<PAGE>
[LOGO OF GOVETT FUNDS APPEARS HERE]
ANNUAL REPORT
December 31, 1997
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[LOGO OF GOVETT FUNDS APPEARS HERE]
<PAGE>
CONTENTS
LETTER TO THE SHAREHOLDERS 1
PORTFOLIO MANAGEMENT REVIEW 2
FINANCIAL STATEMENTS 15
<PAGE>
Letter to shareholders
<PAGE>
February 19, 1998
To Our Shareholders:
For many investors, 1997 will be remembered as a year in which the Asian miracle
had a major setback. But it should also be recalled as a year in which other
emerging markets such as Latin America, Eastern Europe and India stood strong.
In developed markets, European companies continued to move in the direction of
putting shareholder interests first, while Japan's rebound was stalled by its
neighbors' difficulties. However, U.S. markets showed remarkable resiliency,
posting a third consecutive gain of 20 percent or more, although the emphasis
remained with large company stocks. In addition, investors sought U.S. Treasury
bonds as a safe haven. Due to increasing demand for these bonds and almost no
inflation, bond yields fell to historically low levels.
The AIB Govett Group has more than 70 years of experience investing in high
growth markets such as Asia. Because these markets are volatile, it is very
important to look at these investments as part of a long-term, balanced
investment program. Indeed, it is precisely the strategy of the long-term
investor, not the speculator, to stick to a disciplined investment program when
times are particularly challenging. Over the long haul, we believe that these
emerging economies will grow faster than most of those in the developed world.
On the following pages, you'll find individual discussions about the performance
of each fund, followed by a list of portfolio holdings and the 1997 financial
statements. We also want to point out that, as of January 1, 1998, AIB Govett,
Inc. became investment advisor, with AIB Govett Asset Management Limited
(formerly John Govett & Co. Limited) as subadvisor. This represents a
reorganization of functions in the AIB Govett Group. There was no change in
management of the funds.
To better serve your investment needs, we recently added a 24-hour telephone
service so that you can obtain account information and make a variety of
transactions. We combined shareholders' multiple accounts into one statement,
rather than mailing separate statements for each fund. And we were able to
reduce expenses and improve services by changing the Funds' auditors, transfer
agent and distributor.
Thank you for investing in the Govett Funds.
/s/ Keith Mitchell
Keith Mitchell
President
AIB Govett, Inc.
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Govett Funds are distributed by FPS Broker Services, Inc., 3200 Horizon Drive,
PO Box 61503, King of Prussia, PA 19406 (2/98)
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.
1
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- ------------------------------
PORTFOLIO MANAGEMENT REVIEW
- ------------------------------
Govett International Equity Fund
Market Conditions During 1997
Although the events in Asia cast a pall over the global economy, the good news
continues to be the strength of the U.S. and European markets. Meanwhile,
inflation remains subdued in the developed countries in which the Fund primarily
invests.
In Europe, companies are increasingly gearing their strategy to do business with
the entire continent, instead of operating narrowly in a single-country market.
Seeking economies of scale, corporations in the banking, food and beverage, and
publishing industries are consolidating. These consolidations have led to
increases in some of the companies' stock prices.
In Japan, the government tightened fiscal policy before the economy was strong
enough to cope with it. This step depressed consumption much more than most
investors expected. Just as consumer spending began to accelerate in the
summer, the Asian crisis and bankruptcies in the Japanese financial sector led
to deteriorating economic performance there.
Fund Performance During 1997
Total return for the year was -0.71% (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 -5.63%. Both total return calculations include investment of
capital gains distributions of 23 cents per share. In comparison, the MSCI
Europe, Australia and Far East ("EAFE") Index was 2.06%. About 24.3% of the
portfolio was invested in emerging markets as of the end of 1997. Although very
little of that exposure was in Asia, other emerging markets such as Latin
America and Eastern Europe experienced volatility partially related to events in
Asia, which adversely affected the Fund's performance. On the plus side, the
Fund benefited from being overweighted in Europe and underweighted in Japan,
relative to the MSCI EAFE Index.
Current Strategy
We continue to be overweighted in Europe, particularly the peripheral economies
where we believe the potential for falling interest rates is greatest. The Fund
has kept its exposure to Eastern European equity markets, primarily Russia and
Hungary. Although this Eastern European exposure had a negative impact on
performance in November and December, we believe that these markets will
generate superior returns in the longer term.
We will not increase our exposure to Asia until we're confident that the
currencies have stabilized and the economies show a sustainable improvement.
However, our view remains positive for China and Hong Kong. We recently
purchased shares of Hong Kong and Shanghai Bank (0.9% of total net assets as of
12/31/97), a blue-chip global financial institution, after the market volatility
began.
Even though we remain underweighted in Japan, one of our most interesting
portfolio holdings is Matsumotokiyoshi, a Japanese discount retailer that
operates drug stores, supermarket centers and home centers. Japan is a mature
economy, but there are still developing niches, such as discount retailing, that
provide good investment opportunities. For instance, up until the late 1980s,
retailing in Japan was tightly regulated, and it is only recently that large
discount retail outlets have been allowed to exist.
Regardless of where they are located, we're looking for companies which show a
commitment to improving the bottom line and improving returns to investors.
Market Outlook For 1998
After a burst of strong growth in 1997, the world economy will likely lose
momentum in 1998. This is largely due to a dramatic slowing in activity in Asia
in the wake of the currency turmoil in Southeast Asia and Korea, as well as the
disappointing economic outlook in Japan. Nonetheless, because of the resilience
of domestic demand in other major industrial countries and a delay in monetary
tightening in the U.S. and Europe, we do not anticipate that the slowdown in
Asia will lead to a global recession. We also believe that low inflation and
stable interest rates will continue to permit growth in the equity markets
worldwide.
/s/ Rosemary Morgan
Rosemary Morgan
Member, International Equity Team
2
<PAGE>
Fund's Country Allocations
Percentage of Fund's Total Net Assets as of December 31, 1997
55.7% Western Europe
14.1% Central/Eastern Europe
13.8% Southern Asia
7.4% Latin America [PIE CHART APPEARS HERE]
2.5% Indian Subcontinent
2.2% Southern Europe
4.3% Other
1/7/92 - 12/31/97 Change in Value of a $10,000 Investment in Govett
International Equity Fund vs. MSCI EAFE Index
[LINE CHART APPEARS HERE]
Govett International Govett International Equity
Equity Fund at Net Fund at Maximum Offering MSCI
Date Asset Value ("NAV") Price ("MOP") EAFE Index
---- -------------------- ---------------------------- ----------
1/7/92 10,000 9,505 10,000
6/92 10,090 9,591 9,016
12/92 9,468 8,999 8,815
6/93 11,685 11,107 10,882
12/93 14,628 13,904 11,719
6/94 13,976 13,284 12,765
12/94 13,394 12,731 12,664
6/95 13,098 13,220 13,014
12/95 14,869 14,133 14,127
6/96 16,413 15,600 14,786
12/96 16,673 15,847 15,025
6/97 18,237 17,334 16,733
12/97 16,554 15,735 15,335
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Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
---------------------------------------------------------
One Year -5.63% -0.71%
Three Years+ 5.52% 7.32%
Five Year+ 10.69% 11.82%
Since Inception (1/7/92)+ 7.87% 8.78%
---------------------------------------------------------
Source: AIB Govett Asset Management Limited and Datastream
+ Annualized
This graph compares the Fund's performance with the MSCI Europe Australia Far
East ("EAFE") Index, a broad-based unmanaged index that represents the general
performance of international equity markets. Total returns for the Fund at NAV
and MOP, and the index include reinvestment of all dividends and capital gains.
The index does not include commissions or fees that an investor purchasing the
securities in the index would pay. The line representing the Fund's total
return at MOP includes operating expenses (such as transactions costs,
management fees and sales charges) that reduce returns, while the total return
line for the index does not. All such expenses are included in the performance
shown for the Fund with ending value of $15,735. Since investors purchase
shares of the Fund with varying sales charges depending primarily on volume
purchased, the Fund's performance at net asset value is shown. Past performance
is no guarantee of future results, and the investment return and principal
value of an investment in the Fund will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
Although the investment characteristics of the index are similar to those of the
Fund, the securities owned by the Fund and those composing the index are likely
to be different, and any securities that the Fund and the index have in common
are likely to have different weightings in the respective portfolios. Investors
cannot invest directly in the index.
3
<PAGE>
Govett Emerging Markets Equity Fund
Market Conditions During 1997
The major event of the year in the emerging markets was the collapse of the
Asian currency and equity markets, and the subsequent impact on other emerging
markets around the world.
The Asian weakness began in Thailand, as a result of a very high and expanding
budget deficit. By the summer, Malaysia began to experience similar problems,
and the government's attempt to block foreign investors exacerbated the downward
spiral and undermined confidence in the market. Korea became the next major
casualty, brought down by a high indebtedness in the private sector.
By the fourth quarter, selling pressure on the Hong Kong dollar and stock market
began to undermine markets elsewhere. Brazilian and Argentine markets were
particularly weak, while across the world in Eastern Europe investors took
profits in the Czech Republic and Poland. These markets rebounded by year-end
as investors saw that these regions' economic fundamentals stayed positive
during the downturn.
Fund Performance During 1997
Total return for the year was -10.40% (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 -14.83%. In comparison, the MSCI Emerging Markets
Index returned -13.45% during the year. Therefore, the Fund outperformed its
benchmark, primarily because of its underweighted position in Asia in the second
half of the year. Our exposure to India, Israel, South Africa and Turkey had a
beneficial impact on performance.
Current Strategy
Relative to the MSCI Emerging Market Index, we continue to underweight Asia, and
to overweight Latin America and Eastern Europe where the economic outlook
remains bright. For example, the Turkish government has demonstrated a
willingness to put into place an economic program that will tackle the budget
deficit problems and expand the privatization program. One of the strongest
stocks in the portfolio is Yapi ve Kredi Bankasi (1.6% of total net assets as of
12/31/97), a well-managed Turkish bank whose performance also reflects the
improvement in the Turkish economy. The stock has doubled since we bought it in
early 1997 and we believe it will continue to be an attractive investment.
Market Outlook For 1998
At this time, we see no sign of a broad-scale economic recovery in Asia.
Countries such as Indonesia and Korea continue to face enormous financial
problems. However, moves by the International Monetary Fund as well as global
banks suggest that default on sovereign debt is unlikely.
Although the first quarter of 1998 is likely to be volatile for emerging markets
around the world, we believe there are indications that, on balance, the year
will be a positive one overall. The interest rate outlook remains benign, and
valuations and economies are particularly attractive in most markets outside of
Asia.
/s/ Rachael Maunder
Rachael Maunder
Lead Portfolio Manager
4
<PAGE>
[PIE CHART APPEARS HERE]
Fund's Country Allocations
Percentage of Fund's Total Net Assets of December 31, 1997
Latin America 38.2%
Central Eastern Europe 14.8%
Southeast Asia 14.4%
Sub-Sabaran Africa 8.1%
Indian Subcontinent 2.8%
Middle East & N. Africa 6.7%
Southern Europe 5.3%
Northeast Asia 3.4%
Other 1.3%
[LINE CHART APPEARS HERE]
1/7/92 - 12/31/97 Change in Value of a $10,000 Investment in Govett Emerging
Markets Equity Fund vs. MSCI Emerging Market Index
<TABLE>
Govett Emerging Markets Equity Govett Emerging Markets Equity Fund MSCI Emerging
Fund at Net Asset Value ("NAV") at Maximum Offering Price ("MOP") Markets Index
<S> <C> <C> <C>
1/7/92 10,000 9,505 10,000
6/92 11,030 10,484 10,561
12/92 10,720 10,189 10,456
6/93 13,080 12,433 11,847
12/93 19,267 18,314 17,646
6/94 16,796 15,965 16,388
12/94 16,829 15,996 17,457
6/95 15,968 15,178 16,315
12/95 15,510 14,742 15,851
6/96 17,360 16,500 17,664
12/96 17,384 16,523 16,801
6/97 20,158 19,160 19,826
12/97 15,577 14,805 14,542
</TABLE>
- ----------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- ----------------------------------------------------------
One Year -14.83% -10.40%
- ----------------------------------------------------------
Three Year+ -4.18% -2.55%
- ----------------------------------------------------------
Five Year+ 6.67% 7.76%
- ----------------------------------------------------------
Since Inception (1/7/92)+ 6.77% 7.68%
- ----------------------------------------------------------
Source: AIB Govett Asset Management Limited and Datastream
+ Annualized
This graph compares the Fund's performance with the MSCI Emerging Markets Index,
a broad-based unmanaged index that represents the general performance of equity
markets in emerging markets. Total returns for the Fund at NAV and MOP, and
the index include reinvestment of all dividends and capitalizations. The index
does not include commissions or fees that an investor purchasing the securities
in the index would pay. The line representing the Fund's total return at MOP
includes operating expenses (such as transactions costs, management fees and
sales charges) that reduce returns, while the total return line for the index
does not. All such expenses are included in the performance shown for the Fund
with ending value of $14,805. Since investors purchase shares of the Fund with
varying sales charges depending primarily on volume purchased, the Fund's
performance at net asset value is shown. Past performance is no guarantee of
future results, and their investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Although the
investment characteristics of the index are similar to those of the Fund, the
securities owned by the Fund and those composing the index are likely to be
different, and any securities that the Fund and the index have in common are
likely to have different weightings in the respective portfolios. Investors
cannot invest directly in the index.
5
<PAGE>
Govett Smaller Companies Fund
Market Conditions During 1997
Generally, in 1997, small U.S. companies--particularly small growth companies--
continued to underperform large companies. At the same time, the growth style
of investing, in which portfolio managers are willing to pay higher multiples of
earnings to achieve above-average growth, underperformed the value style of
investing, which searches for companies selling at a discount.
As a result of this underperformance, small companies with extremely high growth
rates are now selling at prices nearly the same as large company stocks with
moderate growth. Although small stocks appeared to come back into demand in the
early fall, they reverted backwards in October when investors sought highly
liquid investments as a result of the sudden reversal of fortune in Asia.
Certain industries such as technology and commodities were hit particularly
hard.
Fund Performance During 1997
Total return for the year was -12.55% (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 -16.88%. In comparison, the Russell 2000 Index rose
20.52% for the year. In January 1997, the Funds' investment adviser terminated
its relationship with the subadviser to the Smaller Companies Fund. At that
point, we reduced the portfolio's overexposure to stocks with very high prices,
the most vulnerable in a market correction. However, it took a few months to
shift the portfolio's holdings, and by the time the transfer was complete, the
Fund had already fallen sharply.
Current Strategy
We are looking for capital growth over the medium to long term by investing
primarily in smaller companies in the U.S., although we do have the capability
to invest in international stocks. Our investment style is "growth at a
reasonable price," using a top-down approach to search for industry subsegments
that are expected to prosper.
For example, we own shares in Goody's Family Clothing (3.8% of total net assets
as of 12/31/97), a retailer that focuses on lower- to medium-priced goods
primarily in southeastern U.S. We met with management and were impressed by
their attempt to improve profit margins. In October, the stock price fell
sharply when it appeared that the company would not have a good quarter due to
having stocked cold-weather inventory and the weather turning unseasonably warm.
We took advantage of this short-term weakness to add to our position. In the
end, Goody's posted stronger than expected earnings and the stock rebounded.
Market Outlook For 1998
In our view, the relative valuations of small companies remain attractive. In
the U.S., we expect the economy to slow down, exerting downward pressure on the
profits of large companies. The problems in Asia are more likely to affect U.S.
multinationals, particularly technology and commodity companies that have a
significant amount of sales in the region. While we expect single-digit growth
in profits for many big companies, the growth prospects for smaller companies
are not as limited by economic growth. However, if the problems in Asia
persist, investors may continue to favor the larger names.
/s/ Gareth Watts
Gareth Watts
Lead Portfolio Manager
6
<PAGE>
- --------------------------------------------------------------------------------
Fund's Country Allocations
Percentage of Fund's Total Net Assets as of December 31, 1997
- --------------------------------------------------------------------------------
84.9% United States
2.6% Canada
1.4% Norway [PIE GRAPH APPEARS HERE]
1.0% Belgium
0.5% Ireland
9.6% Other
- --------------------------------------------------------------------------------
1/1/93 - 12/31/97 Change in Value of a $10,000 Investment in Govett
Smaller Companies Fund vs. Russell 2000 Index
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Govett Smaller Companies Fund Govett Smaller Companies Fund at
Date at Net Asset Value ("NAV") Maximum Offering Price ("MOP") Russell 2000 Index
<S> <C> <C> <C>
1/1/93 10,000 9,505 10,000
6/93 12,720 12,090 10,684
12/93 15,850 15,065 11,839
6/94 15,750 14,970 11,001
12/94 20,395 19,386 11,462
6/95 26,794 25,468 12,986
12/95 34,495 32,788 14,466
6/96 36,833 35,009 15,869
12/96 30,833 29,307 16,602
6/97 27,090 25,749 18,147
12/97 26,963 25,629 20,008
</TABLE>
Source: AIB Govett Asset Management Limited and Datastream
- --------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- --------------------------------------------------------
One Year -16.88% -12.55%
- --------------------------------------------------------
Three Year+ 7.91% 9.75%
- --------------------------------------------------------
Five Year+ 20.71% 21.94%
- --------------------------------------------------------
Since Inception (1/1/93)+ 20.71% 21.94%
- --------------------------------------------------------
+ Annualized
This graph compares the Fund's performance with the Russell 2000 Index, a
broad-based unmanaged index that represents the general performance of U.S.
smaller companies primarily with "small cap" companies with market
capitalization of less than $500 million. Total returns for the Fund at NAV
and MOP include reinvestment of all dividends and capital gains. The index
does not include the reinvestment of dividends or capital gains, or
commissions or fees that an investor purchasing the securities in the index
would pay. The line representing the Fund's total return at MOP includes
operating expenses (such as transactions costs, management fees and sales
charges) that reduce returns, while the total return line for the index does
not. All such expenses are included in the performance shown for the Fund with
ending value of $25,629. Since investors purchase shares of the Fund with
varying sales charges depending primarily on volume purchased, the Fund's
performance at net asset value is shown. Past performance is no guarantee of
future results, and the investment return and principal value of an investment
in the Fund will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Although the investment
characteristics of an index are similar to those of the Fund, the securities
owned by the Fund and those composing the index are likely to be different,
and any securities that the Fund and the index have in common are likely to
have different weightings in the respective portfolios. Investors cannot
invest directly in the index.
7
<PAGE>
Govett Asia Fund
Market Conditions During 1997
At the beginning of 1997, we expected China's economy--a big driver for the
Asian region--to benefit from its falling interest rates. We also looked for
Japanese domestic consumption to increase, and for Asian exports to grow.
Neither occurred. As a result of these and other factors, the smaller Asian
markets posted a very poor export performance in 1997. At the same time, these
Asian economies had been undertaking major investment plans. They incurred U.S.
dollar debt to finance the expansion without the export revenues to support it,
placing strains on currencies and economies throughout the region.
Although the negative news dominated, there were some positive developments in
Asia. India, which made up about 8% of our portfolio in the second half of
1997, achieved better economic performance within the Asia/Pacific region. The
country has put in place some significant economic reforms, which have continued
despite political uncertainty. These reforms have given investors more
confidence in India's ability to modernize its economy.
Fund Performance During 1997
Total return for the year was -35.08% (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 -38.30%. In comparison, the MSCI Pacific Index,
including Japan, returned -25.34%. The Fund's performance was adversely affected
by its overweighting in the faster-growing economies in Southeast Asia and an
underweighting in slower-growth economies such as Australia. However, growth was
disappointing in smaller Asian markets such as Malaysia, the Philippines and
Singapore--and their currencies deteriorated, causing a crisis in confidence in
the region.
Current Strategy
Southeast Asian growth prospects were disappointing through the year. We
reduced our exposure there and increased our exposure to Australia, a country
with an economic structure similar to that of the U.S. We eliminated Korean
holdings in 1997, but we will consider re-entering the market in anticipation of
an economic recovery.
Despite the current market sentiment, we believe that there are still excellent
investment opportunities in Asia. For example, Beijing-based Founder (1.4% of
total net assets as of 12/31/97) supplies electronic publishing equipment,
computer software and hardware in China and Japan. The company is trading at a
reasonable multiple to earnings, and we project 20% earnings growth in 1998.
The company's competitive advantage is its affiliation with Beijing University,
from which it draws top engineering talent.
Market Outlook For 1998
At the end of the 1997, the region was in a state of shock from the events of
the year. The currency markets had overreacted, partly due to the crisis of
confidence. However, we've begun to see evidence of a turnaround. Because
investment dried up and currencies devalued so sharply, the mismatch of
investment to exports has begun to reverse. With improved export earnings,
stability will return to the currency markets eventually.
Although we believe that the first quarter of 1998 will continue to be volatile,
we think that stability will return to the currency markets over the summer and
fall. Meanwhile, the quick investor reaction to the downturn in Asia, though
painful, has forced policymakers to address the reasons behind the crisis. At
the same time, there are tremendous buying opportunities, with stocks selling at
just four or five times earnings, or trading at a discount to book value. These
factors provide some basis for optimism for 1998.
/s/ Jane Pickard
Jane Pickard
Lead Portfolio Manager
8
<PAGE>
Fund's Country Allocations
Percentage of Fund's Total Net Assets as of December 31, 1997
[PIE CHART APPEARS HERE]
25.1% Japan
16.0% China
14.6% Hong Kong
8.8% Singapore
8.1% India
6.2% Australia
3.8% Taiwan
3.5% Malaysia
3.4% Philippines
2.9% Indonesia
7.6% Other
1/1/91- 12/31/97 Change in Value of a $10,000 investment in Govett
Asia Fund vs. MSCI Pacific Index
[LINE CHART APPEARS HERE]
PLOT POINTS
Govett Asia Fund Govett Asia Fund MSCI
at Net at Maximum Pacific
Asset Value Offering Price Index
1/1/94 10,000 9,505 10,000
6/94 8,970 8,526 11,938
12/94 8,790 8,355 11,303
6/95 8,410 7,994 10,668
12/95 8,540 8,117 11,641
6/96 9,410 8,944 11,959
12/96 9,326 8,864 10,663
6/97 10,162 9,659 11,440
12/97 6,054 5,755 7,961
- ---------------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- ---------------------------------------------------------------
One Year -38.30% -35.08%
- ---------------------------------------------------------------
Three Year+ -13.17% -11.69%
- ---------------------------------------------------------------
Since Inception 1/1/94+ -12.90% -11.79%
- ---------------------------------------------------------------
Source: AIB Govett Asset Management Limited and Datastream
+ Annualized
This graph compares the Fund's performance with the MSCI Pacific Index, a broad-
based unmanaged index that represents the general performance of the Pacific Rim
equity markets. Total returns for the Fund at NAV and MOP, and the index include
reinvestment of all dividends and capital gains. The index does not include
commissions or fees that an investor purchasing the securities in the index
would pay. The line representing the Fund's total return at MOP includes
operating expenses (such as transactions costs, management fees and sales
charges) that reduce returns, while the total return line for the index does
not. All such expenses are included in the performance shown for the Fund with
ending value of $5,755. Since investors purchase shares of the Fund with varying
sales charges depending primarily on volume purchased, the Fund's performance at
net asset value is shown. Past performance is no guarantee of future results,
and the investment return and principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Although the investment characteristics of the
index are similar to those of the Fund, the securities owned by the Fund and
those composing the index are likely to be different, and any securities that
the Fund and the index have in common are likely to have different weightings in
the respective portfolios. Investors cannot invest directly in the index.
9
<PAGE>
Govett Latin America Fund
Market Conditions During 1997
The Latin American stock markets were strong in 1997. Leading the pack was
Mexico, which posted a 51% gain in U.S. dollar terms. Columbia was up 38%,
followed by 27% for Venezuela, 23% for Brazil, 22% for Argentina and 14% for
Peru. For the region as a whole, gross domestic product grew more than 5%, and
six out of seven major countries showed accelerating growth.
Certainly, the Asian crisis created concerns about Latin America, which only
three years ago underwent its own crisis of confidence. Investors were wary
about Latin American currencies that they perceived to be overvalued and
countries with rising trade deficits. Their focus then went to Brazil,
Argentina, and Mexico, which had strong fundamentals.
Fund Performance During 1997
Total return for the year was 20.08% (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 14.13%. In comparison, the MSCI Latin America Index rose
31.66%. The Fund was adversely affected by an overweighting in countries which
posted good economic performance but only modest stock market results.
We also diversified into smaller growth stocks, which displayed better
valuations than big capitalization companies. However, investors sought the
security of large liquid stocks, as they did in the U.S.
Current Strategy
Our investment style continues to be to take a "top down" view of the markets,
and to focus on companies that exhibit better than average growth. Overall, a
handful of very large Latin American stocks dominate the indices.
As an example of our strategy, we held a large Mexican stock called Desc (2.0%
of total net assets as of 12/31/97), a conglomerate with interests in automobile
components, real estate and specialized industrial and consumer products. In
addition to being an exporter, Desc has a leading market share in the domestic
market where consumer spending is accelerating. During 1997, the stock rose
71%.
A recurring theme in Latin America continues to be deregulation. We invest in
utilities that are in the midst of privatization and restructuring. We try to
avoid exposure to commodities, as inflation remains subdued. In view of the
volatility and illiquidity of these markets, our goal is to re-emphasize large
liquid stocks.
Market Outlook For 1998
Latin America held up relatively well in 1997, despite the influence of Asia's
troubles. The region's recent history includes much of the turmoil that
currently afflicts Asia. Latin American governments responded by restructuring
their banking system, embracing free trade and improving their business climate.
If Asia settles down, then the potential for continued strong performance in
Latin America should be greatly enhanced.
/s/ Caroline E. Lane
Caroline Lane
Lead Portfolio Manager
10
<PAGE>
Fund's Country Allocations
Percentage of Fund's Total Net Assets as of December 31, 1997
[PIE CHART APPEARS HERE]
Brazil 41.3%
Mexico 30.9%
Argentina 12.0%
Chile 6.3%
Venezuela 3.8%
Peru 1.9%
Other 3.8%
3/7/94 - 12/31/97 Change in Value of a $10,000 Investment in Govett
Latin America Fund vs. MSCI Latin America Index
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Govett Latin America Fund Govett Latin America Fund
Date at Net Asset Value ("NAV") at Maximum Offering Price ("MOP") MSCI Latin America Index
<S> <C> <C> <C>
3/7/94 10,000 9,505 10,000
6/94 8,330 7,918 8,467
12/94 8,306 7,895 8,609
6/95 6,664 6,334 7,448
12/95 6,780 6,444 7,444
6/96 8,327 7,915 8,746
12/96 8,457 8,038 9,079
6/97 11,364 10,801 12,755
12/97 10,154 9,652 11,953
</TABLE>
- --------------------------------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- --------------------------------------------------------------------------------
One Year 14.13% 20.08%
- --------------------------------------------------------------------------------
Three Year+ 5.13% 6.93%
- --------------------------------------------------------------------------------
Since Inception (3/7/94)+ -0.92% 0.40%
- --------------------------------------------------------------------------------
Source: AIB Govett Asset Management Limited and Datastream
+ Annualized
This graph compares the Fund's performance with the MSCI Latin America Index, a
broad-based unmanaged index that represents the general performance of Latin
American markets. Total returns for the Fund at NAV and MOP, and the index
include reinvestment of all dividends and capital gains. The index does not
include commissions or fees that an investor purchasing the securities in the
index would pay. The line representing the Fund's total return at MOP includes
operating expenses (such as transactions costs, management fees and sales
charges) that reduce returns, while the total return line for the index does
not. All such expenses are included in the performance shown for the Fund with
ending value of $9,652. Since investors purchase shares of the Fund with varying
sales charges depending primarily on volume purchased, the Fund's performance at
net asset value is shown. Past performance is no guarantee of future results,
and the investment return and principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Although the investment characteristics of the
index are similar to those of the Fund, the securities owned by the Fund and
those composing the index are likely to be different, and any securities that
the Fund and the index have in common are likely to have different weightings in
the respective portfolios. Investors cannot invest directly in the index.
11
<PAGE>
Govett Global Income Fund
Market Conditions During 1997
In the U.S., the year began with a fast-growing economy, tight labor markets and
the likelihood that the Federal Reserve Board would hike interest rates to
restrict inflation. As a result, first quarter bond markets were weak.
The Federal Reserve's first and last action in 1997 was to raise short-term
interest rates by 0.25% in March. For the rest of 1997, benign inflation and
concern over a global economic slowdown due to the Asian crisis kept the Fed on
the sidelines. As a result, the markets took a more sanguine view of where U.S.
interest rates were headed, and bond prices rose.
The European bond market generally followed the U.S. market, although an
interest rate boost of 0.30% by the Bundesbank dampened performance in the
second half. The peripheral European bond markets generally outperformed core
Europe (including Austria, Belgium, France, Germany, and the Netherlands) during
the period. The Japanese economy was weaker during 1997 than most investors
expected. As a result, bond yields in Japan fell as investors shunned the
Japanese stock market.
Fund Performance During 1997
Total return for the year was -0.35% (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 -5.29%. Both total return figures include reinvestment of
distributions of 46 cents per share. In comparison, the Salomon Brothers World
Government Bond Index produced a return of 0.23%. In the first half of the
year, the default and subsequent write-down of bonds issued by Constran Limited,
a Brazilian construction company, adversely affected the Fund's performance. A
substantial amount of this investment was recovered in September, which helped
performance in the second half of the year. Other factors which positively
affected performance was our decision to increase the portfolio's duration and
our exposure to U.S.-dollar denominated bonds.
Current Strategy
The portfolio continues to focus generally on high quality bonds. In the U.S.,
the Fund invests in a mixture of Treasury bonds and investment-grade
corporates.
In Europe, the portfolio emphasizes government bonds. However, to achieve
higher yields in this low interest-rate environment, the portfolio includes a
small allocation to emerging market debt, such as U.S. dollar-denominated
Argentine and Russian bonds. Prices for these Brady bonds* were temporarily
hurt by concerns in Southeast Asia, but they have since recovered.
Market Outlook For 1998
The benign inflation environment in the U.S. and the concern over Asia and its
economic growth suggest a positive outlook for bonds. As the single currency
era approaches, the convergence of yields between core and peripheral Europe has
largely occurred. Although we may see some volatility in currencies over the
coming months, we don't anticipate much change in relative yields among European
markets.
/s/ Michael Grace
Michael Grace
Member, Fixed Income Team
- ------------------
* Brady Bonds are public issue, U.S. dollar-denominated bonds of developing
countries, mainly in Latin America, that were exchanged, in a restructuring, for
commercial bank loans in default and are collateralized by U.S. Treasury
obligations to secure the principal.
12
<PAGE>
[PIE GRAPH APPEARS HERE]
Fund's Country Allocations
Percentage of Fund's Total Net Assets as of December 31, 1997
- -------------------------------------------------------------------
29.5% United States
15.8% United Kingdom
14.6% Germany
11.3% Austria
4.9% Argentina
4.9% Ireland
4.8% Norway
4.7% Multinational
4.6% Russia
2.1% Netherlands
2.8% Other
1/7/92 - 12/31/97 Change in Value of a $10,000 Investment in Govett Global
Income Fund vs. Saloman Brothers World Government Bond Index
[LINE CHART APPEARS HERE]
Govett Global Income Govett Global Income Salomon Brothers
Fund at Net Asset Fund At Maximum World Government
Value ("NAV") Offering Price ("MOP") Bond Index
1/7/92 10,000 9,505 10,000
6/92 10,300 9,790 10,313
12/92 10,895 10,356 10,553
6/93 11,759 11,177 11,441
12/93 12,819 12,185 11,953
6/94 11,586 11,012 12,034
12/94 11,568 10,995 12,234
6/95 12,564 11,942 14,295
12/95 13,200 12,547 14,563
6/96 12,989 12,346 14,348
12/96 13,245 12,590 15,090
6/97 12,715 12,086 14,904
12/97 13,198 12,545 15,125
- -----------------------------------------------------------------
Fund's Average Annual At Maximum At Net
Total Return Offering Price Asset Value
- -----------------------------------------------------------------
One Year -5.79% -0.35
- -----------------------------------------------------------------
Three Year+ 2.74% 4.49%
- -----------------------------------------------------------------
Five Year+ 2.86% 3.91%
- -----------------------------------------------------------------
Since Inception (1/7/92)+ 3.86% 4.74%
- -----------------------------------------------------------------
Source: AIB Govett Asset Management Limited and Datastream
+ Annualized
This graph compares the Fund's performance with Salomon Brothers World
Government Bond Index, a broad-based unmanaged index that represents the
general performance of government bonds in major bond markets. Total returns
for the Fund at NAV and MOP, and the index include reinvestment of all
dividends and capital gains. The index does not include commissions or fees
that an investor purchasing the securities in the index would pay. The line
representing the Fund's total return at MOP includes operating expenses such as
transactions costs, management fees and sales charges) that reduce returns,
while the total return line for the index does not. All such expenses are
included in the performance shown for the Fund with ending value of $12,545.
Since investors purchase shares of the Fund with varying sales charges depending
primarily on volume purchased, the Fund's performance at net asset value is
shown. Past performance is no guarantee of future results, and the investment
return and principal value of an investment in the Fund will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Although the investment characteristics of the index are similar
to those of the Fund, the securities owned by the Fund and those composing the
index are likely to be different, and any securities that the Fund and the
index have in common are likely to have different weightings in the respective
portfolios. Investors cannot invest directly in the index.
13
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
14
<PAGE>
- --------------------------------------------------------------------------------
Govett International Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- ----------------------------------------------------------------
Common Stocks - 89.7%
Argentina - 1.9%
7,000 Telefonica de Argentina ADR......... $ 260,750
-----------
Austria - 1.1%
4,500 Radex-Heraklith..................... 154,970
-----------
Brazil - 3.1%
7,750 Eletrobras ADR...................... 197,913
2,000 Telebras ADR........................ 232,875
-----------
430,788
-----------
China - 0.0%
7,000 China North Industries.............. 1,960
-----------
Croatia - 0.9%
7,770 Pliva GDR........................... 128,788
-----------
Czech Republic - 0.8%
30,400 Prazske Pivovary*................... 115,960
-----------
Denmark - 1.3%
3,000 Spar Nord Holdings.................. 175,025
-----------
France - 4.3%
1,000 Cap Gemini Sogeti................... 81,997
2,300 Christian Dior...................... 235,790
2,000 Compagnie Generale des
Eaux.............................. 279,139
-----------
596,926
-----------
Germany - 9.7%
3,000 Adidas.............................. 396,898
4,300 Daimler Benz........................ 303,566
2,000 S.A.P. AG-Vorzug.................... 649,490
-----------
1,349,954
-----------
Greece - 0.3%
6,770 Sfakianakis*........................ 40,516
-----------
Hong Kong - 2.4%
114,000 Guangdong Investment................ 75,764
5,000 Hong Kong & Shanghai Bank
Holdings.......................... 123,242
113,000 Hong Kong Ferry Holdings............ 131,243
327 Jardine Strategic Holdings.......... 863
-----------
331,112
-----------
Hungary - 3.2%
19,000 Euronet Services ADR*............... 147,250
1,000 Gedeon Richter GDR.................. 105,000
30,000 Scala Business Solutions*........... 199,501
-----------
451,751
-----------
India - 2.5%
19,000 State Bank of India GDR............. 345,800
-----------
Italy - 4.4%
40,000 Bulgari............................. 203,505
2,750 Gucci Group ADR..................... 115,156
40,000 Simint*............................. 290,560
-----------
609,221
Japan - 10.5%
4,000 Bridgestone......................... 86,760
7,000 Canon............................... 163,096
34,000 Furukawa Electric................... 145,668
5,000 Honda Motor......................... 183,560
16,000 Koito Manufacturing................. 63,767
4,000 Matsumotokiyoshi.................... 153,286
5,000 Matsushita Communication............ 133,359
8,000 Matsushita Electric
Industries........................ 117,111
8,000 Mitsui Fudosan...................... 77,256
900 Nichiei............................. 95,880
7,000 Nomura Securities................... 93,351
6,000 Omron............................... 93,811
9,000 Taiyo Yuden......................... 62,426
-----------
1,469,331
-----------
Mexico - 2.4%
134,000 Controladora Comercial
Mexicana.......................... 173,236
11,200 Controladora de Farmacias........... 5,836
4,000 Metalclad*.......................... 4,375
2,800 Telefonos de Mexico ADR............. 156,975
-----------
340,422
-----------
Netherlands - 7.3%
6,000 Cap Gemini.......................... 204,473
8,750 ING Groep........................... 368,530
16,000 VNU................................. 451,360
-----------
1,024,363
-----------
Norway - 2.0%
18,000 Provida*............................ 229,088
2,000 Tandberg*........................... 42,785
-----------
271,873
-----------
Poland - 1.3%
9,880 Krosno*............................. 62,784
11,279 Zaklady Elektrod
Weglowych*........................ 124,789
-----------
187,573
-----------
Russia - 6.2%
7,000 Mosenergo ADR....................... 261,707
See accompanying notes to the financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Govett International Equity Fund (continued)
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- -----------------------------------------------------------------
Common Stocks (continued)
Russia (continued)
35,000 Surgutneftegaz ADR......................... $ 357,742
43,500 Trade House GUM ADR........................ 239,920
-----------
859,369
-----------
Singapore - 0.9%
20,600 Overseas Union Bank........................ 79,019
23,000 Sembawang Shipyard......................... 49,242
-----------
128,261
-----------
Slovakia - 0.2%
3,000 SES*....................................... 23,615
-----------
Spain - 1.9%
50,000 Corp. Financiera Reunida,
(COFIR)*................................. 267,476
-----------
Sweden - 1.7%
5,000 Oxigene Europe*............................ 89,422
20,000 PartnerTech*............................... 148,616
-----------
238,038
-----------
Switzerland - 6.5%
213 Novartis................................... 345,642
280 Sairgroup*................................. 383,430
1,300 SMH........................................ 175,351
-----------
904,423
-----------
Thailand - 0.0%
30,000 National Finance &
Securities............................... 5,545
-----------
United Kingdom - 12.9%
7,300 BOC Group.................................. 120,081
13,000 British Airport Authority.................. 106,388
16,000 British Telecommunications................. 125,811
17,626 Carlton Communications..................... 136,135
4,500 General Accident........................... 78,016
8,800 Harvey Nichols............................. 27,476
10,000 Legal & General Group...................... 87,424
8,900 Lloyds TSB Group........................... 115,102
22,000 Marks & Spencer............................ 216,555
5,500 RTZ........................................ 67,696
23,100 Shell Transport & Trading.................. 167,025
13,501 Thames Water............................... 201,118
10,000 Zeneca Group............................... 351,174
-----------
1,800,001
-----------
Total - Common Stocks
(Cost $10,128,912)....................... 12,513,811
-----------
Value
Shares Description (See Note 1)
- -----------------------------------------------------------------
Preferred Stocks - 6.0%
Finland - 2.0%
4,000 Oy Nokia.................................. $ 283,987
-----------
Germany - 2.5%
63 Daimler Benz Conv*........................ 6,111
200 Porsche................................... 335,751
-----------
341,862
-----------
Russia - 1.5%
6,600 Lukoil Holding ADR*....................... 204,860
-----------
Total - Preferred Stocks
(Cost $604,014)......................... 830,709
-----------
Warrants and Rights* - 0.0%
Malaysia - 0.0%
8,750 Commerce Asset Holding
Warrants, expire
03/16/02 (Cost $5,308).................. 1,260
-----------
TOTAL INVESTMENTS -
95.7% (Cost $10,738,234).................. 13,345,780
Other Assets and Liabilities
(net) - 4.3%.............................. 606,567
-----------
TOTAL NET ASSETS -
100.0%.................................... $13,952,347
===========
* Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
See accompanying notes to the financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Govett International Equity Fund (continued)
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Geographic Concentration+
United Kingdom ................................................... 12.9%
Germany .......................................................... 12.2
Japan ............................................................ 10.5
Russia ........................................................... 7.7
Netherlands ...................................................... 7.3
Switzerland ...................................................... 6.5
Italy ............................................................ 4.4
France ........................................................... 4.3
Hungary .......................................................... 3.2
Brazil ........................................................... 3.1
Other ............................................................ 23.6
-----
95.7
Other Assets and Liabilities (net) ............................... 4.3
-----
Total Net Assets ............................................. 100.0%
=====
Sector Allocation+
Electrical & Electronics ......................................... 11.5%
Services ......................................................... 10.1
Health & Personal Care ........................................... 7.6
Banking .......................................................... 7.1
Retail ........................................................... 6.7
Automobiles ...................................................... 6.2
Telecommunications ............................................... 5.6
Energy Resources ................................................. 5.2
Transportation ................................................... 4.5
Leisure & Tourism ................................................ 4.3
Other ............................................................ 26.9
-----
95.7
Other Assets and Liabilities (net) ............................... 4.3
-----
Total Net Assets ............................................. 100.0%
=====
+ Unaudited
See accompanying notes to the financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Govett Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- ------------------------------------------------------
Common Stocks - 92.6%
Argentina - 7.0%
42,103 Banco Frances del
Rio de la Plata....... $ 390,790
7,300 Disco ADR*.............. 328,044
52,500 Perez Companc........... 374,921
15,200 Quilmes Industrial...... 163,400
6,800 Siderar ADR............. 231,200
21,700 Telefonica de
Argentina ADR......... 808,325
-----------
2,296,680
-----------
Brazil - 12.0%
8,700 Cemig ADR............... 378,006
22,200,000 Eletrobras.............. 1,103,983
950,000 Paulista de Forca e
Luz .................. 125,129
1,243,500 Saneamento Basico
De SP................. 295,262
2,200,000 Telebras................ 223,735
11,240 Telebras ADR............ 1,308,758
1,752,700 Telerj*................. 182,172
116,788 Telesp*................. 31,078
9,800 Unibanco GDR*........... 315,438
-----------
3,963,561
-----------
China - 4.5%
1,223,000 Guangshen Railway....... 323,545
14,000 Huaneng Power
International
ADR*.................. 324,625
965,000 Qingling Motors......... 473,222
22,760 Zhejiang Southeast
Electric Power
GDR*.................. 363,022
-----------
1,484,414
-----------
Croatia - 0.5%
10,550 Pliva GDR............... 174,866
-----------
Czech Republic - 1.5%
7,100 CKD Praha Holding* 235,949
2,380 SPT Telekom*............ 254,472
-----------
490,421
-----------
Egypt - 4.6%
10,200 Al-Ahram Beverages
GDR................... 286,620
13,500 Commercial
International
Bank GDR.............. 272,468
4,500 Eipico.................. 314,768
6,000 North Cairo Mills....... 171,051
26,000 Paint & Chemical
Industries GDR........ 260,000
9,425 Tourah Portland
Cement................ 216,034
-----------
1,520,941
-----------
Hong Kong - 2.1%
96,000 China Telecom
(Hong Kong)*.......... 164,770
326,000 Founder Hong Kong 201,936
612,000 Glorious Sun
Enterprises........... 159,930
225,000 Henderson China
Holding............... 180,023
-----------
706,659
-----------
Hungary - 6.4%
9,200 EGIS EDR................ 531,300
7,600 Gedeon Richter
GDR................... 798,000
6,000 Matav ADR*.............. 156,375
8,600 OTP Bank GDR............ 326,800
2,855 Pick Szeged GDR......... 227,876
11,250 Scala Business
Solutions*............ 74,813
-----------
2,115,164
-----------
India - 7.8%
9,400 Hindalco Industries..... 178,168
13,400 Hindustan Lever......... 472,931
13,000 Indian Hotels GDR....... 248,300
12,000 Industrial Credit &
Investment GDR........ 156,000
5,848 Larsen & Toubro......... 30,247
17,200 Mahanager
Telephone Nigam
GDR*.................. 258,172
51,300 Mahindra &
Mahindra.............. 420,739
108,400 Reliance Industries..... 457,658
22,630 Reliance Industries
GDR................... 190,941
18,500 Tata Engineering and
Locomotive GDR........ 154,012
-----------
2,567,168
-----------
Indonesia - 0.5%
52 Bank Danamon
Indonesia............. 3
51,000 Indofood Sukes
Makmur................ 16,691
See accompanying notes to the financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Govett Emerging Markets Equity Fund (continued)
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- --------------------------------------------------------------------------------
Common Stocks (continued)
Indonesia (continued)
144,000 Mayora Indah................ $ 12,437
973,500 Panin Bank.................. 119,475
-----------
148,606
-----------
Israel - 2.1%
205,000 Bank Leumi Le-Israel........ 344,260
13,500 ECI Telecom................. 344,250
-----------
688,510
-----------
Malaysia - 2.9%
27,000 Malakoff.................... 56,228
219,000 Resorts World............... 368,801
113,000 Telekom Malaysia............ 334,105
89,000 Tenaga Nasional............. 189,921
-----------
949,055
-----------
Mexico - 11.0%
31,000 Alfa........................ 209,231
39,000 Desc........................ 369,677
44,000 Femsa....................... 353,747
220,000 Grupo Elektra............... 388,139
21,000 Grupo Financiero
Bancomer GDR*............. 271,688
85,000 Organizacion
Soriana................... 376,489
58,000 Sanluis Corporacion......... 471,340
235,000 Telefonos de Mexico......... 663,306
12,000 Tubo de Acero de
Mexico ADR*............... 259,500
11,900 TV Azteca ADR*.............. 268,494
-----------
3,631,611
-----------
Peru - 2.1%
29,600 Telefonos del Peru
ADR....................... 690,050
-----------
Philippines - 2.3%
193,520 First Philippine
Holdings.................. 150,516
949,450 International
Container
Terminal Services*........ 117,216
47,950 Manila Electric............. 158,649
14,000 Philippine Long
Distance
Telephone ADR............. 315,000
-----------
741,381
-----------
Poland - 0.1%
2,835 Krosno*..................... 18,015
-----------
Russia - 6.3%
2,720 Lukoil Holding ADR.......... 250,920
11,853 Mosenegro ADR............... 443,144
9 Rostelkom RDC*.............. 310,781
48,755 Surgutneftegaz ADR.......... 498,335
67,060 Trade House GUM
ADR....................... 369,863
7,279 Unified Energy
Systems GDR*.............. 204,336
-----------
2,077,379
-----------
South Africa - 8.1%
57,000 First National Bank
Holdings.................. 506,575
17,000 Liberty Life................ 436,659
139,000 Reunert..................... 225,645
204,000 Safmarine &
Rennies Holdings.......... 373,081
45,300 Sasol....................... 473,804
18,000 South African
Breweries................. 443,851
14,000 Tiger Oats.................. 193,322
-----------
2,652,937
-----------
Taiwan - 3.4%
46,500 China Development*.......... 132,552
282,000 CTCI*....................... 401,931
86,400 Delta Electronic
Industrial................ 344,276
130,000 Nien Hsing Textile*......... 251,034
-----------
1,129,793
-----------
Thailand - 2.1%
127,000 Bangchak Petroleum.......... 10,550
222,900 Electricity
Generating................ 296,274
47,100 Grammy
Entertainment............. 205,421
15,500 PTT Exploration
and Production............ 178,339
-----------
690,584
-----------
Turkey - 5.3%
2,347,000 Akcansa Cimento............. 328,410
2,800,000 Alcatel Teletas
Komunikasyon.............. 412,063
7,500,000 Sabanci Holding*............ 461,399
See accompanying notes to the financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Govett Emerging Markets Equity Fund (continued)
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- -----------------------------------------------------
Common Stocks (continued)
Turkey (continued)
14,000,000 Yapi ve Kredi
Bankasi............ $ 533,655
-----------
1,735,527
-----------
Total--Common
Stocks
(Cost $30,394,422).... 30,473,322
-----------
Preferred Stocks - 6.1%
Brazil - 6.1%
38,400,000 Copel................. 521,267
3,820,000 Petrobras............. 893,347
47,256 Telemig............... 5,970
2,214,034 Telesp*............... 589,173
-----------
2,009,757
-----------
Total--Preferred
Stocks
(Cost $2,004,130)..... 2,009,757
-----------
Warrants and Rights* - 0.0%
Indonesia - 0.0%
39,714 Panin Bank
Warrants, expire
6/26/00 (Cost $0) 339
-----------
TOTAL
INVESTMENTS--
98.7%
(Cost $32,398,552)...... 32,483,418
Other Assets and
Liabilities (net) -
1.3%.................. 415,572
-----------
TOTAL NET ASSETS
- 100.0%.............. $32,898,990
===========
Geographic Concentration+
Brazil ................................................................. 18.1%
Mexico ................................................................. 11.0
South Africa ........................................................... 8.1
India .................................................................. 7.8
Argentina .............................................................. 7.0
Hungary ................................................................ 6.4
Russia ................................................................. 6.3
Turkey ................................................................. 5.3
Egypt .................................................................. 4.6
China .................................................................. 4.5
Other .................................................................. 19.6
-----
98.7
Other Assets and Liabilities (net) ..................................... 1.3
-----
Total Net Assets ................................................... 100.0%
=====
Sector Allocation+
National Telecommunications ............................................ 15.0%
Banking ................................................................ 9.4
Electrical & Electronics ............................................... 8.8
Health & Personal Care ................................................. 7.7
Regional Telecommunications ............................................ 6.5
Energy Resources ....................................................... 5.5
Utilities - Electric & Gas ............................................. 5.4
Multi - Industry ....................................................... 5.3
Retail ................................................................. 4.9
Chemicals .............................................................. 3.4
Other .................................................................. 26.8
-----
98.7
Other Assets and Liabilities (net) ..................................... 1.3
-----
Total Net Assets ................................................... 100.0%
=====
+ Unaudited
* Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
EDR European Depositary Receipt
RDC Russian Depositary Certificate
See accompanying notes to the financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Govett Smaller Companies Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- ---------------------------------------------------------------
Common Stocks - 90.4%
Appliances & Household Durables-
2.8%
156,200 Windmere-Durable
Holdings*........................... $ 3,524,262
-------------
Electrical & Electronics- 16.7%
40,000 Applied Graphics
Technologies*....................... 2,130,000
197,500 CHS Electronics*...................... 3,382,187
65,600 Inacom*............................... 1,840,900
102,500 Intelligroup*......................... 1,960,313
215,000 Larscom A*............................ 2,042,500
27,000 Learnout & Hauspie Speech
Products*........................... 1,255,500
100,000 Network Imaging*...................... 93,750
235,000 Omega Research*....................... 1,263,125
70,000 Synopsys*............................. 2,502,500
81,710 Tandberg*............................. 1,747,973
105,800 Versant Object
Technology*......................... 1,461,363
40,000 Viasoft*.............................. 1,690,000
-------------
21,370,111
-------------
Electrical Equipment- 3.3%
100,000 Accent Color Sciences*................ 243,750
142,500 Encad*................................ 3,918,750
-------------
4,162,500
-------------
Electronic Components &
Instruments- 4.5%
50,000 Cognos*............................... 1,150,000
105,000 GaSonics International*............... 1,036,875
30,000 Harmonic Lightwaves*.................. 326,250
76,000 Indus International*.................. 551,000
50,000 Oryx Technology*...................... 53,125
92,000 SDL*.................................. 1,334,000
71,400 SystemSoft*........................... 455,175
20,000 Trident Microsystems*................. 181,250
28,000 Vantive*.............................. 707,000
-------------
5,794,675
-------------
Energy Resources- 7.1%
75,000 Comstock Resources*................... 895,312
56,000 Eagle Geophysical*.................... 728,000
98,800 Global Industries*.................... 1,679,600
136,000 Precision Drilling*................... 3,315,000
100,000 Pride Petroleum Services.............. 2,525,000
-------------
9,142,912
-------------
Financial Services- 6.7%
150,000 AMRESCO*.............................. 4,537,500
50,000 Credit Acceptance*.................... 387,500
120,000 The Money Store....................... 2,520,000
75,000 United Companies
Financial........................... 1,162,500
-------------
8,607,500
-------------
Food & Household Products- 0.8%
60,000 Dan River*............................ 986,250
-------------
Health & Personal Care- 13.0%
51,400 Access Health*........................ 1,509,875
53,200 Dura Pharmaceuticals*................. 2,440,550
130,000 EndoSonics*........................... 1,397,500
30,000 Ergo Science*......................... 457,500
45,000 Imnet Systems*........................ 731,250
50,000 Jones Medical Industries.............. 1,912,500
32,000 Kos Pharmaceuticals*.................. 494,000
115,000 Medical Resources*.................... 1,078,125
93,525 National Data......................... 3,378,591
40,000 SangStat Medical*..................... 1,620,000
340,000 Trinity Biotech ADR*.................. 669,375
27,000 Vertex Pharmaceuticals*............... 891,000
-------------
16,580,266
-------------
Leisure & Tourism- 3.4%
125,000 Rainforest Cafe*...................... 4,125,000
173,250 Spatializer Audio
Laboratories*....................... 259,875
-------------
4,384,875
-------------
Machinery & Engineering- 1.5%
19,000 Group Maintenance
America............................. 319,438
80,000 OmniQuip International................ 1,595,000
-------------
1,914,438
-------------
Multi - Industry- 5.2%
30,000 CalEnergy*............................ 862,500
130,000 Deston Fearing*....................... 211,250
85,000 Imagemax*............................. 860,625
73,700 Personnel Group of
America............................. 2,432,100
190,000 Printrak International*............... 2,066,250
10,000 Sterigenics International*............ 190,000
-------------
6,622,725
-------------
Retail- 13.4%
155,000 Claire's Stores....................... 3,012,812
178,000 Goody's Family Clothing*.............. 4,839,375
86,000 I.C. Isaacs*.......................... 870,750
115,000 Just For Feet*........................ 1,509,375
100,000 Proffitt's*........................... 2,843,750
124,000 Vans*................................. 1,875,500
See accompanying notes to the financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Govett Smaller Companies Fund (continued)
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- --------------------------------------------------------------------
Common Stocks (continued)
Retail (continued)
100,000 Viking Office Products*.................... $ 2,181,250
------------
17,132,812
------------
Services - 3.6%
200,000 Allied Waste Industries*................... 4,662,500
------------
Telecommunications - 8.4%
150,000 Aspect
Telecommunications*...................... 3,131,250
130,000 Digital Microwave*......................... 1,885,000
251,600 DSP Communications*........................ 3,019,200
68,800 PairGain Technologies*..................... 1,333,000
160,000 Periphonics*............................... 1,400,000
------------
10,768,450
------------
Total - Common Stocks
(Cost $120,710,697)...................... 115,654,276
------------
TOTAL INVESTMENTS - 90.4%
(Cost $120,710,697)...................... 115,654,276
------------
Other Assets and Liabilities
(net) - 9.6%............................... 12,270,792
------------
TOTAL NET ASSETS -
100.0%..................................... $127,925,068
============
* Non-income producing security
ADR American Depositary Receipt
Geographic Concentration+
United States ....................................... 84.9%
Canada .............................................. 2.6
Norway .............................................. 1.4
Belgium ............................................. 1.0
Ireland ............................................. 0.5
-----
90.4
Other Assets and Liabilities (net) .................. 9.6
-----
Total Net Assets ................................ 100.0%
=====
Sector Allocation+
Electrical & Electronics ............................ 16.7%
Retail .............................................. 13.4
Health & Personal Care .............................. 13.0
Telecommunications .................................. 8.4
Energy Resources .................................... 7.1
Financial Services .................................. 6.7
Multi - Industry .................................... 5.2
Electronic Components & Instruments ................. 4.5
Services ............................................ 3.6
Leisure & Tourism ................................... 3.4
Other ............................................... 8.4
-----
90.4
Other Assets and Liabilities (net) .................. 9.6
-----
Total Net Assets ................................ 100.0%
=====
+ Unaudited
See accompanying notes to the financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Govett Asia Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- -----------------------------------------------------------------
Common Stocks - 95.8%
Australia - 6.2%
3,000 Australia & New Zealand
Banking Group........................... $ 19,817
16,000 Sydney Harbour Casino
Holdings*............................... 15,166
6,600 West Australian Newspapers................ 27,745
8,500 Woolworths Holdings....................... 28,406
----------
91,134
----------
China - 16.0%
62,000 First Tractor*............................ 37,405
175,000 Guangshen Railway......................... 46,296
1,000 Huaneng Power International
ADR*.................................... 23,188
44,000 Qingling Motors........................... 21,577
3,250 Shandong Huaneng Power
ADR..................................... 22,344
17,040 Want Want Holdings*....................... 23,515
84,000 Yitai Coal Shanghai*...................... 32,760
90,000 Zhejiang Southeast Electric
Power*.................................. 28,980
----------
236,065
----------
Hong Kong - 14.6%
83,000 Aeon Credit Service....................... 18,209
5,000 Cheung Kong............................... 32,746
8,000 China Telecom*............................ 13,731
34,000 Founder Hong Kong......................... 21,061
22,000 Guangdong Investment...................... 14,621
1,000 HSBC Holdings............................. 24,648
5,000 Hutchison Whampoa......................... 31,359
5,000 Johnson Electric Holdings................. 14,389
6,000 Li & Fung................................. 8,401
14,000 NG Fung Hong.............................. 14,724
6,000 Shanghai Industrial Holdings.............. 22,300
----------
216,189
----------
India - 8.1%
760 Hindalco Industries....................... 14,963
3,000 Industrial Credit & Investment
GDR..................................... 37,275
800 Mahanager Telephone Nigam
GDR*.................................... 12,008
4,700 Reliance Industries GDR................... 39,656
1,900 Tata Engineering and
Locomotive GDR.......................... 15,817
----------
119,719
----------
Indonesia - 2.9%
19,000 Bimantara Citra........................... 3,628
22,000 Indofood Sukes Makmur..................... 7,200
18,000 Medco Energi.............................. 22,009
80,000 Panin Bank................................ 9,818
----------
42,655
----------
Japan - 25.0%
1,500 Aderans................................... 36,214
1,000 Fuji Photo Film........................... 38,322
3,000 Hitachi................................... 21,383
5,000 Kikkoman.................................. 25,331
1,000 Matsushita Communication.................. 26,672
3,000 Mitsui Fudosan............................ 28,971
300 Nichiei................................... 31,960
5 Nippon Telegraph &
Telephone............................... 42,920
2,000 Nomura Securities......................... 26,672
1 NTT Data Communications
Systems................................. 53,880
400 Sony...................................... 35,562
----------
367,887
----------
Malaysia - 3.4%
10,000 Malakoff.................................. 20,825
10,000 Tanjong................................... 16,583
21,000 Technology Resources
Industries.............................. 12,418
----------
49,826
----------
Pakistan - 1.3%
274 Pakistan Telecommunications
GDR..................................... 18,906
----------
Philippines - 3.4%
69,100 DMCI Holdings*............................ 2,047
2,736 Far East Bank & Trust (partly
paid)................................... 3,310
32,000 First Philippine Holdings................. 24,889
24,600 Ionics Circuit............................ 10,022
21,000 La Tondena Distillers..................... 9,593
----------
49,861
----------
Singapore - 8.8%
18,600 Acma...................................... 12,831
23,000 DBS Land.................................. 35,290
5,000 Development Bank of
Singapore............................... 42,819
10,000 Overseas Union Bank....................... 38,359
----------
129,299
----------
Taiwan - 3.8%
19,000 CTCI*..................................... 27,080
15,000 Nien Hsing Textile*....................... 28,966
----------
56,046
----------
See accompanying notes to the financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
Govett Asia Fund (continued)
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- ---------------------------------------------------------
Common Stocks (continued)
Thailand - 2.3%
58,000 Jasmine International.............. $ 11,082
3,900 Shinawatra Computer................ 12,959
5,500 Thai Farmers Bank.................. 9,995
----------
34,036
----------
Total - Common Stocks
(Cost $1,762,138)................ 1,411,623
----------
Preferred Stocks - 0.1%
Malaysia - 0.1%
20,000 Multi-Purpose Holdings,
expire 1/13/02
(Cost $8,005)...................... 1,286
----------
Warrants and Rights* - 0.1%
Hong Kong - 0.0%
18,400 Oriental Press Group
Warrants, expire 10/2/98......... 166
----------
Japan - 0.1%
20 Optec Dai-Ichi Denko
Warrants, expire 2/8/00.......... 563
----------
Malaysia - 0.0%
971 Rashid Hussain Berhad
Warrants, expire 3/25/02......... 180
----------
Philippines - 0.0%
16,200 Belle Corporation Warrants,
expire 10/6/00................... 25
----------
Singapore - 0.0%
4,650 Acma Warrants, expire
7/24/01.......................... 318
----------
Total - Warrants and
Rights (Cost $20,578)............ 1,252
----------
TOTAL INVESTMENTS -
96.0% (Cost $1,790,721)............ 1,414,161
Other Assets and Liabilities (net)
- 4.0%............................. 58,318
----------
TOTAL NET ASSETS - 100.0% $1,472,479
==========
* Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
Geographic Concentration+
Japan ................................................................. 25.1%
China ................................................................. 16.0
Hong Kong ............................................................. 14.6
Singapore ............................................................. 8.8
India ................................................................. 8.1
Australia ............................................................. 6.2
Taiwan ................................................................ 3.8
Malaysia .............................................................. 3.5
Philippines ........................................................... 3.4
Indonesia ............................................................. 2.9
Other ................................................................. 3.6
-----
96.0
Other Assets and Liabilities (net) .................................... 4.0
-----
Total Net Assets .................................................. 100.0%
=====
Sector Allocation+
Financial Services .................................................... 11.7%
Electrical & Electronics .............................................. 9.7
Services .............................................................. 7.8
Multi - Industry ...................................................... 7.6
Telecommunications .................................................... 7.4
Banking ............................................................... 7.2
Real Estate ........................................................... 6.6
Automobiles ........................................................... 5.1
Utilities - Electric & Gas ............................................ 5.1
Retail ................................................................ 4.6
Other ................................................................. 23.2
-----
96.0
Other Assets and Liabilities (net) .................................... 4.0
-----
Total Net Assets .................................................. 100.0%
=====
+ Unaudited
See accompanying notes to the financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
Govett Latin America Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Value
Shares Description (See Note 1)
- ------------------------------------------------------------------
Common Stocks - 82.0%
Argentina - 12.0%
8,186 Banco Frances del Rio de la
Plata................................. $ 75,980
13,000 Perez Companc........................... 92,838
8,400 Quilmes Industrial ADR.................. 114,975
1,700 Siderar ADR............................. 57,800
5,260 Telefonica de Argentina
ADR................................... 195,935
2,350 YPF ADR................................. 80,341
----------
617,869
----------
Brazil - 27.2%
260,000 Encopar................................. 193
2,300 Cemig ADR............................... 99,933
1,065 Centrais Electricas de Santa
Catarina GDR.......................... 132,645
5,420,000 Eletrobras.............................. 269,531
95,000 Riograndense de
Telecommunication*.................... 117,042
380,000 Saneamento Basico De SP................. 90,229
1,900 Siderurgica Nacional ADR................ 49,044
1,080,000 Telebras................................ 109,834
2,400 Telebras ADR............................ 279,450
200,439 Telepar*................................ 107,758
734,104 Telerj*................................. 76,301
35,472 Telesp*................................. 8,073
1,840 Unibanco GDR*........................... 59,225
----------
1,399,258
----------
Chile - 6.3%
6,100 Empresa Nacional
Electricidad ADR...................... 107,894
1,200 Quimica Minera ADR...................... 52,800
3,500 Telecomunicacoes de Chile
ADR................................... 104,562
2,200 Vina Concha Y Toro ADR.................. 55,550
----------
320,806
----------
Mexico - 30.8%
5,400 Cemex ADR*.............................. 57,375
87,000 Controladora Comercial
Mexicana.............................. 112,474
11,000 Desc.................................... 104,268
13,000 Femsa................................... 104,516
70,000 Grupo Elektra........................... 123,499
8,000 Grupo Financiero Bancomer
GDR*.................................. 103,500
17,000 Grupo Industrial Saltillo............... 64,752
2,800 Grupo Televisa GDR*..................... 108,325
20,000 Industrias CH*.......................... 119,107
3,400 Panamerican Beverages................... 110,925
13,000 Sanluis Corporacion..................... 105,645
5,000 Telefonos de Mexico ADR................. 280,312
3,800 Tubo de Acero de Mexico
ADR*.................................. 82,175
4,700 TV Azteca ADR*.......................... 106,044
----------
1,582,917
----------
Peru - 1.9%
4,160 Telefonos del Peru ADR.................. 96,980
----------
Venezuela - 3.8%
1,370 Compania Anonima
Nacional Telefonos de
Venezuela ADR......................... 57,026
78,268 Electricidad de Caracas................. 93,897
10,400 Siderurgica Venezolana
Sivensa ADR........................... 43,515
----------
194,438
----------
Total - Common Stocks
(Cost $3,964,112)..................... 4,212,268
----------
Preferred Stocks - 14.1%
Brazil - 14.1%
273,000 Companhia Cimento
Portland Itau......................... 52,592
7,600,000 Copel................................... 103,167
2,402,000 Duratex................................. 94,698
1,010,000 Petrobras............................... 236,199
9,798 Telemig Tele Minas...................... 1,238
899,215 Telesp*................................. 239,289
----------
727,183
Total - Preferred Stocks
(Cost $669,109)....................... 727,183
----------
Warrants and Rights* - 0.1%
Mexico - 0.1%
20,000 Metalclad Warrants, expire
9/30/99 (Cost $0)..................... 3,000
----------
TOTAL INVESTMENTS -
96.2% (Cost $4,633,221)................ 4,942,451
Other Assets and Liabilities
(net) - 3.8%.......................... 195,131
----------
TOTAL NET ASSETS -
100.0%................................ $5,137,582
==========
* Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
See accompanying notes to the financial statements.
25
<PAGE>
- --------------------------------------------------------------------------------
Govett Latin America Fund (continued)
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Geographic Concentration+
Brazil ................................................................ 41.3%
Mexico ................................................................ 30.9
Argentina ............................................................. 12.0
Chile ................................................................. 6.3
Venezuela ............................................................. 3.8
Peru .................................................................. 1.9
-----
96.2
Other Assets and Liabilities (net) .................................... 3.8
-----
Total Net Assets .................................................. 100.0%
=====
Sector Allocation+
National Telecommunications ........................................... 22.0%
Electrical & Electronics .............................................. 11.2
Regional Telecommunications ........................................... 10.7
Beverages & Tobacco ................................................... 7.5
Energy Resources ...................................................... 6.2
Multi-Industry ........................................................ 5.4
Banking ............................................................... 4.6
Retail ................................................................ 4.6
Energy Equipment & Services ........................................... 4.4
Broadcasting & Publishing ............................................. 4.2
Other ................................................................. 15.4
-----
96.2
Other Assets and Liabilities (net) .................................... 3.8
-----
Total Net Assets .................................................. 100.0%
=====
+ Unaudited
See accompanying notes to the financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
Govett Global Income Fund
- --------------------------------------------------------------------------------
Schedule of Investments
December 31, 1997
Principal Value
Amount Description (See Note 1)
- --------------------------------------------------------------------------------
Government Bonds and Notes-
99.0%
Argentina - 4.9%
USD 500,000 Argentina Global Bond
9.25%, 02/23/01................... $ 504,375
--------------
Austria - 11.3%
ATS 13,800,000 Republic of Austria
6.25%, 05/31/06................... 1,158,603
--------------
Germany - 14.6%
DEM 2,470,000 Treuhandanstalt
6.75%, 05/13/04................... 1,496,733
--------------
Ireland - 4.9%
USD 500,000 BGB Finance 6.50%, 09/03/01....... 504,062
--------------
Multi-National - 4.7%
JPY 52,000,000 IBRD Global Bond
4.75%, 12/20/04................... 480,993
--------------
Netherlands - 2.1%
NLG 400,000 Netherlands Government
7.00%, 06/15/05................... 218,480
--------------
New Zealand - 1.8%
NZD 300,000 New Zealand Government
8.00%, 11/15/06................... 185,064
--------------
Norway - 4.8%
USD 500,000 Telenor Series E
5.75%, 03/26/01................... 493,125
--------------
Russia - 4.6%
USD 500,000 Russia (Ministry of Finance)
9.25%, 11/27/01................... 476,875
--------------
United Kingdom - 15.8%
GBP 350,000 U.K. Gilt
8.00%, 06/07/21................... 698,276
GBP 500,000 U.K. Gilt
9.75%, 08/27/02................... 922,818
--------------
1,621,094
--------------
United States - 29.5%
USD 400,000 U.S. Treasury Bond
6.50%, 11/15/26................... 427,000
USD 1,200,000 U.S. Treasury Note
6.50%, 08/31/01................... 1,229,626
USD 1,250,000 U.S. Treasury Note
7.50%, 02/15/05................... 1,373,437
--------------
3,030,063
--------------
Total -
Government Bonds and
Notes
(Cost $10,383,127).................. 10,169,467
--------------
TOTAL INVESTMENTS - 99.0%
(Cost $10,383,127).................. 10,169,467
Other Assets and
Liabilities (net) - 1.0%........... 107,177
--------------
TOTAL NET ASSETS - 100.0%........... $ 10,276,644
==============
ATS Austrian Schilling
DEM German Mark
GBP British Pound
JPY Japanese Yen
NLG Netherland Guilder
USD United States Dollar
NZD New Zealand Dollar
Geographic Concentration+
United States ......................................................... 29.5%
United Kingdom ........................................................ 15.8
Germany ............................................................... 14.6
Austria ............................................................... 11.3
Argentina ............................................................. 4.9
Ireland ............................................................... 4.9
Norway ................................................................ 4.8
Multi-National ........................................................ 4.7
Russia ................................................................ 4.6
Netherlands ........................................................... 2.1
Other ................................................................. 1.8
-----
99.0
Other Assets and Liabilities (net) .................................... 1.0
-----
Total Net Assets .................................................. 100.0%
=====
+ Unaudited
See accompanying notes to the financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1997
<TABLE>
<CAPTION>
Emerging
International Markets
Equity Equity
Fund Fund
-------------- ------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1) - (see accompanying Schedule of Investments) ......... $ 13,345,780 $ 32,483,418
Cash ................................................................................ 291,942 -
Foreign currency, at value (Note 1) ................................................. 419,772 264,233
Receivable from:
Securities sold ................................................................... - 2,186,061
Net open forward currency contracts (Note 8) ...................................... 32,164 -
Fund shares sold .................................................................. 11,691 8,978
Dividends and interest ............................................................ 27,698 35,471
Deferred organization expense (Note 1) .............................................. - -
Other assets ........................................................................ 12,449 7,173
------------ ------------
Total assets ...................................................................... 14,141,496 34,985,334
------------ ------------
LIABILITIES:
Loans payable (Note 4) .............................................................. - 1,174,503
Payable for:
Securities purchased .............................................................. - 473,646
Fund shares repurchased ........................................................... 87,175 229,362
Deferred foreign country taxes .................................................... 212 12,683
Investment manager (Note 2) ....................................................... 11,942 18,008
Accrued expenses and other liabilities .............................................. 89,820 178,142
------------ ------------
Total liabilities ................................................................. 189,149 2,086,344
------------ ------------
Net assets .......................................................................... $ 13,952,347 $ 32,898,990
============ ============
NET ASSETS CONSIST OF:
Paid-in-capital ..................................................................... $ 11,045,187 $ 38,669,096
Undistributed net investment income (loss) .......................................... (57,234) 253,534
Accumulated net realized gain (loss) on investments and foreign currency transactions 335,009 (6,090,696)
Net unrealized appreciation (depreciation) on investments, forward currency contracts
and net other assets (net of accrued foreign country tax unrealized appreciation) . 2,629,385 67,056
------------ ------------
Net assets .......................................................................... $ 13,952,347 $ 32,898,990
============ ============
Shares outstanding .................................................................. 1,279,859 2,688,385
============ ============
Net Asset Value and redemption price per Class A share .............................. $ 10.90 $ 12.24
============ ============
Offering price per Class A share (net asset value divided by 95.05%) ................ $ 11.47 $ 12.88
============ ============
Cost of investments ................................................................. $ 10,738,234 $ 32,398,552
Cost of foreign currency ............................................................ $ 429,133 $ 266,870
</TABLE>
See accompanying notes to the financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Smaller
Companies Asia
Fund Fund
------------- -------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1) - (see accompanying Schedule of Investments) ......... $ 115,654,276 $ 1,414,161
Cash ................................................................................ 14,207,305 29,434
Foreign currency, at value (Note 1) ................................................. - 95,609
Receivable from:
Securities sold ................................................................... - -
Net open forward currency contracts (Note 8) ...................................... - 5,103
Fund shares sold .................................................................. 710,403 -
Dividends and interest ............................................................ 1,250 1,095
Deferred organization expense (Note 1) .............................................. - 6,327
Other assets ........................................................................ 6,497 6,503
------------- -------------
Total assets ...................................................................... 130,579,731 1,558,232
------------- -------------
LIABILITIES:
Loans payable (Note 4) .............................................................. - -
Payable for:
Securities purchased .............................................................. 110,360 3,198
Fund shares repurchased ........................................................... 2,092,798 6,036
Deferred foreign country taxes .................................................... - 282
Investment manager (Note 2) ....................................................... 3,770 9,326
Accrued expenses and other liabilities .............................................. 447,735 66,911
------------- -------------
Total liabilities ................................................................. 2,654,663 85,753
------------- -------------
Net assets .......................................................................... $ 127,925,068 $ 1,472,479
============= =============
NET ASSETS CONSIST OF:
Paid-in-capital ..................................................................... $ 154,229,272 $ 4,187,247
Undistributed net investment income (loss) .......................................... - (19,305)
Accumulated net realized gain (loss) on investments and foreign currency transactions (21,247,783) (2,324,721)
Net unrealized appreciation (depreciation) on investments, forward currency contracts
and net other assets (net of accrued foreign country tax unrealized appreciation) . (5,056,421) (370,742)
------------- -------------
Net assets .......................................................................... $ 127,925,068 $ 1,472,479
============= =============
Shares outstanding .................................................................. 6,701,087 247,853
============= =============
Net Asset Value and redemption price per Class A share .............................. $ 19.09 $ 5.94
============= =============
Offering price per Class A share (net asset value divided by 95.05%) ................ $ 20.08 $ 6.25
============= =============
Cost of investments ................................................................. $ 120,710,697 $ 1,790,721
Cost of foreign currency ............................................................ $ - $ 96,194
<CAPTION>
Latin Global
America Income
Fund Fund
------------- --------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1) - (see accompanying Schedule of Investments) ......... $ 4,942,451 $ 10,169,467
Cash ................................................................................ 294,738 16,010
Foreign currency, at value (Note 1) ................................................. - 10,933
Receivable from:
Securities sold ................................................................... - -
Net open forward currency contracts (Note 8) ...................................... - 17,562
Fund shares sold .................................................................. 713 3,275
Dividends and interest ............................................................ 6,621 265,287
Deferred organization expense (Note 1) .............................................. 6,962 -
Other assets ........................................................................ 2,180 8,795
------------- --------------
Total assets ...................................................................... 5,253,665 10,491,329
------------- --------------
LIABILITIES:
Loans payable (Note 4) .............................................................. - 100,000
Payable for:
Securities purchased .............................................................. 45,937 -
Fund shares repurchased ........................................................... 6,260 40,121
Deferred foreign country taxes .................................................... - -
Investment manager (Note 2) ....................................................... - 2,203
Accrued expenses and other liabilities .............................................. 63,886 72,361
------------- --------------
Total liabilities ................................................................. 116,083 214,685
------------- --------------
Net assets .......................................................................... $ 5,137,582 $ 10,276,644
============= ==============
NET ASSETS CONSIST OF:
Paid-in-capital ..................................................................... $ 5,836,798 $ 15,102,373
Undistributed net investment income (loss) .......................................... - (68,866)
Accumulated net realized gain (loss) on investments and foreign currency transactions (1,010,742) (4,558,668)
Net unrealized appreciation (depreciation) on investments, forward currency contracts
and net other assets (net of accrued foreign country tax unrealized appreciation) . 311,526 (198,195)
------------- --------------
Net assets .......................................................................... $ 5,137,582 $ 10,276,644
============= ==============
Shares outstanding .................................................................. 536,719 1,314,632
============= ==============
Net Asset Value and redemption price per Class A share .............................. $ 9.57 $ 7.82
============= ==============
Offering price per Class A share (net asset value divided by 95.05%) ................ $ 10.07 $ 8.23
============= ==============
Cost of investments ................................................................. $ 4,633,221 $ 10,383,127
Cost of foreign currency ............................................................ $ - $ 10,967
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Emerging
International Markets
Equity Equity
Fund Fund
----------- -----------
<S> <C> <C>
Investment income:
Interest* .............................................................. $ 1,367 $ 36,269
Dividends* ............................................................. 343,751 1,037,195
----------- -----------
Total investment income .............................................. 345,118 1,073,464
----------- -----------
Expenses:
Management fee (Note 2) ................................................ 216,129 532,713
Custody and administration fees ........................................ 95,477 307,981
12b-1 fee Class A (Note 3) ............................................. 108,102 266,568
Professional fees ...................................................... 53,534 59,241
Transfer agency fee .................................................... 95,656 229,546
Registration and filing fees ........................................... 25,955 35,003
Directors' fees and expenses ........................................... 27,625 27,642
Amortization of organization costs (Note 1) ............................ 226 226
Other .................................................................. 28,791 64,197
----------- -----------
Total expenses ....................................................... 651,495 1,523,117
----------- -----------
Less: Expenses reimbursable and fees waived by the Manager (Note 2) ... (110,750) (188,156)
----------- -----------
Net operating expenses ................................................. 540,745 1,334,961
----------- -----------
Interest and other non-operating expenses (Note 4) ..................... 23,478 29,022
----------- -----------
Net investment income (loss) ........................................... (219,105) (290,519)
----------- -----------
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investment transactions .............................................. 344,772 (22,482)
Foreign currency transactions ........................................ 198,029 284,343
----------- -----------
Net realized gain (loss) ........................................... 542,801 261,861
----------- -----------
Net unrealized appreciation (depreciation) on:
Investments .......................................................... 37,198 (2,488,114)
Foreign currency transactions ........................................ (127,338) (2,064)
----------- -----------
Net unrealized appreciation (depreciation) during the period ....... (90,140) (2,490,178)
----------- -----------
Net realized and unrealized gain (loss) ................................ 452,661 (2,228,317)
----------- -----------
Net increase (decrease) in net assets resulting from operations ........ $ 233,556 $(2,518,836)
=========== ===========
* Net of foreign taxes withheld of ..................................... $ 24,690 $ 35,128
</TABLE>
See accompanying notes to the financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
Smaller Latin Global
Companies Asia America Income
Fund Fund Fund Fund
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment income:
Interest* .............................................................. $ 506,709 $ 3,287 $ 7,107 $ 824,918
Dividends* ............................................................. 101,620 36,104 113,826 -
------------ ------------ ------------ ------------
Total investment income .............................................. 608,329 39,391 120,933 824,918
------------ ------------ ------------ ------------
Expenses:
Management fee (Note 2) ................................................ 1,730,046 26,499 53,584 101,316
Custody and administration fees ........................................ 377,124 81,964 48,552 34,343
12b-1 fee Class A (Note 3) ............................................. 863,271 13,400 26,854 47,056
Professional fees ...................................................... 60,884 54,726 53,235 54,209
Transfer agency fee .................................................... 1,117,567 26,105 24,997 57,449
Registration and filing fees ........................................... 66,032 26,254 24,502 24,612
Directors' fees and expenses ........................................... 27,625 27,625 28,625 23,925
Amortization of organization costs (Note 1) ............................ 8,123 6,315 5,913 226
Other .................................................................. 194,643 21,632 27,594 22,807
------------ ------------ ------------ ------------
Total expenses ....................................................... 4,445,315 284,520 293,856 365,943
------------ ------------ ------------ ------------
Less: Expenses reimbursable and fees waived by the Manager (Note 2) ... (1,050,572) (218,074) (159,809) (129,931)
------------ ------------ ------------ ------------
Net operating expenses ................................................. 3,394,743 66,446 134,047 236,012
------------ ------------ ------------ ------------
Interest and other non-operating expenses (Note 4) ..................... 61,954 9,825 127 15,978
------------ ------------ ------------ ------------
Net investment income (loss) ........................................... (2,848,368) (36,880) (13,241) 572,928
------------ ------------ ------------ ------------
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investment transactions .............................................. (8,401,941) (214,404) 838,886 (301,294)
Foreign currency transactions ........................................ (3,397) (20,507) (11,069) (778,627)
------------ ------------ ------------ ------------
Net realized gain (loss) ........................................... (8,405,338) (234,911) 827,817 (1,079,921)
------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation) on:
Investments .......................................................... (8,647,141) (492,034) (60,327) (22,737)
Foreign currency transactions ........................................ - 7,964 2,666 157,980
------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation) during the period ....... (8,647,141) (484,070) (57,661) 135,243
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) ................................ (17,052,479) (718,981) 770,156 (944,678)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations ........ $(19,900,847) $ (755,861) $ 756,915 $ (371,750)
============ ============ ============ ============
* Net of foreign taxes withheld of ..................................... $ - $ 4,265 $ - $ -
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity Fund
----------------------------
Year Ended Year Ended
December 31, December 31,
1997 1996
------------ ------------
<S>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) ............................................... $ (219,105) $ (296,545)
Net realized gain (loss) on investment and foreign currency transactions ... 542,801 3,101,203
Net change in unrealized appreciation (depreciation) on investments, forward
currency contracts, foreign currency, and other assets ................... (90,140) 373,048
------------ ------------
Net increase (decrease) in net assets resulting from operations ............ 233,556 3,177,706
------------ ------------
Distributions to shareholders:
From net investment income ................................................. - (243,517)
In excess of net investment income ......................................... - (203,336)
From net realized capital gains ............................................ (398,221) (2,610,505)
Return of capital .......................................................... - -
------------ ------------
Total distributions to shareholders ...................................... (398,221) (3,057,358)
------------ ------------
Fund share transactions (Note 6):
Proceeds from shares sold .................................................. 5,058,342 12,422,506
Net asset value of shares issued on reinvestment of distributions .......... 372,030 2,867,255
Cost of shares repurchased ................................................. (17,135,065) (18,134,855)
------------ ------------
Net increase (decrease) in net assets resulting from fund
share transactions ...................................................... (11,704,693) (2,845,094)
------------ ------------
Total change in net assets ................................................. (11,869,358) (2,724,746)
Net Assets:
Beginning of period ...................................................... 25,821,705 28,546,451
------------ ------------
End of period* ........................................................... $ 13,952,347 $ 25,821,705
============ ============
*Including undistributed net investment income (loss) of ................. $ (57,234) $ (203,336)
<CAPTION>
Emerging Markets
Equity Fund
----------------------------
Year Ended Year Ended
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) ............................................... $ (290,519) $ (483,192)
Net realized gain (loss) on investment and foreign currency transactions ... 261,861 2,174,025
Net change in unrealized appreciation (depreciation) on investments, forward
currency contracts, foreign currency, and other assets ................... (2,490,178) 6,645,009
------------ ------------
Net increase (decrease) in net assets resulting from operations ............ (2,518,836) 8,335,842
------------ ------------
Distributions to shareholders:
From net investment income ................................................. - -
In excess of net investment income ......................................... - (247,279)
From net realized capital gains ............................................ - -
Return of capital .......................................................... - -
------------ ------------
Total distributions to shareholders ...................................... - (247,279)
------------ ------------
Fund share transactions (Note 6):
Proceeds from shares sold .................................................. 30,078,065 59,140,053
Net asset value of shares issued on reinvestment of distributions .......... - 225,216
Cost of shares repurchased ................................................. (51,474,083) (86,526,905)
------------ ------------
Net increase (decrease) in net assets resulting from fund
share transactions ...................................................... (21,396,018) (27,161,636)
------------ ------------
Total change in net assets ................................................. (23,914,854) (19,073,073)
Net Assets:
Beginning of period ...................................................... 56,813,844 75,886,917
------------ ------------
End of period* ........................................................... $ 32,898,990 $ 56,813,844
============ ============
*Including undistributed net investment income (loss) of ................. $ 253,534 $ -
</TABLE>
See accompanying notes to the financial statements.
32
<PAGE>
<TABLE>
<CAPTION>
Smaller Companies Fund
--------------------------------
Year Ended Year Ended
December 31, December 31,
1997 1996
------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) ............................................... $ (2,848,368) $ (5,275,475)
Net realized gain (loss) on investment and foreign currency transactions ... (8,405,338) 68,713,180
Net change in unrealized appreciation (depreciation) on investments, forward
currency contracts, foreign currency, and other assets ................... (8,647,141) (107,281,729)
------------- -------------
Net increase (decrease) in net assets resulting from operations ............ (19,900,847) (43,844,024)
------------- -------------
Distributions to shareholders:
From net investment income ................................................. - -
In excess of net investment income ......................................... - -
From net realized capital gains ............................................ - (53,056,746)
Return of capital .......................................................... - -
------------- -------------
Total distributions to shareholders ...................................... - (53,056,746)
------------- -------------
Fund share transactions (Note 6):
Proceeds from shares sold .................................................. 722,881,110 544,700,488
Net asset value of shares issued on reinvestment of distributions .......... - 50,005,460
Cost of shares repurchased ................................................. (834,789,996) (756,060,744)
------------- -------------
Net increase (decrease) in net assets resulting from fund
share transactions ...................................................... (111,908,886) (161,354,796)
------------- -------------
Total change in net assets ................................................. (131,809,733) (258,255,566)
Net Assets:
Beginning of period ...................................................... 259,734,801 517,990,367
------------- -------------
End of period* ........................................................... $ 127,925,068 $ 259,734,801
============= =============
* Including undistributed net investment income (loss) of .................. $ - $ -
<CAPTION>
Asia Fund
------------------------------
Year Ended Year Ended
December 31, December 31,
1997 1996
-------------- -------------
<S> <C> <C>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) ............................................... $ (36,880) $ (122,563)
Net realized gain (loss) on investment and foreign currency transactions ... (234,911) 1,067,644
Net change in unrealized appreciation (depreciation) on investments, forward
currency contracts, foreign currency, and other assets ................... (484,070) 172,286
------------- -------------
Net increase (decrease) in net assets resulting from operations ............ (755,861) 1,117,367
------------- -------------
Distributions to shareholders:
From net investment income ................................................. - (60,408)
In excess of net investment income ......................................... - (26,241)
From net realized capital gains ............................................ - -
Return of capital .......................................................... - -
------------- -------------
Total distributions to shareholders ...................................... - (86,649)
------------- -------------
Fund share transactions (Note 6):
Proceeds from shares sold .................................................. 1,176,022 7,544,424
Net asset value of shares issued on reinvestment of distributions .......... - 70,554
Cost of shares repurchased ................................................. (3,166,013) (16,918,134)
------------- -------------
Net increase (decrease) in net assets resulting from fund
share transactions ...................................................... (1,989,991) (9,303,156)
------------- -------------
Total change in net assets ................................................. (2,745,852) (8,272,438)
Net Assets:
Beginning of period ...................................................... 4,218,331 12,490,769
------------- -------------
End of period* ........................................................... $ 1,472,479 $ 4,218,331
============= =============
* Including undistributed net investment income (loss) of ................. $ (19,305) $ (26,241)
<CAPTION>
Latin America Fund
------------------------------
Year Ended Year Ended
December 31, December 31,
1997 1996
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) ............................................... $ (13,241) $ 36,421
Net realized gain (loss) on investment and foreign currency transactions ... 827,817 336,262
Net change in unrealized appreciation (depreciation) on investments, forward
currency contracts, foreign currency, and other assets ................... (57,661) 892,795
------------- -------------
Net increase (decrease) in net assets resulting from operations ............ 756,915 1,265,478
------------- -------------
Distributions to shareholders:
From net investment income ................................................. - (33,214)
In excess of net investment income ......................................... - -
From net realized capital gains ............................................ - -
Return of capital .......................................................... - -
------------- -------------
Total distributions to shareholders ...................................... - (33,214)
------------- -------------
Fund share transactions (Note 6):
Proceeds from shares sold .................................................. 3,074,853 5,984,647
Net asset value of shares issued on reinvestment of distributions .......... - 31,901
Cost of shares repurchased ................................................. (2,954,747) (7,804,895)
------------- -------------
Net increase (decrease) in net assets resulting from fund
share transactions ...................................................... 120,106 (1,788,347)
------------- -------------
Total change in net assets ................................................. 877,021 (556,083)
Net Assets:
Beginning of period ...................................................... 4,260,561 4,816,644
------------- -------------
End of period * .......................................................... $ 5,137,582 $ 4,260,561
============= =============
* Including undistributed net investment income (loss) of .................. $ - $ -
<CAPTION>
Global Income Fund
--------------------------------
Year Ended Year Ended
December 31, December 31,
1997 1996
-------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) ............................................... $ 572,928 $ 2,147,950
Net realized gain (loss) on investment and foreign currency transactions ... (1,079,921) (1,250,202)
Net change in unrealized appreciation (depreciation) on investments, forward
currency contracts, foreign currency, and other assets ................... 135,243 (1,008,632)
------------- -------------
Net increase (decrease) in net assets resulting from operations ............ (371,750) (110,884)
------------- -------------
Distributions to shareholders:
From net investment income ................................................. (162,682) (2,321,770)
In excess of net investment income ......................................... - (80,433)
From net realized capital gains ............................................ - -
Return of capital .......................................................... (638,355) -
------------- -------------
Total distributions to shareholders ...................................... (801,037) (2,402,203)
------------- -------------
Fund share transactions (Note 6):
Proceeds from shares sold .................................................. 374,048 1,837,136
Net asset value of shares issued on reinvestment of distributions .......... 429,663 1,359,521
Cost of shares repurchased ................................................. (9,708,061) (21,510,409)
------------- -------------
Net increase (decrease) in net assets resulting from fund
share transactions ...................................................... (8,904,350) (18,313,752)
------------- -------------
Total change in net assets ................................................. (10,077,137) (20,826,839)
Net Assets:
Beginning of period ...................................................... 20,353,781 41,180,620
------------- -------------
End of period* ........................................................... $ 10,276,644 $ 20,353,781
============= =============
* Including undistributed net investment income (loss) of .................. $ (68,866) $ (80,433)
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
International Equity Fund
-------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------- ------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $ 11.19 $ 11.27 $ 10.16 $ 13.23 $ 9.31
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) .............................. (0.24)+ (0.11)+ (0.08)+ (0.12)+ (0.03)
Net realized and unrealized gain (loss) on investments .... 0.18 1.45 1.20 (0.94) 5.01
------- ------- ------- ------- -------
Total from investment operations ...................... (0.06) 1.34 1.12 (1.06) 4.98
------- ------- ------- ------- -------
Less distributions to shareholders:
From net investment income ................................ - (0.11) - - -
In excess of net investment income ........................ - (0.09) - - -
From net realized gain .................................... (0.23) (1.22) (0.01) (2.01) (1.06)
In excess of net realized capital gain .................... - - - - -
------- ------- ------- ------- -------
Total distributions ................................... (0.23) (1.42) (0.01) (2.01) (1.06)
------- ------- ------- ------- -------
Net asset value, end of period ............................ $ 10.90 $ 11.19 $ 11.27 $ 10.16 $ 13.23
======= ======= ======= ======= =======
Total Return** ........................................... (0.71)% 12.13% 11.01% (8.44)% 54.50%
Ratios/Supplemental Data:
Net Assets, end of period (000's) ......................... $13,952 $25,822 $28,546 $32,296 $44,610
Net operating expenses to average daily net assets (Note A) 2.50% 2.39% 2.50% 2.50% 2.50%
Net investment income (loss) to average daily net assets .. (1.01)% (1.06)% (0.64)% (0.98)% (0.79)%
Portfolio turnover rate ................................... 51% 84% 101% 155% 151%
Average commission rate++ ................................. $0.0052 $0.0158 N/A N/A N/A
</TABLE>
Note A: AIB Govett Asset Management Limited (formerly John Govett & Co. 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 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:
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses........................................... 3.12% 3.09% 2.75% 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.
(d) Formerly Pacific Strategy Fund.
(e) Formerly Emerging Markets Fund.
* 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.
++ For the fiscal years beginning on or after September 1, 1995, a portfolio
is required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
See accompanying notes to the financial statements.
34
<PAGE>
<TABLE>
<CAPTION>
Emerging Markets Equity Fund (e)
----------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $ 13.66 $ 12.24 $ 13.29 $ 17.70 $ 10.72
---------- --------- -------- --------- ----------
Income from investment operations:
Net investment income (loss) .............................. (0.11)+ (0.13)+ (0.06)+ (0.11)+ (0.05)
Net realized and unrealized gain (loss) on investments .... (1.31) 1.61 (0.98) (1.93) 8.36
---------- --------- -------- --------- ----------
Total from investment operations ...................... (1.42) 1.48 (1.04) (2.04) 8.31
---------- --------- -------- --------- ----------
Less distributions to shareholders:
From net investment income ................................ - - - - -
In excess of net investment income ........................ - (0.06) - - -
From net realized gain .................................... - - (0.01) (2.33) (1.33)
In excess of net realized capital gain .................... - - - (0.04) -
---------- --------- -------- --------- ----------
Total distributions ................................... - (0.06) (0.01) (2.37) (1.33)
---------- --------- -------- --------- ----------
Net asset value, end of period ............................ $ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70
========== ========= ======== ========= ==========
Total Return** ............................................ (10.40)% 12.08% (7.84)% (12.65)% 79.73%
Ratios/Supplemental Data:
Net Assets, end of period (000's) ......................... $ 32,899 $ 56,814 $ 75,887 $ 76,812 $ 71,422
Net operating expenses to average daily net assets (Note A) 2.50% 2.38% 2.50% 2.50% 2.50%
Net investment income (loss) to average daily net assets .. (0.54)% (0.62)% (0.49)% (0.77)% (0.88)%
Portfolio turnover rate ................................... 120% 122% 115% 140% 143%
Average commission rate++ ................................. $ 0.0023 $ 0.0011 N/A N/A N/A
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses........................................... 2.91% 2.62% 2.78% 2.65% 2.52%
<CAPTION>
Smaller Companies Fund
---------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993 (a)
-------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $ 21.83 $ 29.96 $ 19.06 $ 15.85 $ 10.00
------------ ---------- ----------- ---------- -----------
Income from investment operations:
Net investment income (loss) .............................. (0.43)+ (0.44)+ (0.30)+ (0.10)+ (0.06)
Net realized and unrealized gain (loss) on investments .... (2.31) (2.84) 13.32 4.47 5.91
------------ ---------- ----------- ---------- -----------
Total from investment operations ...................... (2.74) (3.28) 13.02 4.37 5.85
------------ ---------- ----------- ---------- -----------
Less distributions to shareholders:
From net investment income ................................ - - - - -
In excess of net investment income ........................ - - - - -
From net realized gain .................................... - (4.85) (2.12) (1.16) -
In excess of net realized capital gain .................... - - - - -
------------ ---------- ----------- ---------- -----------
Total distributions ................................... - (4.85) (2.12) (1.16) -
------------ ---------- ----------- ---------- -----------
Net asset value, end of period ............................ $ 19.09 $ 21.83 $ 29.96 $ 19.06 $ 15.85
============= ========== =========== ========== ===========
Total Return** ........................................... (12.55)% (10.62)% 69.13% 28.68% 58.50%
Ratios/Supplemental Data:
Net Assets, end of period (000's) ......................... $ 127,925 $ 259,735 $ 517,990 $ 76,873 $ 39,681
Net operating expenses to average daily net assets (Note A) 1.95% 1.81% 1.95% 1.95% 1.95%
Net investment income (loss) to average daily net assets .. (1.64)% (1.40)% (1.64)% (1.13)% (0.93)%
Portfolio turnover rate ................................... 77% 406% 280% 519% 483%
Average commission rate++ ................................. $ 0.057 $ 0.0581 N/A N/A N/A
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses........................................... 2.59% 2.08% 2.12% 2.40% 2.44
</TABLE>
35
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
Asia Fund (d)
------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1997 1996 1995 1994 (b)
-------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............................. $ 9.15 $ 8.53 $ 8.79 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) ..................................... (0.20)+ (0.26)+ (0.05)+ (0.18)+
Net realized and unrealized gain (loss) on investments ........... (3.01) 1.05 (0.21) (1.03)
----------- ----------- ----------- -----------
Total from investment operations ............................. (3.21) 0.79 (0.26) (1.21)
----------- ----------- ----------- -----------
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 ................................... $ 5.94 $ 9.15 $ 8.53 $ 8.79
=========== =========== =========== ===========
Total Return** ................................................... (35.08)% 9.33% (2.96)% (12.10)%
Ratios/Supplemental Data:
Net Assets, end of period (000's) ................................ $ 1,472 $ 4,218 $ 12,491 $ 13,849
Net operating 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 ......... (1.39)% (1.51)% (0.67)% (1.33)%
Portfolio turnover rate .......................................... 172% 170% 163% 213%
Average commission rate++ ........................................ $ 0.0078 $ 0.0102 N/A N/A
</TABLE>
- --------------------------------
Note A: AIB Govett Asset Management Limited (formerly John Govett & Co. 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 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:
<TABLE>
<S> <C> <C> <C> <C>
Expenses.................................................... 11.09% 6.66% 3.62% 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.
(d) Formerly Pacific Strategy Fund.
(d) Formerly Emerging Markets Fund.
* 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.
++ For the fiscal years beginning on or after September 1, 1995, a portfolio
is required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
See accompanying notes to the financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
Latin America Fund
--------------------------------------------------------
Year Ended Year Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1997 1996 1995 1994 (c)
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $ 7.97 $ 6.44 $ 7.89 $ 10.00
----------- ---------- ----------- ----------
Income from investment operations:
Net investment income (loss) ................................. (0.02)+ 0.07+ (0.01)+ (0.09)+
Net realized and unrealized gain (loss) on investments ....... 1.62 1.52 (1.44) (1.53)
----------- ---------- ----------- ----------
Total from investment operations ......................... 1.60 1.59 (1.45) (1.62)
----------- ---------- ----------- ----------
Less distributions to shareholders:
From net investment income ................................... - (0.06) - -
In excess of net investment income ........................... - - - -
From net realized gain ....................................... - - - (0.27)
In excess of net realized capital gain ....................... - - - (0.22)
Return of capital ............................................ - - - -
----------- ---------- ----------- ----------
Total distributions ...................................... - (0.06) - (0.49)
----------- ---------- ----------- ----------
Net asset value, end of period ............................... $ 9.57 $ 7.97 $ 6.44 $ 7.89
=========== ========== =========== ==========
Total Return** .............................................. 20.08% 24.74% (18.38)% (16.94)%
Ratios/Supplemental Data:
Net Assets, end of period (000's) ............................ $ 5,138 $ 4,261 $ 4,817 $ 7,096
Net operating 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 ..... (0.25)% 0.54% 0.00% (1.06)%*
Portfolio turnover rate ...................................... 123% 150% 127% 185%
Average commission rate++ .................................... $ 0.0009 $ 0.0005 N/A N/A
</TABLE>
- --------------------------------
Note A: AIB Govett Asset Management Limited (formerly John Govett & Co. 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 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:
<TABLE>
<S> <C> <C> <C> <C>
Expenses.............................................. 5.47% 6.49% 5.66% 3.35%*
<CAPTION>
Global Income Fund
-----------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $ 8.32 $ 8.97 $ 8.48 $ 10.16 $ 9.77
---------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) ............................. 0.26+ 0.57+ 0.63+ 0.76+ 0.99
Net realized and unrealized gain (loss) on investments ... (0.30) (0.54) 0.53 (1.67) 0.66
---------- ----------- ----------- ----------- -----------
Total from investment operations ..................... (0.04) 0.03 1.16 (0.91) 1.65
---------- ----------- ----------- ----------- -----------
Less distributions to shareholders:
From net investment income ............................... (0.12) (0.66) (0.63) (0.24) (0.95)
In excess of net investment income ....................... - (0.02) (0.04) - -
From net realized gain ................................... - - - - (0.31)
In excess of net realized capital gain ................... - - - - -
Return of capital ........................................ (0.34) - - (0.53) -
---------- ----------- ----------- ----------- -----------
Total distributions .................................. (0.46) (0.68) (0.67) (0.77) (1.26)
---------- ----------- ----------- ----------- -----------
Net asset value, end of period ........................... $ 7.82 $ 8.32 $ 8.97 $ 8.48 $ 10.16
========== =========== =========== =========== ===========
Total Return** .......................................... (0.35)% 0.34% 14.11% (9.76)% 17.67%
Ratios/Supplemental Data:
Net Assets, end of period (000's) ........................ $ 10,277 $ 20,354 $ 41,181 $ 51,691 $ 82,000
Net operating expenses to average daily net assets
(Note A) ............................................... 1.75% 1.64% 1.75% 1.75% 1.72%
Net investment income (loss) to average daily net
assets ................................................. 4.23% 7.17% 7.45% 8.30% 9.66%
Portfolio turnover rate .................................. 76% 236% 249% 701% 328%
Average commission rate++ ................................ N/A N/A N/A N/A N/A
</TABLE>
- --------------------------------
Note A: AIB Govett Asset Management Limited (formerly John Govett & Co. 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 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:
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses.............................................. 2.82% 2.38% 1.93% 1.95% 1.72%
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Significant Accounting Policies
The Govett Funds, Inc. (the "Company") was established as a Maryland corporation
on November 13, 1990. The Company's Articles of Incorporation permit the
Directors to create an unlimited number of series, each of which may issue one
or more separate classes of shares. The Company presently consists of six series
(individually a "Fund", and together the "Funds"), which are registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act") and three series, which are currently in
registration with the SEC under the 1940 Act. Govett International Equity Fund,
Govett Emerging Markets Equity Fund (formerly Govett Emerging Markets Fund),
Govett Smaller Companies Fund and Govett Asia Fund (formerly Govett Pacific
Strategy Fund), are all diversified, open-end management investment companies.
Govett Latin America Fund and Govett Global Income Fund are both nondiversified,
open-end management investment companies. Each of the Funds has authorized the
issuance of Class A, Class B and Institutional Class Shares. On May 16, 1997,
the Board of Directors approved the reclassification of Class C Shares as
Institutional Class shares. At that time the Board also authorized the filing of
an amendment to the Fund's registration statement with the Securities and
Exchange Commission, to delete references to Class C Shares and to describe the
characteristics of the Institutional Class Shares. As of December 31, 1997, only
Class A shares of the six series 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 the Pacific Rim. Govett Latin America Fund seeks
long-term capital appreciation by investing primarily in equity and debt
securities of companies located in Latin America. Govett Global Income Fund
seeks primarily a high level of current income, consistent with preservation of
capital, by investing primarily in foreign debt securities, and has a secondary
objective of capital appreciation.
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 Asset Management Limited (formerly John Govett & Co. Limited (the
"Manager")) may determine to be appropriate in computing net asset value.
Securities for which there are no representative quotations or valuations are
valued at fair value, determined in good faith, as authorized by the Company's
Board of Directors.
Repurchase Agreements--Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. The Fund may experience a loss
if the Fund is delayed or prevented from exercising its rights to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assert its
rights. The Manager, acting under the supervision of the Board of Directors,
reviews the value of the collateral and the creditworthiness of those banks and
dealers with which the Fund enters into repurchase agreements to evaluate
potential risks.
Foreign Currency Translation--The accounting records of the Funds are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
foreign currency exchange rates applicable on
38
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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
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
Manager may determine to be appropriate. The change in value is recorded by the
Funds as an unrealized gain or loss. When a forward currency contract is
extinguished, either by delivering the currency or by entering into another
forward currency contract, the Fund records a realized gain or loss equal to the
difference between the value of the contract 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 carry forwards 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 foreign currency
transactions, post-October losses, option and forward transactions, currency
contracts, organization
39
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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, pursuant to the terms of an investment management contract,
provides all investment management services to the Funds. As compensation for
these services, the Manager earns a monthly fee computed at an annual rate of
1.00% (0.75% for the Global Income Fund) of the value of the 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,
1997, 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 9, 1997, the Manager had entered into a Subadvisory Agreement
with Berkeley Capital Management (the "Subadvisor") whereby the Subadvisor
provided day-to-day investment advisory services to the Smaller Companies Fund.
Effective January 9, 1997, the Manager assumed full investment management
control of the Smaller Companies Fund.
In 1997, AIB Asset Management Holdings Limited ("AIBAMH") made several
adjustments to its operating structure in order to more effectively provide
investment management services to its clients around the world. A new U.S.
company, AIB Govett, Inc. ("AIB Govett"), was formed to provide these services
to North American clients. In addition, John Govett & Co. Ltd., which had served
as investment manager to the Funds, changed its name to AIB Govett Asset
Management Limited ("AIB Govett London"). AIB Govett and AIB Govett London are
wholly-owned subsidiaries of AIBAMH.
Effective January 1, 1998, AIB Govett will be investment advisor to the Funds
with AIB Govett London serving as investment subadviser to all Funds. The
reorganization did not result in any change of actual control or management of
AIB Govett London or in any change of management of the Funds. In particular,
the same individuals who provided services to the Funds prior to the
reorganization continue to provide the same services.
The terms of the new advisory agreements are substantially similar to the former
advisory agreement. The investment management fees paid by the Funds are not
effected by the change in investment advisory responsibility from AIB Govett
London to AIB Govett.
40
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 0.50% (0.35% for the
Global Income Fund) of the value of each Fund's average daily net assets,
attributable to Class A shares, for providing ongoing distribution services and
facilities to the 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. Effective April 1, 1997, FPS Broker Services, Inc.
became the Funds' distributor.
Pursuant to Rule 12b-1, the Board of Directors of the Company has approved a
modification of the existing Class A 12b-1 Plan, effective February 1, 1998,
which reduces 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.
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 year ended December 31, 1997, 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 December 31, 1997, under the Credit Agreement with Chase, the Emerging
Markets Equity Fund and Global Income Fund had $1,174,503 and $100,000
outstanding, respectively.
For the year ended December 31, 1997, 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.
Average Maximum
Daily Outstanding Average Interest
Balance Borrowing Interest Rate Expense
------- ----------- ------------- --------
International Equity. $264,822 $ 2,300,000 8.75% $23,478
Emerging Markets
Equity ............ 332,945 2,300,000 8.75 29,022
Smaller Companies ... 679,151 11,950,000 8.75 61,954
Asia ................ 127,562 795,000 8.75 9,825
Latin America ....... 16,855 428,000 8.75 127
Global Income ....... 55,658 600,000 8.75 4,858
Note 5--Purchases and Sales of Securities
Costs of purchases and proceeds from sales of securities, excluding short-term
obligations, for the year ended December 31, 1997, were as follows. Only the
Global Income Fund had U.S. Government securities transactions.
Purchases Sales
------------ ------------
International Equity ......................... $ 10,963,175 $ 23,582,215
============ ============
Emerging Markets Equity ...................... $ 61,720,561 $ 85,762,562
============ ============
Smaller Companies ............................ $126,835,852 $239,186,009
============ ============
Asia ......................................... $ 4,302,179 $ 6,344,022
============ ============
Latin America ................................ $ 6,282,696 $ 6,333,974
============ ============
Global Income:
U.S Government securities .................. $ 744,188 $ 2,631,164
Other Investments .......................... 8,295,886 8,222,381
============ ============
$ 9,040,074 $ 10,853,545
============ ============
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
---------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/97 12/31/96
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares sold ................... 435,290 1,045,705 2,079,986 4,501,935
Shares issued on
reinvestment of
distributions ............... 31,581 255,018 -- 16,595
Shares repurchased ............ (1,494,963) (1,525,675) (3,550,796) (6,561,346)
---------- ---------- ---------- ----------
Net increase (decrease) ...... (1,028,092) (224,952) (1,470,810) (2,042,816)
Fund shares:
Beginning of
period .................... 2,307,951 2,532,903 4,159,195 6,202,011
---------- ---------- ---------- ----------
End of period ............... 1,279,859 2,307,951 2,688,385 4,159,195
========== ========== ========== ==========
</TABLE>
41
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Smaller Companies
Fund Asia Fund
--------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/97 12/31/96
------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold .................. 36,785,126 19,765,798 133,395 828,391
Shares issued on
reinvestment of
distributions .............. -- 2,227,722 -- 7,841
Shares repurchased ........... (41,983,474) (27,384,907) (346,615) (1,839,546)
------------ ----------- ---------- -----------
Net increase (decrease) ...... (5,198,348) (5,391,387) (213,220) (1,003,314)
Fund shares:
Beginning of
period ................... 11,899,434 17,290,821 461,073 1,464,387
------------ ----------- ---------- -----------
End of period .............. 6,701,086 11,899,434 247,853 461,073
============ =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Latin America Fund Global Income Fund
------------------------ ------------------------
Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/97 12/31/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares sold ...................... 315,132 802,452 40,235 212,508
Shares issued on
reinvestment of
distributions .................. -- 4,029 62,277 158,248
Shares repurchased ............... (312,949) (1,020,006) (1,235,195) (2,515,381)
---------- ---------- ---------- ----------
Net increase (decrease) .......... 2,183 (213,525) (1,132,683) (2,144,625)
Fund shares:
Beginning of
period ....................... 534,536 748,061 2,447,315 4,591,940
---------- ---------- ---------- ----------
End of period .................. 536,719 534,536 1,314,632 2,447,315
========== ========== ========== ==========
</TABLE>
Note 7--Federal Income Tax Cost
At December 31, 1997, 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:
International Emerging Smaller
Equity Markets Equity Companies
Fund Fund Fund
------------- -------------- -------------
Aggregate cost ......... $ 10,738,234 $ 32,546,587 $ 120,889,132
============= ============== =============
Gross unrealized
appreciation ......... 3,858,052 3,791,567 15,940,486
Gross unrealized
depreciation ......... (1,250,506) (3,854,736) (21,175,342)
------------- -------------- -------------
Net unrealized
appreciation
(depreciation) ....... $ 2,607,546 $ (63,169) $ (5,234,856)
============= ============== =============
Latin Global
Asia America Income
Fund Fund Fund
------------ ------------ ------------
Aggregate cost ........ $ 1,793,495 $ 4,655,906 $ 10,403,502
============ ============ ============
Gross unrealized
appreciation ........ 54,037 681,886 205,800
Gross unrealized
depreciation ........ (433,371) (395,341) (439,835)
------------ ------------ ------------
Net unrealized
appreciation
(depreciation) ...... $ (379,334) $ 286,545 $ (234,035)
============ ============ ============
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 December 31, 1997 there were no
open security forward commitments. The forward foreign currency contracts at
December 31, 1997 were as follows:
42
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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>
International Equity Fund
Purchases 1/26/98 USD 112,710,000 JPY 1,000,000 $ (132,786)
1/26/98 USD 110,080,000 JPY 1,000,000 (153,022)
1/26/98 USD 55,895,000 JPY 500,000 (69,933)
4/14/98 USD 5,780,500 FRF 1,000,000 (33,907)
4/29/98 USD 1,541,600 NLG 800,000 (34,280)
4/30/98 USD 990,850 CHF 700,000 (12,225)
4/30/98 USD 1,711,500 DEM 1,000,000 (42,121)
Sales 1/5/98 JPY 47,000,000 USD 361,122 900
1/26/98 JPY 282,150,000 USD 2,500,000 329,080
4/14/98 FRF 5,610,000 USD 1,000,000 62,403
4/29/98 NLG 1,515,760 USD 800,000 47,115
4/30/98 CHF 989,520 USD 700,000 13,148
4/30/98 DEM 1,683,500 USD 1,000,000 57,792
-----------
$ 32,164
===========
Asia Fund
Sales 1/5/98 JPY 47,000,000 USD 361,122 $ 5,103
===========
Global Income Fund
Purchases 1/12/98 USD 77,880,000 JPY 600,000 $ (2,032)
Sales 1/12/98 GBP 790,274 USD 1,300,000 2,129
1/12/98 JPY 75,870,000 USD 600,000 17,465
-----------
$ 17,562
===========
</TABLE>
The principal amounts of each non-U.S. dollar denominated contract is stated in
the currency in which the contract is denominated.
CHF - Swiss Franc DEM - German Mark
FRF - French Franc GBP - British Pound
JPY - Japanese Yen NLG - Netherland Guilder
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.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited):
Govett International Equity Fund hereby designates $132,895, at the 28% tax
bracket, as a long-term capital gain dividend for the purpose of the dividend
paid deduction on the Fund's Federal income tax return.
For the year ended December 31, 1997, Govett Global Income Fund earned 33.8% of
it's income from direct U.S. treasury obligations.
43
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To The Board of Directors and Shareholders
of The Govett Funds, Inc.
We have audited the accompanying statements of assets and liabilities of The
Govett Funds, Inc. (the "Funds"), including the schedules of investments as of
December 31, 1997, and the related statements of operations, changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statements of
changes in net assets for the year ended December 31, 1996 and the financial
highlights for each of the four years in the period ended December 31, 1996 were
audited by other auditors whose report dated February 21, 1997 expressed an
unqualified opinion thereon.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1997 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of The Govett Funds, Inc. as of December 31, 1997, and the results of
its operations, the changes in its net assets and its financial highlights for
the year then ended in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 20, 1998
44
<PAGE>
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45
<PAGE>
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46
<PAGE>
The Govett Funds, Inc.
Board of Directors
Patrick K. Cunneen, Chairman
Elliott L. Atamian
Sir Victor Garland
James M. Oates
Frank R.Terzolo
