<PAGE>
[GRAPHIC]
ANNUAL REPORT -- DECEMBER 31, 1999
[LOGO]
PACIFIC
ADVISORS
-
FUND INC.
GOVERNMENT SECURITIES fund
INCOME AND EQUITY fund
BALANCED fund
GROWTH fund
SMALL CAP fund
<PAGE>
PACIFIC ADVISORS
table of contents
MESSAGE FROM THE CHAIRMAN......................................................1
GOVERNMENT SECURITIES FUND.....................................................2
INCOME AND EQUITY FUND.........................................................5
BALANCED FUND..................................................................8
GROWTH FUND...................................................................11
SMALL CAP FUND................................................................14
SCHEDULE OF INVESTMENTS.......................................................18
STATEMENT OF ASSETS AND LIABILITIES...........................................30
STATEMENT OF OPERATIONS.......................................................32
STATEMENT OF CHANGES IN NET ASSETS............................................34
NOTES TO FINANCIAL STATEMENTS.................................................36
FINANCIAL HIGHLIGHTS..........................................................41
<PAGE>
MESSAGE
from the chairman
[GRAPHIC]
Fellow Shareholders,
The U.S. equity market continued its bull market run in 1999, with investors
stampeding into technology and Internet stocks. Investors moved with great speed
from one Internet stock to another, holding a stock for about 20 days compared
to an average holding period 10 years ago of 730 days. For 1999, The Nasdaq
Composite Index rose 85.5%, with the Nasdaq 100 up an astonishing 101%. While
the S&P 500 suffered from including fewer technology and Internet stocks in its
index, it still achieved an impressive return of 19.5% for the year.
Appearances can be deceiving, as proven by the equity and bond markets in
1999. Most stocks declined in value over the course of the year, while the bond
market suffered its second worst year since 1973. During 1999, one half of all
public companies reported losses. Despite this lack of earnings performance, the
stock prices of these companies rose an average of 52%. In contrast, companies
with earnings actually saw their stock prices decline by 2%. At year-end, the
Nasdaq market had an average Price to Earnings ratio of 200 compared to a
historical average in the low to mid 20s. In summary, 1999 was clearly a year of
the haves and have-nots.
Unfortunately, many investors believe that the investment gains realized
over the past two years can be sustained indefinitely, an assumption often made
near the peak of a bull market. The high price valuations of Internet stocks
have created a bubble ready to burst. As investors realize that many Internet
companies may ultimately go out of business or be acquired by a "bricks and
mortar" company, they will sell these stocks in search of lower valued ones.
While we believe the technology and Internet sectors may retreat from their
lofty heights, we see a number of attractive investments in other areas of the
equity and bond markets. Many stocks with good earnings and revenue growth have
been in a bear market and remain undervalued by almost any historical measure.
Inflation remains low, but the Federal Reserve continues to raise interest rates
to slow down the economy. This should enable the U.S. to continue its economic
growth at a slower rate, without the immediate threat of a recession. While
short-term interest rates may move higher, we expect interest rates to decline
later in 2000, which would be good news for bond and stock investors.
Investors maintaining a diversified portfolio may see a shift in performance
as the equity and bond markets respond to the dynamics of a slower growth
economy. Investments which may have lagged in the market, particularly bonds,
mid and smaller capitalization stocks, may see improved performance. Investors
with investments concentrated in certain sectors of the market may need to
adjust their portfolio to take advantage of changes in market leadership.
In May, Pacific Advisors Fund Inc. introduced a Growth Fund, providing
investors with the opportunity to invest primarily in S&P 500 and Nasdaq 100
stocks. The Fund began investing in the third quarter and benefited from strong
performances by Nasdaq 100 and S&P 500 stocks in the fourth quarter. This report
includes information on the Growth Fund's performance during the year.
We are pleased to report that Y2K preparations made by the Funds and the
securities industry proved successful, as none of the Funds experienced
disruptions due to Y2K.
We want to thank you for the opportunity to work with you in your investment
program. We remain committed to providing you with high quality investment
portfolios and services to meet your financial goals.
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 COMMON
STOCKS FOR GROWTH IN INCOME.
INTERVIEW WITH PORTFOLIO MANAGER
R. "KELLY" KELLY
DURING 1999, INFLATION FEARS AND Y2K CONCERNS KEPT BOND INVESTORS SKITTISH. IN
ADDITION, ECONOMIC RECOVERY THROUGHOUT EUROPE AND ASIA, COUPLED WITH A STRONG
STOCK MARKET, INCREASED COMPETITION AND MADE U.S. BONDS LESS ATTRACTIVE. AS A
RESULT, LONG-TERM INTEREST RATES ROSE NEARLY 1 1/2% AND BONDS SUFFERED THEIR
WORST YEAR SINCE 1994, AND THEIR SECOND WORST YEAR SINCE 1973.
AS A RESULT OF THIS UNCERTAINTY AND VOLATILITY, FOR THE YEAR ENDED DECEMBER 31,
1999, THE FUND HAD A LOSS OF -5.04% FOR CLASS A SHARES, AND -5.77% FOR CLASS C
SHARES. THE FUND'S BENCHMARK, THE LEHMAN INTERMEDIATE BOND INDEX(1), RETURNED
0.44% FOR THE SAME PERIOD.
Q AS INTEREST RATES ROSE DURING THE COURSE OF 1999, HOW DID YOUR INVESTMENT
STRATEGY CHANGE?
A The Government Securities Fund takes a unique approach to managing its
bond investments. Instead of laddering the portfolio across the yield curve, we
fluctuate between long and short-term bonds according to the movement of
interest rates. When interest rates began to rise earlier in the year, we sold
most of the Fund's long-term bond positions and invested in short-term
Treasuries, decreasing the Fund's average maturity to 1.4 years as of June 30th.
We maintained this defensive position for the Fund until later in the
year when interest rates seemed to be nearing their peak. At this point, we
slowly began to purchase long-term bonds, extending the portfolio's average
maturity to 10.4 years by year-end. We will continue to incrementally increase
the Fund's long-term bond position, making a full commitment to long-term
Treasuries when we believe long-term interest rates are near their peak.
Q ROBUST ECONOMIC GROWTH HAS CONTINUED DESPITE RISING INTEREST RATES. AT
WHAT POINT DO YOU EXPECT THE ECONOMY TO SHOW SIGNS OF SLOWING?
A The Federal Reserve made three interest rate increases in the last half
of 1999 in an effort to slow economic growth in the U.S. At the same time it
acted to contract the money supply, the Federal Reserve also pumped a
substantial amount of liquidity into the economy as protection against potential
Y2K problems. In addition, a strong stock market, coupled with the lowest
unemployment rate in 30 years, boosted consumer confidence to an all time high.
Increased confidence and an ample credit supply fueled consumer spending and
economic growth despite rising interest rates.
With no significant Y2K problems unfolding, the Federal Reserve began
repurchasing the excess liquidity in early 2000. Once this excess credit has
been removed, last year's interest rate increases should begin to make a greater
impact on the economy. In order to reduce the threat of inflation, the Federal
Reserve has promised to continue raising interest rates until the economy shows
signs of a meaningful slowdown.
We would anticipate seeing a slowing in the economy later in the year,
once the Federal Reserve's interest rate increases have had a chance to filter
through the economy. When this happens, inflation fears should dissipate,
creating a downward trend for long-term interest rates.
Q HOW WILL THE BOND MARKET RESPOND TO THE GOVERNMENT'S PLAN TO BUY BACK
SOME OF ITS TREASURIES?
A As part of a strategy to reduce the nation's debt, the U.S. Government
announced plans to buy back a substantial portion of its Treasuries during the
first half of 2000. The effects of the plan will depend on whether they intend
to buy back Treasuries along the entire yield curve, or whether they intend to
focus their buying on one section of the yield curve.
Regardless of which method they choose, we would expect a decrease in the
supply of treasuries to increase the demand for government
2
<PAGE>
agency and high-grade corporate bonds. In addition, with less money tied up in
debt, the government will have more money to put back into the economy. In the
long run, this should result in lower interest rates.
Q WHAT HAVE BEEN SOME OF THE MORE SIGNIFICANT EVENTS IN GLOBAL RECOVERY
DURING 1999?
A During the last few years, Europe and Asia have made significant strides
toward rebuilding their economies. As a result, investors have renewed their
interest in the European and Japanese markets. In the long run, strengthening
economies in Europe and Asia will increase competition for U.S. markets. As with
any recovery, both areas are likely to suffer setbacks along the way. When those
difficulties occur, we would expect to see money coming back into the U.S. bond
market.
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INVESTMENT MIX as of 12/31/99
<TABLE>
<C> <S> <C>
1. U.S. TREASURY BILLS 35.53%
2. U.S. TREASURY BONDS 35.35%
3. EQUITIES 18.18%
4. CASH 6.30%
5. U.S. TREASURY NOTES 4.64%
</TABLE>
1 The Lehman Treasury Bond Index is an unmanaged index of intermediate term
government bonds since 12/31/80.
3
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PACIFIC ADVISORS
Government Securities Fund continued
CHANGE IN VALUE OF $10,000 INVESTMENT(1)
This chart shows the growth of a $10,000 investment made in Pacific Advisors
Government Securities Fund, Class A shares, on February 8, 1993 compared to the
growth of the Lehman Intermediate T-Bond Index(2).
GOVERNMENT SECURITIES FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND LEHMAN T-BOND INDEX
<S> <C> <C>
2/8/93 $9,525 $10,000
12/93 $9,557 $10,826
12/94 $9,543 $10,604
12/95 $11,600 $12,140
12/96 $11,235 $12,622
12/97 $12,552 $13,590
12/98 $14,789 $14,764
12/31/99 $14,065 $14,829
</TABLE>
Average Annual Compounded Return for period ending December 31, 1999 (Class A
shares)
<TABLE>
<S> <C>
One Year -9.56%
Five Year 7.45%
Inception 5.05%
</TABLE>
- ----------------------------------
1 Performance figures represent the change in value of an investment over the
periods shown, and have been restated to include the maximum 4.75% initial sales
charge, assuming reinvestment of dividends and capital gains at net asset value
and after expense reimbursements. Past performance does not guarantee future
results. Share price and returns fluctuate, so that your shares, when redeemed,
may be worth more or less than their original cost.
2 The Lehman Treasury Bond Index is an unmanaged index of intermediate
government bonds since 12/31/80.
4
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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 YEAR ENDED DECEMBER 31, 1999, THE FUND RETURNED 0.19% FOR CLASS A
SHARES, AND HAD A LOSS OF -0.02% FOR CLASS C SHARES. FOR THE SAME PERIOD, THE
FUND'S BENCHMARK, THE LEHMAN INTERMEDIATE TREASURY BOND INDEX(1), RETURNED
0.44%.
Q WHAT INVESTMENT STRATEGIES DID YOU EMPLOY IN LIGHT OF RISING INTEREST
RATES?
A In response to strong growth in the U.S. economy, interest rates began to
rise in the first quarter of 1999. In late 1999, the bond market entered a rare
phase when short-term interest rates rose to a level higher than long-term
interest rates. In response to this rise in short-term interest rates, the Fund
sold a portion of its longer-term bonds and rotated into bonds with shorter
maturities. We implemented this defensive investment strategy to protect capital
in a rising interest rate market. In 1999, the total return of the Fund was
approximately the same as its benchmark, the Lehman Intermediate Treasury Bond
Index. 1999 turned out to be the second poorest year in performance for bonds
since the 1970's.
The Income & Equity Fund continues to maintain a bond strategy of
optimizing the yield curve, whereby we buy investment grade bonds to generate
the maximum yield at the shortest possible maturity. Since we manage the Fund
for total return, we seek to optimize the Fund's yield while protecting capital.
When the yield curve returns to a more traditional format, with long-term
interest rates higher than short-term interest rates, we will extend the average
maturity of the portfolio by buying longer-term bonds.
Q WHY DID YOU CONTINUE TO INCREASE THE FUND'S CORPORATE BOND POSITION?
A In a rising interest rate market, equities tend to decline in value,
since higher rates dampen consumer spending and cut into corporate profits. The
Federal Reserve raised interest rates three times in the second half of 1999 to
ease inflation concerns created by strong growth in the U.S. economy. The
Federal Reserve also indicated that it would continue raising interest rates in
2000 if U.S. economic growth did not slow toward 2%-3%. While it takes months
for the U.S. economy to feel the full impact of these rate increases, by late
fall, stock prices of companies in certain sectors were already on the decline
in anticipation of the impact of higher interest rates on corporate profits.
As a result of these developments, in the last quarter of 1999, we
modestly reduced our equity exposure to help minimize the effect of declining
stock prices on the portfolio. Once the economy begins to slow, and the equity
market returns to an upward trending phase, we would anticipate increasing our
equity position.
Q WHAT TYPES OF NEW INVESTMENTS DID YOU ADD TO THE PORTFOLIO?
A As mentioned earlier, in the latter half of 1999, we focused on
shortening the average maturity of the portfolio in response to a rise in
short-term interest rates. We implemented this strategy by rotating out of
longer-term bonds and into shorter-term bonds issued by the same company. For
example, we sold one of our Safeway bonds with a maturity of 7 years, and bought
another Safeway bond with a maturity of just 4 years.
In addition to purchasing shorter-term bonds, we also began to rotate out
of the utility sector and increased several of the Fund's existing positions in
the industrial and financial sectors, sectors expected to lead in the market in
the coming year.
5
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PACIFIC ADVISORS
Income and Equity Fund continued
Q WHAT IS YOUR OUTLOOK FOR INTEREST RATES AND ECONOMIC GROWTH IN 2000?
A In the last two quarters of 1999, the economy grew at an annual rate of
5.8%. In order to prevent inflation, the Federal Reserve believes economic
growth should be between 2%-3%. As a result of this disparity, the Fed may make
additional interest rate increases in 2000, to help slow the economy and curtail
the threat of inflation.
It may, however, take two or three quarters for economic growth to slow
in response to the Fed's interest rate increases. Until that time, we expect
long-term interest rates to continue rising, reaching 6 1/2%, possibly 6 3/4%.
Once growth begins to slow, easing inflation fears, we expect long-term interest
rates to peak, and then fall back to a level between 5%-6%.
-------------------------------------------------------
INVESTMENT MIX as of 12/31/99
<TABLE>
<C> <S> <C>
1. CORPORATE BONDS 83.51%
2. EQUITIES 9.73%
3. PREFERRED STOCK 4.54%
4. U.S. TREASURY NOTES 2.00%
5. FOREIGN GOVERNMENT BONDS 0.22%
</TABLE>
1 The Lehman Treasury Bond Index is an unmanaged index of intermediate term
government bonds since 12/31/80.
6
<PAGE>
CHANGE IN VALUE OF $10,000 INVESTMENT(1)
This chart shows the growth of a $10,000 investment made in Pacific Advisers
Income & Equity Fund, Class A shares, on February 8, 1993 compared to the growth
of the Lehman Intermediate T-Bond Index(2).
INCOME AND EQUITY FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INCOME AND EQUITY FUND LEHMAN T-BOND INDEX
<S> <C> <C>
2/8/93 $9,525 $10,000
12/93 $9,630 $10,826
12/94 $9,725 $10,604
12/95 $10,905 $12,140
12/96 $11,100 $12,622
12/97 $12,166 $13,590
12/98 $13,643 $14,764
12/31/99 $13,685 $14,829
</TABLE>
Average Annual Compounded Return for period ending December 31, 1999 (Class A
shares)
<TABLE>
<S> <C>
One Year -4.61%
Five Year 6.48%
Inception 4.63%
</TABLE>
- ----------------------------------
1 Performance figures represent the change in value of an investment over the
periods shown, and have been restated to include the maximum 4.75% initial sales
charge, assuming reinvestment of dividends and capital gains at net asset value
and after expense reimbursements. Past performance does not guarantee future
results. Share price and returns fluctuate, so that your shares, when redeemed,
may be worth more or less than their original cost.
2 The Lehman T-Bond Index is an unmanaged index of intermediate government
bonds since 12/31/80.
7
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PACIFIC ADVISORS
Balanced Fund
INVESTS PRIMARILY IN LARGE AND MEDIUM CAP COMMON STOCKS WITH AT LEAST 25% OF THE
ASSETS IN FIXED-INCOME SECURITIES.
INTERVIEW WITH PORTFOLIO MANAGER
STEPHEN K. BACHE, CFA
FOR THE YEAR ENDED DECEMBER 31, 1999, THE FUND RETURNED 12.61% FOR CLASS A
SHARES, AND 11.57% FOR CLASS C SHARES. FOR THE SAME PERIOD, THE FUND'S
BENCHMARKS, THE S&P 500 INDEX(1) AND THE LEHMAN INTERMEDIATE TREASURY BOND
INDEX(2), RETURNED 19.53% AND 0.44%, RESPECTIVELY.
WITH AN ANNUAL RETURN OF 12.6% FOR CLASS A SHARES, THE BALANCED FUND
OUTPERFORMED THE 10 LARGEST FUNDS IN ITS CATEGORY. DESPITE THE HIGH DEGREE OF
MARKET VOLATILITY IN 1999, THE FUND ACHIEVED THESE IMPRESSIVE RESULTS WHILE
ASSUMING SIGNIFICANTLY LESS RISK THAN THE EQUITY MARKET.
Q HOW DID THE FUND'S PERFORMANCE COMPARE WITH THAT OF ITS BENCHMARKS?
A The Fund performed well in 1999, with a total investment return of
12.61%. The Fund achieved this investment return with approximately half the
volatility experienced by the S&P 500. This is significant since the 19.5% gain
in the S&P 500 Index resulted from the strong performances of a narrow group of
tech stocks. Eight technology stocks accounted for 50% of the Index's increase.
In contrast, the Lehman Intermediate Treasury Bond Index rose only 0.44%.
In accordance with its investment strategy, the Fund maintains a
diversified portfolio with at least 25% of its assets invested in fixed-income
securities. With such a significant portion of its portfolio invested in bonds,
the Fund's investment return would be more accurately compared to a blend of its
two benchmarks, the S&P 500 and Lehman Intermediate Treasury Bond Indices. The
S&P 500's reliance on a small number of stocks for its performance in 1999 runs
contrary to the more conservative investment objective of a balanced fund, which
aims to be more diverse and less volatile.
Q WHAT TYPE OF INVESTMENT STRATEGY DID YOU EMPLOY GIVEN THE RISING INTEREST
RATE MARKET?
A Given the rising interest rate market of 1999, the Balanced Fund remained
defensive rather than being overly aggressive. The Fund did participate in the
growth of the equity market through stocks like Nokia and Time Warner, but
resisted becoming overexposed in the volatile technology sector.
The Fund's flexible investment strategy allows us to adapt to changing
market conditions, while emphasizing low volatility to provide more consistent
returns. As short-term interest rates rose in last half of 1999, we sold a
portion of the Fund's long-term bonds to take advantage of the higher yields on
short-term bonds. The bonds acquired by the Fund included companies in the
process of restructuring, like Public Service Electric & Gas. We expect these
bonds to be called sometime next year, before their scheduled maturity.
In addition, the Fund also rotated money out of the real estate industry,
one of the industries most sensitive to rising interest rates. We invested most
of these assets in the financial sector, which is expected to be a market leader
in 2000.
Q IF INTEREST RATES CONTINUE TO RISE, HOW LONG CAN ECONOMIC GROWTH CONTINUE
AT ITS CURRENT RATE?
A In general, the U.S. Federal Reserve believes the economy should grow at
a rate of 2%-3% per year to keep inflation under control. In the last half of
1999, economic growth topped 5%, increasing the Federal Reserve's inflation
concerns. For these reasons, we expect several more interest rate increases by
the Federal Reserve in 2000 as they try to slow the economy and stave off
inflation.
It will take several quarters for these increases to work through the
economy, but eventually higher rates will dampen consumer spending, slowing down
the economy. Until that
8
<PAGE>
time, inflation fears will persist, keeping long term rates on the rise.
Q WHICH EQUITY POSITIONS CONTRIBUTED TO THE FUND'S GROWTH?
A Nokia further consolidated its position as the number one provider of
cellular phones and remained one of the Fund's top performers. Other top
performers included AT&T Liberty Media and Timer Warner, both of which profited
from increased demand for cable television and programming. Viacom, boosted by
rising profits in its entertainment businesses, also added significantly to the
Fund's return. Outside the entertainment industry, MMI Companies, a medical
malpractice insurance company, performed well after being acquired by a larger
insurance company.
Q WHAT IS YOUR ECONOMIC OUTLOOK FOR 2000?
A The Federal Reserve made three interest rate increases in 1999, promising
to make more if economic growth continues at its rapid pace. Eventually, higher
interest rates will work to slow the economy, although we may not see this kind
of slowing until later in the year. Once we begin to see a significantly slower
economy, we will take a less defensive position with the Fund's assets and begin
increasing our equity exposure.
Along with lower interest rates, strengthening economies in Europe and
Asia also helped fuel economic growth in the U.S. As Europe and Asia continue to
make strides toward a full economic recovery, investors may increasingly look to
these economies as better opportunities for growth and return. Despite an
increase in competition for investors' money, multi-national companies in the
Fund's portfolio would benefit from a growing global economy.
-------------------------------------------------------
INVESTMENT MIX as of 12/31/99
<TABLE>
<C> <S> <C>
1. EQUITIES 55.56%
2. CORPORATE BONDS 40.72%
3. EQUITIES 3.72%
</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.
9
<PAGE>
PACIFIC ADVISORS
Balanced Fund continued
CHANGE IN VALUE OF $10,000 INVESTMENT(1)
This chart shows the growth of a $10,000 investment made in Pacific Advisors
Balanced Fund, Class A shares, on February 8, 1993 compared to the growth of the
S&P 500(2) and Lehman Intermediate T-Bond(3) Indices.
BALANCED FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED FUND S&P 500 INDEX LEHMAN T-BOND INDEX
<S> <C> <C> <C>
2/8/93 $9,425 $10,000 $10,000
12/93 $9,423 $10,706 $10,826
12/94 $9,195 $10,541 $10,604
12/95 $9,996 $14,137 $12,140
12/96 $11,587 $17,348 $12,622
12/97 $13,353 $22,728 $13,590
12/98 $14,379 $28,789 $14,764
12/31/99 $16,206 $34,412 $14,829
</TABLE>
Average Annual Compounded Return for period ending December 31, 1999 (Class A
shares)
<TABLE>
<S> <C>
One Year 6.17%
Five Year 10.76%
Inception 7.25%
</TABLE>
- ----------------------------------
1 Performance figures represent the change in value of an investment over the
periods shown, and have been restated to include the maximum 5.75% initial sales
charge, assuming reinvestment of dividends and capital gains at net asset value
and after expense reimbursements. Past performance does not guarantee future
results. Share price and returns fluctuate, so that your shares, when redeemed,
may be worth more or less than their original cost.
2 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.
3 The Lehman Treasury Bond Index is an unmanaged index of intermediate
government bonds since 12/31/80.
10
<PAGE>
PACIFIC ADVISORS
Growth Fund
INVESTS PRIMARILY IN COMPANIES WHICH ARE A PART OF EITHER 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 1999?
A The Growth Fund commenced operations on May 1, 1999 and we began
purchasing stocks for the Fund in the 3rd quarter of 1999. For the year ended
December 31, 1999, Class A shares returned 16.70% with an annualized return of
25.99%, and Class C shares returned 16.10% with an annualized return of 25.02%.
For the same period the Fund's benchmarks, the S&P 500 and Nasdaq 100, returned
19.53% and 101.90%, respectively.
Q WHY DID THE FUND PERFORM DIFFERENTLY THAN ITS BENCHMARKS?
A While impressive, the investment returns achieved by the Fund's
benchmarks fail to reflect strategies implemented by the Fund which we believe
will produce more consistent returns over an extended period of time.
The investment returns of the S&P 500 and Nasdaq 100 Indices resulted
from the strong performances of a narrow and select group of technology and
Internet stocks. For example, 8 technology stocks accounted for 50% of the
growth in the S&P 500; and by year-end, the average P/E of the Nasdaq market
neared 200, far above its historical average in the mid-20's. These numbers
strongly suggest that a small group of stocks skewed the returns of these
indices.
While the Fund maintained a bias toward the technology sector,
diversification remains an important part of our investment strategy. We seek to
invest in range of sectors and companies broader than that reflected in the
performance of the Fund's benchmarks.
In addition, inflation concerns, coupled with rising interest rates,
created a high degree of market volatility in late 1999, a situation likely to
continue in the first part of 2000. For this reason, the Fund also maintained
ample cash reserves as protection against increased market volatility. Once the
market stabilizes, these reserves leave the Fund well positioned to acquire
choice stocks trading at a discount from their real value.
Q WHAT WERE THE ADVANTAGES OR DISADVANTAGES FOR A NEW FUND IN 1999?
A Since the Fund did not begin investing its assets until the 3rd quarter,
it did not participate in the rapid growth of the equity markets during the
early part of the year. In mid-October, the Fund took advantage of a market
correction and began investing its assets, focusing on a number of leaders in
the technology sector. The market reversed this correction during the final
months of 1999, and the Fund benefited from being substantially invested during
that period.
Q WHAT STOCKS AND SECTORS PERFORMED WELL FOR THE FUND IN 1999?
A The technology and Internet sectors led the market throughout 1999. In
accordance with its investment strategy, the Fund's portfolio maintained a bias
toward these market leaders. The Fund benefited from tech fever through top
performing stocks such as Sun Microsystems, Texas Instruments, Cisco Systems and
Xlinix.
The Fund balanced this bias with investments in market leaders outside
the technology sector. Companies such as Johnson & Johnson, Proctor & Gamble,
MCI WorldCom and Exxon Mobil, added to the healthy returns produced by tech
stocks.
Q HOW WILL THE FUND'S INVESTMENT STRATEGY CHANGE WHEN MARKET FAVOR SHIFTS
FROM GROWTH TO VALUE STOCKS?
A By nature of its investment strategy, the Fund seeks to invest in the
leading sectors and companies of the S&P 500 and Nasdaq 100 Indices. In order to
reflect current market leadership, growth stocks (stocks that trade on price and
earnings momentum), comprise the majority of the Fund's portfolio. We expect
growth stocks to continue their good performance in the coming
11
<PAGE>
PACIFIC ADVISORS
Growth Fund continued
year. As market dynamics change, however, the Fund will adjust its investment
portfolio so that it continues to reflect market leadership, regardless of
whether that leadership comes from growth or value stocks.
-------------------------------------------------------
INVESTMENT MIX as of 12/31/99
<TABLE>
<C> <S> <C>
1. EQUITIES 74.48%
2. CASH 25.52%
</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.
12
<PAGE>
CHANGE IN VALUE OF $10,000 INVESTMENT(1)
This chart shows the growth of a $10,000 investment made in Pacific Advisors
Growth Fund, Class A shares, on May 1, 1999 compared to the growth of the S&P
500(2) and Nasdaq 100(3) Indices.
GROWTH FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH FUND S&P 500 INDEX NASDAQ 100 INDEX
<S> <C> <C> <C>
5/1/99 $10,000 $10,000 $10,000
12/31/99 $11,875 $11,953 $20,109
</TABLE>
Average Annual Compounded Return for period ending December 31, 1999 (Class A
shares)(2)
<TABLE>
<S> <C>
One Year 9.99%
Inception 15.31%
</TABLE>
- ----------------------------------
1 Performance figures represent the change in value of an investment over the
periods shown, and have been restated to include the maximum 5.75% initial sales
charge, assuming reinvestment of dividends and capital gains at net asset value
and after expense reimbursements. Past performance does not guarantee future
results. Share price and returns fluctuate, so that your shares, when redeemed,
may be worth more or less than their original cost.
2 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.
3 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.
13
<PAGE>
PACIFIC ADVISORS
Small Cap Fund
INVESTS PRIMARILY IN SMALL COMPANY STOCKS WITH AN AVERAGE MARKET CAP BELOW $150M
WITH A LOW P/E AND HIGH EARNINGS MOMENTUM.
INTERVIEW WITH PORTFOLIO MANAGERS
THOMAS H. HANSON
GEORGE A. HENNING
Q HOW DID THE FUND PERFORM IN 1999?
A For the year ended December 31, 1999, the Fund had a loss of -15.75% for
Class A shares, and -16.16% for Class C shares. The Fund's benchmark, the
Russell 2000 Stock Index(1), returned 19.62% during the same period.
Q WHY DID THE FUND UNDERPERFORM THE RUSSELL 2000?
A During 1999, technology and Internet Stocks heavily impacted the
performance of the Russell 2000 Index. Most of the Index's growth came from
companies with little or no revenue and earnings history. For example, the stock
price of companies in the Russell 2000 with no earnings grew at 49.7% in 1999,
while companies with earnings only grew 6.6%. Also, many of the companies in the
Russell 2000 don't look like traditional small cap companies with a market
capitalization of $1.5 billion or less. While small in terms of revenue and
earnings, over 140 companies in the Russell 2000 achieved market caps above this
limit, with some exceeding it by $4 or $5 billion.
During the year, many small cap value companies with double-digit revenue
and earnings growth actually saw their stock price decline as investors
concentrated their focus on technology and Internet stocks. For example, both
RailAmerica and Sonic Automotive had revenue and earnings growth in excess of
50% and yet saw their stock price decline over 20% in the fourth quarter,
despite announcing acquisitions that will sustain these superior growth rates.
This disparity in the market negatively impacted the Fund's performance.
While the Russell 2000 Stock Index provides the closest approximation of
the Fund's portfolio for comparison, it has a higher average market
capitalization than the Fund. The Russell 2000 is a subset of the Russell 3000
Stock Index which measures the performance of the 3,000 largest publicly traded
companies. Of those 3,000 stocks, the Russell 2000 measures the performance of
the 2,000 smallest companies.
There are, however, approximately 4,000 smaller companies that are not
included in the Russell 2000. Most of the stocks owned by the Fund fall into
this last category. The Fund continues to focus on small cap value companies
with market capitalizations of $500 million or less, most of which are not
included in any small cap index.
Q WHAT CHANGES HAVE YOU MADE IN YOUR INVESTMENT STRATEGY DURING THE LAST
YEAR?
A The Fund remains committed to investing in small cap value stocks because
we believe that these stocks, over the long term, provide an excellent return
for investors. With value stocks continuing to under perform in the equity
market last year, we found a greater number of stocks which met our investment
parameters.
As a result, we rotated out of some of the smallest companies in the Fund
into larger small cap companies that we believe may be the early beneficiaries
of a market rotation into value stocks. A number of these companies trade on the
NYSE, which gives them greater market recognition and following. These additions
include companies such as Genesco (the holding company for a number of retail
shoe stores including Johnson & Murphy, Jarman and Journeys), ITT Educational
Services (provider of trade and computer training courses), and Sonic Automotive
(nationwide automotive dealership owner).
Q WHY DIDN'T THE FUND PARTICIPATE IN THE GROWTH OF THE TECHNOLOGY AND
INTERNET SECTORS?
A Most of the stocks generating the astronomical growth in the technology
and Internet sectors do not fit the investment criteria for the Fund. The Fund
invests in companies with strong leadership and a proven operating history to
support their earnings and growth potential. In 1999, many technology and
Internet companies traded on pure price momentum, produced no significant
revenue and sustained large operating losses with no assurance that their
products would succeed. Much of the growth in this sector came from IPOs, which
carry more risk than the Fund can assume within its investment guidelines. Also,
they
14
<PAGE>
often achieved a market capitalization in excess of $1 billion, which is
significantly higher than the Fund's criteria.
While many of the technology and Internet stocks lacked a strong
operating history, the Fund did participate in the growth of these sectors
through companies which met the Fund's investment criteria. For example,
Intervoice, the leading developer of voice recognition software and one of the
Fund's largest positions, benefited significantly from tech fever. The company
grew rapidly in 1999, but has maintained revenue and earnings growth to support
its rising stock price.
Q WHAT EVIDENCE IS THERE THAT MANY OF THE STOCKS IN THE PORTFOLIO ARE
UNDERVALUED BY THE MARKET?
A One of the ways to recognize that small cap stocks are undervalued is to
examine takeover activity. If companies experience price depreciation because
they lack value, we would expect to see a number of takeovers at depressed
market prices. Alternatively, takeover activity at premium prices would indicate
an undervalued stock price. During 1999, three companies in the Fund were
acquired at a premium to their stock price, indicating that the companies had
strong fundamental value.
Worthington Foods, the leading producer of meatless foods and one of the
Fund's best performers in 1999, traded for most of the year at $12 per share. In
October, Kellogg bought the company for $24 per share. Herbalife, another of the
Fund's top positions, spent most of the year trading at $9-$11 per share. With
the stock price failing to reflect the company's true value, the company decided
to go private and will buy back its shares for over $17 per share. Also, Central
Sprinkler Systems followed the same pattern. Tyco International bought the
company for $23 per share, when it had been trading around $11 per share.
Q HOW DO YOU EXPECT SMALL CAP STOCKS TO PERFORM IN THE COMING YEAR?
A The performance disparity between technology and Internet stocks with the
rest of the equity market will not continue indefinitely. Historically, it is
not unusual to see investors concentrate on a few stocks when we are in the
later stages of a bull market. When the market finally enters a significant
correction, small cap value stocks will usually assume market leadership as the
market begins to recover. With the technology and Internet sectors significantly
overvalued at the end of 1999, investors are beginning to look for stocks with
lower valuations and good growth potential. As market dynamics change in 2000,
we would expect to see small cap stocks gain greater market recognition since
they have been one of the most undervalued sectors in the market.
In addition to changes in the market, we also expect interest rates to
continue to rise as the Federal Reserve seeks to slow economic growth. In a
rising interest rate market, small cap stocks may benefit because they usually
carry less debt. In addition, as market leaders in smaller or newer industries
with less competition, these companies may have a greater ability to raise
prices for their goods or services to sustain their growth. Small cap value
stocks have been lagging the market for the past two years, but we expect better
performance during the coming year.
-------------------------------------------------------
INVESTMENT MIX as of 12/31/99
<TABLE>
<C> <S> <C>
1. EQUITIES 99.66%
2. CASH 0.34%
</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.
15
<PAGE>
PACIFIC ADVISORS
Small Cap Fund continued
CHANGE IN VALUE OF $10,000 INVESTMENT(1)
This chart shows the growth of a $10,000 investment made in Pacific Advisors
Small Cap Fund, Class A shares, on February 8, 1993 compared to the growth of
the Russell 2000 Index(2).
SMALL CAP FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SMALL CAP FUND RUSSELL 2000 INDEX
<S> <C> <C>
2/8/93 $9,425 $10,000
12/93 $11,319 $11,700
12/94 $10,870 $11,328
12/95 $12,771 $14,297
12/96 $18,352 $16,407
12/97 $19,628 $19,774
12/98 $16,379 $19,092
12/31/99 $13,800 $22,837
</TABLE>
Average Annual Compounded Return for period ending December 31, 1999 (Class A
shares)
<TABLE>
<S> <C>
One Year -20.60%
Five Year 4.92%
Inception 5.66%
</TABLE>
- ----------------------------------
1 Performance figures represent the change in value of an investment over the
periods shown, and have been restated to include the maximum 5.75% initial sales
charge, assuming reinvestment of dividends and capital gains at net asset value
and after expense reimbursements. Past performance does not guarantee future
results. Share price and returns fluctuate, so that your shares, when redeemed,
may be worth more or less than their original cost.
2 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.
16
<PAGE>
PACIFIC ADVISORS
financial statements
[GRAPHIC]
17
<PAGE>
PACIFIC ADVISORS GOVERNMENT SECURITIES FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
US GOVERNMENT SECURITIES - 74.35%
US Treasury Bills
US Treasury Bill 01/06/00 $2,500,000 $ 2,498,368
- -----------------------------------------------------------------------------------------------------------------------
US Treasury Notes
US Treasury Note 4.50% 09/30/00 330,000 326,391
- -----------------------------------------------------------------------------------------------------------------------
US Treasury Bonds
US Treasury Bond 8.125% 08/15/19 300,000 341,813
US Treasury Bond 8.125% 08/15/21 300,000 344,250
US Treasury Bond 7.125% 02/15/23 300,000 312,375
US Treasury Bond 7.50% 11/15/24 330,000 360,112
US Treasury Bond 7.625% 02/15/25 370,000 410,006
US Treasury Bond 6.875% 08/15/25 360,000 366,525
US Treasury Bond 6.75% 08/15/26 350,000 351,531
- -----------------------------------------------------------------------------------------------------------------------
2,486,612
- -----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT SECURITIES
(Cost: $5,396,696) 5,311,371
------------------
<CAPTION>
Number of
Shares Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 17.90%
Communications
Broadwing, Inc.* 5,000 184,375
Ericsson 5,000 328,438
- -----------------------------------------------------------------------------------------------------------------------
512,813
- -----------------------------------------------------------------------------------------------------------------------
Financial Services - Diversified
Convergys Corporation* 5,000 153,750
- -----------------------------------------------------------------------------------------------------------------------
Telephone Systems
Bell Atlantic Corporation 2,200 135,437
Centurytel, Inc.* 3,000 142,125
SBC Communications 2,800 136,500
- -----------------------------------------------------------------------------------------------------------------------
414,062
- -----------------------------------------------------------------------------------------------------------------------
Utilities - Electric
DQE, Inc. 3,400 117,725
Nisource, Inc. 4,500 80,438
- -----------------------------------------------------------------------------------------------------------------------
198,163
- -----------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $1,085,427) 1,278,788
------------------
TOTAL INVESTMENT SECURITIES - 92.25%
(Cost: $6,482,123) $ 6,590,159
------------------
SHORT-TERM INVESTMENTS - 6.21%
United Missouri Bank Money Market Fund 443,406
OTHER ASSETS LESS LIABILITIES - 1.54% 109,838
------------------
TOTAL NET ASSETS - 100% $ 7,143,403
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
PACIFIC ADVISORS INCOME AND EQUITY FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 82.99%
Aerospace & Defense
McDonnell Douglas 9.75% 04/01/12 $ 84,000 $ 95,959
- -----------------------------------------------------------------------------------------------------------------------
Auto-Manufacturers
Ford Motor Company 9.50% 09/15/11 19,000 21,947
- -----------------------------------------------------------------------------------------------------------------------
Banks - Money Centers
Bank of America Subordinate Notes 10.00% 02/01/03 58,000 62,697
Citicorp Subordinate Securities 9.50% 02/01/02 50,000 52,510
- -----------------------------------------------------------------------------------------------------------------------
115,207
- -----------------------------------------------------------------------------------------------------------------------
Banks - Regional
Banc One Corporation 7.25% 08/15/04 100,000 99,460
Banc One Corporation 9.875% 03/01/09 52,000 59,183
Barnett Banks, Inc. 10.875% 03/15/03 144,000 157,952
First Union Corporation 6.824% 08/01/26 25,000 24,204
NCNB Corporation 9.50% 06/01/04 25,000 27,056
Republic of New York Corporation 8.375% 02/15/07 53,000 54,110
- -----------------------------------------------------------------------------------------------------------------------
421,965
- -----------------------------------------------------------------------------------------------------------------------
Cosmetic - Personal Care
Procter & Gamble 8.50% 08/10/09 65,000 70,575
- -----------------------------------------------------------------------------------------------------------------------
Financial Services
Associates Corporation N.A. 8.55% 07/15/09 150,000 159,114
Associates Corporation N.A. 8.15% 08/01/09 60,000 62,046
Ford Motor Credit 5.80% 01/12/09 40,000 35,460
General Motors Acceptance Corporation 9.625%
12/15/01 49,000 51,237
General Motors Acceptance Corporation 8.875%
06/01/10 13,000 14,137
Progressive Corporation 7.30% 06/01/06 40,000 39,183
- -----------------------------------------------------------------------------------------------------------------------
361,177
- -----------------------------------------------------------------------------------------------------------------------
Financial Services - Diversified
General Electric Capital 8.85% 04/01/05 26,000 27,652
General Electric Capital 8.50% 07/24/08 82,000 87,640
Texaco Capital 8.625% 06/30/10 146,000 158,719
Transamerica Corporation 6.75% 11/15/06 80,000 75,683
- -----------------------------------------------------------------------------------------------------------------------
349,694
- -----------------------------------------------------------------------------------------------------------------------
Financial Services - Specialty
Ford Capital B.V. 9.50% 06/01/10 75,000 83,610
- -----------------------------------------------------------------------------------------------------------------------
Food
Ralston Purina 9.25% 10/15/09 72,000 79,045
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
PACIFIC ADVISORS INCOME AND EQUITY FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS CONTINUED
Food - Retailers
Safeway, Inc. 10.00% 12/01/01 $ 80,000 $ 83,805
Safeway, Inc. 9.65% 01/15/04 140,000 150,589
- -----------------------------------------------------------------------------------------------------------------------
234,394
- -----------------------------------------------------------------------------------------------------------------------
Gas - Integrated
Coastal Corporation 10.25% 10/15/04 95,000 105,467
- -----------------------------------------------------------------------------------------------------------------------
Industrial
Caterpillar, Inc. 9.00% 04/15/06 80,000 85,978
- -----------------------------------------------------------------------------------------------------------------------
Insurance - Full Line
American General Financial 8.125% 08/15/09 146,000 149,148
American General Financial 8.45% 10/15/09 50,000 52,150
Cigna Corporation 7.40% 01/15/03 25,000 24,920
Cigna Corporation 7.40% 05/15/07 94,000 90,915
Cigna Corporation 8.25% 01/01/07 77,000 77,962
Transamerica Corporation 9.375% 03/01/08 70,000 76,560
- -----------------------------------------------------------------------------------------------------------------------
471,655
- -----------------------------------------------------------------------------------------------------------------------
Insurance - Life
Conseco, Inc. 6.80% 06/15/05 125,000 117,040
Sunamerica Inc. 9.95% 08/01/08 23,000 26,663
- -----------------------------------------------------------------------------------------------------------------------
143,703
- -----------------------------------------------------------------------------------------------------------------------
Insurance - Specialty
MBIA, Inc. 9.375% 02/15/11 25,000 28,188
- -----------------------------------------------------------------------------------------------------------------------
Office Equipment
Xerox Corporation 7.15% 08/01/04 25,000 24,572
- -----------------------------------------------------------------------------------------------------------------------
Oil - Integrated Majors
Atlantic Richfield 9.125% 03/01/11 237,000 266,111
BP America, Inc. 7.875% 05/15/02 105,000 107,279
Phillips Petroleum 9.375% 02/15/11 25,000 28,189
- -----------------------------------------------------------------------------------------------------------------------
401,579
- -----------------------------------------------------------------------------------------------------------------------
Oil - Pipelines
ANR Pipeline 7.00% 06/01/25 35,000 33,868
- -----------------------------------------------------------------------------------------------------------------------
Railroads
Union Pacific Resources 7.00% 10/15/06 103,000 98,240
- -----------------------------------------------------------------------------------------------------------------------
Real Estate
Secured Finance 9.05% 12/15/04 110,000 118,749
- -----------------------------------------------------------------------------------------------------------------------
Retailers - Broadline
Dayton Hudson Company 10.00% 01/01/11 20,000 23,511
Wal-Mart Stores 6.875% 08/10/09 25,000 24,337
- -----------------------------------------------------------------------------------------------------------------------
47,848
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
PACIFIC ADVISORS INCOME AND EQUITY FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS CONTINUED
Telephone Systems
New York Telephone Company 8.625% 11/15/10 $ 57,000 $ 61,052
- -----------------------------------------------------------------------------------------------------------------------
US Government Agency
InterAmerican Development Bank 8.40% 09/01/09 10,000 10,874
International Bank Reconstruction & Development
8.64% 06/18/01 25,000 25,560
- -----------------------------------------------------------------------------------------------------------------------
36,434
- -----------------------------------------------------------------------------------------------------------------------
Utilities - Electric
Baltimore Gas & Electric 8.54% 09/18/06 60,000 62,485
Niagara Mohawk Power 9.75% 11/01/05 50,000 54,484
Pacific Gas & Electric 8.375% 05/01/25 45,000 44,732
Potomac Electric Power 5.875% 10/15/08 75,000 67,614
- -----------------------------------------------------------------------------------------------------------------------
229,315
- -----------------------------------------------------------------------------------------------------------------------
Utilities - Gas
Consolidated Natural Gas 6.625% 12/01/13 30,000 26,712
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost: $3,885,793) 3,746,933
-----------------
<CAPTION>
Number of
Shares Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 9.67%
Building Materials
Home Depot, Inc. 1,500 102,844
- -----------------------------------------------------------------------------------------------------------------------
Diversified Companies
General Electric 500 77,375
- -----------------------------------------------------------------------------------------------------------------------
Financial Services - Diversified
Citigroup, Inc. 750 41,672
- -----------------------------------------------------------------------------------------------------------------------
Investment Companies
Alliance Capital Management 1,000 29,937
- -----------------------------------------------------------------------------------------------------------------------
Oil - Integrated Majors
Exxon Mobil Corporation 528 42,537
- -----------------------------------------------------------------------------------------------------------------------
Pharmaceuticals
Schering-Plough Corporation 600 25,313
- -----------------------------------------------------------------------------------------------------------------------
Software & Computer Processing Equipment
Microsoft* 1,000 116,750
- -----------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $150,764) 436,428
-----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
PACIFIC ADVISORS INCOME AND EQUITY FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK - 4.51%
Insurance - Full Line
American General Financial LLC 1,200 $ 27,150
Torchmark Capital LLC 9.18% Series A 1,200 28,950
Unum Corporation 8.80% Series A 1,500 33,937
- -----------------------------------------------------------------------------------------------------------------------
90,037
- -----------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts
Price Enterprises Class A 6,000 84,000
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE SYSTEMS
GTE 8.75% Series B 1,200 29,700
- -----------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost: $241,785) 203,737
-----------------
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
US GOVERNMENT SECURITIES - 1.99%
US Treasury Notes
US Treasury Note 7.875% 11/15/04 $ 85,000 89,914
- -----------------------------------------------------------------------------------------------------------------------
TOTAL US GOVERNMENT SECURITIES
(Cost: $85,285) 89,914
-----------------
FOREIGN GOVERNMENT SECURITIES - 0.22%
Foreign Government Agency Bonds
Ontario Global Bond 7.00% 08/04/05 10,000 9,989
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Cost: $10,283) 9,989
-----------------
TOTAL INVESTMENT SECURITIES - 99.38%
(Cost: $4,373,910) $ 4,487,001
-----------------
SHORT-TERM INVESTMENTS - 0.00%
United Missouri Bank Money Market Fund -
OTHER ASSETS LESS LIABILITIES - 0.62% 27,831
-----------------
TOTAL NET ASSETS - 100% $ 4,514,832
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
PACIFIC ADVISORS BALANCED FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCK - 50.68%
Communications
Nokia Corporation 4,000 $ 760,000
- -----------------------------------------------------------------------------------------------------------------------
Entertainment
AT&T - Liberty Media Group Class A* 6,000 340,500
GC Companies, Inc.* 2,000 51,750
Time Warner, Inc. 3,000 217,313
Viacom, Inc.* 6,000 362,625
- -----------------------------------------------------------------------------------------------------------------------
972,188
- -----------------------------------------------------------------------------------------------------------------------
Financial Services - Diversified
Convergys Corporation* 6,000 184,500
Household International 2,000 74,500
- -----------------------------------------------------------------------------------------------------------------------
259,000
- -----------------------------------------------------------------------------------------------------------------------
Financial Services - Specialty
Federal National Mortgage 3,000 187,312
- -----------------------------------------------------------------------------------------------------------------------
Forest Products
Rayonier, Inc. 1,500 72,469
- -----------------------------------------------------------------------------------------------------------------------
Gas - Integrated
Enron Corporation 6,000 266,250
- -----------------------------------------------------------------------------------------------------------------------
Health Care Provider
Johnson & Johnson 1,500 139,688
- -----------------------------------------------------------------------------------------------------------------------
Industrial
UCAR International, Inc.* 5,000 89,062
- -----------------------------------------------------------------------------------------------------------------------
Industrial & Commercial Services
Reliance Steel 6,000 140,625
- -----------------------------------------------------------------------------------------------------------------------
Insurance - Specialty
Farm Family Holdings, Inc.* 4,000 169,000
MMI Companies, Inc. 20,000 172,500
- -----------------------------------------------------------------------------------------------------------------------
341,500
- -----------------------------------------------------------------------------------------------------------------------
Medical & Biotechnology
McKesson HBOC, Inc. 6,000 135,375
- -----------------------------------------------------------------------------------------------------------------------
Oil Equipment & Services
Cooper Cameron* 2,500 122,344
- -----------------------------------------------------------------------------------------------------------------------
Paper Products
American Greetings - Class A 3,000 70,875
- -----------------------------------------------------------------------------------------------------------------------
Publishing
Dun & Bradstreet Corporation 6,000 177,000
R H Donnelley Corporation* 9,000 169,875
- -----------------------------------------------------------------------------------------------------------------------
346,875
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
PACIFIC ADVISORS BALANCED FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK CONTINUED
Railroads
GATX Corporation 2,000 $ 67,500
- -----------------------------------------------------------------------------------------------------------------------
Real Estate
Catellus Development Corporation* 10,000 128,125
- -----------------------------------------------------------------------------------------------------------------------
Software & Computer Processing Equipment
Reynolds & Reynolds 6,000 135,000
- -----------------------------------------------------------------------------------------------------------------------
Trucking
CNF Transportation, Inc. 3,000 103,500
- -----------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $2,240,045) 4,337,688
-----------------
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS - 40.13%
Banks - Money Center
Swiss Bank Corporation - NY 7.375% 07/15/15 $ 300,000 287,891
- -----------------------------------------------------------------------------------------------------------------------
Banks - Regional
Banc One Corporation 9.875% 03/01/09 100,000 113,813
Barnett Banks, Inc. 10.875% 03/15/03 325,000 356,489
- -----------------------------------------------------------------------------------------------------------------------
470,302
- -----------------------------------------------------------------------------------------------------------------------
Food Retailers
Safeway 9.65% 01/15/04 214,000 230,186
Safeway 7.00% 09/15/07 225,000 215,817
- -----------------------------------------------------------------------------------------------------------------------
446,003
- -----------------------------------------------------------------------------------------------------------------------
Industrial
Tenneco, Inc. 10.375% 11/15/00 86,000 88,458
Tenneco Packaging PTV 8.00% 04/15/07 50,000 49,168
- -----------------------------------------------------------------------------------------------------------------------
137,626
- -----------------------------------------------------------------------------------------------------------------------
Insurance - Full Line
CIGNA Corporation 8.25% 01/01/07 121,000 122,512
- -----------------------------------------------------------------------------------------------------------------------
Oil - Integrated Majors
Atlantic Richfield 9.125% 03/01/11 365,000 409,834
- -----------------------------------------------------------------------------------------------------------------------
Telephone Systems
BellSouth Telecommunications 5.85% 11/15/45 100,000 99,419
NYNEX Corporation 9.55% 05/01/10 311,250 333,847
Sprint Spectrum LP 11.00% 08/15/06 100,000 110,523
- -----------------------------------------------------------------------------------------------------------------------
543,789
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
PACIFIC ADVISORS BALANCED FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS CONTINUED
Utilities - Electric
Alabama Power 9.00% 12/01/24 $ 125,000 $ 129,447
Cleveland Electric Illuminating 7.625% 08/01/02 344,000 343,264
Niagara Mohawk Power 9.75% 11/01/05 275,000 299,664
Public Service Electric & Gas 7.375% 03/01/14 134,000 126,057
Public Service Electric & Gas 7.00% 09/01/24 45,000 38,901
Toledo Edison 7.875% 08/01/04 80,000 80,081
- -----------------------------------------------------------------------------------------------------------------------
1,017,414
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost: $3,530,662) 3,435,371
-----------------
<CAPTION>
Number of
Shares Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK - 4.09%
Real Estate Investment Trusts
Price Enterprises Class A 25,000 350,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost: $347,380) 350,000
-----------------
TOTAL INVESTMENT SECURITIES - 94.90%
(Cost: $6,118,087) $ 8,123,059
-----------------
SHORT-TERM INVESTMENTS - 3.67%
United Missouri Bank Money Market Fund 313,767
OTHER ASSETS LESS LIABILITIES - 1.43% 122,679
-----------------
TOTAL NET ASSETS - 100% $ 8,559,505
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
PACIFIC ADVISORS GROWTH FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCK - 71.85%
Building Materials
Home Depot, Inc. 300 $ 20,569
- --------------------------------------------------------------------------------------------------------------------
Computers & Related Equipment
Cisco Systems, Inc.* 300 32,137
Dell Computer Corporation* 300 15,300
EMC Corporation* 300 32,775
Sun Microsystems, Inc.* 400 30,975
- --------------------------------------------------------------------------------------------------------------------
111,187
- --------------------------------------------------------------------------------------------------------------------
Cosmetic - Personal Care
Procter & Gamble Company 200 21,912
- --------------------------------------------------------------------------------------------------------------------
Financial Services - Diversified
Citigroup, Inc. 300 16,669
- --------------------------------------------------------------------------------------------------------------------
Industrial - Diversified
Corning, Inc. 200 25,788
Illinois Tool Works 200 13,513
Tyco International, Ltd. 400 15,550
- --------------------------------------------------------------------------------------------------------------------
54,851
- --------------------------------------------------------------------------------------------------------------------
Medical & Biotechnology
Cardinal Health, Inc. 200 9,575
Johnson & Johnson 200 18,625
- --------------------------------------------------------------------------------------------------------------------
28,200
- --------------------------------------------------------------------------------------------------------------------
Retailers - Broadline
Wal-Mart Stores, Inc. 400 27,650
- --------------------------------------------------------------------------------------------------------------------
Oil - Integrated
Exxon Mobil Corporation 200 16,112
- --------------------------------------------------------------------------------------------------------------------
Semiconductor & Related
Intel Corporation 200 16,462
Texas Instruments Inc. 200 19,375
Xilinx, Inc.* 400 18,188
- --------------------------------------------------------------------------------------------------------------------
54,025
- --------------------------------------------------------------------------------------------------------------------
Software & Computer Processing Equipment
Microsoft* 200 23,350
Oracle Corporation* 200 22,412
- --------------------------------------------------------------------------------------------------------------------
45,762
- --------------------------------------------------------------------------------------------------------------------
Technology - Diversified
Lucent Technologies 300 22,444
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
PACIFIC ADVISORS GROWTH FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK CONTINUED
Telephone Systems
MCI Worldcom, Inc.* 300 $ 15,919
- --------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $352,682) 435,300
---------------
TOTAL INVESTMENT SECURITIES - 71.85%
(Cost: $352,682) $ 435,300
---------------
SHORT-TERM INVESTMENTS - 24.61%
United Missouri Bank Money Market Fund 149,123
OTHER ASSETS LESS LIABILITIES - 3.54% 21,443
---------------
TOTAL NET ASSETS - 100% $ 605,866
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
PACIFIC ADVISORS SMALL CAP FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
COMMON STOCK - 100.02%
Auto Manufacturers
Sonic Automotive, Inc.* 14,000 $ 136,500
- ------------------------------------------------------------------------------------------------------------------------
Banks - Regional
East West Bancorp, Inc. 35,000 400,312
- ------------------------------------------------------------------------------------------------------------------------
Building Materials
Q.E.P. Company, Inc.* 13,500 103,781
- ------------------------------------------------------------------------------------------------------------------------
Chemicals
Ocean Bio-chem, Inc.* 90,000 106,875
- ------------------------------------------------------------------------------------------------------------------------
Computers & Related Equipment
3DFX Interactive, Inc.* 40,000 392,500
Intervoice, Inc.* 30,100 699,825
- ------------------------------------------------------------------------------------------------------------------------
1,092,325
- ------------------------------------------------------------------------------------------------------------------------
Containers/Packaging
Mobile Mini, Inc.* 18,500 397,750
- ------------------------------------------------------------------------------------------------------------------------
Cosmetic - Personal Care
Chattem, Inc.* 1,000 19,000
Helen of Troy* 9,000 65,250
Herbalife Class B 20,000 267,500
Natural Alternatives International* 32,000 104,000
Nature's Sunshine 22,000 176,000
- ------------------------------------------------------------------------------------------------------------------------
631,750
- ------------------------------------------------------------------------------------------------------------------------
Educational Services
ITT Educational Services, Inc.* 8,200 126,588
- ------------------------------------------------------------------------------------------------------------------------
Financial Services - Diversified
American National Financial, Inc. 15,000 46,875
- ------------------------------------------------------------------------------------------------------------------------
Footwear
Genesco, Inc.* 20,000 260,000
- ------------------------------------------------------------------------------------------------------------------------
Health Care Provider
America Service Group* 21,000 315,000
Children's Comprehensive Services* 20,000 112,500
Lifemark Corporation* 34,000 110,500
- ------------------------------------------------------------------------------------------------------------------------
538,000
- ------------------------------------------------------------------------------------------------------------------------
Home Construction
Modtech Holding, Inc.* 38,000 228,000
- ------------------------------------------------------------------------------------------------------------------------
Industrial
Park - Ohio Holdings Corporation* 10,000 98,750
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
PACIFIC ADVISORS SMALL CAP FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK CONTINUED
Industrial & Commercial Services
Diversified Corporate Resources, Inc.* 6,200 $ 17,825
Healthcare Services Group* 30,000 210,000
RCM Technologies, Inc.* 8,000 138,000
- ------------------------------------------------------------------------------------------------------------------------
365,825
- ------------------------------------------------------------------------------------------------------------------------
Insurance - Full Line
Gainsco, Inc. 30,000 161,250
- ------------------------------------------------------------------------------------------------------------------------
Insurance - Specialty
Interstate National Dealer Services* 80,000 480,000
Warrentech Corporation* 40,000 60,000
- ------------------------------------------------------------------------------------------------------------------------
540,000
- ------------------------------------------------------------------------------------------------------------------------
Medical Equipment, Devices & Supplies
Meridian Medical Technicians, Inc.* 51,000 286,875
- ------------------------------------------------------------------------------------------------------------------------
Paper Products
Republic Group, Inc. 30,000 453,750
- ------------------------------------------------------------------------------------------------------------------------
Railroads
Railamerica, Inc.* 85,000 727,812
- ------------------------------------------------------------------------------------------------------------------------
Restaurants
Panchos Mexican Restaurants* 25,000 71,875
- ------------------------------------------------------------------------------------------------------------------------
Retail - Specialty
Rentrak Corporation* 40,000 282,500
- ------------------------------------------------------------------------------------------------------------------------
Semiconductor & Related
Cerprobe Corporation* 15,000 110,625
- ------------------------------------------------------------------------------------------------------------------------
Software & Computer Processing Equipment
Timberline Software Corporation 19,999 268,737
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost: $7,390,233) 7,436,755
------------------
TOTAL INVESTMENT SECURITIES - 100.02%
(Cost: $7,390,233) $ 7,436,755
------------------
SHORT-TERM INVESTMENTS - 0.34%
United Missouri Bank Money Market Fund 25,331
OTHER ASSETS LESS LIABILITIES - (0.36%) (27,122)
------------------
TOTAL NET ASSETS - 100% $ 7,434,964
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
PACIFIC ADVISORS FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME
GOVERNMENT AND
SECURITIES EQUITY
FUND FUND
------------ ------------
<S> <C> <C>
ASSETS
Investment securities
At cost $ 6,482,123 $ 4,373,910
=========== ===========
At market value $ 6,590,159 $ 4,487,001
Short-term investments, at cost, which is
equal to market 443,406 -
Accrued income receivable 64,205 81,760
Receivable from investment manager (Note 3) 36,756 18,178
Receivable for capital shares sold 31,368 5,591
Other assets 2,877 1,206
----------- -----------
Total assets 7,168,771 4,593,736
----------- -----------
LIABILITIES
Payable for investments purchased - 55,330
Payable for fund shares redeemed 1,982 3,003
Accounts payable 19,690 18,979
Accounts payable to related parties (Note 3) 3,696 1,592
Payable to Investment Manager (Note 3) - -
----------- -----------
Total liabilities 25,368 78,904
----------- -----------
NET ASSETS $ 7,143,403 $ 4,514,832
----------- -----------
SUMMARY OF SHAREHOLDERS' EQUITY
Paid in capital 7,037,101 4,400,747
Accumulated undistributed net investment
income (loss) (1,817) 1,675
Accumulated undistributed net realized gains
(losses) on security transactions 83 -
Distributions in excess of net realized gains
on security transactions - (681)
Net unrealized appreciation (depreciation) of
investments 108,036 113,091
----------- -----------
Net assets at December 31, 1999 $ 7,143,403 $ 4,514,832
----------- -----------
CLASS A:
Net assets $ 5,220,295 $ 2,668,142
=========== ===========
Shares authorized 50,000,000 50,000,000
Shares outstanding 535,750 256,806
Net asset value and redemption price per share $ 9.74 $ 10.39
=========== ===========
Maximum offering price per share $ 10.23 $ 10.91
Sales load 4.75% 4.75%
CLASS C:
Net assets $ 1,923,108 $ 1,846,690
=========== ===========
Shares authorized 50,000,000 50,000,000
Shares outstanding 199,638 181,937
Net asset value and redemption price per share $ 9.63 $ 10.15
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
BALANCED GROWTH CAP
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investment securities
At cost $ 6,118,087 $ 352,682 $ 7,390,233
=========== =========== ===========
At market value $ 8,123,059 $ 435,300 $ 7,436,755
Short-term investments, at cost, which is
equal to market 313,767 149,123 25,331
Accrued income receivable 93,512 580 2,037
Receivable from investment manager (Note 3) - 2,626 -
Receivable for capital shares sold 64,502 20,835 4,435
Other assets 3,599 - 7,387
----------- ----------- -----------
Total assets 8,598,439 608,464 7,475,945
----------- ----------- -----------
LIABILITIES
Payable for investments purchased - - -
Payable for fund shares redeemed 4,309 240 10,120
Accounts payable 27,918 2,323 21,358
Accounts payable to related parties (Note 3) 4,273 35 4,836
Payable to Investment Manager (Note 3) 2,434 - 4,667
----------- ----------- -----------
Total liabilities 38,934 2,598 40,981
----------- ----------- -----------
NET ASSETS $ 8,559,505 $ 605,866 $ 7,434,964
----------- ----------- -----------
SUMMARY OF SHAREHOLDERS' EQUITY
Paid in capital 6,547,209 524,632 7,170,145
Accumulated undistributed net investment
income (loss) 2,335 (1,384) -
Accumulated undistributed net realized gains
(losses) on security transactions 4,989 - 218,297
Distributions in excess of net realized gains
on security transactions - - -
Net unrealized appreciation (depreciation) of
investments 2,004,972 82,618 46,522
----------- ----------- -----------
Net assets at December 31, 1999 $ 8,559,505 $ 605,866 $ 7,434,964
----------- ----------- -----------
CLASS A:
Net assets $ 7,007,763 $ 327,831 $ 6,976,048
=========== =========== ===========
Shares authorized 50,000,000 50,000,000 50,000,000
Shares outstanding 499,025 28,087 582,446
Net asset value and redemption price per share $ 14.04 $ 11.67 $ 11.98
=========== =========== ===========
Maximum offering price per share $ 14.90 $ 12.38 $ 12.71
Sales load 5.75% 5.75% 5.75%
CLASS C:
Net assets $ 1,551,742 $ 278,035 $ 458,916
=========== =========== ===========
Shares authorized 50,000,000 50,000,000 50,000,000
Shares outstanding 111,559 23,943 38,471
Net asset value and redemption price per share $ 13.91 $ 11.61 $ 11.93
=========== =========== ===========
</TABLE>
31
<PAGE>
PACIFIC ADVISORS FUND INC.
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME
GOVERNMENT AND
SECURITIES EQUITY
FUND FUND
----------- ----------
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 23,085 $ 26,954
Interest 257,104 224,251
---------- ---------
Total Income 280,189 251,205
---------- ---------
EXPENSES
Investment Management
Fees 42,388 34,061
Transfer Agent Fees 21,068 19,169
Fund Accounting Fees 32,327 23,184
Legal Fees 28,496 16,796
Audit Fees 26,196 19,274
Registration Fees 14,034 12,388
Printing 24,395 16,475
Custody Fees 7,400 7,194
Director
Fees/Meetings 2,260 1,554
Distribution Fees
(Note 3) 24,016 20,784
Other Expense 5,887 4,193
---------- ---------
Total Expenses,
before
reimbursements 228,467 175,072
Less fees waived and
expenses
reimbursed
(Note 3) 120,321 88,127
---------- ---------
Net Expenses 108,146 86,945
---------- ---------
NET INVESTMENT INCOME
(LOSS) 172,043 164,260
---------- ---------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net Realized gain
(loss) on
investments 16,887 5,619
Net Unrealized
appreciation
(depreciation) of
investments (464,032) (157,552)
---------- ---------
(447,145) (151,933)
---------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $ (275,102) $ 12,327
---------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
BALANCED GROWTH CAP
FUND FUND FUND
--------- --------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 55,225 $ 431 $ 41,316
Interest 255,692 4,143 4,551
--------- -------- -------------
Total Income 310,917 4,574 45,867
--------- -------- -------------
EXPENSES
Investment Management
Fees 60,330 1,661 64,893
Transfer Agent Fees 27,181 10,000 40,663
Fund Accounting Fees 40,410 10,000 44,697
Legal Fees 34,142 - 43,738
Audit Fees 35,396 1,038 32,466
Registration Fees 15,461 2,500 15,621
Printing 30,529 - 37,263
Custody Fees 7,242 4,422 8,503
Director
Fees/Meetings 2,791 - 3,164
Distribution Fees
(Note 3) 20,370 1,221 21,119
Other Expense 6,513 800 7,397
--------- -------- -------------
Total Expenses,
before
reimbursements 280,365 31,642 319,524
Less fees waived and
expenses
reimbursed
(Note 3) 30,167 25,684 -
--------- -------- -------------
Net Expenses 250,198 5,958 319,524
--------- -------- -------------
NET INVESTMENT INCOME
(LOSS) 60,719 (1,384) (273,657)
--------- -------- -------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net Realized gain
(loss) on
investments 81,450 - 223,619
Net Unrealized
appreciation
(depreciation) of
investments 766,175 82,618 (1,458,920)
--------- -------- -------------
847,625 82,618 (1,235,301)
--------- -------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $ 908,344 $ 81,234 $ (1,508,958)
--------- -------- -------------
</TABLE>
33
<PAGE>
PACIFIC ADVISORS FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND INCOME AND EQUITY FUND
--------------------------- --------------------------
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS
Net investment income
(loss) $ 172,043 $ 160,810 $ 164,260 $ 91,460
Net realized gain
(loss) on
investments 16,887 378,940 5,619 30,423
Change in net
unrealized
appreciation
(depreciation)
of investments (464,032) 257,522 (157,552) 160,159
--------- ---------- ---------- ---------
Increase (decrease)
in net assets
resulting from
operations (275,102) 797,272 12,327 282,042
--------- ---------- ---------- ---------
FROM DISTRIBUTIONS TO
SHAREHOLDERS
Class A:
Net investment
income (140,251) (146,241) (103,428) (74,762)
Net capital
gains (12,364) (332,026) (3,774) (24,021)
Class C:
Net investment
income (34,684) (15,510) (61,833) (14,485)
Net capital
gains (4,473) (47,268) (2,566) (6,355)
--------- ---------- ---------- ---------
Decrease in net
assets resulting
from
distributions (191,772) (541,045) (171,601) (119,623)
--------- ---------- ---------- ---------
FROM CAPITAL SHARE
TRANSACTIONS
(NOTE 5)
Proceeds from shares
sold 3,703,783 3,206,684 2,239,902 1,428,550
Proceeds from shares
purchased by
reinvestment of
dividends 149,343 459,455 129,167 79,419
Cost of shares
repurchased (2,493,824) (1,610,336) (1,042,897) (216,738)
--------- ---------- ---------- ---------
Increase (decrease)
in net assets
derived from
capital share
transactions 1,359,302 2,055,803 1,326,172 1,291,231
--------- ---------- ---------- ---------
INCREASE (DECREASE)
IN NET ASSETS 892,428 2,312,030 1,166,898 1,453,650
NET ASSETS
Beginning of year 6,250,975 3,938,945 3,347,934 1,894,284
--------- ---------- ---------- ---------
End of year $7,143,403 $6,250,975 $4,514,832 $3,347,934
--------- ---------- ---------- ---------
</TABLE>
(c) Commencement of Operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND GROWTH FUND SMALL CAP FUND
-------------------------- ---------------------------- --------------------------
May 3,1999 (c)
Year ended Year ended to Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
------------ ------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
FROM OPERATIONS
Net investment income
(loss) $ 60,719 $ 12,012 $ (1,384) N/A $ (273,657) $ (396,194)
Net realized gain
(loss) on
investments 81,450 153,998 - N/A 223,619 235,446
Change in net
unrealized
appreciation
(depreciation)
of investments 766,175 277,926 82,618 N/A (1,458,920) (1,816,090)
---------- --------- -------- --- ---------- ----------
Increase (decrease)
in net assets
resulting from
operations 908,344 443,936 81,234 N/A (1,508,958) (1,976,838)
---------- --------- -------- --- ---------- ----------
FROM DISTRIBUTIONS TO
SHAREHOLDERS
Class A:
Net investment
income (60,475) - - N/A - -
Net capital
gains (59,690) (150,322) - N/A (5,375) (229,623)
Class C:
Net investment
income (3,542) (172) - N/A - -
Net capital
gains (12,667) (8,044) - N/A (353) (5,886)
---------- --------- -------- --- ---------- ----------
Decrease in net
assets resulting
from
distributions (136,374) (158,538) - N/A (5,728) (235,509)
---------- --------- -------- --- ---------- ----------
FROM CAPITAL SHARE
TRANSACTIONS
(NOTE 5)
Proceeds from shares
sold 2,253,867 1,207,016 526,173 N/A 1,787,612 2,235,324
Proceeds from shares
purchased by
reinvestment of
dividends 120,829 141,953 - N/A 4,342 182,048
Cost of shares
repurchased (1,385,001) (429,120) (1,541) N/A (2,411,853) (1,760,436)
---------- --------- -------- --- ---------- ----------
Increase (decrease)
in net assets
derived from
capital share
transactions 989,695 919,849 524,632 N/A (619,899) 656,936
---------- --------- -------- --- ---------- ----------
INCREASE (DECREASE)
IN NET ASSETS 1,761,665 1,205,247 605,866 N/A (2,134,585) (1,555,411)
NET ASSETS
Beginning of year 6,797,840 5,592,593 - N/A 9,569,549 11,124,960
---------- --------- -------- --- ---------- ----------
End of year $8,559,505 $6,797,840 $605,866 N/A $7,434,964 $9,569,549
---------- --------- -------- --- ---------- ----------
</TABLE>
(c) Commencement of Operations
35
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
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. Premiums and discounts on debt securities are amortized and accreted on
the same basis used for federal income tax purposes.
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, 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
36
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
the Investment Manager, the following amounts were waived or reimbursed for the
year ended December 31, 1999.
<TABLE>
<CAPTION>
Management Expense
Fees Reimbursements
<S> <C> <C>
Government Securities Fund $ 39,364 $ 80,957
Income and Equity Fund 31,935 56,192
Balanced Fund 30,167 -
Growth Fund 1,557 24,127
</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 December 31, 1999, the cumulative amounts
unrecouped by the Investment Manager since the commencement of operations are:
<TABLE>
<S> <C>
Government Securities Fund $ 596,797
Income and Equity Fund 450,569
Balanced Fund 290,927
Small Cap Fund 217,445
</TABLE>
For the year ended December 31, 1999, 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 $ 3,129 $ 14,946
Income and Equity Fund 1,267 6,465
Balanced Fund 1,381 6,914
Growth Fund 64 305
Small Cap Fund 6,148 29,969
</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 a minimum charge of $1,250
per month. 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 year ended December 31, 1999, total service fees were:
<TABLE>
<S> <C>
Government Securities Fund $ 24,016
Income and Equity Fund 20,784
Balanced Fund 20,370
Growth Fund 1,221
Small Cap Fund 21,119
</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 year ended and as of December 31, 1999.
<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 $ 4,507,416 $ 5,733,170 $ 265,185 $ 157,149 $ 108,036
Income and Equity Fund 2,935,653 1,508,151 290,667 177,576 113,091
Balanced Fund 4,574,054 3,709,896 2,173,828 168,856 2,004,972
Growth Fund 352,682 - 89,968 7,350 82,618
Small Cap Fund 5,450,326 6,077,461 1,289,828 1,243,306 46,522
</TABLE>
37
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 5. CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1999 December 31, 1998
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------ ------------------- ------------ -------------------
<S> <C> <C> <C> <C>
GOVERNMENT SECURITIES FUND
CLASS A
Shares Sold 225,373 $ 2,209,427 218,063 $ 2,343,958
Reinvestment of Distributions 11,340 110,669 38,067 397,397
------------ ------------------- ------------ -------------------
236,713 2,320,096 256,130 2,741,355
Shares Repurchased (216,157) (2,169,999) (140,050) (1,496,807)
------------ ------------------- ------------ -------------------
Net Increase (decrease) 20,556 $ 150,097 116,080 $ 1,244,548
============ =================== ============ ===================
CLASS C
Shares Sold 153,004 $ 1,494,356 80,090 $ 862,726
Reinvestment of Distributions 4,014 38,674 5,980 62,058
------------ ------------------- ------------ -------------------
157,018 1,533,030 86,070 924,784
Shares Repurchased (33,035) (323,825) (10,415) (113,529)
------------ ------------------- ------------ -------------------
Net Increase (decrease) 123,983 $ 1,209,205 75,655 $ 811,255
============ =================== ============ ===================
</TABLE>
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1999 December 31, 1998
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------ ------------------- ------------ -------------------
<S> <C> <C> <C> <C>
INCOME AND EQUITY FUND
CLASS A
Shares Sold 91,057 $ 968,071 70,114 $ 736,108
Reinvestment of Distributions 6,243 65,374 5,544 58,579
------------ ------------------- ------------ -------------------
97,300 1,033,445 75,658 794,687
Shares Repurchased (86,776) (909,772) (19,249) (201,807)
------------ ------------------- ------------ -------------------
Net Increase (decrease) 10,524 $ 123,673 56,409 $ 592,880
============ =================== ============ ===================
CLASS C
Shares Sold 122,405 $ 1,271,831 65,537 $ 692,442
Reinvestment of Distributions 6,224 63,793 1,978 20,840
------------ ------------------- ------------ -------------------
128,629 1,335,624 67,515 713,282
Shares Repurchased (12,807) (133,125) (1,400) (14,931)
------------ ------------------- ------------ -------------------
Net Increase (decrease) 115,822 $ 1,202,499 66,115 $ 698,351
============ =================== ============ ===================
</TABLE>
38
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1999 December 31, 1998
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------ ------------------- ------------ -------------------
<S> <C> <C> <C> <C>
BALANCED FUND
CLASS A
Shares Sold 86,712 $ 1,150,429 65,239 $ 830,434
Reinvestment of Distributions 7,641 104,909 10,614 133,736
------------ ------------------- ------------ -------------------
94,353 1,255,338 75,853 964,170
Shares Repurchased (101,373) (1,335,590) (33,511) (425,402)
------------ ------------------- ------------ -------------------
Net Increase (decrease) (7,020) $ (80,252) 42,342 $ 538,768
============ =================== ============ ===================
CLASS C
Shares Sold 84,177 $ 1,103,438 29,657 $ 376,582
Reinvestment of Distributions 1,171 15,920 656 8,217
------------ ------------------- ------------ -------------------
85,348 1,119,358 30,313 384,799
Shares Repurchased (3,799) (49,411) (303) (3,718)
------------ ------------------- ------------ -------------------
Net Increase (decrease) 81,549 $ 1,069,947 30,010 $ 381,081
============ =================== ============ ===================
</TABLE>
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1999 December 31, 1998
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------ ------------------- ------------ -------------------
<S> <C> <C> <C> <C>
GROWTH FUND
CLASS A
Shares Sold 28,121 $ 282,969 - $ -
Reinvestment of Distributions - - - -
------------ ---------------- ------------ ----------------
28,121 282,969 - -
Shares Repurchased (34) (341) - -
------------ ---------------- ------------ ----------------
Net Increase (decrease) 28,087 $ 282,628 - $ -
============ ================ ============ ================
CLASS C
Shares Sold 24,058 $ 243,204 - $ -
Reinvestment of Distributions - - - -
------------ ---------------- ------------ ----------------
24,058 243,204 - -
Shares Repurchased (115) (1,200) - -
------------ ---------------- ------------ ----------------
Net Increase (decrease) 23,943 $ 242,004 - $ -
============ ================ ============ ================
</TABLE>
39
<PAGE>
PACIFIC ADVISORS FUND INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1999 December 31, 1998
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------ ------------------- ------------ -------------------
<S> <C> <C> <C> <C>
SMALL CAP FUND
CLASS A
Shares Sold 113,526 $ 1,448,076 114,853 $ 1,925,336
Reinvestment of Distributions 341 4,026 12,485 176,162
------------ ------------------- ------------ -------------------
113,867 1,452,102 127,338 2,101,498
Shares Repurchased (186,970) (2,341,370) (107,128) (1,711,220)
------------ ------------------- ------------ -------------------
Net Increase (decrease) (73,103) $ (889,268) 20,210 $ 390,278
============ =================== ============ ===================
CLASS C
Shares Sold 27,145 $ 339,536 19,103 $ 309,988
Reinvestment of Distributions 27 316 417 5,886
------------ ------------------- ------------ -------------------
27,172 339,852 19,520 315,874
Shares Repurchased (5,499) (70,483) (2,722) (49,216)
------------ ------------------- ------------ -------------------
Net Increase (decrease) 21,673 $ 269,369 16,798 $ 266,658
============ =================== ============ ===================
</TABLE>
40
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
-------------------------------------------------------------
Class A
-------------------------------------------------------------
For the year ended December 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.59 $ 9.87 $ 9.30 $ 10.16 $ 8.82
-------- -------- -------- -------- --------
Income from investing operations
Net investment income 0.30 0.34 0.35 0.33 0.31
Net realized and unrealized gains (losses) on
securities (0.84) 1.38 0.71 (0.65) 1.53
-------- -------- -------- -------- --------
Total from investment operations (0.54) 1.72 1.06 (0.32) 1.84
-------- -------- -------- -------- --------
Less distributions
From net investment income (0.29) (0.33) (0.35) (0.32) (0.31)
From net capital gains (0.02) (0.67) (0.14) (0.22) (0.19)
-------- -------- -------- -------- --------
Total distributions (0.31) (1.00) (0.49) (0.54) (0.50)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.74 $ 10.59 $ 9.87 $ 9.30 $ 10.16
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN (b) (5.04)% 17.82% 11.72% (3.15)% 20.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 5,220 $ 5,456 $ 3,939 $ 7,096 $ 5,837
Ratio of net investment income to average net assets
With expense reductions 2.99% 3.32% 3.36% 3.46% 3.75%
Without expense reductions 1.02% 1.04% 1.51% (2.17)% (2.60)%
Ratio of expenses to average net assets
With expense reductions 1.60% 1.66% 1.65% 1.66% 1.65%
Without expense reductions 3.57% 3.94% 3.51% 2.95% 2.80%
Fund portfolio turnover rate 147.01% 41.98% 68.52% 50.49% 57.85%
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------
For the year April 2, 1998(c)
ended to
December 31, 1999 December 31, 1998
<S> <C> <C>
------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.50 $ 10.24
------------------ ------------------
Income from investing operations
Net investment income 0.27 0.23
Net realized and unrealized gains (losses) on
securities (0.88) 1.02
------------------ ------------------
Total from investment operations (0.61) 1.25
------------------ ------------------
Less distributions
From net investment income (0.24) (0.32)
From net capital gains (0.02) (0.67)
------------------ ------------------
Total distributions (0.26) (0.99)
------------------ ------------------
Net asset value, end of period $ 9.63 $ 10.50
------------------ ------------------
TOTAL INVESTMENT RETURN (b) (5.77)% 12.48%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 1,923 $ 795
Ratio of net investment income to average net assets
With expense reductions 2.18% 2.05%(a)
Without expense reductions 0.22% 0.63%(a)
Ratio of expenses to average net assets
With expense reductions 2.38% 1.06%(a)
Without expense reductions 4.34% 2.48%(a)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total
return computation.
(c) Commencement of Operations
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME AND EQUITY FUND
-------------------------------------------------------------
Class A
-------------------------------------------------------------
For the year ended December 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.74 $ 9.98 $ 9.42 $ 9.67 $ 8.98
-------- -------- -------- -------- --------
Income from investing operations
Net investment Income 0.43 0.37 0.33 0.35 0.31
Net realized and unrealized gains (losses) on
securities (0.39) 0.83 0.56 (0.19) 0.72
-------- -------- -------- -------- --------
Total from investment operations 0.04 1.20 0.89 0.16 1.03
-------- -------- -------- -------- --------
Less distributions
From net investment income (0.37) (0.34) (0.33) (0.35) (0.31)
From net capital gains (0.02) (0.10) - (0.06) (0.03)
-------- -------- -------- -------- --------
Total distributions (0.39) (0.44) (0.33) (0.41) (0.34)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.39 $ 10.74 $ 9.98 $ 9.42 $ 9.67
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN (b) 0.19% 12.14% 9.60% 1.78% 11.98%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 2,664 $ 2,646 $ 1,894 $ 1,211 $ 1,071
Ratio of net investment income to average net assets
With expense reductions 4.08% 3.68% 3.56% 3.75% 4.06%
Without expense reductions 1.86% 0.83% (0.96)% (1.69)% (2.32)%
Ratio of expenses to average net assets
With expense reductions 1.85% 1.83% 1.85% 1.85% 1.86%
Without expense reductions 4.06% 4.67% 6.38% 7.29% 8.25%
Fund portfolio turnover rate 37.34% 16.72% 42.30% 28.23% 33.40%
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------
For the year April 2, 1998(c)
ended to
December 31, 1999 December 31, 1998
<S> <C> <C>
------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.62 $ 10.39
------------------ ------------------
Income from investing operations
Net investment Income 0.41 0.22
Net realized and unrealized gains (losses) on
securities (0.43) 0.43
------------------ ------------------
Total from investment operations (0.02) 0.65
------------------ ------------------
Less distributions
From net investment income (0.43) (0.32)
From net capital gains (0.02) (0.10)
------------------ ------------------
Total distributions (0.45) (0.42)
------------------ ------------------
Net asset value, end of period $ 10.15 $ 10.62
------------------ ------------------
TOTAL INVESTMENT RETURN (b) (0.02)% 6.41%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 1,850 $ 702
Ratio of net investment income to average net assets
With expense reductions 3.45% 2.16%(a)
Without expense reductions 1.65% 0.31%(a)
Ratio of expenses to average net assets
With expense reductions 2.51% 1.43%(a)
Without expense reductions 4.30% 3.28%(a)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total
return computation.
(c) Commencement of Operations
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND
-------------------------------------------------------------
Class A
-------------------------------------------------------------
For the year ended December 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.69 $ 12.06 $ 10.66 $ 9.31 $ 8.75
-------- -------- -------- -------- --------
Income from investing operations
Net investment income 0.12 0.03 - 0.09 0.18
Net realized and unrealized gains (losses) on
securities 1.47 0.90 1.62 1.39 0.57
-------- -------- -------- -------- --------
Total from investment operations 1.59 0.93 1.62 1.48 0.75
-------- -------- -------- -------- --------
Less distributions
From net investment income (0.12) - (0.01) (0.09) (0.18)
From net capital gains (0.12) (0.30) (0.21) (0.04) (0.01)
-------- -------- -------- -------- --------
Total distributions (0.24) (0.30) (0.22) (0.13) (0.19)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.04 $ 12.69 $ 12.06 $ 10.66 $ 9.31
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN (b) 12.61% 7.76% 15.24% 15.92% 8.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 7,008 $ 6,420 $ 5,593 $ 3,187 $ 2,219
Ratio of net investment income to average net assets
With expense reductions 0.91% 0.22% (0.03)% 1.12% 2.46%
Without expense reductions 0.51% (0.18)% (0.50)% (0.76)% (0.62)%
Ratio of expenses to average net assets
With expense reductions 3.22% 3.48% 3.28% 2.48% 2.24%
Without expense reductions 3.62% 3.88% 3.75% 4.36% 5.31%
Fund portfolio turnover rate 52.47% 53.97% 64.13% 65.94% 41.23%
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------
For the year April 2, 1998(c)
ended to
December 31, 1999 December 31, 1998
<S> <C> <C>
------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.61 $ 13.09
------------------ ------------------
INCOME FROM INVESTING OPERATIONS
Net investment income 0.03 (0.04)
Net realized and unrealized gains (losses) on
securities 1.42 (0.13)
------------------ ------------------
Total from investment operations 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 $ 13.91 $ 12.61
------------------ ------------------
TOTAL INVESTMENT RETURN (b) 11.57% (1.28)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 1,552 $ 378
Ratio of net investment income to average net assets
With expense reductions 0.01% (0.64)%(a)
Without expense reductions (0.39)% (0.91)%(a)
Ratio of expenses to average net assets
With expense reductions 4.07% 3.12%(a)
Without expense reductions 4.47% 3.39%(a)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total
return computation.
(c) Commencement of Operations
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH FUND
-----------------
Class A
-----------------
May 3, 1999(c)
to
December 31, 1999
<S> <C>
-----------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.00
----------------
Income from investing operations
Net investment income (0.02)
Net realized and unrealized gains (losses) on
securities 1.69
----------------
Total from investment operations 1.67
----------------
Less distributions
From net investment income -
From net capital gains -
----------------
Total distributions -
----------------
Net asset value, end of period $ 11.67
----------------
TOTAL INVESTMENT RETURN (b) 16.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 328
Ratio of net investment income to average net assets
With expense reductions (0.27)%(a)
Without expense reductions (8.40)%(a)
Ratio of expenses to average net assets
With expense reductions 1.63%(a)
Without expense reductions 9.75%(a)
Fund portfolio turnover rate 0.00%
</TABLE>
<TABLE>
<CAPTION>
Class C
-------------------
May 3, 1999(c)
to
December 31, 1999
<S> <C>
-------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.00
------------------
Income from investing operations
Net investment income (0.04)
Net realized and unrealized gains (losses) on
securities 1.65
------------------
Total from investment operations 1.61
------------------
Less distributions
From net investment income -
From net capital gains -
------------------
Total distributions -
------------------
Net asset value, end of period $ 11.61
------------------
TOTAL INVESTMENT RETURN (b) 16.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 278
Ratio of net investment income to average net assets
With expense reductions (0.61)%(a)
Without expense reductions (8.74)%(a)
Ratio of expenses to average net assets
With expense reductions 2.16%(a)
Without expense reductions 10.28%(a)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total
return computation.
(c) Commencement of Operations
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
PACIFIC ADVISORS FUND INC.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP FUND
-------------------------------------------------------------
Class A
-------------------------------------------------------------
For the year ended December 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 14.23 $ 17.51 $ 16.47 $ 11.82 $ 10.35
-------- -------- -------- -------- --------
Income from investing operations
Net investment expense (0.61) (0.58) (0.38) (0.21) (0.08)
Net realized and unrealized gains (losses) on
securities (1.63) (2.34) 1.52 5.35 1.89
-------- -------- -------- -------- --------
Total from investment operations (2.24) (2.92) 1.14 5.14 1.81
-------- -------- -------- -------- --------
Less distributions
From net investment income - - - - -
From net capital gains (0.01) (0.36) (0.10) (0.49) (0.34)
-------- -------- -------- -------- --------
Total distributions (0.01) (0.36) (0.10) (0.49) (0.34)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.98 $ 14.23 $ 17.51 $ 16.47 $ 11.82
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN (b) (15.75)% (16.66)% 6.95% 43.70% 17.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 6,976 $ 9,331 $ 11,125 $ 8,549 $ 4,279
Ratio of net investment income to average net assets
With expense reductions (3.36)% (3.71)% (2.82)% (2.06)% (0.71)%
Without expense reductions (3.36)% (3.71)% (2.99)% (2.39)% (1.88)%
Ratio of expenses to average net assets
With expense reductions 3.92% 4.02% 3.18% 2.91% 2.49%
Without expense reductions 3.92% 4.02% 3.35% 3.24% 3.64%
Fund portfolio turnover rate 68.18% 49.63% 30.72% 51.83% 44.95%
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------
For the year April 2, 1998(c)
ended to
December 31, 1999 December 31, 1998
<S> <C> <C>
------------------------------------------
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.24 $ 19.70
------------------ ------------------
Income from investing operations
Net investment expense (0.18) (0.29)
Net realized and unrealized gains (losses) on
securities (2.12) (4.81)
------------------ ------------------
Total from investment operations (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 $ 11.93 $ 14.24
------------------ ------------------
TOTAL INVESTMENT RETURN (b) (16.16)% (25.88)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 459 $ 239
Ratio of net investment income to average net assets
With expense reductions (3.78)% (3.68)%(a)
Without expense reductions (3.78)% (3.68)%(a)
Ratio of expenses to average net assets
With expense reductions 4.38% 3.85%(a)
Without expense reductions 4.38% 3.85%(a)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
(a) Not annualized
(b) The Fund's maximum sales charge is not included in the total
return computation.
(c) Commencement of Operations
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
PACIFIC ADVISORS
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Board of Directors and Shareholders
Pacific Advisors Fund Inc.
We have audited the statements of assets and liabilities, including the
schedules of investments, of Pacific Advisors Fund Inc. (comprising,
respectively, the Government Securities Fund, Income and Equity Fund, Balanced
Fund, Growth Fund and Small Cap Fund) (the "Fund"), as of December 31, 1999, the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two fiscal years in the period then ended
and the financial highlights for each of the five fiscal years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds constituting Pacific Advisors Fund Inc. as of
December 31, 1999, the results of their operations for the fiscal year then
ended, the changes in their net assets for each of the two fiscal years in the
period then ended, and their financial highlights for each of the five fiscal
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Los Angeles, California
January 28, 2000
46
<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
