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[LOGO OF GOVETT FUNDS APPEARS HERE]
SEMI-ANNUAL REPORT
June 30, 1998
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[LOGO OF GOVETT FUNDS APPEARS HERE]
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CONTENTS
LETTER TO THE SHAREHOLDERS 1
PORTFOLIO MANAGEMENT REVIEW 2
FINANCIAL STATEMENTS 9
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[LETTER TO SHAREHOLDERS APPEARS HERE]
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August 14, 1998
To Govett Funds Investor
As AIB Govett has learned in more than eight decades of investing globally, it
pays to be patiently watchful as newer markets and economies adjust to growth
and change. And, as has always been the case, opportunities abound in both
emerging and more established markets.
The first half of 1998 represented another period of challenges in Asia and most
other emerging markets around the globe. However, Argentina, Brazil, India,
Israel, Mexico and Taiwan were the bright spots among the economies. Investment
opportunities there, together with the optimistic outlook in many parts of
Europe as the inauguration of the single currency approaches, continue to
present good values to long-term investors who can stay the course. Looking
forward, it is important to keep a long-term, comparative perspective. For
example, political upheaval is seen as undesirable in developed countries, but
events leading to political upheaval in an emerging economy may in fact signal
increasing political democratization, which is necessary for long-term economic
growth.
On the following pages, you will find commentaries by AIB Govett portfolio
managers about each Fund. These insights reflect their interpretations of the
most current developments plus the perspective gained from the firm's long
experience in international investing. We think you will find this information
interesting and relevant.
Thank you for investing in Govett Funds
/s/ Keith E. Mitchell
Keith E. Mitchell
Managing Director, North America
AIB Govett, Inc.
__________
Past performance is no guarantee of future results. Share prices and returns
will fluctuate and, when redeemed, shares may be worth more or less than their
original cost.
Each index is a broad-based, unmanaged index considered to reflect the
performance of the relevant markets and is not available for direct investment.
Govett Funds are distributed by FPS Broker Services, Inc. 3200 Horizon Drive, PO
Box 61503, King of Prussia, PA 19406 (8/98).
Investors need to be aware that investing internationally poses special risks,
such as currency fluctuations, economic and political risks and risks not
associated with domestic securities. See the prospectus for details.
Investors should be aware that investing in the Smaller Companies Fund can pose
special risks related to the relatively small size of the companies in which it
invests. See the prospectus for details.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by any bank and are not federally insured by the FDIC, the Federal
Reserve or any other agency.
The report is not authorized for distribution to prospective investors unless
preceded or accompanied by a prospectus for each Fund.
1
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
Govett International Equity Fund
MARKET CONDITIONS DURING THE SIX MONTHS ENDED JUNE 30, 1998
While Asia continued to struggle during the first half of 1998, Europe moved
forward toward the new era of the euro. Europe is currently characterized by
moderate economic growth, accelerating corporate profits, lower interest rates
and low inflation. Companies began increasingly to adopt the U.S. model of
shareholder value and to broaden their market strategy to include the entire
Continent rather than to focus on individual European countries.
In Asia, the year's early optimism about stabilized currencies and IMF economic
packages gave way to higher interest rates and weak economic activity. As the
period progressed, the consensus view on Asia's economies worsened, as the
Japanese yen fell sharply. This development led to fears that the Chinese would
also devalue their currency. The yen continued to fall until the United States
intervened in June, conditioned upon reforms in the Japanese banking and
taxation systems.
FUND PERFORMANCE DURING THE SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1998, total return was 16.47% (without a Class
A front-end sales charge). When maximum front-end sales charges of 4.95% are
taken into account, the Fund's total return was 10.71%. Both total return
calculations include reinvestment of capital gains distributions of 30 cents per
share. In comparison, the Morgan Stanley Capital International ("MSCI") Europe,
Australia and Far East ("EAFE") Index returned 16.08%.
Reflecting the negative impact of Asia on all emerging markets, we reduced the
portfolio's exposure to emerging markets from 24.3% on December 31, 1997 to 8.2%
on June 30, 1998. The allocation to Latin America fell from 7.4% to 4.6%;
Central/Eastern Europe fell from 14.1% to 1.3%; and Southeast Asia fell from
13.8% to 1.5%. At the same time, the exposure to Western Europe rose from 55.7%
on December 31, 1997 to 68.7% on June 30, 1998, reflecting Europe's strong
economic environment. Our exposure to Japan, at 11.2% of the portfolio, is
roughly half the EAFE weighting.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- ---------------------------------------------------------------
<S> <C> <C>
One Year 0.49% 5.72%
- ---------------------------------------------------------------
Three Year+ 9.63% 11.50%
- ---------------------------------------------------------------
Five Year+ 9.42% 10.53%
- ---------------------------------------------------------------
Since Inception (1/7/92)+ 10.19% 10.66%
- ---------------------------------------------------------------
</TABLE>
Source: AIB Govett Asset Management Limited
+ Annualized
CURRENT STRATEGY
The portfolio's top ten holdings are entirely based in the U.K. and Continental
Europe. The largest holding in the Fund is SAP*, a German-based software company
with global operations. The company's earnings are expected to grow at a 40%
rate over the next few years, as it helps clients cope with the Year 2000
computer problem and the systems challenges generated by the euro. Another major
holding is Daimler-Benz*, a stock which rose sharply after the announced merger
with Chrysler. The financial community sees the transaction as having boosted
profits and improved the combined company's position as a global player.
If we begin to see signs of growth in Japan, then we would increase the
portfolio's weighting beyond half the EAFE allocation. To the extent that we
invest in Japan, we intend to focus on global exporters that can benefit from a
weaker yen.
We continue to believe in the long-term attractions of Eastern Europe.
Nevertheless, we plan to maintain our current minimal exposure until the
situation in Asia and Russia stabilizes, and liquidity flows into emerging
markets as a whole improve. Meanwhile, political instability in Indonesia and
nuclear testing in India and Pakistan further unsettled Asian equity markets. A
key factor in Asia's recovery will be the region's willingness to broaden
opportunities for foreign investors, to increase investment flows and reduce
debt. Japan's economic health will also influence recovery elsewhere in Asia, as
will interest rate cuts throughout the region. Until we begin to see these
signs, we do not anticipate increasing exposure to Asian investments.
MARKET OUTLOOK FOR THE REMAINDER OF 1998
In continental Europe, the major economies continue to show signs of recovery.
The impact of Asia on Europe is expected to be less than elsewhere and European
currencies have generally weakened against the dollar thereby maintaining their
competitiveness in the American and British markets. Inflation is subdued, and
there is little upward pressure on interest rates. Consumer spending is picking
up and capital expenditure is growing. Corporate profits are likely to benefit
from continued corporate restructuring and the stockmarket should be underpinned
by good liquidity and low interest rates. As long as bond markets stay firm,
equity markets should make progress.
Although the Japanese stock market remains dull, some positive developments have
surfaced for some Japanese corporations. Nissan's agreement with Daimler-Benz
about truck production and the Traveler's Group's acquisition of a minority
stake in Nikko Securities suggest an emphasis on profitable business links
rather than ventures designed to support affiliated group companies. The
top-down picture for the Japanese market has not yet improved, but there are
beginning to be attractively valued opportunities on a bottom-up basis.
/s/ Rosemary Morgan
Rosemary Morgan
Lead Portfolio Manager
___________________
*As of 6/30/98, the Fund held 5.09% of its total net assets in SAP and 3.03% in
Daimler-Benz. The Fund was not invested in the other securities listed.
2
<PAGE>
[Govett Emerging Markets Equity Fund]
MARKET CONDITIONS DURING THE SIX MONTHS ENDED JUNE 30, 1998
During the first half of 1998, high interest rates and weakening currencies -
especially the Japanese yen - continued to highlight economic contraction
throughout Asia. For the short-term, Latin American markets suffered from
Brazil's decision to boost interest rates to defend its currency, as well as
from weaker commodity prices. However, Latin American companies kept growing,
making valuations compelling. In Eastern Europe, markets suffered following the
recent difficulties in Russia, where the problems of high interest rates, budget
deficits and low reserve levels threatened a liquidity crisis. Events in Asia
generally bypassed smaller European markets such as Greece and Israel.
FUND PERFORMANCE DURING THE SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1998, total return was -19.30% (without a
Class A front-end sales charge). When maximum front-end sales charges of 4.95%
are taken into account, the Fund's total return was -21.33%. In comparison, the
MSCI Emerging Markets Index returned -18.17% during the period.
Underweighting in Asia had a balanced effect, as those markets rallied in the
first quarter, then unwound in the second quarter. Overall, the effect of
underweighting in Asia was beneficial.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- ---------------------------------------------------------
<S> <C> <C>
One Year -40.72% -37.64%
- ---------------------------------------------------------
Three Year+ -9.05% -7.66%
- ---------------------------------------------------------
Five Year+ -1.79% -0.79%
- ---------------------------------------------------------
Since Inception (1/7/92)+ 2.92% 3.59%
- ---------------------------------------------------------
</TABLE>
Source: AIB Govett Asset Management Limited
+ Annualized
CURRENT STRATEGY
The two largest holdings in the portfolio are Telefonos de Mexico* and
Telebras*, Latin America's largest telecommunications companies. Both rapidly
growing companies target expansion into areas such as the internet and
multimedia. The telecommunications sector remains one of the best emerging
market performers, and we continue to view it favorably. The third largest
holding is Bank Leumi*, an Israeli bank which has performed very well in the
local environment of falling interest and inflation rates. Israel's stock
market correlates closely to the U.S., as a result of its historic political
ties and its current export relationship.
Companies in Argentina, Brazil, Greece, Mexico, South Africa and Turkey make up
the remainder of the top ten. We continue to underweight Asia aggressively,
with small holdings in China, India, Taiwan and Thailand. We focus on
industries such as telecommunications and financial services, while avoiding
economically cyclical commodity companies. The Fund's cash position rose to 8%,
to take advantage of future market sell-offs.
MARKET OUTLOOK FOR THE REMAINDER OF 1998
We expect volatility for at least the next six months in the emerging markets.
Recovery in Asia depends significantly on Japan's ability to rectify its
economic problems. Two other key factors are interest rate cuts throughout the
region, and the region's willingness to broaden opportunities for foreign
investors, to increase investment flows and reduce debt. The emerging markets,
with 70% of the world's population and great potential for consumer demand,
retain their promise of high growth over the long term, although at present they
reflect extreme bearish sentiment. We believe that in the long run investment
by the developed world will help resolve troubles in the emerging markets by
exerting downward pressure on interest rates and government deficits, and upward
pressure on economic growth and equity values.
/s/ Rachael Maunder
Rachael Maunder
Lead Portfolio Manager
_____________________
*As of 6/30/98, the Fund held 3.97% of its total net assets in Telefonos de
Mexico, 3.40% in Telebras, and 3.11% in Bank Leumi.
3
<PAGE>
[Govett Smaller Companies Fund]
MARKET CONDITIONS DURING THE SIX MONTHS ENDED JUNE 30, 1998
Small-cap U.S. companies continued to underperform larger U.S. companies during
the first half of 1998, and global investors persist in seeking the perceived
safety and liquidity of the Standard & Poor's top 100 companies despite the fact
that small-cap earnings growth is much greater than large-cap growth. For
example, in the first quarter of 1998, S&P 500 earnings grew just 4%, compared
to 19% for smaller companies. Small growth companies are now selling at a 6%
valuation premium to the S&P 500 Index, compared to a 100% premium two years
ago, representing practically the lowest levels in 20 years.
FUND PERFORMANCE DURING THE SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1998, total return was 2.04% (without a Class
A front-end sales charge). When maximum front-end sales charges of 4.95% are
taken into account, the Fund's total return was -3.01%. In comparison, the
Russell 2000 Index rose 4.66% for the period. The Fund's performance was
adversely affected by its emphasis on growth sectors such as technology and
related products, which were sensitive to decreased demand from Asia. By
comparison, U.S.-based retail firms and financial services companies were more
insulated from Asian and other cyclical pressures.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- ---------------------------------------------------------
<S> <C> <C>
One Year -3.46% 1.56%
- ---------------------------------------------------------
Three Year+ -0.81% 0.89%
- ---------------------------------------------------------
Five Year+ 15.51% 16.68%
- ---------------------------------------------------------
Since Inception (1/1/93)+ 19.80% 20.22%
- ---------------------------------------------------------
</TABLE>
Source: AIB Govett Asset Management Limited
+ Annualized
CURRENT STRATEGY
Our investment style is "growth at a reasonable price," using a top-down
approach to search for industry subsegments worldwide that are expected to
prosper. During the period, we increased the average market capitalization of
the Fund's holdings from $800 million to $1.4 billion.
We continue to overweight the retail industry, a domestic sector that tended to
escape the effects of Asia's troubles. For example, the stock price of Goody's
Family Clothing*, a southeastern U.S.-based retailer of lower- to medium-priced
goods, has doubled since the third quarter of 1997. Another retailer,
Windmere-Durable* which makes and sells electrical products, manufactures most
of its line in Asia, where it is able to take advantage of devalued currencies.
In technology, we have emphasized software companies--such as Lernout &
Hauspie*, a Belgian company specializing in voice recognition--over the hardware
companies adversely affected by Asia.
Other top ten holdings include Amresco*, a financial services company which has
been growing at 25% per year since 1995, Personnel Group of America*, a
placement service for skilled workers in fields such as technology and law, and
Toll Brothers*, a Northeastern homebuilder that has benefited from low interest
rates and strong consumer confidence. We continue to look to international
stocks to add value to the portfolio, ending the period with about 5% of the
portfolio in stocks of European companies.
MARKET OUTLOOK FOR THE REMAINDER OF 1998
The U.S. economy shows signs of slowing growth, and corporate profits of the
largest blue-chips are only growing by 4-5%. As a result, investors tend to
seek companies that continue to exhibit growth despite the slowing economy. Our
portfolio includes companies with excellent fundamentals and very inexpensive
valuations. Although the small company growth area of the market has been out
of favor in recent quarters, we believe that, ultimately, investors will come to
prefer growth at a reasonable price.
/s/ Gareth Watts
Gareth Watts
Lead Portfolio Manager
_________________
*As of 6/30/98, the Fund held 4.38% of its total net assets in Goody's Family
Clothing, 4.30% in Windmere Durable, 3.68% in Lernout & Hauspie, 3.36% in
Personnel Group of America, and 3.17% in Toll Brothers.
4
<PAGE>
[Govett Asia Fund]
MARKET CONDITIONS DURING THE SIX MONTHS ENDED JUNE 30, 1998
In early 1998, Asian markets were extremely bearish. Investors feared that
China might be forced to devalue the country's currency to retain its
competitive advantage against smaller regional markets such as Malaysia,
Thailand and the Philippines, which had seen their currencies fall 60-70%. But
in February, instead of devaluing, China announced a massive infrastructure
spending program designed to boost its economy. The result was a "sigh of
relief" rally, providing some temporary strength for the rest of Asia.
Unfortunately, the relief was short-lived, as Japan reported high unemployment
and declared itself in recession. In addition, Korea's slowness in responding
to its economic problems unnerved the markets.
Spring riots in Indonesia ousted President Suharto, prompting investors to
question political stability elsewhere in Asia. India's nuclear weapons tests
certainly did not stimulate confidence in the region. Among many specters the
testing raised, investors began to fear the development of an Indian movement
toward economic protectionism. In May and June concerns about Chinese
devaluation arose again. Gross domestic product ("GDP") in the first quarter was
below expectations, indicating inadequate exports. The continuing fall of the
Japanese yen created questions about China's currency, despite China's best
efforts to spur development by infrastructure spending. The U.S. decision to
defend the Japanese yen reduced pressure on China somewhat, but investor
concerns have not diminished.
FUND PERFORMANCE DURING THE SIX MONTHS ENDED JUNE 30, 1998
For the six-month period ended June 30, 1998, total return was -25.76% (without
a Class A front-end sales charge). When maximum front-end sales charges of 4.95%
are taken into account, the Fund's total return was -29.43%. In comparison, the
MSCI Pacific Index, including Japan, returned -5.82%. The Fund's performance was
adversely affected by its relative underweight in Japan and Australia, and its
relative overweight in some of Asia's smaller markets.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- ---------------------------------------------------------
<S> <C> <C>
One Year -57.96% -55.77%
- ---------------------------------------------------------
Three Year+ -20.21% -18.85%
- ---------------------------------------------------------
Since Inception (1/1/94)+ -18.56% -16.29%
- ---------------------------------------------------------
</TABLE>
Source: AIB Govett Asset Management Limited
+ Annualized
CURRENT STRATEGY
Although Japan's difficulties are far from over, its stock market remains the
healthiest in the region. As of June 30, 1998, the Fund's allocation to Japan
was 37%, up from 25% at the beginning of the year. Australian stocks are also
attractively priced, and we have boosted our holdings to 15%, up from 6% at the
beginning of 1998. Meanwhile, the portfolio reduced its exposure to the China
market, with 13% compared to about 30% at the beginning of the year. In
addition, we have pared the number of holdings in the portfolio to 35. By doing
so, we are able to focus on the stocks we believe have the most favorable growth
potential. We also raised the Fund's cash position to about 20%, to take
advantage of buying opportunities.
Among the Fund's top ten holdings are Hong Kong & Shanghai Bank*, Woolworths*
and Nintendo*. Hong Kong & Shanghai Bank, a subsidiary of HSBC Holdings*, is
one of the largest banks in the world. Since about 60% of its assets are in
Latin America, Europe and the U.S., we do not expect current economic conditions
in Asia to hurt this company. Indeed, it will probably be a buyer of assets in
these distressed times. Woolworths is an Australian retailer with nearly a 50%
share in its market and historical earnings growth of about 10% per year. It
plans to continue to grow by introducing banking services. Although the
Australian stock market has sold down with the rest of Asia, the Australian
economy continues to expand. In Japan, the weakening yen benefits exporters
such as Nintendo, the global entertainment company. Every 1% drop in the yen
against the U.S. dollar translates into 3% growth in Nintendo's earnings, which
are growing at 25% per year but its price/earnings ratio is only 20. A U.S.
company growing at that rate would probably have a much greater price/earnings
multiple.
MARKET OUTLOOK FOR THE REMAINDER OF 1998
Three key factors are likely to determine the pace of recovery in Asia. One is
Japan's economic health. As a key export market for many Asian countries, Japan
must show signs of economic recovery. A pickup in Japanese growth would be most
beneficial to smaller Asian stock markets. In our view, the current situation
favors investment in Japan as a defensive strategy. Another key factor is the
region's willingness to broaden opportunities for foreign investors, to increase
investment flows and reduce corporate debt. The third factor influencing Asian
recovery is lower interest rates. Real interest rates, ranging from 10% to 40%,
keep domestic economic activity very weak. China is an exception to this trend
(where interest rates have been falling). However, it will take some time for
momentum to build in China's large economy.
The Asia economic crisis could last into 1999, and prices have already factored
in this possibility. Ultimately, though, its high savings rate, strong
demographics and the strong entrepreneurial culture suggests that Asia will
overcome its current difficulties.
/s/ Jane Pickard
Jane Pickard
Lead Portfolio Manager
_________________________
*As of 6/30/98, the Fund held 5.67% of its total net assets in Hong Kong &
Shanghai Bank, 4.08% in Woolworths, and 3.91% in Nintendo.
5
<PAGE>
[Govett Latin America Fund]
MARKET CONDITIONS DURING THE SIX MONTHS ENDED JUNE 30, 1998
The Asian crisis has been negative for Latin America. Depressed commodity
prices hurt copper, a major export for Peru and Chile. Oil prices also fell,
placing pressure on the oil-producing countries of Mexico, Venezuela and
Colombia. In November 1997, Brazil responded to concerns that its currency
would come under pressure by raising interest rates, slowing economic growth in
the first half of 1998. At the same time, strong-performances in the U.S. and
European equity markets further drained liquidity from the Latin American equity
market.
FUND PERFORMANCE DURING THE SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1998, total return was -23.20% (without a
Class A front-end sales charge). When maximum front-end sales charges of 4.95%
are taken into account, the Fund's total return was -27.00%. The Fund
underperformed the MSCI Latin America Index, whose return was -19.88%. The Fund
was adversely affected in January by an overweight position in Mexico, where
concern about the balance of trade led the market to underperform, although
subsequently Mexican markets showed signs of improvement. In addition, the Fund
held a limited number of smaller cap stocks, which did well early in the first
half of the period. The Fund was also overweighted in the Brazilian electricity
sector, which did poorly during the first half of the period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- ---------------------------------------------------------
<S> <C> <C>
One Year -34.77% -31.37%
- ---------------------------------------------------------
Three Year+ 3.61% 5.38%
- ---------------------------------------------------------
Since Inception (3/7/94)+ -7.09% -5.60%
- ---------------------------------------------------------
</TABLE>
Source: AIB Govett Asset Management Limited
+ Annualized
CURRENT STRATEGY
Mexico and Brazil continue to dominate the portfolio's holdings, and the number
one and number two holdings are Telefonos de Mexico ("Telemex")* and Telebras*,
those countries' leading telephone companies. Telmex has outperformed the
market over the period as a result of positive earnings results. In addition,
the stock is a defensive holding in an uncertain economic environment.
Telebras is on the point of privatization and shows strong earnings growth as a
result of restructuring and significant line growth, especially in cellular
lines of its business.
Other top holdings in the Fund include Petrobras*, the Brazilian energy
importer; YPF*, an Argentina energy company whose management has proven adept at
maximizing shareholder value; Eletrobras* and Cemig*, two Brazilian utilities;
Panamerican Beverages*, a Mexican food, beverage and tobacco company with broad
exposure to Brazil and Argentina; CA Nac Telefonos*, a Venezuelan
telecommunications company; Bancomer*, a Mexican bank, and Tubus de Acero
Mexico*, a leading machinery and engineering firm.
As the period drew to a close, we lowered the Fund's Brazilian position and
raised its Mexican holdings. In Brazil, the trade balance is improving and
government fiscal reserves increasing. Nevertheless, the next few months may
prove difficult because high unemployment during the period preceding a
Presidential campaign may lead the Brazilian Central Bank to take unnecessary
risks with fiscal and monetary policy. In Mexico, the government has taken
decisive steps to compensate for the decline in oil prices through three budget
cuts. This development, together with continuing growth in domestic demand and
strong manufacturing exports, gives cause for optimism about the Mexican market.
MARKET OUTLOOK FOR THE REMAINDER OF 1998
The Asian crisis affected Latin America in financial terms, by raising the cost
of borrowing throughout the region, and in terms of trade, by lowering the value
of commodity exports. In spite of compelling valuations in Latin American
markets, greater stability is necessary before Latin American markets will
reflect their fair values. However, specific events, such as the re-election of
President Cardoso in Brazil and the political maneuvering over the bank bailout
fund in Mexico could overshadow the Latin American markets in the short-term.
The Fund's portfolio continues to emphasize companies with good growth
prospects, low leverage and limited exposure to commodities. As a result, the
Fund is underweight in Chile and the Andean countries whose markets are exposed
to commodities. Investments in Mexico and Brazil are expected to focus on the
growth sector and the structural changes taking place in the economy, such as
consumer goods in Mexico and telecommunications in Brazil.
/s/ Caroline Lane
Caroline Lane
Lead Portfolio Manager
_________________________
*As of 6/30/98, the Fund held 12.60% of its total net assets in Telemex, 7.65%
in Telebras, 5.99% in Petrobras, 3.73% in YPF, 4.02% in Eletrobras, 4.05% in
Cemig, 3.59% in Panamerica Beverages, 3.58% in CA Nac Telefonos, 3.58% in
Bancomer, and 3.37% in Tubos de Acero.
6
<PAGE>
[Govett Global Income Fund]
MARKET CONDITIONS DURING THE SIX MONTHS ENDED JUNE 30, 1998
Overall, the first half of 1998 was a favorable environment for the bond market.
The main theme was the continuing impact of the Asian crisis, which made bonds a
safe haven against uncertain equity markets. The fixed income markets were ahead
strongly in January, particularly in the U.S. In February and March, the Asia
story quieted down, and the bond market backtracked and remained sluggish until
the spring, when it surged ahead. By June 30, 1998, the benchmark 30-year U.S.
Treasury bond yield had fallen to 5.62%, about 30 basis points lower than the
beginning of the year.
In Europe, interest rates continued to converge as the launch of the euro
approached and 11 countries qualified for the single currency. Current
short-term interest rates in Germany are about 3.5%, and it appears that
starting short-term interest rates for the new currency will be no more than 4%.
In the U.S., the fed funds rate remained at 5.5%, as the Federal Reserve Board
stayed on the sidelines for the entire period, caught between opposing forces of
strong U.S. growth and possible deflation in Asia.
FUND PERFORMANCE DURING THE SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1998, total return was 2.96% (without a Class
A front-end sales charge). When maximum front-end sales charges of 4.95% are
taken into account, the Fund's total return was -2.14%. Both total return
figures include reinvestment of distributions of 18 cents per share. In
comparison, the Salomon Brothers World Government Bond Index (the "Salomon
Index") produced a return of 2.79%.
The Fund's bias towards dollar-denominated bonds positively affected its
performance. As of June 30, 1998, the portfolio reflected a 75% exposure to the
dollar, and only a 6% exposure to yen-denominated bonds. In contrast, the
Salomon Index has a 34% exposure to the dollar and an 18% exposure to
yen-denominated bonds. Other positive factors include an overweighting in U.K.
bonds, which outperformed, and the portfolio's longer-than average duration of
6.34 years, which was favorable in a period of falling interest rates. In
contrast, the Salomon Index duration was 5.4 during the period.
For yield enhancement, the portfolio included some emerging market debt, issued
by Argentina and Russia. The Argentinian bond* performed quite well during the
period. However, Russian bonds suffered as a result of the crisis over the
Russian ruble.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- ---------------------------------------------------------
<S> <C> <C>
One Year 1.58% 6.87%
- ---------------------------------------------------------
Three Year+ 0.92% 2.65%
- ---------------------------------------------------------
Five Year+ 2.03% 3.07%
- ---------------------------------------------------------
Since Inception (1/7/92)+ 4.33% 4.95%
- ---------------------------------------------------------
</TABLE>
Source: AIB Govett Asset Management Limited
+ Annualized
CURRENT STRATEGY
The portfolio's top ten holdings are dominated by U.S. and U.K. issues. We are
significantly underweighted in continental Europe, because we believe that bond
yields are generally too low to provide good value. In order to qualify for the
single currency, European governments have been required to reduce their budget
deficits and bring down their inflation rates. As a result, yields on fixed
income securities have fallen sharply in the past 12 to 18 months. However, the
U.K. is not one of the 11 countries currently in line for the European Monetary
Union, and U.K. interest rates are substantially higher than comparable rates in
continental Europe.
Long-term interest rates are at historically low levels in the U.S. However,
because we believe that the U.S. economy is likely to slow in the second half of
1998, our view is that there continues to be some value in the U.S. bond market,
but less so in the short end of the yield curve. Looking abroad, we will
continue to hold our Russian position, as we expect the Russian political
environment to improve in the medium term.
MARKET OUTLOOK FOR THE REMAINDER OF 1998
The Asian economic crisis is beginning to have a negative impact on the U.S.
economy, particularly the export and industrial sectors. This, combined with a
benign inflation environment, will likely have a positive impact on the U.S.
bond market for the rest of 1998.
We continue to see some further appreciation in the U.S. dollar, which is why we
will continue to focus on dollar-denominated assets. In the U.K., we believe
that intermediate term bonds offer good value. However, we believe that the
prospects for continental European and Japanese bonds are limited.
/s/ Howard Mahon
Howard Mahon
Member, Fixed Income Team
____________________________
*As of 6/30/98, the Fund held 6.47% of its total net assets in the Argentinian
bond and 5.37% in the Russian bond
7
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
Govett International Equity Fund
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (See Note 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks - 94.0%
ARGENTINA - 0.6%
2,500 Telefonica de Argentina ADR.................... $ 81,094
------------
AUSTRIA - 0.6%
1,500 Radex-Heraklith................................ 72,664
------------
BRAZIL - 2.5%
3,500 Cemig ADR...................................... 108,334
2,000 Telebras ADR................................... 218,375
------------
326,709
------------
CHINA - 0.0%
7,000 China North Industries......................... 1,785
------------
CZECH REPUBLIC - 0.5%
30,400 Prazske Pivovary*.............................. 64,310
------------
DENMARK - 1.8%
2,000 Sophus Berendsen............................... 82,958
3,000 Spar Nord Holdings............................. 158,492
------------
241,450
------------
FINLAND - 2.2%
4,000 Nokia Oyj...................................... 294,389
------------
FRANCE - 10.9%
800 Alcatel Alsthom................................ 162,844
2,000 Banque Nationale de Paris...................... 163,373
1,111 Cap Gemini Sogeti.............................. 174,527
120 Carrefour...................................... 75,899
1,300 Christian Dior................................. 163,588
250 L'Oreal........................................ 139,024
150 Pinault-Printemps-Redoute...................... 125,507
960 Total.......................................... 124,772
1,500 Vivendi........................................ 320,215
------------
1,449,749
------------
GERMANY - 10.0%
1,500 Adidas......................................... 259,495
4,070 Daimler Benz................................... 399,440
1,000 SAP............................................ 680,344
------------
1,339,279
------------
HONG KONG - 0.9%
5,000 Hong Kong & Shanghai Bank Holdings............ 122,290
327 Jardine Strategic Holdings..................... 621
------------
122,911
------------
INDIA - 0.8%
9,000 State Bank of India GDR........................ 106,650
------------
<CAPTION>
Value
Shares Description (See Note 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
ITALY - 3.8%
3,500 Assicurazioni Generali....................... $ 113,853
40,000 Simint*...................................... 390,579
-------------
504,432
--------------
JAPAN - 11.3%
4,000 Bridgestone.................................. 94,647
12,000 Fujitsu...................................... 126,389
20,000 Hitachi Cable................................ 96,379
10,000 Kirin Brewery................................ 94,503
4,000 Matsumotokiyoshi............................. 140,817
9,000 Matsushita Electric Industries............... 144,784
900 Nintendo..................................... 83,429
12 Nippon Telegraph & Telephone................. 99,553
7,000 Nomura Securities............................ 81,554
3 NTT Data Communications Systems.............. 108,426
2,500 Promise...................................... 102,979
10,000 Ricoh........................................ 105,396
15,000 Sekisui House................................ 116,325
1,300 Sony......................................... 112,069
--------------
1,507,250
--------------
MEXICO - 1.5%
84,000 Controladora Comercial Mexicana.............. 70,074
2,800 Telefonos de Mexico ADR...................... 134,575
--------------
204,649
--------------
NETHERLANDS - 9.0%
5,000 Cap Gemini................................... 413,122
4,250 ING Groep.................................... 278,414
3,170 Koninklijke Ahold............................ 101,805
1,200 Philips Electronics.......................... 100,920
8,500 VNU.......................................... 308,931
--------------
1,203,192
--------------
NORWAY - 2.2%
11,000 Provida*..................................... 210,959
6,000 Tandberg*.................................... 83,757
--------------
294,716
--------------
PORTUGAL - 0.7%
7,018 Finibanco*................................... 93,122
--------------
RUSSIA - 0.5%
23,990 Trade House GUM ADR*......................... 71,970
--------------
SINGAPORE - 0.6%
20,600 Overseas Union Bank.......................... 45,114
23,000 Sembawang Shipyard........................... 27,091
--------------
72,205
--------------
</TABLE>
See accompanying notes to the financial statements.
9
<PAGE>
Govett International Equity Fund (continued)
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (See Note 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks (continued)
SLOVAKIA - 0.1%
3,000 SES*....................................... $ 18,624
--------------
SPAIN - 6.9%
36,000 Corp. Financiera Reunida, (COFIR)*........ 543,463
6,600 Iberdrola................................. 107,166
10,500 Prosegur.................................. 124,959
3,272 Telefonica de Espana...................... 151,278
--------------
926,866
--------------
SWEDEN - 1.5%
12,000 Skandivnaviska Enskilda Banken............ 205,340
--------------
SWITZERLAND - 7.8%
213 Novartis.................................. 354,696
9 Roche Holding............................. 88,444
450 SBC....................................... 167,447
110 Swiss Reinsurance......................... 278,393
600 Valora Holding............................ 158,343
--------------
1,047,323
--------------
THAILAND - 0.0%
30,000 National Finance & Securities*............ 2,346
--------------
UNITED KINGDOM - 17.3%
24,000 Barratt Developments...................... 105,812
7,500 British Airport Authority................. 81,037
10,000 British Telecommunications................ 123,580
22,626 Carlton Communications.................... 202,153
5,548 CGU....................................... 103,585
25,000 FirstGroup................................ 171,593
8,800 Harvey Nichols............................ 34,242
12,500 Legal & General Group..................... 133,496
8,900 Lloyds TSB Group.......................... 124,627
17,300 Marks & Spencer........................... 157,601
7,000 National Westminister Bank................ 125,200
28,000 Shell Transport & Trading................. 197,328
18,201 Thames Water.............................. 331,618
16,500 Vodafone Group............................ 209,557
5,000 Zeneca Group.............................. 214,763
--------------
2,316,192
--------------
TOTAL - COMMON STOCKS
(Cost $8,857,100)....................... 12,569,217
--------------
<CAPTION>
Value
Shares Description (See Note 1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Preferred Stocks - 2.2%
GERMANY - 2.2%
68 Daimler Benz Conv............................... $ 6,262
100 Porsche......................................... 289,992
--------------
296,254
--------------
TOTAL - PREFERRED STOCKS
(Cost $76,529)................................ 296,254
--------------
Warrants and Rights* - 0.0%
MALAYSIA - 0.0%
8,750 Commerce Asset Holding Warrants, expire
03/16/02 (Cost $5,308)......................... 675
--------------
TOTAL INVESTMENTS -
96.2% (COST $8,938,937)......................... 12,866,146
Other Assets and Liabilities
(net) - 3.8%................................... 508,998
--------------
TOTAL NET ASSETS -
100.0%.......................................... $ 13,375,144
==============
</TABLE>
* Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
See accompanying notes to the financial statements.
10
<PAGE>
Govett International Equity Fund (continued)
Schedule of Investments
June 30, 1998 (Unaudited)
GEOGRAPHIC CONCENTRATION
<TABLE>
<S> <C>
United Kingdom....................................................... 17.3%
Germany.............................................................. 12.2
Japan................................................................ 11.3
France............................................................... 10.9
Netherlands.......................................................... 9.0
Switzerland.......................................................... 7.8
Spain................................................................ 6.9
Italy................................................................ 3.8
Brazil............................................................... 2.5
Norway............................................................... 2.2
Other................................................................ 12.3
-----
96.2
Other Assets and Liabilities (net)................................... 3.8
-----
Total Net Assets................................................ 100.0%
=====
</TABLE>
SECTOR CONCENTRATION
<TABLE>
<S> <C>
Services............................................................. 14.4%
Electrical & Electronics............................................. 10.5
Telecommunications................................................... 10.3
Banking.............................................................. 9.8
Retail............................................................... 7.6
Health & Personal Care............................................... 7.2
Insurance............................................................ 6.8
Automobiles.......................................................... 5.2
Muli - Industry...................................................... 4.1
Broadcasting & Publishing............................................ 3.8
Other................................................................ 16.5
-----
96.2
Other Assets and Liabilities (net)................................... 3.8
-----
Total Net Assets................................................ 100.0%
=====
</TABLE>
See accompanying notes to the financial statements.
11
<PAGE>
Govett Emerging Markets Equity Fund
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (See Note 1)
- ---------------------------------------------------------------------------
Common Stocks - 84.4%
<S> <C> <C>
ARGENTINA - 4.2%
21,700 Banco Frances del Rio de la Plata.... $ 163,858
8,800 Telefonica de Argentina ADR.......... 285,450
11,800 YPF ADR.............................. 354,737
-----------
804,045
-----------
BRAZIL - 8.2%
9,440 Cemig ADR............................ 292,192
9,756,000 Eletrobras........................... 286,805
17,755,000 Gerasul*............................. 24,256
1,000,000 Saneamento Basico De SP.............. 120,185
6,040 Telebras ADR......................... 659,492
7,100 Unibanco GDR......................... 209,450
-----------
1,592,380
-----------
CHINA - 1.5%
569,000 Qingling Motors...................... 157,892
9,760 Zhejiang Southeast Electric
Power GDR*........................ 135,664
-----------
293,556
-----------
CROATIA - 0.6%
7,450 Pliva GDR............................ 121,063
-----------
CZECH REPUBLIC - 2.5%
17,350 Komercni Banka....................... 219,478
19,714 SPT Telekom*......................... 272,890
-----------
492,368
-----------
EGYPT - 3.7%
3,500 Al-Ahram Beverages GDR............... 111,300
14,100 Commercial International Bank GDR.... 152,985
3,000 Madinet NASR......................... 143,569
22,000 Paint & Chemical Industries GDR...... 206,250
6,025 Tourah Portland Cement............... 103,765
-----------
717,869
-----------
GREECE - 7.3%
2,500 Alpha Credit Bank.................... 202,884
16,400 Hellenic Petroleum*.................. 134,090
18,443 Hellenic Telecommunication
Organization........................ 473,307
3,140 National Bank of Greece.............. 402,819
3,100 Titan Cement......................... 203,025
-----------
1,416,125
-----------
HONG KONG - 1.1%
126,000 China Telecom........................ $ 218,727
-----------
HUNGARY - 4.2%
2,540 Gedeon Richter GDR*.................. 203,200
8,400 Matav ADR............................ 247,275
6,496 MOL Magyar Olaj-es Gazipari GDR...... 175,392
4,050 OTP Bank GDR......................... 196,628
-----------
822,495
-----------
INDIA - 5.8%
883 Hindalco Industries.................. 13,901
7,900 Hindustan Lever...................... 281,251
15,200 ITC.................................. 233,736
4,598 Larsen & Toubro...................... 24,866
17,200 Mahanager Telephone Nigam GDR*....... 180,170
8,700 Ranbaxy Laboratories................. 112,341
54,700 Reliance Industries.................. 184,870
19,000 State Bank of India.................. 94,104
-----------
1,125,239
-----------
ISRAEL - 6.0%
303,000 Bank Leumi Le-Israel*................ 604,431
5,200 ECI Telecom.......................... 196,950
1,600 Koor Industries...................... 184,875
5,150 Teva Pharmaceutical Industries ADR... 181,216
-----------
1,167,472
-----------
MEXICO - 14.3%
27,500 Cemex ADR............................ 242,374
156,250 Cifra C.............................. 216,896
11,120 Femsa................................ 346,321
46,700 Grupo Financiero Banamex*............ 90,902
33,700 Grupo Financiero Bancomer GDR........ 248,706
5,100 Grupo Televisa GDR*.................. 191,887
46,000 Kimberly-Clark de Mexico............. 162,449
71,000 Organizacion Soriana................. 203,748
326,000 Telefonos de Mexico.................. 770,536
23,150 Tubo de Acero de Mexico ADR.......... 296,609
-----------
2,770,428
-----------
POLAND - 1.3%
7,000 Bank Handlowy W Warszawie*........... 135,653
3,900 Bank Rozwoju Eksportu................ 105,693
-----------
241,346
-----------
</TABLE>
12
<PAGE>
Govett Emerging Markets Equity Fund (continued)
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (See Note 1)
- ---------------------------------------------------------------------------
Common Stocks (continued)
<S> <C> <C>
RUSSIA - 0.3%
18,877 Trade House GUM ADR*...................... $ 56,631
-----------
SOUTH AFRICA - 8.6%
52,000 ABSA Group................................ 325,041
14,000 Liberty Life.............................. 273,413
28,000 Rembrandt Group........................... 175,022
11,500 Reunert................................... 13,017
19,000 Sasol..................................... 110,259
60,000 Smith (C.G.).............................. 165,224
16,500 South African Breweries................... 340,077
14,000 Tiger Oats................................ 123,461
109,000 Wooltru................................... 139,950
-----------
1,665,464
-----------
TAIWAN - 2.8%
35,200 Compal Electronics*....................... 94,760
104,000 CTCI*..................................... 189,171
17,400 Delta Electronic Industrial............... 58,235
84,720 Nien Hsing Textile*....................... 197,250
-----------
539,416
-----------
THAILAND - 2.7%
12,100 Advanced Info Service..................... 51,611
5,900 BEC World................................. 22,510
96,500 Electricity Generating*................... 129,070
24,600 PTT Exploration and Production*........... 186,540
145,400 Thai Farmers Bank......................... 128,345
-----------
518,076
-----------
TURKEY - 8.4%
930,000 Alcatel Teletas Komunikasyon.............. 122,231
1,500,000 Eregli Demir*............................. 233,759
6,100,000 Sabanci Holding........................... 377,957
1,037,500 Turkiye Is Bankasi........................ 445,562
7,823,000 Yapi ve Kredi Bankasi..................... 455,112
-----------
1,634,621
-----------
VENEZUELA - 0.9%
7,270 CANTV ADR................................. 181,750
-----------
TOTAL - COMMON STOCKS (Cost $18,361,152).. 16,379,071
-----------
Preferred Stocks - 5.8%
BRAZIL - 5.8%
121,200 Banco Itau.................................. $ 69,164
25,000,000 Copel....................................... 233,453
2,647,000 Petrobras................................... 492,071
1,650,000 Telesp Celular*............................. 136,959
836,000 Telesp...................................... 196,613
-----------
1,128,260
-----------
TOTAL - PREFERRED STOCKS
(Cost $1,326,718)............................. 1,128,260
-----------
Warrants & Rights* - 0.0%
BRAZIL - 0.0%
39,292 Telesp Rights, expire 7/2/98.............. 662
GREECE - 0.0%
2,500 Alpha Credit Bank Rights, expire
7/24/98................................... 4,263
-----------
TOTAL - WARRANTS & RIGHTS (Cost $0).......... 4,925
-----------
TOTAL INVESTMENTS
- 90.2%
(COST $19,687,870)......................... 17,512,256
Other Assets and Liabilities
(net) - 9.8%............................... 1,901,886
-----------
TOTAL NET ASSETS
- 100.0%............................. $19,414,142
===========
</TABLE>
*Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
See accompanying notes to the financial statements.
13
<PAGE>
Govett Emerging Markets Equity Fund (continued)
Schedule of Investments
June 30, 1998 (Unaudited)
GEOGRAPHIC CONCENTRATION
<TABLE>
<S> <C>
Mexico.................................................... 14.3%
Brazil.................................................... 14.0
South Africa.............................................. 8.6
Turkey.................................................... 8.4
Greece.................................................... 7.3
Israel.................................................... 6.0
India..................................................... 5.8
Hungary................................................... 4.2
Argentina................................................. 4.2
Egypt..................................................... 3.7
Other..................................................... 13.7
-----
90.2
Other Assets and Liabilities (net)........................ 9.8
-----
Total Net Assets..................................... 100.0%
=====
</TABLE>
SECTOR CONCENTRATION
<TABLE>
<S> <C>
Banking................................................... 19.4%
National Telecommunications............................... 13.6
Regional Telecommunications............................... 7.0
Energy Resources.......................................... 5.3
Health & Personal Care.................................... 4.9
Electrical & Electronics.................................. 4.3
Beverages & Tobacco....................................... 4.1
Building Materials & Components........................... 3.9
Retail.................................................... 3.2
Chemicals................................................. 2.6
Other..................................................... 21.9
-----
90.2
Other Assets and Liabilities (net)........................ 9.8
-----
Total Net Assets..................................... 100.0%
=====
</TABLE>
See accompanying notes to the financial statements.
14
<PAGE>
Govett Smaller Companies Fund
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (See Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks - 101.0%
APPLIANCES & HOUSEHOLD DURABLES - 4.3%
105,200 Windmere-Durable Holdings*................ $ 3,767,475
------------
BANKING - 0.6%
10,000 Marshall & Ilsley......................... 510,625
------------
BUILDING MATERIALS & COMPONENTS - 3.2%
97,000 Toll Brothers*............................ 2,782,688
------------
ELECTRICAL & ELECTRONICS - 19.2%
40,000 Applied Graphics
Technologies*............................ 1,830,000
170,500 CHS Electronics*.......................... 3,047,687
35,000 CIENA..................................... 2,436,875
24,000 Electronics for Imaging*.................. 507,000
54,000 Learnout & Hauspie Speech Products*....... 3,223,125
70,000 Synopsys*................................. 3,202,500
81,710 Tandberg*................................. 1,140,635
33,000 USWeb*.................................... 781,688
40,000 Viasoft*.................................. 647,500
------------
16,817,010
------------
ELECTRICAL EQUIPMENT - 1.8%
115,300 Encad*.................................... 1,570,963
------------
ELECTRONIC COMPONENTS & INSTRUMENTS - 4.3%
76,000 Indus International*...................... 912,000
100,000 Oryx Technology*.......................... 100,000
92,000 SDL*...................................... 2,196,500
28,000 Vantive*.................................. 574,000
------------
3,782,500
------------
ENERGY RESOURCES - 4.4%
75,000 Comstock Resources*....................... 557,812
98,800 Global Industries*........................ 1,667,250
17,000 Noble Drilling*........................... 409,063
64,000 Precision Drilling*....................... 1,256,000
------------
3,890,125
------------
FINANCIAL SERVICES - 10.8%
110,000 AMRESCO*.................................. 3,203,750
60,000 Friedman, Billings, Ramsey Group.......... 866,250
44,000 Starwood Lodging Trust.................... 2,125,750
70,000 TCF Financial............................. 2,065,000
75,000 United Companies Financial................ 1,171,875
------------
9,432,625
------------
FOOD & HOUSEHOLD PRODUCTS - 0.3%
15,100 Dan River*................................ 256,700
------------
HEALTH & PERSONAL CARE - 10.6%
117,500 Balanced Care*............................ $ 851,875
38,000 Beverly Enterprises*...................... 524,875
55,000 CombiChem*................................ 381,562
93,200 Dura Pharmaceuticals*..................... 2,085,350
15,500 Ergo Science*............................. 55,219
45,000 Imnet Systems*............................ 601,875
40,000 SangStat Medical*......................... 1,255,000
6,000 Sofamor Danek Group....................... 519,375
70,000 Total Renal Care
Holdings*................................. 2,415,000
329,000 Trinity Biotech ADR*...................... 627,156
------------
9,317,287
------------
INSURANCE - 0.9%
36,500 Vesta Insurance Group*.................... 777,906
------------
LEISURE & TOURISM - 3.1%
187,500 Rainforest Cafe*.......................... 2,601,562
199,250 Spatializer Audio Laboratories*........... 143,211
------------
2,744,773
------------
MACHINERY & ENGINEERING - 2.9%
19,000 Group Maintenance America*................ 342,000
30,000 OmniQuip International.................... 555,000
50,000 Rental Service*........................... 1,681,250
------------
2,578,250
------------
MULTI - INDUSTRY - 5.9%
30,000 CalEnergy*................................ 901,875
147,400 Personnel Group of America*............... 2,948,000
165,000 Printrak International*................... 866,250
17,000 Sterigenics International*................ 442,000
------------
5,158,125
------------
RETAIL - 15.2%
15,000 Borders Group*............................ 555,000
50,000 Claire's Stores........................... 1,025,000
70,000 Goody's Family Clothing*.................. 3,841,250
86,000 I.C. Isaacs*.............................. 301,000
85,000 Just For Feet*............................ 2,422,500
88,600 Proffitt's*............................... 3,577,225
50,000 Viking Office Products*................... 1,568,750
------------
13,290,725
------------
SERVICES - 7.9%
130,000 Allied Waste Industries*.................. 3,120,000
49,000 Corrections Corporation of America*....... 1,151,500
100,000 Stewart Enterprises....................... 2,662,500
------------
6,934,000
------------
</TABLE>
15
<PAGE>
Govett Smaller Companies Fund (continued)
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (See Note 1)
- --------------------------------------------------------------------------------
Common Stocks (continued)
<S> <C> <C>
TELECOMMUNICATIONS - 5.6%
87,000 Digital Microwave*........................... $ 630,750
181,600 DSP Communications*.......................... 2,497,000
54,800 PairGain Technologies*....................... 955,575
27,500 World Access*................................ 825,000
-----------
4,908,325
-----------
TOTAL - COMMON STOCKS
(Cost $84,812,467)........................... 88,520,102
-----------
TOTAL INVESTMENTS - 101.0% (COST $84,812,467).. 88,520,102
Other Assets and Liabilities
(net) - (1.0)%................................ (843,640)
-----------
TOTAL NET ASSETS -
100.0%....................................... $87,676,462
===========
</TABLE>
* Non-income producing security
ADR American Depositary Receipt
<TABLE>
GEOGRAPHIC CONCENTRATION
<S> <C>
United States............................................. 95.3%
Belgium................................................... 3.7
Norway.................................................... 1.3
Ireland................................................... 0.7
---------
101.0
Other Assets and Liabilities (net)........................ (1.0)
---------
Total Net Assets..................................... 100.0%
=========
SECTOR CONCENTRATION
Electrical & Electronics.................................. 19.2%
Retail.................................................... 15.2
Financial Services........................................ 10.8
Health & Personal Care.................................... 10.6
Services.................................................. 7.9
Multi-Industry............................................ 5.9
Telecommunications........................................ 5.6
Energy Resources.......................................... 4.4
Electronic Components & Instruments....................... 4.3
Appliances & Household Durables........................... 4.3
Other..................................................... 12.8
---------
101.0
Other Assets and Liabilities (net)........................ (1.0)
---------
Total Net Assets..................................... 100.0%
=========
</TABLE>
See accompanying notes to the financial statements.
16
<PAGE>
Govett Asia Fund
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (See Note 1)
- ---------------------------------------------------------
<S> <C> <C>
Common Stocks - 79.7%
AUSTRALIA - 15.2%
3,000 AMP*............................ $ 35,154
23,800 Goodman Fielder................. 34,677
2,800 Howard Smith.................... 16,492
24,900 Pasminco........................ 18,989
11,900 Woolworths Holdings............. 38,734
---------
144,046
---------
HONG KONG - 13.7%
52,000 China Resources Beijing Land.... 16,779
16,000 China Telecom................... 27,775
2,200 Hong Kong & Shanghai
Bank Holdings.............. 53,807
6,000 Hutchinson Whampoa.............. 31,673
---------
130,034
---------
JAPAN - 36.9%
800 Aderans......................... 17,544
3,000 Alpine Electronics*............. 31,164
1,000 Fuji Photo Film................. 34,843
2,000 Fujitsu......................... 21,065
1,000 Ito-Yokado...................... 47,107
1,000 Kikkoman........................ 5,266
3,000 Kirin Brewery................... 28,351
1,000 Mitsui Fudosan.................. 7,907
400 Nintendo........................ 37,080
3 Nippon Telegraph & Telephone.... 24,888
1 NTT Data Communications
Systems.................... 36,142
100 Shohkoh Fund.................... 24,600
400 Sony............................ 34,483
---------
350,440
---------
PHILIPPINES - 2.8%
2,736 Far East Bank & Trust (partly
paid)...................... 2,296
4,100 Metropolitan Bank & Trust....... 24,089
---------
26,385
---------
SINGAPORE - 5.9%
5,300 Development Bank of Singapore... 29,331
4,000 Singapore Press Holdings........ 26,754
---------
56,085
---------
TAIWAN - 1.2%
1,600 Compal Electronics*............. 4,307
3,080 Nien Hsing Textile*............. 7,171
---------
11,478
---------
<CAPTION>
Value
Shares Description (See Note 1)
- ---------------------------------------------------------
<S> <C> <C>
THAILAND - 4.0%
5,100 Advanced Info Service.......... $ 21,753
18,400 Thai Farmers Bank.............. 16,242
---------
37,995
---------
TOTAL - COMMON STOCKS
(Cost $871,133)........... 756,463
---------
Preferred Stocks - 0.1%
MALAYSIA - 0.1%
20,000 Multi-Purpose Holdings,
expire 1/13/02 1,301
---------
Warrants and Rights* - 0.1%
HONG KONG - 0.0%
18,400 Oriental Press Group Warrants,
expire 10/2/98............ 24
---------
JAPAN - 0.1%
20 Optec Dai-Ichi Denko Warrants,
expire 2/8/00............. 1,020
---------
MALAYSIA - 0.0%
971 Rashid Hussain Berhad Warrants,
expire 3/25/02............ 162
---------
PHILIPPINES - 0.0%
16,200 Belle Corporation Warrants,
expire 10/6/00............ 22
---------
TOTAL - WARRANTS AND RIGHTS
(Cost $18,027)............ 1,228
---------
TOTAL INVESTMENTS -
79.9% (COST $897,165)..... 758,992
Other Assets and Liabilities
(net) - 20.1%............ 190,278
---------
TOTAL NET ASSETS -
100.0%......................... $ 949,270
=========
</TABLE>
* Non-income producing security
See accompanying notes to the financial statements.
17
<PAGE>
Govett Asia Fund (continued)
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
GEOGRAPHIC CONCENTRATION
<S> <C>
Japan......................................... 37.0%
Australia..................................... 15.2
Hong Kong..................................... 13.7
Singapore..................................... 5.9
Thailand...................................... 4.0
Philippines................................... 2.8
Taiwan........................................ 1.2
Malaysia...................................... 0.1
------
79.9
Other Assets and Liabilities (net)............ 20.1
------
Total Net Assets............................ 100.0%
======
<CAPTION>
SECTOR CONCENTRATION
<S> <C>
Retail........................................ 13.5%
Electrical & Electronics...................... 13.3
Banking....................................... 10.2
Telecommunications............................ 9.6
Food & Household Products..................... 6.6
Financial Services............................ 5.7
Services...................................... 5.7
Leisure & Tourism............................. 3.7
Multi - Industry.............................. 3.5
Broadcasting & Publishing..................... 2.8
Other......................................... 5.3
-----
79.9
Other Assets and Liabilities (net)............ 20.1
-----
Total Net Assets............................ 100.0%
=====
</TABLE>
See accompanying notes to the financial statements.
18
<PAGE>
Govett Latin America Fund
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (See Note 1)
- ---------------------------------------------------------------
<S> <C> <C>
Common Stocks - 79.9%
ARGENTINA - 9.9%
7,300 Banco Frances del Rio
de la
Plata . . . . . . . $ 55,123
3,800 Importadora y
Exportadora
Patagonia . . . . . 57,274
2,160 Telefonica de
Argentina ADR . . . 70,065
3,700 YPF ADR . . . . . . 111,231
------------
293,693
------------
BRAZIL - 26.1%
3,900 Cemig ADR . . . . . 120,722
4,079,000 Eletrobras . . . . . 119,914
5,169,000 Gerasul* . . . . . . 7,062
27,000 Guararapes . . . . . 77,039
3,350 Pao de Accucar GDR . 75,794
65,000 Riograndense de
Telecommunication . 70,870
480,000 Telebras . . . . . . 38,183
1,740 Telebras ADR . . . . 189,986
2,690 Unibanco GDR . . . . 79,355
------------
778,925
------------
CHILE - 4.3%
2,750 Empresa Nacional
Electricidad
ADR . . . . . . . . 39,187
900 Quimica Minera ADR . 30,150
2,870 Telecomunicacoes de
Chile
ADR . . . . . . . . 58,297
------------
127,634
------------
MEXICO - 36.0%
18,800 Apasco . . . . . . . 98,700
52,800 Cifra C . . . . . . 73,293
92,000 Controladora
Comercial
Mexicana . . . . . 75,929
1,980 Femsa* . . . . . . . 61,665
15,000 Grupo Financiero
Banamex*. . . . . . 29,197
14,500 Grupo Financiero
Bancomer
GDR . . . . . . . . 106,820
81,500 Grupo Financiero
Banorte*. . . . . . 88,113
17,000 Grupo Industrial
Saltillo. . . . . . 56,727
3,400 Panamerican Beverages 106,888
5,730 Telefonos de Mexico
ADR . . . . . . . . 275,398
7,850 Tubos de Acero de
Mexico
ADR . . . . . . . . 100,578
------------
1,073,308
------------
<CAPTION>
Value
Shares Description (See Note 1)
- --------------------------------------------------------------------
<S> <C> <C>
VENEZUELA - 3.6%
4,270 CANTV ADR . . . . . 106,750
------------
TOTAL - COMMON STOCKS 2,380,310
(Cost $2,893,060) .
------------
Preferred Stocks - 14.4
BRAZIL - 14.4%
84,700 Banco Itau . . . . . 48,335
8,800,000 Copel . . . . . . . 82,176
960,000 Petrobras . . . . . 178,462
380,000 Telesp Celular* . . 31,542
380,000 Telesp . . . . . . . 89,369
------------
429,884
------------
TOTAL - PREFERRED
STOCKS (Cost
$470,859) . . . . . 429,884
------------
Warrants and Rights* - 0.0%
BRAZIL - 0.0%
17,859 Telesp Rights, expire
7/2/98
(Cost $0) . . . . . 301
------------
TOTAL INVESTMENTS -
94.3% (COST
$3,363,919) . . . . 2,810,495
Other Assets and
Liabilities
(net) - 5.7% . . . 169,563
------------
TOTAL NET ASSETS -
100.0% . . . . . . . $2,980,058
============
</TABLE>
* Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
See accompanying notes to the financial statements.
19
<PAGE>
Govett Latin American Fund (continued)
Schedule of Investments
June 30, 1998 (Unaudited)
GEOGRAPHIC CONCENTRATION
Brazil . . . . . . . . . . . . . . 40.5%
Mexico . . . . . . . . . . . . . . 36.0
Argentina. . . . . . . . . . . . . 9.9
Chile. . . . . . . . . . . . . . . 4.3
Venezuela. . . . . . . . . . . . . 3.6
-----
94.3
Other Assets and Liabilities (net) 5.7
-----
Total Net Assets . . . . . . . . 100.0%
=====
SECTOR CONCENTRATION
National Telecommunications. . . . 24.8%
Energy Resources . . . . . . . . . 9.7
Banking. . . . . . . . . . . . . . 9.6
Electrical & Electronics . . . . . 8.3
Regional Telecommunications. . . . 6.4
Beverages & Tobacco. . . . . . . . 5.6
Utilities - Electrical & Gas . . . 5.1
Retail . . . . . . . . . . . . . . 5.0
Financial Services . . . . . . . . 4.6
Merchandising. . . . . . . . . . . 4.5
Other. . . . . . . . . . . . . . . 10.7
-----
94.3
Other Assets and Liabilities (net) 5.7
-----
Total Net Assets . . . . . . . . 100.0%
=====
See accompanying notes to the financial statements.
20
<PAGE>
Govett Global Income Fund
Schedule of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal Value
Amount Description (See Note 1)
- ------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds - 12.7%
IRELAND - 6.4%
USD 500,000 BGB Finance
6.50%, 09/03/01 . . . . . $ 506,250
--------------
NORWAY - 6.3%
USD 500,000 Telenor Series E
5.75%, 03/26/01 . . . . . 497,500
--------------
TOTAL -
CORPORATE BONDS
(Cost $998,322) . . . . . 1,003,750
--------------
Government Bonds and Notes -
87.4%
ARGENTINA - 6.5%
USD 500,000 Argentina Global Bond 9.25%,
02/23/01 . . . . . . . . . 509,062
--------------
AUSTRIA - 8.5%
ATS 7,800,000 Republic of Austria 6.25%,
05/31/06 . . . . . . . . . 672,758
--------------
GERMANY - 0.7%
DEM 100,000 Deutschland Republic 5.625%,
01/04/28 . . . . . . . . . 57,555
--------------
MULTI-NATIONAL - 5.8%
JPY 52,000,000 IBRD Global Bond 4.75%,
12/20/04 . . . . . . . . . 455,544
--------------
NETHERLANDS - 2.8%
NLG 400,000 Netherlands Government
7.00%, 06/15/05 . . . . . 223,774
--------------
NEW ZEALAND - 2.2%
NZD 300,000 New Zealand Government
8.00%, 11/15/06 . . . . . 171,602
--------------
RUSSIA - 5.4%
USD 500,000 Russia (Ministry of Finance)
9.25%, 11/27/01 . . . . . 423,050
--------------
UNITED KINGDOM - 21.5%
GBP 350,000 U.K. Gilt
8.00%, 06/07/21 . . . . . 759,853
GBP 500,000 U.K. Gilt
9.75%, 08/27/02 . . . . . 931,290
--------------
1,691,143
--------------
UNITED STATES - 34.0%
USD 400,000 U.S. Treasury Bond 6.50%,
11/15/26 . . . . . . . . . 444,250
USD 500,000 U.S. Treasury Note 6.125%,
11/15/27 . . . . . . . . . 535,781
<CAPTION>
Principal Value
Amount Description (See Note 1)
- ------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
USD 300,000 U.S. Treasury Note 6.50%,
08/31/01 . . . . . . . . . $ 308,063
USD 1,250,000 U.S. Treasury Note 7.50%,
02/15/05 . . . . . . . . . 1,383,985
--------------
2,672,079
--------------
TOTAL -
GOVERNMENT BONDS AND NOTES
(Cost $6,727,516) . . . . 6,876,567
--------------
TOTAL INVESTMENTS - 100.1%
(COST $7,725,838) . . . . . 7,880,317
Other Assets and Liabilities
(net) - (0.1)% . . . . . . (9,679)
--------------
TOTAL NET ASSETS -
100.0% . . . . . . . . . . $ 7,870,638
==============
</TABLE>
ATS Austrian Schilling
DEM German Mark
GBP British Pound
JPY Japanese Yen
NLG Netherland Guilder
NZD New Zealand Dollar
USD United States Dollar
GEOGRAPHIC CONCENTRATION
<TABLE>
<S> <C>
United States. . . . . . . . . . . 34.0%
United Kingdom . . . . . . . . . . 21.5
Austria. . . . . . . . . . . . . . 8.5
Argentina. . . . . . . . . . . . . 6.5
Ireland. . . . . . . . . . . . . . 6.4
Norway . . . . . . . . . . . . . . 6.3
Multi-National . . . . . . . . . . 5.8
Russia . . . . . . . . . . . . . . 5.4
Netherlands. . . . . . . . . . . . 2.8
New Zealand. . . . . . . . . . . . 2.2
Other. . . . . . . . . . . . . . . 0.7
-----
100.1
Other Assets and Liabilities (net) (0.1)
-----
Total Net Assets . . . . . . . . 100.0%
=====
</TABLE>
See accompanying notes to the financial statements.
21
<PAGE>
Statements of Assets and Liabilities
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Emerging
International Markets
Equity Equity
Fund Fund
------------- --------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1) - (see
accompanying Schedule of Investments) . . . . $12,866,146 $17,512,256
Cash . . . . . . . . . . . . . . . . . . . . . 9,982 362,109
Foreign currency, at value (Note 1) . . . . . . 594,890 1,057,767
Receivable from:
Securities sold . . . . . . . . . . . . . . . 5,026 443,063
Fund shares sold . . . . . . . . . . . . . . . - 52,892
Dividends and interest . . . . . . . . . . . . 25,439 130,603
Reimbursement from investment manager (Note 2) - 20,947
Deferred organization expense (Note 1) . . . . - -
Other assets . . . . . . . . . . . . . . . . . 3,343 3,087
----------- -----------
Total assets . . . . . . . . . . . . . . . . . 13,504,826 19,582,724
----------- -----------
LIABILITIES:
Loans payable (Note 4) . . . . . . . . . . . . - -
Payable for:
Securities purchased . . . . . . . . . . . . . - -
Fund shares repurchased . . . . . . . . . . . 26,417 2,931
Distributions declared . . . . . . . . . . . . - -
Deferred foreign country taxes . . . . . . . . 212 12,683
Investment manager (Note 2) . . . . . . . . . 11,610 -
Net open foreign currency contracts (Note 8) . - -
Accrued expenses and other liabilities . . . . 91,443 152,968
----------- -----------
Total liabilities . . . . . . . . . . . . . . 129,682 168,582
----------- -----------
NET ASSETS . . . . . . . . . . . . . . . . . . $13,375,144 $19,414,142
=========== ===========
NET ASSETS CONSIST OF:
Paid-in-capital . . . . . . . . . . . . . . . . $ 8,707,880 $30,595,391
Undistributed net investment income (loss) . . (83,337) (57,500)
Accumulated net realized gain (loss) on
investments and foreign currency transactions 831,744 (8,873,688)
Net unrealized appreciation (depreciation) on
investments, forward currency contracts and net
other assets (net of accrued foreign country
tax unrealized appreciation) . . . . . . . . . 3,918,857 (2,250,061)
----------- -----------
NET ASSETS . . . . . . . . . . . . . . . . . . $13,375,144 $19,414,142
=========== ===========
SHARES OUTSTANDING . . . . . . . . . . . . . . 1,078,928 1,989,192
=========== ===========
NET ASSET VALUE AND REDEMPTION PRICE PER CLASS A
SHARE. . . . . . . . . . . . . . . . . . . . . $ 12.40 $ 9.76
=========== ===========
OFFERING PRICE PER CLASS A SHARE (NET ASSET
VALUE DIVIDED BY 95.05%) . . . . . . . . . . . $ 13.04 $ 10.27
=========== ===========
Cost of investments . . . . . . . . . . . . . . $ 8,938,937 $19,687,870
Cost of foreign currency . . . . . . . . . . . $ 604,035 $ 1,115,564
</TABLE>
See accompanying notes to the financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
Smaller Latin Global
Companies Asia America Income
Fund Fund Fund Fund
- ------------- ------------ ------------ ------------
<S> <C> <C> <C>
$ 88,520,102 $ 758,992 $ 2,810,495 $ 7,880,317
- 73,178 79,709 -
- 81,761 1,424 -
1,920,732 81,027 158,372 -
- 100 - -
8,200 2,531 32,907 143,154
- 44,006 23,609 16,086
- 3,190 4,054 -
3,087 3,087 3,116 3,087
- ------------ ----------- ----------- -----------
90,452,121 1,047,872 3,113,686 8,042,644
- ------------ ----------- ----------- -----------
2,121,372 - - 12,175
- 42,177 32,249 -
219,613 - 24,240 50,807
- - - 13,154
- 149 - -
46,606 - - -
- - - 33,523
388,068 56,276 77,139 62,347
- ------------ ----------- ----------- -----------
2,775,659 98,602 133,628 172,006
- ------------ ----------- ----------- -----------
$ 87,676,462 $ 949,270 $ 2,980,058 $ 7,870,638
============ =========== =========== ===========
$110,798,906 $ 4,012,073 $ 4,722,333 $12,622,744
(929,517) (24,209) 31,317 (78,276)
(25,900,562) (2,902,250) (1,221,687) (4,794,054)
3,707,635 (136,344) (551,905) 120,224
- ------------ ----------- ----------- -----------
$ 87,676,462 $ 949,270 $ 2,980,058 $ 7,870,638
============ =========== =========== ===========
4,500,825 215,341 405,647 1,000,824
============ =========== =========== ===========
$ 19.48 $ 4.41 $ 7.35 $ 7.86
============ =========== =========== ===========
$ 20.49 $ 4.64 $ 7.73 $ 8.27
============ =========== =========== ===========
$ 84,812,467 $ 897,165 $ 3,363,919 $ 7,725,838
$ - $ 81,091 $ 1,482 $ -
</TABLE>
23
<PAGE>
STATEMENTS OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Emerging
International Markets
Equity Equity
Fund Fund
------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Interest* ..................................... $ 2,928 $ 9,594
Dividends*..................................... 143,404 358,595
---------- -----------
Total investment income....................... 146,332 368,189
---------- -----------
EXPENSES:
Management fee (Note 2)........................ 68,959 134,118
Custody and administration fees................ 41,420 151,635
12b-1 fee Class A (Note 3)..................... 25,849 50,689
Professional fees.............................. 21,972 21,972
Transfer agency fee............................ 28,837 86,911
Registration and filing fees................... 8,340 11,679
Directors' fees and expenses................... 11,450 11,450
Amortization of organization costs (Note 1).... - -
Other.......................................... 12,494 23,423
---------- -----------
Total expenses................................ 219,321 491,877
---------- -----------
Less: Expenses reimbursable and fees waived by
the Manager (Note 2).......................... (46,886) (157,759)
---------- -----------
Net operating expenses......................... 172,435 334,118
---------- -----------
Interest and other non-operating expenses (Note
4)............................................ - 7,238
---------- -----------
NET INVESTMENT INCOME (LOSS)................... (26,103) 26,833
---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investment transactions....................... 831,423 (2,711,049)
Foreign currency transactions................. 318 (71,943)
---------- -----------
Net realized gain (loss)..................... 831,741 (2,782,992)
---------- -----------
Net unrealized appreciation (depreciation) on:
Investments................................... 1,319,663 (2,260,479)
Foreign currency transactions................. (30,191) (56,638)
---------- -----------
Net unrealized appreciation (depreciation)
during the period........................... 1,289,472 (2,317,117)
---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)........ 2,121,213 (5,100,109)
---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $2,095,110 $(5,073,276)
========== ===========
*Net of foreign taxes withheld of.............. $ 20,521 $ 604
</TABLE>
See accompanying notes to the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
Smaller Latin Global
Companies Asia America Income
Fund Fund Fund Fund
- ------------ ---------- ------------ ----------
<S> <C> <C> <C>
$ 47,077 $ 1,454 $ 1,816 $ 287,676
77,588 9,760 81,909 -
- ----------- --------- ----------- ---------
124,665 11,214 83,725 287,676
- ----------- --------- ----------- ---------
528,197 6,450 20,875 34,170
186,010 34,388 25,085 18,202
199,763 2,425 7,899 15,946
21,972 21,973 21,972 21,954
409,538 10,006 12,456 16,995
26,593 8,260 8,321 8,505
11,074 11,713 11,132 11,584
- 3,137 2,908 -
62,600 7,196 8,171 12,378
- ----------- --------- ----------- ---------
1,445,747 105,548 118,819 139,734
- ----------- --------- ----------- ---------
(419,089) (89,454) (66,708) (60,154)
- ----------- --------- ----------- ---------
1,026,658 16,094 52,111 79,580
- ----------- --------- ----------- ---------
27,524 24 297 5,239
- ----------- --------- ----------- ---------
(929,517) (4,904) 31,317 202,857
- ----------- --------- ----------- ---------
(4,652,779) (575,932) (208,372) 30,966
- (1,597) (2,573) (266,352)
- ----------- --------- ----------- ---------
(4,652,779) (577,529) (210,945) (235,386)
- ----------- --------- ----------- ---------
8,764,056 238,387 (862,654) 368,139
- (3,989) (777) (49,720)
- ----------- --------- ----------- ---------
8,764,056 234,398 (863,431) 318,419
- ----------- --------- ----------- ---------
4,111,277 (343,131) (1,074,376) 83,033
- ----------- --------- ----------- ---------
$ 3,181,760 $(348,035) $(1,043,059) $ 285,890
=========== ========= =========== =========
$ - $ 691 $ 136 $ 6,119
</TABLE>
25
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Emerging Markets
International Equity Fund Equity Fund
------------------------------ -------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30,1998 December 31, June 30,1998 December 31,
(Unaudited) 1997 (Unaudited) 1997
---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss).......................... $ (26,103) $ (219,105) $ 26,833 $ (290,519)
Net realized gain (loss) on investment and foreign
currency transactions................................ 831,741 542,801 (2,782,992) 261,861
Net change in unrealized appreciation (depreciation)
on investments, forward currency contracts, foreign
currency, and other assets........................... 1,289,472 (90,140) (2,317,117) (2,490,178)
-------------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations........................................... 2,095,110 233,556 (5,073,276) (2,518,836)
-------------- ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................ - - (337,867) -
From net realized capital gains....................... (335,006) (398,221) - -
Return of capital..................................... - - - -
-------------- ------------ ----------- -----------
Total distributions to shareholders.................. (335,006) (398,221) (337,867) -
-------------- ------------ ----------- -----------
FUND SHARE TRANSACTIONS (NOTE 6):
Proceeds from shares sold............................. 958,596 5,058,342 1,357,465 30,078,065
Net asset value of shares issued on reinvestment of
distributions........................................ 316,468 372,030 313,058 -
Cost of shares repurchased............................ (3,612,371) (17,135,065) (9,744,228) (51,474,083)
-------------- ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
fund share transactions.............................. (2,337,307) (11,704,693) (8,073,705) (21,396,018)
-------------- ------------ ------------ -----------
Total change in net assets............................ (577,203) (11,869,358) (13,484,848) (23,914,854)
NET ASSETS:
Beginning of period.................................. 13,952,347 25,821,705 32,898,990 56,813,844
-------------- ------------ ------------ -----------
End of period* ...................................... $ 13,375,144 $ 13,952,347 $ 19,414,142 $32,898,990
============== ============ ============ ===========
*Including undistributed net investment income (loss)
of................................................... $ (83,337) $ (57,234) $ (57,500) $ 253,534
</TABLE>
See accompanying notes to the financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
Smaller Companies Fund Asia Fund Latin America Fund Global Income Fund
- -------------------------------- ------------------------------ ------------------------------ ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
June 30,1998 December 31, June 30,1998 December 31, June 30,1998 December 31, June 30,1998 December 31,
(Unaudited) 1997 (Unaudited) 1997 (Unaudited) 1997 (Unaudited) 1997
- ---------------- -------------- ---------------- ------------ ---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (929,517) $ (2,848,368) $ (4,904) $ (36,880) $ 31,317 $ (13,241) $ 202,857 $ 572,928
(4,652,779) (8,405,338) (577,529) (234,911) (210,945) 827,817 (235,386) (1,079,921)
8,764,056 (8,647,141) 234,398 (484,070) (863,431) (57,661) 318,419 135,243
------------ ------------- ---------- ----------- ----------- ----------- ----------- ------------
3,181,760 (19,900,847) (348,035) (755,861) (1,043,059) 756,915 285,890 (371,750)
------------ ------------- ---------- ----------- ----------- ----------- ----------- ------------
- - - - - - (212,267) (162,682)
- - - - - - - -
- - - - - - - (638,355)
------------ ------------- ---------- ----------- ----------- ----------- ----------- ------------
- - - - - - (212,267) (801,037)
------------ ------------- ---------- ----------- ----------- ----------- ----------- ------------
48,882,326 722,881,110 130,654 1,176,022 175,416 3,074,853 62,876 374,048
- - - - - - 123,325 429,663
(92,312,692) (834,789,996) (305,828) (3,166,013) (1,289,881) (2,954,747) (2,665,830) (9,708,061)
------------ ------------- ---------- ----------- ----------- ----------- ----------- ------------
(43,430,366) (111,908,886) (175,174) (1,989,991) (1,114,465) 120,106 (2,479,629) (8,904,350)
------------ ------------- ---------- ----------- ----------- ----------- ----------- ------------
(40,248,606) (131,809,733) (523,209) (2,745,852) (2,157,524) 877,021 (2,406,006) (10,077,137)
127,925,068 259,734,801 1,472,479 4,218,331 5,137,582 4,260,561 10,276,644 20,353,781
------------ ------------- ---------- ----------- ----------- ----------- ----------- ------------
$ 87,676,462 $ 127,925,068 $ 949,270 $ 1,472,479 $ 2,980,058 $ 5,137,582 $ 7,870,638 $ 10,276,644
============ ============= ========== =========== =========== =========== =========== ============
$ (929,517) $ - $ (24,209) $ (19,305) $ 31,317 $ - $ (78,276) $ (68,866)
</TABLE>
27
<PAGE>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
International Equity Fund
-------------------------------------------------------------
Six Months
Ended Year Ended Year Ended Year Ended
June 30,1998 December 31, December 31, December 31,
(Unaudited) 1997 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 10.90 $ 11.19 $ 11.27 $ 10.16
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . . . (0.03) (0.24)+ (0.11)+ (0.08)+
Net realized and unrealized gain (loss) on investments . . . . . 1.83 0.18 1.45 1.20
------- ------- ------- -------
Total from investment operations . . . . . . . . . . . . . . . 1.80 (0.06) 1.34 1.12
------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . . . . . . . - - (0.11) -
In excess of net investment income . . . . . . . . . . . . . . . - - (0.09) -
From net realized gain . . . . . . . . . . . . . . . . . . . . . (0.30) (0.23) (1.22) (0.01)
In excess of net realized capital gain . . . . . . . . . . . . . - - - -
------- ------- ------- -------
Total distributions . . . . . . . . . . . . . . . . . . . . . . (0.30) (0.23) (1.42) (0.01)
------- ------- ------- -------
Net asset value, end of period . . . . . . . . . . . . . . . . . $ 12.40 $ 10.90 $ 11.19 $ 11.27
======= ======= ======= =======
TOTAL RETURN** . . . . . . . . . . . . . . . . . . . . . . . . . 16.47 % (0.71) % 12.13 % 11.01 %
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's) . . . . . . . . . . . . . . . . $13,375 $13,952 $25,822 $28,546
Net operating expenses to average daily net assets (Note A) . . . 2.50 %* 2.50 % 2.39 % 2.50 %
Net investment income (loss) to average daily net assets . . . . (0.38)%* (1.01) % (1.06) % (0.64) %
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 36 % 51 % 84 % 101 %
- -----------------------------
Note A: AIB Govett Asset Management Limited waived a portion of its management fees and Govett Financial Services Limited, a former
distributor of the Funds, reimbursed a portion of the other operating expenses of the Funds for the years ended December 31,
1993 and 1994. For the years ended December 31, 1995, 1996 and 1997, AIB Govett Asset Management Limited (former investment
manager, currently subadviser to all Funds) waived a portion of its management fee and reimbursed a portion of the other
operating expenses of the Funds. For the six months ended June 30, 1998, AIB Govett, Inc. (investment manager since January
1, 1998), 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 . . . . . . . . . . . . . . . . . . . . . . . . . .. 3.18 %* 3.12 % 3.09 % 2.75 %
<CAPTION>
International Equity Fund
--------------------------------
Year Ended Year Ended
December 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 13.23 $ 9.31
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . . . (0.12)+ (0.03)
Net realized and unrealized gain (loss) on investments . . . . . (0.94) 5.01
------- -------
Total from investment operations . . . . . . . . . . . . . . . (1.06) 4.98
------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . . . . . . . - -
In excess of net investment income . . . . . . . . . . . . . . . - -
From net realized gain . . . . . . . . . . . . . . . . . . . . . (2.01) (1.06)
In excess of net realized capital gain . . . . . . . . . . . . . - -
------- -------
Total distributions . . . . . . . . . . . . . . . . . . . . . . (2.01) (1.06)
------- -------
Net asset value, end of period . . . . . . . . . . . . . . . . . $ 10.16 $ 13.23
======= =======
TOTAL RETURN** . . . . . . . . . . . . . . . . . . . . . . . . . (8.44) % 54.50 %
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's) . . . . . . . . . . . . . . . . $32,296 $44,610
Net operating expenses to average daily net assets (Note A) . . . 2.50 % 2.50 %
Net investment income (loss) to average daily net assets . . . . (0.98) % (0.79)%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 155 % 151 %
- -----------------------------
Note A: AIB Govett Asset Management Limited waived a portion of its management fees and Govett Financial Services Limited, a former
distributor of the Funds, reimbursed a portion of the other operating expenses of the Funds for the years ended December 31,
1993 and 1994. For the years ended December 31, 1995, 1996 and 1997, AIB Govett Asset Management Limited (former investment
manager, currently subadviser to all Funds) waived a portion of its management fee and reimbursed a portion of the other
operating expenses of the Funds. For the six months ended June 30, 1998, AIB Govett, Inc. (investment manager since January
1, 1998), 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 2.74 % 2.65 %
</TABLE>
(a) Commencement of Operations was January 1, 1993.
(b) Commencement of Operations was January 1, 1994.
(c) 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.
28
<PAGE>
<TABLE>
<CAPTION>
Emerging Markets Equity Fund` Smaller Companies Fund
- ---------------------------------------------------------------------------------- -------------------------------------------
Six Months Six Months
Ended Year Ended Year Ended Year Ended Year Ended Year Ended Ended Year Ended Year Ended
June 30,1998 December 31, December 31, December 31, December 31, December 31, June 30,1998 December 31, December 31,
(Unaudited) 1997 1996 1995 1994 1993 (Unaudited) 1997 1996
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <S> <S> <S> <S> <S> <S> <S> <S>
$ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70 $ 10.72 $ 19.09 $ 21.83 $ 29.96
------- ------- ------- ------- ------- ------- ------- -------- --------
0.03 (0.11)+ (0.13)+ (0.06)+ (0.11)+ (0.05) (0.21) (0.43)+ (0.44)+
(2.36) (1.31) 1.61 (0.98) (1.93) 8.36 0.60 (2.31) (2.84)
------- ------- ------- ------- ------- ------- ------- -------- --------
(2.33) (1.42) 1.48 (1.04) (2.04) 8.31 0.39 (2.74) (3.28)
------- ------- ------- ------- ------- ------- ------- -------- --------
(0.15) - - - - - - - -
- - (0.06) - - - - - -
- - - (0.01) (2.33) (1.33) - - (4.85)
- - - - (0.04) - - - -
------- ------- ------- ------- ------- ------- ------- -------- --------
(0.15) - (0.06) (0.01) (2.37) (1.33) - - (4.85)
------- ------- ------- ------- ------- ------- ------- -------- --------
$ 9.76 $ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70 $ 19.48 $ 19.09 $ 21.83
======= ======= ======= ======= ======= ======= ======= ======== ========
(19.30)% (10.40) % 12.08 % (7.84) % (12.65) % 79.73 % 2.04 % (12.55) % (10.62) %
$19,414 $32,899 $56,814 $75,887 $76,812 $71,422 $87,676 $127,925 $259,735
2.50 %* 2.50 % 2.38 % 2.50 % 2.50 % 2.50 % 1.95 %* 1.95 % 1.81 %
0.20 %* (0.54) % (0.62) % (0.49) % (0.77) % (0.88)% (1.77)%* (1.64) % (1.40) %
58 % 120 % 122 % 115 % 140 % 143 % 30 % 77 % 406 %
3.73 %* 2.91 % 2.62 % 2.78 % 2.65 % 2.52 % 2.80 %* 2.59 % 2.08 %
<CAPTION>
Smaller Companies Fund
- -----------------------------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1995 1994 1993 (a)
------------ ------------ --------------
<S> <C> <C>
$ 19.06 $ 15.85 $ 10.00
-------- ------- -------
(0.30)+ (0.10)+ (0.06)
13.32 4.47 5.91
-------- ------- -------
13.02 4.37 5.85
-------- ------- -------
- - -
- - -
(2.12) (1.16) -
- - -
-------- ------- -------
(2.12) (1.16) -
-------- ------- -------
$ 29.96 $ 19.06 $ 15.85
======== ======= =======
69.13 % 28.68 % 58.50 %
$517,990 $76,873 $39,681
1.95 % 1.95 % 1.95 %
(1.64) % (1.13) % (0.93)%
280 % 519 % 483 %
2.12 % 2.40 % 2.44 %
</TABLE>
29
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
For a Share Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
Asia Fund
---------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended Year Ended Year Ended
June 30, 1998 December 31, December 31, December 31,
(Unaudited) 1997 1996 1995
------------------------ ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............... $ 5.94 $ 9.15 $ 8.53 $ 8.79
------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income
(loss) ........................... (0.03) (0.20)+ (0.26)+ (0.05)+
Net realized and
unrealized gain
(loss) on investments............. (1.50) (3.01) 1.05 (0.21)
------- ------- ------ -------
Total from
investment
operations ..................... (1.53) (3.21) 0.79 (0.26)
------- ------- ------ -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment
income ............................ - - (0.12) -
In excess of net
investment income ............... - - (0.05) -
From net realized gain............. - - - -
In excess of net
realized capital gain............. - - - -
Return of capital ................. - - - -
------- ------- ------ -------
Total distributions.............. - - (0.17) -
------- ------- ------ -------
Net asset value, end
of period ....................... $ 4.41 $ 5.94 $ 9.15 $ 8.53
======= ======= ====== =======
TOTAL RETURN** ................... (25.76)% (35.08)% 9.33% (2.96)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of
period (000's) ................... $ 949 $ 1,472 $4,218 $12,491
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 ................. (0.76)%* (1.39)% (1.51)% (0.67)%
Portfolio turnover
rate ............................. 132% 172% 170% 163%
- -----------------------------
Note A: AIB Govett Asset Management Limited waived a portion of its management fees and Govett Financial Services Limited, a former
distributor of the Funds, reimbursed a portion of the other operating expenses of the Funds for the years ended December 31,
1993 and 1994. For the years ended December 31, 1995, 1996, and 1997, AIB Govett Asset Management Limited (former investment
manager currently, subadviser to all Funds) waived a portion of its management fee and reimbursed a portion of the other
operating expenses of the Funds. For the six months ended June 30, 1998, AIB Govett, Inc. (investment manager since January 1,
1998), 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 ..................... 16.40%* 11.09% 6.66% 3.62%
<CAPTION>
Year Ended
December 31,
1994 (b)
-------------------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (0.18)+
(loss) . . . . . . .
Net realized and
unrealized gain (1.03)
(loss) on investments -------
Total from
investment (1.21)
operations . . . . -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment -
income . . . . . . .
In excess of net -
investment income .
From net realized gain -
In excess of net -
realized capital gain
Return of capital . . -
-------
Total distributions -
-------
Net asset value, end
of period . . . . . $ 8.79
=======
TOTAL RETURN** . . . (12.10)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of $13,849
period (000's) . . .
Net expenses to 2.50%
average daily net
assets (Note A) . .
Net investment income (1.33)%
(loss) to average
daily net assets . .
Portfolio turnover 213%
rate . . . . . . . .
- -----------------------------
Note A: AIB Govett Asset Management Limited waived a portion of its management fees and Govett Financial Services Limited, a former
distributor of the Funds, reimbursed a portion of the other operating expenses of the Funds for the years ended December 31,
1993 and 1994. For the years ended December 31, 1995, 1996, and 1997, AIB Govett Asset Management Limited (former investment
manager currently, subadviser to all Funds) waived a portion of its management fee and reimbursed a portion of the other
operating expenses of the Funds. For the six months ended June 30, 1998, AIB Govett, Inc. (investment manager since January 1,
1998), 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 . . . . 2.66%
</TABLE>
(a) Commencement of Operations was January 1, 1993.
(b) Commencement of Operations was January 1, 1994.
(c) 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
30
<PAGE>
<TABLE>
<CAPTION>
Latin America Fund
- ---------------------------------------------------------------------
Six Months
Ended Year Ended Year Ended Year Ended Period Ended
June 30, 1998 December 31, December 31, December 31, December 31,
(Unaudited) 1997 1996 1995 1994 (c)
- ------------- ------------ ------------ ------------ ------------
<S> <S> <S> <S> <S>
$ 9.57 $ 7.97 $ 6.44 $ 7.89 $ 10.00
------- ------ ------ ------- -------
0.08 (0.02)+ 0.07 + (0.01)+ (0.09)+
(2.30) 1.62 1.52 (1.44) (1.53)
------- ------ ------ ------- -------
(2.22) 1.60 1.59 (1.45) (1.62)
------- ------ ------ ------- -------
- - (0.06) - -
- - - - -
- - - - (0.27)
- - - - (0.22)
- - - - -
------- ------ ------ ------- -------
- - (0.06) - (0.49)
------- ------ ------ ------- -------
$ 7.35 $ 9.57 $ 7.97 $ 6.44 $ 7.89
======= ====== ====== ======= =======
(23.20)% 20.08 % 24.74 % (18.38)% (16.94)%
$ 2,980 $5,138 $4,261 $ 4,817 $ 7,096
2.50 %* 2.50 % 2.50 % 2.50 % 2.50 %*
1.50 %* (0.25)% 0.54 % 0.00 % (1.06)%*
44 % 123 % 150 % 127 % 185 %
5.71 %* 5.47 % 6.49 % 5.66 % 3.35 %*
<CAPTION>
Global Income Fund
- --------------------------------------------------------------------------------------
Six Months
Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1998 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1997 1996 1995 1994 1993
- ------------- ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
$ 7.82 $ 8.32 $ 8.97 $ 8.48 $ 10.16 $ 9.77
------ ------- -------- -------- ------- -------
0.15 0.26 + 0.57 + 0.63 + 0.76 + 0.99
0.07 (0.30) (0.54) 0.53 (1.67) 0.66
------ ------- -------- -------- -------- -------
0.22 (0.04) 0.03 1.16 (0.91) 1.65
------ ------- -------- -------- -------- -------
(0.18) (0.12) (0.66) (0.63) (0.24) (0.95)
- - (0.02) (0.04) - -
- - - - - (0.31)
- - - - - -
- (0.34) - - (0.53) -
------ ------- -------- -------- -------- -------
(0.18) (0.46) (0.68) (0.67) (0.77) (1.26)
------ ------- -------- -------- -------- -------
$ 7.86 $ 7.82 $ 8.32 $ 8.97 $ 8.48 $ 10.16
====== ======= ======== ======== ======== =======
2.96% (0.35)% 0.34 % 14.11 % (9.16)% 17.67 %
$7,871 $10,277 $ 20,354 $41,181 $51,691 $82,000
1.75 %* 1.75 % 1.64 % 1.75 % 1.75 % 1.72 %
4.46 %* 4.23 % 7.17 % 7.45 % 8.30 % 9.66 %
6 % 76 % 236 % 249 % 701 % 328 %
3.19 %* 2.82 % 2.38 % 1.93 % 1.95 % 1.72 %
</TABLE>
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 nine
series which are registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act"). Six
series are currently being offered to the public (individually a "Fund" and
collectively the "Funds"): Govett International Equity Fund, Govett Emerging
Markets Equity Fund, Govett Smaller Companies Fund and Govett Asia Fund (each a
diversified, open-end management investment company), and Govett Latin America
Fund and Govett Global Income Fund (each a non-diversified, open-end management
investment company). Each Fund has authorized the issuance of Class A, Class B
and Institutional Class Shares. As of June 30, 1998, only Class A shares of the
Funds registered with the SEC had been sold to the public.
Govett International Equity Fund seeks long-term capital appreciation by
investing primarily in equity securities of companies located throughout the
world. Govett Emerging Markets Equity 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 Asia Fund
seeks long-term capital appreciation by investing primarily in equity securities
of companies located in Asia. Govett Latin America Fund seeks long-term capital
appreciation by investing primarily in equity and debt securities of issuers
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.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
effect 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 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 the foreign
currency rates applicable on that day or at such other rates as AIB Govett, Inc.
("AIB Govett" or the "Manager") and AIB Govett Asset Management Limited ("AIB
Govett London" or the "Subadviser") 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 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 and Subadviser, 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 applicable on that day. 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
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
transactions and the difference between the amount of net investment income
accrued and the U.S. dollar amount actually received. The effects 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 transactions.
FORWARD CURRENCY EXCHANGE CONTRACT--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 applicable on that day.
Forward currency contracts are marked-to-market daily using the forward foreign
currency exchange rates applicable on that day or at such other rates as the
Subadviser 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 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 Funds 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 purchase 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 Fund as an unrealized gain
or loss. When the Fund enters into a forward commitment transaction, it
establishes a segregated account in which it maintains appropriate 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. The Funds'
policy is 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 necessary. At December 31,
1997, the following Funds had approximate capital loss carryforwards for Federal
tax purposes available to offset future net capital gains through the indicated
expiration dates:
<TABLE>
<CAPTION>
Expiration Date December 31,
-----------------------------------------------
2002 2003 2004 2005 Total
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Emerging Markets
Equity.......... -- $2,573,000 -- -- $ 2,573,000
Smaller
Companies....... -- -- -- $14,359,000 14,359,000
Asia............. -- 1,953,000 -- 47,000 2,000,000
Latin
America......... -- 895,000 -- -- 895,000
Global Income.... $2,210,000 170,000 $1,412,000 745,000 4,537,000
</TABLE>
DISTRIBUTIONS TO SHAREHOLDERS--The International Equity Fund, Emerging Markets
Equity Fund, Smaller Companies Fund, Asia 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
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 (loss) and accumulated net realized gain (loss) on investments
and foreign currency transactions. Undistributed net investment income (loss)
and accumulated net realized gain (loss) may include temporary book and tax
differences which should reverse in a subsequent period.
Distributions in excess of tax basis earnings and profits will be reported in
the Fund's financial statements as 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. 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 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 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 of the Fund not directly attributable to the
operations of specific class of shares are allocated pro rata to each class on
the basis of the relative net assets of the respective classes. 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.
NOTE 2-MANAGEMENT FEES AND AFFILIATED SERVICE PROVIDERS
The Manager and Subadviser, pursuant to the terms of their respective investment
management contracts, provide 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
daily average net assets of each Fund. 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 Equity
Fund, Smaller Companies Fund, Asia Fund, Latin America Fund, and Global Income
Fund through December 31, 1998, 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.
Prior to January 1, 1998, AIB Govett London was investment adviser to all Funds.
On that date, following an internal reorganization which did not result in any
change of actual control or management of AIB Govett London or any change in the
management of the Funds, AIB Govett became investment adviser to the Funds, with
AIB Govett London serving as subadviser. AIB Govett and AIB Govett London are
wholly owned by AIB Asset Management Holdings. The terms of the new advisory
agreements were substantially similar to the prior agreements. Berkeley Capital
Management had served as subadvisor to the Smaller Companies Fund until January
9, 1997.
No officer, director or employee of the Manager or its affiliates receives any
compensation from the Company for serving as an officer or director of the
Company. The compensation of the 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 for their Class A shares
pursuant to Rule 12b-1 of the 1940 Act. The Funds pay the Distributor a
quarterly distribution fee equal to an annual rate of 0.35% 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 Fund's Class A shares. This
is a "compensation plan" that does not provide for continued payments to a
distributor upon termination of the distribution agreement.
Pursuant to Rule 12b-1, the Board of Directors of the Company approved a
modification of the existing Class A 12b-1 Plan which became effective February
1, 1998. The
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
modification reduced the ongoing distribution fee paid by each Fund to the
Distributor to an annual rate of 0.35% of each Fund's aggregate average daily
net assets attributable to its Class A shares from an annual rate of 0.50% for
all Funds other than the Global Income Fund.
NOTE 4-LINE OF CREDIT
The Company has entered into an agreement with Chase Manhattan Bank ("Chase")
under which Chase agrees to provide a 364 day committed line of credit to the
Funds. During the six months ended June 30, 1998, maximum loan amounts under the
terms of the agreement could not exceed 10% of each Fund's net asset value at
the time of borrowing. Borrowing 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 June 30, 1998, under the Credit Agreement with Chase, the Smaller
Companies Fund had $1,920,000 outstanding.
For the six months ended June 30, 1998, the Funds had borrowings from Chase
under the arrangement as follows. The average daily balance is calculated by
totaling the amount of money advanced and dividing by the number of days the
loan was outstanding.
<TABLE>
<CAPTION>
Average Maximum
Daily Outstanding Average Interest
Balance Borrowing Interest Rate Expense
-------- ----------- ------------- --------
<S> <C> <C> <C> <C>
Emerging Markets
Equity............. $183,923 $ 1,260,000 8.75% $ 7,237
Smaller Companies... 768,591 5,230,000 8.75 27,524
Asia................ 1,105 50,000 8.75 24
Latin America....... 7,127 120,000 8.75 297
Global Income....... 149,807 550,000 8.75 5,239
</TABLE>
NOTE 5-PURCHASES AND SALES OF SECURITIES
Costs of purchases and proceeds from sales of securities, excluding short-term
obligations, for the six months ended June 30, 1998, were as follows. Only the
Global Income Fund had U.S. Government securities transactions.
<TABLE>
<CAPTION>
Purchases Sales
----------- -------------
<S> <C> <C>
International Equity...... $ 4,835,797 $ 7,466,516
=========== ===========
Emerging Markets Equity... $15,220,512 $24,973,937
=========== ===========
Smaller Companies......... $31,493,944 $62,739,394
=========== ===========
Asia...................... $ 1,586,516 $ 1,904,140
=========== ===========
Latin America............. $ 1,828,031 $ 2,888,961
=========== ===========
Global Income:
U.S Government securities $ 519,063 $ 927,422
Other Investments........ 57,382 2,038,417
----------- -----------
$ 576,445 $ 2,965,839
=========== ===========
</TABLE>
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 are as follows:
<TABLE>
<CAPTION>
International Equity Emerging Markets
Fund Equity Fund
---------------------- -----------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
6/30/98 12/31/97 6/30/98 12/31/97
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold................ 78,344 435,290 119,257 2,079,986
Shares issued on
reinvestment of
distributions............. 25,584 31,581 25,065 --
Shares repurchased......... (304,859) (1,494,963) (843,515) (3,550,796)
--------- ---------- --------- ----------
Net increase (decrease).... (200,931) (1,028,092) (699,193) (1,470,810)
Fund shares:
Beginning of
period.................... 1,279,859 2,307,951 2,688,385 4,159,195
--------- ---------- --------- ----------
End of period............. 1,078,928 1,279,859 1,989,192 2,688,385
========= ========== ========= ==========
</TABLE>
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Smaller Companies
Fund Asia Fund
------------------------ -----------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
6/30/98 12/31/97 6/30/98 12/31/97
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold.......... 2,510,566 36,785,127 23,830 133,395
Shares issued on
reinvestment of
distributions....... -- -- -- --
Shares repurchased... (4,710,828) (41,983,474) (56,342) (346,615)
---------- ----------- ------- --------
Net decrease......... (2,200,262) (5,198,347) (32,512) (213,220)
Fund shares:
Beginning of
period.............. 6,701,087 11,899,434 247,853 461,073
---------- ----------- ------- --------
End of period....... 4,500,825 6,701,087 215,341 247,853
========== =========== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Latin America Fund Global Income Fund
---------------------- -----------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
6/30/98 12/31/97 6/30/98 12/31/97
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold................ 20,345 315,132 7,961 40,235
Shares issued on
reinvestment of
distributions............. -- -- 15,646 62,277
Shares repurchased......... (151,417) (312,949) (337,415) (1,235,195)
-------- -------- --------- ----------
Net increase (decrease).... (131,072) 2,183 (313,808) (1,132,683)
Fund shares:
Beginning of
period.................... 536,719 534,536 1,314,632 2,447,315
-------- -------- --------- ----------
End of period............. 405,647 536,719 1,000,824 1,314,632
======== ======== ========= ==========
</TABLE>
NOTE 7-FEDERAL INCOME TAX COST
At June 30, 1998, 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>
International Emerging Smaller
Equity Markets Equity Companies
Fund Fund Fund
------------- -------------- ---------------
<S> <C> <C> <C>
Aggregate cost.......... $ 8,938,937 $ 19,687,870 $ 84,812,467
============ ============= ==============
Gross unrealized
appreciation........... 4,653,762 1,236,562 18,111,190
Gross unrealized
depreciation........... (726,553) (3,412,176) (14,403,555)
------------ ------------- --------------
Net unrealized
appreciation
(depreciation)......... $ 3,927,209 $ (2,175,614) $ 3,707,635
============ ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Latin Global
Asia America Income
Fund Fund Fund
---------- ----------- ------------
<S> <C> <C> <C>
Aggregate cost.......... $ 897,165 $ 3,363,919 $ 7,725,838
========== =========== ============
Gross unrealized
appreciation........... 15,055 47,321 339,062
Gross unrealized
depreciation........... (153,228) (600,745) (184,583)
---------- ----------- ------------
Net unrealized
appreciation
(depreciation)......... $ (138,173) $ (553,424) $ 154,479
========== =========== ============
</TABLE>
NOTE 8-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 risk, 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
investment 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.
The difference between the offsetting or closed out transactions is receivable
or payable on the original settlement date. At June 30, 1998 there were no open
security forward commitments. The forward foreign currency contracts at June 30,
1998 were as follows:
36
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
Net
In Unrealized
Settle Contracts to Exchange Appreciation
Date Currency Deliver/Receive Currency For (Depreciation)
------- -------- --------------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Global Income Fund
SALES 7/15/98 GBP 805,578 USD 1,310,675 $ (33,523)
===========
</TABLE>
The principal amounts of each non-U.S. dollar denominated contract is stated in
the currency in which the contract is denominated.
GBP - British Pound USD - United States Dollar
NOTE 9-PORTFOLIO INVESTMENT RISKS
These risks and considerations may involve adverse political and economic
developments and the possible imposition or 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.
37
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
38
<PAGE>
THE GOVETT FUNDS, INC.
BOARD OF DIRECTORS
Patrick K. Cunneen, Chairman
Elliott L. Atamian
Sir Victor Garland
James M. Oates
Frank R. Terzolo
