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GOVETT FUNDS
SEMI-ANNUAL REPORT
June 30, 1999
CONTENTS
LETTER TO THE SHAREHOLDERS 1
PORTFOLIO MANAGEMENT REVIEW AND
SCHEDULE OF INVESTMENTS 2
FINANCIAL STATEMENTS 16
August 13, 1999
To Govett Funds Investors:
The first six months of this year have seen a strong recovery in
emerging markets and a steady positive performance in developed
markets. Investors seem encouraged by the improved prospects for
global growth stemming from the major easing in both developed and
emerging economies' interest rates. This has triggered a
sharp pick up in global liquidity that is positively impacting
markets.
The 0.25% rise in interest rates by the US Federal Reserve in May was
expected, and stock markets responded well to the prospect of limited
further increases and continued economic growth. There are more
promising signs of an economic pick up in mainland Europe, where we
expect better performance, especially from smaller companies, in the
second half of the year.
Developed world stock markets have produced good returns, with the
Japanese market strongest, followed by the US, Europe and the UK. In
Europe, the advent of the "euro" is helping to stimulate a new focus
on shareholder value among corporate leaders across the Continent,
which bodes well for long-term investors. The recovery in demand in
Asia drove good performance there and contributed to the strong
performance of commodity and cyclical stocks.
Emerging markets investors are particularly heartened by the fact that
much of the investment in the first months of the recovery, especially
in Asia, has come from domestic investors in those markets. Currencies
are stabilizing and current account deficits are on the decline. These
indicators, combined with a general upward movement in commodity
prices around the world, all appear to point to a continuing emerging
markets recovery.
In this environment, we have been pleased with the overall performance
of the Govett Funds. Govett International Equity Fund, Govett
International Smaller Companies Fund and Govett Smaller Companies Fund
all added value over the indices in the first half of 1999. We
continue to believe that all five funds are well positioned to play a
prominent role in the international component of a professionally
structured global portfolio.
Thank you for investing with us.
/S/KEITH MITCHELL
Keith E. Mitchell
President and Managing Director
AIB Govett, Inc.
Past performance is no guarantee of future results, and the investment
return and principal value of an investment in a Fund will fluctuate,
so that an Investor's shares, when redeemed, may be worth
more or less than the original cost.
Each index is a broad-based, unmanaged index considered to reflect the
performance of the relevant markets and is not available for direct
investment.
Govett Funds are distributed by First Data Distributors,
Inc., 4400 Computer Drive, Westborough, MA 01581 (8/99)
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
and the International Smaller Companies Fund can pose special risks
related to the relatively small size of the companies in which they
invest. See the prospectus for details.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a prospectus for each
Fund.
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.
PORTFOLIO MANAGEMENT REVIEW
Govett Emerging Markets Equity Fund
Market Conditions During The Six Months Ended June 30, 1999
Improved prospects for global growth have stemmed from the major
easing in both developed and emerging economies' interest
rate. This has triggered a sharp pick up in global liquidity which is
positively impacting emerging markets. Asia is now driving positive
performance, with overweight positions in China, Korea and Thailand
leading the way.
Most Latin American markets saw solid gains, after the curtailed
reaction in January to Brazil's currency. There is some
concern at mid-year about Argentina's currency, but we
attach low probability to the idea that Argentina might dismantle the
currency board arrangement and devalue.
Emerging European markets have not enjoyed the recent rally as much
due to the situation in Yugoslavia and European sluggishness
generally. But Poland remained particularly strong, and there was
little pressure on some others including Greece and Hungary.
Fund Performance During the Six Months Ended June 30, 1999
For the six months ended June 30, 1999, total return at NAV was
35.68%, compared to 42.30% for the Morgan Stanley Capital
International (MSCI) Emerging Markets Index. The Fund performed well
relative to its peers in the second quarter helped by the rally in
Asian Emerging markets and a low cash weighting.
Positive asset allocation came from overweight positions in Asia
particularly China, Korea and Thailand. The overweight position to
Poland and Mexico also added to performance. The upgrade in Poland's
credit rating by Standard and Poors particularly helped the market
rally.
Stock selection was mixed. It was extremely positive in Korea where
industrial cyclical stock performed in response to upgrades to global
growth forecasts. The Fund's holding of oil giant YPF* in
Argentina benefited from the take-over bid by Repsol, while stock
selection in Poland outperformed the index return by 13%.
The Fund had increased its exposure to Asia over the last quarter,
reinvesting back into Malaysia as economic recovery is underway driven
by financial recapitalization and large trade inflows. The exposure to
China/Hong Kong was also increased by 1% to over 6%.
The Latin American exposure has been reduced via the weighting to
Argentina which has been halved and brought back to neutral. The EMEA
exposure has been reduced as the position in Hungary was reduced after
a rally in May. Other market exposure remained broadly stable.
At Net
Asset Value
One Year Average Annual Total Return 10.56%
Three Year Average Annual Total Return+ -7.14%
Five Year Average Annual Total Return+ -3.71%
Since Inception Average Annual Total Return (1/7/92)+ 4.50%
Source: AIB Govett
+ Annualized
Current Strategy and Outlook For 1999
Across emerging markets, currency stability and strengthening current
account balances are encouraging signs. This is also true of the
general upward turn in commodity prices. In summary, after two
extremely difficult years, emerging markets now appear set to regain
their role as the world's fastest growing equity markets.
The Fund remains fully invested with the focus very firmly on Asia
recovery, using funds released from Latin America and EMEA to increase
exposure.
/S/RACHAEL MAUNDER
Rachael Maunder
*As of 6/30/99, the Fund held 2.31% of its total net
assets in YPF.
Govett Emerging Markets Equity Fund
Schedule of Investments
June 30, 1999 (Unaudited)
Shares Description Value
(See Note 1)
Common Stocks -- 92.9%
Argentina -- 4.8%
45,500 Perez Companc $ 261,659
4,550 Telefonica de Argentina ADR 142,756
10,000 YPF ADR 380,000
-----------
784,415
-----------
Brazil -- 4.2%
8,532 Cemig ADR 178,056
3,300 Telebras 297,619
2,900 Telebras ADR 181
8,800 Unibanco GDR 212,850
-----------
688,706
-----------
China -- 0.6%
6,000 Huaneng Power
International ADR 103,500
-----------
Czech Republic -- 1.6%
7,915 Ceska Sporitelna 32,909
1,620 SPT Telekom GDR* 26,244
12,564 SPT Telekom* 202,764
-----------
261,917
-----------
Greece -- 5.3%
5,771 Alpha Credit Bank 372,488
2,650 Commercial Bank of Greece 189,791
3,700 Hellenic Telecommunication
Organization 79,409
4,765 Panafon 115,069
1,270 Titan Cement 117,103
-----------
873,860
-----------
Hong Kong -- 6.2%
92,000 China Telecom 255,546
5,400 Hong Kong & Shanghai
Bank Holdings 196,976
21,000 Hutchinson Whampoa 190,151
70,000 New World Development 209,776
34,000 Swire Pacific 168,284
-----------
1,020,733
-----------
Hungary -- 3.1%
2,022 Gedeon Richter GDR 88,463
9,824 Magyar Tavkozlesi Rt. ADR 270,160
3,461 MOL Magyar Olaj-es
Gazipari GDR 82,891
1,612 OTP Bank GDR 66,817
-----------
508,331
-----------
India -- 6.2%
7,250 Castrol 69,360
10,493 Hindalco Industries 151,937
4,550 Hindustan Lever 249,487
1,200 Infosys Technologies 100,256
6,300 ITC 159,006
98 Larsen & Toubro 647
35,000 Mahanagar Telephone Nigam 149,983
2,850 NIIT 133,488
550 Reliance Industries 2,239
-----------
1,016,403
-----------
Israel -- 2.8%
48,000 Bank Hapoalim 123,197
4,440 ECI Telecom 147,353
1,680 Koor Industries 193,789
-----------
464,339
-----------
Korea -- 15.2%
13,660 Housing & Commercial Bank 430,747
10 Korea Electric Power 416
11,000 Korea Telecom* 440,000
11,066 L.G. Chemical 301,148
4,640 Pohang Iron & Steel 571,151
6,861 Samsung Electronics 752,784
-----------
2,496,246
-----------
Malaysia -- 2.2%
52,000 Commerce Asset Holding 128,632
37,000 Proton 85,684
60,000 Resorts World 141,316
-----------
355,632
-----------
Mexico -- 15.2%
27,300 Cemex ADR 269,888
147,250 Cifra* 269,716
83,841 Femsa 335,435
44,890 Grupo Carso* 208,181
91,400 Grupo Modelo 260,921
7,600 Grupo Televisa GDR* 339,625
44,000 Organizacion Soriana 207,323
149,750 Telefonos de Mexico 600,716
-----------
2,491,805
-----------
Philippines -- 3.1%
35,000 Manila Electric 126,267
11,500 Metropolitan Bank & Trust 115,076
4,600 Philippines Long Distance
Telephone 140,514
61,930 San Miguel Corp. B 135,357
-----------
517,214
-----------
Poland -- 3.3%
4,606 Bank Rozwoju Eksportu 144,743
8,301 Elektrim SA 117,228
3,200 Orbis GDR 25,005
1,500 Powezechny Bank* 36,375
30,491 Telekomunikacja Polska GDR* 214,962
-----------
538,313
-----------
South Africa -- 2.0%
1 Edgars Consolidated Stores* 4
7,400 Nedcor 169,717
20,000 Rembrandt Group 166,708
-----------
336,429
-----------
Taiwan -- 9.5%
18,200 Asustek Computer 205,102
304,500 China Steel 230,025
150,000 Evergreen Marine 187,616
12,000 Hon Hai Precision Industry* 108,483
3,080 Nien Hsing Textile* 7,199
48,000 President Chain Store* 162,725
152,950 United Microelectronics* 329,103
213,000 United World Chinese
Commercial Bank 329,721
-----------
1,559,974
-----------
Thailand -- 4.4%
16,500 Advanced Info Service 223,668
153,100 Bangkok Expressway 100,655
378,200 Krung Tai Bank 251,211
19,200 PTT Exploration and Production 146,791
-----------
722,325
-----------
Turkey -- 3.2%
80,000 Migros Turk T.A.S. 99,606
5,310,000 Sabanci Holding 118,375
21,484,800 Yapi ve Kredi Bankasi 310,813
-----------
528,794
-----------
Total -- Common Stocks (Cost $11,714,458) 15,268,936
-----------
Preferred Stocks -- 9.7%
Brazil -- 9.7%
259,200 Banco Itau 132,566
10,412,400 Copel 84,735
15,200 CVRD 300,650
1,462,900 Petrobras 226,524
14,333,718 Tele Norte Leste Participacoes 259,214
15,530,900 Tele Sudeste
Celular Participacoes 87,770
15,261,700 Telecentro Sul Participacoes 169,048
1,752,000 Telesp Celular 91,090
6,800 Telesp Participacoes* 158,100
800,956 Telesp 94,603
-----------
1,604,300
-----------
Total -- Preferred Stocks (Cost $1,445,438) 1,604,300
-----------
Warrants and Rights* -- 0.0%
Malaysia -- 0.0%
971 Rashid Hussain Berhad Warrants,
expire 3/25/02 (Cost $1,277) 493
-----------
TOTAL INVESTMENTS -- 102.6%
(Cost $13,161,173) 16,873,729
Other Assets and Liabilities (net) -- (2.6)% (433,700)
-----------
TOTAL NET ASSETS -- 100.0% $16,440,029
===========
* Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
Sector Allocation
Banking 18.3%
Regional Telecommunications 12.6
National Telecommunications 12.4
Electrical & Electronics 9.7
Metals-Non Ferrous 6.3
Beverage & Tobacco 4.7
Retail/Merchandising 4.4
Industrial Components 4.0
Utilities 3.6
Health & Personal Care 3.2
Other 23.4
-----
102.6
Other Assets and Liabilities (net) (2.6)
-----
Total Net Assets 100.0%
=====
See accompanying notes to the financial statements.
Govett Smaller Companies Fund
Market Conditions During The Six Months Ended June 30, 1999
World stock markets produced good returns in the first half of 1999,
continuing the improvement from the fourth quarter of 1998. Markets
benefited from the prospect of good economic growth coupled with
relatively low inflation and interest rates. However, towards the end
of the period, markets faltered on fears of increases in interest
rates in the United States. The US market return of 18.5% was
impressive, although it lagged the return from Japan of 27.5%, where
the economy showed a surprising rate of growth in the first quarter
and where the benefits of restructuring are becoming clearer. The US
market was driven by strength in the economy including consumer demand
and good market advances by technology stocks focused on the Internet
and e-commerce. European stock markets were disappointing, with a
return of 1.2% that reflected concerns on the strength of the
economies and political issues, including the dispute in the Balkans,
which was one of the reasons why the new euro currency was weak. The
UK market returned 11.7% as the economy avoided recession.
There have been more encouraging signs that smaller companies have
started to outperform larger companies and to recoup the
underperformance of recent years. In the second quarter, the Russell
2000 Index return was 15.1%, well ahead of the return from the S&P 500
of 6.7% and improving the relative return for the year to date. In
Japan, smaller companies have continued to perform well, and in the
UK, small and mid-sized companies have outperformed larger companies
so far in 1999 by 11% and 18.3%, respectively. In Europe, however,
smaller companies have yet to shine.
During the first half of the year, one feature of performance was the
sharp recovery from depressed levels of shares in commodity and
cyclical stocks. Growth stocks were held back by investors switching
to cyclical stocks and by the impact on valuations of higher interest
rates, but they showed an improved performance again in June.
Fund Performance During The Six Months Ended June 30, 1999
The Fund continued the improved performance since its re-positioning
last year. For the six months ended June 30, 1999, total return for
the Fund was 22.55%, which was well ahead of the Russell 2000 Index
return of 8.48% over the period.
The Fund added value through its investments in the US and from
outside the US, where the Fund's Japanese investments did
particularly well. Strong US performance was led by communications
equipment providers like Comverse Technology* and Windstar
Communications*. Electronics firms also contributed very well, led by
Electronics for Imaging* and Western Wireless*.
At Net
Asset Value
One Year Average Annual Total Return 6.02%
Three Year Average Annual Total Return+ -7.49%
Five Year Average Annual Total Return+ 13.12%
Since Inception Average Annual Total Return (1/1/93)+ 17.91%
Source: AIB Govett
+ Annualized
Current Strategy and Outlook
We will retain our focus on good quality companies with a proven
ability to provide superior growth from the strength of their market
positions, financial returns and management. In an era of low
inflation and increased competition, we believe it is particularly
important that companies in which we invest have a degree of pricing
power that enables them to sustain attractive margins.
The prospects world-wide are for reasonable economic growth. The US
economy remains strong and is capable of growth at least in line with
its trend rate, although it is likely to be slower than in 1998. The
Japanese economy is showing promising signs of a return to growth,
which may not be immediate, but which has the potential to be
sustained and is long overdue. In Europe, the second half of the year
is expected to see improved economic growth and a stronger currency
that should improve returns. In the UK, we expect a continuation of a
steady pick-up and historically low inflation.
The prospect of low inflation world-wide should help to keep bond
yields low, which underpins equity markets, although there is a risk
that interest rates in the US will be raised further. There is also
lingering concern about recent weakness in the US dollar. The fear of
interest rate rises, combined with high valuation levels and potential
disappointments from individual emerging markets, might constrain a
further advancement of markets that might arise from the economic
prospects and high liquidity.
We believe that smaller companies should benefit from the overall
economic prospects and from the restructuring of economies in Japan
and Europe, which is likely to lead to more outsourcing of business
from larger corporations and governments. Smaller companies in the US
outperformed larger companies in the second quarter, and we believe
they will continue to do well in the second half of the year.
Valuations relative to larger companies are still very attractive,
even in markets where smaller companies have already outperformed.
Individual smaller companies should always offer the potential to
benefit from changes in the economy, such as the emergence of
e-commerce.
/S/JULIAN COOKE
Julian Cooke
* As of 6/30/99, the Fund held 3.78% of its total net assets in
Comverse Technology, 2.04% in Windstar Communication, 3.43% in
Electronics for Imaging, and 1.35% in Western Wireless.
Govett Smaller Companies Fund
Schedule of Investments
June 30, 1999 (Unaudited)
Value
Shares Description (See Note 1)
COMMON STOCKS -- 102.4%
BELGIUM -- 1.3%
Food & Household Products -- 1.3%
1,200 Colruyt $ 790,517
-----------
CHINA -- 2.3%
Appliances & Household
Durables -- 2.3%
1,200,000 Guangdong Kelon
Electrical Holdings 1,399,791
-----------
DENMARK -- 1.6%
Business & Public Services -- 1.6%
18,000 International Service System 962,340
-----------
ESTONIA -- 0.8%
Telecommunications -- 0.8%
23,300 AS Eesti Telecom GDR 458,428
-----------
FINLAND -- 0.2%
Industrial Components -- 0.2%
9,000 Perlos* 131,959
-----------
GERMANY -- 0.8%
Multi-Industry -- 0.8%
25,400 Vivanco Gruppe* 477,325
-----------
ISRAEL -- 0.7%
Merchandising -- 0.7%
55,000 Forsoft* 419,375
-----------
ITALY -- 1.9%
Forest Products & Paper -- 1.9%
140,000 Class Editori 1,120,312
-----------
JAPAN -- 9.7%
Business & Public Services -- 5.6%
53,000 H.I.S.C.O 1,881,112
44,800 Meitec 1,501,117
-----------
3,382,229
-----------
Electrical & Electronics -- 1.9%
18,760 Fuji Soft ABC 1,117,498
-----------
Health & Personal Care -- 2.2%
52,000 Kyorin Pharmaceutical* 1,294,945
-----------
5,794,672
-----------
NETHERLANDS -- 3.1%
Data Processing &
Reproduction -- 1.3%
113,000 Magnus Holding 775,907
-----------
Services -- 1.8%
16,000 Cap Gemini 1,093,672
-----------
1,869,579
-----------
NORWAY -- 0.9%
Data Processing &
Reproduction -- 0.9%
55,300 Merkantildata 534,469
-----------
POLAND -- 1.2%
Telecommunications -- 1.2%
100,000 Telekomunikacja Polska GDR* 705,000
-----------
SPAIN -- 2.4%
Business & Public Services -- 0.4%
22,300 Indra Sistemas 240,619
-----------
Leisure & Tourism -- 1.1%
50,000 NH Hoteles* 641,211
-----------
Merchandising -- 0.9%
25,000 Superdiplo* 554,994
-----------
1,436,824
-----------
THAILAND -- 2.0%
Telecommunications -- 2.0%
367,000 Total Access Communication* 1,174,400
-----------
UNITED KINGDOM -- 6.7%
Data Processing &
Reproduction -- 2.1%
161,033 RM 1,270,117
-----------
Electronic Components &
Instruments -- 1.0%
90,000 Critchley Group 585,633
-----------
Health & Personal Care -- 2.9%
105,991 Nestor Healthcare Group 692,194
90,000 SSl International 1,032,133
-----------
1,724,327
-----------
Transportation -- 0.7%
135,000 Metroline 417,396
-----------
3,997,473
-----------
UNITED STATES -- 66.8%
Banking -- 0.9%
15,000 First Tennessee National 574,688
-----------
Broadcasting & Publishing -- 7.5%
10,000 Chancellor Media* 551,250
45,000 Nielsen Media Research* 1,316,250
44,000 Young & Rubicam 1,999,250
40,000 Ziff-Davis* 617,500
-----------
4,484,250
-----------
Data Processing &
Reproduction -- 8.9%
10,000 Copper Mountain Networks* 772,500
40,000 Jabil Circuit* 1,805,000
20,000 Legato Systems* 1,155,000
75,000 Optibase* 576,562
24,900 USinternetworking* 1,045,800
-----------
5,354,862
-----------
Electrical & Electronics -- 20.6%
40,000 CIENA* 1,207,500
40,000 Electronics for Imaging* 2,055,000
52,500 MKS Instruments* 977,812
32,500 National Semiconductor* 822,656
20,000 Networks Associates* 293,750
25,000 Online Resources &
Communications* 339,063
12,000 Sawtek* 550,500
10,000 Teradyne* 717,500
40,000 VoiceStream Wireless* 1,137,500
30,000 Western Wireless* 810,000
100,000 Windmere-Durable Holdings* 1,687,500
30,000 Xilinx* 1,717,500
-----------
12,316,281
-----------
Energy Sources -- 0.7%
40,000 Stolt Comex Seaway* 435,000
-----------
Financial Services -- 3.4%
20,000 Paine Webber 935,000
40,000 Waddell & Reed Financial 1,097,500
-----------
2,032,500
-----------
Food & Household Products -- 3.2%
25,000 Interstate Bakeries 560,938
32,000 Suiza Foods* 1,340,000
-----------
1,900,938
-----------
Health & Personal Care -- 3.2%
30,000 Covance* 718,125
10,000 MedImmune* 677,500
15,000 Watson Pharmaceutical* 525,937
-----------
1,921,562
-----------
Merchandising -- 4.5%
25,000 Linens N Things * 1,093,750
46,500 Office Depot 1,025,906
35,000 School Specialty* 562,188
-----------
2,681,844
-----------
Services -- 0.8%
25,000 Allied Waste Industries* 493,750
-----------
Telecommunications -- 13.1%
30,000 Comverse Technology* 2,265,000
50,000 Dial 1,859,375
15,000 PairGain Technologies* 172,500
12,500 Razorfish* 463,281
25,000 Scientific-Atlanta 900,000
25,000 Sotheby's Holdings (Class A) 953,125
25,000 WinStar Communications* 1,218,750
-----------
7,832,031
-----------
40,027,706
-----------
Total -- Common Stocks (Cost $50,127,034) 61,300,170
-----------
TOTAL INVESTMENTS -- 102.4%
(Cost $50,127,034) 61,300,170
Other Assets and Liabilities (net) -- (2.4)% (1,424,462)
-----------
TOTAL NET ASSETS -- 100.0% $59,875,708
===========
* Non-income producing security
GDR Global Depositary Receipt
Sector Allocation
Electrical & Electronics 22.5%
Telecommunications 17.1
Data Processing & Reproduction 13.2
Health and Personal Care 8.3
Business and Public Services 7.6
Broadcasting and Publishing 7.5
Merchandising 6.1
Food and Household Products 4.5
Financial Services 3.4
Services 2.6
Other 9.6
-----
102.4
Other Assets and Liabilities (net) (2.4)
-----
Total Net Assets 100.0%
======
See accompanying notes to the financial statements.
Govett International Smaller Companies Fund
Market Conditions During The Six Months Ended June 30, 1999
World stock markets produced good returns in the first half of 1999,
continuing the improvement from the fourth quarter of 1998. Markets
benefited from the prospect of good economic growth coupled with
relatively low inflation and interest rates. Although towards the end
of the period markets faltered on fears of increases in interest rates
in the US. There was an impressive return from Japan of 27.5%, where
the economy showed a surprising rate of growth in the first quarter
and where the benefits of restructuring are becoming clearer. European
stock markets were disappointing, with a return of 1.2% that reflected
concerns on the strength of the economies and by political issues,
including the dispute in the Balkans, which was one of the reasons why
the new euro currency was weak. The UK market returned 11.7% as the
economy avoided recession and consumer demand improved. Emerging
markets, especially in Asia, generated strong returns on the back of
higher commodity prices and economic recovery.
There have been more encouraging signs that smaller companies have
started to outperform larger companies and to recoup the
underperformance of recent years. In the US the Russell 2000
outperformed the S&P 500 sharply in the second quarter. In Japan
smaller companies have continued to perform well and in the UK small
and mid- sized companies have outperformed larger companies so far in
1999 by 11% and 18.3% respectively. In Europe, however, smaller
companies have yet to shine, in part because of technical issues
relating to the construction of benchmark indices.
One feature of performance in the first half of the year was the sharp
recovery from depressed levels of shares in commodity and cyclical
stocks. Growth stocks were held back by investors switching to
cyclical stocks and by the impact on valuations of higher interest
rates, but showed an improved performance again in June.
Fund Performance During The Six Months Ended June 30, 1999
In its first six months to the end of June 1999, Institutional Class
shares of the Fund produced a return of 18.40% which was comfortably
ahead of its benchmark index, the MSCI World Small Cap Ex-US, which
rose 12.16%. For the period ended June 30, 1999, total return for
Class A Retail Shares of the Fund was 8.53% and the MSCI World Small
Cap Ex-US index returned 3.78%. The Fund benefited from its
investments in Japan, from improving returns from smaller companies in
the UK and from selected individual stocks in Europe, where overall
returns were a little disappointing. The Fund's limited exposure to
emerging markets also enhanced returns.
Institutional Class A
Class Shares Retail Shares
(Inception 12/31/98) (Inception 5/25/99)
One Year Average Annual Total Return N/A N/A
Three Year Average Annual Total Return+ N/A N/A
Five Year Average Annual Total Return+ N/A N/A
Since Inception Average Annual Total
Return+ N/A N/A
Cumulative Total Return Since Inception 18.40% 8.53%
Source: AIB Govett
+ Annualized
Current Strategy and Outlook
We will retain our focus on good quality companies with a proven
ability to provide superior growth from the strength of their market
positions, financial returns and management. In an era of low
inflation and increased competition we believe it is particularly
important that companies in which we invest have a degree of pricing
power that enables them to sustain attractive margins.
The prospects world-wide are for reasonable economic growth. The US
economy remains strong and is capable of growth at least in line with
its trend rate, although it is likely to be slower than in 1998. The
Japanese economy is showing promising signs of a return to growth,
which may not be immediate but which has the potential to be sustained
and is long overdue. In Europe the second half of the year is expected
to see improved economic growth and a stronger currency that should
improve returns. In the UK we expect a continuation of a steady
pick-up and historically low inflation.
The prospect of low inflation world-wide should help to keep bond
yields low which underpins equity markets, although there is a risk
that interest rates in the US are increased twice more. The fear of
interest rate rises, combined with high valuation levels and potential
disappointments from individual emerging markets, might constraint a
further rise in markets that might arise from the economic prospects
and high liquidity.
We believe that smaller companies should benefit from the overall
economic prospects and from the restructuring of economies in Japan
and Europe, which is likely to lead to more outsourcing of business
from larger corporations and governments. Valuations relative to
larger companies are still very attractive, even in markets where
smaller companies have already outperformed. Individual smaller
companies should always offer the potential to benefit from changes in
the economy, such as the emergence of e-commerce.
/S/JULIAN COOKE
Julian Cooke
Govett International Smaller Companies Fund
Schedule of Investments
June 30, 1999 (Unaudited)
Value
Shares Description (See Note 1)
Common Stocks -- 94.0%
Belgium -- 2.1%
30 Colruyt $ 19,763
-----------
China -- 3.9%
31,775 Guangdong Kelon Electrical Holdings 37,065
-----------
Denmark -- 2.2%
380 International Service System 20,316
-----------
Estonia -- 0.6%
270 AS Eesti Telecom GDR 5,312
-----------
Finland -- 3.1%
2,000 Perlos* 29,324
-----------
Germany -- 5.0%
409 BinTec* 11,783
8 Porsche 18,668
900 Vivanco Gruppe* 16,913
-----------
47,364
-----------
Ireland -- 3.1%
31,650 Fishers International 29,582
-----------
Italy -- 3.8%
2,700 Class Editori 21,606
1,900 Simint 14,047
-----------
35,653
-----------
Japan -- 25.3%
400 Doutor Coffee 21,246
420 Fuji Soft ABC 25,019
100 Hikari Tsushin 30,942
1,000 Kyorin Pharmaceutical* 24,903
1,000 H.I.S.C.O 35,493
1,000 Meitec 33,507
600 People 27,798
4,000 Tsubaki Nakashima 38,388
-----------
237,296
-----------
Netherlands -- 5.1%
410 Cap Gemini 28,025
2,900 Magnus Holding 19,913
-----------
47,938
-----------
Norway -- 1.7%
1,700 Merkantildata 16,431
-----------
Poland -- 2.3%
3,000 Telekomunikacja Polska GDR* 21,150
-----------
Spain -- 5.9%
1,500 Indra Sistemas 16,185
1,700 NH Hoteles* 21,801
800 Superdiplo* 17,760
-----------
55,746
-----------
Thailand -- 2.6%
7,500 Total Access Communication* 24,000
-----------
United Kingdom -- 27.3%
6,000 Cannons Group 17,510
3,915 Critchley Group 25,475
1,866 Filtronic 22,077
8,125 First Choice Holidays* 24,416
4,200 First Technology 27,600
7,000 Grantchester Holdings 18,937
1,203 Guardian IT 10,532
4,700 J.D. Wetherspoon 21,872
4,000 Metroline 12,367
2,780 Nestor Healthcare Group 18,155
6,500 Redrow Group 22,507
2,500 RM 19,718
1,325 SSL International 15,195
-----------
256,361
-----------
Total -- Common Stocks (Cost $795,102) 883,301
Warrants and Rights* -- 0.1%
United Kingdom -- 0.1%
6,000 Cannon Groups Rights (Cost $0) 642
-----------
TOTAL INVESTMENTS -- 94.1%
(Cost $795,102) 883,943
Other Assets and Liabilities (net) -- 5.9% 55,856
-----------
TOTAL NET ASSETS -- 100.0% $939,799
===========
* Non-income producing security
GDR Global Depositary Receipt
Sector Allocation
Business & Public Services 17.2%
Electrical and Electronics 11.7
Electronics Components & Instruments 8.3
Merchandising 7.5
Machinery and Engineering 7.0
Leisure & Tourism 6.9
Health and Personal Care 6.2
Telecommunications 5.4
Food & Household Products 4.4
Insurance 3.2
Other 16.3
-----
94.1
Other Assets and Liabilities (net) 5.9
-----
Total Net Assets 100.0%
=====
See accompanying notes to the financial statements.
Govett International Equity Fund
Market Conditions During The Six Months Ended June 30, 1999
Equity markets generally made strong progress during the first six
months of 1999. Equities benefited from the growing perception that
the impact on the global economy of the slowdown in emerging markets
between 1997 and 1998 would not be as severe as had been feared, and
that global recession would be avoided. The more stable emerging
market environment was also significant, with markets recovering
swiftly after an initially adverse reaction to the devaluation of the
Brazilian currency in January.
Japan and other Asian markets offered particularly strong returns for
the period as a whole. After the turmoil of the last two years,
confidence is returning to the region, underpinned by efforts by Asian
governments to reform their economies, a return of stability to the
foreign exchange markets and improved prospects for growth. The
Japanese market was boosted by better than expected growth data for
the first quarter, hopes of restructuring and from foreign investors
increasing their previously underweight positions.
Western stock markets drew support from low interest rates, strong
liquidity flows and a high level of merger and acquisition activity.
In the UK, the market was supported by further interest rate cuts,
bringing rates down to 5% in June, their lowest level for 22 years.
The reduction in rates enhanced the perception that the UK would avoid
recession and achieve a soft landing with growth returning to its
long-term trend in 2000. Euro- zone interest rates were also cut, from
3.0% to 2.5%, in April in an effort to stimulate growth in the
sluggish core economies. European equity markets underperformed other
markets in the first six months of 1999, constrained by tensions
between European politicians and the European Central Bank regarding
the desirability of cutting interest rates, and the appropriate level
of support for the struggling euro. The decline of the new currency
against the dollar reflected the relative weakness of the European
economy. The conflict in Kosovo also undermined sentiment toward the
European currency.
As the first half progressed, global equity markets became
increasingly pre-occupied by the outlook for US inflation and interest
rates, with the US economy continuing to grow strongly and
unemployment at historically low levels. Equity markets faltered
during May when the Federal Reserve indicated that the next move in
interest rates would be upward, but by the time the 0.25% rise came at
the end of June it had been well sign posted and markets reacted
positively. In the wake of the move, UK and US markets headed back to
the record levels seen in April and early May.
Fund Performance During The Six Months Ended June 30, 1999
The Fund's total return at NAV for the six months ended June 30, 1999
for Class A Retail and Institutional Class shares were 7.88% and
7.95%, respectively. In comparison the MSCI Europe, Australia, Far
East plus Emerging Index (EAFE + EMG) increased 7.56% over the period.
The investment mix of the Fund over the half year continued to reflect
positive views on the developed European equity markets and on
emerging equity markets.
The pace of economic growth in Europe was disappointing during the
early part of the year. Late in the second quarter, signs of a
stabilization in domestic activity levels have emerged and the
international demand background has also become more positive. The
process of restructuring by the corporate and state sectors continues
aggressively. The Fund's weighting to cyclically sensitive sectors was
increased as the world growth picture improved. In the UK, the
engineering stock, Invensys* was bought, and in Europe, the Swedish
capital goods company Atlas Copco* was purchased. The Fund's position
in the German diversified electronics company Siemens* was added to as
well.
Within the emerging markets, the Asian and Latin American regions have
been strong performers as sentiment has recovered and the prospect of
economic activity regaining moderate growth rates has attracted
investors. Exposure to these areas has been maintained at a high level
over the half year.
The Fund's exposure to Japan has increased over the half year as the
positive news flow set out above is felt to offer upside potential to
the market. Hitachi* and Nippon Steel* were two of the companies which
were bought in this increased allocation.
Class A Institutional
Retail Shares Class Shares
(Inception 1/7/92) (Inception 7/24/98)
One Year Average Annual Total Return 10.33% N/A
Three Year Average Annual Total Return+ 9.03% N/A
Five Year Average Annual Total Return+ 8.76% N/A
Since Inception Average Annual Total
Return+ 10.61% N/A
Cumulative Total Return Since Inception+ 112.70% 6.81%
Source: AIB Govett
+Annualized
Current Strategy and Outlook
The focus of major markets has shifted away from concerns about global
slowdown and onto the likely implications for inflation and interest
rates of firming global economy. As the major global economy, the
outlook for US inflation and interest rates particularly concerns
international markets. The reversion by the Federal Reserve to a
neutral stance on interest rates at its end-June meeting reassured
markets that the authorities are more comfortable with the inflation
outlook than had been thought. This could reduce the volatility seen
in markets in recent months. The combination of relatively low
interest rates, even if US rates do move a little higher, and a
continuing improvement in global growth prospects should allow some
further progress in global equity markets during the second half of
1999 and into 2000.
/S/LOUISE MCGUIGAN
Louise McGuigan
*As of 6/30/99, the Fund held 0.70% of its total net assets in
Invensys, 0.56% in Atlas Copco, 1.09% in Siemens, 1.42% in Hitachi,
and 0.9% in Nippon Steel.
Govett International Equity Fund
Schedule of Investments
June 30, 1999 (Unaudited)
Value
Shares Description (See Note 1)
Common Stocks -- 96.8%
Australia -- 0.2%
1,966 National Australia Bank $ 32,409
-----------
Brazil -- 1.0%
4,660 CVRD 92,519
1,400 CVRD ADR 27,795
3,930 Pao de Accucar GDR 73,442
-----------
193,756
-----------
China -- 0.5%
5,900 Huaneng Power International ADR 101,775
-----------
Finland -- 3.1%
6,511 Nokia Oyj 571,447
-----------
France -- 16.1%
1,387 Accor 348,726
2,975 Axa 363,397
3,040 Banque Nationale de Paris 253,626
621 Equant* 57,324
974 Groupe Danone 251,425
641 L' Air Liquide 100,934
1,624 Lafarge 154,606
2,055 Rhone-Poulenc 94,021
840 Suez Lyonnaise des Eaux 151,698
3,761 TotalFina* 485,814
867 Valeo 71,617
7,963 Vivendi 645,851
-----------
2,979,039
-----------
Germany -- 8.0%
4,835 Deutsche Bank 295,048
3,481 Hoechst 157,071
2,285 HypoVereinsbank 145,573
3,603 Mannesmann 539,438
2,598 Siemens 200,655
2,228 Volkswagon 143,943
-----------
1,481,728
-----------
Greece -- 0.9%
2,542 Alpha Credit Bank 164,073
-----------
Hong Kong -- 1.6%
14,000 Hutchinson Whampoa 126,768
56,000 New World Development 167,820
-----------
294,588
-----------
Hungary -- 0.6%
4,000 Magyar Tavkozlesi Rt. ADR 110,000
-----------
India -- 1.2%
8,000 Mahanagar Telephone Nigam GDR 79,200
11,250 State Bank of India GDR 138,094
-----------
217,294
-----------
Israel -- 0.7%
1,100 Koor Industries 126,886
-----------
Italy -- 2.7%
6,915 Assicurazioni Generali 239,906
10,780 Instituto Bancario San
Paolo di Torino 146,927
10,070 Telecom Italia 104,809
-----------
491,642
-----------
Japan -- 14.9%
18,000 Fujitsu 362,621
28,000 Hitachi 262,927
6,000 Honda Motor 254,654
4,000 Ito-Yokado 268,057
13,000 Matsushita Electric Industries 252,751
75,000 Nippon Steel 174,361
10,000 Ricoh 137,834
7,000 Shin-Etsu Chemical 234,549
1,200 Sony 129,561
22,000 Sumitomo Marine & Fire Insurance 132,870
7,000 Takeda Chemical Industries 324,894
20,000 Toppan Printing 223,546
-----------
2,758,625
-----------
Korea -- 3.3%
7,800 Korea Electric Power ADR 159,900
1,814 Samsung Electronics GDR 93,512
12,880 Samsung Electronics GDR
(non-voting shares) 349,370
-----------
602,782
-----------
Mexico -- 2.3%
106,100 Cifra* 194,342
2,850 Telefonos de Mexico ADR 230,850
-----------
425,192
-----------
Netherlands -- 6.9%
4,964 Fortis 153,511
4,751 ING Groep 257,545
9,236 Koninklijke Ahold 318,522
917 Royal Dutch Petroleum 53,781
1,650 United Pan-Europe
Communications * 89,615
10,329 VNU 413,275
-----------
1,286,249
-----------
Philippines -- 0.5%
3,100 Philippine Long Distance
Telephone ADR 93,581
-----------
Poland -- 0.6%
14,861 Telekomunikacja Polska GDR* 104,770
-----------
South Africa -- 0.6%
700 AngloGold 30,160
314 Edgars Stores 2,441
8,600 South African Breweries* 74,677
-----------
107,278
-----------
Spain -- 0.4%
3,785 Telefonica Publicidad e Information 75,623
-----------
Sweden -- 0.6%
3,819 Atlas Copco 104,392
-----------
Switzerland -- 5.7%
92 Nestle 166,071
156 Novartis 228,214
13 Roche Holding 133,879
430 Swisscom 162,112
732 UBS 218,888
247 Zurich Allied 140,715
-----------
1,049,879
-----------
Taiwan -- 1.6%
21,021 Asustek Computer GDR 303,228
-----------
Thailand -- 0.9%
250,000 Krung Tai Bank 166,057
-----------
166,057
-----------
Turkey -- 0.6%
7,812,000 Yapi ve Kredi Bankasi 113,013
-----------
United Kingdom -- 21.3%
6,776 Allied Domecq 65,416
8,731 Allied Zurich 109,838
19,507 ASDA Group 66,851
3,639 AstraZeneca 140,869
7,500 Barclays 218,399
14,390 Barratt Developments 81,265
8,566 BP Amoco 153,637
9,706 British American Tobacco 91,329
9,265 British Energy 78,922
7,478 CGU 108,113
14,500 Cookson Group 48,949
9,250 Diageo 96,669
3,100 Energis 73,988
9,500 General Electric 96,959
9,775 Glaxo Wellcome 271,849
8,047 Granada Group 149,406
8,806 Halifax 105,156
27,399 Invensys 129,771
19,498 Lloyds TSB Group 264,513
6,840 National Power 49,849
9,845 National Westminister Bank 208,880
6,600 Orange 96,824
17,522 Prudential 258,160
7,542 Railtrack Group 154,307
6,623 Royal Sun Alliance
Insurance Group 59,446
7,439 Severn Trent 109,896
12,000 Smithkline Beecham 156,074
3,800 Telewest Communications 17,054
11,544 Unilever 102,797
15,477 Vodafone Group 305,179
10,263 Yorkshire Water 71,396
-----------
3,941,761
-----------
Total -- Common Stocks (Cost $14,763,203) 17,897,067
-----------
Preferred Stocks -- 2.0%
Brazil -- 1.3%
9,021,000 Telecentro Sul Participacoes 99,922
1,087,117 Telesp 128,402
-----------
228,324
-----------
Germany -- 0.7%
1,930 Henkel KGaA 135,113
-----------
Total -- Preferred Stocks (Cost $455,721) 363,437
-----------
Warrants and Rights* -- 0.0%
France -- 0.0%
7,315 Vivendi Rights (Cost $0) 8,611
-----------
TOTAL INVESTMENTS -- 98.8%
(Cost $15,218,924) 18,269,115
Other Assets and Liabilities (net) -- 1.2% 219,073
-----------
TOTAL NET ASSETS -- 100.0% $18,488,188
===========
* Non-income producing security
ADR American Depositary Receipt
GDR Global Depositary Receipt
Sector Allocation
Banking 13.4%
Electrical & Electronics 13.0
Telecommunications 9.9
Utilities 7.5
Merchandising 5.9
Health and Personal Care 5.1
Industrial Components 4.6
Chemicals 3.9
Energy 3.8
Food and Household Products 3.4
Other 28.3
-----
98.8
Other Assets and Liabilities (net) 1.2
-----
Total Net Assets 100.0%
=====
See accompanying notes to the financial statements.
Govett Global Income Fund
Market Conditions During The Six Months Ended June 30, 1999
With the exception of Japan, yields rose significantly in the major
Government bond markets in the first half of 1999. Over the six
months, the major influence on Western bond markets has been the
strong growth of the US economy and the resultant changing view on the
path of US short term interest rates.
At the start of 1999, bond yields reflected the fear that the
international credit crunch and emerging markets turmoil, started by
the Russian default of August 1998, would push the US economy into
recession in 1999. However, during the first half of 1999 the US
economy has remained quite robust. The level of consumer confidence
remained high with continuing strong growth in consumer spending. The
industrial sector expanded at a solid pace with the National
Association of Purchasing Managers' Report showing the highest level
for some time. The labor market remained tight with unemployment
running at an exceptionally low level of 4.2% - 4.3%.
As a result of these economic developments, the US Treasury market
weakened significantly as market participants started to factor in
short interest rate rises rather than further cuts by the US Federal
Reserve previously expected. Higher Consumer Price Inflation data for
April also had a negative impact on the Treasury market. In fact, the
Federal Reserve raised interest rates by 0.25% to 5.0% at the end of
June to cool the economy and to prevent a build-up of inflationary
pressure. Over the period, US 10 year Treasury yields rose by 1.14% to
5.79%.
The US bond weakness was transmitted to European markets even though
the economic picture in Europe was considerably more sluggish than in
the USA. There was a sharp slow-down in European industrial output in
early 1999 from the negative trade effect of the Asian crisis.
However, consumer spending held up well. The European Central Bank
(ECB) cut interest rates by 0.5% to 2.5% in April to combat this
softness. The weaker economic picture early in the half year meant
that European bond yields did not rise as sharply as in the US.
However, Europe did underperform the US late in the review period as
investors became concerned about the continuing weakness of the euro
currency and comments that Italy could be forced to leave the euro
because of problems meeting budgetary targets.
The interest rate back-drop was supportive of UK bonds. Short term
interest rates were cut by from 6.25% to 5.0% during the half year.
However in spite of good domestic economic performance bond yields
moved up, influenced by developments in US bonds.
Japanese bond yields declined modestly after the sharp rise in late
1998. The Japanese economy continued to bounce along the bottom. As a
result domestic investors continued to favor bonds. Although emerging
market debt was volatile over the half year, spreads closed largely
unchanged from opening levels.
With respect to currencies, the major feature was a generally strong
US dollar. The euro currency launched on January 1 1999 depreciated
significantly as interest rate differentials favored the US dollar.
Fund Performance During The Six Months Ended June 30, 1999
For the half year ended June 30 1999 the total return at NAV of the
Fund was -5.76%. The figure reflects reinvestment of distribution of
0.15 cents per share. In comparison the Salomon Smith Barney World
Government Bond Index gave a return of -7.15% for the period.
The Fund benefited from its overweight exposure to the US dollar. At
half year end, the Fund held US dollar denominated bonds and cash
amounting to 61.1%. In addition, hedges out of the euro and Sterling
into the US dollar amounted to a further 20.6% of the Fund. In
performance terms being out of Japanese bonds, which outperformed, was
a negative. However this was partly offset, as a result, by the Fund
having no exposure to the weaker Japanese yen. The yen depreciated
against the US dollar.
During the half year overall portfolio duration was reduced from 6.9
years to 6.3 years. The duration of the index at end June was 5.6
years. The reduction in duration reflected a slightly more cautious
stance to markets in view of the strength of the US economy.
At Net
Asset Value
One Year Average Annual Total Return -1.46%
Three Year Average Annual Total Return+ 1.03%
Five Year Average Annual Total Return+ 3.07%
Since Inception Average Annual Total Return (1/7/92)+ 4.07%
Source: AIB Govett
+ Annualized
Current Strategy and Outlook
We feel that bond markets are overly pessimistic about future US
interest rate rises and the path of inflation generally. We expect
yields to fall over the coming months as the US economy slows and
inflation world-wide remains well behaved. Bonds may also benefit from
periodic "safe haven" inflows if emerging markets or stock markets
become volatile. Therefore, we will maintain our strategy of being
overweight duration on the portfolio with a bias towards US Treasury
long dated maturities. At current yield levels, we do not see value in
Japanese bonds.
On currencies, we feel that the US dollar is fully valued and has
limited scope for further appreciation. We have started to reduce the
Fund's hedge out of the euro back to the US dollar. We will also look
to gain yen exposure in very short date yen bonds on suitable
opportunities.
/S/M. HOWARD MAHON
Howard Mahon
Govett Global Income Fund
Schedule of Investments
June 30, 1999 (Unaudited)
Principal Value
Amount Description (See Note 1)
Corporate Bonds -- 8.4%
Ireland -- 4.2%
USD 200,000 BGB Finance
6.50%, 09/03/01 $ 200,480
----------
Norway -- 4.2%
USD 200,000 Telenor Series E
5.75%, 03/26/01 198,090
----------
Total Corporate Bonds (Cost $399,667) 398,570
----------
Government Bonds and Notes
- -- 86.2%
Austria -- 3.1%
ECU 127,029 Republic of Austria
6.25%, 05/31/06 145,460
----------
Denmark -- 2.9%
DKK 900,000 Kingdom of Denmark
6.00%, 11/15/09 135,602
----------
Germany -- 8.6%
ECU 51,129 Deutschland Republic
5.625%, 01/04/28 54,419
ECU 100,000 Deutschland Republic
6.00%, 06/20/16 114,922
ECU 204,517 Deutschland Republic
6.25%, 01/04/24 236,472
----------
405,813
----------
Netherlands -- 4.5%
ECU 181,512 Netherlands Government
7.00%, 06/15/05 214,595
----------
New Zealand -- 3.6%
NZD 300,000 New Zealand Government
8.00%, 11/15/06 172,611
----------
United Kingdom -- 14.9%
GBP 400,000 U.K. Gilt
9.75%, 08/27/02 705,441
----------
United States -- 48.6%
USD 400,000 U.S. Treasury Bond
6.50%, 11/15/26 414,000
USD 451,000 U.S. Treasury Note
6.125%, 11/15/27 446,772
USD 200,000 U.S. Treasury Note
6.50%, 08/31/01 203,750
USD 1,150,000 U.S. Treasury Note
7.50%, 02/15/05 1,238,406
----------
2,302,928
----------
Total -- Government Bonds and Notes
(Cost $4,111,722) 4,082,450
----------
TOTAL INVESTMENTS -- 94.6%
(Cost $4,511,389) 4,481,020
Other Assets and Liabilities (net) -- 5.4% 254,141
----------
TOTAL NET ASSETS -- 100.0% $4,735,161
==========
Forward Foreign Currency Contracts
In Net
Settle Contracts to Exchange Unrealized
Date Currency Deliver/Receive Currency For Appreciation
------ -------- --------------- -------- --------- ------------
Sales 7/21/99 ECU 300,000 USD 310,260 $ 690
7/21/99 GBP 425,000 USD 676,413 5,907
------
$6,597
======
The principal amounts of each non-U.S. dollar denominated
contract is stated in the currency in which the
contract is denominated.
DKK -- Danish Krone
ECU -- Euro
GBP -- British Pound
NZD -- New Zealand Dollar
USD -- United States Dollar
See accompanying notes to the financial statements.
(THIS PAGE INTENTIONALLY LEFT BLANK)
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
June 30, 1999 (Unaudited)
Emerging International
Markets Smaller Smaller International Global
Equity Companies Companies Equity Income
Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note 1) -
(see accompanying Schedules of Investments) $ 16,873,729 $ 61,300,170 $ 883,943 $ 18,269,115 $ 4,481,020
Cash -- 273,024 -- -- 182,123
Foreign currency, at value (Note 1) 73,048 119 14,973 848,011 --
Receivable from:
Securities sold 298,407 329,375 25,918 208,429 --
Net open forward currency contracts (Note 7) -- -- -- -- 6,597
Fund shares sold 68 442 95 8,188 --
Dividends and interest 57,784 78,537 2,544 52,687 93,816
Reimbursement from investment manager (Note 2) 121,766 -- 66,100 -- 28,209
Other assets 16,111 16,111 16,111 19,049 16,110
------------ ------------ ------------ ------------ ------------
Total assets 17,440,913 61,997,778 1,009,684 19,405,479 4,807,875
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Overdraft payable 106,588 -- 22,386 498,192 --
Payable for:
Securities purchased 693,251 1,714,181 -- 334,255 --
Fund shares repurchased 12,854 107,079 -- 7,295 28,638
Distributions declared -- -- -- -- 1,616
Investment manager (Note 2) -- 45,295 -- 12,745 --
Professional fees 23,105 26,097 20,502 22,098 26,098
Accrued expenses and other liabilities 165,086 229,418 26,997 42,706 16,362
------------ ------------ ------------ ------------ ------------
Total liabilities 1,000,884 2,122,070 69,885 917,291 72,714
------------ ------------ ------------ ------------ ------------
Net assets $ 16,440,029 $ 59,875,708 $ 939,799 $ 18,488,188 $ 4,735,161
============ ============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in-capital $ 26,301,919 $ 81,952,041 $ 799,093 $ 13,822,319 $ 9,504,828
Undistributed net investment income (loss) 14,436 (577,711) (90) 30,797 (163,393)
Accumulated net realized gain (loss) on
investments and foreign currency transactions (13,539,252) (32,671,245) 51,556 1,584,187 (4,578,371)
Net unrealized appreciation (depreciation) on
investments, forward currency contracts
and net other assets (net of accrued foreign
country tax unrealized appreciation) 3,662,926 11,172,623 89,240 3,050,885 (27,903)
------------ ------------ ------------ ------------ ------------
Net assets $ 16,440,029 $ 59,875,708 $ 939,799 $ 18,488,188 $ 4,735,161
============ ============ ============ ============ ============
Class A Retail Shares:
Net assets $ 16,440,029 $ 59,875,708 $ 51,753 $ 11,335,521 $ 4,735,161
============ ============ ============ ============ ============
Shares outstanding 1,522,497 2,899,880 4,375 940,888 634,712
============ ============ ============ ============ ============
Net Asset Value, offering and redemption
price per share $ 10.80 $ 20.65 $ 11.83 $ 12.05 $ 7.46
============ ============ ============ ============ ============
Institutional Class Shares:
Net assets $ 888,046 $ 7,152,667
============ ============
Shares outstanding 74,998 591,995
Net Asset Value, offering and redemption ============ ============
price per share $ 11.84 $ 12.08
============ ============
Cost of investments $ 13,161,173 $ 50,127,034 $ 795,102 $ 15,218,924 $ 4,511,389
Cost of foreign currency $ 73,436 $ 121 $ 14,811 $ 847,949 $ --
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
For the six months ended June 30, 1999 (Unaudited)
Emerging International
Markets Smaller Smaller International Global
Equity Companies Companies Equity Income
Fund Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest* $ 1,268 $ -- $ 1,113 $ -- $ 178,722
Dividends* 191,556 133,652 4,887 233,921 --
------------ ------------ ------------ ------------ ------------
Total investment income 192,824 133,652 6,000 233,921 178,722
------------ ------------ ------------ ------------ ------------
Expenses:
Management fee (Note 2) 73,556 290,424 4,045 91,478 23,111
Custody and administration fees 97,113 166,769 10,728 76,369 20,214
12b-1 fee Class A Retail Shares (Note 3) 25,746 101,760 12 20,166 10,785
Professional fees 27,692 27,684 21,678 27,684 27,684
Transfer agency fee 66,378 265,584 10,287 32,469 11,272
Registration and filing fees 11,976 26,069 7,822 8,657 8,064
Directors' fees and expenses 15,872 15,869 15,869 15,869 15,869
Insurance 3,394 3,394 3,394 3,394 3,394
Other 9,946 30,701 2,399 4,068 3,150
------------ ------------ ------------ ------------ ------------
Total expenses 331,673 928,254 76,234 280,154 123,543
------------ ------------ ------------ ------------ ------------
Less: Expenses reimbursable and fees waived
by the Manager (Note 2) (195,386) (245,099) (70,144) (77,030) (51,319)
------------ ------------ ------------ ------------ ------------
Net operating expenses 136,287 683,155 6,090 203,124 72,224
------------ ------------ ------------ ------------ ------------
Net investment income (loss) 56,537 (549,503) (90) 30,797 106,498
------------ ------------ ------------ ------------ ------------
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investment transactions 33,000 11,483,180 67,593 1,006,087 8,842
Foreign Currency transactions (60,112) (9,271) (16,037) 40,409 98,606
------------ ------------ ------------ ------------ ------------
Net realized gain (loss) (27,112) 11,473,909 51,556 1,046,496 107,448
------------ ------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation) on:
Investments 4,537,608 952,261 88,841 310,175 (538,997)
Foreign currency transactions (27,495) (1,056) 399 (901) (14,775)
------------ ------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation)
during the period 4,510,113 951,205 89,240 309,274 (553,772)
------------ ------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) 4,483,001 12,425,114 140,796 1,355,770 (446,324)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 4,539,538 $ 11,875,611 $ 140,706 $ 1,386,567 $ (339,826)
============ ============ ============ ============ ============
*Net of foreign taxes withheld of $ 11,430 $ 16,506 $ 599 $ 29,422 $ 2,836
============ ============ ============ ============ ============
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Emerging Markets Equity Fund Smaller Companies Fund
------------------------------ ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 1999 December 31, June 30, 1999 December 31,
(Unaudited) 1998 (Unaudited) 1998
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) $56,537 $7,191 $(549,503) $(1,267,489)
Net realized gain (loss) on investment
and foreign currency transactions (27,112) (7,679,065) 11,473,909 (22,950,235)
Net change in unrealized appreciation (depreciation) on investments,
forward currency contracts, foreign currency, and other assets 4,510,113 (914,243) 951,205 15,277,839
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations 4,539,538 (8,586,117) 11,875,611 (8,939,885)
----------- ----------- ----------- -----------
Distributions to shareholders:
From net investment income:
Class A Retail Shares -- (337,697) -- --
From net realized capital gains:
Retail Shares -- -- -- --
Institutional Class Shares -- -- -- --
Return of capital -- -- -- --
----------- ----------- ----------- -----------
Total distributions to shareholders -- (337,697) -- --
----------- ----------- ----------- -----------
Fund share transactions (Note 5):
Class A Retail Shares:
Proceeds from shares sold 416,052 2,989,068 1,276,273 56,126,236
Proceeds from shares issued in connection with merger
of Latin America Fund (Note 9) -- 1,238,739 -- --
Proceeds from shares issued in connection with merger
of Asia Fund (Note 9) -- 801,620 -- --
Net asset value of shares issued on reinvestment of distributions -- 313,058 -- --
Cost of shares repurchased (3,249,314) (14,583,908) (14,228,003) (114,159,592)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from Class A Retail Shares (2,833,262) (9,241,423) (12,951,730) (58,033,356)
Institutional Class Shares:
Proceeds from shares sold -- -- -- --
Proceeds from shares issued in connection with merger
of ARK International Equity Portfolio (Note 10) -- -- -- --
Net asset value of shares issued on reinvestment of distributions -- -- -- --
Cost of shares repurchased -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from Institutional Class Shares -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
fund share transactions (2,833,262) (9,241,423) (12,951,730) (58,033,356)
----------- ----------- ----------- -----------
Total change in net assets 1,706,276 (18,165,237) (1,076,119) (66,973,241)
Net Assets:
Beginning of period 14,733,753 32,898,990 60,951,827 127,925,068
----------- ----------- ----------- -----------
End of Period* $16,440,029 $14,733,753 $59,875,708 $60,951,827
=========== =========== =========== ===========
*Including undistributed net investment income (loss) of $14,436 $(42,101) $(577,711) $(28,208)
(a) Commencement of Operations was December 31, 1998.
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
International Smaller
Companies Fund International Equity Fund
------------------------------ ------------------------------
Six Months Ended Period Ended Six Months Ended Year Ended
June 30, 1999 December 31, June 30, 1999 December 31,
(Unaudited) 1998(a) (Unaudited) 1998
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) $(90) $-- $30,797 $(92,294)
Net realized gain (loss) on investment
and foreign currency transactions 51,556 -- 1,046,496 2,926,017
Net change in unrealized appreciation (depreciation) on investments,
forward currency contracts, foreign currency, and other assets 89,240 -- 309,274 112,226
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations 140,706 -- 1,386,567 2,945,949
----------- ----------- ----------- -----------
Distributions to shareholders:
From net investment income:
Class A Retail Shares -- -- -- --
From net realized capital gains: --
Retail Shares -- -- -- (1,795,430)
Institutional Class Shares -- -- -- (792,286)
Return of capital -- -- -- --
----------- ----------- ----------- -----------
Total distributions to shareholders -- -- -- (2,587,716)
----------- ----------- ----------- -----------
Fund share transactions (Note 5):
Class A Retail Shares:
Proceeds from shares sold 49,110 -- 263,262 1,654,711
Proceeds from shares issued in connection with merger
of Latin America Fund (Note 9) -- -- -- --
Proceeds from shares issued in connection with merger
of Asia Fund (Note 9) -- -- -- --
Net asset value of shares issued on reinvestment of distributions -- -- -- 1,696,393
Cost of shares repurchased -- -- (2,005,928) (5,574,274)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from Class A Retail Shares 49,110 -- (1,742,666) (2,223,170)
----------- ----------- ----------- -----------
Institutional Class Shares:
Proceeds from shares sold -- 749,983 1,075 1,775
Proceeds from shares issued in connection with merger
of ARK International Equity Portfolio (Note 10) -- -- -- 6,072,870
Net asset value of shares issued on reinvestment of distributions -- -- -- 790,393
Cost of shares repurchased -- -- (57,385) (51,851)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from Institutional Class Shares -- 749,983 (56,310) 6,813,187
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
fund share transactions 49,110 749,983 (1,798,976) 4,590,017
----------- ----------- ----------- -----------
Total change in net assets 189,816 749,983 (412,409) 4,948,250
Net Assets:
Beginning of period 749,983 -- 18,900,597 13,952,347
----------- ----------- ----------- -----------
$939,799 $749,983 $18,488,188 $18,900,597
End of Period* =========== =========== =========== ===========
*Including undistributed net investment income (loss) of $ -- $ -- $ 30,798 $ --
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Global Income Fund
------------------------------
Six Months Ended Year Ended
June 30, 1999 December 31,
(Unaudited) 1998
---------------- ------------
<S> <C> <C>
Increase (decrease) in net assets from:
Operations:
Net investment income (loss) $106,498 $359,699
Net realized gain (loss) on investment
and foreign currency transactions 107,448 (489,249)
Net change in unrealized appreciation (depreciation) on investments,
forward currency contracts, foreign currency, and other assets (553,772) 724,064
----------- -----------
Net increase (decrease) in net assets resulting from operations (339,826) 594,514
----------- -----------
Distributions to shareholders:
From net investment income:
Class A Retail Shares (119,925) (78,701)
From net realized capital gains:
Retail Shares -- --
Institutional Class Shares -- (276,101)
Return of capital ----------- -----------
Total distributions to shareholders (119,925) (354,802)
----------- -----------
Fund share transactions (Note 5):
Class A Retail Shares:
Proceeds from shares sold 28,754 130,822
Proceeds from shares issued in connection with merger
of Latin America Fund (Note 9) -- --
Proceeds from shares issued in connection with merger
of Asia Fund (Note 9) -- --
Net asset value of shares issued on reinvestment of distributions 88,197 212,673
Cost of shares repurchased (1,990,333) (3,791,557)
----------- -----------
Net increase (decrease) in net assets resulting
from Class A Retail Shares (1,873,382) (3,448,062)
----------- -----------
Institutional Class Shares:
Proceeds from shares sold -- --
Proceeds from shares issued in connection with merger
of ARK International Equity Portfolio (Note 10) -- --
Net asset value of shares issued on reinvestment of distributions --
Cost of shares repurchased -- --
----------- -----------
Net increase (decrease) in net assets resulting
from Institutional Class Shares -- --
----------- -----------
Net increase (decrease) in net assets resulting from
fund share transactions (1,873,382) (3,448,062)
----------- -----------
Total change in net assets (2,333,133) (3,208,350)
Net Assets:
Beginning of period 7,068,294 10,276,644
----------- -----------
End of Period* $4,735,161 $7,068,294
=========== ===========
*Including undistributed net investment income (loss) of $(163,393) $(149,966)
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
For a Share Outstanding Throughout Each Period:
Emerging Markets Equity Fund
---------------------------------------------------------------------------------------
Class A Retail Shares
---------------------------------------------------------------------------------------
Six Months
Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1999 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1998 1997 1996 1995 1994
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 7.96 $ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70
------- ------- ------- ------- ------- -------
Income from
investment operations:
Net investment income
(loss)+ 0.04 0.02 (0.11) (0.13) (0.06) (0.11)
Net realized and unrealized
gain (loss) on investments 2.80 (4.15) (1.31) 1.61 (0.98) (1.93)
------- ------- ------- ------- ------- -------
Total from investment
operations 2.84 (4.13) (1.42) 1.48 (1.04) (2.04)
------- ------- ------- ------- ------- -------
Less distributions to
shareholders:
From net investment income -- (0.15) -- -- -- --
In excess of net
investment income -- -- -- (0.06) -- --
From net realized gain -- -- -- -- (0.01) (2.33)
In excess of net
realized capital gain -- -- -- -- -- (0.04)
------- ------- ------- ------- ------- -------
Total distributions -- (0.15) -- (0.06) (0.01) (2.37)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 10.80 $ 7.96 $ 12.24 $ 13.66 $ 12.24 $ 13.29
======= ======= ======= ======= ======= =======
Total Return 35.68%** (34.18)% (10.40)% 12.08% (7.84)% (12.65)%
Ratios/Supplemental Data:
Net Assets, end of
period (000's) $16,440 $14,734 $32,899 $56,814 $75,887 $76,812
Net operating expenses to
average daily net assets
(Note A) 1.85%* 2.50% 2.50% 2.38% 2.50% 2.50%
Net investment income (loss) to
average daily net assets 0.77%* 0.03% (0.54)% (0.62)% (0.49)% (0.77)%
Portfolio turnover rate 39% 121% 120% 122% 115% 140%
- -----------------------------------
Note A: For the years presented, AIB Govett, Inc., investment manager (or its predecessors or affiliates thereof), waived a portion
of its management fee and reimbursed a portion of the other operating expenses of the Funds. Without the waiver and
reimbursement of expenses, the expense ratios as a percentage of average net assets for the periods indicated would
have been:
Expenses 4.50%* 4.09% 2.91% 2.62% 2.78% 2.65%
(a) Commencement of Operations was May 25, 1999.
(b) Commencement of Operations was December 31, 1998.
* Annualized
** Not Annualized
+ Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax basis
net investment income (loss). See Note 1.
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Smaller Companies Fund
---------------------------------------------------------------------------------------
Class A Retail Shares
---------------------------------------------------------------------------------------
Six Months
Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1999 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1998 1997 1996 1995 1994
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.85 $ 19.09 $ 21.83 $ 29.96 $ 19.06 $ 15.85
------- ------- ------- ------- ------- -------
Income from
investment operations:
Net investment income
(loss)+ (0.19) (0.35) (0.43) (0.44) (0.30) (0.10)
Net realized and unrealized
gain (loss) on investments 3.99 (1.89) (2.31) (2.84) 13.32 4.47
------- ------- ------- ------- ------- -------
Total from investment
operations 3.80 (2.24) (2.74) (3.28) 13.02 4.37
------- ------- ------- ------- ------- -------
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 $ 20.65 $ 16.85 $ 19.09 $ 21.83 $ 29.96 $ 19.06
======= ======= ======= ======= ======= =======
Total Return 22.55%** (11.73)% (12.55)% (10.62)% 69.13% 28.68%
Ratios/Supplemental Data:
Net Assets, end of
period (000's) $59,876 $60,952 $127,925 $259,735 $517,990 $76,873
Net operating expenses to
average daily net assets
(Note A) 2.35%* 1.95% 1.95% 1.81% 1.95% 1.95%
Net investment income (loss) to
average daily net assets (1.89)%* (1.51)% (1.64)% (1.40)% (1.64)% (1.13)%
Portfolio turnover rate 44% 104% 77% 406% 280% 519%
- -----------------------------------
Note A: For the years presented, AIB Govett, Inc., investment manager (or its predecessors or affiliates thereof), waived a portion
of its management fee and reimbursed a portion of the other operating expenses of the Funds. Without the waiver and
reimbursement of expenses, the expense ratios as a percentage of average net assets for the periods indicated would
have been:
Expenses 3.19%* 2.91% 2.59% 2.08% 2.12% 2.40%
(a) Commencement of Operations was May 25, 1999.
(b) Commencement of Operations was December 31, 1998.
* Annualized
** Not Annualized
+ Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax basis
net investment income (loss). See Note 1.
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
<CAPTION>
International Smaller Companies Fund
----------------------------------------------------------
Class A Retail Shares Institututional Class Shares
--------------------- -----------------------------
Six Months
Period Ended Ended
June 30, 1999 June 30, 1999
(Unaudited)(a) (Unaudited)(b)
--------------------- ----------------------------
<S> <C> <C>
Net asset value,
beginning of period $10.90 $10.00
------- -------
Income from
investment operations:
Net investment income
(loss)+ -- --
Net realized and unrealized
gain (loss) on investments 0.93 1.84
------- -------
Total from investment
operations 0.93 1.84
------- -------
Less distributions to
shareholders:
From net investment income -- --
In excess of net
investment income -- --
From net realized gain -- --
In excess of net
realized capital gain -- --
------- -------
Total distributions -- --
------- -------
Net asset value, end of period $11.83 $11.84
======= =======
Total Return 8.53%** 18.40%**
Ratios/Supplemental Data:
Net Assets, end of
period (000's) $ 52 $ 888
Net operating expenses to
average daily net assets
(Note A) 1.85%* 1.50%*
Net investment income (loss) to
average daily net assets (0.55)%* (0.01)%*
Portfolio turnover rate 62% 62%
- -----------------------------------
Note A: For the years presented, AIB Govett, Inc., investment manager (or its predecessors or affiliates thereof), waived a portion
of its management fee and reimbursed a portion of the other operating expenses of the Funds. Without the waiver and
reimbursement of expenses, the expense ratios as a percentage of average net assets for the periods indicated would
have been:
Expenses 15.89%* 18.84%*
(a) Commencement of Operations was May 25, 1999.
(b) Commencement of Operations was December 31, 1998.
* Annualized
** Not Annualized
+ 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.
</TABLE>
See accompanying notes to the financial statements.
<TABLE>
<CAPTION>
Financial Highlights (continued)
For a Share Outstanding Throughout Each Period:
International Equity Fund
--------------------------------------------------------------------------------------------------------------------
Class A Retail Shares Institutional Class Shares
-------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Six Months
Ended Year Ended Year Ended Year Ended Year Ended Year Ended Ended Period Ended
June 30, 1999 December 31, December 31, December 31, December 31, December 31, June 30, 1999 December 31,
(Unaudited) 1998 1997 1996 1995 1994 (Unaudited) 1998 (a)
Net asset value,
beginning of
period $ 11.17 $ 10.90 $ 11.19 $ 11.27 $ 10.16 $ 13.23 $ 11.19 $ 12.85
-------- -------- -------- -------- -------- -------- -------- --------
Income from
investment operations:
Net investment
income (loss)+ 0.03 (0.08) (0.24) (0.11) (0.08) (0.12) 0.03 (0.02)
Net realized and
unrealized gain
(loss) on
investments 0.85 2.15 0.18 1.45 1.20 (0.94) 0.86 (0.13)
-------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations 0.88 2.07 (0.06) 1.34 1.12 (1.06) 0.89 (0.15)
-------- -------- -------- -------- -------- -------- -------- --------
Less distributions
to shareholders:
From net investment
income -- -- -- (0.11) -- -- -- --
In excess of net
investment income -- -- -- (0.09) -- -- -- --
From net realized
gain -- (1.80) (0.23) (1.22) (0.01) (2.01) -- (1.51)
Return of capital -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions -- (1.80) (0.23) (1.42) (0.01) (2.01) -- (1.51)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period $ 12.05 $ 11.17 $ 10.90 $ 11.19 $ 11.27 $ 10.16 $ 12.08 $ 11.19
======== ======== ======== ======== ======== ======== ======== ========
Total Return 7.88%** 19.12% (0.71)% 12.13% 11.01% (8.44)% 7.95%** (1.15)%**
Ratios/
Supplemental
Data:
Net Assets,
end of period
(000's) $11,335 $12,223 $13,952 $25,822 $28,546 $32,296 $7,153 $6,678
Net operating
expenses to
average daily
net assets
(Note A) 2.35%* 2.45% 2.50% 2.39% 2.50% 2.50% 2.00%* 1.75%*
Net investment
income (loss) to
average daily net
assets 0.19%* (0.62)% (1.01)% (1.06)% (0.64)% (0.98)% 0.58%* (0.47)%*
Portfolio turnover
rate 19% 109% 51% 84% 101% 155% 19% 109%
- ------------------------
Note A: For the years presented,AIB Govett, Inc., investment manager (or its predecessors or affiliates thereof), waived a
portion of its management fee and reimbursed a portion of the other operating expenses of the Funds. Without the waiver
and reimbursement of expenses, the expense ratios as a percentage of average net assets for the periods indicated would
have been:
Expenses 3.19%* 3.30% 3.12% 3.09% 2.75% 2.74% 2.84%* 2.90%*
(a) Commencement of Operations was July 24, 1998.
* Annualized
** Not Annualized
+ 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.
</TABLE>
<TABLE>
<CAPTION>
Global Income Fund
- --------------------------------------------------------------------------------------------------------------------------------
Class A Retail Shares
- --------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1999 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 8.07 $ 7.82 $ 8.32 $ 8.97 $ 8.48 $ 10.16
-------- -------- -------- -------- -------- --------
Income from
investment operations:
Net investment
income (loss)+ 0.07 0.32 0.26 0.57 0.63 0.76
Net realized and
unrealized gain
(loss) on
investments (0.53) 0.27 (0.30) (0.54) 0.53 (1.67)
Total from -------- -------- -------- -------- -------- --------
investment
operations (0.46) 0.59 (0.04) 0.03 1.16 (0.91)
-------- -------- -------- -------- -------- --------
Less distributions
to shareholders:
From net investment
income (0.15) (0.06) (0.12) (0.66) (0.63) (0.24)
In excess of net
investment income -- -- -- (0.02) (0.04) --
From net realized
gain -- -- -- -- -- --
Return of capital -- (0.28) (0.34) -- -- (0.53)
-------- -------- -------- -------- -------- --------
Total
distributions (0.15) (0.34) (0.46) (0.68) (0.67) (0.77)
Net asset value, -------- -------- -------- -------- -------- --------
end of period $ 7.46 $ 8.07 $ 7.82 $ 8.32 $ 8.97 $ 8.48
======== ======== ======== ======== ======== ========
Total Return (5.76)%** 7.65% (0.35)% 0.34% 14.11% (9.16)%
Ratios/
Supplemental
Data:
Net Assets,
end of period
(000's) $4,735 $7,068 $10,277 $20,354 $41,181 $51,691
Net operating
expenses to
average daily
net assets
(Note A) 2.35%* 1.75% 1.75% 1.64% 1.75% 1.75%
Net investment
income (loss) to
average daily net
assets 3.49%* 4.37% 4.23% 7.17% 7.45% 8.30%
Portfolio turnover
rate 0% 23% 76% 236% 249% 701%
- ------------------------
Note A: For the years presented,AIB Govett, Inc., investment manager (or its predecessors or affiliates thereof), waived a
portion of its management fee and reimbursed a portion of the other operating expenses of the Funds. Without the waiver
and reimbursement of expenses, the expense ratios as a percentage of average net assets for the periods indicated would
have been:
Expenses 4.02%* 3.54% 2.82% 2.38% 1.93% 1.95%
(a) Commencement of Operations was July 24, 1998.
* Annualized
** Not Annualized
+ 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.
</TABLE>
Notes to Financial Statements (Unaudited)
Note 1--Significant Accounting Policies The Govett Funds, Inc. (the
"Company") consists of seven series (individually a "Fund" and
collectively the "Funds") which are registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act of 1940,
as amended (the "1940 Act"). Five series are currently being offered
to the public, as diversified open-end investment companies, except
Govett Global Income Fund, which is a non-diversified investment
company.
Each Fund has authorized the issuance of Retail Shares (Class A and
Class B) and Institutional Class shares. Presently, none of the Funds
offer Class B shares and only the International Equity Fund and
International Smaller Companies Fund have Institutional Class shares
outstanding. Each class of shares has equal rights as to assets and
voting privileges. Class A and Class B have exclusive voting rights
for their respective distribution plan. Each class of shares differs
in its respective service, distribution and transfer agent expenses.
Each Fund, except Govett Global Income Fund, seeks long-term capital
appreciation by investing in certain geographical regions or
companies. Govett Global Income Fund seeks primarily a high level of
current income, consistent with preservation of capital.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts and disclosures in
the financial statements. Actual results could differ from those
estimates. The following is a summary of significant accounting
policies consistently followed by the "Funds" in the preparation of
their financial statements.
Portfolio Valuation -- Portfolio securities listed or traded on
domestic or foreign securities exchanges are valued at the last quoted
sales price. Securities listed or traded on the over-the-counter
market are valued at the mean between the latest available current bid
and asked prices. Bonds and short-term debt securities with remaining
maturities in excess of 60 days are valued at the mean of
representative quoted bid and asked prices for such securities or, if
such prices are not available, they are based on prices for securities
of comparable maturity, quality and type. Prices are obtained from
pricing services as authorized by the Company's Board of Directors.
Short-term debt securities which mature in 60 days or less are valued
at amortized cost. Foreign securities quoted in foreign currency are
translated into U.S. dollars at the foreign currency rates applicable
on that day or at such other rates as AIB Govett, Inc. ("AIB Govett" or
the "Manager") and AIB Govett Asset Management Limited ("AIB Govett London"
or the "Subadviser") may determine to be appropriate in computing net
asset value. Securities for which there are no representative quotations
or valuations are valued at fair value as determined in good faith by the
Board of Directors.
Repurchase Agreements -- 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. The value of
the collateral is at least equal at all times to the total amount of
the repurchase obligations, including interest. The Manager and
Subadviser, acting under the supervision of the Board of Directors,
review 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 -- Investment securities and other assets
and liabilities denominated in a foreign currency are translated into
U.S. dollars at the foreign currency exchange rates applicable on that
day. Purchases and sales of securities, income receipts and expense
payments are translated into U.S. dollars at the prevailing exchange
rate on the respective dates of the transactions. Net realized gains
and losses on foreign currency transactions represent net gains and
losses from sales and maturities of forward currency contracts,
disposition of foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities 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 Foreign Currency Exchange Contracts -- The Funds may enter
into forward foreign 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. Forward foreign currency
contracts are marked-to-market daily using the forward foreign
currency exchange rates applicable on that day or at such other rates
as the Subadviser may determine to be appropriate.
Taxes -- No provision has been made for income tax because each Fund's
policy is to qualify as a regulated investment company under the
Internal Revenue Code and to distribute all of its taxable income.
At December 31, 1998, the following Funds had capital loss
carryforwards for Federal tax purposes available to offset future net
capital gains through the indicated expiration dates:
Emerging Smaller
Expiration Date December 31, Markets Equity Companies Global Income
- ---------------------------- -------------- --------- --------------
2002 $ 2,848,112 $ -- $2,025,272
2003 2,573,930 -- 170,438
2004 46,772 -- 1,412,148
2005 2,080,847 14,359,142 745,011
2006 10,135,022 29,786,012 --
----------- ----------- ----------
Total $17,684,683 $44,145,154 $4,352,869
=========== =========== ==========
Utilization of the capital loss carryforward of the Emerging Markets
Equity Fund may be limited because a portion of each capital loss is
from a merger with another fund.
Distributions to Shareholders -- All of the Funds except Govett Global
Income Fund intend to declare and pay distributions from net
investment income and net realized 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 gains, if any, annually.
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. The cost of securities sold 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.
Expenses -- Fund expenses not directly attributable to the operations
of specific class of shares are allocated pro rata to each class on
the basis of the relative net assets of the respective classes.
Expenses which are not readily attributable to a specific Fund are
allocated in such manner as deemed equitable by the
Company's Board of Directors, taking into consideration,
among other things, the nature and type of expense.
Note 2--Management Fees and Affiliated Service Providers
The Manager and Subadviser, pursuant to the terms of their respective
investment management contracts, provide all investment management
services to the Funds. As compensation for these services, the Manager
earns a monthly fee computed at an annual rate of 1.00% (0.75% for the
Global Income Fund) of the value of the average daily net assets of
each Fund. The Manager agreed to waive a portion of its management fee
and to reimburse a portion of the other operating expenses to the
extent that the Funds'annual ordinary operating expenses
exceed 2.35% for Class A shares and 2.00% for Institutional Class
shares for Smaller Companies Fund, International Equity Fund and
Global Income Fund and 1.85% for Class A shares and 1.50% for
Institutional Class Shares for the Emerging Markets Equity Fund and
International Smaller Companies Fund.
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 a
distribution fee, computed daily and paid quarterly, equal to an
annual rate not to exceed 0.35% of the value of each Fund's
average daily net assets, attributable to Class A shares, for
providing ongoing distribution services and facilities to the
Fund's Class A shares.
Note 4--Purchases and Sales of Securities
Costs of purchases and proceeds from sales of securities, excluding
short-term obligations, for the six months ended June 30, 1999, were
as follows. Only the Global Income Fund had long- term U.S. Government
securities transactions.
Purchases Sales
Emerging Markets Equity $ 5,783,369 $ 7,670,556
=========== ===========
Smaller Companies $26,821,029 $40,282,648
=========== ===========
International Smaller Companies $ 1,184,828 $ 457,319
=========== ===========
International Equity $ 3,467,032 $ 5,051,822
=========== ===========
Global Income:
U.S Government securities $ -- $ 200,531
Other Investments -- 1,435,018
----------- -----------
$ -- $ 1,635,549
=========== ===========
<TABLE>
<CAPTION>
Note 5--Fund Share Transactions
The Company's Articles of Incorporation permit the
Company's Board of Directors to establish an unlimited
number of series (or Funds), each of which may issue one or more
separate classes of shares. The Company can issue up to a total of
three billion shares and has authorized 250 million shares for each
Fund. Transactions in fund shares for the periods indicated below are
as follows:
Smaller Companies
Fund Global Income Fund
---------------------- -----------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
6/30/99 12/31/98 6/30/99 12/31/98
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares sold 69,950 2,955,025 5,382 16,469
Shares issued on reinvestment
of distributions -- -- 9,576 26,888
Shares repurchased (787,267) (6,038,915) (256,648) (481,587)
--------- ----------- --------- ---------
Net increase (decrease) (717,317) (3,083,890) (241,690) (438,230)
========= =========== ========= =========
<CAPTION>
International Smaller Companies Fund
--------------------------------------------------
Institutional
Class A Retail Shares Class Shares
--------------------- ---------------------------
Six Months
Period Ended Ended Period Ended
6/30/99 6/30/99 12/31/98
------------ ---------- ------------
<S> <C> <C> <C>
Shares sold 4,375 -- 74,998
Shares repurchased -- -- --
----- ---- ------
Net increase (decrease) 4,375 -- 74,998
===== ==== ======
<CAPTION>
Emerging Markets Equity Fund
------------------------------
Six Months
Ended Year Ended
6/30/99 12/31/98
--------- ----------
<S> <C> <C>
Shares sold 40,913 263,337
Shares issued in connection with merger of
Asia Fund -- 105,054
Shares issued in connection with merger of
Latin America Fund -- 186,487
Shares issued on reinvestment of distributions -- 25,065
Shares repurchased (370,004) (1,416,740)
--------- -----------
Net increase (decrease) (329,091) (836,797)
========= ===========
<CAPTION>
International Equity Fund
--------------------------------------------------
Institutional
Class A Retail Shares Class Shares
----------------------- -----------------------
Six Months Six Months
Ended Year Ended Ended Period Ended
6/30/99 12/31/98 6/30/99 12/31/98
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 22,694 135,936 94 1,224
Shares issued in
connection with merger
of ARK International
Equity Fund -- -- -- 529,774
Shares issued on
reinvestment
of distributions -- 149,566 -- 70,892
Shares repurchased (176,121) (471,046) (4,935) (5,054)
--------- --------- ------- --------
Net increase (decrease) (153,427) (185,544) (4,841) 596,836
========= ========= ======= ========
Note 6--Federal Income Tax Cost
At June 30, 1999, 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:
<CAPTION>
Emerging Smaller
Markets Equity Companies
Fund Fund
-------------- ------------
<S> <C> <C>
Aggregate cost $13,234,609 $50,127,155
=========== ===========
Gross unrealized appreciation 4,132,462 15,495,420
Gross unrealized depreciation (420,294) (4,322,286)
----------- -----------
Net unrealized appreciation (depreciation) $ 3,712,168 $11,173,134
=========== ===========
International Smaller International
Companies Equity
Fund Fund
---------------------- -------------
Aggregate cost $809,913 $16,066,873
======== ============
Gross unrealized appreciation 135,260 3,611,603
Gross unrealized depreciation (46,257) (561,350)
-------- ------------
Net unrealized appreciation
(depreciation) $ 89,003 $ 3,050,253
======== ============
<C>
Global
Income
Fund
-----------
Aggregate cost $4,511,389
==========
Gross unrealized appreciation 99,786
Gross unrealized depreciation (130,155)
----------
Net unrealized appreciation (depreciation) $ (30,369)
==========
Note 7 -- 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 foreign currency exchange contracts
(see Schedule of Investments).
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.
Note 8-Portfolio Investment Risks
Each Fund primarily purchases securities of foreign issuers other
than Smaller Companies Fund, which may purchase such
securities. Investing in securities of foreign issuers involves
special risks not typically associated with investing in securities
of U.S. issuers. These risks and considerations may involve
adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign
governmental laws or restrictions. In addition, the securities of
some foreign companies and securities markets are less liquid
and at times more volatile than securities of comparable U.S.
companies and U.S. securities and most foreign securities are
subject to the risk of currency rate fluctuations.
Note 9-Merger of Asia and Latin America Funds
On December 18, 1998, Emerging Markets Equity Fund acquired
all the net assets of the Asia and Latin America Funds. The
merger was accomplished by a tax-free exchange of 291,541
shares of Emerging Markets Equity Fund (valued at $2,235,733)
for 182,159 shares of Asia Fund and 271,709 of Latin America
Fund outstanding on December 18, 1998. Asia and Latin America
Funds'net assets at that date ($805,627 and $1,430,106,
respectively), including $4,007 and $191,367 of unrealized
depreciation, respectively, were combined with those of Emerging
Markets Equity Fund. The aggregate net assets of Emerging
Markets Equity Fund, Asia Fund and Latin America Fund
immediately before the merger were $12,325,440, $805,627 and
$1,430,106, respectively.
Note 10-Merger of ARK International Equity
Fund
On July 24, 1998, International Equity Fund acquired all the net
assets of the ARK International Equity Portfolio. The merger was
accomplished by a tax-free exchange of 529,774 shares of
International Equity Fund (valued at $6,808,077) for 592,388
shares of ARK International Equity Portfolio outstanding on July
24, 1998. ARK International Equity Portfolio's net assets at that
date $6,808,077, including $735,207 of unrealized depreciation,
were combined with those of International Equity Fund. The
aggregrate net assets of International Equity Fund and ARK
International Equity Portfolio immediately before the merger
were $13,456,570 and $6,808,077, respectively.
(THIS PAGE INTENTIONALLY LEFT BLANK)
The Govett Funds, Inc.
Board of Directors
Patrick K. Cunneen, Chairman
Elliott L. Atamian
Sir Victor Garland
James M. Oates
Frank R. Terzolo
P.O. Box 61503
King of Prussia, PA 19406-0903
Bulk Rate
U.S. Postage Paid
Postage Permit #258
Conshohocken
</TABLE>
