 6.4%
South Africa 5.7%
South Korea 5.6%
Malaysia 5.4%
Chili 4.2%
India 4.1%
Other 25.9%
</TABLE>
Q. HOW DID THE FUND PERFORM DURING 1995?
A. 1995 proved to be a disappointing year for investments in emerging markets,
as reflected in the Fund's performance which registered a decline of 7.92
percent at net asset value (without a Class A front-end sales charge). When
maximum sales charges of 4.95 percent are taken into consideration, the Fund
achieved a total return of -12.46 percent. Both total return calculations
include reinvestment of a capital gains distribution of $0.01. However, the
Fund's broad diversification across markets and countries helped protect it from
some of the worst volatility, and as a result the Fund fared significantly
better than the Morgan Stanley Capital International Emerging Markets Index, a
broad-based unmanaged index that reflects the performance of equity markets in
emerging markets countries, which fell by 10.9. The Index does not include any
commission or fees that would be paid by an investor purchasing the securities
it represents. From inception on January 7, 1992 through December 31, 1995, the
Fund had an average annual total return of 11.62 percent at net asset value and
10.62 percent when maximum front-end sales charges are taken into account. As
described in the financial statements and the
8
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accompanying notes, in 1995 the Manager (and in prior years the Distributor)
absorbed a portion of the Fund's expenses. If these expenses had not been
absorbed, the reported total returns of each Fund would have been lower.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C> <C>
Govett Emerging Markets Fund vs.
MSCI Emerging Markets Index
1/7/92-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = (12.46%)
3 Year Avg. Annual = 11.27%
Inception Avg. Annual = 10.21%
Govett Emerging Markets Fund Morgan Stanley Capital
at Maximum Offering Price International Emerging Markets Index
1/7/1992 9505 10000
6/92 10475 9838
12/92 10162 9784
6/93 12433 10928
12/93 18315 16193
6/94 15966 14904
12/94 15997 17048
6/95 15179 15769
12/95 14,731 15215
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C>
Govett Emerging Markets Fund vs.
MSCI Emerging Markets Index
1/7/92-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = (12.46%)
3 Year Avg. Annual = 11.27%
Inception Avg. Annual = 10.21%
Govett Emerging Markets Fund
at Net Asset Value
1/7/1992 10000
6/92 11020
12/92 10690
6/93 13080
12/93 19267
6/94 16796
12/94 16829
6/95 15968
12/95 15497
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. THE MORGAN STANLEY
CAPITAL INTERNATIONAL EMERGING MARKETS INDEX IS A BROAD-BASED UNMANAGED INDEX
THAT REPRESENTS THE GENERAL PERFORMANCE OF EQUITY MARKETS IN EMERGING MARKETS
COUNTRIES. IT DOES NOT INCLUDE ANY COMMISSIONS OR FEES THAT WOULD BE PAID BY AN
INVESTOR PURCHASING THE SECURITIES IT REPRESENTS. ALL SALES CHARGES AND ALL
OTHER FEES AND EXPENSES ARE INCLUDED IN THE PERFORMANCE SHOWN FOR GOVETT
EMERGING MARKETS FUND SHARES WITH ENDING VALUE OF $14,731. IN ADDITION, SINCE
INVESTORS PURCHASE SHARES OF THE FUND WITH VARYING SALES CHARGES DEPENDING
PRIMARILY ON VOLUME PURCHASED, THE FUND'S PERFORMANCE AT NET ASSET VALUE ALSO IS
SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUNDS
WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.
Q. LOOKING TOWARD 1996, WHAT IS YOUR OUTLOOK FOR THE GLOBAL MARKETS AND FOR THE
FUND?
A. Following two years of disappointing performance, emerging markets appear to
be poised for a stronger period in 1996. Stock prices moved toward the bottom of
their historic ranges. When one takes into account the scope for recovery in
economic activity in Mexico and Argentina in 1996, and an acceleration
elsewhere, stock values appear even more attractive. Moreover, while the rally
in the U.S. bond market has not yet
9
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been fully reflected in the level of domestic interest rates in many emerging
markets, there are nevertheless clear indicators of the potential for a more
accommodating monetary policy in many regions.
In anticipation of a recovery in emerging markets in 1996, we made significant
investments in certain areas, particularly in Latin America, where there appears
to be the possibility for a sharp rally from the depressed levels reached in
1995, particularly in view of these markets' position as beneficiaries of
reduced interest rates in the U.S. In Asia, we concentrated on markets such as
Thailand, where there appears to be some room for interest rates to ease. The
Fund also invested in Korea and Taiwan, where political concerns during 1995
held back the equity markets despite strengthening economic indicators.
These purchases were financed by reducing cash and by taking profits in the
South African equity market, which appears fully valued. Sales have also been
made in Greece, where the uncertainty regarding the Prime Minister's health
depressed the equity market.
Rachael E. Maunder
PORTFOLIO MANAGER
GOVETT EMERGING MARKETS FUND
10
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GOVETT SMALLER COMPANIES FUND
THE FOLLOWING IS AN INTERVIEW WITH JEFF BERNSTEIN, PORTFOLIO MANAGER OF THE
GOVETT SMALLER COMPANIES FUND. MR. BERNSTEIN TOOK OVER AS PORTFOLIO MANAGER
EFFECTIVE DECEMBER 30, 1995, FOLLOWING GARRETT VAN WAGONER'S DEPARTURE.
Q. WHAT WERE THE KEY FACTORS THAT CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE
DURING 1995?
A. On the whole, the Fund experienced optimal market conditions in 1995, and it
was correctly focused on the highest growth areas. At the beginning of the year,
investors felt general uncertainty regarding the economy, focusing on the U.S.
dollar, interest rates, and the federal budget deficit. In response, the Fund
concentrated on companies with the strongest potential to exceed earnings
estimates. Opportunities for continued strong growth in the semiconductor and
communications industries made these sectors particularly attractive. The Fund
was well rewarded for maintaining its holdings in these sectors, as the U.S.
economy experienced a "soft landing" and recession was averted. After a
half-year of inaction, as inflation continued to be low, the Federal Reserve
Board apparently began to perceive that the economy was struggling, and eased
credit. Growth in the U.S. as measured by gross domestic product, was volatile
and unpredictable throughout most of the year, contributed to uncertainty in the
financial markets.
Q. WHAT CHANGES WERE MADE TO THE PORTFOLIO DURING THE YEAR?
A. The Fund made one critical investment transition during 1995. Having started
the year with a significant overweighting in the semiconductor industry, the
Fund took profits in the unprecedented rally in these companies' share prices.
Assets were shifted into the emerging Internet sector in late summer and early
fall, as networking, communications and Internet stocks began to outperform
semiconductor stocks in the last quarter.
Q. WHAT SECTORS PROVED TO BE MOST BENEFICIAL FOR THE FUND?
A. The Fund experienced its greatest gains from technology stocks, followed by
stocks of financial institutions due to favorable interest rates and takeover
speculation. However, we do not view small banks and
11
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savings and loans as growth companies, and we do not currently intend to
overweight the Fund's investments in these areas in 1996. Positive trends in
interest rates are forecast, and we see the restructuring in the insurance
industry as providing interesting opportunities. Retail stocks performed poorly,
and the Fund benefited from its lack of exposure to retail companies. We
anticipate the high consumer debt and marginal income gains should continue to
dampen the retail market, and we currently intend to continue to be
underweighted in this sector.
Q. HOW DID THE FUND PERFORM IN 1995?
A. The Fund achieved a total return at net asset value (without a Class A
front-end sales charge) of 69.08 percent. When maximum front-end sales charges
of 4.95 percent are taken into consideration, the Fund achieved a total return
of 60.73 percent. Both total return calculations include reinvestment of
dividends and capital gains distributions of $2.125 per share. By comparison,
the NASDAQ Composite Index, a broad-based, unmanaged index that reflects the
performance of smaller companies, achieved a total return of 39.92 percent for
the same period. The Index does not include any commission or fees that would be
paid by an investor purchasing the securities it represents. From inception on
January 1, 1993 through December 31, 1995, the Fund had an average annual total
return of 51.08 percent at net asset value and 48.55 percent when maximum
front-end sales charges are taken into account. As described in the financial
statements and the accompanying notes, in 1995 the Manager (and in prior years
the Distributor) absorbed a portion of the Fund's expenses. If these expenses
had not been absorbed, the reported total returns of each Fund would have been
lower.
12
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C> <C>
Govett Smaller Companies Fund vs.
NASDAQ Composite Index
1/1/93-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = 60.73%
3 Year Avg. Annual = 48.55%
Inception Avg. Annual = 48.55%
Govett Smaller Companies Fund NASDAQ Composite
at Maximum Offering Price Index
1/1/93 9506 10000
6/93 12091 10395
12/93 15067 11475
6/94 14971 10431
12/94 19387 11105
6/95 25470 13789
12/95 19397 15341
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C>
Govett Smaller Companies Fund vs.
NASDAQ Composite Index
1/1/93-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = 60.73%
3 Year Avg. Annual = 48.55%
Inception Avg. Annual = 48.55%
Govett Smaller Companies Fund
at Net Asset Value
1/1/93 10000
6/93 12720
12/93 15850
6/94 15750
12/94 20395
6/95 26794
12/95 34483
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. THE NASDAQ COMPOSITE
INDEX IS A BROAD-BASED UNMANAGED INDEX THAT REPRESENTS THE GENERAL PERFORMANCE
OF THE STOCKS OF SMALLER COMPANIES. IT DOES NOT INCLUDE ANY COMMISSIONS OR FEES
THAT WOULD BE PAID BY AN INVESTOR PURCHASING THE SECURITIES IT REPRESENTS. ALL
SALES CHARGES AND ALL OTHER FEES AND EXPENSES ARE INCLUDED IN THE PERFORMANCE
SHOWN FOR GOVETT SMALLER COMPANIES FUND SHARES WITH ENDING VALUE OF $32,779. IN
ADDITION, SINCE INVESTORS PURCHASE SHARES OF THE FUND WITH VARYING SALES CHARGES
DEPENDING PRIMARILY ON VOLUME PURCHASED, THE FUND'S PERFORMANCE AT NET ASSET
VALUE ALSO IS SHOWN. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT
IN THE FUNDS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Q. WHAT IS THE OUTLOOK FOR SMALLER COMPANIES IN THE NEXT SIX MONTHS?
A. Investors' fears about earnings will continue to influence smaller companies'
stock prices. Nevertheless, smaller companies as well as large corporations
should eventually benefit from declining interest rates and orderly economic
growth. The next six months should represent a classic stock pickers' market.
The Fund will continue to focus on identifying and holding shares of companies
with the highest earnings growth and most exciting business prospects.
Jeff Bernstein
PORTFOLIO MANAGER
GOVETT SMALLER COMPANIES FUND
13
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GOVETT PACIFIC STRATEGY FUND
THE FOLLOWING IS AN INTERVIEW WITH PETER ROBSON, PORTFOLIO MANAGER OF THE
GOVETT PACIFIC STRATEGY FUND.
Q. WHAT MARKET CONDITIONS HAD THE GREATEST EFFECT ON THE FUND'S PERFORMANCE IN
1995?
A. In 1995, after many years of rapid growth in Asia, many of the more immature
Asian economies started suffering from accelerating inflation and a
deteriorating trade balance. Malaysia, Thailand and Indonesia felt the brunt of
these trends, but Taiwan and South Korea also experienced a sharp deterioration
in their trade balances. The central banks of these countries raised interest
rates and imposed fiscal and credit controls to reduce private sector
expenditures. Compounding the problem of an overheating economy, political
uncertainties unsettled a number of the region's stock markets. In particular,
the South Korean bribery scandal affected several very senior business figures
and an ex-President. Taiwan's relations with China deteriorated, climaxing with
a series of Chinese missile tests off the Taiwanese coast. In Thailand, the
newly elected coalition government failed to win credibility in the eyes of
local and foreign investors, who felt that the country's economic problems would
not be addressed rapidly enough.
The poor performance in the more immature markets starkly contrasted with the
sharp revival in fortunes for the more developed markets of Hong Kong and
Australia. These markets, which are more sensitive to U.S. interest rate
movements, benefited from the yield contraction which affected U.S. bonds.
The difficult time experienced by the Japanese economy vindicated the Fund's
significant underweighting in this market over the past two years. However,
signs are beginning to emerge indicating that the bulk of the bad debt problem
plaguing the Japanese banking system has been eradicated and that some growth is
returning.
Q. HOW DID YOU POSITION THE FUND IN RESPONSE TO THESE EVENTS?
A. The Fund took the opportunity to raise its exposure significantly to the Hong
Kong market early in 1995, switching out of the North East Asia markets of
Taiwan and South Korea. In Australia, the Fund benefited from a shift from an
overweighting in the commodity sector into the industrial sector.
14
<PAGE>
Over the third quarter, the Fund maintained a substantial cash position of
around ten percent. These assets were reinvested during the fourth quarter in
Malaysian, Thai and Japanese stocks, as these markets bottomed in anticipation
of a rally in the new year.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND...S COUNTRY ALLOCATIONS
<S> <C>
Percentage of Total Net Assets
as of December 31, 1995
Japan 23.7%
Hong Kong 16.7%
Thailand 11.5%
Malaysia 10.1%
Singapore 9.8%
South Korea 6.3%
Taiwan 4.5%
Australia 4.5%
China 3.1%
Indonesia 2.4%
Philippines 1.9%
India & Pakistan 1.2%
Other 4.3%
</TABLE>
Q. HOW DID THE FUND PERFORM IN 1995?
A. The Fund achieved a total return at net asset value (without a Class A
front-end sales charge) of -2.96 percent. When maximum front-end sales charges
of 4.95 percent are taken into consideration, the Fund achieved a total return
of -7.78 percent. By comparison, the Morgan Stanley Capital International
Pacific Index, a broad-based, unmanaged index that is believed to reflect the
performance of equity markets in the Pacific Rim, achieved a total return of
1.76 percent for the same period. The Index does not include any commission or
fees that would be paid by an investor purchasing the securities it represents.
From inception on January 1, 1994 through December 31, 1995, the Fund had an
average annual total return of -7.64 percent at net asset value and -9.95
percent when maximum front-end sales charges are taken into account. As
described in the financial statements and the accompanying notes, in 1995 the
Manager (and in prior years the Distributor) absorbed a portion of the Fund's
expenses. If these expenses had not been absorbed, the reported total returns of
each Fund would have been lower.
15
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C> <C> <C>
Govett Pacific Strategy Fund vs.
the MSCI Pacific Index
1/1/94-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = -7.78%
3 Year Avg. Annual = NA
Inception Avg. Annual = -9.95%
Govett Pacific Strategy Fund MSCI Pacific Govett Pacific Strategy Fund
at Maximum Offering Price Index at Net Asset Value
1/1/94 9506 10000 10000
6/94 8527 8442 8970
12/94 8356 8547 8790
6/95 7994 9161 8410
12/95 8356 9690 8540
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. THE MORGAN STANLEY
CAPITAL INTERNATIONAL PACIFIC INDEX IS A BROAD-BASED, UNMANAGED INDEX THAT
REPRESENTS THE GENERAL STOCK MARKET PERFORMANCE IN THE PACIFIC RIM. IT DOES NOT
INCLUDE ANY COMMISSIONS OR FEES THAT WOULD BE PAID BY AN INVESTOR PURCHASING THE
SECURITIES IT REPRESENTS. ALL SALES CHARGES AND ALL OTHER FEES AND EXPENSES ARE
INCLUDED IN THE PERFORMANCE SHOWN FOR GOVETT PACIFIC STRATEGY FUND SHARES WITH
ENDING VALUE OF $8,118. IN ADDITION, SINCE INVESTORS PURCHASE SHARES OF THE FUND
WITH VARYING SALES CHARGES DEPENDING PRIMARILY ON VOLUME PURCHASED, THE FUND'S
PERFORMANCE AT NET ASSET VALUE ALSO IS SHOWN. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT IN THE FUNDS WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
Q. LOOKING TOWARDS 1996, WHAT IS YOUR OUTLOOK FOR THE GLOBAL EQUITY MARKETS AND
FOR THE FUND?
A. During 1995 global equity and bond markets were dominated by strong
performances in the U.S. and European markets. We believe that in 1996
leadership may shift markedly from these markets to those of the Pacific Basin
and other emerging markets.
We believe that Japan is likely to see a pick-up in real economic growth for
the first time since the early nineties, as the problems of the banking system
are resolved and consumer confidence returns. Given this improved outlook, the
Fund intends to have significant exposure to this market over the coming year,
focusing on areas that should benefit from a resurgence in domestic demand.
Elsewhere in the Pacific region we
16
<PAGE>
expect that those economies which had to contend with a serious deterioration in
their trade balance during 1995 will see some improvement in 1996, and
consequently will experience some relaxation in the tight monetary environment
currently prevailing. Markets to which this scenario applies include Taiwan,
Thailand, Malaysia and the Philippines. The loosening of monetary policy should
also help support the underlying markets in 1996.
The more mature markets of Australia and Hong Kong are likely to lag the
smaller markets and we expect that the Fund will have a low weighting of
Australian securities, and will further switch its exposure in Hong Kong towards
stock that is interrelated with the mainland Chinese economy.
In general, stock values are in the middle in relation to their historic
trading ranges. As the markets focus on the potential for renewed economic
activity in the region in 1996 and 1997, we expect stock prices to rise.
Peter N. Robson
PORTFOLIO MANAGER
GOVETT PACIFIC STRATEGY FUND
17
<PAGE>
GOVETT LATIN AMERICA FUND
THE FOLLOWING IS AN INTERVIEW WITH CAROLINE LANE, THE PORTFOLIO MANAGER OF
THE GOVETT LATIN AMERICA FUND.
Q. WHAT MARKET CONDITIONS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
DURING 1995?
A. 1995 was a turbulent year for markets in Latin America, following the
currency devaluation and the continuing economic crisis that hit Mexico in
December 1994. In spite of a significant rescue package from the U.S. government
and the International Monetary Fund (IMF), foreign investor sentiment turned
against Mexico and the whole region. Investment outflows followed, paving the
way for a significant squeeze on credit and sharply rising interest rates.
Argentina suffered most as a result of the Mexican problems. Reserves fell
sharply as the government fought to maintain the exchange rate pegging the
Argentine Peso to the U.S. dollar, until the government was forced to turn to
the IMF for emergency funds. However, this action did not prevent a significant
slowdown in the economy, which was exacerbated by political infighting.
Regional sentiment has negatively affected the Brazilian market. Nevertheless,
the progress of reform, while generally better than expected, has been slow due
to the exhaustive process of passing legislation through the Congress. The
prospects for privatization, which changed almost daily, were also a key factor
in the market's poor performance.
Following the currency devaluation in Mexico, interest rates and inflation
rose dramatically as the exchange rate fell to a low of 8.30 pesos to the dollar
in October, from 3.46 pesos to the dollar in December, 1994. The exchange rate
has now stabilized at around 7.50 pesos to the dollar, but the government faces
a battle to get the economy back on its feet, with significant unemployment and
the possibility of social unrest looming.
Q. HOW DID YOU POSITION THE FUND IN RESPONSE TO THESE EVENTS?
A. We maintained a cautious stance throughout most of 1995, as uncertainty
continued, maintaining a comparatively higher cash position. We immediately
reduced the Fund's exposure to Mexico at the beginning of 1995, gradually
extending into this market as appropriate to take advantage of lower prices.
18
<PAGE>
We maintained a defensive position toward Argentina for most of the period.
Investments there have primarily focused on utilities and the energy sector,
where profits have been related to world commodity prices. We have been
optimistic about the prospects for Brazil throughout 1995, but we have relied on
stock selection for performance. An overweight position in Chile and Peru
coincided with the reduction of Mexican holdings at the beginning of the year,
but assets have been switched during the second half in order to finance
increasing investment in Mexico. The Fund is currently fully invested in order
to carry our positive view of the Latin American market.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND...S COUNTRY ALLOCATIONS
<S> <C>
Percentage of Total Net Assets
as of December 31, 1995
Brazil 33.5%
Mexico 26.9%
Chile 11.7%
Argentina 11.2%
Peru 5.0%
Columbia 4.0%
Uruguay 2.1%
Ecuador 1.4%
Other 4.2%
</TABLE>
Q. HOW DID THE FUND PERFORM IN 1995?
A. The Fund achieved a total return at net asset value (without a Class A
front-end sales charge) of -18.38 percent. When maximum front-end sales charges
of 4.95 percent are taken into consideration, the Fund achieved a total return
of -22.41 percent. By comparison, the Morgan Stanley Capital International Latin
America Index, a broad-based, unmanaged index that reflects the performance of
equity markets in the Latin America region, achieved a total return of -15.77
percent for the same period. The Index does not include any commission or fees
that would be paid by an investor purchasing the securities it represents. From
inception on March 7, 1994 through December 31, 1995, the Fund had an average
annual total return of -19.21 percent at net asset value and -21.43 percent when
maximum front-end sales charges are taken into account. As described in the
financial statements and the accompanying notes, in 1995 the Manager (and in
prior years the Distributor) absorbed a portion of the Funds' expenses. If these
expenses had not been absorbed, the reported total returns of each Fund would
have been lower.
19
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C> <C> <C>
Govett Latin American Fund vs.
the MSCI Latin America Index
3/7/94-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = -22.41%
3 Year Avg. Annual = NA
Inception Avg. Annual = -21.43%
Govett Latin American Fund MSCI Latin America Govett Latin American Fund
at Maximum Offering Price Index at Net Asset Value
3/7/94 9506 10000 10000
6/94 7918 8435 8330
12/94 7895 8769 8306
6/95 6334 7468 6664
12/95 7895 7387 6780
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. THE MORGAN STANLEY
CAPITAL INTERNATIONAL LATIN AMERICA INDEX IS A BROAD-BASED, UNMANAGED INDEX THAT
REPRESENTS THE GENERAL PERFORMANCE OF EQUITY MARKETS IN THE LATIN AMERICA
REGION. IT DOES NOT INCLUDE ANY COMMISSIONS OR FEES THAT WOULD BE PAID BY AN
INVESTOR PURCHASING THE SECURITIES IT REPRESENTS. ALL SALES CHARGES AND ALL
OTHER FEES AND EXPENSES ARE INCLUDED IN THE PERFORMANCE SHOWN FOR GOVETT LATIN
AMERICAN FUND SHARES WITH ENDING VALUE OF $6,444. IN ADDITION, SINCE INVESTORS
PURCHASE SHARES OF THE FUND WITH VARYING SALES CHARGES DEPENDING PRIMARILY ON
VOLUME PURCHASED, THE FUND'S PERFORMANCE AT NET ASSET VALUE ALSO IS SHOWN. THE
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUNDS WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
Q. LOOKING TOWARD 1996, WHAT IS YOUR OUTLOOK FOR THE GLOBAL MARKETS AND FOR THE
FUND?
A. Following the substantial divergence between the performance of the developed
and the emerging markets in 1995, we believe that the emerging markets are
currently undervalued. We continue to believe that a more accommodating U.S.
monetary policy, coupled with significantly higher returns from domestic equity
market this year, will contribute to U.S. investors looking elsewhere for better
returns in 1996.
The markets in Latin America have anticipated a recovery in 1996 with a strong
performance in the last few weeks of 1995. Trading volumes have improved
substantially as foreign investor sentiment has swung in
20
<PAGE>
favor of the continent. We believe that there is potential for this recovery to
continue as stronger corporate earnings growth and an improved economic outlook
are supported by higher capital inflows from abroad.
The Fund is likely to maintain a higher level of investment this year than in
1995, to take into account this more positive view. The possibility of several
large privatizations in Brazil will give liquidity and investor interest to the
market, which could extend to the whole region. Confidence remains fragile,
however, necessitating a close watch on the effect that any bad news may have.
Caroline E. Lane
PORTFOLIO MANAGER
GOVETT LATIN AMERICA FUND
21
<PAGE>
GOVETT GLOBAL INCOME FUND
THE FOLLOWING IS AN INTERVIEW WITH ALAN DOYLE, PORTFOLIO MANAGER OF THE
GOVETT GLOBAL INCOME FUND.
Q. WHAT MARKET CONDITIONS HAD THE GREATEST EFFECT ON THE FUND'S PERFORMANCE
DURING THE REPORTING PERIOD?
A. First, the slowdown in economic activity which became apparent in the United
States in the first half of 1995 began to be more noticeable in other parts of
the industrialized world in the second half of the year. Growth in Europe
particularly began to decelerate sharply. This trend, together with more
moderate economic growth rates in the United States, contributed to a neutral
environment for world bond markets. Short-term interest rates were cut in Europe
in reaction to this slowing of growth and the subsequent reduction in
inflationary fears. This global slowing in activity has pushed up bond prices to
levels not seen since the end of 1993.
Second, as the pace of growth in Europe dropped below that in the United
States, the U.S. dollar began to stabilize in value against the other major
currencies, and then to appreciate, particularly against the Japanese yen, but
also against the European currencies. This pattern took place after an
eighteen-month period during which the U.S. dollar had fallen consistently in
value against other currencies. The movements in exchange rates have not been
large over the period, but have been great enough to reward an overweight
position in U.S. dollars in the Fund's portfolio. The unresolved budget
negotiations between the U.S. Congress and the President continued to cloud the
prospects for further strengthening of the U.S. dollar.
Q. HOW DID YOU POSITION THE FUND IN RESPONSE TO THESE EVENTS?
A. The Fund maintained its overweight position in U.S.dollar-denominated
investments in 1995, which worked to the Fund's benefit. The Fund moved between
neutral to underweighted positions in the U.S. bond market in response to market
changes, and increased its overweight positions in the European bond markets.
As the U.S. dollar stabilized and then rose against other currencies, the
pressures within the European Exchange Rate Mechanism decreased. This
development has allowed smaller European bond markets to outperform
22
<PAGE>
those of Germany and the larger European states. The Fund held investments in
Sweden, Spain and Italy over the period to take advantage of this dissimilarity.
In a pattern similar to the outperformance of the smaller European markets,
other markets such as New Zealand and Australia have also risen faster than the
U.S. market against which they tend to move. The Fund invested in New Zealand
and Australia towards the end of the period under review.
In May, 1995, the Fund's name changed from "Global Government Income Fund" to
reflect a number of changes in non-fundamental investment policies. In
particular, the Fund is no longer required to invest primarily in government
securities, and gained the ability to invest in corporate bonds and forward
security purchase commitments. As of September 1, the Fund's Trustees were
pleased to increase the dividend from five cents per share to 6.75 cents, a step
due in part to the new investment strategy.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND...S COUNTRY ALLOCATIONS
<S> <C>
Percentage of Total Net Assets
as of December 31, 1995
United States 27.6%
Germany 15.0%
Poland 10.2%
South Africa 9.5%
Italy 9.4%
France 7.9%
Austria 6.9%
Netherlands 6.3%
Turkey 2.7%
Other 4.5%
</TABLE>
Q. HOW DID THE FUND PERFORM IN 1995?
A. The Fund achieved a total return at net asset value (without a Class A
front-end sales charge) of 14.11 percent. When maximum front-end sales charges
of 4.95 percent are taken into consideration, the Fund achieved a total return
of 8.48 percent. Both total return calculations include reinvestment of
dividends and capital gains distributions of $0.67 per share. By comparison, the
Salomon Brothers World Government Bond Index, a broad-based, unmanaged index
that reflects the general performance of bond markets in the industrialized
countries, achieved a total return of 19.04 percent for the same period. The
Index does not include any commission or fees that would be paid by an investor
purchasing the securities it represents. From inception on January 7, 1992
through
23
<PAGE>
December 31, 1995, the Fund had an average annual total return of 7.39 percent
at net asset value and 6.04 percent when maximum front-end sales charges are
taken into account. As described in the financial statements and the
accompanying notes, in 1995 the Manager (and in prior years the Distributor)
absorbed a portion of the Fund's expenses. If these expenses had not been
absorbed, the reported total returns of each Fund would have been lower.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C> <C>
Govett Global Income Fund vs.
the Salomon Brothers World Government Bond Index
1/7/92-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = 8.48%
3 Year Avg. Annual = 5.04%
Inception Avg. Annual = 6.04%
Govett Global Income Fund Salomon Brothers World
at Maximum Offering Price Government Bond Index
1/7/92 9506 10000
6/92 9791 10290
12/92 10359 10402
6/93 11213 11277
12/93 12186 12182
6/94 11013 12253
12/94 11070 12233
6/95 12023 14532
12/95 11070 15195
<CAPTION>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
<S> <C>
Govett Global Income Fund vs.
the Salomon Brothers World Government Bond Index
1/7/92-12/31/95
Fund's Total Return at MOP
1 Year Avg. Annual = 8.48%
3 Year Avg. Annual = 5.04%
Inception Avg. Annual = 6.04%
Govett Global Income Fund
at Net Asset Value
1/7/92 10000
6/92 10300
12/92 10897
6/93 11796
12/93 12819
6/94 11585
12/94 11645
6/95 12848
12/95 13273
</TABLE>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. THE SALOMON BROTHERS
WORLD GOVERNMENT BOND INDEX IS A BROAD-BASED, UNMANAGED INDEX THAT REPRESENTS
THE GENERAL PERFORMANCE OF GOVERNMENT BONDS IN MAJOR BOND MARKETS. IT DOES NOT
INCLUDE ANY COMMISSIONS OR FEES THAT WOULD BE PAID BY AN INVESTOR PURCHASING THE
SECURITIES IT REPRESENTS. ALL SALES CHARGES AND ALL OTHER FEES AND EXPENSES ARE
INCLUDED IN THE PERFORMANCE SHOWN FOR GOVETT GLOBAL INCOME FUND SHARES WITH
ENDING VALUE OF $12,618. IN ADDITION, SINCE INVESTORS PURCHASE SHARES OF THE
FUND WITH VARYING SALES CHARGES DEPENDING PRIMARILY ON VOLUME PURCHASED, THE
FUND'S PERFORMANCE AT NET ASSET VALUE ALSO IS SHOWN. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT IN THE FUNDS WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
Q. WHAT IS THE OUTLOOK FOR 1996?
A. The economic conditions underlying global bond markets are currently benign.
Economic growth is subdued in Europe and Japan, and running at a sustainable
rate in the United States and the United
24
<PAGE>
Kingdom. Inflationary pressures are consequently light at present, and inflation
rates have proved to be surprisingly low in all parts of the industrialized
world. We do not expect any sudden resurgence of growth and inflationary fears,
and so we do not anticipate a sharp fall in bond prices during the first part of
1996. In addition, the economic imbalances which led to sharp exchange rate
movements in 1994 and the first half of 1995 are no longer present, and we
expect currency movements to be moderate.
Alan Doyle
PORTFOLIO MANAGER
GOVETT GLOBAL INCOME FUND
25
<PAGE>
(This page has been left blank intentionally.)
26
<PAGE>
- -------------------------------------------------------------------
GOVETT INTERNATIONAL EQUITY FUND
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 95.3%
AUSTRALIA - 2.3%
51,000 Howard Smith.................................... $ 240,702
50,000 Pioneer International........................... 128,954
30,000 TAB Corp Holdings............................... 84,731
158,000 TNT............................................. 209,032
-----------
663,419
-----------
BRAZIL - 0.5%
10,000 Electrobras ADR................................. 135,298
-----------
CHINA - 1.5%
365,000 China North Industries Investment *............. 328,500
500,000 Jilin Chemical Industrial *..................... 103,459
-----------
431,959
-----------
FINLAND - 1.0%
3,000 Kymmene Oy...................................... 79,227
5,000 Nokia A......................................... 196,346
-----------
275,573
-----------
FRANCE - 5.4%
2,000 Axime........................................... 153,799
2,300 Christian Dior.................................. 247,710
244 Club Mediterranee............................... 19,460
2,838 Primagaz........................................ 225,188
3,000 Sanofi.......................................... 192,086
6,000 SGS-Thomson Microelectronics.................... 229,475
580 Sidel........................................... 180,536
1,500 Societe Generale................................ 185,110
9,000 Usinor Sacilor.................................. 118,868
-----------
1,552,232
-----------
GERMANY - 5.9%
4,000 Adidas.......................................... 211,509
1,370 Bayer........................................... 361,255
1,650 Commerzbank..................................... 389,682
2,000 Deutsche Bank................................... 94,747
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
27
<PAGE>
- --------------------------------------------------------------------------------
GOVETT INTERNATIONAL EQUITY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
GERMANY (CONTINUED)
230 Mannesmann...................................... $ 73,147
7,600 Praktiker Bau-und Heimwerkemaerkte.............. 232,437
600 Siemens......................................... 329,051
-----------
1,691,828
-----------
HONG KONG - 4.2%
160,000 First Pacific Co................................ 177,950
60,000 Hong Kong Electric Holdings..................... 196,702
35,000 Hutchinson Whampoa.............................. 213,191
150,000 New World Infrastructure........................ 287,100
40,000 Swire Pacific A................................. 310,378
-----------
1,185,321
-----------
HUNGARY - 0.3%
5,000 Gedeon Richter GDR.............................. 96,250
-----------
INDONESIA - 0.7%
100,000 Roda Vivatex.................................... 59,042
6,000 Telekomunikasi Indonesia ADR.................... 154,230
-----------
213,272
-----------
ITALY - 0.5%
3,500 Gucci Group..................................... 136,063
-----------
JAPAN - 27.0%
15,000 Amada Co........................................ 148,105
20,000 Bank of Tokyo................................... 350,419
7,350 Canon Sales..................................... 195,658
16,000 Daimei Telecom Engineer Corp.................... 137,844
18,000 Daiwa Securities Co............................. 275,301
25,000 Fujitsu......................................... 278,302
15,000 Hitachi......................................... 151,009
4,000 Ito Yokado Co................................... 246,261
40,000 Itochu Corp..................................... 269,106
20,000 Komatsu......................................... 164,561
4,000 Kyocera Corp.................................... 296,985
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
28
<PAGE>
- --------------------------------------------------------------------------------
GOVETT INTERNATIONAL EQUITY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
JAPAN (CONTINUED)
8,000 Maruichi Steel Tube............................. $ 146,363
20,000 Mitsubishi Estate Co............................ 249,746
40,000 Mitsubishi Heavy................................ 318,668
20,000 Mitsubishi Trust & Banking Corp................. 332,995
20,000 Mitsukoshi...................................... 187,793
8,000 Nippon Hodo..................................... 135,521
11,000 Nippondenso Co.................................. 205,508
20,000 Nishimatsu Construction Co...................... 234,258
16,000 Nomura Securities Co............................ 348,483
14,000 Omron Corporation............................... 322,540
31,000 Ricoh Corp...................................... 339,093
5,000 Rohm Company.................................... 278,302
7,000 Sanwa Bank...................................... 142,297
40,000 Shimadzu Corp................................... 231,935
10,000 Sumitomo Bank................................... 211,994
12,000 SXL Corp........................................ 124,292
6,000 TDK Corp........................................ 306,084
6,000 Tokyo Electron.................................. 232,322
15,000 Tokyu Land Corp................................. 105,852
45,000 Toshiba......................................... 352,403
5,000 Uniden.......................................... 83,733
14,000 Yamanouchi Pharmaceutical....................... 300,857
-----------
7,704,590
-----------
MALAYSIA - 2.5%
50,000 Commerce Asset Holding.......................... 251,998
70,000 Metacorp........................................ 181,911
50,000 Resorts World................................... 267,748
-----------
701,657
-----------
MEXICO - 1.4%
15,000 Cemex ADR....................................... 107,660
5,600 Controladora de Farmacias....................... 2,541
12,000 Empressa Ica Sociedad ADR *..................... 123,000
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
29
<PAGE>
- --------------------------------------------------------------------------------
GOVETT INTERNATIONAL EQUITY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
MEXICO (CONTINUED)
4,000 Metalclad Corp *................................ $ 16,000
4,500 Telefonos de Mexico ADR......................... 143,438
-----------
392,639
-----------
NETHERLANDS - 5.7%
19,000 BE Semiconductor Industries..................... 247,000
3,500 International Nederlanden Group................. 233,566
4,000 KLM Koninklijke................................. 140,438
10,000 Philips Electronics............................. 361,056
2,200 Unilever........................................ 308,827
2,400 VNU............................................. 329,133
-----------
1,620,020
-----------
NORWAY - 0.8%
40,000 Uni-Storebrand A................................ 220,958
-----------
PORTUGAL - 1.1%
10,000 Investec-Consultoria International.............. 200,434
17,200 Portucel Industria ADR.......................... 101,700
-----------
302,134
-----------
SINGAPORE - 2.5%
63,000 DBS Land........................................ 212,895
74,000 Overseas Union Bank............................. 510,074
-----------
722,969
-----------
SOUTH KOREA - 1.4%
99 Hanyang Chemical *.............................. 1,519
3,500 L.G. Chemical GDR............................... 73,325
22 Samsung Electronics............................. 3,999
5,449 Samsung Electronics GDS (non-voting shares)..... 317,404
-----------
396,247
-----------
SWEDEN - 5.0%
6,000 Astra B......................................... 239,683
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
30
<PAGE>
- --------------------------------------------------------------------------------
GOVETT INTERNATIONAL EQUITY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
SWEDEN (CONTINUED)
10,000 Atlas Copco A................................... $ 150,744
9,000 Celsius Industrier B............................ 183,154
8,900 Ericsson B...................................... 174,411
9,000 Kalmar Industries............................... 149,237
90,000 Rotneros Bruks.................................. 94,969
30,000 Skandinaviska Enskilda Banken................... 248,728
15,000 Stora Kopparbergs B............................. 182,024
-----------
1,422,950
-----------
SWITZERLAND - 5.8%
875 Adia............................................ 142,616
220 Alusuisse-Lonza Holdings........................ 174,329
400 Ciba-Geigy...................................... 351,984
700 Logitech International.......................... 72,218
345 Nestle.......................................... 381,655
500 Schweizerischer Bankverein *.................... 202,870
160 Societe Generale de Surveillance B.............. 317,656
-----------
1,643,328
-----------
TAIWAN - 0.8%
15,000 Siliconware Precision GDR....................... 247,500
-----------
THAILAND - 1.0%
30,000 National Finance & Securities................... 160,778
2,000 Siam Cement Co.................................. 110,838
-----------
271,616
-----------
UNITED KINGDOM - 18.0%
50,000 Astec........................................... 88,436
17,000 BOC Group....................................... 237,643
27,000 British Airport Authority....................... 203,169
52,000 British Telecommunications...................... 285,600
100,000 Bunzl........................................... 310,300
48,000 Cable & Wireless................................ 342,571
10,000 De La Rue Company............................... 101,003
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
31
<PAGE>
- --------------------------------------------------------------------------------
GOVETT INTERNATIONAL EQUITY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
UNITED KINGDOM (CONTINUED)
20,000 Dixons Group.................................... $ 138,549
30,000 Farnell Electronic.............................. 334,426
10,100 General Accident................................ 101,934
7,000 Glaxo Wellcome.................................. 99,374
35,000 Greenalls Group................................. 320,385
80,000 Guardian Royal Exchange......................... 342,571
25,000 J. Sainsbury.................................... 152,241
13,800 London Electricity.............................. 122,790
30,000 Marks & Spencer................................. 209,453
11,768 National Grid Group............................. 36,425
29,500 National Westminster Bank....................... 296,814
25,000 Reuters Holdings................................ 228,652
18,500 RTZ............................................. 268,658
20,000 Severn Trent.................................... 213,331
16,000 Shell Transport & Trading Co.................... 211,376
20,000 Smithkline Beecham A............................ 220,313
16,000 Zeneca Group.................................... 309,183
-----------
5,175,197
-----------
TOTAL - COMMON STOCKS (Cost $24,992,577)........ 27,203,020
-----------
PREFERRED STOCKS - 1.3%
GERMANY - 1.3%
6,000 Berliner Elecktro Holding....................... 192,281
280 Colonia Versicherung............................ 181,413
-----------
373,694
-----------
TOTAL - PREFERRED STOCKS (Cost $342,216)........ 373,694
-----------
WARRANTS - 0.0%
FRANCE - 0.0%
258 Primagaz Warrants 06/30/98 *.................... 2,210
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
32
<PAGE>
- --------------------------------------------------------------------------------
GOVETT INTERNATIONAL EQUITY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
WARRANTS (CONTINUED)
<C> <S> <C>
SINGAPORE - 0.0%
715 United Overseas Bank Warrants 06/17/97 *........ $ 2,881
-----------
TOTAL - WARRANTS (Cost $200).................... 5,091
-----------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
CONVERTIBLE BONDS - 1.8%
HONG KONG - 0.0%
$ 1,000 Jardine Strategic Holdings, 7.50%, 05/07/49..... 1,093
-----------
TAIWAN - 1.8%
$100,000 Acer Inc, 4.00%, 06/10/01....................... 301,500
$160,000 United Micro Electronic, 1.25%, 06/08/04........ 201,600
-----------
503,100
-----------
TOTAL - CONVERTIBLE BONDS (Cost $508,795)....... 504,193
-----------
TOTAL INVESTMENTS - 98.4% (Cost $25,843,788)...... 28,085,998
Other Assets and Liabilities (net) -- 1.6%........ 460,453
-----------
TOTAL NET ASSETS - 100.0%......................... $28,546,451
-----------
-----------
</TABLE>
* NON-INCOME PRODUCING SECURITY
ADR AMERICAN DEPOSITORY RECEIPT
GDR GLOBAL DEPOSITORY RECEIPT
GDS GLOBAL DEPOSITORY SHARE
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
33
<PAGE>
- --------------------------------------------------------------------------------
GOVETT INTERNATIONAL EQUITY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
GEOGRAPHIC CONCENTRATION*
<S> <C>
Japan.................. 27.0%
United Kingdom......... 18.0
Germany................ 7.2
Switzerland............ 5.8
Netherlands............ 5.7
France................. 5.4
Sweden................. 5.0
Hong Kong.............. 4.2
Taiwan................. 2.6
Singapore.............. 2.5
Malaysia............... 2.5
Australia.............. 2.3
China.................. 1.5
South Korea............ 1.4
Mexico................. 1.4
Portugal............... 1.1
Finland................ 1.0
Thailand............... 1.0
Norway................. 0.8
Indonesia.............. 0.7
Italy.................. 0.5
Brazil................. 0.5
Hungary................ 0.3
----------
98.4
Other Assets and
Liabilities (net).... 1.6
----------
Total Net Assets... 100.0%
----------
----------
</TABLE>
<TABLE>
<CAPTION>
SECTOR ALLOCATION*
<S> <C>
Electronics............ 16.3%
Banks.................. 10.4
Wholesale and Retail
Trade................ 5.7
Manufacturing.......... 5.0
Telecommunications..... 5.0
Finance................ 4.8
Natural Resources...... 4.7
Health Care............ 4.4
Chemicals.............. 4.0
Transportation......... 3.9
Consumer Goods and
Services............. 3.9
Insurance.............. 3.8
Food and Beverage...... 3.5
Construction and
Construction
Materials............ 3.4
Computers and Office
Equipment............ 2.7
Utilities.............. 2.5
Conglomerates.......... 2.5
Broadcasting and
Publishing........... 2.3
Real Estate............ 1.6
Leisure................ 1.3
Electronics
Manufacturing........ 1.2
Business Services...... 1.1
Engineering............ 1.1
Packaging.............. 1.1
Textiles............... 0.7
Pharmaceuticals........ 0.7
Industrial............. 0.5
Computer Software and
Services............. 0.3
----------
98.4
Other Assets and
Liabilities (net).... 1.6
----------
Total Net Assets... 100.0%
----------
----------
</TABLE>
* UNAUDITED
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
34
<PAGE>
- -------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 86.0%
ARGENTINA - 6.5%
350,000 Astra........................................... $ 647,403
59,100 Banco Frances................................... 522,957
233,000 Central Costanera B............................. 717,532
125,000 Perez Companc B................................. 662,401
16,000 Telecom Argentina ADR........................... 755,346
303,315 Transportadora de Gas del Sur B................. 730,880
40,000 YPF ADR......................................... 865,000
------------
4,901,519
------------
BRAZIL - 6.1%
34,705 Cemig ADR....................................... 767,716
2,750,000 Electrobras..................................... 744,123
15,000,000 Paulista de Forca e Luz......................... 726,889
20,450 Telebras ADR.................................... 984,712
80,000 Usiminas ADR.................................... 650,248
17,500 Vale do Rio Doce ADR............................ 720,225
------------
4,593,913
------------
CHILE - 4.2%
97,000 Antofagasta Holdings............................ 440,199
50,000 Banco Osorno ADR................................ 693,750
10,500 Compania de Telefonos de Chile ADR.............. 870,188
21,500 Endesa ADR...................................... 489,125
25,000 Enersis ADR..................................... 712,500
------------
3,205,762
------------
CHINA - 3.1%
1,335,000 China North Industries *........................ 1,201,500
1,880,000 Qingling Motors Company......................... 547,042
2,835,000 Yizheng Chemical Fibre Co....................... 637,944
------------
2,386,486
------------
COLOMBIA - 2.1%
35,000 Cadenalco ADR................................... 411,250
43,600 Cemento Argos................................... 272,840
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
35
<PAGE>
- --------------------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COLOMBIA (CONTINUED)
23,000 Cementos Paz del Rio ADS........................ $ 364,536
30,600 Suramericana de Seguros......................... 571,385
------------
1,620,011
------------
GREECE - 0.4%
34,200 Aegek........................................... 294,079
------------
HONG KONG - 8.8%
155,000 Cheung Kong Holdings............................ 944,132
256,000 China Resources Enterprise...................... 132,428
2,261,000 Continental Mariner............................. 163,745
1,200,000 Guangzhou Investment Co......................... 721,629
200,000 Guoco Group..................................... 964,759
288,000 Hong Kong Telecommunications.................... 513,986
132,000 Hutchinson Whampoa.............................. 804,035
225,687 Jardine Strategic Holdings...................... 690,602
160,000 New World Development Co........................ 697,317
525 New World Infrastructure........................ 1,005
630,000 Shangri-La Asia................................. 769,932
4,674,285 Tomei International Holdings.................... 290,159
------------
6,693,729
------------
INDIA - 4.1%
86,000 Arvind Mills GDR................................ 365,500
56,000 Ashok Leyland GDR............................... 595,000
21,300 East India Hotels GDR........................... 388,725
60,750 Indian Aluminum GDR............................. 364,500
18,000 Indian Hotels Co GDR............................ 348,750
24,000 Indian Rayon & Industries GDR................... 300,000
30,000 Raymond Woollen Mills GDR....................... 513,750
20,000 Southern Petrochemical Industries GDR........... 165,000
27,000 Tube Investments of India GDR................... 57,375
------------
3,098,600
------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
36
<PAGE>
- --------------------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
INDONESIA - 3.1%
217,300 Astra International............................. $ 451,421
349,900 Kabel Metal Indonesia........................... 286,929
509,500 Panca Wiratama Sakti............................ 350,957
650,000 Panin Bank...................................... 582,768
171,200 Semen Cibinong.................................. 426,783
9,000 Telekomunikasi Indonesia ADR.................... 226,710
------------
2,325,568
------------
ISRAEL - 3.0%
459,000 Bank Hapoalim................................... 757,204
14,644 Delek Israel Fuel Corp.......................... 406,903
14,500 ECI Telecommunications.......................... 330,781
8,010 Koor Industries................................. 794,804
------------
2,289,692
------------
LEBANON - 0.8%
47,000 Banque Audi GDR................................. 575,750
------------
MALAYSIA - 5.3%
500,000 Faber Group..................................... 427,216
110,000 Hong Leong Industries........................... 584,715
192,333 Metacorp........................................ 499,822
499,000 Multi-Purpose Holdings.......................... 730,905
200,000 Tanjong......................................... 582,746
274,000 Technology Resources Industries................. 809,151
144,000 UMW Holdings.................................... 385,557
------------
4,020,112
------------
MEXICO - 8.1%
70,000 Cemex ADR....................................... 502,411
500,000 Cifra C......................................... 505,509
15,000 Controladora de Farmacias....................... 6,805
170,000 Desc B.......................................... 623,590
250,000 Empaques Ponderosa B............................ 447,175
42,000 Grupo Carso ADR *............................... 456,540
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
37
<PAGE>
- --------------------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
MEXICO (CONTINUED)
60,000 Grupo Financiero Bancomer GDR................... $ 345,000
26,000 Grupo Industrial Saltillo A..................... 374,076
84,000 Grupo Industrial San Luis....................... 430,063
20,000 Hylsamex GDS *.................................. 410,000
54,500 ICA............................................. 568,664
4,000 Metalclad Corp *................................ 16,000
65,000 Sears Roebuck de Mexico ADR..................... 303,368
700,000 Telefonos de Mexico L........................... 1,121,458
------------
6,110,659
------------
MOROCCO - 0.4%
7,500 Les Ciments de Oriental *....................... 288,703
------------
PAKISTAN - 0.0%
10,000 Adamjee Insurance Co............................ 30,249
74 Khadim Ali Shah Bukhar and Co................... 55
------------
30,304
------------
PHILIPPINES - 1.7%
61,826 Bacnotan Consolidated Industries................ 353,561
480,000 Fil-Estate Land................................. 361,418
551,000 Pilipino Telephone.............................. 556,672
------------
1,271,651
------------
SINGAPORE - 6.1%
31,000 Creative Technology............................. 267,375
59,000 Fraser & Neave.................................. 750,795
102,000 Jardine Matheson................................ 698,700
55,000 Keppel Corporation.............................. 489,926
65,000 Sembawang Shipyard.............................. 360,728
140,000 Singapore Land.................................. 905,620
358,000 Venture Manufacturing Singapore................. 1,199,661
------------
4,672,805
------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
38
<PAGE>
- --------------------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
SOUTH AFRICA - 5.7%
110,000 Amalgamated Banks of South Africa............... $ 618,571
7,000 Anglo American Corp............................. 422,438
15,000 Anglo American Industrial Corp.................. 682,005
60,500 Free State Consolidated Gold Mines.............. 452,231
518,500 Iron & Steel Industrial......................... 466,515
50,000 Sasol Beperk.................................... 409,405
80,000 Smith (C.G.).................................... 614,456
18,000 South African Breweries......................... 659,167
------------
4,324,788
------------
SOUTH KOREA - 4.7%
39,800 Cho Hung Bank Co................................ 463,286
12,073 Chosun Brewery *................................ 446,658
16 Daewoo Corp *................................... 186
8,433 Hyundai Engineering and Construction Co *....... 386,999
15,220 Korean Air *.................................... 533,656
19,000 LG Industrial Systems........................... 612,311
3,600 LG Information & Communication.................. 329,488
12,700 Sammi Steel Co.................................. 100,192
39 Samsung Electronics............................. 7,038
281 Samsung Electronics *........................... 51,074
4,200 Seoul City Gas Co............................... 384,402
2,535 Shinsegae Department Stores..................... 211,754
------------
3,527,044
------------
SRI LANKA - 1.8%
102,124 Aitken Spence & Co.............................. 353,318
896,000 Asian Hotel Corp *.............................. 240,370
64,799 Development Finance Corp of Ceylon.............. 359,660
133,333 Hayleys......................................... 425,531
------------
1,378,879
------------
TAIWAN - 1.8%
2,300 Asia Cement Corporation GDS..................... 37,950
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
39
<PAGE>
- --------------------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
TAIWAN (CONTINUED)
300,000 China Bills Finance Corp........................ $ 400,191
400,000 China Steel Corporation......................... 319,566
55,000 Taiwan Semiconductor............................ 172,335
170,000 Taiwan Styrene Monomer.......................... 279,107
11,877 Tung Ho Steel GDR............................... 121,739
30,000 Walsin Lihwa Electric Wire & Cable.............. 31,224
------------
1,362,112
------------
THAILAND - 6.5%
120,000 Finance One..................................... 700,278
10,000 Grammy Entertainment............................ 93,688
58,000 International Engineering....................... 297,018
50,800 Kang Yong Electric Co........................... 209,734
31,800 Loxley Co....................................... 646,352
15,000 Siam Cement Co.................................. 831,282
48,000 Siam City Cement................................ 647,876
236,000 Thai Military Bank.............................. 815,085
44,000 Total Access Communication...................... 286,000
34,000 United Communication Industry................... 434,617
------------
4,961,930
------------
TURKEY - 1.7%
5,550,000 Bossa Ticaret ve Sanayii Isletmeleri............ 396,430
6,270,000 Eregli Demir Ve Celik Fabrikalari............... 514,778
1,434,000 Netas Telekomunik............................... 406,182
------------
1,317,390
------------
TOTAL - COMMON STOCKS (Cost $69,551,284)........ 65,251,486
------------
PREFERRED STOCKS - 7.7%
BRAZIL - 6.7%
102,322,260 Acesita......................................... 594,805
100,000,000 Banco Bradesco.................................. 870,000
1,424,627 Brahma.......................................... 586,234
1,750,000 Brasmotor....................................... 347,497
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
40
<PAGE>
- --------------------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
PREFERRED STOCKS (CONTINUED)
<C> <S> <C>
BRAZIL (CONTINUED)
20,000,000 Industrias de Papel Simao....................... $ 410,000
323,189,934 Refripar........................................ 645,084
22,773,376 Telebras........................................ 1,096,552
3,900,000 Telesp.......................................... 573,795
------------
5,123,967
------------
GREECE - 0.1%
11,400 Aegek........................................... 63,888
------------
SOUTH KOREA - 0.9%
6,081 Samsung Electronics *........................... 705,498
------------
TOTAL - PREFERRED STOCKS (Cost $6,027,636)...... 5,893,353
------------
WARRANTS AND RIGHTS - 0.3%
BRAZIL - 0.0%
2,338,201 Banco Bradesco Rights 02/15/96 *................ 3,849
------------
HONG KONG - 0.0%
26,187 Jardine Strategic Holdings Warrants 05/02/98
*............................................. 8,380
------------
MALAYSIA - 0.1%
20,400 Kian Joo Can Factory Warrants 05/22/99 *........ 37,431
6,000 Multi-Purpose Holdings Warrants 11/23/98 *...... 3,638
------------
41,069
------------
SINGAPORE - 0.2%
50,000 Hotel Properties Warrants 03/11/98 *............ 42,418
63,000 Venture Manufacturing Singapore Warrants
07/31/99 *.................................... 100,212
------------
142,630
------------
SOUTH KOREA - 0.0%
50 Tong Yang Cement Warrants 08/18/96 *............ 11,250
------------
TOTAL - WARRANTS AND RIGHTS (Cost $136,064)..... 207,178
------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
41
<PAGE>
- -------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE BONDS - 1.7%
SINGAPORE - 0.1%
$ 84,000 Venture Manufacturing, 2.50%, 07/27/99.......... $ 54,634
------------
TAIWAN - 1.6%
$150,000 Acer Inc, 4.00%, 06/10/01....................... 447,750
$480,000 President Enterprises, 0.00%, 07/22/01.......... 633,600
$135,000 United Micro Electronic, 1.25%, 06/08/04........ 169,931
------------
1,251,281
------------
TOTAL - CONVERTIBLE BONDS (Cost $998,509)....... 1,305,915
------------
TOTAL INVESTMENTS - 95.7% (Cost $76,713,493)...... 72,657,932
Other Assets and Liabilities (net) - 4.3%......... 3,228,985
------------
TOTAL NET ASSETS - 100.0%......................... $ 75,886,917
------------
------------
</TABLE>
* NON-INCOME PRODUCING SECURITY
ADR AMERICAN DEPOSITORY RECEIPT
ADS AMERICAN DEPOSITORY SHARE
GDR GLOBAL DEPOSITORY RECEIPT
GDS GLOBAL DEPOSITORY SHARE
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
42
<PAGE>
- --------------------------------------------------------------------------------
GOVETT EMERGING MARKETS FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
GEOGRAPHIC CONCENTRATION*
<S> <C>
Brazil................. 12.8%
Hong Kong.............. 8.8
Mexico................. 8.1
Thailand............... 6.5
Argentina.............. 6.5
Singapore.............. 6.4
South Africa........... 5.7
South Korea............ 5.6
Malaysia............... 5.4
Chile.................. 4.2
India.................. 4.1
Taiwan................. 3.4
China.................. 3.1
Indonesia.............. 3.1
Israel................. 3.0
Colombia............... 2.1
Sri Lanka.............. 1.8
Turkey................. 1.7
Philippines............ 1.7
Lebanon................ 0.8
Greece................. 0.5
Morocco................ 0.4
-----
95.7
Other Assets and
Liabilities (net).... 4.3
-----
Total Net Assets... 100.0%
-----
-----
</TABLE>
<TABLE>
<CAPTION>
SECTOR ALLOCATION*
<S> <C>
Conglomerates.......... 14.9%
Finance................ 12.0
Telecommunications..... 11.5
Natural Resources...... 8.1
Construction and
Construction
Materials............ 6.7
Transportation......... 6.6
Electronics............ 6.0
Real Estate............ 5.1
Utilities.............. 5.0
Industrial............. 3.3
Food and Beverage...... 3.2
Leisure................ 2.2
Chemicals.............. 2.0
Consumer Goods and
Services............. 1.9
Banks.................. 1.8
Textiles............... 1.7
Retail................. 1.6
Manufacturing.......... 0.9
Miscellaneous.......... 0.5
Computers and Office
Equipment............ 0.4
Wholesale and Retail
Trade................ 0.3
-----
95.7
Other Assets and
Liabilities (net).... 4.3
-----
Total Net Assets... 100.0%
-----
-----
</TABLE>
* UNAUDITED
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
43
<PAGE>
- -------------------------------------------------------------------
GOVETT SMALLER COMPANIES FUND
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 90.2%
AUDIO RECORDS AND TAPES - 0.5%
201,400 Expert Software Inc............................. $ 2,819,600
------------
BROADCASTING - 6.7%
320,900 Echostar Communications......................... 7,781,825
120,800 Glenayre Technologies Inc....................... 7,519,800
12,800 Microwave Power Devices Inc..................... 142,400
266,800 Pairgain Technologies Inc....................... 14,607,300
176,400 United Video Satellite *........................ 4,762,800
------------
34,814,125
------------
COMMUNICATIONS - CUSTOMER EQUIPMENT - 11.9%
434,400 3 Com Corp *.................................... 20,253,900
349,100 Ascend Communications Inc....................... 28,320,738
152,000 Fore Systems Inc................................ 9,044,000
245,600 Gandalf Technologies Inc........................ 4,175,200
1,800 Information Resources Engineering Inc........... 44,550
------------
61,838,388
------------
COMPUTER SOFTWARE AND SERVICES - 17.7%
170,500 Atria Software Inc *............................ 6,670,813
332,325 Avant Corp...................................... 6,397,256
44,500 Checkfree Corporation........................... 956,750
200,000 Cooper & Chyan Technology....................... 3,150,000
357,900 Learmonth & Burchett Management Systems ADR..... 3,176,363
153,700 Logic Works Inc................................. 1,921,250
83,500 Netscape Communications Corp.................... 11,606,500
215,900 Pure Software Inc............................... 6,962,775
137,100 Quarterdeck Corporation......................... 3,770,250
247,966 Rational Software Corp.......................... 5,548,247
290,000 Security Dynamics Technologies Inc.............. 15,805,000
99,000 Spyglass Inc.................................... 5,643,000
600 Unison Software Inc............................. 10,350
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
44
<PAGE>
- --------------------------------------------------------------------------------
GOVETT SMALLER COMPANIES FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES (CONTINUED)
276,000 Verity Inc...................................... $ 12,213,000
262,000 Wind River Systems.............................. 7,630,747
------------
91,462,301
------------
CONSTRUCTION AND CONSTRUCTION MATERIALS - 1.4%
243,100 JLG Industries Inc.............................. 7,232,225
------------
ELECTRONIC COMPONENTS - 4.2%
239,000 CP Clare Corp................................... 4,899,500
236,400 International Rectifier Corp.................... 5,910,000
260,600 Oak Technology Inc.............................. 11,010,350
------------
21,819,850
------------
ELECTRONICS MANUFACTURING - 0.5%
10,700 Asyst Technologies Inc *........................ 377,175
178,100 Speedfam International Inc...................... 2,003,625
------------
2,380,800
------------
ENVIRONMENTAL CONTROL - 0.7%
315,333 Continental Waste Industries Inc................ 3,665,746
------------
FOOD AND BEVERAGE - 0.8%
306,000 Opta Food Ingredients Inc....................... 3,939,750
------------
HEALTH CARE - 13.0%
480,000 Angeion Corp.................................... 4,080,000
287,500 ATS Medical Inc................................. 2,659,375
95,300 Cycare Systems.................................. 2,442,063
140,500 Dura Pharmaceuticals Inc........................ 4,882,375
390,100 Endosonics Corp................................. 5,900,263
72,700 HBO & Co........................................ 5,570,638
155,400 Omnicare Inc.................................... 6,954,150
238,100 Pediatric Services of America *................. 3,750,075
160,100 Renal Treatment Centers Inc..................... 7,044,400
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
45
<PAGE>
- --------------------------------------------------------------------------------
GOVETT SMALLER COMPANIES FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
HEALTH CARE (CONTINUED)
239,800 Rotech Medical Corp *........................... $ 6,594,500
285,000 Sequus Pharmaceuticals Inc...................... 4,061,250
23,800 Shiva Corp...................................... 1,731,450
118,700 SQA Inc......................................... 2,284,975
245,000 Summit Medical Systems Inc...................... 5,267,500
140,100 Total Renal Care Holdings....................... 4,132,950
------------
67,355,964
------------
TELECOMMUNICATIONS - 7.0%
231,500 Arch Communications Group Inc................... 5,556,000
211,250 Computer Telephone Corp......................... 2,851,875
229,000 Mobile Media.................................... 5,095,250
63,500 Netcom On-Line Communication.................... 2,286,000
632,600 PsiNet Inc...................................... 14,470,725
94,800 Uunet Technologies.............................. 5,972,400
------------
36,232,250
------------
TELEPHONE EQUIPMENT - 24.5%
274,700 Cascade Communications Corp..................... 23,418,175
554,500 Premisys Communications Inc..................... 31,052,000
302,300 Secure Computing Corp........................... 16,928,800
303,900 Stratacom Inc *................................. 22,336,650
319,200 Sync Research Inc............................... 14,443,800
185,000 Telebit Corp.................................... 1,156,250
198,500 US Robotics Corporation......................... 17,418,375
------------
126,754,050
------------
TRANSPORTATION - 0.3%
105,000 Nuco2 Inc....................................... 1,365,000
------------
WHOLESALE AND RETAIL TRADE - 1.0%
130,000 CDW Computer Centers Inc........................ 5,265,000
------------
TOTAL - COMMON STOCKS (Cost $356,287,849)....... 466,945,049
------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
46
<PAGE>
- --------------------------------------------------------------------------------
GOVETT SMALLER COMPANIES FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------------------------------------
WARRANTS - 0.1%
<C> <S> <C>
HEALTH CARE - 0.1%
702,000 ATS Medical Inc Warrants 03/02/97 *............. $ 658,125
------------
TOTAL - WARRANTS (Cost $442,876)................ 658,125
------------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
REPURCHASE AGREEMENT - 8.2%
$42,718,371 Prudential-Bache Repurchase Agreement, dated
12/29/95 due 01/02/96, with a maturity value
of $42,743,955 and an effective yield of
5.39%, collateralized by US Government Agency
Obligations with rates ranging from 5.00% to
9.50% and maturity dates ranging from 02/01/96
to 03/01/33, with an aggregate market value of
$43,572,794 (Cost - $42,718,371).............. 42,718,371
------------
TOTAL INVESTMENTS - 98.5% (Cost $399,449,096)..... 510,321,545
Other Assets and Liabilities (net) - 1.5%......... 7,668,822
------------
TOTAL NET ASSETS - 100.0%......................... $517,990,367
------------
------------
</TABLE>
* NON-INCOME PRODUCING SECURITY
ADR AMERICAN DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
47
<PAGE>
- --------------------------------------------------------------------------------
GOVETT SMALLER COMPANIES FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
GEOGRAPHIC CONCENTRATION*
<S> <C>
United States.......... 97.1%
Canada................. 0.8
United Kingdom......... 0.6
-----
98.5
Other Assets and
Liabilities (net).... 1.5
-----
Total Net Assets... 100.0%
-----
-----
</TABLE>
<TABLE>
<CAPTION>
SECTOR ALLOCATION*
<S> <C>
Telephone Equipment.... 24.5%
Computer Software and
Services............. 17.7
Health Care............ 13.1
Communications -
Customer Equipment... 11.9
Cash Equivalents....... 8.2
Telecommunications..... 7.0
Broadcasting........... 6.7
Electronic Components.. 4.2
Construction and
Construction
Materials............ 1.4
Wholesale and Retail
Trade................ 1.0
Food and Beverage...... 0.8
Environmental
Control.............. 0.7
Audio Records and
Tapes................ 0.5
Electronics
Manufacturing........ 0.5
Transportation......... 0.3
-----
98.5
Other Assets and
Liabilities (net).... 1.5
-----
Total Net Assets... 100.0%
-----
-----
</TABLE>
* UNAUDITED
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
48
<PAGE>
- -------------------------------------------------------------------
GOVETT PACIFIC STRATEGY FUND
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 91.5%
AUSTRALIA - 4.5%
16,000 Broken Hill Proprietary Co...................... $ 225,948
50,000 Cochlear........................................ 107,771
20,000 Commonwealth Bank of Australia.................. 160,691
200,000 Walker Corp..................................... 66,893
-----------
561,303
-----------
CHINA - 3.1%
150,000 China North Industries.......................... 135,000
230,000 Guangdong Electric Power B...................... 110,055
80,000 Shanghai Shangling Electrical Appliances........ 48,960
400,000 Yizheng Chemical Fibre Co....................... 90,010
-----------
384,025
-----------
HONG KONG - 16.7%
29,000 Cheung Kong Holdings............................ 176,644
530,000 China-Hong Kong Photo Product................... 299,871
350,000 China Resources Enterprise...................... 181,054
55,000 Guoco Group..................................... 265,309
29,000 Henderson Land Development Co................... 174,769
138,000 HKR International............................... 127,604
92,800 Hong Kong Telecommunications.................... 165,618
67,875 Jardine Strategic Holdings...................... 207,698
186,000 Manhattan Card Co............................... 79,379
107,000 MC Packaging.................................... 38,054
83 New World Infrastructure........................ 159
151,000 Shangri-La Asia................................. 184,539
22,000 Swire Pacific A................................. 170,708
-----------
2,071,406
-----------
INDIA - 0.9%
18,000 CESC GDR........................................ 51,660
8,000 Southern Petrochemical Industries GDR........... 66,000
-----------
117,660
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
49
<PAGE>
- --------------------------------------------------------------------------------
GOVETT PACIFIC STRATEGY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INDONESIA - 2.4%
54,000 Astra International............................. $ 112,180
120,000 Panin Bank...................................... 107,588
3,000 Telekomunikasi Indonesia ADR.................... 77,115
-----------
296,883
-----------
JAPAN - 22.6%
17,000 Chiyoda Fire & Marine Insurance Co.............. 97,091
37,000 Denki Kagaku Kogyo.............................. 134,311
11,000 Fukuyama Transporting Co........................ 103,286
26,000 Hitachi Zosen Corp.............................. 134,650
21,000 Itochu Corp..................................... 141,281
14,000 Komatsu......................................... 115,193
7,000 Komori Corp..................................... 176,177
10,000 Kurimoto........................................ 101,641
10,000 Mitsubishi Estate Co............................ 124,873
13,000 Nippon Shokubai Co.............................. 127,099
11 Nippon Telegraph & Telephone Corp............... 90,690
22,000 Nippon Zeon Co.................................. 118,194
14,000 NSK............................................. 101,641
8,000 Onward Kashiyama Co............................. 130,100
20,000 Shimadzu Corp................................... 115,967
2,500 Sony Corp....................................... 149,799
5,000 Sumitomo Bank................................... 105,997
30,000 Sumitomo Metal Industries....................... 90,896
16,000 Sumitomo Warehouse.............................. 102,996
17,000 Taisei Corp..................................... 113,383
15,000 Teikoku Oil Co.................................. 101,054
17,000 Toray Industries Inc............................ 111,902
4,000 Toyota Motor Co................................. 84,797
24,000 Yasuda Trust & Banking.......................... 141,949
-----------
2,814,967
-----------
MALAYSIA - 10.0%
130,000 Faber Group..................................... 111,076
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
50
<PAGE>
- --------------------------------------------------------------------------------
GOVETT PACIFIC STRATEGY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
MALAYSIA (CONTINUED)
700 Gadek........................................... $ 3,583
74,000 Magnum Corp..................................... 139,859
50,625 Malaysia Assurance Alliance..................... 229,235
52,000 Malaysian Airline System........................ 168,918
109,000 Malaysian Resources Corp........................ 175,107
148,000 Multi-Purpose Holdings.......................... 216,782
58,000 Technology Resources Industries................. 171,280
15,866 UMW Holdings.................................... 42,481
-----------
1,258,321
-----------
PAKISTAN - 0.3%
390 Pakistan Telecommunications GDS................. 33,930
-----------
PHILIPPINES - 1.9%
132,000 Fil-Estate Land................................. 99,390
125,000 Picop Resources................................. 30,023
62,000 Security Bank................................... 112,276
-----------
241,689
-----------
SINGAPORE - 9.8%
43,600 Acma............................................ 144,871
20,000 Amcol Holdings.................................. 55,143
7,000 Creative Technology............................. 60,375
35,000 First Capital Corp.............................. 96,995
94,000 Hotel Properties................................ 145,536
31,000 Jardine Matheson................................ 212,350
1,000 Keppel Corporation.............................. 8,908
300,000 Odin Mining Investment Co *..................... 68,929
12,000 Overseas Chinese Banking Corp................... 150,159
30,000 Sembawang Shipyard.............................. 166,490
19,000 Singapore Land.................................. 122,906
-----------
1,232,662
-----------
SOUTH KOREA - 5.3%
9,500 Cho Hung Bank Co................................ 110,583
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
51
<PAGE>
- --------------------------------------------------------------------------------
GOVETT PACIFIC STRATEGY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
SOUTH KOREA (CONTINUED)
2,599 Chosun Brewery *................................ $ 96,154
2,394 Hyundai Engineering and Construction Co *....... 109,863
2,800 Korea Electric Power Corp....................... 111,170
1,700 Korean Air *.................................... 59,607
700 LG Information & Communication.................. 64,067
300 Pohang Iron & Steel Co.......................... 19,607
2,200 Sammi Steel Co.................................. 17,356
1 Samsung Electronics *........................... 182
131 Samsung Electronics GDR (common shares) *....... 23,811
639 Samsung Electronics GDS (non-voting shares)..... 37,861
180 Shinsegae Department Stores..................... 15,036
-----------
665,297
-----------
TAIWAN - 2.5%
4,400 Asia Cement Corporation GDS..................... 72,600
40,000 China Bills Finance Corp........................ 53,359
140,000 China Steel Corporation......................... 111,848
3,004 Tung Ho Steel GDR............................... 30,791
44,600 Walsin Lihwa Electric Wire & Cable.............. 46,419
-----------
315,017
-----------
THAILAND - 11.5%
59,100 Electricity Generating.......................... 175,291
35,000 Finance One..................................... 204,248
150,000 First Bangkok City Bank......................... 111,651
14,000 K.R. Precision Co............................... 97,817
6,000 Loxley Co....................................... 121,953
118,000 Saha Union Corp................................. 132,334
7,000 Sanyo Universal Electric Co..................... 30,568
40,000 Swedish Motor Corp.............................. 173,085
45,000 Thai Military Bank.............................. 155,681
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
52
<PAGE>
- --------------------------------------------------------------------------------
GOVETT PACIFIC STRATEGY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
THAILAND (CONTINUED)
18,500 United Communication Industry................... $ 236,483
-----------
1,439,111
-----------
TOTAL - COMMON STOCKS (Cost $11,459,619)........ 11,432,271
-----------
PREFERRED STOCKS - 1.0%
SOUTH KOREA - 1.0%
1,048 Samsung Electronics *........................... 121,586
-----------
TOTAL - PREFERRED STOCKS (Cost $117,676)........ 121,586
-----------
WARRANTS - 0.3%
HONG KONG - 0.0%
7,875 Jardine Strategic Holdings Warrants 05/02/98
*............................................. 2,520
-----------
JAPAN - 0.2%
15 Fujitsu Warrants 12/06/00 *..................... 11,813
20 Keihin Electric Warrants 11/02/99 *............. 13,000
25,000 Salomon Brothers Nikkei 300 Warrants 01/18/96
*............................................. 2,625
-----------
27,438
-----------
MALAYSIA - 0.1%
7,866 UMW Holdings Warrants 01/26/00 *................ 5,544
-----------
SOUTH KOREA - 0.0%
11 Daewoo Corp Warrants 11/08/96 *................. 3,025
-----------
TOTAL - WARRANTS (Cost $131,085)................ 38,527
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
53
<PAGE>
- -------------------------------------------------------------------
GOVETT PACIFIC STRATEGY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- -------------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE BONDS - 2.9%
JAPAN - 0.9%
$100,000 MBL International Finance, 3.00%, 11/30/02...... $ 115,690
-----------
TAIWAN - 2.0%
$ 30,000 Acer Inc, 4.00%, 06/10/01....................... 89,550
$100,000 President Enterprises, 0.00%, 07/22/01.......... 132,000
$ 21,000 United Micro Electronic, 1.25%, 06/08/04........ 26,434
-----------
247,984
-----------
TOTAL - CONVERTIBLE BONDS (Cost $331,899)....... 363,674
-----------
TOTAL INVESTMENTS - 95.7% (Cost $12,040,279)...... 11,956,058
Other Assets and Liabilities (net) - 4.3%......... 534,711
-----------
TOTAL NET ASSETS - 100.0%......................... $12,490,769
-----------
-----------
</TABLE>
* NON-INCOME PRODUCING SECURITY
ADR AMERICAN DEPOSITORY RECEIPT
GDR GLOBAL DEPOSITORY RECEIPT
GDS GLOBAL DEPOSITORY SHARE
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
54
<PAGE>
- --------------------------------------------------------------------------------
GOVETT PACIFIC STRATEGY FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
GEOGRAPHIC CONCENTRATION*
<S> <C>
Japan.................. 23.7%
Hong Kong.............. 16.7
Thailand............... 11.5
Malaysia............... 10.1
Singapore.............. 9.8
South Korea............ 6.3
Taiwan................. 4.5
Australia.............. 4.5
China.................. 3.1
Indonesia.............. 2.4
Philippines............ 1.9
India.................. 0.9
Pakistan............... 0.3
-----
95.7
Other Assets and
Liabilities (net).... 4.3
-----
Total Net Assets... 100.0%
-----
-----
</TABLE>
<TABLE>
<CAPTION>
SECTOR ALLOCATION*
<S> <C>
Conglomerates.......... 13.7%
Real Estate............ 13.5
Finance................ 12.8
Transportation......... 6.6
Banks.................. 5.9
Electronics............ 5.7
Natural Resources...... 5.4
Telecommunications..... 5.4
Manufacturing.......... 4.7
Utilities.............. 4.5
Chemicals.............. 4.3
Textiles............... 3.0
Construction and
Construction
Materials............ 2.5
Leisure................ 2.4
Wholesale and Retail
Trade................ 1.3
Health Care............ 0.9
Storage................ 0.8
Food and Beverage...... 0.8
Consumer Goods and
Services............. 0.6
Computers and Office
Equipment............ 0.6
Packaging.............. 0.3
-----
95.7
Other Assets and
Liabilities (net).... 4.3
-----
Total Net Assets... 100.0%
-----
-----
</TABLE>
* UNAUDITED
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
55
<PAGE>
- -------------------------------------------------------------------
GOVETT LATIN AMERICA FUND
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 77.7%
ARGENTINA - 11.2%
40,000 Astra........................................... $ 73,989
8,370 Banco Frances................................... 74,063
25,000 Central Costanera B............................. 76,988
15,000 Perez Companc B................................. 79,488
3,000 Telefonica de Argentina ADR..................... 81,750
26,930 Transportadora de Gas del Sur B................. 64,892
4,000 YPF ADR......................................... 86,500
-----------
537,670
-----------
BRAZIL - 17.7%
6,000 Aracruz Celulose ADR............................ 46,500
5,194 Cemig ADR....................................... 114,898
200,000 Electrobras..................................... 54,118
3,000,000 Paulista de Forca e Luz......................... 145,378
4,204 Telebras ADR.................................... 202,432
450,000 Telefonica da Borda do Campo.................... 67,133
12,000 Usiminas ADR.................................... 97,537
3,000 Vale do Rio Doce ADR............................ 123,467
-----------
851,463
-----------
CHILE - 11.7%
14,000 Antofagasta Holdings............................ 63,533
10,000 Banco Osorno ADR................................ 138,750
1,500 Compania de Telefonos de Chile ADR.............. 124,313
3,000 Endesa ADR...................................... 68,250
2,250 Enersis ADR..................................... 64,125
3,000 Masisa ADR...................................... 58,500
1,000 Sociedad Quimica Minera de Chile ADR............ 47,000
-----------
564,471
-----------
COLOMBIA - 4.0%
3,000 Cadenalco ADR................................... 35,250
4,400 Cemento Argos................................... 27,534
4,000 Cementos Paz del Rio ADS........................ 63,398
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
56
<PAGE>
- --------------------------------------------------------------------------------
GOVETT LATIN AMERICA FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COLOMBIA (CONTINUED)
3,500 Suramericana de Seguros......................... $ 65,354
-----------
191,536
-----------
ECUADOR - 1.4%
384 La Cimento Nacional GDR......................... 67,668
-----------
MEXICO - 25.2%
20,000 Apasco.......................................... 81,918
4,000 Bufete Industrial ADR........................... 60,000
10,006 Cemex ADR....................................... 71,816
95,000 Cifra C......................................... 96,047
18,000 Corporacion GEO B............................... 52,145
20,000 Desc B.......................................... 73,364
20,000 Empaques Ponderosa B............................ 35,774
7,200 Empresas la Moderna ADR *....................... 111,600
15,000 Grupo Carso *................................... 80,881
13,500 Grupo Financiero Bancomer GDR................... 77,625
6,000 Grupo Profesional Planeacion B.................. 33,052
3,000 Hylsamex GDS *.................................. 61,500
5,000 ICA............................................. 52,171
21,700 Internacional de Ceramica....................... 26,719
60,008 Organizacion Soriana A.......................... 58,025
2,000 Panamerican Beverages Inc A..................... 64,000
20,000 Sears Roebuck de Mexico......................... 41,918
4,250 Telefonos de Mexico ADR......................... 135,469
-----------
1,214,024
-----------
PERU - 4.4%
8,000 Buenaventura.................................... 51,714
45,000 Embotelladora del Pacifico ADR B................ 18,351
27,625 Enrique Ferreyros............................... 32,359
73,365 Fabricacion Industries T........................ 26,418
46,055 Indeco Peruana *................................ 24,773
4,217 Minsur.......................................... 29,637
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
57
<PAGE>
- --------------------------------------------------------------------------------
GOVETT LATIN AMERICA FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
PERU (CONTINUED)
15,000 Telefonica de Peru.............................. $ 32,213
-----------
215,465
-----------
URUGUAY - 2.1%
6,150 Banco Commercial GDR............................ 99,938
-----------
TOTAL - COMMON STOCKS (Cost $4,312,866)......... 3,742,235
-----------
PREFERRED STOCKS - 15.8%
BRAZIL - 15.8%
12,780,000 Acesita......................................... 74,291
10,000,000 Banco Bradesco.................................. 87,000
300,000 Banco Itau...................................... 83,646
245,513 Brahma.......................................... 101,029
325,000 Brasmotor....................................... 64,535
300,000 Coteminas....................................... 100,290
140,000 Dixie Toga...................................... 122,434
34,795,612 Refripar........................................ 69,452
400,000 Telesp.......................................... 58,851
-----------
761,528
-----------
TOTAL - PREFERRED STOCKS (Cost $800,038)........ 761,528
-----------
WARRANTS AND RIGHTS - 1.7%
BRAZIL - 0.0%
233,820 Banco Bradesco Rights 01/15/96 *................ 385
3,000 Brazil Basket Warrants 01/29/96 *............... 330
-----------
715
-----------
MEXICO - 1.7%
67,000 Metalclad Warrants 09/30/99 *................... 83,750
-----------
TOTAL - WARRANTS AND RIGHTS (Cost $5,820)....... 84,465
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
58
<PAGE>
- -------------------------------------------------------------------
GOVETT LATIN AMERICA FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE BONDS - 0.6%
PERU - 0.6%
$ 20,000 International Financial Holdings, 6.50%,
08/01/99...................................... $ 26,900
-----------
TOTAL - CONVERTIBLE BONDS (Cost $20,000)........ 26,900
-----------
TOTAL INVESTMENTS - 95.8% (Cost $5,138,724)....... 4,615,128
Other Assets and Liabilities (net) - 4.2%......... 201,516
-----------
TOTAL NET ASSETS - 100.0%......................... $ 4,816,644
-----------
-----------
</TABLE>
* NON-INCOME PRODUCING SECURITY
ADR AMERICAN DEPOSITORY RECEIPT
ADS AMERICAN DEPOSITORY SHARE
GDR GLOBAL DEPOSITORY RECEIPT
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
59
<PAGE>
- --------------------------------------------------------------------------------
GOVETT LATIN AMERICA FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
GEOGRAPHIC CONCENTRATION*
<S> <C>
Brazil................. 33.5%
Mexico................. 26.9
Chile.................. 11.7
Argentina.............. 11.2
Peru................... 5.0
Colombia............... 4.0
Uruguay................ 2.1
Ecuador................ 1.4
-----
95.8
Other Assets and
Liabilities (net).... 4.2
-----
Total Net Assets... 100.0%
-----
-----
</TABLE>
<TABLE>
<CAPTION>
SECTOR ALLOCATION*
<S> <C>
Telecommunications..... 14.5%
Finance................ 13.6
Natural Resources...... 12.5
Construction and
Construction
Materials............ 11.1
Conglomerates.......... 9.4
Utilities.............. 8.2
Industrial............. 6.3
Consumer Goods and
Services............. 4.5
Food and Beverage...... 3.8
Retail................. 3.6
Transportation......... 2.9
Textiles............... 2.1
Wholesale and Retail
Trade................ 1.2
Electronics............ 1.1
Chemicals.............. 1.0
-----
95.8
Other Assets and
Liabilities (net).... 4.2
-----
Total Net Assets... 100.0%
-----
-----
</TABLE>
* UNAUDITED
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
60
<PAGE>
- -------------------------------------------------------------------
GOVETT GLOBAL INCOME FUND
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------------------------------
GOVERNMENT BONDS - 78.9%
<C> <S> <C>
SOUTH AFRICA - 5.8%
$2,200,000 Republic Of South Africa, 9.625%, 12/15/99...... $ 2,368,440
-----------
UNITED STATES - 73.1%
$5,700,000 U.S. Treasury Bond, 7.50%, 01/31/96 *........... 5,716,023
$6,500,000 U.S. Treasury Bond, 9.375%, 04/15/96 *.......... 6,579,209
$13,600,000 U.S. Treasury Bond, 6.50%, 09/30/96 *........... 13,729,093
$3,600,000 U.S. Treasury Bond, 7.50%, 02/15/05............. 4,087,120
-----------
30,111,445
-----------
TOTAL - BONDS (Cost $32,291,555)................ 32,479,885
-----------
SHORT-TERM INVESTMENTS - 16.6%
POLAND - 10.2%
PLZ 5,150,000 Polish Treasury Bill, 3/06/96................... 2,001,813
PLZ 5,510,000 Polish Treasury Bill, 01/24/96.................. 2,198,199
-----------
4,200,012
-----------
SOUTH AFRICA - 3.7%
ZAR 5,700,000 Escom Commercial Paper, 3/04/96................. 1,508,433
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
61
<PAGE>
- --------------------------------------------------------------------------------
GOVETT GLOBAL INCOME FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONTINUED)
<C> <S> <C>
TURKEY - 2.7%
TRL 69,500,000,000 Turkish Treasury Bill, 01/05/96................. $ 1,129,170
-----------
TOTAL - SHORT-TERM INVESTMENTS (Cost
$7,135,223)................................... 6,837,615
-----------
TOTAL INVESTMENTS - 95.5% (Cost $39,426,778)...... 39,317,500
Other Assets and Liabilities (net) - 4.5%......... 1,863,120
-----------
TOTAL NET ASSETS - 100.0%......................... $41,180,620
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
62
<PAGE>
- -------------------------------------------------------------------
GOVETT GLOBAL INCOME FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
SECURITY FORWARD PURCHASE COMMITMENT CONTRACTS
<TABLE>
<CAPTION>
NET
SETTLEMENT PRINCIPAL UNREALIZED
DATE AMOUNT SECURITY APPRECIATION
<C> <C> <S> <C>
- ------------------------------------------------------------------------------------
01/05/96 $ 4,400,000 US Treasury Note, 7.50%, 02/15/05.... $ 236,388
Government of France, OAT, 7.75%,
01/19/96 FRF 14,800,000 10/25/05........................... 130,791
Republic of Austria, 6.875%,
01/22/96 AUS 28,000,000 06/20/05........................... 3,885
Netherlands Government, 7.00%,
02/13/96 NLG 3,900,000 06/15/05........................... 121,648
02/20/96 DEM 8,500,000 Treuhandanstalt, 6.50%, 04/23/03..... 208,404
04/08/96 $ 5,750,000 US Treasury Note, 7.50%, 02/15/05.... 26,977
Italian Government, 12.00%,
04/12/96 ITL 5,750,000,000 01/01/03........................... 50,687
-------------
TOTAL FORWARD PURCHASE COMMITMENT CONTRACTS
(COST $29,355,095)...................................................... $ 778,780
-------------
-------------
</TABLE>
* SECURITY WAS PLEDGED AS COLLATERAL FOR FORWARD PURCHASE COMMITMENTS
CONTRACTS (SEE NOTE 1)
AUS AUSTRIAN SCHILLING
ITL ITALIAN LIRA
TRL TURKISH LIRA
DEM GERMAN MARK
NLG NETHERLANDS GUILDER
ZAR SOUTH AFRICAN RAND
FRF FRENCH FRANC
PLZ POLISH ZLOTY
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
63
<PAGE>
- -------------------------------------------------------------------
GOVETT GLOBAL INCOME FUND (CONTINUED)
Schedule of Investments
(showing percentage of total net assets)
December 31, 1995
<TABLE>
<CAPTION>
GEOGRAPHIC CONCENTRATION*
(PERCENTAGES INCLUDE SECURITY FORWARD PURCHASE COMMITMENTS)
<S> <C> <C>
United States............................... 27.6%
Germany..................................... 15.0
Poland...................................... 10.2
South Africa................................ 9.5
Italy....................................... 9.4
France...................................... 7.9
Austria..................................... 6.9
Netherlands................................. 6.3
Turkey...................................... 2.7
-----
95.5
Other Assets and Liabilities (net).......... 4.5
-----
Total Net Assets........................ 100.0%
-----
-----
</TABLE>
* UNAUDITED
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
64
<PAGE>
(This page has been left blank intentionally.)
65
<PAGE>
- --------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING
EQUITY FUND MARKETS FUND
------------- -------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1)* - (see accompanying Schedule of
Investments)................................................... $28,085,998 $72,657,932
Repurchase agreement............................................. -- --
Cash in overnight time deposit................................... -- 3,347,706
Foreign currency, at value (Note 1)**............................ 120 1,125,728
Receivable from:
Securities sold................................................ 706,012 84,540
Net open forward purchase commitments (see accompanying
Schedule of Investments)..................................... -- --
Closed forward purchase commitments (Note 9)................... -- --
Net open forward currency contracts (Note 9)................... 103,356 --
Fund shares sold............................................... 129,161 721,883
Dividends and interest......................................... 87,945 214,877
Investment manager (Note 2).................................... -- --
Prepaid expenses................................................. 28,440 29,890
Deferred organization expense.................................... 14,416 14,416
------------- -------------
Total assets................................................... 29,155,448 78,196,972
------------- -------------
LIABILITIES:
Notes payable (Note 4)........................................... 354,935 --
Payable for:
Securities purchased........................................... -- 1,482,060
Fund shares repurchased........................................ 183,001 624,427
Distributions declared......................................... -- --
Net open forward currency contracts (Note 9)................... -- --
Management fee (Note 2)........................................ 2,005 6,677
Accrued expenses and other liabilities........................... 69,056 196,891
------------- -------------
Total liabilities.............................................. 608,997 2,310,055
------------- -------------
NET ASSETS....................................................... $28,546,451 $75,886,917
------------- -------------
------------- -------------
NET ASSETS CONSIST OF:
Paid-in capital.................................................. $25,740,046 $88,217,026
Undistributed net investment income (loss)....................... 131,541 (25,349)
Accumulated net realized gain (loss) on investments and foreign
currency transactions.......................................... 328,387 (8,216,985)
Net unrealized appreciation (depreciation) on investments,
forward currency contracts, forward purchase commitments and
net other assets............................................... 2,346,477 (4,087,775)
------------- -------------
NET ASSETS....................................................... $28,546,451 $75,886,917
------------- -------------
------------- -------------
SHARES OUTSTANDING............................................... 2,532,903 6,202,011
------------- -------------
------------- -------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE................... $ 11.27 $ 12.24
------------- -------------
------------- -------------
OFFERING PRICE PER SHARE (NET ASSET VALUE DIVIDED BY 95.05%)..... $ 11.86 $ 12.88
------------- -------------
------------- -------------
* Cost of investments............................................ $25,843,788 $76,713,493
** Cost of foreign currency...................................... $ 121 $ 1,160,762
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
66
<PAGE>
- --------------------------------------------------------------
<TABLE>
<CAPTION>
SMALLER LATIN
COMPANIES PACIFIC AMERICA GLOBAL
FUND STRATEGY FUND FUND INCOME FUND
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note 1)* - (see accompanying Schedule of
Investments)................................................... $ 467,603,174 $11,956,058 $ 4,615,128 $39,317,500
Repurchase agreement............................................. 42,718,371 -- -- --
Cash in overnight time deposit................................... -- 1,261,033 -- 445,175
Foreign currency, at value (Note 1)**............................ 184 817,018 -- --
Receivable from:
Securities sold................................................ 10,727,438 37,172 94,233 --
Net open forward purchase commitments (see accompanying
Schedule of Investments)..................................... -- -- -- 778,780
Closed forward purchase commitments (Note 9)................... -- -- -- 260,558
Net open forward currency contracts (Note 9)................... -- 26,980 -- --
Fund shares sold............................................... 2,345,025 13,869 74,774 3,909
Dividends and interest......................................... 24,794 13,820 21,325 674,488
Investment manager (Note 2).................................... -- 9,483 4,481 --
Prepaid expenses................................................. 61,216 27,105 23,095 27,740
Deferred organization expense.................................... 16,288 18,985 18,804 14,416
------------- ------------- ----------- ------------
Total assets................................................... 523,496,490 14,181,523 4,851,840 41,522,566
------------- ------------- ----------- ------------
LIABILITIES:
Notes payable (Note 4)........................................... -- -- -- --
Payable for:
Securities purchased........................................... 2,327,343 1,578,097 -- --
Fund shares repurchased........................................ 1,820,014 76,114 13,541 118,567
Distributions declared......................................... -- -- -- 123,389
Net open forward currency contracts (Note 9)................... -- -- -- 11,998
Management fee (Note 2)........................................ 241,741 -- -- 12,767
Accrued expenses and other liabilities........................... 1,117,025 36,543 21,655 75,225
------------- ------------- ----------- ------------
Total liabilities.............................................. 5,506,123 1,690,754 35,196 341,946
------------- ------------- ----------- ------------
NET ASSETS....................................................... $ 517,990,367 $12,490,769 $ 4,816,644 $41,180,620
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
NET ASSETS CONSIST OF:
Paid-in capital.................................................. $ 390,930,333 $15,531,017 $ 7,550,849 $43,542,752
Undistributed net investment income (loss)....................... -- 14,325 -- (355,342)
Accumulated net realized gain (loss) on investments and foreign
currency transactions.......................................... 16,187,585 (2,995,615) (2,210,597) (2,681,984)
Net unrealized appreciation (depreciation) on investments,
forward currency contracts, forward purchase commitments and
net other assets............................................... 110,872,449 (58,958) (523,608) 675,194
------------- ------------- ----------- ------------
NET ASSETS....................................................... $ 517,990,367 $12,490,769 $ 4,816,644 S$41,180,620
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
SHARES OUTSTANDING............................................... 17,290,821 1,464,387 748,061 4,591,940
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE................... $ 29.96 $ 8.53 $ 6.44 $ 8.97
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
OFFERING PRICE PER SHARE (NET ASSET VALUE DIVIDED BY 95.05%)..... $ 31.52 $ 8.97 $ 6.77 $ 9.44
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
* Cost of investments............................................ $ 356,730,725 $12,040,279 $ 5,138,724 $39,426,778
** Cost of foreign currency...................................... $ 186 $ 820,464 -- --
</TABLE>
67
<PAGE>
- --------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING
EQUITY FUND MARKETS FUND
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Interest......................................................... $ 55,642 $ 259,765
Dividends *...................................................... 517,879 1,267,746
------------- -------------
Total investment income........................................ 573,521 1,527,511
------------- -------------
EXPENSES:
Management fee (Note 2).......................................... 302,657 745,285
Custody and administration fees.................................. 110,158 432,106
12b-1 fee Class A (Note 3)....................................... 152,106 374,718
Professional fees................................................ 56,311 70,157
Transfer agency fee.............................................. 118,697 320,766
Registration and filing fees..................................... 31,350 38,941
Directors' fees and expenses..................................... 25,786 30,962
Amortization of organization costs............................... 14,190 14,190
Other............................................................ 25,503 53,953
------------- -------------
Total expenses................................................. 836,758 2,081,078
Less: Expenses reimbursable and fees waived by the Manager (Note
2)............................................................. 76,145 207,496
------------- -------------
Net operating expenses........................................... 760,613 1,873,582
------------- -------------
Interest expense................................................. 7,466 18,463
------------- -------------
NET INVESTMENT INCOME (LOSS)..................................... (194,558) (364,534)
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investment transactions........................................ 749,268 (7,289,885)
Foreign currency transactions.................................. 317,782 (226,020)
------------- -------------
Net realized gain (loss)..................................... 1,067,050 (7,515,905)
------------- -------------
Net change in unrealized appreciation (depreciation) on:
Investments.................................................... 2,179,903 1,529,309
Forward currency contracts..................................... 103,356 --
Forward security purchase contracts............................ -- --
Foreign currency and net other assets.......................... (4,803) (56,727)
------------- -------------
Net unrealized appreciation during the period................ 2,278,456 1,472,582
------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS).......................... 3,345,506 (6,043,323)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS..................................................... $ 3,150,948 $(6,407,857)
------------- -------------
------------- -------------
* Net of foreign taxes withheld of:.............................. $ 93,176 $ 132,207
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
68
<PAGE>
- --------------------------------------------------------------
<TABLE>
<CAPTION>
SMALLER PACIFIC
COMPANIES STRATEGY LATIN GLOBAL
FUND FUND AMERICA FUND INCOME FUND
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest......................................................... $ 903,344 $ 24,113 $ 17,181 $4,177,043
Dividends *...................................................... 107,188 196,907 104,020 --
------------- ------------ ------------ ------------
Total investment income........................................ 1,010,532 221,020 121,201 4,177,043
------------- ------------ ------------ ------------
EXPENSES:
Management fee (Note 2).......................................... 3,173,782 118,565 47,489 338,596
Custody and administration fees.................................. 503,225 108,722 67,637 91,602
12b-1 fee Class A (Note 3)....................................... 1,601,106 59,626 23,877 158,798
Professional fees................................................ 208,856 44,340 41,284 60,731
Transfer agency fee.............................................. 955,385 33,574 24,504 129,886
Registration and filing fees..................................... 196,792 27,494 29,779 26,982
Directors' fees and expenses..................................... 48,516 23,246 22,276 27,307
Amortization of organization costs............................... 8,165 6,343 5,929 14,190
Other............................................................ 108,112 9,259 7,538 26,472
------------- ------------ ------------ ------------
Total expenses................................................. 6,803,939 431,169 270,313 874,564
Less: Expenses reimbursable and fees waived by the Manager (Note
2)............................................................. 559,632 133,040 150,934 80,573
------------- ------------ ------------ ------------
Net operating expenses........................................... 6,244,307 298,129 119,379 793,991
------------- ------------ ------------ ------------
Interest expense................................................. 7,146 3,078 1,605 4,034
------------- ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)..................................... (5,240,921) (80,187) 217 3,379,018
------------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investment transactions........................................ 50,116,140 (1,886,813) (1,974,755) 2,536,571
Foreign currency transactions.................................. -- 87,973 (37,057) (1,111,154)
------------- ------------ ------------ ------------
Net realized gain (loss)..................................... 50,116,140 (1,798,840) (2,011,812) 1,425,417
------------- ------------ ------------ ------------
Net change in unrealized appreciation (depreciation) on:
Investments.................................................... 101,603,018 1,449,284 938,169 350,073
Forward currency contracts..................................... -- 26,980 -- 58,466
Forward security purchase contracts............................ -- -- -- 778,780
Foreign currency and net other assets.......................... 3 (11,965) 213 13,245
------------- ------------ ------------ ------------
Net unrealized appreciation during the period................ 101,603,021 1,464,299 938,382 1,200,564
------------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS).......................... 151,719,161 (334,541) (1,073,430) 2,625,981
------------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS..................................................... $ 146,478,240 $ (414,728) $ (1,073,213) $6,004,999
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
* Net of foreign taxes withheld of:.............................. $ 2,354 $ 21,221 $ 7,301 --
</TABLE>
69
<PAGE>
- --------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss).......................... $ (194,558) $ (356,958)
Net realized gain (loss) on investment and foreign
currency transactions............................... 1,067,050 4,195,834
Net change in unrealized appreciation (depreciation)
on investments, forward currency contracts, foreign
currency, and other assets.......................... 2,278,456 (7,489,312)
------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... 3,150,948 (3,650,436)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................ -- --
In excess of net investment income.................... -- --
From net realized capital gains....................... (23,679) (5,709,085)
In excess of net realized capital gains............... -- --
Tax return of capital................................. -- --
------------- -------------
Total distributions to shareholders................. (23,679) (5,709,085)
------------- -------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from shares sold............................. 9,996,843 48,342,857
Assets acquired from Govett Developing Markets Bond
Fund (Note 7)....................................... -- --
Net asset value of shares issued on reinvestment of
distributions....................................... 22,100 5,132,796
Cost of shares repurchased............................ (16,895,695) (56,429,994)
------------- -------------
Net increase (decrease) in net assets resulting from
Fund share transactions............................. (6,876,752) (2,954,341)
------------- -------------
TOTAL CHANGE IN NET ASSETS............................ (3,749,483) (12,313,862)
NET ASSETS:
Beginning of period................................... 32,295,934 44,609,796
------------- -------------
End of period *....................................... $ 28,546,451 $ 32,295,934
------------- -------------
------------- -------------
* Including undistributed net investment loss of:..... $ 131,541 $ (31,008)
</TABLE>
(A) COMMENCEMENT OF OPERATIONS WAS MARCH 7, 1994.
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
70
<PAGE>
- --------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING MARKETS FUND SMALLER COMPANIES FUND
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- -----------------------------
1995 1994 1995 1994
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss).......................... $ (364,534) $ (649,481) $ (5,240,921) $ (474,738)
Net realized gain (loss) on investment and foreign
currency transactions............................... (7,515,905) 8,772,370 50,116,140 9,486,544
Net change in unrealized appreciation (depreciation)
on investments, forward currency contracts, foreign
currency, and other assets.......................... 1,472,582 (21,376,938) 101,603,021 4,131,346
------------- -------------- -------------- -------------
Net increase (decrease) in net assets resulting from
operations.......................................... (6,407,857) (13,254,049) 146,478,240 13,143,152
------------- -------------- -------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................ -- -- -- --
In excess of net investment income.................... -- -- -- --
From net realized capital gains....................... (53,799) (12,753,820) (35,821,751) (3,261,233)
In excess of net realized capital gains............... -- (234,040) -- --
Tax return of capital................................. -- -- -- --
------------- -------------- -------------- -------------
Total distributions to shareholders................. (53,799) (12,987,860) (35,821,751) (3,261,233)
------------- -------------- -------------- -------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from shares sold............................. 72,812,483 129,481,614 617,309,409 112,661,218
Assets acquired from Govett Developing Markets Bond
Fund (Note 7)....................................... -- -- -- --
Net asset value of shares issued on reinvestment of
distributions....................................... 49,891 11,343,753 32,731,146 3,034,952
Cost of shares repurchased............................ (67,325,397) (109,193,765) (319,579,803) (88,386,149)
------------- -------------- -------------- -------------
Net increase (decrease) in net assets resulting from
Fund share transactions............................. 5,536,977 31,631,602 330,460,752 27,310,021
------------- -------------- -------------- -------------
TOTAL CHANGE IN NET ASSETS............................ (924,679) 5,389,693 441,117,241 37,191,940
NET ASSETS:
Beginning of period................................... 76,811,596 71,421,903 76,873,126 39,681,186
------------- -------------- -------------- -------------
End of period *....................................... $ 75,886,917 $ 76,811,596 $ 517,990,367 $ 76,873,126
------------- -------------- -------------- -------------
------------- -------------- -------------- -------------
* Including undistributed net investment loss of:..... $ (25,349) $ (233,219) $ -- $ (8,041)
</TABLE>
71
<PAGE>
- --------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
PACIFIC STRATEGY FUND
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss)..................................... $ (80,187) $ (278,208)
Net realized gain (loss) on investment and foreign currency
transactions................................................... (1,798,840) (1,115,896)
Net change in unrealized appreciation (depreciation) on
investments, forward currency contracts, foreign currency, and
other assets................................................... 1,464,299 (1,523,257)
------------- -------------
Net increase (decrease) in net assets resulting from
operations..................................................... (414,728) (2,917,361)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income....................................... -- --
In excess of net investment income............................... -- --
From net realized capital gains.................................. -- --
In excess of net realized capital gains.......................... -- --
Tax return of capital............................................ -- --
------------- -------------
Total distributions to shareholders............................ -- --
------------- -------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from shares sold........................................ 11,102,393 88,954,561
Assets acquired from Govett Developing Markets Bond Fund (Note
7)............................................................. -- --
Net asset value of shares issued on reinvestment of
distributions.................................................. -- --
Cost of shares repurchased....................................... (12,046,042) (72,188,154)
------------- -------------
Net increase (decrease) in net assets resulting from Fund share
transactions................................................... (943,649) 16,766,407
------------- -------------
TOTAL CHANGE IN NET ASSETS....................................... (1,358,377) 13,849,046
NET ASSETS:
Beginning of period.............................................. 13,849,146 100
------------- -------------
End of period *.................................................. $ 12,490,769 $ 13,849,146
------------- -------------
------------- -------------
* Including undistributed net investment loss of:................ $ 14,325 --
</TABLE>
(A) COMMENCEMENT OF OPERATIONS WAS MARCH 7, 1994.
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
72
<PAGE>
- --------------------------------------------------------------
<TABLE>
<CAPTION>
LATIN AMERICA FUND
---------------------------- GLOBAL INCOME FUND
YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, ----------------------------
1995 1994 (A) 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss)..................................... $ 217 $ (77,854) $ 3,379,018 $ 6,048,018
Net realized gain (loss) on investment and foreign currency
transactions................................................... (2,011,812) 237,588 1,425,417 (12,553,764)
Net change in unrealized appreciation (depreciation) on
investments, forward currency contracts, foreign currency, and
other assets................................................... 938,382 (1,461,990) 1,200,564 (1,614,301)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations..................................................... (1,073,213) (1,302,256) 6,004,999 (8,120,047)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income....................................... -- -- (3,379,018) (1,929,087)
In excess of net investment income............................... -- -- (43,384) --
From net realized capital gains.................................. -- (237,588) -- --
In excess of net realized capital gains.......................... -- (189,215) -- --
Tax return of capital............................................ -- -- -- (4,241,735)
------------- ------------- ------------- -------------
Total distributions to shareholders............................ -- (426,803) (3,422,402) (6,170,822)
------------- ------------- ------------- -------------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from shares sold........................................ 6,916,699 20,373,324 4,442,943 32,352,529
Assets acquired from Govett Developing Markets Bond Fund (Note
7)............................................................. -- -- 903,675 --
Net asset value of shares issued on reinvestment of
distributions.................................................. -- 418,178 2,072,302 3,415,621
Cost of shares repurchased....................................... (8,123,019) (11,966,266) (20,512,230) (51,786,231)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from Fund share
transactions................................................... (1,206,320) 8,825,236 (13,093,310) (16,018,081)
------------- ------------- ------------- -------------
TOTAL CHANGE IN NET ASSETS....................................... (2,279,533) 7,096,177 (10,510,713) (30,308,950)
NET ASSETS:
Beginning of period.............................................. 7,096,177 -- 51,691,333 82,000,283
------------- ------------- ------------- -------------
End of period *.................................................. $ 4,816,644 $ 7,096,177 $ 41,180,620 $ 51,691,333
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
* Including undistributed net investment loss of:................ $ -- $ (49,773) $ (355,342) $ (527,101)
</TABLE>
73
<PAGE>
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
----------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992(A)
------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 10.16 $ 13.23 $ 9.31 $ 10.00
------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................. (0.08)+ (0.12)+ (0.03) (0.01)
Net realized and unrealized gain (loss) on
investments................................ 1.20 (0.94) 5.01 (0.52)
------------- ------------- ------------- -------------
Total from investment operations......... 1.12 (1.06) 4.98 (0.53)
------------- ------------- ------------- -------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................... -- -- -- (0.04)
In excess of net investment income........... -- -- -- --
From net realized gains...................... (0.01) (2.01) (1.06) (0.12)
In excess of net realized capital gains...... -- -- -- --
Tax return of capital........................ -- -- -- --
------------- ------------- ------------- -------------
Total distributions...................... (0.01) (2.01) (1.06) (0.16)
------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD............... $ 11.27 $ 10.16 $ 13.23 $ 9.31
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN **.............................. 11.01% (8.44)% 54.50% (5.32)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............ $ 28,546 $ 32,296 $ 44,610 $ 1,328
Net expenses to average daily net assets
(Note A)................................... 2.50% 2.50% 2.50% 2.50%*
Net investment income (loss) to average daily
net assets................................. (0.64)% (0.98)% (0.79)% (0.10)%*
Portfolio turnover rate...................... 101% 155% 151% 140%
- ---------------------------------------------
Note A: John Govett & Co. Limited waived a
portion of its management fees and
Govett Financial Services Limited
reimbursed a portion of the other
operating expenses of the Funds for
the years ended December 31, 1992,
1993 and 1994. For the year ended
December 31, 1995, John Govett & Co.
Limited waived a portion of its
management fee and reimbursed a
portion of the other operating
expenses of the Funds. Without the
waiver and reimbursement of expenses,
the expense ratios as a percentage of
average net assets for the periods
indicated would have been:
Expenses............................. 2.75% 2.74% 2.65% 13.85%*
</TABLE>
(A) COMMENCEMENT OF OPERATIONS WAS JANUARY 7, 1992.
(B) COMMENCEMENT OF OPERATIONS WAS JANUARY 1, 1993.
(C) COMMENCEMENT OF OPERATIONS WAS JANUARY 1, 1994.
(D) COMMENCEMENT OF OPERATIONS WAS MARCH 7, 1994.
* ANNUALIZED
** TOTAL RETURN CALCULATIONS EXCLUDE FRONT END SALES LOAD.
+ PER SHARE NET INVESTMENT INCOME (LOSS) DOES NOT REFLECT THE CURRENT PERIOD'S
RECLASSIFICATION OF PERMANENT DIFFERENCES BETWEEN BOOK AND TAX BASIS NET
INVESTMENT INCOME (LOSS). SEE NOTE 1.
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
74
<PAGE>
- --------------------------------------------------------------
<TABLE>
<CAPTION>
SMALLER
COMPANIES
EMERGING MARKETS FUND FUND
---------------------------------------------------------- -------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992(A) 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 13.29 $ 17.70 $ 10.72 $ 10.00 $ 19.06
------------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................. (0.06)+ (0.11)+ (0.05) (0.03) (0.30)+
Net realized and unrealized gain (loss) on
investments................................ (0.98) (1.93) 8.36 0.75 13.32
------------- ------------- ------------- ------------- -------------
Total from investment operations......... (1.04) (2.04) 8.31 0.72 13.02
------------- ------------- ------------- ------------- -------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................... -- -- -- -- --
In excess of net investment income........... -- -- -- -- --
From net realized gains...................... (0.01) (2.33) (1.33) -- (2.12)
In excess of net realized capital gains...... -- (0.04) -- -- --
Tax return of capital........................ -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Total distributions...................... (0.01) (2.37) (1.33) -- (2.12)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD............... $ 12.24 $ 13.29 $ 17.70 $ 10.72 $ 29.96
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL RETURN **.............................. (7.92)% (12.65)% 79.73% 7.20% 69.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............ $ 75,887 $ 76,812 $ 71,422 $ 5,625 $ 517,990
Net expenses to average daily net assets
(Note A)................................... 2.50% 2.50% 2.50% 2.50%* 1.95%
Net investment income (loss) to average daily
net assets................................. (0.49)% (0.77)% (0.88)% (0.49)%* (1.64)%
Portfolio turnover rate...................... 115% 140% 143% 182% 280%
Note A: John Govett & Co. Limited waived a
portion of its management fees and
Govett Financial Services Limited
reimbursed a portion of the other
operating expenses of the Funds for
the years ended December 31, 1992,
1993 and 1994. For the year ended
December 31, 1995, John Govett & Co.
Limited waived a portion of its
management fee and reimbursed a
portion of the other operating
expenses of the Funds. Without the
waiver and reimbursement of expenses,
the expense ratios as a percentage of
average net assets for the periods
indicated would have been:
Expenses............................. 2.78% 2.65% 2.52% 7.52%* 2.12%
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993(B)
-------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 15.85 $ 10.00
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................. (0.10)+ (0.06)
Net realized and unrealized gain (loss) on
investments................................ 4.47 5.91
------------- -------------
Total from investment operations......... 4.37 5.85
------------- -------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................... -- --
In excess of net investment income........... -- --
From net realized gains...................... (1.16) --
In excess of net realized capital gains...... -- --
Tax return of capital........................ -- --
------------- -------------
Total distributions...................... (1.16) --
------------- -------------
NET ASSET VALUE, END OF PERIOD............... $ 19.06 $ 15.85
------------- -------------
------------- -------------
TOTAL RETURN **.............................. 28.74% 58.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............ $ 76,873 $ 39,681
Net expenses to average daily net assets
(Note A)................................... 1.95% 1.95%
Net investment income (loss) to average daily
net assets................................. (1.13)% (0.93)%
Portfolio turnover rate...................... 519% 483%
Note A: John Govett & Co. Limited waived a
portion of its management fees and
Govett Financial Services Limited
reimbursed a portion of the other
operating expenses of the Funds for
the years ended December 31, 1992,
1993 and 1994. For the year ended
December 31, 1995, John Govett & Co.
Limited waived a portion of its
management fee and reimbursed a
portion of the other operating
expenses of the Funds. Without the
waiver and reimbursement of expenses,
the expense ratios as a percentage of
average net assets for the periods
indicated would have been:
Expenses............................. 2.40% 2.44%
</TABLE>
75
<PAGE>
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
PACIFIC STRATEGY FUND LATIN AMERICA FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994(C) 1995 1994(D)
------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 8.79 $ 10.00 $ 7.89 $ 10.00
------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............................. (0.05)+ (0.18)+ (0.01)+ (0.09)+
Net realized and unrealized gain (loss) on investments... (0.21) (1.03) (1.44) (1.53)
------------- ------------- ------------- -------------
Total from investment operations..................... (0.26) (1.21) (1.45) (1.62)
------------- ------------- ------------- -------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................... -- -- -- --
In excess of net investment income....................... -- -- -- --
From net realized gains.................................. -- -- -- (0.27)
In excess of net realized capital gains.................. -- -- -- (0.22)
Tax return of capital.................................... -- -- -- --
------------- ------------- ------------- -------------
Total distributions.................................. -- -- -- (0.49)
------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD........................... $ 8.53 $ 8.79 $ 6.44 $ 7.89
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN **.......................................... (2.96)% (12.10)% (18.38)% (16.94)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........................ $ 12,491 $ 13,849 $ 4,817 $ 7,096
Net expenses to average daily net assets (Note A)........ 2.50% 2.50% 2.50% 2.50%*
Net investment income (loss) to average daily net
assets................................................. (0.67)% (1.33)% 0.00% (1.06)%*
Portfolio turnover rate.................................. 163% 213% 127% 185%
- ---------------------------------------------------------
Note A: John Govett & Co. Limited waived a portion of its
management fees and Govett Financial Services
Limited reimbursed a portion of the other
operating expenses of the Funds for the years
ended December 31, 1992, 1993 and 1994. For the
year ended December 31, 1995, John Govett & Co.
Limited waived a portion of its management fee and
reimbursed a portion of the other operating
expenses of the Funds. Without the waiver and
reimbursement of expenses, the expense ratios as a
percentage of average net assets for the periods
indicated would have been:
Expenses......................................... 3.62% 2.66% 5.66% 3.35%*
</TABLE>
(A) COMMENCEMENT OF OPERATIONS WAS JANUARY 7, 1992.
(B) COMMENCEMENT OF OPERATIONS WAS JANUARY 1, 1993.
(C) COMMENCEMENT OF OPERATIONS WAS JANUARY 1, 1994.
(D) COMMENCEMENT OF OPERATIONS WAS MARCH 7, 1994.
* ANNUALIZED
** TOTAL RETURN CALCULATIONS EXCLUDE FRONT END SALES LOAD.
+ PER SHARE NET INVESTMENT INCOME (LOSS) DOES NOT REFLECT THE CURRENT PERIOD'S
RECLASSIFICATION OF PERMANENT DIFFERENCES BETWEEN BOOK AND TAX BASIS NET
INVESTMENT INCOME (LOSS). SEE NOTE 1.
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
76
<PAGE>
- --------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
----------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1992(A)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................... $ 8.48 $ 10.16 $ 9.77 $ 10.00
------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............................. 0.63+ 0.76+ 0.99 0.80
Net realized and unrealized gain (loss) on investments... 0.53 (1.67) 0.66 0.06
------------- ------------- ------------- -------------
Total from investment operations..................... 1.16 (0.91) 1.65 0.86
------------- ------------- ------------- -------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................... (0.63) (0.24) (0.95) (0.78)
In excess of net investment income....................... (0.04) -- -- --
From net realized gains.................................. -- -- (0.31) (0.31)
In excess of net realized capital gains.................. -- -- -- --
Tax return of capital.................................... -- (0.53) --
------------- ------------- ------------- -------------
Total distributions.................................. (0.67) (0.77) (1.26) (1.09)
------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD........................... $ 8.97 $ 8.48 $ 10.16 $ 9.77
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN **.......................................... 14.11% (9.16)% 17.64% 8.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)........................ $ 41,181 $ 51,691 $ 82,000 $ 34,084
Net expenses to average daily net assets (Note A)........ 1.75% 1.75% 1.72% 1.75%*
Net investment income (loss) to average daily net
assets................................................. 7.45% 8.30% 9.66% 9.75%*
Portfolio turnover rate.................................. 249% 701% 328% 378%
Note A: John Govett & Co. Limited waived a portion of its
management fees and Govett Financial Services
Limited reimbursed a portion of the other
operating expenses of the Funds for the years
ended December 31, 1992, 1993 and 1994. For the
year ended December 31, 1995, John Govett & Co.
Limited waived a portion of its management fee and
reimbursed a portion of the other operating
expenses of the Funds. Without the waiver and
reimbursement of expenses, the expense ratios as a
percentage of average net assets for the periods
indicated would have been:
Expenses......................................... 1.93% 1.95% 1.72% 3.17%*
</TABLE>
77
<PAGE>
- -------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
The Govett Funds, Inc. (the "Company") was established as a Maryland corporation
on November 13, 1990. The Company's Articles of Incorporation permit the
Directors to create an unlimited number of series, each of which may issue one
or more separate classes of shares. The Company presently consists of six series
(individually a "Fund", and together the "Funds"), which are registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act"). The Govett International Equity Fund, Govett
Emerging Markets Fund, Govett Smaller Companies Fund and Govett Pacific Strategy
Fund are all diversified, open-end management investment companies. The Govett
Latin America Fund and Govett Global Income Fund (formerly named the Govett
Global Government Income Fund) are both non-diversified, open-end management
investment companies.
Govett International Equity Fund seeks long-term capital appreciation by
investing primarily in equity securities of companies located throughout the
world. Govett Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located in emerging markets.
Govett Smaller Companies Fund seeks long-term capital appreciation by investing
primarily in equity securities of smaller companies. Govett Pacific Strategy
Fund seeks long-term capital appreciation by investing primarily in equity
securities of companies located in the Pacific Rim. Govett Latin America Fund
seeks long-term capital appreciation by investing primarily in equity and debt
securities of companies located in Latin America. Govett Global Income Fund
seeks primarily a high level of current income, consistent with preservation of
capital, by investing primarily in foreign debt securities, and has a secondary
objective of capital appreciation.
Each of the Funds has authorized the issuance of Class A, Class B and Class C
shares, each with its own sales charge structure. As of January 1, 1995, all of
the previously outstanding shares of each Fund were redesignated as Class A
shares without any other changes, and Class B and Class C shares were authorized
for issuance. As of December 31, 1995, only Class A shares were available to the
public and Class B and Class C shares were inactive. The only activity for Class
B and Class C during the year ended December 31, 1995 was an initial investment
made by Berkeley Financial Services Limited (formerly
78
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
named Govett Financial Services Limited) on January 3, 1995. On June 29, 1995,
the Govett Developing Markets Bond Fund was reorganized into the Govett Global
Income Fund (See Note 7).
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--Portfolio securities listed or traded on domestic or
foreign securities exchanges are valued at the last quoted sales price.
Securities listed or traded on the over-the-counter market are valued at the
mean between the latest available current bid and asked prices. Bonds and short-
term debt securities with remaining maturities in excess of 60 days are valued
at the mean of representative quoted bid and asked prices for such securities
or, if such prices are not available, they are valued based on prices for
securities of comparable maturity, quality and type. Prices are obtained from
pricing services as authorized by the Company's Board of Directors. Short-term
debt securities which mature in 60 days or less are valued at amortized cost.
Foreign securities quoted in foreign currency are translated into U.S. dollars
at exchange rates quoted at 1:00 p.m. Eastern Time or at such other rates as
John Govett & Co. Limited (the "Manager") may determine to be appropriate in
computing net asset value. Securities for which there are no representative
quotations or valuations are valued at fair value, determined in good faith, as
authorized by the Company's Board of Directors.
REPURCHASE AGREEMENTS--Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund 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 obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. The Fund may
79
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
experience a loss if the Fund is delayed or prevented from exercising its rights
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. The Manager, acting under the supervision of
the Board of Directors, 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.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Funds are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
foreign currency exchange rates available at 1:00 p.m Eastern Time. Purchases
and sales of securities, income receipts and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates of the
transactions. Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities transactions and the
difference between the amount of net investment income accrued and the U.S.
dollar amount actually received. The effect of changes in foreign currency
exchange rates on investments in securities are not segregated in the Statement
of Operations from the effects of changes in market prices of those securities,
but are included with the net realized and unrealized gain or loss on investment
in securities.
FORWARD CURRENCY EXCHANGE CONTRACTS--The Funds may enter into forward currency
exchange contracts in connection with planned purchases or sales of securities
or to hedge the value of some or all of a Fund's portfolio securities. A forward
currency contract is an agreement between two parties to buy and sell a currency
at a set price on a future date. The market value of a forward currency contract
fluctuates with changes in currency exchange rates. Forward currency contracts
are marked-to-market daily using the forward foreign currency exchange rates
available at 1:00 p.m. Eastern Time or at such other rates as the Manager may
determine to be appropriate. The change in value is recorded by the Funds as an
unrealized gain or loss. When a forward currency contract is extinguished,
either by delivering the currency or by entering into another forward currency
contract, the Fund records a realized gain or loss equal to the difference
between the value of the contract
80
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
at the time it was opened and the value of the contract at settlement date. The
Funds could be exposed to risk if the counterparties are unable to meet the
terms of the contracts or if the value of the currency changes unfavorably
relative to the U.S. dollar.
OPTIONS--The Smaller Companies Fund may purchase option contracts to manage its
exposure to general market conditions. Exchange-traded options are valued using
the last sale price or, in the absence of a sale, the last offering price.
The maximum exposure to loss for any purchased option is limited to the premium
initially paid for the option. Risks may arise if counterparties do not perform
under the contract's terms, or if the Fund is unable to offset a contract with a
counterparty on a timely basis ("liquidity risk"). Exchange-traded options have
minimal credit risk as the exchanges act as counterparties to each transaction,
and only present liquidity risk in highly unusual market conditions.
SECURITY FORWARD PURCHASE COMMITMENTS--The Global Income Fund may enter into
security forward purchase commitments ("forward commitments"). Forward
commitments are securities purchased for delivery beyond the normal settlement
date at a stated price or yield, and no income accrues to the Fund on such
securities prior to delivery. Forward commitments are marked-to-market on a
daily basis. The change in value is recorded by the Funds as an unrealized gain
or loss. When the Fund enters into a forward commitment transaction, it
establishes a segregated account in which it maintains high quality liquid debt
securities in an amount at least equal in value to the Fund's commitment to
purchase such security. It is the Fund's intention to sell securities purchased
on a forward commitment basis prior to settlement date. The Fund may experience
a loss if a counterparty does not perform under the contract's terms, or if the
Fund is unable to offset a contract with a counterparty on a timely basis.
TAXES--The Funds intend to continue to qualify as regulated investment companies
under Subchapter M of the Internal Revenue Code of 1986, as amended. It is the
policy of the Funds to distribute all of their taxable income, including any net
realized gain on investments, to shareholders within the prescribed time
periods. Therefore, no provision for income or excise tax is
81
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
necessary. At December 31, 1995, Emerging Markets Fund, Pacific Strategy Fund,
Latin America Fund, and Global Income Fund had a capital loss carryforward of
approximately $6,522,728, $2,704,485, $1,934,781 and $2,647,018, respectively.
The following carryforwards will expire on December 31, 2002: $464,940 (Pacific
Strategy); and $2,647,018 (Global Income). The following carryforwards will
expire on December 31, 2003: $6,522,728 (Emerging Markets); $2,239,545 (Pacific
Strategy); and $1,934,781 (Latin America).
DISTRIBUTIONS TO SHAREHOLDERS--The International Equity Fund, Emerging Markets
Fund, Smaller Companies Fund, Pacific Strategy Fund and Latin America Fund
intend to declare and pay distributions from net investment income and net
realized capital gains, if any, annually. The Global Income Fund seeks to
declare dividends daily and to pay dividends monthly from net investment income,
if any, and to declare and pay distributions from net realized capital gains, if
any, annually.
Income and capital gains 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 for foreign currency
transactions, post-October losses, option and forward transactions, currency
contracts, organization costs, losses deferred due to wash sales transactions,
market discount and realized gains on sales of investments in passive foreign
investment companies.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid-in capital. Undistributed net
investment income and accumulated net realized gain may include temporary
82
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
book and tax differences which will reverse in a subsequent period. For the year
ended December 31, 1995, the Funds reclassified the following amounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME (LOSS) GAIN (LOSS) CAPITAL
-------------- -------------- ------------
<S> <C> <C> <C>
International Equity Fund............ $ 357,107 $ (348,751) $ (8,356)
Emerging Markets Fund................ $ 572,404 $ (25,248) $ (547,156)
Smaller Companies Fund............... $ 5,248,962 $ (5,247,821) $ (1,141)
Pacific Strategy Fund................ $ 94,512 $ (89,941) $ (4,571)
Latin America Fund................... $ 49,556 $ 14,883 $ (64,439)
Global Income Fund................... $ 215,143 $ 337,331 $ (552,474)
</TABLE>
Distributions in excess of tax basis earnings and profits will be reported in
the Fund's financial statements as a return of capital. There were no
distributions for the year ended December 31, 1995 that resulted in a return of
capital. Furthermore, differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or in excess of accumulated net
realized gains.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME--Security transactions are
recorded as of the trade date. 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. Interest income is recorded
on an accrual basis. In determining the net gain or loss on securities sold, the
cost of securities is determined on the identified cost basis. Original issue
discount and premium on debt securities is amortized using the yield to maturity
method. Market discount on debt securities is amortized on a straight-line
basis. Withholding taxes on foreign interest and dividend income have been
withheld in accordance with the applicable country's tax treaty with the U.S.
ORGANIZATION EXPENSES--Organization expenses are being amortized on a straight
line basis over a period of 60 months from commencement of operations of each
Fund. In the event that any of the initial shares purchased by the Manager or
its affiliated companies are redeemed during the amortization
83
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
period by any holder thereof, the Funds will be reimbursed for any remaining
unamortized organization expenses in the same proportion as the number of
initial shares redeemed bears to the total number of initial shares outstanding
at the time of redemption.
EXPENSES--A significant portion of the Company's expenses are directly related
to individual Funds. Expenses which are not readily attributable to a specific
Fund are allocated in such manner as deemed equitable by the Company's Board of
Directors, taking into consideration, among other things, the nature and type of
expense. Operating expenses directly attributable to a class of shares of a Fund
will be charged to the operations of that class. Expenses of the Fund not
directly attributable to the operations of a specific class of shares are
allocated pro rata to each class on the basis of the relative net assets of the
respective classes, except for the expenses of the distribution plan and any
incremental transfer agency costs which will be borne by Class B and Class C,
respectively.
NOTE 2-MANAGEMENT FEES AND AFFILIATED SERVICE PROVIDERS
The Manager, pursuant to the terms of an investment management contract,
provides all investment management services to the Funds. As compensation for
these services, the Manager earns a monthly fee computed at an annual rate of
1.00% (0.75% for the Global Income Fund) of the value of the average daily net
assets of each Fund. The Manager has agreed to waive a portion of its management
fee and has agreed to bear a portion of each Fund's other ordinary operating
expenses to the extent necessary to comply with the most stringent expense
limits prescribed by any state in which the Fund's shares are offered for sale.
The most stringent current state restrictions limit each Fund's allowable
operating expenses (excluding interest, taxes, a portion of a Fund's 12b-1
distribution fee, a portion of a Fund's custodian fees attributable to
investments in foreign securities, brokerage commissions and extraordinary
expenses) in a fiscal year to 2.50% of the first $30 million of the average
daily net assets of a Fund, 2.00% of the next $70 million of the average daily
net assets of a Fund and 1.50% of the average daily net assets of a Fund in
excess of $100 million. In addition to the state imposed expense limitations,
the Manager has agreed to voluntarily waive a portion of its management fee and
to reimburse a portion of the other operating expenses of the International
Equity Fund, Emerging Markets Fund, Smaller Companies Fund, Pacific Strategy
Fund, Latin America Fund, and Global Income
84
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fund through December 31, 1995, to the extent that the Funds' annual ordinary
operating expenses exceed 2.50%, 2.50%, 1.95%, 2.50%, 2.50%, and 1.75% of its
average daily net assets, respectively.
The Manager has entered into a Subadvisory Agreement with Berkeley Capital
Management (the "Subadvisor," formerly Govett Asset Management Company), whereby
the Subadvisor provides day-to-day investment advisory services to the Smaller
Companies Fund. For these services, the Manager pays to the Subadvisor an annual
fee of 0.50% of the Smaller Companies Fund's average daily net assets. The
Smaller Companies Fund does not compensate the Subadvisor directly for its
subadvisory services.
On December 29, 1995, the sale of the Manager to John Govett Holdings Limited, a
newly formed, majority-owned subsidiary of Allied Irish Banks p.l.c. ("AIB") was
completed.
In connection with the sale, and subject to Fund shareholder approval, the
directors of the Fund have approved (i) a new investment management agreement
with the Manager, under its new ownership, for all of the Funds, and (ii) a new
subadvisory agreement between the Manager and the Subadvisor. The Subadvisor was
not purchased by AIB and, following the sale, changed its name to Berkeley
Capital Management. No change in the portfolio management of any Fund or in the
advisory fees paid by the Funds is expected to occur as a result of the sale. At
December 31, 1995, the new management and subadvisory agreements were awaiting
Fund shareholder approval. The Manager and the Subadvisor have each agreed that
neither of them will be paid any advisory fees by the Funds with respect to the
advisory services they will provide to the Funds during the period between the
closing of the sale and the time the shareholders approve the agreements, and no
such fees will be accrued with respect to such period of time. Similarly, each
has agreed that during this period each will continue to honor all of the terms
and conditions of their respective investment advisory agreements with the
Funds. See also Note 11 below.
John Govett & Co. Limited, Berkeley Financial Services Limited (formerly Govett
Financial Services Limited), and the Subadvisor were affiliated companies prior
to the sale of John Govett & Co. Limited to AIB. No officer, director or
employee of the Manager or its affiliates receives any compensation from
85
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the Company for serving as an officer or director of the Company. The
compensation of unaffiliated directors of the Company is borne by the Company.
NOTE 3-DISTRIBUTION AGREEMENT/12B-1 PLAN
The Funds have adopted a Distribution and Service Plan (the "Plan") for their
Class A shares pursuant to Rule 12b-1 of the 1940 Act. Van Kampen American
Capital Distributors, Inc. (the "Distributor") serves as the distributor, or
principal underwriter, of the Funds' shares. The Funds pay the Distributor a
quarterly distribution fee equal to an annual rate of 0.50% (0.35% for the
Global Income Fund) of the value of each Fund's average daily net assets,
attributable to Class A shares, for providing ongoing distribution services and
facilities to the Funds' Class A shares.
NOTE 4-LINE OF CREDIT
On June 5, 1995, the Company signed a letter of commitment with Chase Manhattan
Bank ("Chase") to provide a 364 day committed line of credit to the Funds which
was the basis for a Credit Agreement between the Funds and Chase dated December
1, 1995. Maximum loan amounts under the terms of the agreement are as follows:
<TABLE>
<CAPTION>
MAXIMUM LOAN
AMOUNT
---------------
<S> <C>
Emerging Markets Fund.............................................. $ 6,000,000
Global Income Fund................................................. $ 5,000,000
International Equity Fund.......................................... $ 3,000,000
Latin America Fund................................................. $ 250,000
Pacific Strategy Fund.............................................. $ 1,000,000
Smaller Companies Fund............................................. $ 15,000,000
</TABLE>
Borrowings under the agreement cannot exceed $30,250,000 in the aggregate.
Interest on amounts loaned are calculated at the Chase New York Prime Rate plus
0.25% per annum. The Funds also pay to Chase a commitment fee of 0.20% per annum
on the unused amount of the line of credit.
As of December 31, 1995, International Equity Fund had $354,935 outstanding
under the Credit Agreement with Chase.
86
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the year ended December 31, 1995, the Funds had borrowings from Chase under
the arrangement as follows:
<TABLE>
<CAPTION>
AVERAGE MAXIMUM
DAILY OUTSTANDING AVERAGE INTEREST
BALANCE BORROWING* INTEREST RATE EXPENSE
----------- -------------- --------------- ---------
<S> <C> <C> <C> <C>
Smaller Companies........... $ 71,135 $ 10,477,000 9.00% $ 6,675
Emerging Markets............ 197,387 3,134,345 9.00% 18,463
Pacific Strategy............ 33,610 1,221,399 9.00% 3,078
Latin America............... 8,827 399,453 9.00% 826
Global Income............... 45,141 5,037,713 9.00% 4,034
International Equity........ 81,595 2,422,349 9.00% 7,466
</TABLE>
Prior to the agreement with Chase, the Company had an uncommitted line of credit
agreement with The First National Bank of Chicago ("First Chicago"). On December
19, 1995, the Fund terminated this credit agreement with First Chicago. For the
period from January 1 to June 4, 1995, the Funds had borrowings under this
arrangement as follows:
<TABLE>
<CAPTION>
AVERAGE MAXIMUM
DAILY OUTSTANDING AVERAGE INTEREST
BALANCE BORROWING INTEREST RATE EXPENSE
--------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
Latin America Fund................ $ 9,017 $ 500,000 8.50% $ 779
Smaller Companies Fund............ $ 5,453 914,000 8.50% 471
</TABLE>
* INCLUDES OVERDRAFTS PERMITTED BY THE CUSTODIAN OUTSIDE THE COMMITTED LINE OF
CREDIT, ON TERMS IDENTICAL TO THE LINE OF CREDIT.
87
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5-PURCHASES AND SALES OF SECURITIES
Costs of purchases and proceeds from sales of securities, excluding short-term
obligations, for the year ended December 31, 1995, were as follows. Only the
Global Income Fund had U.S. government securities transactions.
<TABLE>
<CAPTION>
PURCHASES SALES
------------------ ----------------
<S> <C> <C>
International Equity Fund..................... $ 29,114,211 $ 34,640,128
------------------ ----------------
------------------ ----------------
Emerging Markets Fund......................... $ 84,854,710 $ 81,396,482
------------------ ----------------
------------------ ----------------
Smaller Companies Fund........................ $ 1,093,306,628 $ 851,331,660
------------------ ----------------
------------------ ----------------
Pacific Strategy Fund......................... $ 18,164,177 $ 18,587,781
------------------ ----------------
------------------ ----------------
Latin America Fund............................ $ 5,835,673 $ 6,397,600
------------------ ----------------
------------------ ----------------
Global Income Fund:
U.S. Government securities.................. $ 72,936,781 $ 71,965,203
Other investments........................... 22,623,561 38,908,288
------------------ ----------------
$ 95,560,342 $ 110,873,491
------------------ ----------------
------------------ ----------------
</TABLE>
88
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6-FUND SHARE TRANSACTIONS
The Company's Articles of Incorporation permit the Company's Board of Directors
to establish separate series (or Funds) and to issue up to a total of three
billion shares, with 250 million shares authorized for each Fund. Transactions
in fund shares for the periods indicated below were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY
FUND EMERGING MARKETS FUND
---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/95 12/31/94 12/31/95 12/31/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares sold....................... 938,909 3,612,741 5,899,218 7,321,426
Shares issued on reinvestment of
distributions................... 2,020 473,878 3,905 759,382
Shares repurchased................ (1,585,336) (4,281,263) (5,481,043) (6,336,853)
---------- ---------- ---------- ----------
Net increase (decrease)........... (644,407) (194,644) 422,080 1,743,955
Fund Shares:
Beginning of period............. 3,177,310 3,371,954 5,779,931 4,035,976
---------- ---------- ---------- ----------
End of period................... 2,532,903 3,177,310 6,202,011 5,779,931
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
SMALLER COMPANIES FUND PACIFIC STRATEGY FUND
----------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/95 12/31/94 12/31/95 12/31/94
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares sold...................... 23,879,944 6,569,850 1,363,983 9,101,258
Shares issued on reinvestment of
distributions.................. 1,157,423 177,812 -- --
Shares repurchased............... (11,779,342) (5,219,155) (1,474,634) (7,526,230)
----------- ---------- ---------- ----------
Net increase (decrease).......... 13,258,025 1,528,507 (110,651) 1,575,028
Fund Shares:
Beginning of period............ 4,032,796 2,504,289 1,575,038 10
----------- ---------- ---------- ----------
End of period.................. 17,290,821 4,032,796 1,464,387 1,575,038
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
</TABLE>
89
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
LATIN AMERICA FUND
---------------------- GLOBAL INCOME FUND
PERIOD ----------------------
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
12/31/95 12/31/94* 12/31/95 12/31/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares sold....................... 1,078,726 2,072,545 506,309 3,373,572
Shares issued for acquisition of
the net assets of the Govett
Developing Markets Bond Fund
(see Note 7).................... -- -- 101,651 --
Shares issued on reinvestment of
distributions................... -- 44,821 235,489 380,697
Shares repurchased................ (1,230,104) (1,217,927) (2,348,046) (5,730,805)
---------- ---------- ---------- ----------
Net increase (decrease)........... (151,378) 899,439 (1,504,597) (1,976,536)
Fund Shares:
Beginning of period............. 899,439 -- 6,096,537 8,073,073
---------- ---------- ---------- ----------
End of period................... 748,061 899,439 4,591,940 6,096,537
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
*LATIN AMERICA FUND COMMENCED OPERATIONS ON MARCH 7, 1994.
NOTE 7-REORGANIZATION
On June 29, 1995, the Govett Global Income Fund completed the acquisition of the
net assets of the Govett Developing Markets Bond Fund, pursuant to a plan of
reorganization approved by the Developing Markets Bond Fund's shareholders on
June 14, 1995. Shareholders of the Developing Markets Bond Fund received 0.6412
Class A shares of the Global Income Fund in exchange for one share of the
Developing Markets Bond Fund. Before the merger, the Developing Markets Bond
Fund had total net assets of $903,911 and the Global Income Fund had total net
assets of $45,106,892. Following the merger, the Global Income Fund's total net
assets were $46,010,863. After completion of this reorganization the operations
of the Developing Markets Bond Fund were terminated. This transaction was
taxable to the shareholders of the Developing Markets Bond Fund.
90
<PAGE>
- -------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8-FEDERAL INCOME TAX COST
At December 31, 1995 the cost and gross unrealized appreciation and depreciation
in value of investments owned by the Funds, as computed on a federal income tax
basis, were as follows:
<TABLE>
<CAPTION>
EMERGING SMALLER
INTERNATIONAL MARKETS COMPANIES
EQUITY FUND FUND FUND
------------- ----------- -------------
<S> <C> <C> <C>
Aggregate cost.......................... $25,871,481 $77,063,142 $ 359,577,012
------------- ----------- -------------
------------- ----------- -------------
Gross unrealized appreciation........... 3,369,282 5,239,725 116,965,170
Gross unrealized depreciation........... (1,154,765) (9,644,935) (8,939,008)
------------- ----------- -------------
Net unrealized appreciation
(depreciation)........................ $ 2,214,517 $(4,405,210) $ 108,026,162
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
PACIFIC
STRATEGY LATIN GLOBAL
FUND AMERICA FUND INCOME FUND
----------- ------------ -----------
<S> <C> <C> <C>
Aggregate cost............................ $12,152,717 $5,392,568 $39,426,778
----------- ------------ -----------
----------- ------------ -----------
Gross unrealized appreciation............. 738,281 67,790 469,722
Gross unrealized depreciation............. (934,940) (845,230) (579,000)
----------- ------------ -----------
Net unrealized appreciation
(depreciation).......................... $ (196,659) $ (777,440) $ (109,278)
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
NOTE 9-FINANCIAL INSTRUMENTS
The Funds regularly trade financial instruments with off-balance sheet risk in
the normal course of their investing activities to assist in managing exposure
to market risks, such as interest rates and foreign currency exchange rates.
These financial instruments include forward currency exchange contracts and
security forward commitments.
The notional or contractual amounts of these instruments represent the
investments the Funds have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risk associated with these instruments is meaningful only
when all related and offsetting transactions are considered. Security forward
commitments involve purchasing or selling securities on a delayed delivery
basis, which may be settled on their original terms or closed out with an
offsetting transaction on or before the settlement date.
91
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The difference between the offsetting or closed out transactions is receivable
or payable on the original settlement date. A summary of the security forward
commitments at December 31, 1995 is shown on page 63. The forward foreign
currency contracts at December 31, 1995 are as follows:
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLE CONTRACTS TO APPRECIATION
DATE CURRENCY DELIVER/RECEIVE CURRENCY IN EXCHANGE FOR (DEPRECIATION)
--------- --------- --------------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND
SALES 4/11/96 FRF 5,002,000 USD 1,021,943 $ (21,943)
9/24/96 JPY 98,900,000 USD 992,673 7,327
11/13/96 JPY 239,350,000 USD 2,416,741 83,259
11/13/96 JPY 94,850,000 USD 957,710 42,290
11/13/96 SKR 4,803,050 USD 707,577 (7,577)
--------------
$ 103,356
--------------
--------------
<CAPTION>
GLOBAL INCOME FUND
<S> <C> <C> <C> <C> <C> <C>
PURCHASES 2/16/96 USD 2,270,394 DEM 3,250,590 $ (29,606)
SALES 1/5/96 TKL 69,500,000,000 USD 1,141,215 19,052
1/16/96 NZL 105,185 USD 68,661 (827)
3/8/96 AUD 202,842 USD 150,254 (617)
--------------
$ (11,998)
--------------
--------------
<CAPTION>
PACIFIC STRATEGY FUND
<S> <C> <C> <C> <C> <C> <C>
SALES 1/12/96 MYR 609,360 USD 239,881 $ 119
1/16/96 JPY 100,500,000 USD 975,485 24,515
1/16/96 JPY 30,666,000 USD 297,654 2,346
--------------
$ 26,980
--------------
--------------
</TABLE>
The principal amounts of each non-U.S. dollar denominated contract is stated in
the currency in which the contract is denominated.
AUD - Australian Dollar
DEM - German Mark
FRF - French Franc
JPY - Japanese Yen
MYR - Malaysian Ringgit
NZL - New Zealand Dollar
SKR - Swedish Krona
TKR - Turkish Lira
USD - U.S. Dollar
92
<PAGE>
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10-PORTFOLIO INVESTMENT RISKS
These risks and considerations may involve adverse political and economic
developments and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times more
volatile than securities of comparable U.S. companies and U.S. securities
markets.
NOTE 11-SUBSEQUENT EVENT
On February 23, 1996 the shareholders of the Company will be asked to approve a
new investment management contract between the Funds and the Manager as an
affiliate of AIB. In addition, shareholders of the Smaller Companies Fund will
also be asked to approve a new subadvisory contract between the Manager and
Berkeley Capital Management.
FEDERAL INCOME TAX INFORMATION -- SMALLER COMPANIES FUND CORPORATE
SHAREHOLDERS -- QUALIFYING DIVIDEND (UNAUDITED)
In 1995, 0.10% of the distributions taxable as ordinary income, as reported on
Form 1099-DIV, qualifies for the dividends received deduction for
corporations.
93
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF THE GOVETT FUNDS, INC.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Govett International Equity Fund,
Govett Emerging Markets Fund, Govett Smaller Companies Fund, Govett Pacific
Strategy Fund, Govett Latin America Fund, and Govett Global Income Fund
(constituting The Govett Funds, Inc., hereafter referred to as the "Funds") at
December 31, 1995, the results of each of their operations, the changes in each
of their net assets and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodians and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 16, 1996
94
<PAGE>
Van Kampen American Capital Distributors, Inc.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
--------------------
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