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[GRAPHIC]
SEMIANNUAL REPORT -- JUNE 30, 2000
[LOGO]
PACIFIC
ADVISORS
-
FUND INC.
GOVERNMENT SECURITIES fund
INCOME AND EQUITY fund
BALANCED fund
GROWTH fund
SMALL CAP fund
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PACIFIC ADVISORS
table of contents
MESSAGE FROM THE CHAIRMAN......................................................1
GOVERNMENT SECURITIES FUND.....................................................2
INCOME AND EQUITY FUND.........................................................4
BALANCED FUND..................................................................6
GROWTH FUND....................................................................8
SMALL CAP FUND................................................................10
SCHEDULE OF INVESTMENTS.......................................................14
STATEMENT OF ASSETS AND LIABILITIES...........................................26
STATEMENT OF OPERATIONS.......................................................28
STATEMENT OF CHANGES IN NET ASSETS............................................30
NOTES TO FINANCIAL STATEMENTS.................................................32
FINANCIAL HIGHLIGHTS..........................................................37
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MESSAGE
from the chairman
[GRAPHIC]
Fellow Shareholders,
For many investors this year has been a bad dream. By the end of the first
quarter, the equity market had turned its back on many of last year's leading
Internet and technology stocks, whose growth potential seemed limitless in the
new age of E-Commerce. It has even been a disappointing year for those investors
who believed an index fund would provide good returns year in and year out.
Index funds also suffered from the market correction that impacted last year's
winners. The rigid formula that determines the investment allocation of these
funds did not allow them to adjust defensively to a declining market.
HOW DID THE MARKET CHANGE SO QUICKLY?
In hindsight, it appears that concerns about Y2K preparedness had a
significant impact on the market. During the summer of 1999, the Federal Reserve
raised short-term interest rates by 0.75% in an effort to control inflation
produced by strong economic growth. The impact of these rate increases, however,
was more than offset by the Federal Reserve's decision to increase the money
supply in late 1999. This action was taken to prevent a potential liquidity
crisis due to Y2K problems on December 31. As we now know, there was no
liquidity crisis, but the additional money supply enabled investors to borrow
aggressively, which increased speculative investing in the Internet and
technology sectors. The growth in margin accounts, where investors used their
current stock position as collateral to borrow money, increased rapidly in the
fourth quarter of 1999 through mid-March 2000.
Early in 2000, the Federal Reserve reduced the money supply to pre-Y2K
levels. Investors, however, were convinced that market leaders had growth rates
which made them immune to interest rate increases. When the Federal Reserve
increased short-term interest rates again in March to slow the economy, the
Nasdaq market went into a decline, which continued through May. A combination of
higher interest rates and poor earnings performance by many Internet and
technology stocks sent Nasdaq into a bear market decline exceeding 20%. Other
major market indices also experienced significant corrections.
WHERE DO WE GO FROM HERE?
It now appears that the economy is slowing and that further interest rate
increases may not be needed. However, we expect the market to remain volatile
until the Federal Reserve indicates that inflation is under control and is no
longer a concern. In addition, the November presidential election will be a
factor as the markets anticipate and respond to the outcome. While we expect the
economy to continue its growth, investors will be watching third quarter
corporate profits to gauge the impact of a slowing economy.
We believe the equity market will improve through year-end, with the
potential for a rally later in the fourth quarter. The Nasdaq bear market has
caused investors to shift their focus from pure growth stocks to value stocks
which have both good earnings growth potential and fundamental value.
Historically, value stocks have emerged as market leaders at the beginning of a
new bull market cycle. While Internet and technology will continue to be
important sectors, investors will be more selective, choosing stocks that have
strong earnings to support their growth potential.
The Balanced, Growth and Small Cap Funds have performed well as the market
shifted its focus to value investing. Through mid August, each of the Funds had
a positive return and was outperforming its respective indices.
As seen in the excellent performance results of our Government Securities
Fund, long-term bonds have already begun to benefit from the Federal Reserve's
commitment to a slower growth economy. Additionally, the Income and Equity Fund
should benefit from a decline in intermediate corporate bond rates as inflation
concerns subside.
While there has been much uncertainty in the market during the past few
months, we believe that our emphasis on value investing has positioned Pacific
Advisors Funds to perform well in a slower growth economy.
Sincerely,
[SIGNATURE]
George A. Henning
Chairman of the Board and President
1
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PACIFIC ADVISORS
Government Securities Fund
INVESTS PRIMARILY IN FIXED-INCOME SECURITIES GUARANTEED BY THE U.S. GOVERNMENT
OR ITS INSTRUMENTALITIES. THE FUND MAY ALSO INVEST IN DIVIDEND-PAYING UTILITY
STOCKS FOR GROWTH OF INCOME.
INTERVIEW WITH PORTFOLIO MANAGERS
R. "KELLY" KELLY, CIC
RYAN KELLY
BETWEEN DECEMBER 31, 1999 AND JUNE 30, 2000 LONG-TERM INTEREST RATES FELL FROM
6.48% TO 5.89%. AS ECONOMIC SIGNALS INDICATED THAT LONG-TERM RATES HAD NEARED A
PEAK, THE FUND REPLACED ITS SHORT-TERM U.S. TREASURIES WITH LONG-TERM U.S.
TREASURY BONDS, EXTENDING THE PORTFOLIO'S AVERAGE MATURITY TO 23.7 YEARS BY LATE
JUNE.
FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE FUND HAD A TOTAL RETURN OF 6.28% FOR
CLASS A SHARES, AND 5.84% FOR CLASS C SHARES. BY COMPARISON, THE FUND'S
BENCHMARK, THE LEHMAN INTERMEDIATE TREASURY BOND INDEX(1), INCREASED 3.54%
DURING THE SAME PERIOD.
SINCE FEBRUARY 2000, LIPPER ANALYTICAL SERVICES, INC. HAS RANKED THE GOVERNMENT
SECURITIES FUND (A) AS ONE OF THE TOP 5 GOVERNMENT BOND FUNDS BASED ON ITS
1-YEAR RETURN. AT PRESENT, THE FUND RANKS AS THE NUMBER ONE GOVERNMENT BOND FUND
WITH A 1-YEAR RETURN OF 11.1% THROUGH AUGUST 22, 2000 (WALL STREET JOURNAL
8/24/00).
Q WHAT EVENTS CONTRIBUTED TO THE FUND'S EXCELLENT PERFORMANCE DURING THE
FIRST SIX MONTHS?
A In mid-1999, the Federal Reserve began raising short-term interest rates
to cool economic expansion and reduce the threat of inflation. At the same time,
the Fed continued to pump excess liquidity into the economy as a cushion against
potential Y2K crises, which limited the effect of the rate increases on the
economy and the stock market. Prices of bonds and bond substitutes declined
during this period as investors flocked to technology and Internet stocks on the
assumption that these sectors were immune to Fed actions.
In early 2000, the Fed repurchased the excess liquidity and continued
raising interest rates. As the money supply decreased and signs of economic
slowing appeared, investors sought companies with earnings, dividends, and
reasonable stock valuations. With many stocks in the leading sectors of the
market overvalued, the stock market struggled to find new leadership resulting
in an increased demand for high-quality bonds and income producing stocks.
As long-term interest rates began to decline, the demand for high-quality
bonds increased. The Fund sold its U.S. Treasury bills and notes and bought
long-term U.S. Treasury bonds. Repositioning the portfolio benefited the Fund's
performance in two ways. The Fund locked in a higher coupon yield and
experienced price appreciation in its bonds as interest rates declined.
Q WHAT CATALYSTS LED TO A DECLINE IN LONG-TERM INTEREST RATES?
A Over the past year, the Fed raised short-term interest rates by 1 3/4% in
an effort to restrain economic growth. Rising short-term rates compete with
stocks by increasing the cost of borrowing and reducing the credit available to
buy equities. In addition, slower growth diminishes corporate profits, which
tends to drive down stock valuations.
In the wake of rising interest rates, high-quality bonds and bond
surrogates such as utility common stocks became increasingly attractive for
their ability to provide greater stability and a more competitive rate of
return.
Q WHAT INDICATORS SUGGEST THAT LONG-TERM INTEREST RATES HAVE PEAKED?
A As we mentioned before, anticipation of a slower economy usually produces
a downward trend in long-term interest rates. Several signs including declining
home and retail sales already indicate the onset of slower economic growth. In
addition, the existence of an inverted yield curve, where short-term rates
exceed long-term rates, historically precedes sub-par economic growth.
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More important than signs of a slowing economy, is the Fed's commitment
to reducing economic growth to a sustainable level in the 3%-4% range. While it
is uncertain whether current rate increases will be sufficient to bring about
this reduction, it is clear that the Fed intends to implement enough rate
increases to produce an authentic economic slowdown. The Fed's commitment,
coupled with early signs of economic slowing, gives us a strong indication that
long-term interest rates have peaked.
Q HOW WILL CHANGES IN U.S. ECONOMIC GROWTH IMPACT GLOBAL ECONOMIC RECOVERY?
A The easy credit and robust consumer spending that fueled record U.S.
economic growth also increased the demand for foreign imports which in turn
aided the global economic recovery. Therefore, any decline in U.S. economic
growth is likely to have a negative impact on global economies. Despite this
setback, economic recovery should continue with global inflation kept in check
by deflationary forces such as deregulation and excess capacity, which will
limit companies' pricing power. As with the slowing economy in the U.S.,
setbacks abroad should attract foreign money to the U.S. government bond market.
This increased demand for long-term U.S. Treasury bonds should be favorable for
the Fund's performance.
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INVESTMENT MIX as of 6/30/00
<TABLE>
<C> <S> <C>
1. U.S. TREASURY BONDS 80.68%
2. EQUITIES 16.31%
3. CASH 3.01%
</TABLE>
1 The Lehman Treasury Bond Index is an unmanaged index of intermediate term
government bonds since 12/31/80.
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PACIFIC ADVISORS
Income and Equity Fund
INVESTS PRIMARILY IN INVESTMENT-GRADE FIXED-INCOME SECURITIES. THE FUND MAY ALSO
INVEST IN STOCKS FOR LONG-TERM CAPITAL APPRECIATION.
INTERVIEW WITH PORTFOLIO MANAGERS
THOMAS H. HANSON
STEPHEN K. BACHE, CFA
FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE FUND HAD A TOTAL RETURN OF 0.59% FOR
CLASS A SHARES, AND 0.58% FOR CLASS C SHARES. DURING THE SAME PERIOD THE FUND'S
BENCHMARK, THE LEHMAN INTERMEDIATE TREASURY BOND INDEX(1), INCREASED 3.54%.
Q HOW DID YOU ADJUST YOUR INVESTMENT STRATEGY AS INTEREST RATES CONTINUED
TO RISE?
A 2000 began with a high degree of uncertainty as to the effects of Y2K on
the markets and the economy. To safeguard against potential problems, the
Federal Reserve increased the money supply during the last half of 1999. When
Y2K proved to be non-event, this additional liquidity fueled further economic
growth. As a result, the Federal Reserve began raising short-term interest rates
to slow the economy and reduce inflationary concerns. The uncertainty of how
high the Fed would raise rates made intermediate corporate bonds less attractive
to investors.
In response to these economic conditions, the Fund maintained a defensive
position to protect principal. The Fund maintained a bond strategy of managing
to the yield curve. We selectively sold some intermediate-term bonds and
purchased shorter-term bonds, which demonstrated a greater potential for price
appreciation. By late June, the economy began to show signs of slowing and the
Fed appeared near the end of its interest rate increases. With short-term rates
approaching a peak, the Fund sold most of its short-term bonds and purchased
intermediate-term investment grade corporate bonds which offered the best
potential for price appreciation in the remainder of the year.
The economic events we mentioned earlier also created volatility in the
equity market. When the stock market began a significant correction in
mid-March, the Fund reduced its equity exposure, but remained invested in
quality stocks such as General Electric, Home Depot and Exxon Mobil.
Q HOW DID INTERMEDIATE-TERM CORPORATE BONDS PERFORM IN COMPARISON TO U.S.
TREASURY BONDS DURING THE FIRST HALF OF THE YEAR?
A With its rate increases in the first half of the year, the Fed
demonstrated a commitment to fighting inflation. As investors became confident
that the Fed would manage inflation, they began purchasing long-term Treasury
bonds to lock in higher yields. Prospects of a slower economy increased the
demand for long-term bonds, which led to a decline in long-term interest rates.
Since the market did not know how high the Fed would raise rates to fight
inflation, this created a high degree of uncertainty in the corporate bond
market during the first half of the year. The corporate bond market remained in
a trading range during this period and did not experience the price appreciation
seen in long-term Treasury bonds.
When the Fed indicates it no longer needs to raise interest rates to slow
the economy, intermediate-term interest rates will begin to level off and
decline. As intermediate rates begin to decline, corporate bonds should benefit
from the same type of price appreciation that long-term Treasury bonds
experienced earlier in the year.
Q WHAT IS YOUR OUTLOOK FOR CORPORATE BOND PERFORMANCE THROUGH YEAR-END?
A Various economic indicators suggest that the economy is slowing, which
means the Fed should be near the end of its most recent round of interest rate
increases. During the second half of the year, we anticipate receiving a clear
signal that the Fed is finished raising rates. A slower economy produced by
higher interest rates will put some pressure on corporate profits. Under these
conditions, the stock market is not likely to revisit
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the spectacular gains it achieved in recent years. Instead, we would anticipate
a more historical growth rate between 9% and 12% per year. As growth in the
equity market slows, the spread between the total return of stocks and bonds
will narrow, making corporate bonds, which carry less risk, more attractive to
investors.
Q WHAT ECONOMIC TRENDS DO YOU EXPECT TO DEVELOP IN THE LAST HALF OF THE
YEAR?
A Once again, we believe that the Fed will reach the conclusion of its
interest rate increases later this year. Over the next six months, the economy
will continue to adjust to the impact of higher interest rates, which should
slow consumer spending and reduce corporate revenue and profit growth. Economic
slowing should work to contain inflationary pressures benefiting investment
grade corporate bonds and higher quality stocks. While corporate bonds struggled
under interest rate uncertainty early in the year, a slowing economy should
benefit and improve the performance of investment grade corporate bonds in the
last half of the year.
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INVESTMENT MIX as of 6/30/00
<TABLE>
<C> <S> <C>
1. CORPORATE BONDS 79.75%
2. EQUITIES 11.07%
3. PREFERRED STOCK 5.05%
4. U.S. TREASURY NOTES 2.50%
5. CASH 1.63%
</TABLE>
1 The Lehman Treasury Bond Index is an unmanaged index of intermediate term
government bonds since 12/31/80.
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PACIFIC ADVISORS
Balanced Fund
INVESTS PRIMARILY IN LARGE AND MEDIUM CAP COMMON STOCKS WITH AT LEAST 25% OF THE
ASSETS INVESTED IN FIXED-INCOME SECURITIES.
INTERVIEW WITH PORTFOLIO MANAGER
STEPHEN K. BACHE, CFA
FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE FUND HAD A TOTAL RETURN OF 5.34% FOR
CLASS A SHARES, AND 4.74% FOR CLASS C SHARES. THE FUND OUTPERFORMED ITS
BENCHMARKS, THE S&P 500 INDEX(1) AND THE LEHMAN INTERMEDIATE TREASURY BOND
INDEX(2), WHICH RETURNED -1.00% AND 3.54%, RESPECTIVELY, FOR THE SAME PERIOD.
Q WHAT CHANGES DID YOU MAKE IN YOUR INVESTMENT STRATEGY AS INTEREST RATES
CONTINUED TO RISE?
A In the first half of 2000, the Federal Reserve demonstrated its
commitment to slowing economic growth and reducing the threat of inflation by
raising short-term interest rates to 6.5%. As rising interest rates threatened
corporate growth and profitability, investors shunned overvalued stocks which
led to a prolonged period of market volatility.
During this period the Fund maintained a mix of approximately 55%
equities and 40% bonds in its portfolio. In the corporate bond market, long-
term rates continued to exceed short-term rates. We took advantage of higher
rates and the potential for price appreciation by purchasing intermediate and
long-term investment grade bonds such as a 9.75% Caterpillar bond maturing in
2019 and a 9.875% Safeway bond maturing in 2007.
As new money came into the Fund, the Fund took advantage of market
volatility to acquire attractive equities at lower prices. When purchasing new
equities the Fund selected cyclical stocks like Honeywell and Waste Management,
companies whose services should remain in high demand in spite of slower
economic growth. Despite rampant volatility in the equity market, we continued
to benefit from strong performers in the technology and entertainment sectors
such as Nokia, Time Warner and Viacom.
Q WHAT ACCOUNTS FOR THE FUND'S ABILITY TO ACHIEVE STRONG PERFORMANCE WHILE
MAINTAINING A LOW LEVEL OF VOLATILITY?
A The "beta" of a fund measures its volatility relative to the S&P 500
Index. A beta of 1.0 means a fund experiences the same amount of volatility as
the S&P 500. A beta of less than 1.0 means a fund experiences less volatility
than the S&P 500. The Balanced Fund has consistently maintained a beta of
approximately 0.5.
Our ability to produce attractive returns while experiencing only half
the volatility of the overall market comes from selecting stocks and bonds which
prove less sensitive to shifts in the market or the economy. For instance, the
Fund selects high coupon bonds that tend to be less sensitive to changes in
interest rates. Similarly, when selecting equities the Fund gravitates toward
sectors whose products are in constant demand. Areas such as media,
entertainment and leisure comprise a significant portion of our equity position
because demand in these sectors typically remains strong despite changes in the
economy.
Q WHAT BENEFITS CAN A BALANCED FUND OFFER AN INVESTOR IN A VOLATILE AND
UNCERTAIN ECONOMIC ENVIRONMENT?
A Balanced funds offer investors stability, a quality which becomes
increasingly attractive during extended periods of market volatility and
economic uncertainty. As the name implies, a balanced fund maintains a
significant portion of its assets in both stocks and bonds.
We maintain a flexible investment strategy that allows us to adapt to
changing market conditions. When the stock market experiences a correction we
can still find attractive returns in the bond market and vice versa. In
addition, careful stock selection and yield management reduces the Fund's
volatility enabling us to provide more consistent returns.
6
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Q WHAT IS YOUR ECONOMIC OUTLOOK FOR THE REMAINDER OF THE YEAR?
A At the end of the 2nd quarter we saw declines in imports, industrial
production, and home sales, all of which suggest the onset of slower economic
growth. Economic slowing, however, will only continue if there is a decline in
consumer spending, the main catalyst of recent economic growth. Although the Fed
appears to be near the end of its interest rate increases, the possibility of
another rate increase will remain until the Fed believes it has produced an
authentic economic slowdown.
Higher short-term interest rates should continue to burden the stock
market, tightening the money supply and cutting into corporate earnings and
profits in the latter half of the year. When it becomes clear that the Fed has
reached the end of its interest rate increases corporate bonds should begin to
appreciate in value. Likewise, an end to the rate increases should help the
equity market find the leadership and direction needed to generate and sustain
another rally. We believe the Fund is well positioned to continue its good
performance.
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INVESTMENT MIX as of 6/30/00
<TABLE>
<C> <S> <C>
1. EQUITIES 53.11%
2. CORPORATE BONDS 41.60%
3. CASH 5.29%
</TABLE>
1 The Standard & Poor's 500 Index is an unmanaged, market capitalization
weighted measure of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and The Nasdaq Stock Market. The Index returns
assume reinvestment of dividends, but, unlike the Fund's returns, do not reflect
the effects of management fees or expenses.
2 The Lehman Treasury Bond Index is an unmanaged index of intermediate term
government bonds since 12/31/80.
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PACIFIC ADVISORS
Growth Fund
INVESTS PRIMARILY IN COMPANIES WHICH ARE A PART OF THE S&P 500 COMPOSITE
INDEX(1) OR THE NASDAQ 100 INDEX(2).
INTERVIEW WITH PORTFOLIO MANAGER
THOMAS H. HANSON
Q HOW DID THE FUND PERFORM IN THE FIRST HALF OF THE YEAR?
A For the six months ended June 30, 2000, the Fund had a total return of
4.37% for Class A shares, and 4.05% for Class C shares. During the same period,
the Fund's benchmarks, the S&P 500 and the Nasdaq 100 Indices, returned -1.00%
and 1.51%, respectively.
At the beginning of the year, the Fund took a defensive position against
increasing stock market volatility and maintained approximately 35% of its
assets in cash. From mid-March through April, the stock market experienced a
correction as investors demanded more reasonable stock valuations, particularly
in the overvalued technology and Internet sectors. Although the market began to
recover in the last half of the 2nd quarter, volatility persisted as rising
interest rates threatened to cut into corporate profits.
Q HOW DID A DEFENSIVE INVESTMENT STRATEGY BENEFIT THE FUND IN THE FIRST
HALF OF THE YEAR?
A The Fund aims to invest in the leading sectors and companies of the
Nasdaq 100 and the S&P 500 Indices. Extended periods of economic uncertainty,
however, create an absence of leadership, leading to persistent market
volatility. By maintaining smaller equity positions during these downtrends in
the market, the Fund reduced its exposure to investment losses. In addition, an
increased cash position gives the Fund the ability to take advantage of buying
opportunities as new leaders emerge and the market begins to rebound.
In contrast, index funds, which must invest according to a strict
allocation formula, were heavily concentrated in the overvalued stocks of the
S&P 500 and Nasdaq 100 indices. Without the flexibility to take a defensive
position in response to market volatility, many of these portfolios produced
smaller returns or experienced losses in the first half of the year.
Q WHICH SECTORS AND STOCKS PERFORMED WELL FOR THE FUND IN THE FIRST SIX
MONTHS?
A The technology sector continued to perform well this year, especially in
the 2nd quarter as it recovered from its mid-March correction. This correction
returned many tech stocks to more reasonable valuations, while companies with
strong earnings growth and solid fundamentals emerged as sector leaders. Those
companies included some of the Fund's best performers such as JDS Uniphase,
Nortel Networks, Cisco Systems and Oracle. The energy sector also performed
well, with stocks such as Anadarko, Burlington Resources, and BJ Services
benefiting from rising costs and increased demand in the oil and natural gas
industries.
Q WHAT ECONOMIC EVENTS OR INDICATORS WOULD LEAD YOU TO INCREASE THE FUND'S
EQUITY POSITION?
A In keeping with our investment strategy, the Fund will maintain a
defensive cash position until current market volatility subsides. At present, we
anticipate continued volatility through early November as the market awaits a
decisive end to the Federal Reserve's interest rate increases and the outcome of
the presidential election. By mid-fall, we would expect to see a definitive
uptrend in the market with leadership likely coming from the semiconductor,
fiber optic, and energy sectors. As this uptrend develops, we would anticipate
using the Fund's cash reserves to take advantage of buying opportunities,
gradually increasing the Fund's equity position.
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Q WHAT IS YOUR OUTLOOK FOR THE EQUITY MARKETS THROUGH YEAR-END?
A With signs of slower economic growth on the horizon, it appears that the
Fed has reached or neared the end of its current round of interest rate
increases. These rate increases should continue to filter through the economy
resulting in a drop in consumer spending and a decrease in corporate profits.
Rising rates and slower economic growth should benefit both the economy and the
market by reducing the threat of inflation and returning many stocks to more
reasonable valuations.
Market volatility should continue throughout the rest of the year as the
economy continues to adjust to a slower pace. Despite continued volatility, we
expect to see a positive trend in the market over the next six months, again
with the technology and energy sectors leading the way. While a positive trend
should produce growth and attractive buying opportunities, it seems unreasonable
to expect that either the S&P 500 or the Nasdaq 100 Indices would return to
their highs by year-end.
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INVESTMENT MIX as of 6/30/00
<TABLE>
<C> <S> <C>
1. EQUITIES 61.78%
2. CASH 38.22%
</TABLE>
1 The Standard & Poor's 500 Index is an unmanaged, market capitalization
weighted measure of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and The Nasdaq Stock Market. The Index returns
assume reinvestment of dividends but, unlike the Fund's returns, do not reflect
the effects of management fees or expenses.
2 The Nasdaq 100 Stock Index is an unmanaged, weighted measure of 100 largest
non-financial domestic and international common stocks listed on The Nasdaq
Stock Market. The Index returns assume reinvestment of dividends, but, unlike
the Fund, do not reflect management fees or expenses.
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PACIFIC ADVISORS
Small Cap Fund
INVESTS PRIMARILY IN SMALL COMPANY VALUE STOCKS WITH AN AVERAGE MARKET CAP BELOW
$200M. THE FUND FOCUSES ON COMPANIES WITH STRONG EARNINGS AND GROWTH POTENTIAL.
INTERVIEW WITH PORTFOLIO MANAGERS
THOMAS H. HANSON
GEORGE A. HENNING
FOR THE SIX MONTHS ENDED JUNE 30, 2000, THE FUND HAD A TOTAL RETURN OF -7.85%
FOR CLASS A SHARES, AND -9.05% FOR CLASS C SHARES. THE FUND'S BENCHMARK, THE
RUSSELL 2000 STOCK INDEX(1), INCREASED 2.47% DURING THE SAME PERIOD.
Q HOW WERE SMALL CAP VALUE STOCKS IMPACTED BY MARKET VOLATILITY IN THE
FIRST HALF OF THE YEAR?
A Stock market speculation throughout 1999 resulted in the significant
overvaluation of many technology and Internet stocks. The market's bias toward
technology stocks also left many small cap value stocks unrecognized and
undervalued. When technology and Internet companies came under pressure at the
end 1999, investors became concerned about overvaluation in these sectors and
began to move into undervalued sectors with better growth potential. As a result
of this broadening in the market, small cap value stocks performed well in
February and early March.
In mid-March, rising interest rates created a general pessimism about
corporate profitability which led to a correction in the market. Although the
technology and Internet sectors took the biggest hits, every area of the market
suffered, including small cap value stocks.
In May, volatility persisted, but the market began to recover as it
shifted its focus from companies with growth potential to companies with growth
and earnings potential. This recovery began spreading to small cap value stocks
in June; and since June, small cap value stocks have continued to benefit from a
renewed interest in companies with solid fundamentals and revenue growth.
Q HOW DID THE FUND ADJUST ITS INVESTMENT STRATEGY IN RESPONSE TO RECENT
STOCK MARKET VOLATILITY?
A The Fund continues to focus on value stocks, targeting small cap
companies that demonstrate market leadership and strong growth potential. The
market volatility in recent months provided the Fund with opportunities to
purchase larger small cap stocks at attractive discounts. With a larger market
following, these stocks should be among the first to benefit from a recovery in
small cap value stocks. This strategy increased the average market cap of the
portfolio to approximately $125 million and reduced the Fund's position in
micro-cap stocks of companies with less than $100 million in market
capitalization.
Stocks purchased by the Fund as a continuation of this strategy included
Linens 'N Things, a home furnishings retailer profiting from robust consumer
spending; Fred's, a chain of discount stores with a history of strong sales
during periods of slower economic growth; A.C.L.N., a company that ships cars
from the U.S. and Europe to third world countries; and Morrison Knudsen, a heavy
construction firm expected to benefit from money appropriated by Congress for
highway construction and other large infrastructure projects.
By mid-summer, the Fund began to benefit from this strategy as evidenced
by a one-month return of 2.8% in June and 5.9% in July. With recovery in small
cap value stocks gaining momentum, improved performance in this area of the
market is expected to continue.
Q HAS THE FUND SEEN IMPROVED PERFORMANCE IN ITS MICRO-CAP POSITIONS?
A Despite a poor market for micro-cap stocks during the last 18 months, the
Fund maintained positions in a number of solid micro-cap companies with
promising growth potential. Although these companies produced consistent revenue
and profit growth, their stock prices remained relatively unchanged. In June,
however, small cap value stocks began to experience a meaningful recovery
10
<PAGE>
and many of these companies appreciated 20-70% from their stock prices at the
beginning of the year.
Some of the companies with improved performance include America Service
Group, which provides healthcare to prisons; Cerprobe Corp, a producer of
microchip testing equipment; East West Bancorp, the leading bank servicing
Chinese-Americans on the West Coast; Lifemark, a provider of HMO services to
state and local governments; and Meridian Medical Technologies, which recently
developed a new diagnostic testing kit used in assessing stroke victims.
The outlook for further price appreciation in these stocks remains
favorable since these companies continue to produce above average revenue and
profit growth.
Q WHAT IS THE CURRENT OUTLOOK FOR SMALL CAP VALUE STOCKS?
A The outlook for small cap value stocks has improved considerably since
the first of the year. As we mentioned earlier, with rising interest rates
expected to slow economic growth, investors became concerned that many
technology and Internet companies would not be able to achieve the revenue and
profit growth built into their valuations. As the market placed greater
importance on earnings, many of these stocks experienced a significant reduction
in their valuations. At the same time, small cap value stocks, which offered
strong growth potential in revenues and earnings, became more attractive. While
we expect the technology and Internet sectors will maintain leadership
positions, the market will become more selective in these areas, favoring those
companies that can produce strong growth and earnings.
Actions by the Federal Reserve to reduce inflationary concerns by raising
short-term interest rates should lead to a period of slower economic growth.
Small cap value stocks generally perform better in these market conditions
because they carry less debt, making them less sensitive to interest rate
movements. In addition, small cap companies often provide unique products and
services in specialized markets, which enables them to increase revenue and
earnings growth more rapidly. The ability to produce strong growth in a slower
economy should also make some of these companies attractive takeover candidates
as larger companies look for new sources of earnings growth.
In the first half of the year, small cap value stocks entered a
much-awaited period of recovery. Slower economic growth and a market emphasis on
companies with strong fundamentals and good earnings should continue to create
an environment favorable for small cap value stocks.
-------------------------------------------------------
INVESTMENT MIX as of 6/30/00
<TABLE>
<C> <S> <C>
1. EQUITIES 99.90%
2. CASH 0.10%
</TABLE>
1 The Russell 2000 Stock Index is an unmanaged, market-weighted measure of
stock market performance. It contains stocks of the 2,000 smallest publicly
traded companies of the Russell 3000 Index. The Russell 2000 Stock Index does
not take capital gains into consideration, and, unlike the Fund, does not
reflect the effects of management fees or expenses.
11
<PAGE>
PACIFIC ADVISORS FUND INC.
notes
12
<PAGE>
PACIFIC ADVISORS
financial statements
[GRAPHIC]
13
<PAGE>
PACIFIC ADVISORS GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
----------------------------------------------------------------
US GOVERNMENT SECURITIES - 78.77%
US Treasury Bonds
US Treasury Bond 8.125%
08/15/19 $ 350,000 $ 422,188
US Treasury Bond 8.125%
08/15/21 350,000 426,781
US Treasury Bond 7.25% 08/15/21 350,000 392,656
US Treasury Bond 7.625%
11/15/22 350,000 408,735
US Treasury Bond 7.125%
02/15/23 380,000 421,563
US Treasury Bond 7.50% 11/15/24 380,000 441,987
US Treasury Bond 7.625%
02/15/25 380,000 448,163
US Treasury Bond 6.875%
08/15/25 400,000 434,875
US Treasury Bond 6.75% 08/15/26 410,000 440,622
US Treasury Bond 6.625%
02/15/27 400,000 424,125
US Treasury Bond 6.375%
08/15/27 400,000 411,375
US Treasury Bond 5.50% 08/15/28 500,000 458,594
US Treasury Bond 6.125%
08/15/29 400,000 404,250
----------------------------------------------------------------
5,535,914
----------------------------------------------------------------
TOTAL US GOVERNMENT SECURITIES
(Cost: $5,433,111) 5,535,914
-----------
<CAPTION>
Number of
Shares Value
----------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 15.92%
Financial Services - Diversified
Convergys Corporation* 5,000 259,375
----------------------------------------------------------------
Gas - Integrated
Kinder Morgan, Inc. 5,100 176,269
----------------------------------------------------------------
Telephone Systems
Bell Atlantic Corporation 2,240 113,820
SBC Communications 2,850 123,262
----------------------------------------------------------------
237,082
----------------------------------------------------------------
Utilities - Electric
Ipalco Enterprises, Inc. 7,850 157,981
Nisource, Inc. 8,830 164,459
----------------------------------------------------------------
322,440
----------------------------------------------------------------
Utilities - Telephone
Alltel Corporation 2,000 123,875
----------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $1,045,706) 1,119,041
-----------
TOTAL INVESTMENT SECURITIES - 94.69%
(Cost: $6,478,817) $ 6,654,955
-----------
SHORT-TERM INVESTMENTS - 2.93%
United Missouri Bank Money
Market Fund 206,196
OTHER ASSETS LESS LIABILITIES - 2.38% 167,311
-----------
TOTAL NET ASSETS - 100% $ 7,028,462
----------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
PACIFIC ADVISORS INCOME AND EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
-----------------------------------------------------------------
CORPORATE BONDS - 78.25%
Aerospace & Defense
McDonnell Douglas 9.75%
04/01/12 $ 114,000 $ 131,872
-----------------------------------------------------------------
Auto - Manufacturers
Ford Motor Company 9.50%
09/15/11 19,000 21,498
-----------------------------------------------------------------
Banks - Regional
Banc One Corporation 9.875%
03/01/09 52,000 58,053
First Union Corporation 6.824%
08/01/26 25,000 24,208
HSBC USA Inc. 8.375% 02/15/07 158,000 161,271
-----------------------------------------------------------------
243,532
-----------------------------------------------------------------
Cosmetic - Personal Care
Procter & Gamble 8.50% 08/10/09 65,000 70,738
-----------------------------------------------------------------
Financial Services
Associates Corporation N.A.
8.55% 07/15/09 150,000 154,479
Associates Corporation N.A.
8.15% 08/01/09 105,000 105,476
Progressive Corporation 7.30%
06/01/06 40,000 39,077
-----------------------------------------------------------------
299,032
-----------------------------------------------------------------
Financial Services - Diversified
General Electric Capital 8.50%
07/24/08 82,000 87,446
Texaco Capital 8.625% 06/30/10 171,000 183,800
-----------------------------------------------------------------
271,246
-----------------------------------------------------------------
Financial Services - Specialty
Ford Capital B.V. 9.50%
06/01/10 75,000 81,671
-----------------------------------------------------------------
Gas - Integrated
Coastal Corporation 10.25%
10/15/04 125,000 137,471
-----------------------------------------------------------------
Insurance - Full Line
American General Financial
8.125% 08/15/09 146,000 146,426
Cigna Corporation 7.40%
05/15/07 94,000 89,390
Cigna Corporation 8.25%
01/01/07 102,000 101,668
Transamerica Corporation 9.375%
03/01/08 70,000 75,979
-----------------------------------------------------------------
413,463
-----------------------------------------------------------------
Insurance - Life
Conseco, Inc. 6.80% 06/15/05 125,000 82,500
Sunamerica Inc. 9.95% 08/01/08 23,000 26,068
-----------------------------------------------------------------
108,568
-----------------------------------------------------------------
Insurance - Specialty
MBIA Inc. 9.375% 02/15/11 25,000 27,405
-----------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
PACIFIC ADVISORS INCOME AND EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
-----------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS CONTINUED
Oil - Integrated Majors
Atlantic Richfield 9.125%
03/01/11 $ 165,000 $ 186,990
Phillips Petroleum 9.375%
02/15/11 25,000 27,129
-----------------------------------------------------------------
214,119
-----------------------------------------------------------------
Oil - Pipelines
ANR Pipeline 7.00% 06/01/25 44,000 42,458
-----------------------------------------------------------------
Railroads
Union Pacific Resources 7.00%
10/15/06 103,000 98,686
-----------------------------------------------------------------
Real Estate
Secured Finance 9.05% 12/15/04 174,000 186,495
-----------------------------------------------------------------
Retailers - Broadline
Dayton Hudson Company 10.00%
01/01/11 50,000 57,966
-----------------------------------------------------------------
Telephone Systems
New York Telephone Company
8.625% 11/15/10 50,000 52,630
New York Telephone Company
7.00% 06/15/13 47,000 44,547
-----------------------------------------------------------------
97,177
-----------------------------------------------------------------
US Government Agency
InterAmerican Development Bank
8.40% 09/01/09 10,000 10,824
-----------------------------------------------------------------
Utilities - Electric
Baltimore Gas & Electric 7.50%
03/01/23 50,000 46,224
Baltimore Gas & Electric 8.54%
09/18/06 100,000 104,464
Niagara Mohawk Power 9.75%
11/01/05 65,000 70,127
Pacific Gas & Electric 8.375%
05/01/25 45,000 44,497
Potomac Electric Power 5.875%
10/15/08 75,000 67,931
-----------------------------------------------------------------
333,243
-----------------------------------------------------------------
Utilities - Gas
Consolidated Natural Gas 6.625%
12/01/13 30,000 26,750
-----------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost: $3,032,131) 2,874,214
-----------
<CAPTION>
Number of
Shares Value
-----------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 10.86%
Building Materials
Home Depot, Inc. 1,500 74,906
-----------------------------------------------------------------
Diversified Companies
General Electric 1,500 79,500
-----------------------------------------------------------------
Financial Services - Diversified
Citigroup, Inc. 750 45,188
-----------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
PACIFIC ADVISORS INCOME AND EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
-----------------------------------------------------------------
<S> <C> <C>
COMMON STOCK CONTINUED
Investment Companies
Alliance Capital Management 1,000 $ 47,438
-----------------------------------------------------------------
Oil - Integrated Majors
Exxon Mobil Corporation 528 41,448
-----------------------------------------------------------------
Pharmaceuticals
Schering-Plough Corporation 600 30,300
-----------------------------------------------------------------
Software & Computer Processing Equipment
Microsoft* 1,000 80,000
-----------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $150,764) 398,780
-----------
PREFERRED STOCK - 4.95%
Insurance - Full Line
American General Financial LLC 1,200 28,875
Torchmark Capital LLC 9.18%
Series A 1,200 29,400
Unum Corporation 8.80%
Series A 1,500 35,906
-----------------------------------------------------------------
94,181
-----------------------------------------------------------------
Real Estate Investment Trusts
Price Enterprises Class A 6,000 87,750
-----------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost: $186,975) 181,931
-----------
<CAPTION>
Principal
Amount Value
-----------------------------------------------------------------
<S> <C> <C>
US GOVERNMENT SECURITIES - 2.45%
US Treasury Notes
US Treasury Note 7.875%
11/15/04 $ 85,000 89,967
-----------------------------------------------------------------
TOTAL US GOVERNMENT SECURITIES
(Cost: $85,257) 89,967
-----------
TOTAL INVESTMENT SECURITIES - 96.51%
(Cost: $3,455,127) $ 3,544,892
-----------
SHORT-TERM INVESTMENTS - 1.60%
United Missouri Bank Money
Market Fund 58,620
OTHER ASSETS LESS LIABILITIES - 1.89% 69,586
-----------
TOTAL NET ASSETS - 100% $ 3,673,098
-----------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
PACIFIC ADVISORS BALANCED FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
------------------------------------------------------------------
COMMON STOCK - 49.15%
Chemicals - Specialty
Cabot Corporation 5,000 $ 136,250
------------------------------------------------------------------
Communications
Nokia Corporation 12,500 624,219
------------------------------------------------------------------
Entertainment
AT&T - Liberty Media Group
Class A* 12,000 291,000
GC Companies, Inc.* 3,000 67,125
Time Warner, Inc. 3,000 228,000
Viacom, Inc.* 6,000 409,125
------------------------------------------------------------------
995,250
------------------------------------------------------------------
Financial Services - Diversified
Convergys Corporation* 6,000 311,250
Household International 2,000 83,125
------------------------------------------------------------------
394,375
------------------------------------------------------------------
Financial Services - Specialty
Freddie Mac 4,000 162,000
------------------------------------------------------------------
Forest Products
Rayonier, Inc. 1,500 53,812
------------------------------------------------------------------
Gas - Integrated
Enron Corporation 5,000 322,500
------------------------------------------------------------------
Health Care Provider
Johnson & Johnson 1,500 152,812
------------------------------------------------------------------
Industrial
UCAR International, Inc.* 7,500 97,969
------------------------------------------------------------------
Industrial & Commercial Services
Reliance Steel 6,000 114,750
------------------------------------------------------------------
Industrial - Diversified
Coorstek, Inc. 5,000 230,000
Honeywell International, Inc. 3,000 101,062
------------------------------------------------------------------
331,062
------------------------------------------------------------------
Insurance - Full Line
Berkshire Hathaway, Inc. 2 107,600
------------------------------------------------------------------
Insurance - Life
MetLife, Inc. 6,000 126,375
------------------------------------------------------------------
Insurance - Specialty
Farm Family Holdings, Inc.* 4,000 123,750
------------------------------------------------------------------
Medical & Biotechnology
McKesson HBOC, Inc. 10,000 209,375
------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
PACIFIC ADVISORS BALANCED FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK CONTINUED
Oil Equipment & Services
Cooper Cameron* 2,000 $ 132,000
------------------------------------------------------------------
Paper Products
American Greetings - Class A 3,000 57,000
------------------------------------------------------------------
Pharmaceuticals
Pfizer, Inc. 2,750 132,000
------------------------------------------------------------------
Pollution/Waste Management
Waste Management, Inc. 4,000 76,000
------------------------------------------------------------------
Publishing
Dun & Bradstreet Corporation 6,000 171,750
R H Donnelley Corporation* 9,000 174,375
------------------------------------------------------------------
346,125
------------------------------------------------------------------
Railroads
GATX Corporation 2,000 68,000
------------------------------------------------------------------
Real Estate
Catellus Development
Corporation* 10,000 150,000
------------------------------------------------------------------
Software & Computer Processing Equipment
Reynolds & Reynolds 6,000 109,500
------------------------------------------------------------------
Trucking
CNF Transportation, Inc. 3,000 68,250
------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $2,907,473) 5,090,974
------------
<CAPTION>
Principal
Amount Value
------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS - 41.27%
Banks - Money Center
Swiss Bank Corporation - NY
7.375% 07/15/15 $ 300,000 286,218
------------------------------------------------------------------
Banks - Regional
Banc One Corporation 9.875%
03/01/09 100,000 111,640
Barnett Banks, Inc. 10.875%
03/15/03 462,000 496,112
------------------------------------------------------------------
607,752
------------------------------------------------------------------
Food Retailers
McDonald's Corporation 8.875%
04/01/11 167,000 186,926
Safeway 9.65% 01/15/04 156,000 165,744
Safeway 9.875% 03/15/07 86,000 94,299
Safeway 7.00% 09/15/07 160,000 152,237
------------------------------------------------------------------
599,206
------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
PACIFIC ADVISORS BALANCED FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS CONTINUED
Industrial
Caterpillar, Inc. 9.75%
06/01/19 $ 77,000 $ 80,413
Tenneco, Inc. 10.375% 11/15/00 86,000 87,007
Tenneco Packaging PTV 8.00%
04/15/07 50,000 48,029
------------------------------------------------------------------
215,449
------------------------------------------------------------------
Insurance - Full Line
CIGNA Corporation 8.25%
01/01/07 131,000 130,574
------------------------------------------------------------------
Iron & Steel
Wheeling Pittsburgh 9.375%
11/15/03 72,000 74,486
------------------------------------------------------------------
Oil - Integrated Majors
Atlantic Richfield 9.125%
03/01/11 377,000 427,244
------------------------------------------------------------------
Telephone Systems
BellSouth Telecommunications
5.85% 11/15/45 100,000 99,475
NYNEX Corporation 9.55%
05/01/10 283,815 300,024
Sprint Spectrum LP 11.00%
08/15/06 100,000 107,643
------------------------------------------------------------------
507,142
------------------------------------------------------------------
Utilities - Electric
Alabama Power 9.00% 12/01/24 125,000 128,811
Baltimore Gas & Electric 7.50%
03/01/23 49,000 45,300
Baltimore Gas & Electric 7.50%
03/01/23 55,000 51,665
Cleveland Electric Illuminating
7.625% 08/01/02 188,000 187,108
Niagara Mohawk Power 9.75%
11/01/05 275,000 296,690
Public Service Electric & Gas
6.25% 01/01/07 75,000 69,984
Public Service Electric & Gas
7.375% 03/01/14 124,000 118,950
Public Service Electric & Gas
7.00% 09/01/24 288,000 250,824
Toledo Edison 7.875% 08/01/04 278,000 277,216
------------------------------------------------------------------
1,426,548
------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost: $4,346,723) 4,274,619
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
PACIFIC ADVISORS BALANCED FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK - 3.53%
Real Estate Investment Trusts
Price Enterprises Class A 25,000 $ 365,625
------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost: $347,380) 365,625
------------
TOTAL INVESTMENT SECURITIES - 93.95%
(Cost: $7,601,576) $ 9,731,218
------------
SHORT-TERM INVESTMENTS - 5.25%
United Missouri Bank Money
Market Fund 543,734
OTHER ASSETS LESS LIABILITIES - 0.80% 82,681
------------
TOTAL NET ASSETS - 100% $ 10,357,633
------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
PACIFIC ADVISORS GROWTH FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
------------------------------------------------------------------
COMMON STOCK - 62.58%
Building Materials
Home Depot, Inc. 300 $ 14,981
------------------------------------------------------------------
Communications
Flextronics International, Ltd. 400 27,475
JDS Uniphase Corporation 400 47,950
Nortel Networks Corporation 600 40,950
------------------------------------------------------------------
116,375
------------------------------------------------------------------
Computers & Related Equipment
Cisco Systems, Inc.* 600 38,138
Compaq Computer Corporation 500 12,781
Dell Computer Corporation* 500 24,656
EMC Corporation* 600 46,163
Sun Microsystems, Inc.* 400 36,375
------------------------------------------------------------------
158,113
------------------------------------------------------------------
Financial Services - Diversified
Citigroup, Inc. 300 18,075
------------------------------------------------------------------
Gas - Integrated
Baker Hughes Inc. 400 12,800
Enron Corporation 300 19,350
------------------------------------------------------------------
32,150
------------------------------------------------------------------
Industrial - Diversified
Corning, Inc. 200 53,975
Tyco International, Ltd. 400 18,950
------------------------------------------------------------------
72,925
------------------------------------------------------------------
Medical & Biotechnology
Amgen Inc. 500 35,125
Johnson & Johnson 200 20,375
------------------------------------------------------------------
55,500
------------------------------------------------------------------
Oil - Drilling
BJ Services Company 300 18,750
Global Marine Inc. 500 14,094
------------------------------------------------------------------
32,844
------------------------------------------------------------------
Oil - Integrated
Anadarko Petroleum Corporation 500 24,656
Apache Corporation 300 17,644
Exxon Mobil Corporation 200 15,700
------------------------------------------------------------------
58,000
------------------------------------------------------------------
Oil - Secondary
Burlington Resources 500 19,125
------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
PACIFIC ADVISORS GROWTH FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK CONTINUED
Semiconductor & Related
Analog Devices Inc. 400 $ 30,400
Conexant Systems Inc. 400 19,450
Intel Corporation 200 26,738
SDL Inc. 200 57,037
Teradyne Inc. 500 36,750
Texas Instruments Inc. 400 27,475
Vitesse Semiconductor
Corporation 300 22,069
Xilinx, Inc.* 400 33,025
------------------------------------------------------------------
252,944
------------------------------------------------------------------
Software & Computer Processing Equipment
Informix Corporation 500 3,719
Microsoft* 200 16,000
Oracle Corporation* 400 33,625
Peoplesoft, Inc. 500 8,375
Siebel Systems, Inc. 200 32,712
------------------------------------------------------------------
94,431
------------------------------------------------------------------
Technology - Diversified
Lucent Technologies 300 17,775
------------------------------------------------------------------
Telephone Systems
MCI Worldcom, Inc.* 400 18,350
------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $809,582) 961,588
-------------
TOTAL INVESTMENT SECURITIES - 62.58%
(Cost: $809,582) $ 961,588
-------------
SHORT-TERM INVESTMENTS - 38.72%
United Missouri Bank Repurchase
Agreement
5.86% 07/03/00
(Secured by US Treasury Bonds
7.50% 05/15/02
par value $593,000 - market
value $607,825) 595,000
OTHER ASSETS LESS LIABILITIES - (1.30%) (19,906)
-------------
TOTAL NET ASSETS - 100% $ 1,536,682
------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
PACIFIC ADVISORS SMALL CAP FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
-----------------------------------------------------------------
COMMON STOCK - 100.42%
Apparel
Ashworth, Inc. 20,000 $ 89,376
-----------------------------------------------------------------
Auto Manufacturers
Sonic Automotive, Inc.* 20,000 213,750
-----------------------------------------------------------------
Banks - Regional
East West Bancorp, Inc. 35,000 503,125
-----------------------------------------------------------------
Chemicals
Ocean Bio-chem, Inc.* 94,500 100,406
-----------------------------------------------------------------
Computers & Related Equipment
3DFX Interactive, Inc.* 20,000 155,626
Intervoice, Inc.* 33,100 217,219
-----------------------------------------------------------------
372,845
-----------------------------------------------------------------
Containers/Packaging
Mobile Mini, Inc.* 20,000 441,250
-----------------------------------------------------------------
Cosmetic - Personal Care
Herbalife Class B 10,000 78,750
Nature's Sunshine 17,000 119,000
-----------------------------------------------------------------
197,750
-----------------------------------------------------------------
Educational Services
ITT Educational
Services, Inc.* 15,200 266,950
-----------------------------------------------------------------
Footwear
Genesco, Inc.* 25,000 401,563
-----------------------------------------------------------------
Health Care Provider
America Service Group* 21,000 430,500
Children's Comprehensive
Services* 10,900 33,381
Lifemark Corporation* 21,000 126,000
-----------------------------------------------------------------
589,881
-----------------------------------------------------------------
Heavy Construction
Morrison Knudsen Corporation 16,000 116,000
-----------------------------------------------------------------
Home Construction
Modtech Holding, Inc.* 25,000 225,000
-----------------------------------------------------------------
Industrial
Park - Ohio Holdings
Corporation* 10,000 86,250
-----------------------------------------------------------------
Insurance - Full Line
Gainsco, Inc. 30,000 150,000
-----------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
PACIFIC ADVISORS SMALL CAP FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
-----------------------------------------------------------------
<S> <C> <C>
COMMON STOCK CONTINUED
Insurance - Specialty
Interstate National Dealer
Services* 60,000 $ 315,000
Warrentech Corporation* 35,000 29,531
-----------------------------------------------------------------
344,531
-----------------------------------------------------------------
Medical Equipment, Devices & Supplies
Meridian Medical
Technicians, Inc.* 33,000 371,250
-----------------------------------------------------------------
Paper Products
Republic Group, Inc. 34,800 313,200
-----------------------------------------------------------------
Railroads
Railamerica, Inc.* 85,000 541,875
-----------------------------------------------------------------
Retailers - Broadline
Fred's, Inc. 2,000 36,000
Wild Oats 5,000 62,813
-----------------------------------------------------------------
98,813
-----------------------------------------------------------------
Retailers - Specialty
Linens 'N Things 6,000 162,750
Rentrak Corporation* 21,000 77,437
-----------------------------------------------------------------
240,187
-----------------------------------------------------------------
Semiconductor & Related
Cerprobe Corporation* 15,000 210,000
Phoenix Technologies, Ltd. 3,000 48,938
-----------------------------------------------------------------
258,938
-----------------------------------------------------------------
Transportation Equipment
A.C.L.N. Limited 11,000 309,375
-----------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $5,960,226) 6,232,315
-----------
TOTAL INVESTMENT SECURITIES - 100.42%
(Cost: $5,960,226) $ 6,232,315
-----------
SHORT-TERM INVESTMENTS - 0.10%
United Missouri Bank Money
Market Fund 6,315
OTHER ASSETS LESS LIABILITIES - (0.52%) (32,663)
-----------
TOTAL NET ASSETS - 100% $ 6,205,967
-----------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
PACIFIC ADVISORS FUND INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME
GOVERNMENT AND
SECURITIES EQUITY
FUND FUND
------------ ------------
<S> <C> <C>
ASSETS
Investment securities
At cost $ 6,478,817 $ 3,455,127
=========== ===========
At market value $ 6,654,955 $ 3,544,892
Short-term investments, at cost, which is
equal to market 206,196 58,620
Accrued income receivable 120,955 60,967
Receivable from investment manager (Note 3) 32,118 11,784
Receivable for capital shares sold 31,368 3,217
Other assets 2,336 993
----------- -----------
Total assets 7,047,928 3,680,473
----------- -----------
LIABILITIES
Payable for fund shares redeemed - -
Accounts payable 15,857 5,972
Accounts payable to related parties (Note 3) 3,609 1,403
Payable to Investment Manager (Note 3) - -
----------- -----------
Total liabilities 19,466 7,375
----------- -----------
NET ASSETS $ 7,028,462 $ 3,673,098
----------- -----------
SUMMARY OF SHAREHOLDERS' EQUITY
Paid in capital 6,624,959 3,621,547
Accumulated undistributed net investment
income (loss) 494 20,309
Accumulated undistributed net realized gains
(losses) on security transactions 226,871 (58,523)
Net unrealized appreciation (depreciation) of
investments 176,138 89,765
----------- -----------
Net assets at June 30, 2000 $ 7,028,462 $ 3,673,098
----------- -----------
CLASS A:
Net assets $ 4,976,987 $ 2,469,669
=========== ===========
Shares authorized 50,000,000 50,000,000
Shares outstanding 488,458 241,688
Net asset value and redemption price per share $ 10.19 $ 10.22
=========== ===========
Maximum offering price per share $ 10.70 $ 10.73
Sales load 4.75% 4.75%
CLASS C:
Net assets $ 2,051,475 $ 1,203,429
=========== ===========
Shares authorized 50,000,000 50,000,000
Shares outstanding 203,924 119,305
Net asset value and redemption price per share $ 10.06 $ 10.09
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
BALANCED GROWTH CAP
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investment securities
At cost $ 7,601,576 $ 809,582 $ 5,960,226
=========== =========== ===========
At market value $ 9,731,218 $ 961,588 $ 6,232,315
Short-term investments, at cost, which is
equal to market 543,734 595,000 6,315
Accrued income receivable 112,846 1,821 526
Receivable from investment manager (Note 3) - 169 -
Receivable for capital shares sold 2,836 160 959
Other assets 2,968 - 6,075
----------- ----------- -----------
Total assets 10,393,602 1,558,738 6,246,190
----------- ----------- -----------
LIABILITIES
Payable for fund shares redeemed - - 26,792
Accounts payable 27,296 21,993 4,649
Accounts payable to related parties (Note 3) 5,717 63 5,019
Payable to Investment Manager (Note 3) 2,956 - 3,763
----------- ----------- -----------
Total liabilities 35,969 22,056 40,223
----------- ----------- -----------
NET ASSETS $10,357,633 $ 1,536,682 $ 6,205,967
----------- ----------- -----------
SUMMARY OF SHAREHOLDERS' EQUITY
Paid in capital 7,868,739 1,393,227 6,395,962
Accumulated undistributed net investment
income (loss) 40,405 - -
Accumulated undistributed net realized gains
(losses) on security transactions 318,847 (8,551) (462,084)
Net unrealized appreciation (depreciation) of
investments 2,129,642 152,006 272,089
----------- ----------- -----------
Net assets at June 30, 2000 $10,357,633 $ 1,536,682 $ 6,205,967
----------- ----------- -----------
CLASS A:
Net assets $ 7,057,406 $ 778,406 $ 5,790,458
=========== =========== ===========
Shares authorized 50,000,000 50,000,000 50,000,000
Shares outstanding 477,315 63,886 524,504
Net asset value and redemption price per share $ 14.79 $ 12.18 $ 11.04
=========== =========== ===========
Maximum offering price per share $ 15.69 $ 12.92 $ 11.71
Sales load 5.75% 5.75% 5.75%
CLASS C:
Net assets $ 3,300,227 $ 758,276 $ 415,509
=========== =========== ===========
Shares authorized 50,000,000 50,000,000 50,000,000
Shares outstanding 226,466 62,777 38,299
Net asset value and redemption price per share $ 14.57 $ 12.08 $ 10.85
=========== =========== ===========
</TABLE>
27
<PAGE>
PACIFIC ADVISORS FUND INC.
STATEMENT OF OPERATIONS (UNAUDITED)
For the period ended June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME
GOVERNMENT AND
SECURITIES EQUITY
FUND FUND
----------- ----------
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 9,873 $ 11,747
Interest 159,785 122,892
---------- ---------
Total Income 169,658 134,639
---------- ---------
EXPENSES
Investment Management
Fees 23,740 16,384
Transfer Agent Fees 15,750 14,858
Fund Accounting Fees 18,314 12,094
Legal Fees 5,309 4,398
Audit Fees 9,157 5,120
Registration Fees 9,800 6,144
Printing 13,766 6,144
Custody Fees 3,970 3,482
Director
Fees/Meetings 1,137 819
Distribution Fees
(Note 3) 15,894 10,930
Other Expense 3,383 1,929
---------- ---------
Total Expenses,
before
reimbursements 120,220 82,302
Less fees waived and
expenses
reimbursed
(Note 3) 56,859 39,144
---------- ---------
Net Expenses 63,361 43,158
---------- ---------
NET INVESTMENT INCOME
(LOSS) 106,297 91,481
---------- ---------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net Realized gain
(loss) on
investments 226,788 (57,842)
Net Unrealized
appreciation
(depreciation) of
investments 68,102 (23,326)
---------- ---------
294,890 (81,168)
---------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $ 401,187 $ 10,313
---------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
BALANCED GROWTH CAP
FUND FUND FUND
--------- --------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 34,710 $ 643 $ 16,343
Interest 153,486 11,998 124
--------- -------- -------------
Total Income 188,196 12,641 16,467
--------- -------- -------------
EXPENSES
Investment Management
Fees 37,309 4,606 27,338
Transfer Agent Fees 20,101 12,596 20,980
Fund Accounting Fees 26,883 8,607 20,645
Legal Fees 10,754 562 8,402
Audit Fees 12,125 979 7,518
Registration Fees 10,627 3,032 6,835
Printing 18,754 957 15,378
Custody Fees 4,114 3,965 3,417
Director
Fees/Meetings 1,865 84 1,567
Distribution Fees
(Note 3) 20,669 3,472 10,322
Other Expense 5,579 1,289 4,725
--------- -------- -------------
Total Expenses,
before
reimbursements 168,780 40,149 127,127
Less fees waived and
expenses
reimbursed
(Note 3) 18,654 23,987 -
--------- -------- -------------
Net Expenses 150,126 16,162 127,127
--------- -------- -------------
NET INVESTMENT INCOME
(LOSS) 38,070 (3,521) (110,660)
--------- -------- -------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net Realized gain
(loss) on
investments 313,858 (8,551) (680,381)
Net Unrealized
appreciation
(depreciation) of
investments 124,670 69,388 225,567
--------- -------- -------------
438,528 60,837 (454,814)
--------- -------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $ 476,598 $ 57,316 $ (565,474)
--------- -------- -------------
</TABLE>
29
<PAGE>
PACIFIC ADVISORS FUND INC.
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND INCOME AND EQUITY FUND
-------------------------- --------------------------
Period ended Year ended Period ended Year ended
June 30, December 31, June 30, December 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS
Net investment income
(loss) $ 106,297 $ 172,043 $ 91,481 $ 164,260
Net realized gain
(loss) on
investments 226,788 16,887 (57,842) 5,619
Change in net
unrealized
appreciation
(depreciation)
of investments 68,102 (464,032) (23,326) (157,552)
---------- ---------- ---------- ----------
Increase (decrease)
in net assets
resulting from
operations 401,187 (275,102) 10,313 12,327
---------- ---------- ---------- ----------
FROM DISTRIBUTIONS TO
SHAREHOLDERS
Class A:
Net Investment
Income (77,718) (140,251) (52,189) (103,428)
Net capital
gains - (12,364) - (3,774)
Class C:
Net Investment
Income (26,268) (34,684) (20,658) (61,833)
Net capital
gains - (4,473) - (2,566)
---------- ---------- ---------- ----------
Decrease in net
assets resulting
from
distributions (103,986) (191,772) (72,847) (171,601)
---------- ---------- ---------- ----------
FROM CAPITAL SHARE
TRANSACTIONS
(NOTE 5)
Proceeds from shares
sold 979,673 3,703,783 152,065 2,239,902
Proceeds from shares
purchased by
reinvestment of
dividends 84,294 149,343 50,924 129,167
Cost of shares
repurchased (1,476,109) (2,493,824) (982,189) (1,042,897)
---------- ---------- ---------- ----------
Increase (decrease)
in net assets
derived from
capital share
transactions (412,142) 1,359,302 (779,200) 1,326,172
---------- ---------- ---------- ----------
INCREASE (DECREASE)
IN NET ASSETS (114,941) 892,428 (841,734) 1,166,898
NET ASSETS
Beginning of period 7,143,403 6,250,975 4,514,832 3,347,934
---------- ---------- ---------- ----------
End of period $7,028,462 $7,143,403 $3,673,098 $4,514,832
---------- ---------- ---------- ----------
</TABLE>
(c) Commencement of Operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND GROWTH FUND SMALL CAP FUND
-------------------------- ----------------------------- --------------------------
Period ended Year ended Period ended May 3, 1999 (c) Period ended Year ended
June 30, December 31, June 30, to December 31, June 30, December 31,
2000 1999 2000 1999 2000 1999
------------ ------------ ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS
Net investment income
(loss) $ 38,070 $ 60,719 $ (3,521) $(1,384) $ (110,660) $ (273,657)
Net realized gain
(loss) on
investments 313,858 81,450 (8,551) - (680,381) 223,619
Change in net
unrealized
appreciation
(depreciation)
of investments 124,670 766,175 69,388 82,618 225,567 (1,458,920)
----------- ---------- ---------- ------- ---------- ----------
Increase (decrease)
in net assets
resulting from
operations 476,598 908,344 57,316 81,234 (565,474) (1,508,958)
----------- ---------- ---------- ------- ---------- ----------
FROM DISTRIBUTIONS TO
SHAREHOLDERS
Class A:
Net Investment
Income - (60,475) - - - -
Net capital
gains - (59,690) - - - (5,375)
Class C:
Net Investment
Income - (3,542) - - - -
Net capital
gains - (12,667) - - - (353)
----------- ---------- ---------- ------- ---------- ----------
Decrease in net
assets resulting
from
distributions - (136,374) - - - (5,728)
----------- ---------- ---------- ------- ---------- ----------
FROM CAPITAL SHARE
TRANSACTIONS
(NOTE 5)
Proceeds from shares
sold 2,510,843 2,253,867 1,018,151 526,173 360,842 1,787,612
Proceeds from shares
purchased by
reinvestment of
dividends - 120,829 - - - 4,342
Cost of shares
repurchased (1,189,313) (1,385,001) (144,651) (1,541) (1,024,365) (2,411,853)
----------- ---------- ---------- ------- ---------- ----------
Increase (decrease)
in net assets
derived from
capital share
transactions 1,321,530 989,695 873,500 524,632 (663,523) (619,899)
----------- ---------- ---------- ------- ---------- ----------
INCREASE (DECREASE)
IN NET ASSETS 1,798,128 1,761,665 930,816 605,866 (1,228,997) (2,134,585)
NET ASSETS
Beginning of period 8,559,505 6,797,840 605,866 - 7,434,964 9,569,549
----------- ---------- ---------- ------- ---------- ----------
End of period $10,357,633 $8,559,505 $1,536,682 $605,866 $6,205,967 $7,434,964
----------- ---------- ---------- ------- ---------- ----------
</TABLE>
(c) Commencement of Operations
31
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Pacific Advisors Fund Inc. (the "Company") is an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Company currently offers five Funds: Government Securities
Fund, Income and Equity Fund, Balanced Fund, Growth Fund and Small Cap Fund.
Each fund is a separate investment portfolio of the Company with a distinct
investment objective, investment program, policies and restrictions. The
Government Securities Fund seeks to provide high current income, preservation of
capital, and rising future income, consistent with prudent investment risk. The
Income and Equity Fund seeks to provide current income and secondarily,
long-term capital appreciation. The Balanced Fund seeks to achieve long-term
capital appreciation and income consistent with reduced market risk. The Growth
Fund seeks to achieve long-term capital appreciation through investment in
medium to large capitalization companies. The Small Cap Fund seeks to provide
capital appreciation through investment in small capitalization companies.
Effective April 1, 1998, the Funds offer Class A and Class C shares,
each of which has equal rights as to assets and voting privileges except that
Class A and Class C each has exclusive voting rights with respect to its
distribution plan. Investment income, realized and unrealized capital gains and
losses, and the common expenses of each Fund are allocated on a pro rata basis
to each class based on the relative net assets of each class to the total net
assets of the Fund. Each class of shares differs in its respective service and
distribution expenses and may differ in its transfer agent, registration, and
certain other class-specific fees and expenses.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION. Securities listed on a national securities
exchange and certain over-the-counter ("OTC") issues traded on the NASDAQ
national market system are valued at the last quoted sale price at the close of
the NYSE. OTC issues not quoted on the NASDAQ system and other equity securities
for which no sale price is available, are valued at the last bid price as
obtained from published sources (including Quotron), where available, and
otherwise from brokers who are market makers for such securities. Debt
securities with a maturity of less than 60 days are valued on an amortized cost
basis.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME. Security transactions
are accounted for on the trade date. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
Federal income tax purposes. Dividends are recorded on the ex-dividend date.
Interest income is recorded on an accrual basis.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. The Government
Securities Fund and Income and Equity Fund declare and distribute dividends of
their net investment income, if any, quarterly. The Balanced Fund, Growth Fund
and Small Cap Fund declare and distribute dividends of their net investment
income, if any, annually. The Board of Directors will determine the amount and
timing of such payments. Income dividends and capital gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gain on various investment securities held by
the Funds, timing differences and differing characterization of distributions
made by the Funds.
D. FEDERAL INCOME TAXES. No provision is made for Federal taxes since
the Company intends to qualify as a regulated investment company and to make the
requisite distributions to its shareholders, which will be sufficient to relieve
it from Federal income and excise taxes.
E. USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts in the financial
statements and footnotes. Actual results could differ from those estimates.
NOTE 3. INVESTMENT MANAGEMENT, DISTRIBUTOR AND OTHER RELATED PARTY TRANSACTIONS
The Company and the Funds have entered into investment management
agreements ("Management Agreements") with Pacific Global Investment Management
Company, Inc. ("Investment Manager"). The Management Agreements provide for
investment management fees, payable monthly, and calculated at the maximum
annual rate of 0.65% of average net assets for the Government Securities Fund
and 0.75% of average net assets for the Income and Equity, Balanced, Growth and
Small Cap Funds. The Investment Manager has entered into sub-advisory agreements
("Sub-Advisory Agreements") with Hamilton & Bache, Inc. and Spectrum Asset
Management, Inc. ("Advisors") for the Balanced and Government Securities Funds
respectively. It has also entered into a co-management agreement ("Co-management
Agreement") with Hamilton and Bache, Inc. ("Advisor") for the Income and Equity
Fund. The Investment Manager is solely responsible for the payment of these fees
to the Advisors.
In accordance with Expense Limitation agreements, with the Company, on
behalf of the Government Securities, Income and Equity and Growth Funds, the
Investment Manager is required to reduce its investment management fees in any
fiscal year in which all fund operating expenses exceed 1.65%, 1.85% and 2.50%,
respectively, of average daily net assets of the respective Funds, and to
reimburse the Government Securities, Income and Equity and Growth Funds for any
additional amounts that exceed these limits. These agreements may be terminated
by either party. In addition,
32
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
from time to time, the Investment Manager and Advisors may voluntarily waive
their management and sub-advisory fees, and/or absorb certain expenses for the
Funds.
Pursuant to the Expense Limitation Agreements, voluntary waiver of fees
and the assumption of expenses by the Investment Manager, the following amounts
were waived or reimbursed for the period ended June 30, 2000.
<TABLE>
<CAPTION>
Management Expense
Fees Reimbursements
<S> <C> <C>
Government Securities Fund $ 22,044 $ 34,815
Income and Equity Fund 15,360 23,784
Balanced Fund 18,654 -
Growth Fund 4,318 19,669
</TABLE>
With the exception of the Growth Fund, these waived and reimbursed
expenses may be subject to future recoupment by the Investment Manager.
Fund operating expenses may not fall below the current expense levels in
subsequent years until the Investment Manager has fully recouped fees forgone
and expenses paid or assumed, as each fund will reimburse the Investment Manager
in subsequent years during which the Fund's total assets are greater than
$20,000,000. Such recoupments, if any, are limited to a period of five years
from the date on which the first reimbursement is made to the Investment Manager
on a fund by fund basis. As of June 30, 2000, the cumulative amounts unrecouped
by the Investment Manager since the commencement of operations are:
<TABLE>
<S> <C>
Government Securities Fund $653,656
Income and Equity Fund 489,713
Balanced Fund 309,581
Small Cap Fund 217,445
</TABLE>
For the period ended June 30, 2000, Pacific Global Fund Distributors,
Inc. ("PGFD"), the principal underwriter for the Company, received commissions
on sales of capital stock, after deducting amounts allowed to authorized
distributors as commissions. The amounts are as follows.
<TABLE>
<CAPTION>
Underwriting Commissions
Fees Retained Paid
<S> <C> <C>
Government Securities Fund $ 1,323 $ 4,619
Income and Equity Fund 154 821
Balanced Fund 2,957 7,376
Growth Fund 807 2,163
Small Cap Fund 1,499 4,881
</TABLE>
PGFD is a wholly-owned subsidiary of the Investment Manager.
The Company and the Funds have entered into agreements with Pacific
Global Investor Services, Inc. ("PGIS") to provide fund accounting services at
the monthly fee of three basis points for the first one hundred million in net
assets or a minimum of $1,250. In addition, agreements to provide transfer agent
services has also been entered into at a rate of $18.00 per year per open
account and $2.00 per year per closed account with minimum charges of $1,250 per
month and $750 per month respectively for the A and C share accounts. PGIS is a
wholly owned subsidiary of the Investment Manager.
Accounts payable to related parties consists of management fees payable
to the Investment Manager and fund accounting and transfer agent fees payable to
PGIS.
The Company has adopted a plan of distribution, whereby the Funds may
pay a service fee to qualified recipients in an amount up to 0.25% and 1.00% per
annum of each Fund's daily net assets for A shares and C shares, respectively.
For the period ended June 30, 2000, total service fees were:
<TABLE>
<S> <C>
Government Securities Fund $15,894
Income and Equity Fund 10,930
Balanced Fund 20,669
Growth Fund 3,472
Small Cap Fund 10,322
</TABLE>
NOTE 4. PURCHASE AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities,
other than short-term investments, and aggregate gross unrealized appreciation
and depreciation by each Fund for the period ended and as of June 30, 2000.
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Cost of Proceeds Unrealized Unrealized Appreciation
Purchases From Sales Appreciation Depreciation (Depreciation)
<S> <C> <C> <C> <C> <C>
Government Securities
Fund $9,402,801 $2,656,004 $ 288,861 $ 112,723 $ 176,138
Income and Equity Fund 624,930 1,445,812 255,776 166,011 89,765
Balanced Fund 3,080,652 1,814,788 2,389,961 260,319 2,129,642
Growth Fund 602,366 136,915 211,496 59,490 152,006
Small Cap Fund 1,089,245 1,877,517 1,238,845 966,756 272,089
</TABLE>
33
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
NOTE 5. CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
Period ended Year ended
June 30, 2000 December 31, 1999
---------------------- ----------------------
Shares Amount Shares Amount
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
GOVERNMENT SECURITIES FUND
CLASS A
Shares Sold 78,400 $ 788,772 225,373 $ 2,209,427
Reinvestment of Distributions 5,761 58,266 11,340 110,669
-------- ------------ -------- ------------
84,161 847,038 236,713 2,320,096
Shares Repurchased (131,453) (1,303,645) (216,157) (2,169,999)
-------- ------------ -------- ------------
Net Increase (decrease) (47,292) $ (456,607) 20,556 $ 150,097
======== ============ ======== ============
CLASS C
Shares Sold 19,327 $ 190,901 153,004 $ 1,494,356
Reinvestment of Distributions 2,607 26,028 4,014 38,674
-------- ------------ -------- ------------
21,934 216,929 157,018 1,533,030
Shares Repurchased (17,648) (172,464) (33,035) (323,825)
-------- ------------ -------- ------------
Net Increase (decrease) 4,286 $ 44,465 123,983 $ 1,209,205
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
Period ended Year ended
June 30, 2000 December 31, 1999
---------------------- ----------------------
Shares Amount Shares Amount
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
INCOME AND EQUITY FUND
CLASS A
Shares Sold 10,974 $ 112,433 91,057 $ 968,071
Reinvestment of Distributions 2,980 30,507 6,243 65,374
-------- ------------ -------- ------------
13,954 142,940 97,300 1,033,445
Shares Repurchased (29,072) (295,973) (86,776) (909,772)
-------- ------------ -------- ------------
Net Increase (decrease) (15,118) $ (153,033) 10,524 $ 123,673
======== ============ ======== ============
CLASS C
Shares Sold 3,949 $ 39,632 122,405 $ 1,271,831
Reinvestment of Distributions 2,029 20,417 6,224 63,793
-------- ------------ -------- ------------
5,978 60,049 128,629 1,335,624
Shares Repurchased (68,610) (686,216) (12,807) (133,125)
-------- ------------ -------- ------------
Net Increase (decrease) (62,632) $ (626,167) 115,822 $ 1,202,499
======== ============ ======== ============
</TABLE>
34
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period ended Year ended
June 30, 2000 December 31, 1999
---------------------- ----------------------
Shares Amount Shares Amount
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
BALANCED FUND
CLASS A
Shares Sold 52,053 $ 749,257 86,712 $ 1,150,429
Reinvestment of Distributions - - 7,641 104,909
-------- ------------ -------- ------------
52,053 749,257 94,353 1,255,338
Shares Repurchased (73,763) (1,064,319) (101,373) (1,335,590)
-------- ------------ -------- ------------
Net Increase (decrease) (21,710) $ (315,062) (7,020) $ (80,252)
======== ============ ======== ============
CLASS C
Shares Sold 123,622 $ 1,761,586 84,177 $ 1,103,438
Reinvestment of Distributions - - 1,171 15,920
-------- ------------ -------- ------------
123,622 1,761,586 85,348 1,119,358
Shares Repurchased (8,715) (124,994) (3,799) (49,411)
-------- ------------ -------- ------------
Net Increase (decrease) 114,907 $ 1,636,592 81,549 $ 1,069,947
======== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
Period ended Year ended
June 30, 2000 December 31, 1999
----------------------- -----------------------
Shares Amount Shares Amount
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
GROWTH FUND
CLASS A
Shares Sold 42,553 $ 502,150 28,121 $ 282,969
Reinvestment of Distributions - - - -
-------- ---------- -------- ----------
42,553 502,150 28,121 282,969
Shares Repurchased (6,754) (77,496) (34) (341)
-------- ---------- -------- ----------
Net Increase (decrease) 35,799 $ 424,654 28,087 $ 282,628
======== ========== ======== ==========
CLASS C
Shares Sold 44,505 $ 516,001 24,058 $ 243,204
Reinvestment of Distributions - - - -
-------- ---------- -------- ----------
44,505 516,001 24,058 243,204
Shares Repurchased (5,671) (67,155) (115) (1,200)
-------- ---------- -------- ----------
Net Increase (decrease) 38,834 $ 448,846 23,943 $ 242,004
======== ========== ======== ==========
</TABLE>
35
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period ended Year ended
June 30, 2000 December 31, 1999
---------------------- ----------------------
Shares Amount Shares Amount
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
SMALL CAP FUND
CLASS A
Shares Sold 21,802 $ 257,444 113,526 $ 1,448,076
Reinvestment of Distributions - - 341 4,026
-------- ------------ -------- ------------
21,802 257,444 113,867 1,452,102
Shares Repurchased (79,744) (928,950) (186,970) (2,341,370)
-------- ------------ -------- ------------
Net Increase (decrease) (57,942) $ (671,506) (73,103) $ (889,268)
======== ============ ======== ============
CLASS C
Shares Sold 8,624 $ 103,398 27,145 $ 339,536
Reinvestment of Distributions - - 27 316
-------- ------------ -------- ------------
8,624 103,398 27,172 339,852
Shares Repurchased (8,796) (95,415) (5,499) (70,483)
-------- ------------ -------- ------------
Net Increase (decrease) (172) $ 7,983 21,673 $ 269,369
======== ============ ======== ============
</TABLE>
36
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(For a share outstanding throughout the period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
------------------------------------------------------------------------------
Class A
------------------------------------------------------------------------------
For the six months For the year ended December 31,
ended ----------------------------------------------------------
June 30, 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 9.74 $ 10.59 $ 9.87 $ 9.30 $ 10.16
----------------- ------------ ------------ ------------ ------------
Income from investing operations
Net investment income 0.17 0.30 0.34 0.35 0.33
Net realized and unrealized gains
(losses) on securities 0.44 (0.84) 1.38 0.71 (0.65)
----------------- ------------ ------------ ------------ ------------
Total from investment operations 0.61 (0.54) 1.72 1.06 (0.32)
----------------- ------------ ------------ ------------ ------------
Less distributions
From net investment income (0.16) (0.29) (0.33) (0.35) (0.32)
From net capital gains - (0.02) (0.67) (0.14) (0.22)
----------------- ------------ ------------ ------------ ------------
Total distributions (0.16) (0.31) (1.00) (0.49) (0.54)
----------------- ------------ ------------ ------------ ------------
Net asset value, end of period $ 10.19 $ 9.74 $ 10.59 $ 9.87 $ 9.30
----------------- ------------ ------------ ------------ ------------
TOTAL INVESTMENT RETURN (b) 6.28% (5.04)% 17.82% 11.72% (3.15)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 4,977 $ 5,220 $ 5,456 $ 3,939 $ 7,096
Ratio of net investment income to
average net assets
With expense reductions 1.64%(a) 2.99% 3.32% 3.36% 3.46%
Without expense reductions 0.81%(a) 1.02% 1.04% 1.51% (2.17)%
Ratio of expenses to average net assets
With expense reductions 0.83%(a) 1.60% 1.66% 1.65% 1.66%
Without expense reductions 1.65%(a) 3.57% 3.94% 3.51% 2.95%
Fund portfolio turnover rate 21.42% 147.01% 41.98% 68.52% 50.49%
</TABLE>
<TABLE>
<CAPTION>
Class C
--------------------------------------------------------
For the six months For the year April 2, 1998(c)
ended ended to
June 30, 2000 December 31, 1999 December 31, 1998
<S> <C> <C> <C>
--------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 9.63 $ 10.50 $ 10.24
----------------- ---------------- ----------------
Income from investing operations
Net investment income 0.13 0.27 0.23
Net realized and unrealized gains
(losses) on securities 0.43 (0.88) 1.02
----------------- ---------------- ----------------
Total from investment operations 0.56 (0.61) 1.25
----------------- ---------------- ----------------
Less distributions
From net investment income (0.13) (0.24) (0.32)
From net capital gains - (0.02) (0.67)
----------------- ---------------- ----------------
Total distributions (0.13) (0.26) (0.99)
----------------- ---------------- ----------------
Net asset value, end of period $ 10.06 $ 9.63 $ 10.50
----------------- ---------------- ----------------
TOTAL INVESTMENT RETURN (b) 5.84% (5.77)% 12.48%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 2,051 $ 1,923 $ 795
Ratio of net investment income to
average net assets
With expense reductions 1.33%(a) 2.18% 2.05%(a)
Without expense reductions 0.50%(a) 0.22% 0.63%(a)
Ratio of expenses to average net assets
With expense reductions 1.16%(a) 2.38% 1.06%(a)
Without expense reductions 1.99%(a) 4.34% 2.48%(a)
</TABLE>
--------------------------------------------------------------------------------
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total return
computation.
(c) Commencement of Operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(For a share outstanding throughout the period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME AND EQUITY FUND
--------------------------------------------------------------------
Class A
--------------------------------------------------------------------
For the six months For the year ended December 31,
ended ---------------------------------------------
June 30, 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.39 $ 10.74 $ 9.98 $ 9.42 $ 9.67
----------------- -------- -------- -------- --------
Income from investing operations
Net investment Income 0.22 0.43 0.37 0.33 0.35
Net realized and unrealized gains
(losses) on securities (0.18) (0.39) 0.83 0.56 (0.19)
----------------- -------- -------- -------- --------
Total from investment operations 0.04 0.04 1.20 0.89 0.16
----------------- -------- -------- -------- --------
Less distributions
From net investment income (0.21) (0.37) (0.34) (0.33) (0.35)
From net capital gains - (0.02) (0.10) - (0.06)
----------------- -------- -------- -------- --------
Total distributions (0.21) (0.39) (0.44) (0.33) (0.41)
----------------- -------- -------- -------- --------
Net asset value, end of period $ 10.22 $ 10.39 $ 10.74 $ 9.98 $ 9.42
----------------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN (b) 0.59% 0.19% 12.14% 9.60% 1.78%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 2,470 $ 2,664 $ 2,646 $ 1,894 $ 1,211
Ratio of net investment income to
average net assets
With expense reductions 2.07%(a) 4.08% 3.68% 3.56% 3.75%
Without expense reductions 1.12%(a) 1.86% 0.83% (0.96)% (1.69)%
Ratio of expenses to average net assets
With expense reductions 1.20%(a) 1.85% 1.83% 1.85% 1.85%
Without expense reductions 2.15%(a) 4.06% 4.67% 6.38% 7.29%
Fund portfolio turnover rate 15.65% 37.34% 16.72% 42.30% 28.23%
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------
For the six months For the year April 2, 1998(c)
ended ended to
June 30, 2000 December 31, 1999 December 31, 1998
<S> <C> <C> <C>
------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.15 $ 10.62 $ 10.39
----------------- -------- ----------
Income from investing operations
Net investment Income 0.22 0.41 0.22
Net realized and unrealized gains
(losses) on securities (0.14) (0.43) 0.43
----------------- -------- ----------
Total from investment operations 0.08 (0.02) 0.65
----------------- -------- ----------
Less distributions
From net investment income (0.14) (0.43) (0.32)
From net capital gains - (0.02) (0.10)
----------------- -------- ----------
Total distributions (0.14) (0.45) (0.42)
----------------- -------- ----------
Net asset value, end of period $ 10.09 $ 10.15 $ 10.62
----------------- -------- ----------
TOTAL INVESTMENT RETURN (b) 0.58% (0.02)% 6.41%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 1,203 $ 1,850 $ 702
Ratio of net investment income to
average net assets
With expense reductions 2.47%(a) 3.45% 2.16%(a)
Without expense reductions 1.52%(a) 1.65% 0.31%(a)
Ratio of expenses to average net assets
With expense reductions 0.80%(a) 2.51% 1.43%(a)
Without expense reductions 1.75%(a) 4.30% 3.28%(a)
</TABLE>
--------------------------------------------------------------------------------
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total return
computation.
(c) Commencement of Operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(For a share outstanding throughout the period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND
--------------------------------------------------------------------
Class A
--------------------------------------------------------------------
For the six months For the year ended December 31,
ended ---------------------------------------------
June 30, 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 14.04 $ 12.69 $ 12.06 $ 10.66 $ 9.31
----------------- -------- -------- -------- --------
Income from investing operations
Net investment income 0.08 0.12 0.03 - 0.09
Net realized and unrealized gains
(losses) on securities 0.67 1.47 0.90 1.62 1.39
----------------- -------- -------- -------- --------
Total from investment operations 0.75 1.59 0.93 1.62 1.48
----------------- -------- -------- -------- --------
Less distributions
From net investment income - (0.12) - (0.01) (0.09)
From net capital gains - (0.12) (0.30) (0.21) (0.04)
----------------- -------- -------- -------- --------
Total distributions - (0.24) (0.30) (0.22) (0.13)
----------------- -------- -------- -------- --------
Net asset value, end of period $ 14.79 $ 14.04 $ 12.69 $ 12.06 $ 10.66
----------------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN (b) 5.34% 12.61% 7.76% 15.24% 15.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 7,057 $ 7,008 $ 6,420 $ 5,593 $ 3,187
Ratio of net investment income to
average net assets
With expense reductions 0.51%(a) 0.91% 0.22% (0.03)% 1.12%
Without expense reductions 0.31%(a) 0.51% (0.18)% (0.50)% (0.76)%
Ratio of expenses to average net assets
With expense reductions 1.49%(a) 3.22% 3.48% 3.28% 2.48%
Without expense reductions 1.69%(a) 3.62% 3.88% 3.75% 4.36%
Fund portfolio turnover rate 20.31% 52.47% 53.97% 64.13% 65.94%
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------
For the six months For the year April 2, 1998(c)
ended ended to
June 30, 2000 December 31, 1999 December 31, 1998
<S> <C> <C> <C>
------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 13.91 $ 12.61 $ 13.09
----------------- -------- ----------
Income from investing operations
Net investment income 0.03 0.03 (0.04)
Net realized and unrealized gains
(losses) on securities 0.63 1.42 (0.13)
----------------- -------- ----------
Total from investment operations 0.66 1.45 (0.17)
----------------- -------- ----------
Less distributions
From net investment income - (0.03) (0.01)
From net capital gains - (0.12) (0.30)
----------------- -------- ----------
Total distributions - (0.15) (0.31)
----------------- -------- ----------
Net asset value, end of period $ 14.57 $ 13.91 $ 12.61
----------------- -------- ----------
TOTAL INVESTMENT RETURN (b) 4.74% 11.57% (1.28)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 3,300 $ 1,552 $ 378
Ratio of net investment income to
average net assets
With expense reductions 0.10%(a) 0.01% (0.64)%(a)
Without expense reductions (0.10)%(a) (0.39)% (0.91)%(a)
Ratio of expenses to average net assets
With expense reductions 1.90%(a) 4.07% 3.12%(a)
Without expense reductions 2.10%(a) 4.47% 3.39%(a)
</TABLE>
--------------------------------------------------------------------------------
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total return
computation.
(c) Commencement of Operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(For a share outstanding throughout the period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH FUND
--------------------------------------------
Class A
--------------------------------------------
For the six months May 3, 1999(c)
ended to
June 30, 2000 December 31, 1999
<S> <C> <C>
--------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.67 $ 10.00
------------------ ------------------
Income from investing operations
Net investment income (0.01) (0.02)
Net realized and unrealized gains
(losses) on securities 0.52 1.69
------------------ ------------------
Total from investment operations 0.51 1.67
------------------ ------------------
Less distributions
From net investment income - -
From net capital gains - -
------------------ ------------------
Total distributions - -
------------------ ------------------
Net asset value, end of period $ 12.18 $ 11.67
------------------ ------------------
TOTAL INVESTMENT RETURN (b) 4.37% 16.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 778 $ 328
Ratio of net investment income to
average net assets
With expense reductions (0.22)%(a) (0.27)%(a)
Without expense reductions (2.28)%(a) (8.40)%(a)
Ratio of expenses to average net assets
With expense reductions 1.31%(a) 1.63%(a)
Without expense reductions 3.36%(a) 9.75%(a)
Fund portfolio turnover rate 20.35% 0.00%
</TABLE>
<TABLE>
<CAPTION>
Class C
--------------------------------------------
For the six months May 3, 1999(c)
ended to
June 30, 2000 December 31, 1999
<S> <C> <C>
--------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.61 $ 10.00
------------------ ------------------
Income from investing operations
Net investment income (0.01) (0.04)
Net realized and unrealized gains
(losses) on securities 0.48 1.65
------------------ ------------------
Total from investment operations 0.47 1.61
------------------ ------------------
Less distributions
From net investment income - -
From net capital gains - -
------------------ ------------------
Total distributions - -
------------------ ------------------
Net asset value, end of period $ 12.08 $ 11.61
------------------ ------------------
TOTAL INVESTMENT RETURN (b) 4.05% 16.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 758 $ 278
Ratio of net investment income to
average net assets
With expense reductions (0.39)%(a) (0.61)%(a)
Without expense reductions (2.49)%(a) (8.74)%(a)
Ratio of expenses to average net assets
With expense reductions 1.50%(a) 2.16%(a)
Without expense reductions 3.59%(a) 10.28%(a)
</TABLE>
--------------------------------------------------------------------------------
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total return
computation.
(c) Commencement of Operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
(For a share outstanding throughout the period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP FUND
----------------------------------------------------------------------
Class A
----------------------------------------------------------------------
For the six months For the year ended December 31,
ended ---------------------------------------------
June 30, 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.98 $ 14.23 $ 17.51 $ 16.47 $ 11.82
------------------ -------- -------- -------- --------
Income from investing operations
Net investment expense (0.40) (0.61) (0.58) (0.38) (0.21)
Net realized and unrealized gains
(losses) on securities (0.54) (1.63) (2.34) 1.52 5.35
------------------ -------- -------- -------- --------
Total from investment operations (0.94) (2.24) (2.92) 1.14 5.14
------------------ -------- -------- -------- --------
Less distributions
From net investment income - - - - -
From net capital gains - (0.01) (0.36) (0.10) (0.49)
------------------ -------- -------- -------- --------
Total distributions - (0.01) (0.36) (0.10) (0.49)
------------------ -------- -------- -------- --------
Net asset value, end of period $ 11.04 $ 11.98 $ 14.23 $ 17.51 $ 16.47
------------------ -------- -------- -------- --------
TOTAL INVESTMENT RETURN (b) (7.85)% (15.75)% (16.66)% 6.95% 43.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 5,790 $ 6,976 $ 9,331 $ 11,125 $ 8,549
Ratio of net investment income to
average net assets
With expense reductions (1.53)%(a) (3.36)% (3.71)% (2.82)% (2.06)%
Without expense reductions (1.53)%(a) (3.36)% (3.71)% (2.99)% (2.39)%
Ratio of expenses to average net assets
With expense reductions 1.77%(a) 3.92% 4.02% 3.18% 2.91%
Without expense reductions 1.77%(a) 3.92% 4.02% 3.35% 3.24%
Fund portfolio turnover rate 15.73% 68.18% 49.63% 30.72% 51.83%
</TABLE>
<TABLE>
<CAPTION>
Class C
--------------------------------------------------------------
For the six months For the year April 2, 1998(c)
ended ended to
June 30, 2000 December 31, 1999 December 31, 1998
<S> <C> <C> <C>
--------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.93 $ 14.24 $ 19.70
----------------- ---------------- -----------------
Income from investing operations
Net investment expense (0.33) (0.18) (0.29)
Net realized and unrealized gains
(losses) on securities (0.75) (2.12) (4.81)
----------------- ---------------- -----------------
Total from investment operations (1.08) (2.30) (5.10)
----------------- ---------------- -----------------
Less distributions
From net investment income - - -
From net capital gains - (0.01) (0.36)
----------------- ---------------- -----------------
Total distributions - (0.01) (0.36)
----------------- ---------------- -----------------
Net asset value, end of period $ 10.85 $ 11.93 $ 14.24
----------------- ---------------- -----------------
TOTAL INVESTMENT RETURN (b) (9.05)% (16.16)% (25.88)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 416 $ 459 $ 239
Ratio of net investment income to
average net assets
With expense reductions (2.71)%(a) (3.78)% (3.68)%(a)
Without expense reductions (2.71)%(a) (3.78)% (3.68)%(a)
Ratio of expenses to average net assets
With expense reductions 2.95%(a) 4.38% 3.85%(a)
Without expense reductions 2.95%(a) 4.38% 3.85%(a)
</TABLE>
--------------------------------------------------------------------------------
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total return
computation.
(c) Commencement of Operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
PACIFIC ADVISORS FUND INC.
notes
<PAGE>
PACIFIC ADVISORS FUND INC.
notes
<PAGE>
PACIFIC ADVISORS
Fund Inc
[GRAPHIC]
DIRECTORS
GEORGE A. HENNING, CHAIRMAN
VICTORIA L. BREEN
THOMAS M. BRINKER
L. MICHAEL HALLER III
TAKASHI MAKINODAN, PH.D.
GERALD E. MILLER
LOUISE K. TAYLOR, PH.D.
OFFICERS
GEORGE A. HENNING, PRESIDENT
THOMAS H. HANSON, VICE PRESIDENT AND SECRETARY
VICTORIA L. BREEN, ASSISTANT SECRETARY
PAUL W. HENNING, TREASURER
INVESTMENT MANAGER
PACIFIC GLOBAL INVESTMENT MANAGEMENT COMPANY
206 NORTH JACKSON STREET, SUITE 301
GLENDALE, CALIFORNIA 91206
BALANCED FUND ADVISER
HAMILTON & BACHE, INC.
206 NORTH JACKSON STREET, SUITE 201
GLENDALE, CALIFORNIA 91206
GOVERNMENT SECURITIES FUND ADVISER
SPECTRUM ASSET MANAGEMENT, INC.
450 NEWPORT CENTER DRIVE, SUITE 420
NEWPORT BEACH, CALIFORNIA 92660
TRANSFER AGENT AND ADMINISTRATOR
PACIFIC GLOBAL INVESTOR SERVICES, INC.
206 NORTH JACKSON STREET, SUITE 301
GLENDALE, CALIFORNIA 91206
DISTRIBUTOR
PACIFIC GLOBAL FUND DISTRIBUTORS, INC.
206 NORTH JACKSON STREET, SUITE 301
GLENDALE, CALIFORNIA 91206
(800) 989-6693
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless
accompanied or preceded by a current effective prospectus of the Fund, which
contains information concerning the investment policies of the Fund as well as
other pertinent information.
<PAGE>
<TABLE>
<C> <S> <C>
PACIFIC GLOBAL FUND DISTRIBUTORS, INC.
[LOGO] 206 NORTH JACKSON STREET, SUITE 301 BULK RATE
GLENDALE, CALIFORNIA 91206 U. S. POSTAGE
PAID
GLENDALE, CA
PERMIT NO. 1090
</TABLE>
pg101.898
