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As filed with the Securities and Exchange Commission on December 27, 1996
Registration No. 811-7384
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
Under
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12
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NICHOLAS-APPLEGATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
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600 West Broadway, 30th Floor
San Diego, California 92101
(Address, including zip code, of Principal Executive Offices)
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Arthur E. Nicholas
c/o Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, California 92101
(Name and address of agent for service)
Copies to:
Robert E. Carlson
Paul, Hastings, Janofsky & Walker
555 South Flower Street
Los Angeles, California 90071
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EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to Section
8(b) of the Investment Company Act of 1940. However, Interests in the
Registrant are not being registered under the Securities Act of 1933, as amended
(the "Securities Act"), because such Interests will be issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act. Investments in the Registrant
may only be made by investment companies, registered broker-dealers, insurance
company separate accounts, common or commingled trust funds, group trusts or
similar organizations or entities that are "accredited investors" within the
meaning of Regulation D under the Securities Act. This Registration Statement
does not constitute an offer to sell, or the solicitation of an offer to buy,
any Interests of the Registrant.
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NICHOLAS-APPLEGATE-REGISTERED TRADEMARK- INVESTMENT TRUST
Nicholas-Applegate Core Growth Fund
Nicholas-Applegate Emerging Growth Fund
Nicholas-Applegate Mini-Cap Growth Fund
Nicholas-Applegate Emerging Countries Growth Fund
Nicholas-Applegate Income & Growth Fund
Nicholas-Applegate Balanced Growth Fund
Nicholas-Applegate Worldwide Growth Fund
Nicholas-Applegate International Growth Fund
Nicholas-Applegate Global Growth & Income Fund
Nicholas-Applegate Government Income Fund
Nicholas-Applegate Short-Intermediate Fixed Income Fund
Nicholas-Applegate Fully Discretionary Fixed Income Fund
Nicholas-Applegate Value Fund
Nicholas-Applegate High Yield Bond Fund
Nicholas-Applegate Strategic Income Fund
Nicholas-Applegate Money Market Fund
Nicholas-Applegate International Core Growth Fund
Nicholas-Applegate Large Cap Growth Fund
PART A
ITEM 1. COVER PAGE. Not applicable.
ITEM 2. SYNOPSIS. Not applicable.
ITEM 3. CONDENSED FINANCIAL INFORMATION. Not applicable.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
Nicholas-Applegate Investment Trust, a Delaware business trust (the
"Trust"), is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). The
Trust currently has eighteen series (each a "Fund" and collectively the
"Funds")-- Nicholas-Applegate Core Growth Fund (the "Core Growth Fund"),
Nicholas-Applegate Emerging Growth Fund (the "Emerging Growth Fund"), Nicholas-
Applegate Mini-Cap Growth Fund (the "Mini-Cap Fund"), Nicholas-Applegate
Emerging Countries Fund (the "Emerging Countries Fund"), Nicholas-Applegate
Income & Growth Fund (the "Income & Growth Fund"), Nicholas-Applegate Balanced
Growth Fund (the "Balanced Fund"), Nicholas-Applegate Worldwide Growth Fund (the
"Worldwide Fund"), Nicholas-Applegate International Growth Fund (the
"International Fund"), Nicholas-Applegate Global Growth & Income Fund (the
"Global Growth Fund"), Nicholas-Applegate Government Income Fund (the
"Government Fund"), Nicholas-Applegate Short-Intermediate Fixed Income Fund (the
"Short-Intermediate Fund"), Nicholas-Applegate Fully Discretionary Fixed Income
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Fund (the "Fully Discretionary Fund"), Nicholas-Applegate Value Fund (the "Value
Fund"), Nicholas-Applegate High Yield Bond Fund (the "High Yield Bond Fund"),
Nicholas-Applegate Strategic Income Fund (the "Strategic Income Fund"),
Nicholas-Applegate Money Market Fund (the "Money Market Fund"), Nicholas-
Applegate Large Cap Growth Fund (the "Large Cap Growth Fund"), and Nicholas-
Applegate International Core Growth Fund (the "International Core Growth Fund").
The assets of the Funds are managed by Nicholas-Applegate Capital Management
(the "Investment Adviser").
Beneficial interests in each Fund ("Interests") are issued solely in
private placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"). Investments in a Fund may only be made by investment
companies, registered broker-dealers, insurance company separate accounts,
common or commingled trust funds, group trusts or similar organizations or
entities that are "accredited investors" within the meaning of Regulation D
under the Securities Act (each an "Investor" and collectively the "Investors").
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the
Securities Act.
INVESTMENT OBJECTIVES AND POLICIES.
CORE GROWTH FUND
The investment objective of the Core Growth Fund is to maximize long-
term capital appreciation. The Fund invests primarily in common stocks of U.S.
companies the earnings and stock prices of which are expected by its Investment
Adviser to grow faster than the average rate of companies in the Standard &
Poor's 500 Stock Price Index (the "S&P 500 Index"). Companies in which the Fund
invests do business in a cross-section of industries and may be growth
companies, cyclical companies or companies believed to be undergoing a basic
change in operations or markets which, in the opinion of the Investment Adviser,
would result in a significant improvement in earnings. The securities of such
companies may be subject to more volatile market movements than securities of
larger, more established companies because the issuers typically are more
subject to changes in earnings and prospects. Although the Fund is not
restricted to investments in companies of any particular size, it currently
intends to invest primarily in companies with middle market capitalizations and
above (generally, above $500 million). There can be no assurance that the Fund
will achieve its investment objective. See "Investment Policies and Strategies"
for a discussion of the risks associated with investment in such growth
companies.
Under normal market conditions, at least 75% of the Fund's total
assets will be invested in common stocks. The remainder of the Fund's assets
may be invested in preferred convertible securities issued by similar growth
companies, investment grade corporate debt securities, securities issued or
guaranteed by the U.S. Government and its agencies and instrumentalities and
various other securities and instruments described in "Investment Policies and
Strategies"
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below. The Fund may invest up to 20% of its total assets, directly or
indirectly through American Depository Receipts, in securities issued by foreign
issuers. See "Investment Policies and Strategies" for a discussion of the risks
associated with investment in foreign securities. The other debt securities in
which the Fund may invest will be rated "Baa" or higher by Moody's Investors
Service, Inc. ("Moody's) or "BBB" or higher by Standard & Poor's Corporation
("S&P") or unrated if determined by the Investment Adviser to be of comparable
quality. These securities are of investment grade, which means that their
issuers are believed to have adequate capacity to pay interest and repay
principal, although certain of such securities in the lower grades have
speculative characteristics, and changes in economic conditions or other
circumstances may be more likely to lead to a weakened capacity to pay interest
and principal than would be the case with higher rated securities. If the
rating of a debt security held by the Fund is downgraded below investment grade,
the Investment Adviser will sell the security as promptly as practicable. The
Fund may also make short sales, which is considered a speculative technique.
See "Investment Policies and Strategies" for a discussion of the risks
associated with short sale transactions.
EMERGING GROWTH FUND
The investment objective of the Emerging Growth Fund is to maximize
long-term capital appreciation. The Fund invests in the same types of
securities and companies as the Core Growth Fund, as described above, except
that the Emerging Growth Fund intends to invest primarily in companies with
smaller market capitalizations (E.G., up to $500 million). However, the Fund
will not necessarily sell any security held by it if the market capitalization
of the issuer increases above $500 million subsequent to purchase. The
securities of such companies may be subject to more volatile market movements
than securities of larger, more established companies, including the companies
in which the Core Growth Fund invests. There can be no assurance that the Fund
will achieve its investment objective. See "Core Growth Fund" above and
"Investment Policies and Strategies" for a discussion of the risks associated
with investments in growth companies, foreign companies, convertible and other
debt securities, short sales and other investments of the Emerging Growth Fund.
MINI-CAP FUND
The investment objective of the Mini-Cap Fund is to maximize long-term
capital appreciation. The Fund invests in the same types of securities and
companies as the Core Growth Fund, as described above, except that the Mini-Cap
Fund intends to invest primarily in companies with small market capitalizations
(E.G., up to $100 million). However, the Fund will not necessarily sell any
security held by it if the market capitalization of the issuer increases above
$100 million subsequent to purchase. The securities of such companies may be
subject to more volatile market movements than securities of larger, more
established companies, including the companies in which the Core Growth Fund
invests. There can be no assurance that the Mini-Cap Fund will achieve its
investment objective. See "Core Growth Fund" above and "Investment Policies and
Strategies" for a discussion of the risks associated with investments
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in growth companies, foreign companies, convertible and other debt securities,
short sales and other investments of the Mini-Cap Fund.
EMERGING COUNTRIES FUND
The investment objective of the Emerging Countries Fund is to maximize
long-term capital appreciation. Assets of the Fund are invested primarily in
equity securities of issuers located in countries with emerging securities
markets -- that is, countries with securities markets which are, in the opinion
of the Investment Adviser, emerging as investment markets but have yet to reach
a level of maturity associated with developed foreign stock markets, especially
in terms of participation by foreign investors. The Fund currently expects to
invest in issuers located in some or all of the following emerging market
countries: Argentina, Brazil, Chile, China, Colombia, the Czech Republic,
Greece, Hungary, India, Indonesia, Israel, Jordan, Malaysia, Mexico, Morocco,
Pakistan, Peru, the Philippines, Poland, Portugal, Singapore, South Africa, Sri
Lanka, South Korea, Taiwan, Thailand, Turkey and Venezuela. At the discretion
of the Investment Adviser, the Fund may also invest in other countries with
emerging securities markets.
Under normal market conditions, as a fundamental policy which cannot
be changed without shareholder approval, at least 65% of the Emerging Countries
Fund's total assets will be invested in securities of issuers located in at
least three different countries (other than the United States). With this
exception, the Fund is not driven by allocation considerations with respect to
any particular countries, geographic regions or economic sectors. Although the
Fund is authorized to invest more than 25% of its total assets in the securities
of issuers located in any one country, it does not currently intend to do so.
However, the Investment Adviser currently selects portfolio securities for the
Fund from an investment universe of approximately 6,000 foreign issuers in 20
emerging markets.
The Fund may invest up to 10% of its total assets in closed-end or
open-end country funds. Under normal market conditions, the Fund may invest up
to 35% of its total assets in securities of U.S. companies. In addition, the
Fund may also invest up to 20% of its total assets in securities of issuers that
are not domiciled or do not have their principal places of business in
developing countries, but that have or will have substantial assets in
developing countries, or derive or expect to derive a substantial portion of
their total revenues from either goods and services produced in, or sales made
in, developing countries.
Under normal market conditions, at least 75% of the Emerging Countries
Fund's total assets will be invested in equity securities (common and preferred
stocks), and warrants and securities convertible into equity securities. The
remainder of the Fund's assets will be invested in debt securities of foreign
companies and foreign governments and their agencies and instrumentalities which
the Investment Adviser believes present attractive opportunities for capital
growth, as well as in various other securities and instruments described below.
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The debt securities in which the Emerging Countries Fund may invest
will be rated "Baa" or higher by Moody's or "BBB" or higher by S&P or unrated if
determined by the Investment Adviser to be of comparable quality. At least 75%
of the Fund's total assets invested in such securities will be invested in
securities rated A or better by Moody's or S&P or, if unrated, determined to be
of comparable quality by the Investment Adviser. See "Core Growth Fund" above
for a discussion of these securities. If the rating of a debt security held by
the Fund is downgraded below investment grade, the security will be sold as
promptly as practicable.
The Emerging Countries Fund intends to invest principally in
securities that are listed on a bona fide securities exchange or are actively
traded in an over-the-counter market (either within or outside the issuer's
domicile country). The Fund will not invest in securities denominated in a
foreign currency unless, at the time of investment, such currency is considered
by the Investment Adviser to be fully exchangeable into United States dollars
without significant legal restriction. The Fund may purchase securities issued
by the government of, or a company located in, one nation but denominated in the
currency of another nation (or in a multinational currency unit).
There can be no assurance the Fund will achieve its investment
objective. See "Investment Policies and Strategies" for a description of the
rules associated with investments in emerging countries and other investments of
the Emerging Countries Fund.
INCOME & GROWTH FUND
The investment objective of the Income & Growth Fund is to maximize
total return, consisting of capital appreciation and current income. The Fund
invests primarily in convertible and equity securities of U.S. companies the
earnings and stock prices of which are expected by the Investment Adviser to
grow at above-average rates. Convertible securities are bonds, debentures,
corporate notes or preferred stocks which pay interest or dividends and which
may be converted into common stock at the option of the holder. Convertible
securities provide for participation in the appreciation of the underlying
common stock but at a lower level of risk because the yield is higher and the
security is senior to the common stock upon liquidation of the issuer. There
can be no assurance that the Fund will achieve its investment objective.
Under normal market conditions at least 65% of the Income & Growth
Fund's total assets will be invested in convertible securities and in common
stocks received upon conversion or exchange of such securities and retained in
the Fund's portfolio to permit orderly disposition. Up to 35% of the Fund's
total assets may be invested in other securities, including non-convertible
equity (common and preferred stocks) and debt securities and securities issued
or guaranteed by the U.S. Government. See "Investment Policies and Strategies"
for a description of the various other securities and instruments in which the
Fund may invest. The Fund may also invest in Eurodollar convertible securities
and American Depository Receipts. See "Investment Policies and Strategies" for
a discussion of the risks associated with investment in foreign securities. At
all times, a minimum of 25% of the Fund's total assets will be invested
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in income-producing securities (including convertible securities and debt
securities), and a minimum of 25% of the Fund's total assets will be invested in
equity securities (including common and preferred stocks).
The issuers of the convertible and equity securities in which the
Income & Growth Fund invests will be the same types of growth companies as those
in which the Core Growth Fund invests. See "Core Growth Fund" above and
"Investment Policies and Strategies" for a discussion of the risks associated
with investment in such growth companies. The Income & Growth Fund's
convertible and other debt securities will generally be investment grade
securities rated "Baa" or higher by Moody's or "BBB" or higher by S&P or unrated
if determined by the Investment Adviser to be of comparable quality, as
described above under "Core Growth Fund." However, the Income & Growth Fund's
net assets may be invested without limitation in debt securities rated below
investment grade or unrated if the Investment Adviser believes that the
financial condition of the issuer or the protection afforded to the particular
securities is stronger than would otherwise be indicated by such low ratings or
the lack thereof. Debt securities with ratings below "Baa" or "BBB," commonly
referred to as "junk bonds," are speculative and subject to greater market
fluctuations and risk of loss of income and principal than higher rated bonds.
If the rating of an investment grade security held by the Fund is downgraded,
the Investment Adviser will determine whether it is in the best interests of the
Fund to continue to hold such security in its investment portfolio. See
"Investment Policies and Strategies" for a discussion of the risks associated
with investment in junk bonds.
BALANCED FUND
The investment objective of the Balanced Fund is to provide investors
with a balance of long-term capital appreciation and current income. The Fund
invests in equity securities (common and preferred stocks), convertible
securities and warrants primarily of U.S. companies, debt securities (bonds,
debentures and notes), money market instruments and other short-term investments
and instruments described in "Investment Policies and Strategies" below. Under
normal circumstances, the Fund will allocate approximately 60% of the total
value of its assets to equity securities, convertible securities and warrants
and approximately 40% to debt securities, money market instruments and other
short-term investments and instruments.
Temporary deviations from the Fund's 60%/40% balance of securities due
to market fluctuations in the value of securities or otherwise will be permitted
so long as the percentage of equity securities in the Fund's investment
portfolio is not more than 70% or less than 50% of the value of the Fund's total
assets. If the value of the equity securities, convertible securities and
warrants in the Fund's investment portfolio increases above 70% or decreases
below 50%, the Fund will effect sales or purchases of certain of its existing
investments as promptly as practicable to restore the 60%/40% ratio. Such a
portfolio adjustment may cause the Fund to buy or sell securities which have
appreciated or depreciated in value at times different from when the Investment
Adviser would otherwise have made such purchases and sales. Such purchases and
sales may also cause the Fund to incur a higher proportion of short-term capital
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gains than might otherwise be the case. There can be no assurance that the Fund
will achieve its investment objective.
The issuers of the Balanced Fund's equity investments will be the same
types of growth companies as those in which the Core Growth Fund invests. See
"Core Growth Fund" above and "Investment Policies and Strategies" for a
discussion of the risks associated with investment in such growth companies.
The debt securities in which the Balanced Fund may invest include debt
securities issued by the U.S. Government and its agencies and instrumentalities
and corporate debt securities. The ratings (or in the case of unrated
securities, the Investment Adviser's assessment of comparable quality) of the
Fund's convertible and other debt securities, and its policies regarding
downgraded securities, will be the same as those of the Income & Growth Fund.
The Fund may invest a portion (less than 35%) of its net assets in convertible
and debt securities rated below investment grade or in unrated securities of
comparable quality. Such securities or "junk bonds" are speculative and subject
to greater market fluctuations and risk of loss of income and principal than
higher rated bonds. See "Income & Growth Fund" above and "Investment Policies
and Strategies" for a discussion of the risks associated with investment in junk
bonds.
WORLDWIDE FUND
The investment objective of the Worldwide Fund is to maximize long-
term capital appreciation. The Fund invests primarily in equity securities of
U.S. and foreign companies. Such companies may be in the earlier states of
development, growth companies, cyclical companies or companies believed to be
undergoing a basic change in operations or markets which, in the opinion of the
Investment Adviser, would result in a significant improvement in earnings. The
securities of such companies may be subject to more volatile market movements
than securities of larger, more established companies. Although the Fund is not
restricted to investments in companies of any particular size, it currently
intends to invest principally in companies with smaller to middle market
capitalizations (I.E., from $100 million to $5 billion). See "Investment
Policies and Strategies" for a discussion of the risks associated with
investment in such companies.
The Worldwide Fund may invest in securities issued by companies based
or operating in any country, including the United States. Under normal market
conditions, as a fundamental policy which cannot be changed without shareholder
approval, at least 65% of the Fund's assets will be invested in securities of
issuers located in at least three countries, one of which may be the United
States. Under normal market conditions, the Fund may invest up to 50% of its
total assets in securities of U.S. issuers. With these exceptions, the Fund is
not driven by allocation considerations with respect to any particular
countries, geographic regions or economic sectors. Countries in which
investment opportunities will be sought include Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Malaysia, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States. However, the Fund may
also invest in securities issued by
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companies based in other countries such as the countries of Eastern Europe and
South America, Indonesia, Korea, Mexico, the Philippines, Portugal and Thailand.
The Fund may also invest up to 10% of its assets in closed-end or open-end
country funds. An investment in such funds may result in duplication of fees.
See "Investment Policies and Strategies" for a discussion of the risks
associated with investment in foreign securities. There can be no assurance
that the Fund will achieve its investment objective.
Under normal market conditions, at least 75% of the Fund's total
assets will be invested in equity securities (common and preferred stocks and
warrants) and securities convertible into equity securities. The remainder of
the Worldwide Fund's assets will be invested in debt securities of foreign
companies and foreign governments and their agencies and instrumentalities,
which the Investment Adviser believes present attractive opportunities for
capital growth, as well as in various other securities and instruments described
in "Investment Policies and Strategies" below. The ratings (or in the case of
unrated securities, the Investment Adviser's assessment of comparable quality)
of the Fund's debt securities, and its policies regarding downgraded securities,
will be the same as those of the Core Growth Fund. See "Core Growth Fund"
above. The Fund also make short sales, which is considered a speculative
technique. See "Investment Policies and Strategies" for a discussion of the
risks associated with short sale transactions.
INTERNATIONAL FUND
The International Fund seeks to maximize long-term capital
appreciation. Assets of the International Fund are invested in the same types
of securities as the Worldwide Fund, except that the International Fund may
invest up to 35% of its total assets in securities of U.S. companies. Under
normal market conditions, as a fundamental policy which cannot be changed
without shareholder approval, at least 65% of the Fund's total assets will be
invested in securities of issuers located in at least three countries. There
can be no assurance that the Fund will achieve its investment objective. See
"Worldwide Fund" above.
GLOBAL GROWTH FUND
The investment objective of the Global Growth Fund is long-term
capital appreciation while providing current income. Assets of the Fund are
invested primarily in a diversified portfolio of equity securities, bonds and
money market instruments of U.S. and foreign issuers. Although the Fund is not
restricted to investments in companies of any particular size, it currently
intends to invest principally in established companies in the world's leading
industrial nations and in other rapidly growing countries. There can be no
assurance that the Fund will achieve its investment objectives. See "Investment
Policies and Strategies" for a discussion of the risks associated with
investment in such securities, bonds and money market instruments.
Under normal market conditions, as a fundamental policy which cannot
be changed without shareholder approval, at least 65% of the Fund's total assets
will be invested in securities of issuers located in at least three different
countries (one of which may be the United
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States). With this exception, the Fund is not driven by allocation
considerations with respect to any particular countries, geographic regions or
economic sectors. Although the Fund is authorized to invest more than 25% of
its total assets in the securities of issuers located in any one country, it
does not currently intend to do so. Countries in which investment opportunity
be sought are the same as for the International Growth Fund, except that the
Global Growth & Income Fund may also invest up to 10% of its net assets in
securities issued by companies based in other countries such as the countries of
Eastern Europe and South America, Indonesia, Korea, Mexico, the Philippines,
Portugal and Thailand. The Fund may also invest up to 10% of its total assets
in closed-end country funds. An investment in such funds may result in
duplication of fees.
Under normal market conditions, at least 60% of the Fund's total
assets will be invested in equity securities (common and preferred stocks), and
warrants to acquire such securities. The remainder of the Fund's assets will be
invested in debt securities of foreign companies and foreign governments and
their agencies and instrumentalities which the Investment Adviser believes
present attractive opportunities for capital growth, as well as in various other
securities and instruments described in "Investment Policies and Strategies."
The Fund's convertible and other debt securities will generally be
investment grade securities rated "Baa" or higher by Moody's or "BBB" or higher
by S&P or unrated if determined by the Investment Adviser to be of comparable
quality. See "Core Growth Fund" above for a discussion of these securities.
However, a portion (less than 35%) of the Fund's net assets may be invested in
debt securities rated below investment grade or in unrated securities of
comparable quality if the Investment Adviser believes that the financial
condition of the issuer or the protection afforded to the particular securities
is stronger than would otherwise be indicated by such low ratings or the lack
thereof. See "Income & Growth Fund" above and "Investment Policies and
Strategies" for a discussion of the risks associated with investment in junk
bonds.
The Global Growth Fund intends to invest principally in securities
that are listed on a bona fide securities exchange or are actively traded in an
over-the-counter market (either within or outside the issuer's domicile
country). The Fund will not invest in securities denominated in a foreign
currency unless, at the time of investment, such currency is considered by the
Investment Adviser to be fully exchangeable into United States dollars without
significant legal restriction. The Fund may purchase securities issued by the
government of, or a company located in, one nation but denominated in the
currency of another nation (or in a multinational currency unit).
GOVERNMENT FUND
The investment objective of the Government Fund is to seek to maximize
current income consistent with prudent investment risk and preservation of
capital. The Fund invests primarily in investment grade, intermediate-term debt
securities of the U.S. Government and its agencies
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and instrumentalities. Such securities are of varying maturities, with a
weighted average portfolio duration (expected life) generally from three to six
years. The Fund may invest in direct obligations of the United States (such as
Treasury bills, notes and bonds, which are supported by the full faith and
credit of the United States) and obligations (including mortgage-related
securities) issued or guaranteed by agencies and instrumentalities of the U.S.
Government that are established under an act of Congress. These agencies and
instrumentalities may include, but are not limited to, the Government National
Mortgage Association, Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, Student Loan Marketing Association, Federal Farm Credit
Banks, Federal Home Loan Banks, and Resolution Funding Corporation. Under
normal market conditions, at least 75% of the total assets of the Fund will be
invested in securities issued or guaranteed by the U.S. Government or its
agencies and instrumentalities. The remainder of the Fund's assets may be
invested in mortgage-related securities (including collateralized mortgage
obligations), investment grade debt securities, short-term investments and other
securities and instruments described in "Investment Policies and Strategies"
below. There can be no assurance that the Fund will achieve its investment
objective.
Although the Fund invests primarily in securities issued or guaranteed
by the U.S. Government or its agencies and instrumentalities, the value of the
Fund's Interests and its current yield will fluctuate and are not guaranteed by
the U.S. Government. The market value of the debt securities in which the Fund
will invest is generally affected by changes in the level of interest rates. An
increase in interest rates will tend to reduce their market value, and a decline
in interest rates will tend to increase their value. The magnitude of these
changes generally will be greater for securities with longer remaining
maturities than those with shorter maturities. Generally, the longer the
maturity of a debt security, the higher its yield and the greater its price
volatility. Conversely, the shorter the maturity, the lower the yield but the
greater the price stability.
Duration is one of the fundamental tools used by the Investment
Adviser in the selection of securities for the Government Fund. Developed as a
more precise alternative to the concept of "term to maturity," duration is a
measure of the expected life of a debt security on a present value basis and is
an indicator of a security's price movement and risk associated with changes in
interest rates. Duration incorporates a bond's yield, coupon interest payments,
final maturity and call features into one measure. Duration takes the length of
the time intervals between the present time and the time that interest and
principal payments are scheduled and weighs them by the present values of the
cash to be received at each future point in time. For any fixed income security
with interest payments occurring prior to the payment of principal, duration is
always less than maturity. In general, all other things being the same, the
lower the stated or coupon rate of interest of a fixed income security, the
longer the duration of the security; conversely, the higher the stated or coupon
rate of interest of a fixed income security, the shorter the duration of the
security. For example, the maturity of a current coupon bond with a three-year
duration is approximately 3.5 years, and the maturity of a current coupon bond
with a six-year duration is approximately nine years. In some situations the
standard duration
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calculation does not properly reflect the interest rate exposure of a security,
such as in the case of mortgage pass-through securities. In such instances, the
Investment Adviser will use more sophisticated analytical techniques that
incorporate the economic life of a security into the determination of its
interest rate exposure.
SHORT-INTERMEDIATE FUND
The Short-Intermediate Fund seeks primarily to preserve principal and
liquidity, and secondarily to realize a high level of current income. The Fund
seeks to provide a return greater than the return of one to three-year U.S.
Treasury obligations over a full market cycle. The Fund invests primarily in an
actively managed portfolio of investment grade fixed-income securities. The
Fund may invest in a broad range of fixed-income securities, including bonds,
notes, mortgage-backed and asset-backed securities, issued by U.S. and foreign
corporations or other entities, and sovereign debt securities of U.S. or foreign
governments or their agencies, authorities, instrumentalities or sponsored
enterprises. The Fund will invest only in obligations payable in U.S. dollars.
The Fund may purchase securities that pay interest on a fixed, variable,
floating or deferred basis. Under normal market conditions, at least 90% of the
Fund's total assets will be invested in such securities. The Fund may acquire
over-the-counter and illiquid securities, and may utilize techniques such as
when-issued securities and firm commitment agreements, forward roll
transactions, swap transactions, futures contracts, securities lending, and
borrowing. See "Investment Policies and Strategies" for a description of the
Fund's investment securities and techniques and associated risks.
The Short-Intermediate Fund may adopt a temporary defensive position
during adverse market conditions by investing without limit in high quality
money market instruments, including short-term U.S. Government securities,
negotiable certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances, floating-rate notes and repurchase agreements.
The average dollar-weighted maturity of the Short-Intermediate Fund's
portfolio will be adjusted as the Investment Adviser determines market
conditions warrant. The minimum average dollar-weighted portfolio maturity of
the Fund's portfolio will be two years, and the maximum will be five years. The
Fund is not constrained as to the maximum maturity of its individual portfolio
securities. However, the Fund will normally invest in securities with final
maturities, average lives or interest rate reset frequencies of ten years or
less.
The debt securities in which the Short-Intermediate Fund may invest
will be rated at the time of purchase "Baa" or higher by Moody's, "BBB" or
higher by S&P, or equivalent ratings by other recognized rating agencies, or may
be unrated if determined by the Investment Adviser to be of comparable quality.
See "Core Growth Fund" above for a discussion of these securities. The
Investment Adviser anticipates that the average dollar-weighted credit quality
of the securities in the Fund's portfolio will be Aa or AA according to Moody's
and S&P's ratings, respectively, or comparable credit quality as determined by
the Investment Adviser. In the case of a security that is rated differently by
one or more rating services, the higher rating
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will be used in computing the Fund's average dollar-weighted credit quality. If
the rating of a security held in the Fund's portfolio is downgraded below
investment grade by a rating service (or determined to have fallen below
investment grade by the Investment Adviser in the case of unrated securities),
such action will be considered by the Investment Adviser in its evaluation of
the overall investment merits of the security, but will not necessarily result
in the sale of the security.
In order to achieve the Fund's investment objectives, the Investment
Adviser will seek to add value by moving portfolio investments among market
sectors (e.g., U.S. Treasury securities, corporate securities and mortgage-
booked securities), positioning investments in the most attractive maturities
along the yield curve, selecting undervalued investments in order to take
advantage of lower prices and higher yields, and varying the average maturity of
the Fund's portfolio to reflect interest rate forecasts. There can be no
assurance that use of these techniques will be successful.
FULLY DISCRETIONARY FUND
The Fully Discretionary Fund seeks to maximize total return. It seeks
to provide a total return greater than the return of an index of either
government/corporate debt or government/corporate/mortgage debt over a full
market cycle. The Fund invests primarily in an actively managed portfolio of
investment grade fixed-income securities. The Fund may invest in a broad range
of fixed-income securities, including bonds, notes, and mortgage-backed and
asset-backed securities issued by U.S. and foreign corporations or other
entities, and sovereign debt securities of U.S. or foreign governments or their
agencies, authorities, instrumentalities or sponsored enterprises. The Fund may
purchase securities that pay interest on a fixed, variable, or floating basis.
Under normal market conditions, at least 65% of the Fund's total assets will be
invested in such securities. The Fund may acquire over-the-counter and illiquid
securities, and may utilize techniques such as when-issued securities and firm
commitment agreements, forward roll transactions, put and call options on
securities, swap transactions, futures contracts and options, securities
lending, and borrowing. See "Investment Policies and Strategies" for a
description of the Fund's investment securities and techniques and the
associated risks.
Although the Fully Discretionary Fund will invest primarily in
obligations payable in U.S. dollars, up to 30% of the Fund's portfolio assets
may be payable in other currencies. Countries in which non-dollar denominated
investments may be made will include Australia, Austria, Belgium, Canada,
Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, and the
United Kingdom. The Fund may or may not hedge against the currency risks
associated with such investments.
The Fully Discretionary Fund may adopt a temporary defensive position
during adverse market conditions by investing without limit in high quality
money market instruments, including
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short-term U.S. Government securities, negotiable certificates of deposit, non-
negotiable fixed time deposits, bankers' acceptances, floating-rate notes and
repurchase agreements.
The average duration of the Fund's portfolio will be adjusted as the
Investment Adviser determines market conditions warrant. The average portfolio
duration of the Fund will range from two to eight years. The Fund is not
constrained as the maximum maturity of its individual portfolio securities.
However, its duration policy will limit the amount of longer-term investments in
its portfolio. See "Government Fund" above for an explanation of "duration."
The debt securities in which the Fully Discretionary Fund may invest
will be rated at the time of purchase investment grade by Moody's, S&P or other
recognized rating agencies, or may be unrated if determined by the Investment
Adviser to be of comparable quality. The Investment Adviser anticipates that
the average dollar-weighted credit quality of the securities in the Fund's
portfolio will be Aa or AA according to Moody's and S&P's ratings, respectively,
or comparable credit quality as determined by the Investment Adviser. The
policies of the Fund regarding determination of ratings and the disposition of
downgraded securities are the same as those of the Short-Intermediate Fund
described above.
In order to achieve the Fund's investment objectives, the Investment
Adviser will seek to add value by varying the average duration of the Fund's
portfolio to reflect interest rate forecasts, moving portfolio investments among
market sectors (e.g., non-dollar securities, U.S. Treasury securities, corporate
securities and mortgage-backed securities), positioning investments in the most
attractive maturities along the yield curve, and selecting undervalued
investments in order to take advantage of lower prices and higher yields. There
can be no assurance that use of these techniques will be successful.
VALUE FUND
The investment objective of the Value Fund is to provide a total
return consisting of capital appreciation plus dividend and interest income that
exceeds the total return realized on the Standard & Poor's 500 Stock Price
Index. Under normal circumstances, the Value Fund will invest at least 80% of
its total assets in a diversified portfolio of equity securities, primarily of
companies with larger market capitalizations (e.g. over $5 billion). Such
equity securities will include common stocks, preferred stocks, convertible
securities, and warrants. The Fund may invest in equity securities of domestic
issuers and in equity securities of foreign issuers that are traded in the
United States and comply with U.S. accounting standards. The Fund's portfolio
is designed to have risk, capitalization and industry characteristics similar to
those of the S&P 500 Index. The remainder of the Fund's assets will be invested
in debt securities of such domestic and foreign issuers that are considered by
the Investment Adviser to be cash equivalents, as well as in various other
securities described herein. There can be no assurance that the Value Fund will
achieve its investment objective.
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HIGH YIELD BOND FUND
The investment objective of the High Yield Bond Fund is to seek income
and capital growth. The High Yield Bond Fund invests primarily in domestic and
foreign debt instruments, convertible securities, and common and preferred
stocks. The Fund has broad flexibility to invest in instruments of any type or
quality, but the Investment Adviser expects to invest principally in debt
instruments and convertible securities with an emphasis on lower-quality
securities. Convertible securities are bonds, debentures, corporate notes or
preferred stocks which pay interest or dividends and which may be converted into
common stock at the option of the holder.
The High Yield Bond Fund may invest in a broad range of fixed-income
securities denominated in the U.S. dollar and foreign currencies, including
bonds, notes, mortgage-backed securities and other real estate-related
instruments, asset-backed securities, and direct debt instruments, issued by
U.S. and foreign corporations or other entities, and sovereign debt securities
of U.S. or foreign governments or their agencies, authorities, instrumentalities
or sponsored enterprises. The Fund may purchase securities that pay interest on
a fixed, variable, floating or deferred basis. Under normal market conditions,
at least 65% of the Fund's total assets will be invested in high-yield bonds.
The Fund is not constrained as to the maximum maturity of its portfolio
securities. The High Yield Bond Fund may invest without limitation in debt
securities rated below investment grade or in unrated securities of comparable
quality if the Investment Adviser believes that the financial condition of the
issuer or the protection afforded to the particular securities is stronger than
would otherwise be indicated by such low ratings or the lack thereof. These
debt securities, commonly referred to as "junk bonds," are speculative and
subject to greater risk of loss of income and principal than higher rated
securities, and may be in default at the time they are purchased by the Fund.
See "Income & Growth Fund" above and "Investment Policies and Strategies" for a
description of the risks associated with investment in junk bonds.
The High Yield Bond Fund may invest a portion of its assets (no more
than 35% of its total assets) in equity securities of U.S. and foreign
companies. Such companies may be in the earlier stages of development, growth
companies, cyclical companies or companies believed to be undergoing a basic
change in operations or markets which, in the opinion of the Investment Adviser,
would result in a significant improvement in earnings. The securities of such
companies may be subject to more volatile market movements than securities of
larger, more established companies. Although the Fund is not restricted in
investments in companies of any particular size, it currently intends to invest
principally in companies with capitalizations of at least $100 million at the
time of purchase. See "Investment Policies and Strategies" for a description of
the Fund's investment securities and techniques and associated risks.
The High Yield Bond Fund may invest in securities issued by companies
based or operating in any country, including the United States. The Fund is not
driven by allocation considerations with respect to any particular countries,
geographic regions or economic sectors.
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See "Worldwide Fund" above and "Investment Policies and Strategies" for a
description of the risks associated with investment in foreign securities and
emerging market countries.
When investing in foreign securities, the High Yield Bond Fund intends
to invest principally in foreign securities that are listed on a bona fide
securities exchange or are actively traded in an over-the-counter market (either
within or outside the issuer's domicile country). The Fund will not invest in
securities denominated in a foreign currency unless, at the time of investment,
such currency is considered by the Investment Adviser to be fully exchangeable
into United States dollars without significant legal restriction. The Fund may
purchase securities issued by the government of, or a company located in, one
nation but denominated in the currency of another nation (or in a multinational
currency unit).
The High Yield Bond Fund may adopt a temporary defensive position
during adverse market conditions by investing principally in high quality money
market instruments, including short-term U.S. Government securities, negotiable
certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances, floating-rate notes and repurchase agreements, and high quality
preferred stocks.
STRATEGIC INCOME FUND
The investment objective of the Strategic Income Fund is to seek a
high level of current income.
The Strategic Income Fund invests principally in three domestic and
foreign market sectors: convertible securities; lower-rated, high yield debt
securities; and mortgage-backed securities, including collateralized mortgage
obligations. Under normal market conditions, the Fund will invest in each of
these three sectors, but from time to time the Investment Adviser will adjust
the amount the Fund invests in each sector. By investing in all three sectors,
the Fund seeks to reduce the volatility of fluctuations in its net asset value
per share, because the overall securities price and interest rate movements in
each of the sectors are not necessarily correlated with each other. Changes in
one sector may be offset by changes in another sector that moves in a different
direction. However, the Fund may invest up to 100% of its assets in any one
sector if the Investment Adviser believes that in doing so the Fund can achieve
its objective without undue risk.
The Strategic Income Fund may invest in a broad range of fixed-income
securities, including bonds, notes and mortgage-backed securities, asset-backed
securities, and direct debt instruments, issued by domestic and foreign
corporations and other entities, and sovereign debt securities of U.S. and
foreign governments or their agencies, authorities, instrumentalities or
sponsored enterprises. The Fund may purchase securities that pay interest on a
fixed, variable, or floating basis. The Fund will acquire listed or actively
traded securities of foreign issuers which are denominated in foreign currencies
considered to fully exchangeable into U.S. dollars, in the same manner as
described above for the High Yield Bond Fund. The average maturity
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of the Fund's portfolio will be adjusted as the Investment Adviser determines
market conditions warrant. The Fund is not constrained as to the maturity of
its individual portfolio securities or its overall portfolio.
The Strategic Income Fund may invest without limitation in debt
securities rated below investment grade or in unrated securities of comparable
quality if the Investment Adviser believes that the financial condition of the
issuer or the protection afforded to the particular securities is stronger than
would otherwise be indicated by such low ratings or the lack thereof. These debt
securities, commonly referred to as "junk bonds," are speculative and subject to
greater risk of loss of income and principal than higher rated securities, and
may be in default at the time they are purchased by the Fund. See "Income &
Growth Fund" above and "Investment Policies and Strategies" for a description of
junk bonds.
The Strategic Income Fund may adopt a temporary defensive position
during adverse market conditions by investing principally in high quality money
market instruments, including short-term U.S. Government securities, negotiable
certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances, floating-rate notes and repurchase agreements.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to obtain a high
level of current income consistent with preservation of capital and maintenance
of liquidity. The Fund invests in high quality, short-term, U.S. dollar
denominated money market instruments. Such instruments include obligations
issued or guaranteed as to principal or interest by the U.S. Government or its
agencies and instrumentalities; certificates of deposit, time deposits and
bankers' acceptance of certain domestic banks, foreign banks, foreign branches
of domestic and foreign banks, domestic branches of foreign banks, and domestic
savings and loan associations; commercial paper; and other short-term corporate
obligations, including those with floating or variable rates of interest; and
repurchase agreements with respect to any of the foregoing obligations. The
Fund may also invest in firm commitment agreements and other securities and
instruments described in "Investment Policies and Strategies" below under
certain circumstances. The Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
All of the Fund's investments will mature in 397 days or less from the
date of purchase, and such investments will have a dollar-weighted maturity of
90 days or less. By limiting the maturity of its investments, the Fund seeks to
lessen changes in the value of its assets caused by fluctuations in short-term
interest rates; however, due to the short maturities of its investments, the
Fund will tend to have a lower yield (but less volatility) than funds that
invest in longer-term securities. In addition, the Fund will invest only in
securities determined by or under the supervision of the Trust's Board of
Trustees to present minimal credit risks and which at the time of purchase are
"eligible securities" as defined by Rule 2a-7 under the Investment Company Act.
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Although the Fund will invest only in U.S. dollar denominated
instruments, the Fund may invest up to 20% of its total assets in securities
issued by foreign banks, foreign branches of domestic banks, domestic and
foreign branches of foreign banks, and commercial paper issued by foreign
issuers. Investment in such securities may subject the Money Market Fund to
certain special risks that are different from those incurred by a fund which
invests only in debt obligations of U.S. issuers, and the Investment Adviser
will give appropriate consideration to such risks. See "Investment Policies and
Strategies" below for a discussion of the risks associated with investment in
foreign securities.
The Money Market Fund is subject to certain restrictions required by
Rule 2a-7 under the Investment Company Act. In order to comply with such
restrictions, the Fund will not, among other things, purchase the securities of
any issuer if it would cause (i) more than 5% of its total assets to be invested
in the securities of any one issuer (excluding U.S. Government securities and
repurchase agreements fully collateralized by U.S. Government securities),
except as permitted by the Rule for certain securities for a period of up to
three business days after purchase, (ii) more than 5% of its total assets to be
invested in "second tier securities," as defined by the Rule, or (iii) more than
the greater of $1 million or 1% of its total net assets to be invested in the
second tier securities of any one issuer. See Part B for a more detailed
description of the requirements of Rule 2a-7.
LARGE CAP GROWTH FUND
The Large Cap Growth Fund seeks long-term capital appreciation by
investing primarily in equity securities of U.S. companies with larger market
capitalizations (above $3 billion). Equity securities include common stocks,
preferred stocks, warrants, and debt securities that are convertible into common
stocks. The portion of the Portfolio's total assets invested in common stock,
preferred stock, warrants and convertible securities will vary according to the
Investment Adviser's assessment of market and economic conditions and outlook.
The Investment Adviser's stock selection emphasizes those common stocks that the
Investment Adviser expects to grow at a rate greater than the market in general,
as measured by the S&P 500 Index.
Under normal conditions, at least 65% of the Fund's total assets will
be invested in domestic and foreign equity securities of large capitalization
companies. The remainder of the assets may be invested in investment grade
corporate debt securities, U.S. Government securities, and various other
securities and instruments described in "Investment Policies and Strategies"
below. The Fund may invest up to 30% of its total assets directly (or
indirectly through American Depository Receipts) in securities issued by foreign
issuers. See "Investment Policies and Strategies" for a discussion of the risks
associated with investments in foreign securities. The debt securities in which
the Fund may invest will be rated at the time of purchase "Baa" or higher by
Moody's, "BBB" or higher by S&P, or equivalent ratings by other recognized
agencies, or will be unrated if determined by the Investment Adviser to be of
comparable quality. See "Core Growth Fund" above for a
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discussion of investment grade securities. The Investment Adviser will evaluate
securities downgraded below investment grade on a case by case basis to
determine whether the security continues to be an acceptable investment. If
not, the Fund will sell the security as promptly as practicable. The Fund will
not apply rating limitations to convertible debt securities.
INTERNATIONAL CORE GROWTH FUND
The International Core Growth Fund seeks long-term capital
appreciation. Assets of the Fund are invested primarily in a diversified
portfolio of equity securities of international companies with larger market
capitalizations (above $1 billion, which currently includes the top 75th
percentile worldwide of publicly traded companies). Equity securities
include common stocks, preferred stocks, debt securities that are convertible
into common stocks, and warrants. The portion of the Portfolio's total assets
invested in common stock, preferred stock, warrants, and convertible
securities will vary according to the Investment Adviser's assessment of
market and economic conditions and outlook.
The Fund may invest in securities issued by companies based or
operating in any country, including the United States. Under normal market
conditions, as a fundamental policy which cannot be changed without shareholder
approval, at least 65% of the Fund's total assets will be invested in securities
of issuers located in at least three countries other than the United States.
Under normal market conditions, the Fund may invest up to 35% of its total
assets in securities of U.S. issuers. With these exceptions, the Fund is not
driven by allocation considerations with respect to any particular countries,
geographic regions or economic sectors. Countries in which investment
opportunities will be sought are the same as the Worldwide Fund. See
"Investment Policies and Strategies" for a discussion of the risks associated
with investing in foreign securities. There can be no assurance that the Fund
will achieve its investment objective.
Under normal market conditions, at least 75% of the Fund's total
assets will be invested in equity securities (common and preferred stocks,
warrants and securities convertible into equity securities). The remainder of
the Fund's assets will be invested in debt securities of U.S. and foreign
companies and U.S. and foreign governments and their agencies and
instrumentalities which the Investment Adviser believes present attractive
opportunities for capital growth, as well as in various other securities and
instruments described in "Investment Policies and Strategies." The debt
securities in which the fund may invest will be the same as those in which the
Large Cap Growth Fund may invest. The Fund may also make short sales, which is
considered a speculative technique. See "Investment Policies and Strategies"
for a discussion of the risks associated with short sale transactions.
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INVESTMENT TECHNIQUES AND PROCESSES.
The focus of the Investment Adviser's investment program is GROWTH
OVER TIME-Registered Trademark-. In making investment decisions for the Funds
with respect to equity securities, the Investment Adviser uses a proprietary
investment methodology which is designed to capture positive change at an early
stage. It adheres rigorously to this methodology, and applies it to various
segments of the capital markets, domestically and internationally. This
methodology consists of investment techniques and processes designed to identify
companies with attractive earnings and dividend growth potential and to evaluate
their investment prospects. These techniques and processes include
relationships with an extensive network of brokerage and research firms located
throughout the United States; computer-assisted fundamental analysis of
thousands of U.S. and foreign companies; established criteria for the purchase
and sale of individual securities; portfolio structuring and rebalancing
guidelines; securities trading techniques; and continual monitoring and
reevaluation of all holdings with a view to maintaining the most attractive mix
of investments. The Investment Adviser generally collects data (adjusted for
reporting and accounting differences) on approximately 26,000 companies in 35
countries (including the United States). There can be no assurance that use of
the proprietary investment methodology will be successful.
The decision to invest in any particular debt security for a Fund will
be based on such factors as the Investment Adviser's analysis of the effect of
the yield to maturity of the security on the average yield to maturity of the
total debt security portfolio of the Fund, the Investment Adviser's assessment
of the credit quality of the issuer and other factors the Investment Adviser
deems relevant. Additional techniques used in connection with the Short-
Intermediate Fund, the Fully Discretionary Fund, the High Yield Bond Fund and
the Strategic Income Fund are described above. In managing the debt security
investments of the other Funds, the Investment Adviser seeks to capture major
moves in interest rates and utilizes a proprietary model to identify interest
rate trends in the bond market. There can be no assurance that use of these
techniques will be successful.
PORTFOLIO TURNOVER.
The Investment Adviser's investment approach results in above-average
portfolio turnover for each Fund, as the Investment Adviser sells portfolio
securities when it is believed that the sale of a security owned by a Fund and
the purchase of another security of better value can enhance principal and/or
increase income. A security may also be sold to avoid any prospective decline
in market value or a security may be purchased in anticipation of a market rise.
Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary from year to year, each Fund (other than the
Money Market Fund) anticipates that its annual portfolio turnover rate may be up
to 200%, which is substantially greater than that of many other investment
companies. A high rate of portfolio turnover (100% or more) will result in a
Fund paying greater brokerage commissions on equity securities (other than those
effected with dealers on a principal basis) than would otherwise be the case,
which will be borne directly
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by the Fund and ultimately by the Investors. High portfolio turnover should not
result in any Fund paying greater brokerage commissions on debt securities, as
most transactions in debt securities are effected with dealers on a principal
basis. However, debt securities, as well as equity securities traded on a
principal basis, are subject to a mark-up by the dealers. High portfolio
turnover may also result in the realization of substantial net capital gains,
and any distributions derived from such gains may be ordinary income for federal
tax purposes.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS.
Each Fund is subject to certain investment restrictions which
constitute fundamental policies. Fundamental policies may not be changed
without the approval of the holders of a majority of the outstanding Interests
of the affected Fund, as defined in the Investment Company Act. An investment
policy or restriction which is not described as fundamental in this Registration
Statement may be changed or modified by the Board of Trustees of the Trust
without Investor approval.
Each Fund's investment objective is a fundamental policy. Certain of
the investment restrictions which are fundamental policies are set forth below.
Additional investment restrictions are discussed in Part B.
1.No Fund may invest more than 5% of its total assets in the
securities of any one issuer. However, up to 25% of a Fund's total assets may
be invested without regard to this limitation, and this limitation does not
apply to investments in securities of U.S. Government or its agencies and
instrumentalities.
2.No Fund may purchase more than 10% of the outstanding voting
securities of any one issuer, or purchase the securities of any issuer for the
purpose of exercising control.
3.No Fund may invest 25% or more of its total assets in any one
particular industry; however, this restriction does not apply to the securities
of the U.S. Government, its agencies and instrumentalities or, with respect to
the Money Market Fund, domestic branches of U.S. banks and U.S. branches of
foreign banks which are subject to the same regulation as U.S. banks.
4.No Fund may make loans of its portfolio securities in an aggregate
amount exceeding 30% of the value of its total assets, or borrow money (except
from banks for temporary, extraordinary or emergency purposes or for the
clearance of transactions and in an aggregate amount not exceeding 20% of the
value of its total assets for all Funds except the Strategic Income Fund, which
may borrow up to 50% of the value of its net assets from banks for such purposes
or to buy securities).
5.No Fund may invest more than 15% (10% in the case of the Money
Market Fund) of its net assets in illiquid securities.
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INVESTMENT POLICIES AND STRATEGIES.
SHORT-TERM INVESTMENTS (ALL FUNDS)
Each of the Funds may retain cash (U.S. dollars and, in some cases,
foreign currencies or multinational currency units) and make short-term
investments to maintain liquidity for redemptions or during periods when, in the
opinion of the Investment Adviser, attractive investments are temporarily
unavailable. Under normal circumstances no more than 10% of a Fund's total
assets will be retained in cash (U.S. dollars or, in the case of the Emerging
Countries, Worldwide, International, Core Growth International and Global Growth
Funds, foreign currencies or multinational currency units) and short-term
investments. The Money Market Fund, however, is under no such restriction, as
it invests all of its assets in short-term investments. In addition, each Fund
may retain cash and make short-term investments without restriction for
temporary defensive purposes, such as when the securities markets or economic
conditions are expected to enter a period of decline. Short-term investments in
which the Funds may invest include U.S. Treasury bills or other U.S. Government
or Government agency or instrumentality obligations; certificates of deposit;
bankers' acceptances; time deposits; high quality commercial paper and other
short-term, high grade corporate obligations; shares of money market mutual
funds; or repurchase agreements with respect to such securities. The High Yield
Bond Fund may also invest in high quality preferred stocks for such purposes.
These instruments are described below. The Funds will only invest in short-term
investments which, in the opinion of the Investment Adviser, present minimal
credit and interest rate risk.
GOVERNMENT OBLIGATIONS (ALL FUNDS)
Securities issued or guaranteed by the U.S. Government or its agencies
and instrumentalities in which each of the Funds may invest include U.S.
Treasury securities, which differ only in their interest rates, maturities and
times of issuance. Treasury bills have initial maturities of one year or less;
Treasury notes have initial maturities of one to ten years; and Treasury bonds
generally have initial maturities of more than ten years.
Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
("GNMA") pass-through certificates, are supported by the full faith and credit
of the U.S. Treasury; others, such as those of the Federal Home Loan Banks, by
the right of the issuer to borrow money from the Treasury; others, such as those
issued by the Federal National Mortgage Association, by the discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
While the U.S. Government provides financial support to U.S.
Government-sponsored agencies and instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. The Funds will
invest in securities issued or guaranteed by U.S. Government agencies and
instrumentalities only when the Investment Adviser is satisfied that the credit
risk with respect to the issuer is minimal.
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The Emerging Countries, Worldwide, International, Global Growth and
International Core Growth Funds may invest in sovereign debt securities of
foreign governments and their agencies and instrumentalities. Investments in
such securities involve special risks. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable to
or unwilling to pay principal or interest when due in accordance with the terms
of the debt. Periods of economic uncertainty may result in the volatility of
market prices of sovereign debt, and in turn the Funds' net asset value, to a
greater extent than the volatility inherent in domestic fixed income securities.
ZERO COUPON SECURITIES (INCOME & GROWTH, BALANCED, GLOBAL GROWTH,
GOVERNMENT, SHORT-INTERMEDIATE, FULLY DISCRETIONARY, HIGH YIELD BOND,
STRATEGIC INCOME AND MONEY MARKET FUNDS)
The Short-Intermediate, Fully Discretionary, High Yield Bond and
Strategic Income Funds may each invest up to 50% of its net assets, and the
Income & Growth, Balanced, Global Growth and Government Funds may each invest up
to 35% of its net assets, in "zero coupon" securities issued or guaranteed by
the U.S. Government and its agencies and instrumentalities, and in the case of
the High Yield Bond and Strategic Income Funds, foreign governments and their
agencies and instrumentalities. For example, U.S. zero coupon securities may be
issued by the U.S. Treasury or by a U.S. Government agency, authority or
instrumentality (such as the Student Loan Marketing Association or the
Resolution Funding Corporation). In addition, the Money Market Fund may invest
up to 5% of its net assets in separately traded interest and principal component
parts of U.S. Treasury securities that are sold as zero coupon securities and
are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS") and Coupons Under
Book Entry Safekeeping ("CUBES"). Zero coupon securities are sold at a
substantial discount from face value and redeemed at face value at their
maturity date without interim cash payments of interest and principal. This
discount is amortized over the life of the security and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be subject to greater
volatility as a result of changes in prevailing interest rates than interest
paying investments in which the Funds may invest. Because income on such
securities is accrued on a current basis, even though the Funds do not receive
the income currently in cash, the Funds may have to sell other portfolio
investments to obtain cash needed by the related Investors to make income
distributions.
The High Yield Bond and Strategic Income Funds may also invest in zero
coupon corporate securities, which are similar to U.S. Government zero coupon
securities but are issued by companies. They have an additional risk that the
issuing company may fail to pay interest or repay principal on the obligations.
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CERTIFICATES OF DEPOSIT, TIME DEPOSITS AND BANKERS' ACCEPTANCES (ALL
FUNDS)
Each of the Funds may invest in certificates of deposit, time deposits
and bankers' acceptances issued by domestic banks, domestic branches of foreign
banks and domestic savings and loan associations, and in similar instruments
issued by foreign banks, foreign branches of domestic banks, and foreign
branches of foreign banks, each of which at the date of investment has capital,
surplus and undivided profits as of the date of its most recent published
financial statements in excess of $100 million, or less than $100 million if the
principal amount of such bank obligations is insured by the Federal Deposit
Insurance Corporation. Certificates of deposit are certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Bankers'
acceptances are credit instruments evidencing the obligation of a bank to pay a
draft drawn on it by a customer; these instruments reflect the obligation both
of the bank and of the drawer to pay the face amount of the instrument upon
maturity.
COMMERCIAL PAPER (ALL FUNDS)
Each of the Funds may invest in commercial paper of domestic and
foreign entities which is rated (or guaranteed by a corporation the commercial
paper of which is rated) in the two highest rating categories by at least two
nationally recognized statistical rating organizations ("NRSROs"), including
"P-1" or "P-2" by Moody's or "A-1" or "A-2" by S&P, or, if rated by only one
NRSRO, in such NRSRO's two highest grades, or, if not rated, is issued by an
entity which the Investment Adviser, acting pursuant to guidelines established
by the Master Trust's Board of Trustees, has determined to be of minimal credit
risk and comparable quality. The High Yield Bond Fund may also invest in such
commercial paper issued by foreign entities. Commercial paper consists of
short-term, unsecured promissory notes issued to finance short-term credit
needs.
VARIABLE RATE DEMAND SECURITIES (ALL FUNDS)
Each of the Funds may purchase floating and variable rate demand notes
and bonds, which are obligations ordinarily having stated maturities in excess
of one year, but which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding one year, in each case upon not
more than 30 days' notice. Variable rate demand notes include master demand
notes, which are obligations that permit a Fund to invest fluctuating amounts,
which may change daily without penalty. The interest rates on these notes are
adjusted at designated intervals or whenever there are changes in the market
rates of interest on which the interest rates are based. The issuer of such
obligations normally has a corresponding right, after a given period, to prepay
in its discretion the outstanding principal amount of the obligations plus
accrued interest upon a specified number of days' notice to the holders of such
obligations. Because these obligations are direct lending arrangements between
the lender and borrower, it is not contemplated that such instruments generally
will be traded, and there generally is no
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established secondary market for these obligations, although they are redeemable
at face value. Such obligations frequently are not rated by credit rating
agencies and a Fund may invest in obligations which are not so rated only if the
Investment Adviser determines that at the time of investment the obligations are
of comparable quality to the other obligations in which the Fund may invest.
The Investment Adviser will monitor the creditworthiness of the issuers of such
obligations and their earning power and cash flow, and will also consider
situations in which all holders of such notes would redeem at the same time.
Investment by a Fund in floating or variable rate demand obligations as to which
it cannot exercise the demand feature on not more than seven days' notice will
be subject to the Fund's limit on illiquid securities of 15% (10% in the case of
the Money Market Fund) of net assets if there is no secondary market available
for these obligations.
MUNICIPAL SECURITIES (SHORT-INTERMEDIATE AND FULLY DISCRETIONARY
FUNDS)
Each of the Short-Intermediate and Fully Discretionary Funds may
invest up to 5% of its net assets in tax-exempt securities such as state and
municipal bonds if the Investment Adviser believes they will provide competitive
returns. Such securities may include general obligation notes and bonds secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest; revenue notes and bonds payable only from the
revenues derived from a particular facility or only from the proceeds of a
special excise tax; lease obligations issued by state or local government
authorities to acquire land, equipment or facilities; and certificates of
participation issued by municipalities or municipal authorities to evidence a
proportionate interest in rental or lease payments relating to specific
projects.
CORPORATE DEBT SECURITIES (ALL FUNDS)
The non-convertible corporate debt securities in which the Funds may
invest include obligations of varying maturities (such as debentures, bonds and
notes) over a cross-section of industries. The value of a debt security changes
as interest rates fluctuate, with longer-term securities fluctuating more widely
in response to changes in interest rates than those of shorter-term securities.
A decline in interest rates usually produces an increase in the value of debt
securities, while an increase in interest rates generally reduces their value.
The corporate debt securities purchased by such Funds are generally of
investment grade, except that certain of the Funds may invest some of their
assets in debt securities rated below investment grade. See "Junk Bond
Considerations" below. For short-term purposes, all Funds may invest in
corporate obligations which mature in one year or less and which are rated "Aa"
or higher by Moody's, "AA" or higher by S&P, rated in the two highest rating
categories by any other NRSRO, or are unrated but determined by the Investment
Adviser to be of minimal credit risk and comparable quality.
The High Yield Bond and Strategic Income Funds may also invest in
loans and other direct debt instruments, which are interests in amounts owed to
another party by a company, government, or other borrower. These investments
may be interests in, or assignments of, a
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<PAGE>
loan and may be acquired from banks or brokers that have made the loan or are
members of a lending syndicate. No more than 5% of the net assets of either the
High Yield Bond or Strategic Income Fund will be invested in direct debt
instruments of the same borrower. In addition, such instruments are subject to
the Funds' limitations on investments in illiquid securities. Such instruments
have additional risks beyond conventional debt securities, because they may
entail less legal protection for the Fund or there may be a requirement that the
Fund supply additional cash to a borrower on demand.
CONVERTIBLE SECURITIES AND WARRANTS (ALL FUNDS OTHER THAN SHORT-
INTERMEDIATE, FULLY DISCRETIONARY AND MONEY MARKET FUND)
All Funds other than the Short-Intermediate Fully Discretionary and
Money Market Funds may invest in securities which may be exchanged for,
converted into, or exercised to acquire a predetermined number of shares of the
issuer's common stock at the option of the holder during a specified time period
(such as convertible preferred stocks, convertible debentures and warrants).
Convertible securities generally pay interest or dividends and provide for
participation in the appreciation of the underlying common stock but at a lower
level of risk because yield is higher and the security is senior to common
stock. Convertible debt securities purchased by the Income & Growth and
Balanced Growth Funds are subject to certain minimum rating requirements (see
"Junk Bond Considerations" below). Convertible debt securities purchased by the
other Funds, which are acquired in whole or substantial part for their equity
characteristics, are not subject to such rating requirements.
The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value, if
converted into the underlying common stock). The credit standing of the issuer
and other factors may also affect the investment value of a convertible
security. The conversion value of a convertible security is determined by the
market price of the underlying common stock. If the conversion value is low
relative to the investment value, the price of the convertible security is
governed principally by its investment value. To the extent the market price of
the underlying common stock approaches or exceeds the conversion price, the
price of the convertible security will be increasingly influenced by its
conversion value.
Like other debt securities, the market value of convertible securities
tends to vary inversely with the level of interest rates. The value of the
security declines as interest rates increase and increases as interest rates
decline. Although under normal market conditions longer term securities have
greater yields than do shorter term securities of similar quality, they are
subject to greater price fluctuations. Fluctuations in the value of a Fund's
investments will be reflected in its net asset value per share. A convertible
security may be subject to redemption at the option of the issuer at a price
established in the instrument governing the convertible security. If a
convertible security held by a Fund is called for redemption, the Fund will be
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required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
Warrants give the holder the right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price but which do not pay a fixed dividend. Investments in warrants involve
certain risks, including the possible lack of a liquid market for resale,
potential price fluctuations as a result of speculation or other factors, and
the failure of the price of the underlying security to reach or have reasonable
prospects of reaching a level at which the warrant can be prudently exercised,
in which event the warrant may expire without being exercised, resulting in a
loss of a Fund's entire investment therein. As a matter of operating policy, no
Fund will invest more than 5% of its net assets in warrants.
SYNTHETIC CONVERTIBLE SECURITIES (INCOME & GROWTH, GLOBAL GROWTH, HIGH
YIELD BOND, STRATEGIC INCOME, VALUE, LARGE CAP GROWTH AND
INTERNATIONAL CORE GROWTH FUNDS)
The Income & Growth, Global Growth, High Yield Bond, Strategic Income,
Value, Large Cap Growth and International Core Growth Funds may invest in
"synthetic" convertible securities, which are derivative positions composed of
two or more different securities whose investment characteristics, taken
together, resemble those of convertible securities. For example, the Fund may
purchase a non-convertible debt security and a warrant or option, which enables
the Fund to have a convertible-like position with respect to a company, group of
companies or stock index. Synthetic convertible securities are typically
offered by financial institutions and investment banks in private placement
transactions. Upon conversion, the Fund generally receives an amount in cash
equal to the difference between the conversion price and the then current value
of the underlying security. Unlike a true convertible security, a synthetic
convertible comprises two or more separate securities, each with its own market
value. Therefore, the market value of a synthetic convertible is the sum of the
values of its fixed-income component and its convertible component. For this
reason, the values of a synthetic convertible and a true convertible security
may respond differently to market fluctuations. The Income & Growth Fund,
Global Growth and Value Funds only invest in synthetic convertibles with respect
to companies whose corporate debt securities are rated "A" or higher by Moody's
or "A" or higher by S&P the Large Cap Growth Fund only invests in synthetic
convertibles with respect to companies whose corporate debt securities are rated
investment grade by Moody's or S&P, or an equivalent rating by any other NRSRO,
and no Fund will invest more than 15% of its net assets in such synthetic
securities and other illiquid securities. See "Illiquid Securities" below.
EURODOLLAR CONVERTIBLE SECURITIES (WORLDWIDE, INTERNATIONAL, EMERGING
COUNTRIES, GLOBAL, INCOME & GROWTH, HIGH YIELD BOND, STRATEGIC INCOME,
AND INTERNATIONAL CORE GROWTH FUNDS)
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Each of the Worldwide, International, Emerging Countries, Global,
Income & Growth, High Yield Bond, Strategic Income and International Core Growth
Funds may invest in Eurodollar convertible securities, which are fixed income
securities of a U.S. issuer or a foreign issuer that are issued outside the
United States and are convertible into or exchangeable for equity securities of
the same or a different issuer. Interest and dividends on Eurodollar securities
are payable in U.S. dollars outside of the United States. The Funds may invest
without limitation in Eurodollar convertible securities that are convertible
into or exchangeable for foreign equity securities listed, or represented by
ADRs listed, on the New York Stock Exchange or the American Stock Exchange or
convertible into or exchangeable for publicly traded common stock of U.S.
companies. The Income & Growth, High Yield Bond and Strategic Income Funds may
also invest up to 15% of its total assets invested in convertible securities,
taken at market value, in Eurodollar convertible securities that are convertible
into or exchangeable for foreign equity securities which are not listed, or
represented by ADRs listed, on such exchanges.
JUNK BOND CONSIDERATIONS (INCOME & GROWTH, BALANCED, HIGH YIELD BOND,
STRATEGIC INCOME AND GLOBAL GROWTH FUNDS)
The Income & Growth, Balanced, High Yield Bond, Strategic Income and
Global Growth Funds may invest in convertible and other debt securities rated
below "Baa" by Moody's or "BBB" by S&P or below investment grade by other
recognized rating agencies, or in unrated securities determined by the
Investment Adviser to be of comparable quality if the Investment Adviser
believes that the financial condition of the issuer or the protection afforded
to the particular securities is stronger than would otherwise be indicated by
such low ratings or the lack thereof. Securities rated below "Baa" or "BBB,"
commonly referred to as "junk bonds," are subject to greater risk of loss of
income and principal than higher-rated bonds and are considered to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal, which may in any case decline during sustained periods of
deteriorating economic conditions or rising interest rates. Junk bonds are also
generally considered to be subject to greater market risk in times of
deteriorating economic conditions, and to wider market and yield fluctuations,
than higher-rated securities. Junk bonds may also be more susceptible to real
or perceived adverse economic and competitive industry conditions than
investment grade securities. The market for such securities may be thinner and
less active than that for higher-rated securities, which can adversely affect
the prices at which these securities can be sold. To the extent that there is
no established secondary market for lower-rated securities, a Fund may
experience difficulty in valuing such securities and, in turn, its assets. In
addition, adverse publicity and investor perceptions about junk bonds, whether
or not based on fundamental analysis, may tend to decrease the market value and
liquidity of such securities.
Legislation has been and could be adopted limiting the use, or tax and
other advantages, of junk bonds which could adversely affect their value. Under
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, for
example, federally insured savings and loan
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associations were required to divest their investments in non-investment grade
corporate debt securities by July 1, 1994. Such legislation could have a
material adverse effect on the market for, and prices of, securities.
The Investment Adviser will try to reduce the risk inherent in the
Funds' investment in such securities through credit analysis, diversification
and attention to current developments and trends in interest rates and economic
conditions. However, there can be no assurance that losses will not occur.
Since the risk of default is higher for lower-rated bonds, the Investment
Adviser's research and credit analysis are a correspondingly more important
aspect of its program for managing the Funds' investments in such debt
securities. The Investment Adviser will attempt to identify those issuers of
high-yielding securities whose financial condition is adequate to meet future
obligations, or has improved or is expected to improve in the future.
The Income & Growth and Balanced Growth Funds will in no event
purchase securities rated below "C" by Moody's or S&P. Debt securities with
such ratings are predominantly speculative with respect to the capacity of the
issuer to pay interest and repay principal. Unrated securities will also be
considered for investment when the Investment Adviser believes that the
financial condition of the issuers of such securities, or the protection
afforded by the terms of the securities themselves, limit the risk to a Fund to
a degree comparable to that of rated securities which are consistent with the
Fund's investment objective and policies. See Part B for a description of
credit ratings.
The corporate debt securities purchased by the Short-Intermediate and
Fully Discretionary Funds will not necessarily be sold if their ratings
subsequently decline below investment grade. However, if the downgrading of an
investment grade security causes either of these Funds to hold 5% or more of its
net assets in securities rated below investment grade or determined by the
Investment Adviser to be of comparable quality, the Fund will sell sufficient
principal amount of such securities as promptly as practicable to make sure that
it holds less than 5% of its net assets in such securities.
Credit ratings evaluate the safety of principal and interest payments
of securities, not their market value. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time a rating is assigned and
the time it is updated. As credit rating agencies may fail to timely change
credit ratings of securities to reflect subsequent events, the Investment
Adviser will also monitor issuers of such securities to determine if such
issuers will have sufficient cash flow and profits to meet required principal
and interest payments and to assure their liquidity. If the rating of a debt
security held by the Income & Growth or Balanced Growth Fund is downgraded below
"C", the Investment Adviser will determine whether it is in the best interests
of the Fund to continue to hold such security in its investment portfolio.
However, if the downgrading of an investment grade security causes the Income &
Growth Fund or Balanced Fund to hold 35% or more of its net assets in securities
rated below investment grade, the Fund will sell sufficient
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principal amount of such securities as promptly as practicable to make sure that
it holds less than 35% of its net assets in such securities.
The average percentages of assets invested by the Income & Growth and
Balanced Growth Funds in bonds of each permissible rating, on a monthly dollar-
weighted basis, were as follows for the year ended March 31, 1996: AA - 3.86%
and 0%; A - 10.76% and 1.93%; BBB - 14.14% and 0%; BB - 7.50% and 0%; B - 20.20%
and 31.98%; CCC - 0.10% and 0%; nonrated - 3.28% and 14.98%.
MORTGAGE-BACKED SECURITIES (ALL FUNDS OTHER THAN EMERGING COUNTRIES,
INTERNATIONAL, LARGE CAP GROWTH AND INTERNATIONAL CORE GROWTH FUNDS)
Each of the Short-Intermediate and Fully Discretionary Funds may
invest in mortgage-backed securities, and each of the High Yield Bond and
Strategic Income Funds may invest in U.S. mortgage-backed securities. Mortgage-
backed securities represent direct or indirect participations in or obligations
collateralized by and payable from mortgage loans secured by real property.
Each mortgage pool underlying mortgage-backed securities will consist of
mortgage loans evidenced by promissory notes secured by first mortgages or first
deeds of trust or other similar security instruments creating a first lien on
real property. An investment in mortgage-backed securities includes certain
risks. Mortgage-backed securities are often subject to more rapid repayment
than their stated maturity dates would indicate as a result of the pass-throughs
or prepayments of principal on the underlying loans, which may increase the
volatility of such investments relative to similarly rated debt securities.
During periods of declining interest rates, prepayment of loans underlying
mortgage-backed securities can be expected to accelerate and thus impair a
Fund's ability to reinvest the returns of principal at comparable yields.
During periods of rising interest rates, reduced prepayment rates may extend the
average life of mortgage-backed securities and increase a Fund's exposure to
rising interest rates. Accordingly, the market values of such securities will
vary with changes in market interest rates generally and in yield differentials
among various kinds of U.S. Government securities and other mortgage-backed
securities.
The Government, Short-Intermediate, Fully Discretionary, High Yield
Bond and Strategic Income Funds may invest in mortgage pass-through securities,
which are fixed or adjustable rate mortgage-backed securities that provide for
monthly payments that are a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees or other amounts paid to any guarantor,
administrator and/or servicer of the underlying mortgage loans.
Each of the other Funds (except the Emerging Countries, International,
Large Cap Growth and International Core Growth Funds) may invest in certificates
issued by the Government National Mortgage Association as a short-term
investment. GNMA certificates are
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mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are issued by lenders such as mortgage bankers, commercial banks
and savings associations, and are either insured by the Federal Housing
Administration or the Veterans Administration. A pool of these mortgages is
assembled and, after being approved by GNMA, is offered to investors through
securities dealers. The timely payment of interest and principal on each
mortgage is guaranteed by GNMA and backed by the full faith and credit of the
U.S. Government. Principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
market rates, GNMA certificates can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates.
CMOS (GOVERNMENT, SHORT-INTERMEDIATE, FULLY DISCRETIONARY, HIGH YIELD
BOND AND STRATEGIC INCOME FUNDS)
The Government, Short-Intermediate, Fully Discretionary, High Yield
Bond and Strategic Income Funds may invest in collateralized mortgage
obligations ("CMOs"), which are multiple class mortgage-backed securities, and
the High Yield Bond and Strategic Income Funds may also invest in stripped
mortgage-back securities. Some of these securities may have a structure that
makes their reaction to interest rates and other factors difficult to predict,
making their value highly volatile. These securities may also be subject to
prepayment risk. CMOs provide an investor with a specified interest in the cash
flow from a pool of underlying mortgages or of other mortgage-backed securities.
CMOs are issued in multiple classes, each with a specified fixed or adjustable
interest rate and a final distribution date. In most cases, payments of
principal are applied to the CMO classes in the order of their respective stated
maturities, so that no principal payments will be made on a CMO class until all
other classes having an earlier stated maturity date are paid in full.
Sometimes, however, CMO classes are "parallel pay" (i.e., payments of principal
are made to two or more classes concurrently).
OTHER REAL ESTATE-RELATED INSTRUMENTS (HIGH YIELD BOND AND STRATEGIC
INCOME FUNDS)
Each of the High Yield Bond and Strategic Income Funds may invest in
real estate-related instruments such as securities of real estate investment
trusts and real estate financings. Real estate-related instruments are
sensitive to factors such as changes in real estate values and property taxes,
interest rates, cash flow of underlying real estate assets, overbuilding, and
the management skill and creditworthiness of the issue. Real estate-related
instruments may also be affected by tax and regulatory requirements, such as
those relating to the environment.
ASSET-BACKED SECURITIES (SHORT INTERMEDIATE, FULLY DISCRETIONARY, HIGH
YIELD BOND AND STRATEGIC INCOME FUNDS)
The Short-Intermediate and Fully Discretionary Funds may invest in
asset-backed securities, and the High Yield Bond and Strategic Income Funds may
invest in U.S. asset-backed securities, which represent participations in, or
are secured by and payable from, assets such as
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motor vehicle installment sale contracts, installment loan contracts, leases of
various types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Asset-backed
securities may also be collateralized by a portfolio of U.S. Government
securities, but are not direct obligations of the U.S. Government, its agencies
or instrumentalities. Payments or distributions of principal and interest on
asset-backed securities may be guaranteed up to certain amounts and for a
certain time period by a letter of credit or a pool insurance policy issued by a
financial institution, or other credit enhancements may be present; however,
privately issued obligations collateralized by a portfolio of privately issued
asset-backed securities do not involve any government-related guaranty or
insurance.
Asset-backed securities can be structured in several ways, the most
common of which has been a "pass-through" model. A certificate representing a
fractional undivided beneficial interest in a trust or corporation created
solely for the purpose of holding the trust's assets is issued to the asset-
backed security holder. The certificate entitles the holder to receive a
percentage of the interest and principal payments on the terms and according to
the schedule established by the trust instrument. A servicing agent collects
amounts due on the underlying assets for the account of the trust, which
distributes such amounts to the security holders. As an alternative structure,
the issuer of asset-backed securities effectively transforms an asset-backed
pool into obligations comprised of several different maturities. Instead of
holding an undivided interest in trust assets, the purchaser of the asset-backed
security holds a bond collateralized by the underlying assets. The bonds are
serviced by cash flows from the underlying assets, a specified fraction of all
cash received (less a fixed servicing fee) being allocated first to pay interest
and then to reduce principal.
Asset-backed securities present certain risks similar to and in
addition to those presented by mortgage-backed securities. Asset-backed
securities generally do not have the benefit of a security interest in
collateral that is comparable to mortgage assets and there is the possibility
that, in some cases, recoveries on repossessed collateral may not be available
to support payments on these securities. Asset-backed securities, however, are
not generally subject to the risks associated with prepayments of principal on
the underlying loans.
EQUITY SECURITIES (ALL FUNDS OTHER THAN GLOBAL GROWTH,
GOVERNMENT, VALUE, STRATEGIC INCOME, AND MONEY MARKET FUNDS)
Each of the Funds other than the Global Growth, Government, Value,
Strategic Income, and Money Market Funds may invest in equity securities
including common stocks, preferred stocks, convertible securities and warrants.
Common stocks, the most familiar type of equity securities, represent an equity
(ownership) interest in a corporation. Preferred stock, unlike common stock,
offers a stated dividend rate payable from the issuer's earnings and also
generally has a preference over common stock in the event of liquidation of the
issuer. See "Convertible Securities and Warrants" for a description of
convertible securities and warrants. The Fund may invest in equity securities
of growth companies, cyclical companies, companies with small market
capitalizations or companies believed to be
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undergoing a basic change in operations or markets which could result in a
significant improvement in earnings. Although equity securities have a history
of long term growth in value, their prices fluctuate based on changes in the
issuer's financial condition and prospects and on overall market and economic
conditions.
COUNTRY FUNDS (EMERGING COUNTRIES, WORLDWIDE, INTERNATIONAL, GLOBAL
GROWTH, HIGH YIELD BOND, STRATEGIC INCOME AND INTERNATIONAL CORE
GROWTH FUNDS)
Closed-end and open-end country funds in which the Emerging Countries,
Worldwide, International, Global Growth, High Yield Bond, Strategic Income and
International Core Growth Funds may invest are registered closed-end investment
companies with publicly traded shares and which hold portfolio securities of
issuers operated or located in a single country or geographical region. The
extent to which a Fund may invest in closed-end and open-end country funds is
limited by the Investment Company Act. Accordingly, as a fundamental policy,
none of such Funds will own more than 3% of the outstanding voting stock of any
closed-end or open-end investment company, will invest more than 10% of its
total assets in securities issued by closed-end or open-end investment companies
nor, together with other investment companies managed by the Investment Adviser,
will own more than 10% of any closed-end or open-end investment company. Assets
of a Fund invested in closed-end and open-end country funds are subject to
advisory and other fees imposed by the closed-end and open-end country fund, as
well as to fees imposed by the Fund.
INDEX AND CURRENCY-LINKED SECURITIES (HIGH YIELD BOND AND STRATEGIC
INCOME FUNDS)
Each of the High Yield Bond and Strategic Income Funds may invest in
"index-linked" or "commodity-linked" notes, which are debt securities of
companies that call for interest payments and/or payments at maturity in
different term than the typical note where the borrower agrees to make fixed
interest payments and to pay a fixed sum at maturity. Principal and/or interest
payments on an index-linked note depend on the performance of one or more market
indices, such as the S&P 500 Index or a weighted index of commodity futures such
as crude oil, gasoline and natural gas. The Funds may also invest in "equity
linked" and "currency-linked" debt securities. At maturity, the principal
amount of an equity-linked debt security is exchanged for common stock of the
issuer or is payable in an amount based on the issuer's common stock price at
the time of maturity. Currency-linked debt securities are short-term or
intermediate term instruments having a value at maturity, and/or an interest
rate, determined by reference to one or more foreign currencies. Payment of
principal or periodic interest may be calculated as a multiple of the movement
of one currency against another currency, or against an index.
Index and currency-linked securities are derivative instruments which
may entail substantial risks. Such instruments may be subject to significant
price volatility. The company issuing the instrument may fail to pay the amount
due on maturity. The underlying investment or security may not perform as
expected by the Investment Adviser. Markets, underlying securities and indexes
may move in a direction that was not anticipated by the Investment
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Adviser. Performance of the derivatives may be influenced by interest rate and
other market changes in the U.S. and abroad. Certain derivative instruments may
be illiquid. See "Illiquid Securities" below.
DEPOSITORY RECEIPTS (ALL FUNDS OTHER THAN GOVERNMENT AND MONEY MARKET
FUNDS)
Each of the funds other than the Government and Money Market Funds may
invest in American Depository Receipts ("ADRs"), which are receipts issued by an
American bank or trust company evidencing ownership of underlying securities
issued by a foreign issuer. ADRs, in registered form, are designed for use in
U.S. securities markets. The Emerging Countries, Worldwide, International,
Global Growth, High Yield Bond and Strategic Income Funds may also invest in
European and Global Depository Receipts ("EDRs" and "GDRs"), which, in bearer
form, are designed for use in European and other foreign securities markets, and
in other instruments representing securities of foreign companies. Such
depository receipts may be sponsored by the foreign issuer or may be
unsponsored. Unsponsored depository receipts are organized independently and
without the cooperation of the foreign issuer of the underlying securities; as a
result, available information regarding the issuer may not be as current as for
sponsored depository receipts, and the prices of unsponsored depository receipts
may be more volatile than if they were sponsored by the issuers of the
underlying securities.
EURODOLLAR AND YANKEE DOLLAR SECURITIES (INCOME & GROWTH, GLOBAL
GROWTH, SHORT-INTERMEDIATE, FULLY DISCRETIONARY, HIGH YIELD BOND AND
STRATEGIC INCOME FUNDS)
Each of the Short-Intermediate and Fully Discretionary Funds may
invest in Eurodollar and Yankee Dollar instruments. Eurodollar instruments are
bonds that pay interest and principal in U.S. dollars held in banks outside the
United States, primarily in Europe. Eurodollar instruments are usually issued
on behalf of multinational companies and foreign governments by large
underwriting groups composed of banks and issuing houses from many countries.
Yankee dollar instruments are U.S. dollar denominated bonds issued in the U.S.
by foreign banks and corporations. These investments involve risks that are
different from investments in securities issued by U.S. issuers. See "Foreign
Considerations" below. Certain of the Funds may also invest in Eurodollar
convertible securities, as described above.
FOREIGN INVESTMENT CONSIDERATIONS (ALL FUNDS OTHER THAN GOVERNMENT
FUND)
There are special risks associated with the Funds' investments in
securities of foreign companies and governments, which add to the usual risks
inherent in domestic investments. Such special risks include fluctuations in
foreign exchange rates, political or economic instability in the country of
issue, and the possible imposition of exchange controls or other laws or
restrictions. In addition, securities prices in foreign markets are generally
subject to different economic, financial, political and social factors than are
the prices of securities in United States markets. With respect to some foreign
countries there may be the possibility of expropriation
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or confiscatory taxation, limitations on liquidity of securities or political or
economic developments which could affect the foreign investments of a Fund.
Moreover, securities of foreign issuers generally will not be
registered with the Securities and Exchange Commission and such issuers
generally will not be subject to the Commission's reporting requirements.
Accordingly, there is likely to be less publicly available information
concerning certain of the foreign issuers of securities held by a Fund than is
available concerning U.S. companies. Foreign companies are also generally not
subject to uniform accounting, auditing and financial reporting standards or to
practices and requirements comparable to those applicable to U.S. companies.
There may also be less government supervision and regulation of foreign broker-
dealers, financial institutions and listed companies than exists in the United
States. Settlement of transactions in some foreign markets may be delayed or
may be less frequent than in the United States, which could affect the liquidity
of the Fund's portfolio. In addition, foreign governments may withhold taxes
(typically at a rate between 10% and 35% of the gross amount paid) from
dividends or interest paid with respect to securities held by the Fund,
decreasing the net asset value of the Fund. The Funds will not invest in
securities denominated in a foreign currency unless, at the time of investment,
such currency is considered by the Investment Adviser to be fully exchangeable
into United States dollars without significant legal restriction.
SPECIAL CONSIDERATIONS REGARDING EMERGING MARKETS INVESTMENTS
(EMERGING COUNTRIES, WORLDWIDE, INTERNATIONAL, GLOBAL GROWTH, MINI-
CAP, HIGH YIELD BOND, STRATEGIC INCOME, AND INTERNATIONAL CORE GROWTH
FUNDS)
Investments by the Funds in securities issued by the governments of
emerging or developing countries, and of companies within those countries,
involves greater risks than other foreign investments. The Emerging Countries
Fund invests primarily in emerging markets; the High Yield Bond, Strategic
Income and International Core Growth Funds may invest without limitation in
emerging markets; and the Worldwide, International and Global Growth Funds may
invest up to 10% of their assets in emerging markets. Investments in emerging
or developing markets involve exposure to economic and legal structures that are
generally less diverse and mature (and in some cases the absence of developed
legal structures governing private and foreign investments and private
property), and to political systems which can be expected to have less
stability, than those of more developed countries. The risks of investment in
such countries may include matters such as relatively unstable governments,
higher degrees of government involvement in the economy, the absence until
recently of capital market structures or market-oriented economies, economies
based on only a few industries, securities markets which trade only a small
number of securities, restrictions on foreign investment in stocks, and
significant foreign currency devaluations and fluctuations.
Emerging markets can be substantially more volatile than both U.S. and
more developed foreign markets. Such volatility may be exacerbated by
illiquidity. The average daily trading volume in all of the emerging markets
combined is a small fraction of the average daily volume
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of the U.S. market. Small trading volumes may result in the Funds being forced
to purchase securities at substantially higher prices than the current market,
or to sell securities at much lower prices than the current market.
As a result of the factors described above, the Emerging Countries
Fund's net asset value is expected to be volatile, investment in the Fund should
be considered speculative, and investors should be able to tolerate sudden,
sometimes substantial, fluctuations in the value of their investments. Because
of the risks associated with international equity investments and emerging
markets in particular, the Fund is intended to be a long-term investment vehicle
and is not designed to provide investors with a means of speculating on short-
term market movements.
OVER-THE-COUNTER SECURITIES (ALL FUNDS OTHER THAN GOVERNMENT AND MONEY
MARKET FUNDS)
Securities owned by each of the Funds other than the Government and
Money Market Funds may be traded in the over-the-counter market or on a regional
securities exchange and may not be traded every day or in the volume typical of
securities trading on a national securities exchange. As a result, disposition
by such Funds of portfolio securities to meet redemptions by shareholders or
otherwise may require the Funds to sell these securities at a discount from
market prices, to sell during periods when such disposition is not desirable, or
to make many small sales over a lengthy period of time.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS (ALL FUNDS)
The Funds may purchase securities on a delayed delivery or "when-
issued" basis and enter into firm commitment agreements (transactions in which
the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). Delivery and payment for these
securities typically occur 15 to 45 days after the commitment to purchase. No
interest accrues to the purchaser during the period before delivery. There is a
risk in these transactions that the value of the securities at settlement may be
more or less than the agreed upon price, or that the party with which a Fund
enters into such a transaction may not perform its commitment. The Funds will
normally enter into these transactions with the intention of actually receiving
or delivering the securities. The Funds may sell the securities before the
settlement date.
To the extent a Fund engages in any of these transactions it will do
so for the purpose of acquiring securities for its portfolio consistent with its
investment objective and policies and not for the purpose of investment
leverage. The Funds will segregate liquid assets such as cash, U.S. Government
securities and other liquid debt or equity securities in an amount sufficient to
meet their payment obligations with respect to these transactions. A Fund may
not purchase when-issued securities or enter into firm commitments and roll
transactions if, as a result, more than 15% of the Fund's net assets would be
segregated to cover such contracts.
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"ROLL" TRANSACTIONS (GOVERNMENT, SHORT-INTERMEDIATE, FULLY
DISCRETIONARY, HIGH YIELD BOND AND STRATEGIC INCOME FUNDS)
Each of the Government, Short-Intermediate, Fully Discretionary, High
Yield Bond and Strategic Income Funds may enter into "roll" transactions, which
are the sale of GNMA certificates and other securities together with a
commitment to purchase similar, but not identical, securities at a later date
from the same party. During the roll period, a Fund forgoes principal and
interest paid on the securities. The Fund is compensated by the difference
between the current sales price and the forward price for the future purchase,
as well as by the interest earned on the cash proceeds of the initial sale.
Like when-issued securities or firm commitment agreements, roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the price at which the Fund is committed to purchase similar
securities. Additionally, in the event the buyer of securities under a roll
transaction files for bankruptcy or becomes insolvent, the Fund's use of the
proceeds of the transaction may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.
The Funds will engage in roll transactions for the purpose of
acquiring securities for their portfolio consistent with their investment
objectives and policies and not for investment leverage. Nonetheless, roll
transactions are speculative techniques and are considered borrowings by the
Funds for purposes of the percentage limitations applicable to borrowings. See
"Borrowings" below. Each Fund will establish a segregated account with its
Custodian in which it will maintain cash, U.S. Government securities and other
liquid debt and equity securities in an amount sufficient to meet its payment
obligations with respect to these transactions. A Fund will not enter into roll
transactions if, as a result, more than 15% of the Fund's net assets would be
segregated to cover such contracts.
SHORT SALES (CORE GROWTH, EMERGING GROWTH, MINI-CAP, WORLDWIDE,
INTERNATIONAL, HIGH YIELD BOND, STRATEGIC INCOME AND INTERNATIONAL
CORE GROWTH FUNDS)
The Investment Adviser believes that its growth equity management
approach, in addition to identifying equity securities the earnings and prices
of which it expects to grow at a rate above that of the S&P 500, also identifies
securities the prices of which can be expected to decline. Therefore, each of
the Core Growth, Emerging Growth, Mini-Cap, Worldwide, International, High Yield
Bond, Strategic Income and International Core Growth Funds is authorized to make
short sales of securities it owns or has the right to acquire at no added cost
through conversion or exchange of other securities it owns (referred to as short
sales "against the box") and to make short sales of securities which it does not
own or have the right to acquire. A short sale that is not made "against the
box" is a transaction in which a Fund sells a security it does not own in
anticipation of a decline in market price. When the Fund makes a short sale,
the proceeds it receives are retained by the broker until the Fund replaces the
borrowed security. In order to deliver the security to the buyer, the Fund must
arrange through
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a broker to borrow the security and, in so doing, the Fund becomes obligated to
replace the security borrowed at its market price at the time of replacement,
whatever that price may be.
Short sales by the Core Growth, Emerging Growth, Mini-Cap, Worldwide,
International, High Yield Bond, Strategic Income, and International Core Growth
Funds that are not made "against the box" create opportunities to increase the
Fund's return but, at the same time, involve special risk considerations and may
be considered a speculative technique. Since the Fund in effect profits from a
decline in the price of the securities sold short without the need to invest the
full purchase price of the securities on the date of the short sale, the Fund's
net asset value per share, and that of the corresponding Portfolio, will tend to
increase more when the securities it has sold short decrease in value, and to
decrease more when the securities it has sold short increase in value, than
would otherwise be the case if it had not engaged in such short sales. Short
sales theoretically involve unlimited loss potential, as the market price of
securities sold short may continuously increase, although a Fund may mitigate
such losses by replacing the securities sold short before the market price has
increased significantly. Under adverse market conditions a Fund might have
difficulty purchasing securities to meet its short sale delivery obligations,
and might have to sell portfolio securities to raise the capital necessary to
meet its short sale obligations at a time when fundamental investment
considerations would not favor such sales. The value of securities of any
issuer in which a Fund maintains a short position which is "not against the box"
may not exceed the lesser of 2% of the value of the Fund's net assets or 2% of
the securities of such class of the issuer.
If the Core Growth, Emerging Growth, Mini-Cap, Worldwide,
International, High Yield Bond, Strategic Income, or International Core Growth
Fund makes a short sale "against the box", the Fund would not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the proceeds of the
sale. A Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Investment Adviser believes
that the price of a security may decline, causing a decline in the value of a
security owned by the Fund or a security convertible into or exchangeable for
such security. In such case, any future losses in the Fund's long position
would be reduced by a gain in the short position.
In the view of the Commission, a short sale involves the creation of a
"senior security" as such term is defined in the Investment Company Act, unless
the sale is "against the box" and the securities sold are placed in a segregated
account (not with the broker), or unless the Fund's obligation to deliver the
securities sold short is "covered" by placing in a segregated account (not with
the broker) cash, U.S. Government securities or other liquid debt or equity
securities in an amount equal to the difference between the market value of the
securities sold short at the time of the short sale and any such collateral
required to be deposited as collateral with a broker in connection with the sale
(not including the proceeds from the short sale), which difference is adjusted
daily for changes in the value of the securities sold short. The total value of
the cash and securities deposited with the broker and otherwise segregated may
not at any time be less
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than the market value of the securities sold short at the time of the short
sale. Each Fund will comply with these requirements. In addition, as a matter
of policy, the Trust's Board of Trustees has determined that no Fund will make
short sales of securities or maintain a short position if to do so could create
liabilities or require collateral deposits and segregation of assets aggregating
more than 25% of the Fund's total assets, taken at market value.
A Fund's ability to enter into short sales transactions is limited by
the requirements of the Internal Revenue Code for qualification of an Investor
as a regulated investment company.
FOREIGN EXCHANGE CONTRACTS (EMERGING COUNTRIES, WORLDWIDE,
INTERNATIONAL, GLOBAL GROWTH, FULLY DISCRETIONARY, HIGH YIELD BOND,
STRATEGIC INCOME AND INTERNATIONAL CORE GROWTH FUNDS)
Since the Emerging Countries, Worldwide, International, Global Growth,
Fully Discretionary, High Yield Bond, Strategic Income and International Core
Growth Funds may invest in securities denominated in currencies other than the
U.S. dollar, changes in foreign currency exchange rates will affect the values
of its portfolio securities and the unrealized appreciation or depreciation of
its investments. The rate of exchange between the U.S. dollar and other
currencies is determined by forces of supply and demand in the foreign exchange
markets. These forces are affected by the international balance of payments and
other economic and financial conditions, government intervention, speculation
and other factors.
The Emerging Countries, Worldwide, International, Global Growth, Fully
Discretionary, High Yield Bond, Strategic Income and International Core Growth
Funds may enter into derivative positions such as foreign exchange forward
contracts or currency futures or options contracts for the purchase or sale of
foreign currency to "lock in" the U.S. dollar price of the securities
denominated in a foreign currency or the U.S. dollar equivalent of interest and
dividends to be paid on such securities, or to hedge against the possibility
that the currency of a foreign country in which the Fund has investments may
suffer a decline against the U.S. dollar. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. For example, a Fund may
purchase a particular currency or enter into a forward currency contract to
preserve the U.S. dollar price of securities it intends to or has contracted to
purchase. Alternatively, a Fund might sell a particular currency on either a
spot (cash) basis at the rate then prevailing in the currency exchange market or
on a forward basis by entering into a forward contract to purchase or sell
currency, to hedge against an anticipated decline in the U.S. dollar value of
securities it intends or has contracted to sell. This method of attempting to
hedge the value of a Fund's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the
securities. None of the Funds is obligated to engage in any such currency
hedging operations, and there can be no assurance as to the success of any
hedging operations which a Fund may implement. Although the strategy of
engaging in foreign currency transactions could reduce the risk of loss due to a
decline in the value of the hedged currency,
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it could also limit the potential gain from an increase in the value of the
currency. None of the Funds other than the Fully Discretionary Fund intends to
maintain a net exposure to such contracts where the fulfillment of the Fund's
obligations under such contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency.
OPTIONS (ALL FUNDS OTHER THAN GOVERNMENT, VALUE AND MONEY MARKET
FUNDS)
Each of the Funds other than the Government, Value and Money Market
Funds may purchase listed covered "put" and "call" options with respect to
securities (in the case of the High Yield Bond and Strategic Income Funds, debt
securities and currencies) which are otherwise eligible for purchase by such
Funds (and, in the case of such Funds other than the Short-Intermediate and
Fully Discretionary Funds, with respect to various stock indices), for hedging
purposes, subject to the following restrictions: the aggregate premiums on call
options purchased by a Fund may not exceed 5% of the market value of net assets
of the Fund as of the date the call options are purchased, and the aggregate
premiums on put options may not exceed 5% of the market value of the net assets
of the Fund as of the date such options are purchased. In addition, no Fund
will purchase or sell options if, immediately thereafter, more than 25% of its
net assets would be hedged. A "put" gives a holder the right, in return for the
premium paid, to require the writer of the put to purchase from the holder a
security at a specified price. A "call" gives a holder the right, in return for
the premium paid, to require the writer of the call to sell a security to the
holder at a specified price. An option on a securities index (such as a stock
index) gives the holder the right, in return for the premium paid, to require
the writer to pay cash equal to the difference between the closing price of the
index and the exercise price of the option, expressed in dollars, times a
specified multiplier.
Put and call options are derivative securities traded on U.S. and
foreign exchanges, including the American Stock Exchange, Chicago Board Options
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and New York Stock
Exchange. Additionally, the Core Growth, Emerging Growth, Emerging Countries,
Worldwide, International, Fully Discretionary, Large Cap Growth and
International Core Growth Funds may purchase options not traded on a securities
exchange, which may bear a greater risk of nonperformance than options traded on
a securities exchange. Options not traded on an exchange are considered dealer
options and generally lack the liquidity of an exchange traded option.
Accordingly, dealer options may be subject to the Funds' restriction on
investment in illiquid securities, as described below. Dealer options may also
involve the risk that the securities dealers participating in such transactions
will fail to meet their obligations under the terms of the option.
The Core Growth, Emerging Growth, Mini-Cap, Emerging Countries, Income
& Growth, Worldwide, International, Global Growth, High Yield Bond, Strategic
Income, Fully Discretionary, Large Cap Growth and International Core Growth
Funds may also write listed covered options on up to 25% of the value of their
respective net assets. Call options written by a Fund give the holder the right
to buy the underlying securities from the Fund at a stated
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exercise price; put options written by a Fund give the holder the right to sell
the underlying security to the Fund. A call option is covered if the Fund owns
the security underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration upon conversion or
exchange of securities currently held by the Fund. A put option is covered if
the Fund maintains liquid assets such as cash, U.S. Government securities, or
other liquid high quality debt or equity securities equal to the exercise price
in a segregated amount with its Custodian. If an option written by a Fund
expires unexercised, the Fund realizes a gain equal to the premium received at
the time the option was written. If an option purchased by a Fund expires
unexercised, the Fund realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option written by a
Fund may be closed out by an offsetting purchase or sale of an option of the
same series. A Fund will realize a gain from a closing purchase transaction if
the cost of the closing transaction is less than the premium received from
writing the option; if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a gain; if it is less, the Fund
will realize a loss.
FUTURES CONTRACTS (ALL FUNDS OTHER THAN BALANCED AND MONEY MARKET
FUNDS)
Each of the Funds other than the Balanced, Government, High Yield
Bond, Strategic Income and Money Market Funds may purchase and sell stock index
futures contracts as a hedge against changes in market conditions. A stock
index futures contract is a bilateral agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of the
last trading day of the contract and the price at which the futures contract is
originally struck. No physical delivery of the underlying stocks in the index
is made.
The Emerging Countries, Income & Growth, Worldwide, International,
Global Growth, Government, Short-Intermediate, Fully Discretionary, High Yield
Bond, Strategic Income, Value, Large Cap Growth and International Core Growth
Funds may also purchase and sell financial futures contracts as a hedge against
changes in interest rates. Additionally, the Emerging Countries, Worldwide,
International, Fully Discretionary, High Yield Bond, Strategic Income, Value,
Large Cap Growth and International Core Growth Funds may purchase and sell
currency futures contracts to hedge against foreign currency fluctuations, and
the Core Growth, Emerging Countries, Income & Growth, Worldwide, International,
Global Growth, Government, Fully Discretionary, High Yield Bond, Strategic
Income, Value, Large Cap Growth and International Core Growth Funds may purchase
and sell related options on futures contracts. A financial or currency futures
contract obligates the seller of the contract to deliver and the purchaser of
the contract to take delivery of the type of financial instrument or currency
called for in the contract at a specified future time (the settlement date) for
a specified price. Although the terms of a contract call for actual delivery or
acceptance of the financial instrument or currency, the contracts normally will
be closed out before the delivery date
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without delivery or acceptance taking place. Futures options possess many of
the same characteristics as options on securities and indices. A futures option
gives the holder, in return for the premium paid, the right to buy (call) from
or sell (put) to the writer of the option a futures contract at a specified
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option,
the opposite is true. A futures option may be closed out before exercise or
expiration by an offsetting purchase or sale of a futures option of the same
series.
Financial, currency and stock index futures contracts are derivative
instruments traded on U.S. commodities and futures exchanges, including the
Chicago Mercantile Exchange, the New York Futures Exchange, the Kansas City
Board of Trade, the Chicago Board of Trade and the International Monetary
Market, as well as commodity and securities exchanges located outside the United
States, including the London International Financial Futures Exchange, the
Singapore International Monetary Exchange, the Sydney Futures Exchange Limited
and the Tokyo Stock Exchange.
Except as described below under "Non-Hedging Strategic Transactions,"
the Funds will not engage in transactions in futures contracts for speculation,
but only as a hedge against the risk of unexpected changes in the values of
securities held or intended to be held by the Funds or, in the case of the High
Yield Bond and Strategic Income Funds, unexpected changes in interest rates or
other matters. As a general rule, no Fund will purchase or sell futures if,
immediately thereafter, more than 25% of its net assets would be hedged. In
addition, no Fund may purchase or sell futures or related options if,
immediately thereafter, the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for such options would exceed 5% of
the market value of the Fund's net assets.
INTEREST RATE AND CURRENCY SWAPS (HIGH YIELD BOND, STRATEGIC INCOME,
SHORT-INTERMEDIATE AND FULLY DISCRETIONARY FUNDS)
For hedging purposes, each of the High Yield Bond, Strategic Income,
Short-Intermediate and Fully Discretionary Funds may enter into interest rate
swap transactions and purchase or sell interest rate caps and floors, and the
Fully Discretionary, High Yield Bond and Strategic Income Funds may enter into
currency swap cap transactions. An interest rate or currency swap involves an
agreement between a Fund and another party to exchange payments calculated as if
they were interest on a specified ("notional") principal amount (e.g., an
exchange of floating rate payments by one party for fixed rate payments by
another). An interest rate cap or floor entitles the purchaser, in exchange for
a premium, to receive payments of interest on a notional principal amount from
the seller of the cap or floor, to the extent that a specified reference rate
exceeds or falls below a predetermined level.
A Fund usually enters into such transactions on a "net" basis, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payment streams. The net
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amount of the excess, if any, of a Fund's obligations over its entitlements with
respect to each swap is accrued on a daily basis, and an amount of cash or high-
quality liquid securities having an aggregate net asset value at least equal to
the accrued excess is maintained in a segregated account by the Trust's
custodian. If a Fund enters into a swap on other than a net basis, or sells
caps or floors, the Fund maintains a segregated account in the full amount
accrued on a daily basis of the Fund's obligations with respect to the
transaction. Such segregated accounts are maintained in accordance with
applicable regulations of the Commission.
A Fund will not enter into any of these derivative transactions unless
the unsecured senior debt or the claims paying ability of the other party to the
transaction is rated at least "high quality" at the time of purchase by at least
one of the established rating agencies (e.g., AAA or AA by S&P). The swap
market has grown substantially in recent years, with a large number of banks and
investment banking firms acting both as principals and agents utilizing standard
swap documentation, and the Investment Adviser has determined that the swap
market has become relatively liquid. Swap transactions do not involve the
delivery of securities or other underlying assets or principal, and the risk of
loss with respect to such transactions is limited to the net amount of payments
that the Fund is contractually obligated to make or receive. Caps and floors
are more recent innovations for which standardized documentation has not yet
been developed; accordingly, they are less liquid than swaps, and caps and
floors purchased by a Fund are considered to be illiquid assets.
SPECIAL HEDGING CONSIDERATIONS (ALL FUNDS OTHER THAN MONEY MARKET
FUND)
Special risks are associated with the use of options, futures
contracts and swap transactions as hedging techniques. There can be no guaranty
of a correlation between price movements in the hedging vehicle and in the
portfolio securities being hedged. A lack of correlation could result in a loss
on both the hedged securities in a Fund and the hedging vehicle, so that the
Fund's return might have been better had hedging not been attempted. In
addition, a decision as to whether, when and how to use options, futures or
swaps involves the exercise of skill and judgment which are different from those
needed to select portfolio securities, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior, currency fluctuations
or interest rate trends. If the Investment Adviser is incorrect in its
forecasts regarding market values, currency fluctuations, interest rate trends
or other relevant factors, a Fund may be in a worse position than if the Fund
had not engaged in options, futures or swap transactions. The potential loss
incurred by a Fund in writing options on futures and engaging in futures and
swap transactions is unlimited. The Investment Adviser is experienced in the
use of options, futures contracts and swap transactions as an investment
technique.
In the event of a default by the other party to an over-the-counter
option transaction or a futures or swap transaction, a Fund might incur a loss.
In addition, there can be no assurance that a liquid market will exist at a time
when a Fund seeks to close out an option position or futures or swap contract.
Most futures exchanges and boards of trade limit the amount of
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fluctuation in futures contract prices during a single day; once the daily
limit has been reached on a particular contract, no trades may be made that day
at a price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there is
no assurance that an active secondary market will develop or continue to exist.
Lack of a liquid market for any reason may prevent a Fund from liquidating an
unfavorable position and a Fund would remain obligated to meet margin
requirements until the position is closed.
A Fund's ability to enter into options, futures contracts and swap
transactions is limited by the requirements of the Internal Revenue Code for
qualification of an Investor as a regulated investment company.
NON-HEDGING STRATEGIC TRANSACTIONS (STRATEGIC INCOME, SHORT-
INTERMEDIATE AND FULLY DISCRETIONARY FUNDS)
Each Fund's options, futures and swap transactions will generally be
entered into for hedging purposes -- to protect against possible changes in the
market values of securities held in or to be purchased for the Fund's portfolio
resulting from securities markets, currency or interest rate fluctuations, to
protect the Fund's unrealized gains in the values of its portfolio securities,
to facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of the Fund's portfolio, or to establish a
position in the derivatives markets as a temporary substitute for purchase or
sale of particular securities. However, in addition to the hedging transactions
referred to above, each of the Strategic Income, Short-Intermediate and Fully
Discretionary Funds may enter into options, futures and swap transactions to
enhance potential gain in circumstances where hedging is not involved. A Fund's
net loss exposure resulting from transactions entered into for such purposes is
not expected to exceed, in the case of the Short-Intermediate and Fully
Discretionary Funds 1%, and in the case of the Strategic Income Fund, 5% of the
Fund's net assets at any one time and, in the event it does exceed such amount,
the Fund will close out transactions as promptly as practicable in order to
comply with this limitation. Such transactions are subject to the limitations
described above under "Options," "Futures Contracts," and "Interest Rate and
Currency Swaps," and to the same types of risks as described above under
"Special Hedging Considerations."
REPURCHASE AGREEMENTS (ALL FUNDS)
Each Fund may on occasion enter into repurchase agreements, in which
the Fund purchases securities and the seller agrees to repurchase them from the
Fund at a mutually agreed-upon time and price. The period of maturity is
usually overnight or a few days, although it may extend over a number of months.
The resale price is in excess of the purchase price, reflecting an agreed-upon
rate of return effective for the period of time the Fund's money is invested in
the security. Each Fund's repurchase agreements will at all times be fully
collateralized in an amount at least equal to 102% of the purchase price,
including accrued interest earned on the underlying securities. The instruments
held as collateral are valued daily
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and, if the value of the instruments declines, the Fund will require additional
collateral. If the seller defaults and the value of the collateral securing the
repurchase agreement declines, the Fund may incur a loss. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by a Fund may be delayed or limited. A Fund will only enter into
repurchase agreements involving securities in which it could otherwise invest
and with selected financial institutions and brokers and dealers which meet
certain creditworthiness and other criteria.
REVERSE REPURCHASE AGREEMENTS (HIGH YIELD BOND AND STRATEGIC INCOME
FUNDS)
Each of the High Yield Bond and Strategic Income Funds may enter into
reverse repurchase agreements, which involve the sale of a security by a Fund
and its agreement to repurchase the security (or, in the case of mortgage-backed
securities, substantially similar but not identical securities) at a specified
time and price. A Fund will maintain in a segregated account with the Custodian
cash, U.S. Government securities or other appropriate liquid debt and equity
securities obligations in an amount sufficient to cover its obligations under
these agreements with broker-dealers (no such collateral is required on such
agreements with banks). Under the 1940 Act, these agreements are considered
borrowings by the Funds, and are subject to the limitations on borrowings
described below. The agreements are subject to the same types of risks as
borrowings.
ILLIQUID SECURITIES (ALL FUNDS)
Each Fund may invest up to 15% (10% in the case of the Money Market
Fund) of its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale or are otherwise illiquid. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933 ("restricted securities"), securities which are otherwise
not readily marketable such as over-the-counter, or dealer traded, options, and
repurchase agreements having a maturity of more than seven days. Mutual funds
do not typically hold a significant amount of restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the
marketability of portfolio securities and the Fund might not be able to dispose
of restricted or other securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions. The Fund might also have
to register such restricted securities in order to dispose of them, resulting in
additional expense and delay.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act of 1933,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain
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institutions may not be indicative of the liquidity of such investments. If
such securities are subject to purchase by institutional buyers in accordance
with Rule 144A promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, the Investment Adviser, pursuant to guidelines adopted
by the Trust's Board of Trustees, may determine that such securities are not
illiquid securities notwithstanding their legal or contractual restrictions on
resale, based on factors such as the frequency of trades and quotes for the
securities, the number of dealers and others wishing to purchase and sell the
securities, and the nature of the security and the marketplace trades. In all
other cases, however, securities subject to restrictions on resale will be
deemed illiquid. Investing in restricted securities eligible for resale under
Rule 144A could have the effect of increasing the level of illiquidity in the
Funds to the extent that qualified institutional buyers become uninterested in
purchasing such securities.
SECURITIES LENDING (ALL FUNDS)
To increase its income, each Fund may lend its portfolio securities to
financial institutions such as banks and brokers if the loan is collateralized
in accordance with applicable regulatory requirements. The Trust's Board of
Trustees has adopted an operating policy that limits the amount of loans made by
a Fund to not more than 30% of the value of the total assets of the Fund.
During the time portfolio securities are on loan, the borrower pays the Fund an
amount equivalent to any dividends or interest paid on such securities, and the
Fund may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower who has
delivered equivalent collateral or secured a letter of credit. The amounts
received by a Fund will be reduced by any fees and administrative expenses
associated with such loans. In addition, such loans involve risks of delay in
receiving additional collateral or in recovering the securities loaned or even
loss of rights in the collateral should the borrower of the securities fail
financially. However, such securities lending will be made only when, in the
Investment Adviser's judgment, the income to be earned from the loans justifies
the attendant risks. Loans are subject to termination at the option of the Fund
or the borrower.
BORROWING (ALL FUNDS)
Each Fund may borrow money from banks in amounts up to 20% of its
total assets (calculated when the loan is made) only for temporary,
extraordinary or emergency purposes or for the clearance of transactions. In
addition, the Strategic Income Fund may borrow from banks to buy securities, so
long as its total borrowing for this and other purposes do not exceed 50% of the
value of its net assets. Purchases of portfolio securities while borrowings are
outstanding create leverage and involve special risk considerations. Since
substantially all of a Fund's assets fluctuate in value, whereas the interest
obligation resulting from a borrowing will be fixed by the terms of the Fund's
agreement with its lender, the asset value per share of the Fund will tend to
increase more when its portfolio securities increase in value, and to decrease
more when its portfolio assets decrease in value, than would otherwise be the
case if the Fund did not borrow funds. In addition, interest costs on
borrowings may fluctuate with changing
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market rates of interest and may partially offset or exceed the return earned on
borrowed funds (or on the assets that were retained rather than sold to meet
the needs for which funds were borrowed). Under adverse market conditions, a
Fund might have to sell portfolio securities to meet interest or principal
payments at a time when fundamental investment considerations would not favor
such sales. All borrowings by a Fund will be made only to the extent that the
value of the Fund's total assets, less its liabilities other than borrowings, is
equal to at least 300% of all borrowings. If such asset coverage of 300% is not
maintained, the Fund will take prompt action to reduce its borrowings as
required by applicable law. Short sales "not against the box" and roll
transactions are considered borrowings for purposes of the percentage
limitations applicable to borrowings.
ITEM 5. MANAGEMENT OF THE FUNDS.
The business and affairs of the Funds are managed under the direction
of the Trust's Board of Trustees.
INVESTMENT ADVISER.
Nicholas-Applegate Capital Management, a California limited
partnership, 600 West Broadway, 30th Floor, San Diego, California 92101, serves
as the Investment Adviser to each of the Funds. The Investment Adviser
currently manages approximately $31 billion of discretionary assets for numerous
clients, including employee benefit plans of corporations, public retirement
systems and unions, university endowments, foundations, and other institutional
investors, and individuals. Its general partner is Nicholas-Applegate Capital
Management Holdings, L.P., a California limited partnership controlled by
Arthur E. Nicholas. Mr. Nicholas and thirteen other partners manage a staff of
approximately 350 employees.
In its advisory agreement with the Trust (the "Investment Advisory
Agreement"), the Investment Adviser has agreed to manage the Funds' assets and
to be responsible for, make decisions with respect to and place orders for all
purchases and sales of the securities held by the Funds. For the services
provided and expenses assumed pursuant to the Investment Advisory Agreement, the
Investment Adviser receives a fee at the following annual rates: for the
Emerging Countries and Mini-Cap Funds, 1.25% of average net assets; for the
Emerging Growth Fund, 1.00% of average net assets; for the Worldwide,
International, and International Core Growth Funds, 1.00% of the first $500
million of such Fund's average net assets, 0.90% of the next $500 million, and
0.85% of the portion of such Fund's average net assets in excess of $1 billion;
for the Global Growth Fund, .85% of average net assets; for the Value Fund,
0.75% of average net assets; for the Core Growth, Income & Growth, Balanced, and
Large Cap Growth Funds, 0.75% of the first $500 million of each such Fund's
average net assets, 0.675% of the next $500 million, and 0.65% of the portion of
each such Fund's average net assets in excess of $1 billion; for the High Yield
Bond and Strategic Income Funds, 0.60% of such Fund's average net assets; for
the Government Fund, 0.40% of the first $500 million of the Fund's average net
assets, and 0.35% of the portion of the Fund's average net assets in
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excess of $500 million; for the Short-Intermediate Fund, 0.30% of the first $250
million of the Fund's average net assets and 0.25% of average net assets in
excess of $250 million; for the Fully Discretionary Fund, 0.45% of the first
$500 million of the Fund's average net assets, 0.40% of the next $250 million of
the Fund's average net assets, and 0.35% of average net assets in excess of $750
million; for the Money Market Fund, 0.25% of the first $500 million of the
Fund's average net assets, and 0.2275% of the portion of the Fund's average net
assets in excess of $500 million.
As a result of the expense limitations and fee deferrals described
below under "Expense Limitations and Fee Waivers," the fees and expense
recoupments paid to the Investment Adviser for the fiscal year ended March 31,
1996 with respect to the Funds were the following percentages of the Funds'
respective average net assets: Emerging Growth Fund - 1.00%; Worldwide Fund -
0.94%; International Fund - 0.37%; Emerging Countries Fund - 0.58%; Core Growth
Fund - 0.75%; Income & Growth Fund - 0.69%; Balanced Fund - 0.33%; Government
Fund - 0%; Global Growth Fund - 0%; Mini-Cap Fund - 0.52%; Short-Intermediate
Fund - 0%; Fully Discretionary Fund - 0%; Money Market Fund - 0%.
The High Yield Bond, Strategic Income, Short-Intermediate and Fully
Discretionary Funds are managed under the general supervision of John D. Wylie,
the Investment Adviser's Chief Investment Officer - Investment Services Group.
The Investment Adviser's fixed income management team headed by Fred S.
Robertson III, the Chief Investment Officer -- Fixed Income of the Investment
Adviser, is primarily responsible for the Investment Adviser's day-to-day
management of such Funds' portfolios. Mr. Robertson has managed similar
institutional accounts for the Investment Adviser since May 1995; for more than
five years prior to May 1995, he managed similar institutional accounts for
Criterion Investment Management Company.
The other Funds are managed under the general supervision of Mr.
Nicholas, who has been the Chief Investment Officer of the Investment Adviser
since its organization, and John D. Wylie, the Investment Adviser's Chief
Investment Officer - Investor Services Group. The following persons are
primarily responsible for the Investment Adviser's day-to-day management of the
Funds' portfolios; except as otherwise indicated, each of them has been
primarily responsible since the Funds began operations: Core Growth Fund - John
C. Marshall, Jr.; Emerging Growth and Mini-Cap Funds - Catherine Somhegyi;
Emerging Countries and Global Growth Funds - the Investment Adviser's
global/international investment team, headed by Lawrence S. Speidell; Income &
Growth Fund - Mr. Somhegyi (since December 1996); Government Fund - the
Investment Adviser's fixed income management team under the supervision of
Fred S. Robertson III (since December 1996); Value Fund - John D. Wylie;
Balanced Fund - the Investment Adviser's fixed team under the supervision of
Mr. Robertson (since December 1996) and the Investment Adviser's
global/international investment team under the supervision of Mr. Speidell
(since March 1994) and Ms. Somhegyi (since March 1996); Worldwide Fund,
International, and International Core Growth Fund - the Investment Adviser's
global/international investment team under the supervision of Mr. Speidell
(since March 1994) and Ms. Somhegyi (since March 1996); Large Cap Growth Fund -
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Andrew Gallagher. Each of them other than Messrs Speidell and Gallagher has
managed institutional accounts for the Investment Adviser for more than the last
five years. Mr. Speidell has been a portfolio manager with the Investment
Adviser since March 1994; from 1983 until he joined the Investment Adviser, he
was an institutional portfolio manager with Batterymarch Financial Management.
Mr. Gallagher has been a portfolio manager with the Investment Adviser since
October 1992; from April 1990 until he joined the Investment Adviser, he was a
portfolio manager with Sentinal Asset Management, Inc.
ADMINISTRATOR.
Investment Company Administration Corporation, a Delaware corporation,
4455 East Camelback Road, Suite 261-E, Phoenix, Arizona 85018, is the
Administrator of each Fund. Pursuant to an Administration Agreement with the
Trust, and subject to the supervision of the Board of Trustees of the Trust, the
Administrator supervises the overall administration of the Trust. Its
responsibilities include preparing and filing all documents required for
compliance by the Trust with applicable laws and regulations, arranging for the
maintenance of books and records of the Trust and supervision of other
organizations that provide services to the Trust. Certain officers of the Trust
are also provided by the Administrator. The Administrator is compensated for
its services to the Emerging Growth Fund at the annual rate of $35,000. It is
compensated for its services to the other Funds at an annual rate equal to 0.05%
of the first $100 million of the Funds' aggregate net assets, of 0.04% on the
next $150 million, 0.03% on the next $300 million, 0.02% on the next $300
million and 0.01% on the portion of the aggregate net assets in excess of $850
million average daily net assets of each Fund, with a minimum of $25,000 per
year for each Fund.
PLACEMENT AGENT.
Nicholas-Applegate Securities (the "Placement Agent"), 600 West
Broadway, 30th Floor, San Diego, California 92101, a California limited
partnership, serves as the Placement Agent of Interests of the Funds. The
general partner of the Placement Agent is Nicholas-Applegate Capital Management
Holdings, L.P. and its limited partner is the Investment Adviser. The Placement
Agent also serves as distributor for Interests of Nicholas-Applegate Mutual
Funds and receives no separate compensation for serving as Placement Agent for
the Trust.
CUSTODIAN.
PNC Bank, Airport Business Center, International Court 2, 200 Stevens
Drive, Lester, Pennsylvania 19113, serves as Custodian for the Trust pursuant to
a Custodian Services Agreement.
EXPENSE LIMITATIONS AND FEE WAIVERS.
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The Funds each pay all of their own expenses, including taxes, fees
and expenses of Trustees and officers, administration and transfer agency fees,
certain insurance premiums, outside auditing and legal expenses, costs of
Investor reports and meetings, Securities and Exchange Commission fees, state
securities qualification (or exemption) fees, costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing Investors, brokerage fees and commissions in
connection with the purchase of portfolio securities, investment advisory and
custodial fees and any extraordinary expenses.
The Investment Adviser has entered into agreements with certain
Investors under which the Investment Adviser has agreed for a period of time to
waive or defer its management fees payable by the Funds, and to absorb certain
other expenses of the Funds and Portfolios (including the operating expenses of
the Funds, but excluding interest, taxes, brokerage commissions and other costs
incurred in connection with portfolio securities transactions, organizational
expenses and other capitalized expenditures and extraordinary expenses), to
ensure that the operating expenses for the Investor do not exceed certain fixed
percentages of such Investors' average daily net assets.
In addition, each of the Funds is subject to certain limitations on
expenses imposed by state securities laws. At present, the only expense
limitation in effect is in California. Under California law, each Fund will be
subject to an annual expense limitation equal to the sum of 2.5% of the first
$30 million of the Fund's average net assets, 2.0% of the next $70 million of
average net assets, and 1.5% of the remaining average net assets. If a Fund's
expenses (excluding interest, brokerage commissions litigation expenses and
certain other items, but including an Investor's allocable share of the expenses
incurred by the Fund) were to exceed such limit in any fiscal year, the
Investment Adviser has agreed to bear the amount of such excess to the extent
required by such limitations.
The Investment Adviser may also waive fees from time to time to assist
the Funds in maintaining competitive yields.
Total Fund expenses for the fiscal year ended March 31, 1996 were the
following percentages of their respective average net assets; the amount of such
expenses prior to the expense reimbursements and fee deferrals is set forth in
parentheses: Emerging Growth Fund - 1.11% (1.11%); Worldwide Fund - 1.20%
(1.25%); International Fund - 1.35% (2.00%); Emerging Countries Fund - 1.60%
(2.80%); Core Growth Fund - 0.89% (0.89%); Income & Growth Fund - 0.95% (0.95%);
Balanced Fund - 0.95% (0.98%); Government Fund - 0.63% (2.32%); Mini-Cap Growth
Fund - 1.51% (2.03%); Fully Discretionary Fund (annualized) - 0.40% (2.68%);
Short-Intermediate Fund (annualized) - 0.30% (1.36%); Money Market Fund - 0.45%
(2.95%).
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
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The Trust was organized in December 1992 as a Delaware business trust.
The Trust's Declaration of Trust authorizes the Board of Trustees to issue
unlimited Interests and to classify and reclassify any authorized and unissued
Interests into one or more series. Pursuant to such authority, the Board of
Trustees has established each of the Funds as a separate series of the Trust.
VOTING RIGHTS.
Each Investor is entitled to vote in proportion to its Interests, and
Investors will vote by series except as required by the 1940 Act or other
applicable law or when permitted by the Board of Trustees. Investors are
entitled to participate in the net distributable assets of the Fund in which
they hold Interests on liquidation. Interests have no preemptive rights and
only such conversion and exchange rights as the Board of Trustees may grant at
its discretion. Interests do not have cumulative voting rights for the election
of Trustees.
As used in this Registration Statement, a "vote of a majority" of the
outstanding Interests of the Trust or a Fund means the affirmative vote of the
lesser of (i) more than 50% of the outstanding Interests of the Trust or Fund,
or (ii) 67% of the Interests of the Trust or Fund present at a meeting at which
more than 50% of the outstanding Interests of the Trust or Fund are represented
in person or by proxy.
The Trust does not presently intend to hold annual meetings of
Investors for the election of trustees and other business unless and until such
time as less than a majority of the trustees holding office have been elected by
the Investors, at which time the trustees then in office will call a meeting of
Investors for the election of trustees. Under certain circumstances, however,
Investors have the right to call a meeting of Investors to consider the removal
of one or more trustees and such meetings will be called when requested by the
holders of record of 10% or more of the Trust's outstanding Interests.
As with any mutual fund, certain Investors in a Fund could control the
results of voting in certain instances. For example, a vote by certain
Investors holding a majority of Interests in a Fund to change the Fund's
investment objective could result in an Investor's withdrawal of its investment
in such Fund, and in increased costs and expenses for the remaining Investors.
Additionally, the failure by an Investor to approve a change in its investment
objectives and policies parallel to a change that has been approved for the
corresponding Fund (thus requiring the Investor to redeem its Interests in the
Fund) could lead to a number of adverse consequences, such as the inability of
the Investor to find another investment company in which to invest its assets or
an equivalent investment adviser to manage its assets. The policy of Investors,
and other similar investment companies, to invest their assets in trusts such as
the Trust is a relatively recent development in the mutual fund industry and,
consequently, there is a lack of substantial experience in the operation of this
policy.
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As of March 31, 1996, the Trust was controlled by Nicholas-Applegate
Mutual Funds, which held substantially all of its Interests.
LIABILITIES.
Investors will be jointly and severally liable for all obligations of
the Fund in which such Investors hold Interests (with rights of contribution
INTER SE in proportion to their respective ownership interests in the Trust).
However, the risk of an Investor incurring financial loss on account of such
liability is limited to circumstances in which both inadequate insurance exists
and the Fund itself is unable to meet its obligations. In the event that an
Investor becomes liable for the obligations of a Fund, the Trust will indemnify
each Investor from any claim or liability to which the Investor may become
subject solely by reason of having been an Investor, and will reimburse the
Investor for all legal and other expenses reasonably incurred by it in
connection with any such claim or liability.
DISTRIBUTIONS.
Investors are entitled to their pro rata shares of any distributions
arising from the net investment income and net realized gains, if any, earned on
investments held by the Fund in which such Investor holds Interests. Each Fund
will allocate its investment income, expenses, and realized and unrealized gains
and losses daily. A request for distribution must be made in writing to the
Transfer Agent, State Street Bank and Trust Company, Attention: Nicholas-
Applegate Mutual Funds, P.O. Box 8326, Boston, Massachusetts 02266-8326, and
will become effective after its receipt by the Trust.
FEDERAL TAXES.
The Trust intends for each Fund to be treated as a partnership rather
than as a regulated investment company or a corporation under the Internal
Revenue Code of 1986, as amended (the "Code"), as long as such qualification is
in the best interests of the Investors. As a partnership under the Code, any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Investors in the Fund, regardless of whether such
interest, dividends or gains have been distributed by the Fund or such losses
have been realized and recognized by the Investors. Therefore, to the extent a
Fund were to accrue but not distribute any interest, dividends or gains, the
Investors would be deemed to have realized and recognized their proportionate
share of interest, dividends, gains or losses realized and recognized by the
Fund in which they hold Interests without receipt of any corresponding
distribution.
Each Investor will be taxable on its share (as determined in
accordance with the governing instruments of the Trust) of the applicable Fund's
ordinary income and capital gain in determining its income tax liability. The
determination of such share will be made in accordance with the Code and the
regulations promulgated thereunder. It is intended that each Fund's assets,
income and distributions will be managed in such a way that an Investor in the
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Fund will be able to satisfy the requirements of Subchapter M of the Code,
assuming that the Investor invested all of its assets in the Fund.
Each Fund's taxable year-end is March 31. Although the Fund will not
be subject to federal income tax, it will file appropriate federal income tax
returns.
A taxable gain or loss may be realized by an Investor upon its
redemption, transfer or exchange of Interests, depending upon the tax basis of
such Interests and their price at the time of redemption, transfer or exchange.
Investors will be advised at least annually as to the federal income
tax consequences of any interest, dividends and gains or losses accrued each
year by the Fund in which the Investor holds Interests. The foregoing is only a
brief summary of some of the important federal tax considerations generally
affecting the Funds and their Investors, and is based on federal tax laws and
regulations which are in effect as of the date of this Registration Statement.
Such laws and regulations may be changed by legislative or administrative
actions. Potential Investors should consult their tax advisers with specific
reference to their own situations.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
Interests are issued only through the Placement Agent in private
placement transactions which do not involve a "public offering" within the
meaning of Section 4(2) of the Securities Act. Investments in the Funds may
only be made by investment companies or other entities which are "accredited
investors" within the meaning of Regulation D under the Securities Act. The
Funds are prohibited by the Trust's Declaration of Trust from accepting
investments from individuals, S corporations, partnerships and grantor trusts.
An account may be opened by contacting the Placement Agent. There is
no minimum initial or subsequent purchase amount with respect to any Fund of the
Trust. The Trust reserves the right to reject any purchase order or to suspend
or modify the continuous offering of the Interests of any of the Funds. For
example, the investment opportunities in the small capitalization sector of the
securities markets may from time to time be more limited than those in other
sectors of the markets. Therefore, in order to retain adequate investment
flexibility, the Investment Adviser and the Trustees of the Trust may from time
to time recommend that Investors indefinitely discontinue some or all new
investments in the Emerging Growth Fund or the Mini-Cap Growth Fund. From
January 31 to September 1, 1994, certain Investors in the Emerging Growth Fund
discontinued sales of shares to new shareholders. The Trust may recommence the
offering of Interests in any Fund to new Investors at any time after it is
suspended if in the Board of Trustees' opinion doing so would be in the best
interests of the Fund and its Investors.
If accepted by the Trust, investments in a Fund may be made in
exchange for securities which are eligible for acquisition by the Fund as
described above in this Part A. All dividends,
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interest, subscription, or other rights pertaining to such securities will
become the property of the Fund and must be delivered to the Fund by the
Investor upon receipt from the issuer. The Trust will not accept securities in
exchange for Interests in a Fund unless: (i) such securities are, at the time
of the exchange, eligible for purchase by the Fund; (ii) the Investor represents
that all securities offered to be exchanged are not subject to any transfer
restrictions; (iii) the value of any such security (except U.S. Government
securities) being exchanged together with any other securities of the same
issuer owned by the Fund will not exceed 5% of the Fund's net assets immediately
after the transaction; and (iv) such securities are consistent with the Fund's
investment objective and policies.
Each Investor in a Fund may add to or reduce its investment in the
Fund on each business day. At 4:00 p.m., Eastern time, on each business day,
the value of each such Investor's Interests in a Fund will be determined by
multiplying the Fund's net asset value by the percentage, effective for that
day, which represents that Investor's share of the aggregate Interests in the
Fund. Any additions or withdrawals which are to be effected on that day will
then be effected. The Investor's percentage of the aggregate Interests in the
Fund will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such Investor's investment in the Fund as of
4:00 p.m., Eastern time, on such day, plus or minus, as the case may be, the
amount of any additions to or withdrawals from the Investor's investment in the
Fund effected on such day, and (ii) the denominator of which is the Fund's
aggregate net asset value as of 4:00 p.m., Eastern time, on such day, plus or
minus,as the case may be, the amount of the net additions to or withdrawals from
the aggregate investments in the Fund by all Investors in the Fund. The
percentage so determined will then be applied to determine the value of the
Investor's interest in the Fund as of 4:00 p.m., Eastern time, on the following
business day. Net asset value per Interest for each Fund as of such time is
determined by dividing the total value of the Fund's assets, less any
liabilities, by 100 (the percentage which represents the aggregate Interests in
the Fund).
ITEM 8. REDEMPTION OR REPURCHASE.
An Investor may redeem Interests in a Fund in any amount at any time
by sending a written or telephonic request to the Trust, 600 West Broadway, 30th
Floor, San Diego, California 92101 (telephone (619) 687-8100). Redemption
requests must be made by duly authorized representatives of each Investor and
must specify the name of the Fund, the dollar amount to be redeemed and the
Investor's name and account number.
Redemption orders are effected at the net asset value of the Interests
next determined after receipt of the order in proper form by the Trust. The
Funds ordinarily will make payment for all Interests redeemed within three
business days after receipt by the Trust of a request in proper form, except as
provided by the rules of the Securities and Exchange Commission. The Trust
imposes no charge when Interests are redeemed. The value of the Interests
redeemed may be more or less than the Investor's cost, depending on the Fund's
current net asset value.
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The Trust will wire the proceeds of redemption in federal funds to the
commercial bank specified by the Investor, normally the next business day after
receiving the redemption request and all necessary documents. Wire redemptions
may be terminated or modified by the Trust at any time. An Investor should
contact its bank for information on any charges imposed by the bank in
connection with the receipt of redemption proceeds by wire. During periods of
substantial economic or market change, telephonic and wire redemptions may be
difficult to implement.
The right of any Investor to receive payment with respect to any
withdrawal may be suspended or postponed during any period in which the New York
Stock Exchange is closed (other than weekends or holidays) or trading on the
Exchange is restricted, or, to the extent otherwise permitted by the Investment
Company Act, if an emergency exists.
EXCHANGE PRIVILEGE.
Investors may exchange Interests of any Fund into Interests of other
Funds by sending a written or telephonic request to the Trust, 600 West
Broadway, 30th Floor, San Diego, California 92101 (telephone (619) 687-8100).
Exchange requests must be made by duly authorized representatives of the
Investor and must specify the names of the applicable Funds, the dollar amount
to be exchanged and the Investor's name and account number.
CROSS-REINVESTMENT.
Investors may cross-reinvest dividends and/or capital gains
distributions paid by a Fund into Interests of another Fund. For more details,
Investors should contact the Placement Agent of the Trust.
ITEM 9. PENDING LEGAL PROCEEDINGS. Not applicable.
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NICHOLAS-APPLEGATE INVESTMENT TRUST
PART B
ITEM 10. COVER PAGE.
Nicholas-Applegate Investment Trust (the "Trust") is a registered,
open-end management investment company organized in December 1992 as a Delaware
business trust. The Trust offers Interests of fourteen separate series (each a
"Fund" and collectively the "Funds"): Nicholas-Applegate Core Growth Fund (the
"Core Growth Fund"); Nicholas-Applegate Emerging Growth Fund (the "Emerging
Growth Fund"); Nicholas-Applegate Mini-Cap Growth Fund (the "Mini-Cap Fund");
Nicholas-Applegate Emerging Countries Fund (the "Emerging Countries Fund");
Nicholas-Applegate Income & Growth Fund (the "Income & Growth Fund"); Nicholas-
Applegate Balanced Growth Fund (the "Balanced Fund"); Nicholas-Applegate
Worldwide Growth Fund (the "Worldwide Fund"); Nicholas-Applegate International
Growth Fund (the "International Fund"); Nicholas-Applegate Global Growth &
Income Fund (the "Global Growth Fund"); Nicholas-Applegate Government Income
Fund (the "Government Fund"), Nicholas-Applegate Short-International Fixed
Income Fund (the "Short Intermediate Fund"), Nicholas-Applegate Fully
Discretionary Fixed Income Fund (the "Fully Discretionary Fund"); Nicholas
Applegate Value Fund (the "Value Fund"); Nicholas-Applegate High Yield Bond Fund
(the "High Yield Bond Fund"); Nicholas-Applegate Strategic Income Fund (the
"Strategic Income Fund"); Nicholas-Applegate Money Market Fund (the "Money
Market Fund"); Nicholas-Applegate Large Cap Growth Fund (the "Large Cap Growth
Fund"); and Nicholas-Applegate International Core Growth Fund (the
"International Core Growth Fund").
This Part B is not a prospectus and should be read in conjunction with
Part A. All terms used in this Part B that are not otherwise defined herein
have the meanings assigned to them in Part A.
ITEM 11. TABLE OF CONTENTS.
Item Page
---- ----
General Information and History B-2
Investment Objectives and Policies B-2
Management of the Trust B-37
Control Persons and Principal Holders of Securities B-40
Investment Advisory and Other Services B-42
Brokerage Allocation and Other Practices B-45
Capital Stock and Other Securities B-48
Purchase, Redemption and Pricing of Interests Being Offered B-49
Tax Status B-51
Underwriters B-54
Calculations of Performance Data B-54
Financial Statements B-54
<PAGE>
Appendix A: Description of Securities Ratings
ITEM 12. GENERAL INFORMATION AND HISTORY. Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
PORTFOLIO TURNOVER
Each Fund's turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities of the Fund for the year by the
monthly average value of the portfolio securities of such Fund. The calculation
excludes all securities whose maturities at the time of acquisition were one
year or less. Portfolio turnover may vary greatly from year to year as well as
within a particular year, and may also be affected by cash requirements for
redemptions of Interests and by requirements which enable an Investor to receive
certain favorable tax treatment. Portfolio turnover will not be a limiting
factor in making portfolio decisions.
EQUITY SECURITIES OF GROWTH COMPANIES
Each of the Funds other than the Global Growth, Government, Value,
Short-Intermediate, Fully Discretionary, and Money Market Funds invests in
equity securities of domestic and foreign companies, the earnings and stock
prices of which are expected by the Investment Adviser to grow at an above-
average rate. Such investments will be diversified over a cross-section of
industries and individual companies. Some of these companies will be
organizations with market capitalizations of $500 million or less or companies
that have limited product lines, markets and financial resources and are
dependent upon a limited management group. Examples of possible investments
include emerging growth companies employing new technology, cyclical companies,
initial public offerings of companies offering high growth potential, or other
corporations offering good potential for high growth in market value. The
securities of such companies may be subject to more abrupt or erratic market
movements than larger, more established companies both because the securities
typically are traded in lower volume and because the issuers typically are
subject to a greater degree to changes in earnings and prospects.
PREFERRED STOCK
Preferred stock, unlike common stock, offers a stated dividend rate
payable from a corporation's earnings. Such preferred stock dividends may be
cumulative or non-cumulative, participating, or auction rate. If interest rates
rise, the fixed dividend on preferred stocks may be less attractive, causing the
price of preferred stocks to decline. Preferred stock may have mandatory
sinking fund provisions, as well as call/redemption provisions prior to
maturity, a negative feature when interest rates decline. Dividends on some
preferred stock may be "cumulative," requiring all or a portion of prior unpaid
dividends to be paid. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation,
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and may be "participating," which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases. The rights of preferred stocks
on the distribution of a corporation's assets in the event of a liquidation are
generally subordinate to the rights associated with a corporation's debt
securities.
CONVERTIBLE SECURITIES AND WARRANTS
Each of the Funds other than the Short-Intermediate, Fully
Discretionary, and Money Market Funds may invest in convertible securities and
warrants. A convertible security is a fixed income security (a bond or
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in an
issuer's capital structure, but are usually subordinated to similar non-
convertible securities. While providing a fixed income stream (generally higher
in yield than the income derivable from common stock but lower than that
afforded by a similar non-convertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation attendant upon a market price advance in
the convertible security's underlying common stock.
A warrant gives the holder a right to purchase at any time during a
specified period a predetermined number of Interests of common stock at a fixed
price. Unlike convertible debt securities or preferred stock, warrants do not
pay a fixed dividend. Investments in warrants involve certain risks, including
the possible lack of a liquid market for resale of the warrants, potential price
fluctuations as a result of speculation or other factors, and failure of the
price of the underlying security to reach or have reasonable prospects of
reaching a level at which the warrant can be prudently exercised (in which event
the warrant may expire without being exercised, resulting in a loss of the
Fund's entire investment therein). The International Core Growth Fund will not
retain debt securities downgraded below investment grate in excess of 5% of its
net assets.
OTHER CORPORATE DEBT SECURITIES
The Funds invest in non-convertible debt securities of foreign and
domestic companies over a cross-section of industries. The debt securities in
which the Funds may invest will be of varying maturities and may include
corporate bonds, debentures, notes and other similar corporate debt instruments.
The value of a longer-term debt security fluctuates more widely in response to
changes in interest rates than do shorter-term debt securities.
RISKS OF INVESTING IN DEBT SECURITIES.
There are a number of risks generally associated with an investment
in debt securities (including convertible securities). Yields on short,
intermediate, and long-term securities depend on a variety of factors, including
the general condition of the money and bond markets, the size
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of a particular offering, the maturity of the obligation, and the rating of the
issue. Debt securities with longer maturities tend to produce higher yields and
are generally subject to potentially greater capital appreciation and
depreciation than obligations with short maturities and lower yields. The
market prices of debt securities usually vary, depending upon available yields.
An increase in interest rates will generally reduce the value of such portfolio
investments, and a decline in interest rates will generally increase the value
of such portfolio investments. In addition, a Fund's return on the debt
securities in which it invests depends on the continuing ability of the issuers
of such debt securities to meet their obligations for the payment of interest
and principal when due.
SHORT-TERM INVESTMENTS
Each of the Funds may invest in any of the following securities and
instruments:
BANK CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME
DEPOSITS. Each Fund may acquire certificates of deposit, bankers' acceptances
and time deposits. Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Funds will be
dollar-denominated obligations of domestic or foreign banks or financial
institutions which at the time of purchase have capital, surplus and undivided
profits in excess of $100 million (including assets of both domestic and foreign
branches), based on latest published reports, or less than $100 million if the
principal amount of such obligations is fully insured by the U.S. Government.
A Fund holding instruments of foreign banks or financial
institutions may be subject to additional investment risks that are different in
some respects from those incurred by a fund which invests only in debt
obligations of U.S. domestic issuers. See "Foreign Investment" below. Such
risks include future political and economic developments, the possible
imposition of withholding taxes by the particular country in which the issuer is
located on interest income payable on the securities, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities.
Domestic banks and foreign banks are subject to different
governmental regulations with respect to the amount and types of loans which may
be made and interest rates which may be charged. In addition, the profitability
of the banking industry depends largely upon the availability and cost of funds
for the purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
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arising from possible financial difficulties of borrowers play an important part
in the operations of the banking industry.
As a result of federal and state laws and regulations, domestic
banks are, among other things, required to maintain specified levels of
reserves, limited in the amount which they can loan to a single borrower, and
subject to other regulations designed to promote financial soundness. However,
such laws and regulations do not necessarily apply to foreign bank obligations
that a Fund may acquire.
In addition to purchasing certificates of deposit and bankers'
acceptances, to the extent permitted under their respective investment
objectives and policies stated above and in Part A, a Fund may make interest-
bearing time or other interest-bearing deposits in commercial or savings banks.
Time deposits are non-negotiable deposits maintained at a banking institution
for a specified period of time at a specified interest rate.
SAVINGS ASSOCIATION OBLIGATIONS. The Funds may invest in
certificates of deposit (interest-bearing time deposits) issued by savings banks
or savings and loan associations that have capital, surplus and undivided
profits in excess of $100 million, based on latest published reports, or
obligations caused by institutions with capital, surplus and undivided profits
of less than $100 million if the principal amount of such obligations is fully
insured by the U.S. Government.
COMMERCIAL PAPER, SHORT-TERM NOTES AND OTHER CORPORATE OBLIGATIONS.
The Funds may invest a portion of their assets in commercial paper and short-
term notes. Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper and short-term notes will normally
have maturities of less than nine months and fixed rates of return, although
such instruments may have maturities of up to one year.
Commercial paper and short-term notes will consist of issues rated
at the time of purchase "A-2" or higher by S&P, "Prime-1" or "Prime-2" by
Moody's, or similarly rated by another nationally recognized statistical rating
organization or, if unrated, will be determined by the Investment Adviser to be
of comparable quality. These rating symbols are described in Appendix A.
Corporate obligations include bonds and notes issued by
corporations to finance longer-term credit needs than supported by commercial
paper. While such obligations generally have maturities of ten years or more,
the Funds may purchase obligations which have remaining maturities of one year
or less from the date of purchase and which are rated "AA" or higher by S&P or
"Aa" or higher by Moody's.
MONEY MARKET FUNDS
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The Funds may under certain circumstances invest a portion of their
assets in money market funds. The Investment Company Act prohibits the Funds
from investing more than 5% of the value of their total assets in any one
investment company, or more than 10% of the value of their total assets in
investment companies as a group, and also restricts their investment in any
investment company to 3% of the voting securities of such investment company.
In addition to the advisory and other fees paid by a Fund, an investment in a
money market mutual fund will involve payment of the Funds' pro rata share of
advisory and administrative fees charged by such fund.
GOVERNMENT OBLIGATIONS
Each Fund may make short-term investments in U.S. Government
obligations. Such obligations include Treasury bills, certificates of
indebtedness, notes and bonds, and issues of such entities as the Government
National Mortgage Association ("GNMA"), Export-Import Bank of the United States,
Tennessee Valley Authority, Resolution Funding Corporation, Farmers Home
Administration, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Farm Credit Banks, Federal Land Banks, Federal Housing Administration,
Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage
Corporation, and the Student Loan Marketing Association.
Some of these obligations, such as those of the GNMA, are supported
by the full faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the FNMA, are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law.
The Emerging Countries, Worldwide, International, Global Growth,
High Yield Bond, Strategic Income, Short-Intermediate, Fully Discretionary,
International Core Growth and Large Cap Growth Funds may invest in sovereign
debt securities of foreign governments and their agencies and instrumentalities.
A sovereign debtor's willingness or ability to repay principal and interest in a
timely manner may be affected by a number of factors, including its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which it may be
subject. Emerging market governments could default on their sovereign debt.
Such sovereign debtors also may be dependent on expected disbursements from
foreign governments, multilateral agencies and other entities abroad to reduce
principal and interest arrearages on their debt. The commitments on the part of
these governments, agencies and others to make such disbursements may be
conditioned on a sovereign debtor's implementation of economic
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reforms and/or economic performance and the timely service of such debtor's
obligations. Failure to meet such conditions could result in the cancellation
of such third parties' commitments to lend funds to the sovereign debtor, which
may further impair such debtor's ability or willingness to service its debt in a
timely manner.
ZERO COUPON SECURITIES
The Income & Growth, Balanced, Government, Global Growth, Fully
Discretionary, Short-Intermediate, High Yield Bond and Strategic Income Funds
may each invest in zero coupon securities issued by the U.S. Treasury on up to
35% of their respective net assets. Zero coupon Treasury securities are U.S.
Treasury notes and bonds which have been stripped of their unmatured interest
coupons and receipts, or certificates representing interests in such stripped
debt obligations or coupons. Because a zero coupon security pays no interest to
its holder during its life or for a substantial period of time, it usually
trades at a deep discount from its face or par value and will be subject to
greater fluctuations of market value in response to changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest.
VARIABLE AND FLOATING RATE INSTRUMENTS
The Funds may acquire variable and floating rate instruments. Such
instruments are frequently not rated by credit rating agencies; however, unrated
variable and floating rate instruments purchased by a Fund will be determined by
the Investment Adviser under guidelines established by the Board of Trustees to
be of comparable quality at the time of the purchase and rated instruments
eligible for purchase by the Fund. In making such determinations, the
Investment Adviser will consider the earning power, cash flow and other
liquidity ratios of the issuers of such instruments (such issuers include
financial, merchandising, bank holding and other companies) and will monitor
their financial condition. An active secondary market may not exist with
respect to particular variable or floating rate instruments purchased by the
Fund. The absence of such an active secondary market could make it difficult
for the Fund to dispose of the variable or floating rate instrument involved in
the event of the issuer of the instrument defaulted on its payment obligation or
during periods in which the Fund is not entitled to exercise its demand rights,
and the Fund could, for these or other reasons, suffer a loss to the extent of
the default. Variable and floating rate instruments may be secured by bank
letters of credit.
PARTICIPATION INTERESTS
The High Yield Bond and Strategic Income Funds may invest in
participation interests, subject to the limitation on investments by the Funds
in illiquid investments. Participation interests represent an undivided
interest in or assignment of a loan made by an issuing financial institution.
No more than 5% of a Fund's net assets can be invested in participation interest
of
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the same issuing borrower. Participation interests are primarily dependent upon
the financial strength of the borrowing corporation, which is obligated to make
payments of principal and interest on the loan, and there is a risk that such
borrowers may have difficulty making payments. In the event the borrower fails
to pay scheduled interest or principal payments, a Fund could experience a
reduction in its income and might experience a decline in its net asset value.
In the event of a failure by the financial institution to perform its obligation
in connection with the participation agreement, the Fund might incur certain
costs and delays in realizing payment or may suffer a loss of principal and/or
interest. The Investment Adviser has set certain creditworthiness standards for
issuers of loan participations and monitors their creditworthiness.
MUNICIPAL SECURITIES
The Fully Discretionary and Short-Intermediate Funds may invest in
debt obligations issued by state and local governments, territories and
possessions of the U.S., regional government authorities, and their agencies and
instrumentalities ("municipal securities"). Municipal securities include both
notes (which have maturities of less than one year) and bonds (which have
maturities of one year or more) that bear fixed or variable rates of interest.
In general, "municipal securities" debt obligations are issued to
obtain funds for a variety of public purposes, such as the construction, repair,
or improvement of public facilities including airports, bridges, housing,
hospitals, mass transportation, schools, streets, water and sewer works.
Municipal securities may be issued to refinance outstanding obligations as well
as to raise funds for general operating expenses and lending to other public
institutions and facilities.
The two principal classifications of municipal securities are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Characteristics and
methods of enforcement of general obligation bonds vary according to the law
applicable to a particular issuer, and the taxes that can be levied for the
payment of debt service may be limited or unlimited as to rates or amounts of
special assessments. Revenue securities are payable only from the revenues
derived from a particular facility, a class of facilities or, in some cases,
from the proceeds of a special excise tax. Revenue bonds are issued to finance
a wide variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport facilities; colleges
and universities; and hospitals. Although the principal security behind these
bonds may vary, many provide additional security in the form of a debt service
reserve fund the assets of which may be used to make principal and interest
payments on the issuer's obligations. Housing finance authorities have a wide
range of security, including partially or fully insured mortgages, rent
subsidized and collateralized mortgages, and the net revenues from housing or
other public projects. Some authorities are provided further security in the
form of a state's assurance (although without obligation) to make up
deficiencies in the debt service reserve fund.
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Both Funds may purchase insured municipal debt in which scheduled
payments of interest and principal are guaranteed by a private, non-governmental
or governmental insurance company. The insurance does not guarantee the market
value of the municipal debt or the value of the Interests of a Fund.
Securities of issuers of municipal obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Bankruptcy Reform Act of 1978. In addition,
the obligations of such issuers may become subject to laws enacted in the future
by Congress, state legislatures or referenda extending the time for payment of
principal or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. Furthermore,
as a result of legislation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
obligations may be materially affected.
MORAL OBLIGATION SECURITIES. Municipal securities may include
"moral obligation" securities which are usually issued by special purpose public
authorities. If the issuer of moral obligation bonds cannot fulfill its
financial responsibilities from current revenues, it may draw upon a reserve
fund, the restoration of which is moral commitment but not a legal obligation of
the state or municipality which created the issuer.
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL BONDS. Both Funds may
invest in tax-exempt industrial development bonds and pollution control bonds
which, in most cases, are revenue bonds and generally are not payable from the
unrestricted revenues of an issuer. They are issued by or on behalf of public
authorities to raise money to finance privately operated facilities for
business, manufacturing, housing, sport complexes, and pollution control.
Consequently, the credit quality of these securities is dependent upon the
ability of the user of the facilities financed by the bonds and any guarantor to
meet its financial obligations.
MUNICIPAL LEASE OBLIGATIONS. Both Funds may invest in lease
obligations or installment purchase contract obligations of municipal
authorities or entities ("municipal lease obligations"). Although lease
obligations do not constitute general obligations of the municipality for which
its taxing power is pledged, a lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make the payment due
under the lease obligation. A Fund may also purchase "certificates of
participation," which are securities issued by a particular municipality or
municipal authority to evidence a proportionate interest in base rental or lease
payments relating to a specific project to be made by the municipality, agency
or authority. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in any year unless money is appropriated for such
purpose for such year. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
default and foreclosure might prove difficult. In addition, these securities
represent a relatively new type of financing, and certain lease obligations may
therefore be considered to be illiquid securities.
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Both Funds will attempt to minimize the special risks inherent in
municipal lease obligations and certificates of participation by purchasing only
lease obligations which meet the following criteria: (1) rated A or better by
at least one nationally recognized securities rating organization; (2) secured
by payments from a governmental lessee which has actively traded debt
obligations; (3) determined by the Investment Adviser to be critical to the
lessee's ability to deliver essential services; and (4) containing legal
features which the Investment Adviser deems appropriate, such as covenants to
make lease payments without the right of offset or counterclaim, requirements
for insurance policies, and adequate debt service reserve funds.
SHORT-TERM OBLIGATIONS. Both Funds may invest in short-term
municipal obligations. These securities including the following:
TAX ANTICIPATION NOTES are used to finance working capital needs of
municipalities and are issued in anticipation of various seasonal tax revenues,
to be payable from these specific future taxes. They are usually general
obligations of the issuer, secured by the taxing power of the municipality for
the payment of principal and interest when due.
REVENUE ANTICIPATED NOTES are issued in expectation of receipt of
other kinds of revenue, such as federal revenues available under the Federal
Revenue Sharing Program. They also are usually general obligations of the
issuer.
BOND ANTICIPATION NOTES normally are issued to provide interim
financing until long-term financing can be arranged. The long-term bonds then
provide the money for the repayment of the notes.
CONSTRUCTION LOAN NOTES are sold to provide construction financing
for specific projects. After successful completion and acceptance, many
projects receive permanent financing through the Federal National Mortgage
Association or the Government National Mortgage Association.
SHORT-TERM DISCOUNT NOTES (tax-exempt commercial paper) are short-
term (365 days or less) promissory notes issued by municipalities to supplement
their cash flow.
MORTGAGE-RELATED SECURITIES
Each of the Funds other than the International, Emerging Countries,
Large Cap Growth and International Core Growth Funds may invest in mortgage-
related securities (in the case of the High Yield Bond and Strategic Income
Funds, U.S. mortgage-related securities). Mortgage-related securities are
derivative interests in pools of mortgage loans made to U.S. residential home
buyers, including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private organizations. The Government, High Yield Bond, Strategic Income, Fully
Discretionary and Short-Intermediate Funds may also invest in debt securities
which are secured with collateral
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consisting of U.S. mortgage-related securities, and in other types of U.S.
mortgage-related securities.
U.S. MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of
mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their residential mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
sale of the underlying residential property, refinancing or foreclosure, net of
fees or costs which may be incurred. Some mortgage-related securities (such as
securities issued by the Government National Mortgage Association) are described
as "modified pass-throughs." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.
The principal governmental guarantor of U.S. mortgage-related
securities is the Government National Mortgage Association ("GNMA"). GNMA is a
wholly owned United States Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the United States Government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of mortgages insured by the Federal Housing Agency or
guaranteed by the Veterans Administration.
Government-related guarantors include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders and subject to general regulation by the Secretary of Housing and
Urban Development. FNMA purchases conventional residential mortgages not
insured or guaranteed by any government agency from a list of approved
seller/services which include state and federally chartered savings and loan
associations, mutual savings banks, commercial banks and credit unions and
mortgage bankers. FHLMC is a government-sponsored corporation created to
increase availability of mortgage credit for residential housing and owned
entirely by private stockholders. FHLMC issues participation certificates which
represent interests in conventional mortgages from FHLMC's national portfolio.
Pass-through securities issued by FNMA and participation certificates issued by
FHLMC are guaranteed as to timely payment of principal and interest by FNMA and
FHLMC, respectively, but are not backed by the full faith and credit of the
United States Government.
Although the underlying mortgage loans in a pool may have
maturities of up to 30 years, the actual average life of the pool certificates
typically will be substantially less because the
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mortgages will be subject to normal principal amortization and may be prepaid
prior to maturity. Prepayment rates vary widely and may be affected by changes
in market interest rates. In periods of falling interest rates, the rate of
prepayment tends to increase, thereby shortening the actual average life of the
pool certificates. Conversely, when interest rates are rising, the rate of
prepayments tends to decrease, thereby lengthening the actual average life of
the certificates. Accordingly, it is not possible to predict accurately the
average life of a particular pool.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). A domestic or
foreign CMO in which the Government, Fully Discretionary and Short-Intermediate
Funds may invest is a hybrid between a mortgage-backed bond and a mortgage pass-
through security. Like a bond, interest is paid, in most cases, semiannually.
CMOs may be collateralized by whole mortgage loans, but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC, FNMA or equivalent foreign entities.
CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal and
interest received from the pool of underlying mortgages, including prepayments,
is first returned to the class having the earliest maturity date or highest
seniority. Classes that have longer maturity dates and lower seniority will
receive principal only after the highest class has been retired.
FOREIGN MORTGAGE-RELATED SECURITIES. Foreign mortgage-related
securities are interests in pools of mortgage loans made to residential home
buyers domiciled in a foreign country. These include mortgage loans made by
trust and mortgage loan companies, credit unions, chartered banks, and others.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related, and private organizations (e.g.,
Canada Mortgage and Housing Corporation and First Australian National Mortgage
Acceptance Corporation Limited). The mechanics of these mortgage-related
securities are generally the same as those issued in the United States.
However, foreign mortgage markets may differ materially from the U.S. mortgage
market with respect to matters such as the sizes of loan pools, pre-payment
experience, and maturities of loans.
FOREIGN INVESTMENTS
The United States government has from time to time imposed
restrictions, through taxation or otherwise, on foreign investments by U.S.
entities such as the Funds. If such restrictions should be reinstituted, it
might become necessary for such Funds to invest substantially all of their
assets in United States securities. In such event, the Board of Trustees of the
Trust would consider alternative arrangements, including reevaluation of the
Funds' investment objectives and policies. However a Fund would adopt revised
investment objective
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and fundamental policies only after approval by the holders of a majority (as
defined in the Investment Company Act) of the Interests of the Fund.
DEPOSITORY RECEIPTS. American Depository Receipts ("ADRs") may be
listed on a national securities exchange or may trade in the over-the-counter
market. ADR prices are denominated in the United States dollars; the underlying
security may be denominated in a foreign currency, although the underlying
security may be subject to foreign government taxes which would reduce the yield
on such securities.
BRADY BONDS. The High Yield Bond and Strategic Income Funds may
invest in U.S. dollar-denominated foreign securities referred to as "Brady
Bonds." These are debt obligations of foreign entities that may be fixed-rate
par bonds or floating-rate discount bonds and are generally collateralized in
full as to principal due at maturity by U.S. Treasury zero coupon obligations
that have the same maturity as the Brady Bonds. However the Funds may also
invest in uncollateralized Brady Bonds. Brady Bonds are generally viewed as
having three or four valuation components: (i) any collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity (these uncollateralized amounts constitute what is
referred to as the "residual risk" of such bonds). In the event of a default
with respect to collateralized Brady Bonds as a result of which the payment
obligations of the issuer are accelerated, the zero coupon U.S. Treasury
securities held as collateral for the payment of principal will not be
distributed to investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal the
principal payments which would have been due on the Brady Bonds in the normal
course. In addition, in light of the residual risk of Brady Bonds and, among
other factors, the history of defaults with respect to commercial bank loans by
public and private entities of countries issuing Brady Bonds, investments in
Brady Bonds may be viewed as speculative.
RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign
securities involve certain inherent risks, including the following:
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of
certain countries may differ favorably or unfavorably from the United States'
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency, diversification and balance of
payments position. The internal politics of certain foreign countries may not
be as stable as those of the United States. Governments in certain foreign
countries also continue to participate to a significant degree, through
ownership interest or regulation, in their respective economies. Action by
these governments could include restrictions on foreign investment,
nationalization, expropriation of goods or imposition of taxes, and could have a
significant effect on market prices of securities and payment of interest. The
economies of many foreign countries are heavily dependent upon international
trade and are
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accordingly affected by the trade policies and economic conditions of their
trading partners. Enactment by these trading partners of protectionist trade
legislation could have a significant adverse effect upon the securities markets
of such countries.
CURRENCY FLUCTUATIONS. All of the Funds other than the Money
Market Fund may invest in securities denominated in foreign currencies.
Accordingly, a change in the value of any such currency against the U.S. dollar
will result in a corresponding change in the U.S. dollar value of a Fund's
assets denominated in that currency. Such changes will also affect a Fund's
income. The value of a Fund's assets may also be affected significantly by
currency restrictions and exchange control regulations enacted from time to
time.
MARKET CHARACTERISTICS. The Investment Adviser expects that most
foreign securities in which the Funds invest will be purchased in over-the-
counter markets or on exchanges located in the countries in which the principal
offices of the issuers of the various securities are located, if that is the
best available market. Foreign exchanges and markets may be more volatile than
those in the United States. While growing in volume, they usually have
substantially less volume than U.S. markets, and the Funds' portfolio securities
may be less liquid and more volatile than U.S. Government securities. Moreover,
settlement practices for transactions in foreign markets may differ from those
in United States markets, and may include delays beyond periods customary in the
United States. Foreign security trading practices, including those involving
securities settlement where Fund assets may be released prior to receipt of
payment or securities, may expose the Funds to increased risk in the event of a
failed trade or the insolvency of a foreign broker-dealer.
Transactions in options on securities, futures contracts, futures
options and currency contracts may not be regulated as effectively on foreign
exchanges as similar transactions in the United States, and may not involve
clearing mechanisms and related guarantees. The value of such positions also
could be adversely affected by the imposition of different exercise terms and
procedures and margin requirements than in the United States. The value of a
Fund's positions may also be adversely impacted by delays in its ability to act
upon economic events occurring in foreign markets during non-business hours in
the United States.
LEGAL AND REGULATORY MATTERS. Certain foreign countries may have
less supervision of securities markets, brokers and issuers of securities, and
less financial information available to issuers, than is available in the United
States.
TAXES. The interest payable on certain of the Funds' foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to the Investors. An
Investor otherwise subject to United States federal income taxes may, subject to
certain limitations, be entitled to claim a credit or deduction of U.S. federal
income tax purposes for his proportionate share of such foreign taxes paid by
the Funds.
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COSTS. The expense ratios of the Funds are likely to be higher
than those of investment companies investing in domestic securities, since the
cost of maintaining the custody of foreign securities is higher.
In considering whether to invest in the securities of a foreign
company, the Investment Adviser considers such factors as the characteristics of
the particular company, differences between economic trends and the performance
of securities markets within the U.S. and those within other countries, and also
factors relating to the general economic, governmental and social conditions of
the country or countries where the company is located. The extent to which a
Fund (other than the International and Emerging Countries Funds) will be
invested in foreign companies and countries and depository receipts will
fluctuate from time to time within the limitations described in Part A,
depending on the Investment Adviser's assessment of prevailing market, economic
and other conditions.
PREFERRED STOCKS
The High Yield Bond Fund may invest in preferred stocks. Preferred
stock, unlike common stock, offers a stated dividend rate payable from a
corporation's earnings. Such preferred stock dividends may be cumulative or
non-cumulative, participating, or auction rate. If interest rates rise, the
fixed dividend on preferred stocks may be less attractive, causing the price of
preferred stocks to decline. Preferred stock also generally has a preference
over common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stocks on distribution of a corporation's assets in the
event of a liquidation are generally subordinate to the rights associated with a
corporation's debt securities.
OPTIONS ON SECURITIES AND SECURITIES INDICES
PURCHASING PUT AND CALL OPTIONS. Each Fund other than the
Government, Short-Intermediate, Value and Money Market Funds is authorized to
purchase "put" and "call" options with respect to securities which are otherwise
eligible for purchase by the Funds and with respect to various stock indices
subject to certain restrictions. Such Funds will engage in trading of such
derivative securities exclusively for hedging purposes.
If a Fund purchases a put option, the Fund acquires the right to
sell the underlying security at a specified price at any time during the term of
the option (for "American-style" options) or on the option expiration date (for
"European-style" options). Purchasing put options may be used as a portfolio
investment strategy when the Investment Adviser perceives significant short-term
risk but substantial long-term appreciation for the underlying security. The
put option acts as an insurance policy, as it protects against significant
downward price movement while it allows full participation in any upward
movement. If a Fund is holding a security which it feels has strong
fundamentals, but for some reason may be weak in the near term, the Fund may
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purchase a put option on such security, thereby giving itself the right to sell
such security at a certain strike price throughout the term of the option.
Consequently, the Fund will exercise the put only if the price of such security
falls below the strike price of the put. The difference between the put's
strike price and the market price of the underlying security on the date the
Fund exercises the put, less transaction costs, will be the amount by which the
Fund will be able to hedge against a decline in the underlying security. If
during the period of the option the market price for the underlying security
remains at or above the put's strike price, the put will expire worthless,
representing a loss of the price the Fund paid for the put, plus transaction
costs. If the price of the underlying security increases, the profit the Fund
realizes on the sale of the security will be reduced by the premium paid for the
put option less any amount for which the put may be sold.
If a Fund purchases a call option, it acquires the right to
purchase the underlying security at a specified price at any time during the
term of the option. The purchase of a call option is a type of insurance policy
to hedge against losses that could occur if the Fund has a short position in the
underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If the call option has been
purchased to hedge a short position of the Fund in the underlying security and
the price of the underlying security thereafter falls, the profit the Fund
realizes on the cover of the short position in the security will be reduced by
the premium paid for the call option less any amount for which such option may
be sold.
Prior to exercise or expiration, an option may be sold when it has
remaining value by a purchaser through a "closing sale transaction," which is
accomplished by selling an option of the same series as the option previously
purchased. A Fund generally will purchase only those options for which the
Investment Adviser believes there is an active secondary market to facilitate
closing transactions.
WRITING CALL OPTIONS. The Core Growth, Emerging Growth, Mini-Cap,
Emerging Countries, Income & Growth, Worldwide, International, Global Growth,
High Yield Bond, Strategic Income, Fully Discretionary, Large Cap Growth and
International Core Growth Funds may write covered call options. A call option
is "covered" if a Fund owns the security underlying the call or has an absolute
right to acquire the security without additional cash consideration (or, if
additional cash consideration is required, cash or cash equivalents in such
amount as are held in a segregated account by the Trust's Custodian). The
writer of a call option receives a premium and gives the purchaser the right to
buy the security underlying the option at the exercise price. The writer has
the obligation upon exercise of the option to deliver the underlying security
against payment of the exercise price during the option period. If the writer
of an exchange-traded option wishes to terminate his obligation, he may effect a
"closing purchase transaction." This is accomplished by buying an option of the
same series as the option
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previously written. A writer may not effect a closing purchase transaction
after it has been notified of the exercise of an option.
Effecting a closing transaction in the case of a written call
option will permit a Fund to write another call option on the underlying
security with either a different exercise price, expiration date or both. Also,
effecting a closing transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be used for other
investments of the Fund. If the Fund desires to sell a particular security from
its portfolio on which it has written a call option, it will effect a closing
transaction prior to or concurrent with the sale of the security.
A Fund will realize a gain from a closing transaction if the cost
of the closing transaction is less than the premium received from writing the
option or if the proceeds from the closing transaction are more than the premium
paid to purchase the option. A Fund will realize a loss from a closing
transaction if the cost of the closing transaction is more than the premium
received from writing the option or if the proceeds from the closing transaction
are less than the premium paid to purchase the option. However, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss to the Fund resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security owned by the Fund.
STOCK INDEX OPTIONS. Each Fund (other than the Government, Value,
Fully Discretionary, Short-Intermediate, High Yield Bond, Strategic Income and
Money Market Funds) may also purchase put and call options with respect to the
S&P 500 Stock Price Index and other stock indices. Such options may be
purchased as a hedge against changes resulting from market conditions in the
values of securities which are held in a Fund's portfolio or which it intends to
purchase or sell, or when they are economically appropriate for the reduction of
risks inherent in the ongoing management of the Fund.
The distinctive characteristics of options on stock indices create
certain risks that are not present with stock options generally. Because the
value of an index option depends upon movements in the level of the index rather
than the price of a particular stock, whether the Fund will realize a gain or
loss on the purchase or sale of an option on an index depends upon movements in
the level of stock prices in the stock market generally rather than movements in
the price of a particular stock. Accordingly, successful use by a Fund of
options on a stock index would be subject to the Investment Adviser's ability to
predict correctly movements in the direction of the stock market generally.
This requires different skills and techniques than predicting changes in the
price of individual stocks.
Index prices may be distorted if trading of certain stocks included
in the index is interrupted. Trading of index options also may be interrupted
in certain circumstances, such as if trading were halted in a substantial number
of stocks included in the index. If this were to occur, the Fund would not be
able to close out options which it had purchased, and if
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restrictions on exercise were imposed, the Fund might be unable to exercise an
option it holds, which could result in substantial losses to the Fund. It is
the policy of the Funds to purchase put or call options only with respect to an
index which the Investment Adviser believes includes a sufficient number of
stocks to minimize the likelihood of a trading halt in the index.
RISKS OF TRANSACTIONS IN OPTIONS. There are several risks
associated with transactions in options on securities and indices. Options may
be more volatile than the underlying instruments and, therefore, on a percentage
basis, an investment in options may be subject to greater fluctuation than an
investment in the underlying instruments themselves. There are also significant
differences between the securities and options markets that could result in an
imperfect correlation between these markets, causing a given transaction not to
achieve its objective. In addition, a liquid secondary market for particular
options may be absent for reasons which include the following: there may be
insufficient trading interest in certain options; restrictions may be imposed by
an exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of option of underlying securities; unusual or
unforeseen circumstances may interrupt normal operations on an exchange; the
facilities of an exchange or clearing corporation may not at all times be
adequate to handle current trading volume; or one or more exchanges could, for
economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
The extent to which a Fund may enter into options transactions may be limited by
the Internal Revenue Code requirements for qualification of an Investor as a
regulated investment company.
In addition, when trading options on foreign exchanges, many of the
protections afforded to participants in United States option exchanges will not
be available. For example, there may be no daily price fluctuation limits in
such exchanges or markets, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, a Fund as an option writer
could lose amounts substantially in excess of its initial investment, due to the
margin and collateral requirements typically associated with such option
writing. See "Dealer Options" below.
DEALER OPTIONS. The Core Growth, Emerging Growth, Mini-Cap,
Emerging Countries, Worldwide, International, Global Growth, High Yield Bond,
Strategic Income, Fully Discretionary, Large Cap Growth and International Core
Growth Funds will engage in transactions involving dealer options as well as
exchange-traded options. Certain risks are
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specific to dealer options. While a Fund might look to a clearing corporation
to exercise exchange-traded options, if a Fund were to purchase a dealer option
it would need to rely on the dealer from which it purchased the option to
perform if the option were exercised. Failure by the dealer to do so would
result in the loss of the premium paid by the Fund as well as loss of the
expected benefit of the transaction.
Exchange-traded options generally have a continuous liquid market
while dealer options may not. Consequently, a Fund may generally be able to
realize the value of a dealer option it has purchased only by exercising or
reselling the option to the dealer who issued it. Similarly, when a Fund writes
a dealer option, the Fund may generally be able to close out the option prior to
its expiration only by entering into a closing purchase transaction with the
dealer to whom the Fund originally wrote the option. While the Funds will seek
to enter into dealer options only with dealers who will agree to and which are
expected to be capable of entering into closing transactions with the Funds,
there can be no assurance that a Fund will at any time be able to liquidate a
dealer option at a favorable price at any time prior to expiration. Unless the
Fund, as a covered dealer call option writer, is able to effect a closing
purchase transaction, it will not be able to liquidate securities (or other
assets) used as cover until the option expires or is exercised. In the event of
insolvency of the other party, a Fund may be unable to liquidate a dealer
option. With respect to options written by a Fund, the inability to enter into
a closing transaction may result in material losses to the Fund. For example,
because a Fund must maintain a secured position with respect to any call option
on a security it writes, the Fund may not sell the assets which it has
segregated to secure the position while it is obligated under the option. This
requirement may impair the Fund's ability to sell portfolio securities at a time
when such sale might be advantageous.
The Staff of the Securities and Exchange Commission has taken the
position that purchased dealer options are illiquid securities. A Fund may
treat the cover used for written dealer options as liquid if the dealer agrees
that the Fund may repurchase the dealer option it has written for a maximum
price to be calculated by a predetermined formula. In such cases, the dealer
option would be considered illiquid only to the extent the maximum purchase
price under the formula exceeds the intrinsic value of the option. Accordingly,
each Fund will treat dealer options as subject to the Fund's limitation on
unmarketable securities. If the Securities and Exchange Commission changes its
position on the liquidity of dealer options, each Fund will change its treatment
of such instruments accordingly.
FOREIGN CURRENCY OPTIONS
The Emerging Countries, Worldwide, International, Global Growth,
High Yield Bond, Strategic Income, Fully Discretionary, Large Cap Growth and
International Core Growth Funds may buy or sell put and call options on foreign
currencies. A put or call option on a foreign currency gives the purchaser of
the option the right to sell or purchase a foreign currency at the exercise
price until the option expires. A Fund will use foreign currency options
separately or in combination to control currency volatility. Among the
strategies employed to
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control currency volatility is an option collar. An option collar involves the
purchase of a put option and the simultaneous sale of call option on the same
currency with the same expiration date but with different exercise (or "strike")
prices. Generally, the put option will have an out-of-the-money strike price,
while the call option will have either an at-the-money strike price or an in-
the-money strike price. Foreign currency options are derivative securities.
Currency options traded on U.S. or other exchanges may be subject to position
limits which may limit the ability of the Funds to reduce foreign currency risk
using such options.
As with other kinds of option transactions, the writing of an
option on foreign currency will constitute only a partial hedge, up to the
amount of the premium received. A Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations; however, in the event of an exchange rate
movements adverse to the Fund's position, the Fund may forfeit the entire amount
of the premium plus related transaction costs.
FORWARD CURRENCY CONTRACTS
The Emerging Countries, Worldwide, International, Global Growth,
High Yield Bond, Strategic Income, Fully Discretionary, and International Core
Growth Funds may enter into forward currency contracts in anticipation of
changes in currency exchange rates. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fix number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. For example, the Fund
might purchase a particular currency or enter into a forward currency contract
to preserve the U.S. dollar price of securities it intends to or has contracted
to purchase. Alternatively, it might sell a particular currency on either a
spot or forward basis to hedge against an anticipated decline in the dollar
value of securities it intends to or has contracted to sell. Although this
strategy could minimize the risk of loss due to a decline in the value of the
hedged currency, it could also limit any potential gain from an increase in the
value of the currency.
FUTURES CONTRACTS AND RELATED OPTIONS
Each of the Funds other than the Balanced and Money Market Funds
may invest in futures contracts, and each of the Funds other than the Balanced,
Money Market and Short-Intermediate Funds may invest in options on futures
contracts, as a hedge against changes in market conditions or interest rates or,
in the case of the High Yield Bond or Strategic Income Fund, changes in currency
exchange rates. The Funds will trade in such derivative securities for bona
fide hedging purposes (except in the case of the High Yield Bond Fund) and
otherwise, in accordance with the rules of the Commodity Futures Trading
Commission ("CFTC"). Each Fund will segregate cash, U.S. Government securities,
or other high quality liquid debt or equity securities in a separate account
with its Custodian when required to do so by CFTC guidelines in order to cover
its obligation in connection with futures and options transactions.
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No price is paid or received by a Fund upon the purchase or sale of
a futures contract. When it enters into a domestic futures contract, the Fund
will be required to deposit in a segregated account with its Custodian an amount
of cash, U.S. Government securities, or other high quality liquid debt or equity
securities equal to approximately 5% of the contract amount. This amount is
known as initial margin. The margin requirements for foreign futures contracts
may be different.
The nature of initial margin in futures transactions is different
from that of margin in securities transactions. Futures contract margin does
not involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to a Fund upon termination of the
futures contract, assuming all contractual obligations have been satisfied.
Subsequent payments (called variation margin) to and from the broker will be
made on a daily basis as the price of the underlying stock index fluctuates, to
reflect movements in the price of the contract making the long and short
positions in the futures contract more or less valuable. For example, when a
Fund has purchased an index futures contract and the price of the underlying
stock index has risen, that position will have increased in value and the Fund
will receive from the broker a variation margin payment equal to that increase
in value. Conversely, when the Fund has purchased an index futures contract and
the price of the underlying index has declined, the position will be less
valuable and the Fund will be required to make a variation margin payment to the
broker.
At any time prior to expiration of a futures contract, a Fund may
elect to close the position by taking an opposite position, which will operate
to terminate the Fund's position in the futures contract. A final determination
of variation margin is made on closing the position. Additional cash is paid by
or released to the Fund, which realizes a loss or a gain.
STOCK INDEX FUTURES. Each of the Funds other than the Government,
Fully Discretionary, Short-Intermediate, Strategic Income and Money Market Funds
may invest in futures contracts on stock indices. Currently, stock index
futures contracts can be purchased or sold with respect to the S&P 500 Stock
Price Index on the Chicago Mercantile Exchange, the Major Market Index on the
Chicago Board of Trade, the New York Stock Exchange Composite Index on the New
York Futures Exchange and the Value Line Stock Index on the Kansas City Board of
Trade. Foreign financial and stock index futures are traded on foreign
exchanges including the London International Financial Futures Exchange, the
Singapore International Monetary Exchange, the Sydney Futures Exchange Limited
and the Tokyo Stock Exchange.
INTEREST RATE OR FINANCIAL FUTURES CONTRACTS. The Emerging
Countries, Income and Growth, Worldwide, International, Government, Fully
Discretionary, Short-Intermediate, High Yield Bond, Strategic Income, Large Cap
Growth and International Core Growth Funds may invest in interest rate or
financial futures contracts. Bond prices are established in both the cash
market and the futures market. In the cash market, bonds are purchased and sold
with payment for the full purchase price of the bond being made in cash,
generally within three
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business days after the trade. In the futures market, a contract is made to
purchase or sell a bond in the future for a set price on a certain date.
Historically, the prices for bonds established in the futures markets have
generally tended to move in the aggregate in concert with cash market prices,
and the prices have maintained fairly predictable relationships.
The sale of an interest rate or financial futures sale by a Fund
would create an obligation by the Fund, as seller, to deliver the specific type
of financial instrument called for in the contract at a specific future time for
a specified price. A futures contract purchased by a Fund would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate or financial futures contracts by their
terms call for actual delivery or acceptance of securities, in most cases the
contracts are closed out before the settlement date without delivery of
securities. Closing out of a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
in the sale exceeds the price in the offsetting purchase, the Fund is paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by the Fund's
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
The Funds deal only in standardized contracts on recognized
exchanges. Each exchange guarantees performance under contract provisions
through a clearing corporation, a nonprofit organization managed by the exchange
membership. Domestic interest rate futures contracts are traded in an auction
environment on the floors of several exchanges - principally, the Chicago Board
of Trade and the Chicago Mercantile Exchange. A public market now exists in
domestic futures contracts covering various financial instruments including
long-term United States Treasury bonds and notes; Government National Mortgage
Association ("GNMA") modified pass-through mortgage-backed securities; three-
month United States Treasury bills; and 90-day commercial paper. A Fund may
trade in any futures contract for which there exists a public market, including,
without limitation, the foregoing instruments. International interest rate
futures contracts are traded on the London International Financial Futures
Exchange, the Singapore International Monetary Exchange, the Sydney Futures
Exchange Limited and the Tokyo Stock Exchange.
FOREIGN CURRENCY FUTURES CONTRACTS. The Emerging Countries,
Worldwide, International, Global Growth, High Yield Bond, Strategic Income,
Fully Discretionary Large Cap Growth and International Core Growth Funds may use
foreign currency futures contracts for hedging purposes. A foreign currency
contract provides for the future sale by one party and
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purchase by another party of a specified quantity of a foreign currency at a
specified price and time. A public market exists in futures contacts covering
several foreign currencies, including the Australian dollar, the Canadian
dollar, the British pound, the German mark, the Japanese yen, the Swiss franc,
and certain multinational currencies such as the European Currency Unit ("ECU").
Other foreign currency futures contracts are likely to be developed and traded
in the future. The Funds will only enter into futures contracts and futures
options which are standardized and traded on a U.S. or foreign exchange, board
of trade, or similar entity, or quoted on an automated quotation system.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS. There are several
risks related to the use of futures as a hedging device. One risk arises
because of the imperfect correlation between movements in the price of the
futures contract and movements in the price of the securities which are the
subject of the hedge. The price of the future may move more or less than the
price of the securities being hedged. If the price of the future moves less
than the price of the securities which are the subject of the hedge, the hedge
will not be fully effective, but if the price of the securities being hedged has
moved in an unfavorable direction, a Fund would be in a better position than if
it had not hedged at all. If the price of the securities being hedged has moved
in a favorable direction, this advantage will be partially offset by the loss on
the future. If the price of the future moves more than the price of the hedged
securities, the Fund will experience either a loss or a gain on the future which
will not be completely offset by movements in the price of the securities which
are subject to the hedge.
To compensate for the imperfect correlation of movements in the
price of securities being hedged and movements in the price of the futures
contract, the Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of securities being hedged if the historical volatility
of the prices of such securities has been greater than the historical volatility
over such time period of the future. Conversely, the Fund may buy or sell fewer
futures contracts if the historical volatility of the price of the securities
being hedged is less than the historical volatility of the futures contract
being used. It is possible that, when the Fund has sold futures to hedge its
portfolio against a decline in the market, the market may advance while the
value of securities held in the Fund's portfolio may decline. If this occurs,
the Fund will lose money on the future and also experience a decline in value in
its portfolio securities. However, the Investment Adviser believes that over
time the value of a diversified portfolio will tend to move in the same
direction as the market indices upon which the futures are based.
Where futures are purchased to hedge against a possible increase in
the price of securities before the Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then decides not to invest in
securities or options at that time because of concern as to possible further
market decline or for other reasons, it will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.
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In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
securities being hedged, the price of futures may not correlate perfectly with
movement in the stock index or cash market due to certain market distortions.
All participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions, which could distort the normal relationship between the index or
cash market and futures markets. In addition, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures market
may also cause temporary price distortions. As a result of price distortions in
the futures market and the imperfect correlation between movements in the cash
market and the price of securities and movements in the price of futures, a
correct forecast of general trends by the Investment Adviser may still not
result in a successful hedging transaction over a very short time frame.
Positions in futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures position, and in the event of adverse price
movements, the Funds would continue to be required to make daily cash payments
of variation margin. When futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, as described above, there is no guarantee that the price of the
securities will in fact correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures contract.
Most United States futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
The daily limit establishes the maximum amount that the price of a futures
contract may vary either up or down from the previous day's settlement price at
the end of a trading session. Once the daily limit has been reached in a
particular type of futures contract, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential losses, because
the limit may prevent the liquidation of unfavorable positions. Futures
contract prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses.
Successful use of futures by a Fund is also subject to the
Investment Adviser's ability to predict correctly movements in the direction of
the market. For example, if the Fund has hedged against the possibility of a
decline in the market adversely affecting stocks held in its portfolio and stock
prices increase instead, the Fund will lose part or all of the benefit of the
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increased value of the stocks which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. The Fund
may have to sell securities at a time when it may be disadvantageous to do so.
In the event of the bankruptcy of a broker through which a Fund
engages in transactions in futures contracts or options, the Fund could
experience delays and losses in liquidating open positions purchased or sold
through the broker, and incur a loss of all or part of its margin deposits with
the broker.
OPTIONS ON FUTURES CONTRACTS. As described above, certain of the
Funds may purchase options on the futures contracts they can purchase or sell,
as described above. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder or writer of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. There is no guarantee that such closing transactions can be
effected.
Investments in futures options involve some of the same
considerations as investments in futures contracts (for example, the existence
of a liquid secondary market). In addition, the purchase of an option also
entails the risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option. Depending on the
pricing of the option compared to either the futures contract upon which it is
based, or upon the price of the securities being hedged, an option may or may
not be less risky than ownership of the futures contract or such securities. In
general, the market prices of options can be expected to be more volatile than
the market prices on the underlying futures contracts. Compared to the purchase
or sale of futures contracts, however, the purchase of call or put options on
futures contracts may frequently involve less potential risk to the Funds
because the maximum amount at risk is limited to the premium paid for the
options (plus transaction costs).
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND RELATED OPTIONS.
Except as otherwise described in Part A, a Fund will not engage in transactions
in futures contracts or related options for speculation, but only as a hedge
against changes resulting from market conditions in the values of securities
held in the Fund's portfolio or which it intends to purchase and where the
transactions are economically appropriate to the reduction of risks inherent in
the ongoing management of the Funds. A Fund may not purchase or sell futures or
purchase related options if, immediately thereafter, more than 25% of its net
assets would be hedged. A Fund also may not purchase or sell futures or
purchase related options if, immediately thereafter, the sum of
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the amount of margin deposits on the Fund's existing futures positions and
premiums paid for such options would exceed 5% of the market value of the Fund's
net assets.
Upon the purchase of futures contracts by a Fund, an amount of cash
and cash equivalents, equal to the market value of the futures contracts, will
be deposited in a segregated account with the Custodian or in a margin account
with a broker to collateralize the position and thereby insure that the use of
such futures is unleveraged.
These restrictions, which are derived from current federal and
state regulations regarding the use of options and futures by mutual funds, are
not "fundamental restrictions" and may be changed by the Trustees of the Master
Trust if applicable law permits such a change and the change is consistent with
the overall investment objective and policies of the Fund.
The extent to which a Fund may enter into such futures and options
transactions may be limited by the Internal Revenue Code requirements for
qualification of an Investor as a regulated investment company.
INTEREST RATE AND CURRENCY SWAPS
The Short-Intermediate, Fully Discretionary, High Yield Bond and
Strategic Income Funds may enter into interest rate and currency swaps.
INTEREST RATE SWAPS. As indicated in Part A, an interest rate swap
is a contract between two entities ("counterparties") to exchange interest
payments (of the same currency) between the parties. In the most common
interest rate swap structure, one counterparty agrees to make floating rate
payments to the other counterparty, which in turn makes fixed rate payments to
the first counterparty. Interest payments are determined by applying the
respective interest rates to an agreed upon amount, referred to as the "notional
principal amount." In most such transactions, the floating rate payments are
tied to the London Interbank Offered Rate, which is the offered rate for short-
term Eurodollar deposits between major international banks. As there is no
exchange of principal amounts, an interest rate swap is not an investment or a
borrowing.
CROSS CURRENCY SWAPS. A cross-currency swap is a contract between
two counterparties to exchange interest and principal payments in different
currencies. A cross-currency swap normally has an exchange of principal at
maturity (the final exchange); an exchange of principal at the start of the swap
(the initial exchange) is optional. An initial exchange of notional principal
amounts at the spot exchange rate serves the same function as a spot transaction
in the foreign exchange market (for an immediate exchange of foreign exchange
risk). An exchange at maturity of notional principal amounts at the spot
exchange rate serves the same function as a forward transaction in the foreign
exchange market (for a future transfer of foreign exchange risk). The currency
swap market convention is to use the spot rate rather than the forward rate for
the exchange at maturity. The economic difference is realized through the
coupon exchanges
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over the life of the swap. In contrast to single currency interest rate swaps,
cross-currency swaps involve both interest rate risk and foreign exchange risk.
SWAP OPTIONS. Each Fund may invest in swap options. A swap option
is a contract that gives a counterparty the right (but not the obligation) to
enter into a new swap agreement or to shorten, extend, cancel or otherwise
change an existing swap agreement, at some designated future time on specified
terms. It is different from a forward swap, which is a commitment to enter into
a swap that starts at some future date with specified rates. A swap option may
be structured European-style (exercisable on the pre-specified date) or
American-style (exercisable during a designated period). The right pursuant to
a swap option must be exercised by the right holder. The buyer pursuant to a
swap option is said to own a call.
CAPS AND FLOORS. Each Fund may also invest in interest rate and,
in the case of the High Yield Bond and Strategic Income Funds, currency, caps
and floors. An interest rate cap is a right to receive periodic cash payments
over the life of the cap equal to the difference between any higher actual level
of interest rates in the future and a specified strike (or "cap") level. The
cap buyer purchases protection for a floating rate move above the strike. An
interest rate floor is the right to receive periodic cash payments over the life
of the floor equal to the difference between any lower actual level of interest
rates in the future and a specified strike (or "floor") level. The floor buyer
purchases protection for a floating rate move below the strike. The strikes are
typically based on the three-month LIBOR (although other indices are available)
and are measured quarterly. Rights arising pursuant to both caps and floors are
exercised automatically if the strike is in the money. Caps and floors
eliminate the risk that the buyer fails to exercise an in-the-money option.
RISKS ASSOCIATED WITH SWAPS. The risks associated with interest
rate and currency swaps and interest rate caps and floors are similar to those
described above with respect to dealer options. In connection with such
transactions, a Fund relies on the other party to the transaction to perform its
obligations pursuant to the underlying agreement. If there were a default by
the other party to the transaction, the Fund would have contractual remedies
pursuant to the agreement, but could incur delays in obtaining the expected
benefit of the transaction or loss of such benefit. In the event of insolvency
of the other party, the Fund might be unable to obtain its expected benefit. In
addition, while each Fund will seek to enter into such transactions only with
parties which are capable of entering into closing transactions with the Fund,
there can be no assurance that a Fund will be able to close out such a
transaction with the other party, or obtain an offsetting position with any
other party, at any time prior to the end of the term of the underlying
agreement. This may impair a Fund's ability to enter into other transactions at
a time when doing so might be advantageous.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with respect to its
portfolio securities. Pursuant to such agreements, the Fund acquires securities
from financial institutions such as
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banks and broker-dealers as are deemed to be creditworthy by the Investment
Adviser, subject to the seller's agreement to repurchase and the Fund's
agreement to resell such securities at a mutually agreed upon date and price.
The repurchase price generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the underlying portfolio security). Securities subject to
repurchase agreements will be held by the Trust's Custodian or in the Federal
Reserve/Treasury Book-Entry System or an equivalent foreign system. The seller
under a repurchase agreement will be required to maintain the value of the
underlying securities at not less than 102% of the repurchase price under the
agreement. If the seller defaults on its repurchase obligation, the Fund
holding the repurchase agreement will suffer a loss to the extent that the
proceeds from a sale of the underlying securities is less than the repurchase
price under the agreement. Bankruptcy or insolvency of such a defaulting seller
may cause the Fund's rights with respect to such securities to be delayed or
limited. Repurchase agreements are considered to be loans under the Investment
Company Act.
WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS
Each of the Funds may purchase securities on a "when-issued,"
forward commitment or delayed settlement basis. In this event, the Custodian
will set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the Fund's Custodian will set aside
portfolio securities to satisfy a purchase commitment. In such a case, a Fund
may be required subsequently to place additional assets in the separate account
in order to assure that the value of the account remains equal to the amount of
the Fund's commitment. It may be expected that the Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash.
The Funds do not intend to engage in these transactions for
speculative purposes but only in furtherance of their investment objectives.
Because a Fund will set aside cash or liquid portfolio securities to satisfy its
purchase commitments in the manner described, the Fund's liquidity and the
ability of the Investment Adviser to manage it may be affected in the event the
Fund's forward commitments, commitments to purchase when-issued securities and
delayed settlements ever exceeded 15% of the value of its net assets.
A Fund will purchase securities on a when-issued, forward
commitment or delayed settlement basis only with the intention of completing the
transaction. If deemed advisable as a matter of investment strategy, however, a
Fund may dispose of or renegotiate a commitment after it is entered into, and
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a taxable capital gain or loss. When a Fund engages in when-issued,
forward commitment and delayed settlement transactions, it relies on the other
party to consummate the trade. Failure of such party to do so may result in a
Fund's incurring a loss or missing an opportunity to obtain a price credited to
be advantageous.
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The market value of the securities underlying a when-issued
purchase, forward commitment to purchase securities, or a delayed settlement and
any subsequent fluctuations in their market value is taken into account when
determining the market value of a Fund starting on the day the Fund agrees to
purchase the securities. A Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the settlement
date.
BORROWING
The Strategic Income Fund may borrow up to 50% of the value of its
net assets for temporary, extraordinary or emergency purposes, for the clearance
of transactions, or to purchase securities. Each of the other Funds is
authorized to borrow money from time to time for temporary, extraordinary or
emergency purposes or for clearance of transactions in amounts up to 20% of the
value of its total assets at the time of such borrowings. The use of borrowing
by a Fund involves special risk considerations that may not be associated with
other funds having similar objectives and policies. Since substantially all of
a Fund's assets fluctuate in value, whereas the interest obligation resulting
from a borrowing will be fixed by the terms of the Fund's agreement with its
lender, the asset value per share of the Fund will tend to increase more when
its portfolio securities increase in value and to decrease more when its
portfolio assets decrease in value than would otherwise be the case if the Fund
did not borrow funds. In addition, interest costs on borrowings may fluctuate
with changing market rates of interest and may partially offset or exceed the
return earned on borrowed funds. Under adverse market conditions, the Fund
might have to sell portfolio securities to meet interest or principal payments
at a time when fundamental investment considerations would not favor such sales.
LENDING PORTFOLIO SECURITIES
Each of the Funds may lend its portfolio securities in an amount
not exceeding 30% of its total assets to financial institutions such as banks
and brokers if the loan is collateralized in accordance with applicable
regulations. Under the present regulatory requirements which govern loans of
portfolio securities, the loan collateral must, on each business day, at least
equal the value of the loaned securities and must consist of cash, letters of
credit of domestic banks or domestic branches of foreign banks, or securities of
the U.S. Government or its agencies. To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demand by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank would have to be
satisfactory to the Fund. Any loan might be secured by any one or more of the
three types of collateral. The terms of the Fund's loans must permit the Fund
to reacquire loaned securities on five days' notice or in time to vote on any
serious matter and must meet certain tests under the Internal Revenue Code.
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SHORT SALES
The Investment Adviser's growth equity management approach is aimed
principally at identifying equity securities the earnings and prices of which it
expects to grow at a rate above that of the S&P 500 Stock Price Index. However,
the Investment Adviser believes that its approach also identifies securities the
prices of which can be expected to decline. Therefore, the Core Growth,
Emerging Growth, Mini-Cap, Worldwide, International, and International Core
Growth Funds are authorized to make short sales of securities they own or has
the right to acquire at no added cost through conversion or exchange of other
securities they own (referred to as short sales "against the box") and to make
short sales of securities which they do not own or have the right to acquire.
In a short sale that is not "against the box," a Fund sells a
security which it does not own, in anticipation of a decline in the market value
of the security. To complete the sale, the Fund must borrow the security
(generally from the broker through which the short sale is made) in order to
make delivery to the buyer. The Fund is then obligated to replace the security
borrowed by purchasing it at the market price at the time of replacement. The
Fund is said to have a "short position" in the securities sold until it delivers
them to the broker. The period during which the Fund has a short position can
range from one day to more than a year. Until the security is replaced, the
proceeds of the short sale are retained by the broker, and the Fund is required
to pay to the broker a negotiated portion of any dividends or interest which
accrue during the period of the loan. To meet current margin requirements, the
Fund is also required to deposit with the broker additional cash or securities
so that the total deposit with the broker is maintained daily at 150% of the
current market value of the securities sold short (100% of the current market
value if a security is held in the account that is convertible or exchangeable
into the security sold short within 90 days without restriction other than the
payment of money).
Short sales by a Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
specific risk considerations and may be considered a speculative technique.
Since the Fund in effect profits from a decline in the price of the securities
sold short without the need to invest the full purchase price of the securities
on the date of the short sale, the Fund's net asset value per share will tend to
increase more when the securities it has sold short decrease in value, and to
decrease more when the securities it has sold short increase in value, than
would otherwise be the case if it had not engaged in such short sales. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of any premium, dividends or interest the Fund may be required to pay
in connection with the short sale. Furthermore, under adverse market conditions
the Fund might have difficulty purchasing securities to meet its short sale
delivery obligations, and might have to sell portfolio securities to raise the
capital necessary to meet its short sale obligations at a time when fundamental
investment considerations would not favor such sales.
If a Fund makes a short sale "against the box," the Fund would not
immediately deliver the securities sold and would not receive the proceeds from
the sale. The seller is said to have
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a short position in the securities sold until it delivers the securities sold,
at which time it receives the proceeds of the sale. To secure its obligation to
deliver securities sold short, a Fund will deposit in escrow in a separate
account with the Custodian an equal amount of the securities sold short or
securities convertible into or exchangeable for such securities. The Fund can
close out its short position by purchasing and delivering an equal amount of the
securities sold short, rather than by delivering securities already held by the
Fund, because the Fund might want to continue to receive interest and dividend
payments on securities in its portfolio that are convertible into the securities
sold short.
A Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Investment Adviser believes
that the price of a security may decline, causing a decline in the value of a
security owned by the Fund or a security convertible into or exchangeable for
such security. In such case, any future losses in the Fund's long position
would be reduced by a gain in the short position. The extent to which such
gains or losses in the long position are reduced will depend upon the amount of
securities sold short relative to the amount of the securities the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the investment values or conversion premiums of such
securities.
The extent to which a Fund may enter into short sales transactions
may be limited by the Internal Revenue Code requirements for qualification of an
Investor as a regulated investment company.
ILLIQUID SECURITIES
No Fund may invest more than 15% (10% in the case of the Money
Market Fund) of the value of its net assets in securities that at the time of
purchase have legal or contractual restrictions on resale or are otherwise
illiquid. The Investment Adviser will monitor the amount of illiquid securities
in the Fund's portfolio, under the supervision of the Board of Trustees, to
ensure compliance with the Fund's investment restrictions.
Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the Securities Act are
referred to as private placement or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the
marketability of portfolio securities and the Fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemption within seven days.
The Fund might also have to register such restricted securities in order to
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dispose of them, resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the Securities
Act, including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments. If such securities are subject to purchase by
institutional buyers in accordance with Rule 144A promulgated by the Securities
and Exchange Commission under the Securities Act, the Board of Trustees may
determine that such securities are not illiquid securities notwithstanding their
legal or contractual restrictions on resale. In all other cases, however,
securities subject to restrictions on resale will be deemed illiquid.
The Emerging Countries, High Yield Bond and Strategic Income Funds
may invest in foreign securities that are restricted against transfer within the
United States or to United States persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less liquid than
foreign securities of the same class that are not subject to such restrictions.
Unless these securities are acquired directly from the issuer or its
underwriter, the Fund treats such foreign securities whose principal market is
abroad as not subject to the investment limitation on securities subject to
legal or contractual restrictions on resale.
INVESTMENT TECHNIQUES AND PROCESSES
The Investment Adviser's investment techniques and processes, which
it has used in managing institutional portfolios for many years, are described
generally in Part A under "Investment Objectives and Policies -- Investment
Techniques and Processes." In making decisions with respect to equity
securities for the Funds, GROWTH OVER TIME-Registered Trademark- is the
Investment Adviser's underlying goal. It's how the Investment Adviser built its
reputation. Over the past ten years, the Investment Adviser has built a record
as one of the finest performing investment managers in the United States. It
has successfully delivered growth over time to many institutional investors,
pension plans, foundations, endowments and high net worth individuals. The
Investment Adviser's methods have proven their ability to achieve growth over
time through a variety of investment vehicles.
The Investment Adviser emphasizes growth over time through
investment in securities of companies with earnings growth potential. The
Investment Adviser's style is a "bottoms up" growth approach that focuses on the
growth prospects of individual companies rather than on economic trends. It
builds portfolios stock by stock. The Investment Adviser's decision-making is
guided by three critical questions: Is there a positive change? Is it
sustainable? Is it timely? The Investment Adviser uses these three factors
because it focuses on discovering positive
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developments when they first show up in an issuer's earnings, but before they
are fully reflected in the price of the issuer's securities. The Investment
Adviser is always looking for companies that are driving change and surpassing
analysts' expectations. It seeks to identify companies poised for rapid growth.
The Investment Adviser focuses on recognizing successful companies, regardless
of their capitalization or whether they are domestic or foreign companies.
As indicated in Part A, the Investment Adviser's techniques and
processes include relationships with an extensive network of brokerage research
firms located throughout the world. These analysts are often located in the
same geographic regions as the companies they follow, have followed those
companies for a number of years, and have developed excellent sources of
information about them. The Investment Adviser does not employ in-house
analysts other than the personnel actually engaged in managing investments for
the Funds and the Investment Adviser's other clients. However, information
obtained from a brokerage research firm is confirmed with other research sources
or the Investment Adviser's computer-assisted quantitative analysis (including
"real time" pricing data) of a substantial universe of potential investments.
As indicated in Part A, the equity investments of a Fund are
diversified, as with respect to at least 75% of its total assets no Fund may
invest more than 5% of its total assets in the equity securities of any one
issuer. The equity securities of each issuer that are included in the
investment portfolio of a Fund are purchased by the Investment Adviser in
approximately equal amounts, and the Investment Adviser attempts to stay fully
invested within the applicable percentage limitations set forth in Part A. In
addition, for each issuer whose securities are added to an investment portfolio,
the Investment Adviser sells the securities of one of the issuers currently
included in the portfolio.
INVESTMENT RESTRICTIONS
Each Fund is subject to the following investment restrictions
adopted by the Board of Trustees, which constitute fundamental policies that may
not be changed without a vote of the holders of a majority of such Fund's
outstanding Interests (as defined in the Investment Company Act).
All percentage limitations set forth below apply immediately after
a purchase or initial investment, and any subsequent change in the applicable
percentage resulting from market fluctuations will not require elimination of
any security from the relevant portfolio.
A Fund may not:
1. Invest in securities of any one issuer if more than 5% of the
market value of its total assets would be invested in the securities of such
issuer. However, up to 25% of a Fund's total assets may be invested without
regard to this restriction, and this restriction does not apply to investments
by a Fund in securities of the U.S. Government or agencies and
instrumentalities.
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2. Purchase more than 10% of the outstanding voting securities,
or of any class of securities, of any one issuer, or purchase the securities of
any issuer for the purpose of exercising control or management.
3. Invest 25% or more of the market value of its total assets in
the securities of issuers in any one particular industry. This restriction does
not apply to investments by a Fund in securities of the U.S. Government or its
agencies and instrumentalities, or to investments by the Money Market Fund in
obligations of domestic branches of U.S. banks and U.S. branches of foreign
banks which are subject to the same regulation as U.S. banks.
4. Purchase or sell real estate. However, a Fund may invest in
securities secured by, or issued by companies that invest in, real estate or
interests in real estate.
5. Make loans of money, except that a Fund may purchase publicly
distributed debt instruments and certificates of deposit and enter into
repurchase agreements. Each Fund reserves the authority to make loans of its
portfolio securities in an aggregate amount not exceeding 30% of the value of
its total assets.
6. Borrow money on a secured or unsecured basis, except for
temporary, extraordinary or emergency purposes or for the clearance of
transactions in amounts not exceeding 20% of the value of its total assets at
the time of the borrowing, or, in the case of the Strategic Income Fund, except
for temporary, extraordinary or emergency purposes, for the clearance of
transactions, or to purchase securities, in amounts not in excess of 50% of the
value of its net assets. Pursuant to the Investment Company Act, borrowings
will only be made from banks and will be made only to the extent that the value
of the Fund's total assets, less its liabilities other than borrowings, is equal
to at least 300% of all borrowings (including the proposed borrowing). If such
asset coverage of 300% is not maintained, the Fund will take prompt action to
reduce its borrowings as required by applicable law.
7. Pledge or in any way transfer as security for indebtedness any
securities owned or held by it, except to secure indebtedness permitted by
restriction 6 above. This restriction shall not prohibit the Funds from
engaging in short sales, options, futures and foreign currency transactions.
8. Underwrite securities of other issuers, except insofar as it
may be deemed an underwriter under the Securities Act in selling portfolio
securities.
9. Invest more than 15% (10% in the case of the Money Market
Fund) of the value of its net assets in securities that at the time of purchase
have legal or contractual restrictions on resale or are otherwise illiquid.
B-34
<PAGE>
10. Purchase securities on margin, except for initial and variation
margin on options and futures contracts, except as set forth in restriction 6
above, and except that a Fund may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of securities.
11. Engage in short sales, except that a Fund may use such short-
term credits as are necessary for the clearance of transactions. This
restriction does not apply to the Core Growth, Emerging Growth, Mini-Cap,
Worldwide, High Yield Bond, Strategic Income, International, and International
Core Growth Funds.
12. Invest in securities of other investment companies, except in
compliance with the Investment Company Act and applicable state securities laws
or as part of a merger, consolidation, acquisition or reorganization involving
the Fund.
13. Issue senior securities, except that a Fund may borrow money as
permitted by restrictions 6 and 7 above. This restriction shall not prohibit
the Funds from engaging in short sales, options, futures and foreign currency
transactions.
14. Enter into transactions for the purpose of arbitrage, or invest
in commodities and commodities contracts, except that a Fund may invest in stock
index, currency and financial futures contracts and related options in
accordance with any rules of the Commodity Futures Trading Commission.
15. Purchase or write options on securities, except for hedging
purposes and then only if (i) aggregate premiums on call options purchased by a
Fund do not exceed 5% of its net assets, (ii) aggregate premiums on put options
purchased by a Fund do not exceed 5% of its net assets, (iii) not more than 25%
of a Fund's net assets would be hedged, and (iv) not more than 25% of a Fund's
net assets are used as cover for options written by the Fund. This restriction
does not apply to the Value Fund.
MONEY MARKET FUND RESTRICTIONS. Investment by the Money Market
Fund are subject to limitations imposed under regulations adopted by the
Securities and Exchange Commission. These regulations generally require the
Money Market Fund to acquire only U.S. dollar denominated obligations maturing
in 397 days or less and to maintain a dollar-weighted average portfolio maturity
of 90 days or less. In addition, the Money Market Fund may acquire only
obligations that present minimal credit risks and that are "eligible securities"
which means they are (i) rated, at the time of investment, by at least two
nationally recognized security rating organizations (or one, if it is the only
organization rating such obligation) in the highest short-term rating category
or, if unrated, determined to be of comparable quality (a "first tier
security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). A security is not considered to be
unrated if its issuer has outstanding obligations of comparable priority and
security that have a short-term rating. The Investment Adviser will determine
that an obligation presents minimal credit risks or that unrated instruments are
of comparable quality
B-35
<PAGE>
in accordance with guidelines established by the Board of Trustees. The
Trustees must also approve or ratify the acquisition of unrated securities or
securities rated by only one rating organization. In addition, investments in
second tier securities are subject to the further constraints that (i) no more
than 5% of the Money Market Fund's assets may be invested in such securities in
the aggregate, and (ii) any investment in such securities of one issuer is
limited to the greater of 1% of the Fund's total assets or $1 million. In
addition, the Money Market Fund may only invest up to 25% of its total assets in
the first tier securities of a single issuer for three business days.
OPERATING RESTRICTIONS. As a matter of operating (not fundamental)
policy adopted by the Board of Trustees, no Fund:
1. May invest in interests in oil, gas or other mineral
exploration or development programs or leases, or real estate limited
partnerships, although a Fund may invest in the securities of companies which
invest in or sponsor such programs.
2. May purchase any security if as a result of the Fund would
then have more than 5% of its total assets (taken at current value) invested in
securities of companies (including predecessors) having a record of less than
three years of continuous operation, except in compliance with the Investment
Company Act or as part of a merger, consolidation, acquisition or reorganization
involving the Fund.
3. May purchase securities of any issuer if any officer or
trustee of the Trust or of any Investor, or any officer or director of the
Administrator, the Placement Agent, the Investment Adviser, owning more than 1/2
of 1% of the outstanding securities of such issuer, own in the aggregate more
than 5% of the outstanding securities of such issuer.
4. May lend any securities from its portfolio unless the value of
the collateral received therefor is continuously maintained in an amount not
less than 100% of the value of the loaned securities by marking to market daily.
5. May invest in warrants valued, at the lower of cost or market,
in excess of 5% of the market value of the Fund's net assets, or in excess of 2%
of the market value of the Fund's net assets if such warrants are not listed on
the New York Stock Exchange or the American Stock Exchange, as of the date of
investment; provided, however, that the Fully Discretionary and Short-
Intermediate Funds may not invest in warrants.
6. May purchase or write options on securities (Value Fund
only).
BLUE SKY RESTRICTIONS. In order to permit the sale of Interests of
a Fund or securities of Investors in certain states, the Board of Trustees may,
in its sole discretion, adopt additional restrictions on investment policies
more restrictive than those described above. Should the Trustees determine that
any such restrictive policy is no longer in the best interests of a Fund
B-36
<PAGE>
or and its shareholders, the Trust may cease offering Interests of a Trust in
the state involved and the Board of Trustees may revoke such restrictive policy.
Moreover, if the states involved no longer require any such restrictive policy,
the Board of Trustees may, in its sole discretion, revoke such policy.
The Trust has agreed, in connection with certain undertakings given
by Nicholas-Applegate Mutual Funds to the State of South Dakota, that (i) no
Fund will invest more than 10% of its total assets in interests in real estate
investment trusts, (ii) no Fund will invest more than 15% of its total assets in
equity securities of issuers which are not readily marketable, in securities of
issuers which the Fund is restricted from selling without registration under the
Securities Act (other than restricted securities eligible for resale pursuant to
Rule 144A under the Securities Act that have been determined by the Master
Trust's Board of Trustees to be liquid based upon the trading markets for the
securities), and securities of unseasoned issuers referred to in restriction 2
above, and (iii) the Trust will provide adequate notice to each Investor of
changes in such restrictions to enable such Investor to provide at least 30 days
advance notice of such changes to its shareholders.
The Trust has agreed, in connection with certain undertakings given
by Nicholas-Applegate Mutual Funds to the State of Texas, that the International
Fund will not make short sales of securities or maintain a short position if to
do so could create liabilities or require collateral deposits and segregation of
assets aggregating more than 25% of the Fund's net assets.
The Trust has agreed, in connection with certain undertakings given
by Nicholas-Applegate Mutual Funds to the State of Ohio, that no Fund will
invest more than 50% of its total assets in the securities of issuers which
together with any predecessors have a record of less than three years continuous
operation or securities of issuers which are restricted as to disposition
(including without limitation securities issued pursuant to Rule 144A under the
Securities Act of 1933).
ITEM 14. MANAGEMENT OF THE TRUST.
The names and addresses of the trustees and officers of the Trust,
their positions and offices with the Trust, and their principal occupations
during the past five years are set forth below (except as indicated below, the
business address of all such persons is 600 West Broadway, 30th Floor, San
Diego, California 92101):
ARTHUR E. NICHOLAS, TRUSTEE AND CHAIRMAN OF THE BOARD OF
TRUSTEES.*/ Managing Partner and Chief Investment Officer, Nicholas-Applegate
Capital Management, since 1984. Director and Chairman of the Board of Directors
of Nicholas-Applegate Fund, Inc., a registered investment company, since 1987.
DANN V. ANGELOFF, TRUSTEE. 727 West Seventh Street, Los Angeles,
California. President, The Angeloff Company, corporate financial advisers
(since 1976); Director Nicholas-
B-37
<PAGE>
Applegate Fund, Inc. (since 1987); Trustee (1979 to 1987) and University
Counselor to the President (since 1987), University of Southern California;
Director, Public Storage, Inc., a real estate investment trust (since 1980),
SEDA Specialty Packaging, Inc. (since 1993), and Bonded Motors, Inc., an
automotive engine remanufacturer (since 1996).
WALTER E. AUCH, TRUSTEE*/. 6001 North 62nd Place, Paradise Valley,
Arizona. Director, Geotech Communications, Inc., a mobile radio communications
company (since 1987); Express America Corporation, a mortgage banking company
(since 1992); Fort Dearborn Fund (since 1987); Brinson Funds (since 1994), and
Smith Barney Trak Fund (since 1992), registered investment companies; Pimco
Advisors L.P., an investment manager (since 1994); and Banyan Realty Fund (since
1987), Banyan Strategic Land Fund (since 1987), Banyan Strategic Land Fund II
(since 1988), and Banyan Mortgage Fund (since 1988), real estate investment
trusts. Formerly Chairman and Chief Executive Officer, Chicago Board Options
Exchange (1979 to 1986) and Senior Executive Vice President, Director and Member
of the Executive Committee, PaineWebber, Inc. (until 1979). Mr. Auch is
considered to be an "interested person" of the Trust under the 1940 Act because
he is on the board of a company a subsidiary of which is a broker-dealer.
THEODORE J. COBURN, TRUSTEE. 17 Cotswold Road, Brookline,
Massachusetts. Partner, Brown Coburn & Co., an investment banking firm (since
1991), and research associate, Harvard Graduate School of Education (since
1996); Director, Nicholas-Applegate Fund, Inc. (since 1987), Emerging Germany
Fund (since 1991), Moovies, Inc. (since 1995). Formerly Managing Director of
Global Equity Transactions Group and member of the Board of Directors,
Prudential Securities (from 1986 to June 1991).
DARLENE DEREMER, TRUSTEE.*/ 155 South Street, Wrentham,
Massachusetts. President and Founder, DeRemer Associates, a marketing
consultant for the financial services industry (since 1987); Vice President,
PBNG Funds, Inc. (since 1995); formerly Vice President and Director, Asset
Management Division, State Street Bank and Trust Company (from 1982 to 1987),
and Vice President, T. Rowe Price & Associates (1979 to 1982). Director, Jurika
& Voyles Fund Group (since 1994), Nicholas-Applegate Strategic Opportunities,
Ltd. (since 1994), Nicholas-Applegate Securities International (since 1994) and
King's Wood Montesori School (since 1995); Member of Advisory Board, Financial
Women's Association (since 1995). Ms. DeRemer is considered to an "interested
person" of the Trust under the 1940 Act because DeRemer Associates received
$100,778 in 1995 and $54,247 in 1994 from the Investment Adviser as compensation
for consulting services provided in connection with its institutional business.
GEORGE F. KEANE, TRUSTEE. 450 Post Road East, Westport,
Connecticut. President Emeritus and Senior Investment Adviser, The Common Fund,
a non-profit investment management organization representing educational
institutions (since 1993), after serving as its President (from 1971 to 1992);
Member of Investment Advisory Committee, New York State Common Retirement Fund
(since 1982); Director and Chairman of the Investment Committee,
B-38
<PAGE>
United Negro College Fund (since 1987); Director, United Educators Risk
Retention Group (since 1989); Director, RCB Trust Company (since 1991);
Director, School, College and University Underwriters Ltd. (since 1986);
Director, Universal Stainless & Alloy Products Inc. (since 1994). Formerly
President, Endowment Advisers, Inc. (from August 1987 to December 1992).
JOHN D. WYLIE, PRESIDENT. Partner (since January 1994), Chief
Investment Officer-Investor Services Group (since December 1995), and Portfolio
Manager (since January 1990), Nicholas-Applegate Capital Management.
THOMAS PINDELSKI, CHIEF FINANCIAL OFFICER. Partner (since January
1996) and Chief Financial Officer, Nicholas-Applegate Capital Management (since
January 1993), and Chief Financial Officer, Nicholas-Applegate Securities (since
January 1993); Chief Financial Officer, Nicholas-Applegate Mutual Funds (since
March 1993); formerly Chief Financial Officer, Aurora Capital Partners/WSGP
Partners L.P., an investment partnership (from November 1988 to January 1993),
and Vice President and Controller, Security Pacific Merchant Banking Group (from
November 1986 to November 1988).
PETER J. JOHNSON, VICE PRESIDENT. Partner and Director-Client
Services/Marketing, Nicholas-Applegate Capital Management (since January 1992)
and Vice President, Nicholas-Applegate Securities (since December 1995);
formerly, Marketing Director Pacific Financial Asset Management Company, an
investment management firm (from July 1989 to December 1991).
E. BLAKE MOORE, JR., SECRETARY. General Counsel and Secretary,
Nicholas-Applegate Capital Management and Nicholas-Applegate Securities (since
1993); formerly Attorney, Luce, Forward, Hamilton & Scripps (from 1989 to 1993).
Each Trustee who is not an officer or affiliate of the Trust, the
Investment Adviser or the Distributor receives an aggregate annual fee of
$10,000 for services rendered as a Trustee of the Trust, and $1,000 for each
meeting attended. Each Trustee is also reimbursed for out-of-pocket expenses
incurred as a Trustee. The Trustees and officers of the Trust, as a group, own
less than 1% of the outstanding Interests of the Trust.
The following table sets forth the aggregate compensation paid by
the Trust for the fiscal year ended March 31, 1996, to the Trustees who are not
affiliated with the Investment Adviser and the aggregate compensation paid to
such Trustees for service on the Trust's board and that all other funds in the
"Trust complex" (as defined in Schedule 14A under the Securities Exchange Act of
1934):
B-39
<PAGE>
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Estimated Annual Total Compensation
Compensation from Benefits Accrued Benefits Upon from Trust and Trust
Name Trust as Part of Trust Retirement Complex Paid to
Expenses Trustee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dann V. Angeloff $ 15,500 None N/A $ 32,500 (13*)
Walter E. Auch $ 15,000 None N/A $ 15,000 (12*)
Theodore J. Coburn $ 15,000 None N/A $ 29,000 (13*)
Darlene DeRemer $ 15,000 None N/A $ 15,000 (12*)
George F. Keane $ 15,000 None N/A $ 15,000 (12*)
</TABLE>
* Indicates total number of funds in Trust complex, including the Funds.
The Declaration of Trust of the Trust provides that obligations of the
Trust are not binding upon its Trustees, officers, employees and agents
individually and that the Trustees, officers, employees and agents will not be
liable to the Trust or its Investors for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee, officer, employee or
agent against any liability to the Trust or its Investors to which the Trustee,
officer, employee or agent would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of his or her
duties. The Declaration of Trust also provides that the debts, liabilities,
obligations and expenses incurred, contracted for or existing with respect to a
designated Fund shall be enforceable against the assets and property of such
Fund and its Investors and not against the assets or property of any other Fund
or the Investors therein.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of October 31, 1996, there were issued and outstanding the
following beneficial interests in the Funds: $492,223,108 of the Core Growth
Fund, of which 16.96% were owned by Nicholas-Applegate Core Growth Portfolio A,
5.01% were owned by Nicholas-Applegate Core Growth Portfolio B, 37.08% were
owned by Nicholas-Applegate Core Growth Portfolio C, 38.33% were owned by
Nicholas-Applegate Core Growth Institutional Portfolio, and 2.62% were owned
by Nicholas-Applegate Core Growth Qualified Portfolio; $122,063,495 of the
Income & Growth Fund, of which 25.11% were owned by Nicholas-Applegate Income
& Growth Portfolio A, 6.32% were owned by Nicholas-Applegate Income & Growth
Portfolio B, 51.23% were owned by Nicholas-Applegate Income Growth, Portfolio
C, 14.27% were owned by Nicholas-Applegate Income and Growth Institutional
Portfolio, and 3.06% were owned by Nicholas-Applegate Income & Growth
Qualified Portfolio; $26,272,604 of the Balanced Fund, of which 22.02% were
owned by Nicholas-Applegate Balanced Growth Portfolio A, 7.77% were owned by
Nicholas-Applegate Balanced Growth
B-40
<PAGE>
Portfolio B, 67.82% were owned by Nicholas-Applegate Balanced Growth
Portfolio C, and 2.39% were owned by Nicholas-Applegate Balanced Growth
Institutional Portfolio, and 0.01% were owned by Nicholas-Applegate Balanced
Growth Qualified Portfolio; $100,784,559 of the Worldwide Fund, of which
23.81% were owned by Nicholas-Applegate Worldwide Growth Portfolio A, 4.06%
were owned by Nicholas-Applegate Worldwide Growth Portfolio B, 69.93% were
owned by Nicholas-Applegate Worldwide Growth Portfolio C and 2.20% were owned
by Nicholas-Applegate Worldwide Growth Institutional Portfolio and 0.01% were
owned by Nicholas-Applegate Worldwide Growth Qualified Portfolio; $47,383,113
of the International Growth Fund, of which 5.71% were owned by
Nicholas-Applegate International Growth Portfolio A, 5.98% were owned by
Nicholas-Applegate International Growth Portfolio B, 5.27% were owned by
Nicholas-Applegate International Growth Portfolio C, 82.86% were owned by
Nicholas-Applegate International Growth Institutional Portfolio, 0.06% were
owned by Nicholas-Applegate International Qualified Portfolio and 0.12% were
owned by Nicholas-Applegate Capital Management Profit Sharing Plan.;
$571,925,621 of the Emerging Countries Fund, of which 26.89% were owned by
Nicholas-Applegate Emerging Countries Portfolio A, 4.39% were owned by
Nicholas-Applegate Emerging Countries Portfolio B, 39.55% were owned by
Nicholas-Applegate Emerging Countries Portfolio C, 29.05% were owned by
Nicholas-Applegate Emerging Countries Institutional Portfolio and 0.12% were
owned by Nicholas-Applegate Emerging Countries Qualified Portfolio;
$6,955,199, of Nicholas-Applegate Government Income Fund, of which 21.41%
were owned by Nicholas-Applegate Government Income Portfolio A, 17.56% were
owned by Nicholas-Applegate Government Income Portfolio B, 61.02% were owned
by Nicholas-Applegate Government Income Portfolio C, and 0.02% were owned by
Nicholas-Applegate Government Income Qualified Portfolio; $571,925,621 of the
Emerging Growth Fund, of which 26.89% were owned by Nicholas-Applegate
Emerging Growth Portfolio A, 4.39% were owned by Nicholas-Applegate Emerging
Growth Fund Portfolio B, 39.55% were owned by Nicholas-Applegate Emerging
Growth Portfolio C, 29.05% were owned by Nicholas-Applegate Emerging
Growth Institutional Portfolio, and 0.12% were owned by Nicholas-Applegate
Emerging Growth Qualified Portfolio; $28,482,906 of the Money Market Fund, of
which 99.73% were owned by Nicholas-Applegate Money Market Portfolio and
0.27% were owned by Nicholas-Applegate Profit Sharing Plan; $29,449,748 of
the Mini-Cap Fund, of which 98.93% were owned by Nicholas-Applegate Mini-Cap
Institutional Portfolio and 1.07% were owned by Nicholas-Applegate Profit
Sharing Plan; $4,528,533 of the Fully Discretionary Income Fund, of which
98.82% were owned by Nicholas-Applegate Fully Discretionary Income
Institutional Portfolio and 1.18% were owned by Nicholas-Applegate Profit
Sharing Plan; and $4,924,781 of the Short-Intermediate Fixed Income Fund, of
which is 98.92% were owned by Nicholas-Applegate Short-Intermediate Fixed
Income Institutional Portfolio and 1.08% were owned by Nicholas-Applegate
Profit Sharing Plan; $2,461,767 of the Value Fund, of which 98.83% were owned
by Nicholas-Applegate Value Institutional Portfolio and 1.17% were owned by
Nicholas-Applegate Profit Sharing Plan.
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<PAGE>
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER
The Investment Adviser was organized in August 1984 to manage
discretionary accounts investing primarily in publicly traded equity securities
and securities convertible into or exercisable for publicly traded equity
securities, with the goal of capital appreciation. Its general partner is
Nicholas-Applegate Capital Management, Holdings, L.P., a California limited
partnership of which the general partner is Nicholas-Applegate Capital
Management Holdings Inc., a California corporation owned by Mr. Nicholas. The
Investment Adviser currently has fourteen partners (including Mr. Nicholas) who
manage approximately 325 employees, including 28 portfolio managers.
Personnel of the Investment Adviser may invest in securities for their
own accounts pursuant to a Code of Ethics that sets forth all partners' and
employees' fiduciary responsibilities regarding the Funds, establishes
procedures for personal investing, and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance, and
participation in initial public offerings is prohibited. In addition,
restrictions on the timing of personal investing in relation to trades by the
Funds and on short-term trading having been adopted.
Under the Investment Advisory Agreement between the Trust and the
Investment Adviser, the Trust retains the Investment Adviser to manage the
Funds' investment portfolios, subject to the direction of the Board of Trustees.
The Investment Adviser is authorized to determine which securities are to be
bought or sold by the Funds and in what amounts.
The amounts of the advisory fees paid to the Investment Advisor for
the fiscal year ended March 31, 1996, and the amounts of the deferrals in fees
(or recoupment of fees previously deferred) as a result of the expense
limitations and fee waivers, were as follows:
FUND ADVISORY FEES FEE DEFERRALS
- ---- ------------- -------------
Core Growth Fund $2,563,061 -0-
Emerging Growth Fund $5,190,853 -0-
Income & Growth Fund $ 723,032 ($ 4,263)
Balanced Growth Fund $ 75,048 $ 94,371
Worldwide Growth Fund $ 922,328 $ 58,228
International Growth Fund $ 69,849 $117,278
B-42
<PAGE>
Government Fund -0- $ 80,735
Money Market Fund -0- $ 93,976
Emerging Countries Fund $ 49,827 $ 57,853
Mini-Cap Fund $ 57,094 $ 40,723
Fully Discretionary Fund -0- $ 16,120
Short Intermediate Fund -0- $ 14,974
The Investment Advisory Agreement provides that the Investment
Adviser will not be liable for any error of judgment or for any loss suffered by
a Fund or the Trust in connection with the matters to which the Investment
Advisory Agreement relates, except for liability resulting from willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of the Investment Adviser's reckless disregard of its duties and
obligations under the Investment Advisory Agreement. The Trust has agreed to
indemnify the Investment Adviser against liabilities, costs and expenses that
the Investment Adviser may incur in connection with any action, suit,
investigation or other proceeding arising out of or otherwise based on any
action actually or allegedly taken or omitted to be taken by the Investment
Adviser in connection with the performance of its duties or obligations under
the Investment Advisory Agreement or otherwise as an investment adviser of the
Trust. The Investment Adviser is not entitled to indemnification with respect
to any liability to the Trust or its shareholders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
of its reckless disregard of its duties and obligations under the Investment
Advisory Agreement.
The Investment Advisory Agreement provides that it will terminate
in the event of its assignment (as defined in the Investment Company Act). The
Investment Advisory Agreement may be terminated by the Trust (by the Board of
Trustees or vote of a majority of the outstanding voting securities of the
Trust, as defined in the Investment Company Act) or the Investment Adviser upon
60 days' written notice, without payment of any penalty. The Investment
Advisory Agreement provides that it will continue in effect for a period of more
than two years from its execution only so long as such continuance is
specifically approved at least annually in conformity with the Investment
Company Act.
ADMINISTRATOR
The Administrator of the Trust is Investment Company Administration
Corporation, 4455 East Camelback Road, Suite 261-E, Phoenix, Arizona 85018.
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<PAGE>
Pursuant to an Administration Agreement with the Trust, the
Administrator is responsible for performing all administrative services required
for the daily business operations of the Trust, subject to the supervision of
the Board of Trustees of the Trust. The Administrator has no supervisory
responsibility over the investment operations of the Funds. The management or
administrative services of the Administrator for the Trust are not exclusive
under the terms of the Administration Agreement and the Administrator is free
to, and does, render management and administrative services to others. The
Administrator also provides an assistant treasurer and an assistant secretary
for the Trust.
In connection with its management of the corporate affairs of the
Trust, the Administrator pays the salaries and expenses of all its personnel and
pays all expenses incurred in connection with managing the ordinary course of
the business of the Trust, other than expenses assumed by the Trust as described
below.
Under the terms of the Administration Agreement, the Trust is
responsible for the payment of the following expenses: (a) the fees and
expenses incurred by the Trust in connection with the management of the
investment and reinvestment of their assets, (b) the fees and expenses of
Trustees and officers of the Trust who are not affiliated with the
Administrator, the Investment Adviser, (c) out-of-pocket travel expenses for the
officers and Trustees of the Trust and other expenses of Board of Trustees'
meetings, (d) the fees and certain expenses of the Trust's Custodian, (e) the
fees and expenses of the Transfer and Dividend Disbursing Agent that relate to
the maintenance of each shareholder account, (f) the charges and expenses of the
Trust's legal counsel and independent accountants, (g) brokerage commissions and
any issue or transfer taxes chargeable to Trustees and officers of the Trust in
connection with securities transactions, (h) all taxes and corporate fees
payable by the Trust to federal, state and other governmental agencies, (i) the
fees of any trade association of which the Trust may be a member, (j) the cost
of maintaining the Trust's existence, taxes and interest, (k) the cost of
fidelity and liability insurance, (l) allocable communication expenses with
respect to Investor services and all expenses of Investors' and Board of
Trustees' meetings and of preparing, printing and mailing prospectuses and
reports to Investors, (m) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the business of
the Trust, and (n) expenses assumed by the Trust in connection with private
placement transactions regarding Interests of the Funds.
The Administration Agreement provides that the Administrator will
not be liable for any error of judgment or for any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from the Administrator's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties. The Administration
Agreement may be terminated without penalty by either the Administrator or the
Trust (by the Board of Trustees or vote of a majority of the outstanding voting
securities of the Trust, as defined in the Investment Company Act), upon 60
days' written notice. The Administration Agreement will continue in effect only
so long as such continuance is specifically approved at least annually in
conformity with the Investment Company Act.
B-44
<PAGE>
CUSTODIAN
PNC Bank acts as Custodian of the Funds pursuant to a Custodian
Services Agreement. The Custodian (i) maintains a separate account or accounts
in the name of each Fund, (ii) holds and disburses portfolio securities on
account of each Fund, (iii) makes receipts and disbursements of money on behalf
of each Fund, (iv) collects and receives all income and other payments and
distributions on account of the Funds' portfolio securities held by the
Custodian, (v) responds to correspondence from security brokers and others
relating to its duties and (vi) makes periodic reports to the Board of Trustees
concerning its duties thereunder. Under the Custodian Services Agreement, the
Funds will reimburse the Custodian for its costs and expenses in providing
services thereunder.
COUNSEL
Paul, Hastings, Janofsky & Walker LLP, 555 South Flower Street, Los
Angeles, California 90071, serves as counsel to the Trust and will pass on the
legality of the Interests offered hereby and has reviewed the portions of Part A
and Part B concerning taxes. It also acts as legal counsel for the Investment
Adviser and Placement Agent, and for Nicholas-Applegate Mutual Funds.
INDEPENDENT AUDITORS
Ernst & Young, L.L.P., independent auditors, has been selected as
auditor of the Funds for the fiscal year ended March 31, 1997, and will provide
audit services, tax return preparation, and assistance with respect to the
preparation of filings with the Securities and Exchange Commission. Its
principal business address is 515 South Flower Street, Los Angeles, California
90071.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
Subject to policies established by the Board of Trustees, the
Investment Adviser is primarily responsible for the execution of the Funds'
portfolio transactions and the allocation of the brokerage business. In
executing such transactions, the Investment Adviser will seek to obtain the best
price and execution for the Funds, taking into account such factors as price,
size of order, difficulty and risk of execution and operational facilities of
the firm involved. Securities in which the Funds invest may be traded in the
over-the-counter markets, and the Funds deal directly with the dealers who make
markets in such securities except in those circumstances where better prices and
execution are available elsewhere. Commission rates are established pursuant to
negotiation with brokers or dealers based on the quality or quantity of services
provided in light of generally prevailing rates, and while the Investment
Adviser generally seeks reasonably competitive commission rates, the Funds do
not necessarily pay the lowest commissions available. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Board of Trustees.
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The Funds have no obligation to deal with any broker or group of
brokers in executing transactions in portfolio securities. Subject to obtaining
the best price and execution, brokers who provide supplemental research, market
and statistical information and other research services and products to the
Investment Adviser may receive orders for transactions by the Funds. Such
information, services and products are those which brokerage houses customarily
provide to institutional investors, and include items such as statistical and
economic data, research reports on particular companies and industries, and
computer software used for research with respect to investment decisions.
Information, services and products so received are in addition to and not in
lieu of the services required to be performed by the Investment Adviser under
the Investment Advisory Agreement and the expenses of the Investment Adviser are
not necessarily reduced as a result of the receipt of such supplemental
information, services and products. Such information, services and products may
be useful to the Investment Adviser in providing services to clients other than
the Trust, and not all such information, services and products are used by the
Investment Adviser in connection with the Funds. Similarly, such information,
services and products provided to the Investment Adviser by brokers and dealers
through whom other clients of the Investment Adviser effect securities
transactions may be useful to the Investment adviser in providing services to
the Funds. The Investment Adviser is authorized to pay higher commission on
brokerage transactions for the Funds to brokers in order to secure the
information, services and products described above, subject to review by the
Board of Trustees from time to time as to the extent and continuation of this
practice.
Although investment decisions for the Trust are made independently
from those of the other accounts managed by the Investment Adviser, investments
of the kind made by the Funds may often also be made by such other accounts.
When a purchase or sale of the same security is made at substantially the same
time on behalf of the Funds and one or more other accounts managed by the
Investment Adviser, available investments are allocated in the discretion of the
Investment Adviser by such means as, in its judgment, result in fair treatment.
The Investment Adviser aggregates orders for purchases and sales of securities
of the same issuer on the same day among the Funds and its other managed
accounts, and the price paid to or received by the Funds and those accounts is
the average obtained in those orders. In some cases, such aggregation and
allocation procedures may affect adversely the price paid or received by the
Funds or the size of the position purchased or sold by the Funds.
In the over-the-counter market, securities are generally traded on
a "net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's commission or discount. On occasion, certain
money market instruments and agency securities may be purchased directly from
the issuer, in which case no commissions or discounts are paid.
During the fiscal year ended March 31, 1996, the following Funds
acquired securities of their regular brokers or dealers (as defined in Rule 10b-
1 under the Investment Company Act)
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or their parents, including repurchase agreements: Income & Growth Fund --
Merrill Lynch & Co., Inc., Donaldson, Lufkin & Jenrette; Balanced Growth Fund --
Bear Stearns, Inc., Salomon Brothers, Inc.; Core Growth Fund -- Lehman
Brotheres, Inc., Bear Stearns, Inc., Alex Brown, Inc., Morgan Stanley Group,
Inc. The aggregate holdings of such securities were as follows as of March 31,
1996: Core Growth Fund - $8,197,548; Balanced Growth Fund - $440,075; Worldwide
Growth Fund - $20,600; Government Income Fund - $103,846; Money Market Fund -
$1,962,750.
The aggregate dollar amount of brokerage commissions paid by the
Funds during the last three fiscal years of the Trust were as follows:
YEAR ENDED
-----------------------------------------------
March 31, March 31, March 31,
1996 1995 1994
---------- --------- ----------
Worldwide Fund $ 484,310 $ 344,167 $ 390,163
International Growth Fund 116,735 69,187 3,146
Core Growth Fund 862,396 728,347 698,807
Emerging Growth Fund 1,038,140 649,053 525,555
Income & Growth Fund 83,459 174,247 131,675
Balanced Fund 51,038 44,386 51,142
Government Fund 3 0 516
Money Market Fund 0 0 0
Emerging Countries Fund 169,728 20,701 N/A
Fully Discretionary Fund 0 N/A N/A
Short-Intermediate Fund 0 N/A N/A
Mini-Cap Fund 40,185 N/A N/A
Global Growth Fund 0 0 N/A
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Of the total commissions paid during the fiscal year ended March 31, 1996,
$2,136,382 (75.1%) were paid to firms which provided research, statistical or
other services to the Investment Adviser.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
DESCRIPTION OF INTERESTS
Rule 18f-2 under the Investment Company Act provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed
to have been effectively acted upon unless approved by a majority of the
outstanding Interests of each Fund of the Trust affected by the matter. A
Fund is not affected by a matter unless it is clear that the interests of such
Fund in the matter are substantially identical or that the matter does not
affect any interest of such Fund. Under Rule 18f-2, the approval of an
investment advisory agreement or Rule 12b-1 distribution plan or any change
in a fundamental investment policy would be effectively acted upon with respect
to a Fund only if approved by a majority of the outstanding Interests of such
Fund. However, the rule also provides that the ratification of independent
public accountants, the approval of principal underwriting contracts and the
election of directors may be effectively acted upon by Investors of the Trust
voting without regard to Fund.
Unless otherwise provided by law (for example, by Rule 18f-2
discussed above) or by the Trust's Declaration of Trust, the Trust may take or
authorize any action upon the favorable vote of the holders of more than 50% of
the outstanding Interests of the Trust voting without regard to any particular
Fund.
REPORTS
Investors will receive unaudited semi-annual reports describing the
Trust's investment operations and annual financial statements audited by
independent accountants.
REGISTRATION STATEMENT
The Registration Statement of the Trust, including exhibits filed therewith, may
be examined at the office of the Securities and Exchange Commission in
Washington, D.C. Statements contained in Part A or Part B of such Registration
Statement as to the contents of any contract or other document referred to
therein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to such
Registration Statement, such statement being qualified in all respects by such
reference.
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ITEM 19. PURCHASE, REDEMPTION AND PRICING OF INTERESTS BEING OFFERED.
REDEMPTION IN KIND
The Trust intends to pay in cash for all Interests of a Fund redeemed, but
reserves the right to make payment wholly or partly in readily marketable
investment securities. In such cases, an Investor may incur brokerage costs in
converting such securities to cash. However, the Trust has elected to be
governed by the provisions of Rule 18f-1 under the Investment Company Act,
pursuant to which it is obligated to pay in cash all requests for redemptions by
any Investor of record, limited in amount with respect to each Investor during
any 90-day period to the lesser of $250,000 or 1% of the net asset value of the
Trust at the beginning of such period.
PRICING OF INTERESTS
The value of the investments and assets of a Fund is determined each business
day. Investment securities, including ADRs and EDRs, that are traded on a
domestic or foreign stock exchange or on the NASDAQ National Market System are
valued at the last sale price as of the close of business on the New York Stock
Exchange (normally 4:00 P.M. New York time) on the day the securities are being
valued, or lacking any sales, at the mean between the closing bid and asked
prices. Securities listed or traded on certain foreign exchanges whose
operations are similar to the United States over-the-counter market are valued
at the price within the limits of the latest available current bid and asked
prices deemed by the Investment Adviser best to reflect fair value. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange determined to be the primary market for such security by the
Investment Adviser. Listed securities that are not traded on a particular day
and other over-the-counter securities are valued at the mean between the closing
bid and asked prices.
In the event that the New York Stock Exchange adopts different trading hours on
either a permanent or temporary basis, the Board of Trustees will reconsider the
time at which net asset value is computed. In addition, the asset value of the
Fund may be computed as of any time permitted pursuant to any exemption, order
or statement of the Securities and Exchange Commission or its staff.
Long-term debt obligations are valued at the quoted bid price for such
securities or, if such prices are not available, at prices for securities of
comparable maturity, quality and type; however, when the Investment Adviser
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used, as discussed below. Debt securities with
maturities of 60 days or less are valued at amortized cost if their term to
maturity from date of purchase is less than 60 days, or by amortizing, from the
sixty-first day prior to maturity, their value on the sixty-first day prior to
maturity if their term to maturity from date of purchase by the Fund is more
than 60 days, unless this is determined by the Board of Trustees not to
represent fair value. Repurchase agreements are valued at cost plus accrued
interest.
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U.S. Government securities are traded in the over-the-counter market
and are valued at the last available bid price, except that securities with a
demand feature exercisable within one to seven days are valued at par. Such
valuations are based on quotations of one or more dealers that make markets in
the securities as obtained from such dealers, or on the evaluation of a pricing
service. Options, futures contracts and options thereon, which are traded on
exchanges, are valued at their last sale or settlement price as of the close of
such exchanges or, if no sales are reported, at the mean between the last
reported bid and asked prices. The individual securities which make up a
synthetic convertible security are valued separately. If an options or futures
exchange closes later than 4:00 p.m. New York time, the options or futures
traded on it are valued based on the sale price, or on the mean between the bid
and ask prices, as the case may be, as of 4:00 p.m. New York time.
Trading in securities on foreign securities exchanges and over-the-
counter markets is normally completed well before the close of business day in
New York. In addition, foreign securities trading may not take place on all
business days in New York, and may occur in various foreign markets on days
which are not business days in New York and on which net asset value is not
calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the calculation of net asset value
unless the Board of Trustees deems that the particular event would materially
affect net asset value, in which case an adjustment will be made. Assets or
liabilities initially expressed in terms of foreign currencies are translated
prior to the next determination of the net asset value into U.S. dollars at the
spot exchange rates at 1:00 p.m. New York time or at such other rates as the
Investment Adviser may determine to be appropriate in computing net asset value.
Securities and assets for which market quotations are not readily
available, or for which the Board of Trustees or persons designated by the Board
determine that the foregoing methods do not accurately reflect current market
value, are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees. Such valuations and procedures will be
reviewed periodically by the Board of Trustees.
The Trust may use a pricing service approved by the Board of Trustees.
Prices provided by such a service represent evaluations of the mean between
current bid and asked market prices, may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, individual trading characteristics, indications
of values from dealers, and other market data. Such services may use electronic
data processing techniques and/or a matrix system to determine valuations. The
procedures of such services are reviewed periodically by the officers of the
Trust under the general supervision and responsibility of its Board of Trustees,
which may replace a service at any time if it determines that it is in the best
interests of the Trust to do so.
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<PAGE>
MONEY MARKET FUND
The calculation of the net asset value per share of the Money Market
Fund is based upon Rule 2a-7 under the Investment Company Act. Under the Rule,
the Money Market Fund must maintain a dollar-weighted average portfolio maturity
of 90 days or less, purchase instruments having remaining maturities of 13
months or less only (25 months or less in the case of U.S. Government
securities), and invest only in securities determined by the Board of Trustees
to be of high quality with minimal credit risks. The net asset value per share
of Investors in the Money Market Fund will normally remain constant at $1.00.
The Money Market Fund determines the value of its portfolio securities
by the amortized cost method. This method involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Money Market Fund would receive if it sold
the instrument. During these periods, the yield to an Investor may differ
somewhat from that which could be obtained from a similar fund which marks its
portfolio securities to market each day.
ITEM 20. TAX STATUS.
SPECIAL TAX CONSIDERATIONS
U.S. GOVERNMENT OBLIGATIONS. Income received on direct U.S.
Government obligations is exempt from tax at the state level when received
directly and may be exempt, depending on the state, when received by an Investor
from a Fund provided that certain conditions are satisfied. Interest received
on repurchase agreements collateralized by U.S. Government obligations normally
is not exempt from state taxation. The Trust will inform Investors annually of
the percentage of income and distributions derived from direct U.S. Government
obligations. Investors should consult their tax advisers to determine whether
any portion of the income dividends received from the Fund is considered tax
exempt in their particular states.
With respect to investments in zero coupon Treasury securities,
including STRIPS and CUBES made by the Money Market Fund, that are sold at
original issue discount and thus do not make periodic cash interest payments,
the Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund may have to
sell portfolio securities to distribute such imputed income, which may occur at
a time when the Investment Adviser would not have chosen to sell such securities
and which may result in a taxable gain or loss.
SECTION 1256 CONTRACTS. Many of the futures contracts and forward
contracts used by the Funds are "Section 1256 contracts." Any gains or losses
on Section 1256 contracts are generally credited 60% long-term and 40% short-
term capital gains or losses ("60/40") although gains and losses from hedging
transactions, certain mixed straddles and certain foreign currency transactions
from such contracts may be treated as ordinary in character. Also, Section 1256
contracts held by
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the Funds at the end of each taxable year are "marked to market" with the result
that unrealized gains or losses are treated as though they were realized and the
resulting gain or loss is treated as ordinary or 60/40 gain or loss, depending
on the circumstances.
STRADDLE RULES. Generally, the hedging transactions and certain other
transactions in options, futures and forward contracts undertaken by the Funds
may result in "straddles" for U.S. federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by the Funds and
their Investors. In addition, losses realized by the Funds and their Investors
on positions that are part of a straddle may be deferred under the straddle
rules, rather than being taken into account in calculating the taxable income
for the taxable year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences of transactions in options, futures and forward contracts to the
Funds and their Investors are not entirely clear. The transactions may increase
the amount of short-term capital gain realized by the Funds which is taxed as
ordinary income when distributed to their Investors.
The Funds may make one or more of the elections available under the
Code which are applicable to straddles. If the Funds make any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because applications of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to the shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions.
The 30% limit on gains from the disposition of certain options,
futures, and forward contracts held less than three months and the qualifying
income and diversification requirements applicable to the Investors' assets may
limit the extent to which the Funds will be able to engage in transactions in
futures contracts or forward contracts.
SECTION 988 GAINS AND LOSSES. Under the Code, gains or losses
attributable to fluctuations in exchange rates which occur between the time a
Fund accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivables or pays such liabilities generally are treated as
ordinary income or loss. Similarly, gains or losses on disposition of debt
securities denominated in a foreign currency and on disposition of certain
futures attributable to fluctuations in the value of the foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These gains and losses,
referred to under the Code as "Section 988" gains or losses, may increase or
decrease the amount of an Investor's investment company taxable income to be
distributed to its shareholders.
SHORT SALES. Generally, capital gain or loss realized by a Fund in a
short sale may be long-term or short-term depending on the holding period of the
short position. Under a special rule,
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however, the capital gain will be short-term gain if (1) as of the date of the
short sale, the Fund owned property for the short-term holding period that was
substantially identical to that which the Fund used to close the sale or (2)
after the short sale and on or before its closing, the Fund acquired
substantially similar property. Similarly, if property substantially identical
to that sold short was held by the Fund for the long-term holding period as of
the date of the short sale, any loss on closing the short position will be long-
term capital loss. These special rules do not apply to substantially similar
property to the extent such property exceeds the property used by the Fund to
close its short position.
SWAPS. No definitive guidance currently exists with respect to the
classification of interest rate swaps and cross-currency swaps as securities or
foreign currencies for purposes of certain of the tests described above.
Accordingly, to avoid the possibility of disqualification as a regulated
investment company, each Fund will limit its positions in swaps to transactions
for the purpose of hedging against interest rate or currency fluctuation risks,
and will treat swaps as excluded assets for purposes of determining compliance
with the diversification test.
FOREIGN TAX. Income received by a Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the U.S. may reduce or
eliminate such taxes. In addition, the Investment Adviser intends to manage the
Funds with the intention of minimizing foreign taxation in cases where it is
deemed prudent to do so. If more than 50% of an Investor's total assets at the
close of its taxable year consists of securities of foreign corporations
(including its pro rata share of foreign securities held by a Fund), the
Investor may be eligible to elect to "pass through" to its shareholders the
Investor's pro rata share of foreign income and similar taxes paid by the Fund.
Each Investor will be notified within 60 days after the close of the Fund's
taxable year the amount of the foreign taxes paid by the Fund for that year.
Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed an Investor's U.S. tax attributable to its total foreign
source taxable income. The limitation on the foreign tax credit is applied
separately to foreign source passive income, and to certain other types of
income. Investors may be unable to claim a credit for the full amount of their
proportionate share of the foreign taxes paid by the Fund. The foreign tax
credit is modified for purposes of the federal alternative minimum tax and can
be used to offset only 90% of the alternative minimum tax, and foreign taxes
generally are not deductible in computing alternative minimum taxable income.
ORIGINAL ISSUE DISCOUNT. Some of the debt securities (with a fixed
maturity date of more than one year from the date of issuance) that may be
acquired by the Funds may be treated as debt securities that are issued
originally at a discount. Generally, the amount of the original issue discount
("OID") is treated as interest income and is included in income over the term of
the debt security, even though payment of that amount is not received until a
later time, usually when the debt security matures. A portion of the OID
includible in income with respect to certain high-yield corporation debt
securities may be treated as a dividend for federal income tax purposes.
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by the Funds in the
secondary market may be treated as having
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market discount. Generally, any gain recognized on the disposition of, and any
partial payment of principal on, a debt security having market discount issued
after July 18, 1994 is treated as ordinary income to the extent the gain, or
principal payment, does not exceed the "accrued market discount" on such debt
security. Market discount generally accrues in equal daily installments. The
Funds may make one or more of the elections applicable to debt securities having
market discount, which could affect the character and timing the recognition of
income.
Some of the debt securities (with a fixed maturity date of one year or
less from the date of issuance) that may be acquired by the Funds may be treated
as having an acquisition discount, or OID in the case of certain types of debt
securities. Generally, a Fund will be required to include the acquisition
discount, or OID, in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures. The Fund may make one or more of the elections applicable to
the debt securities having acquisition discount, or OID, which could affect the
character and timing of recognition of income.
OTHER TAX INFORMATION
The Funds may be required to withhold for U.S. federal income taxes
31% of all taxable distributions payable to Investors who fail to provide the
Funds with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate Investors and certain other
Investors specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. federal tax liability.
The Trust may also be subject to state or local taxes in certain other
states where it is deemed to be doing business. Further, in those states which
have income tax laws, the tax treatment of the Trust and of Investors of a Fund
with respect to distributions by the Investors may differ from federal tax
treatment. Distributions to Investors may be subject to additional state and
local taxes. Investors should consult their own tax advisers regarding specific
questions as to federal, state or local taxes.
ITEM 21. UNDERWRITERS. Not applicable.
ITEM 22. CALCULATIONS OF PERFORMANCE DATA. Not applicable.
ITEM 23. FINANCIAL STATEMENTS. The financial statements in the Trust's 1996
Annual Reports are incorporated in this Part B by reference. Such financial
statements have been audited by Ernst & Young, L.L.P. with respect to the fiscal
year ended March 31, 1996, and by Coopers & Lybrand L.L.P. with respect to the
period from commencement of operations of the Funds through March 31, 1995,
whose reports thereon also appear in such Annual Reports and are incorporated
herein by reference. Such financial statements have been included herein in
reliance upon such reports given upon their authority as experts in accounting
and auditing.
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The financial statements in the Trust's 1996 Semi-Annual Reports are
also incorporated in this Party B by reference. Such financial statements have
been prepared by the Trust and are not audited.
Copies of the Trust's 1996 Annual and Semi-Annual Reports may be
obtained at no charge by writing or telephoning the Trust at 600 West Broadway,
30th Floor, San Diego, California 92101 (phone 619-687-8000).
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APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
COMMERCIAL PAPER RATINGS
STANDARD & POOR'S CORPORATION. An S&P commercial paper rating is a
current assessment of the likelihood of timely payment of debt having an
original maturity of no more than 365 days. The following summarizes the rating
categories used by S&P for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However,
the relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is,
however, more vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designation.
"B" - Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
MOODY'S INVESTORS SERVICES, INC. Moody's short-term debt ratings are
opinions of the ability of issuers to repay punctually senior debt obligations
which have an original maturity not exceeding one year. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions have a superior
ability for repayment of short-term promissory obligations. Repayment ability
will often be evidenced by the following characteristics: leading market
positions in well established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earning coverage of fixed financial
charges and high internal cash generation; and well established access to a
range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuer or related supporting institutions have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
APP-1
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"Prime-3" - Issuer or related supporting institutions have an
acceptable ability for repayment of short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime rating
categories.
DUFF & PHELPS. The three rating categories of Duff & Phelps for
investment grade commercial paper are "Duff 1," "Duff 2" and "Duff 3." Duff &
Phelps employs three designations, "Duff 1+," "Duff 1" and "Duff 1-," within the
highest rating category. The following summarizes the rating categories used by
Duff & Phelps for commercial paper:
"Duff 1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"Duff 1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"Duff 1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"Duff 2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"Duff 3" - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"Duff 4" - Debt possesses speculative investment characteristics.
"Duff 5" - Issuer has failed to meet scheduled principal and/or
interest payments.
FITCH INVESTORS SERVICE, INC. Fitch short-term ratings apply to debt
obligations that are payable on demand or have original maturities of up to
three years. The following summarizes the rating categories used by Fitch for
short-term obligations:
"F-1+" - Exceptionally strong credit quality. Commercial paper
assigned this rating is regarded as having the strongest degree of assurance for
timely payment.
"F-1" - Very strong credit quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in degree than issues
rated "F-1+."
APP-2
<PAGE>
"F-2" - Good credit quality. Commercial paper assigned this rating
has a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned the "F-1+" and "F-1" ratings.
"F-3" - Fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these securities to be
rated below investment grade.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a commercial
bank.
THOMSON BANKWATCH. Thomson BankWatch commercial paper ratings assess
the likelihood of an untimely payment of principal or interest of debt having a
maturity of one year or less which is issued by United States commercial banks,
thrifts and non-bank banks; non-United States banks; and broker-dealers. The
following summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
rating category and indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade
category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded as non-
investment grade and therefore speculative.
IBCA. IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations are supported by the highest capacity for timely
repayment.
"A1" - Obligations are supported by a strong capacity for timely
repayment.
"A2" - Obligations are supported by a satisfactory capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic, or financial conditions.
APP-3
<PAGE>
"A3" - Obligations are supported by an adequate capacity for timely
repayment. Such capacity is more susceptible to adverse changes in business,
economic, or financial conditions than for obligations in higher categories.
"B" - Obligations' capacity for timely repayment is susceptible to
adverse changes in business, economic, or financial conditions.
"C" - Obligations have an inadequate capacity to ensure timely
repayment.
"D" - Obligations have a high risk of default or are currently in
default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
STANDARD & POOR'S CORPORATION. The following summarizes the ratings
used by S&P for corporate and municipal debt:
"AAA" - Debt has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from higher rated issues only in small
degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher-rated categories.
"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating is also used
for debt subordinated to senior debt that is assigned an actual or implied "BB"
or "BB-" rating.
APP-4
<PAGE>
"CCC" - Debt has currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
"C" - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
MOODY'S INVESTORS SERVICES, INC. The following summarizes the ratings used
by Moody's for corporate and municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba" - Bonds judged to have speculative elements; their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
APP-5
<PAGE>
"B" - Bonds generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
"Caa" - Bonds are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
"Ca" - Bonds represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcoming.
"C" - Bonds are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B." The modifier 1 indicates that the company
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
DUFF & PHELPS. The following summarizes the ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
APP-6
<PAGE>
FITCH INVESTORS SERVICES, INC. The following summarizes the highest
four ratings used by Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that possess
one of these ratings are considered by Fitch to be speculative investments. The
ratings "BB" to "C" represent Fitch's assessment of the likelihood of timely
payment of principal and interest in accordance with the terms of obligation for
bond issues not in default. For defaulted bonds, the rating "DDD" to "D" is an
assessment of the ultimate recovery value through reorganization or liquidation.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "C" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA. IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
APP-7
<PAGE>
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions may lead
to increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of
these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to
denote relative status within major rating categories.
THOMSON BANKWATCH. Thomson BankWatch assesses the likelihood of an
untimely repayment of principal or interest over the term to maturity of long
term debt and preferred stock which are issued by United States commercial
banks, thrifts and non-bank banks; non-United States banks; and broker-dealers.
The following summarizes the rating categories used by Thomson BankWatch for
long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is very high.
"AA" - This designation indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
APP-8
<PAGE>
"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
APP-9
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Registrant's Statements of Investments as of March 31, 1996,
Statements of Assets and Liabilities as of March 31, 1996, Statements
of Operations for the fiscal year ended March 31, 1996, Statements of
Changes in Net Assets for the period ended March 31, 1996, related
Notes, and Independent Auditors' Report dated May 10, 1996, are
included as part of Registrant's Annual Reports for the fiscal year
ended March 31, 1996, and are incorporated herein by reference.
Copies of such financial statements are provided herewith as Exhibit
19.1 for the information of the Commission.
Registrant's Statements of Investments as of September 30, 1996,
Statements of Assets and Liabilities as of September 30, 1996,
Statements of Operations for the six-month period ended September 30,
1996, and related notes, are included as part of Registrant's Semi-
Annual Reports for the six months ended September 30, 1996, and are
incorporated herein by reference. Copies of such financial statements
are provided herewith as Exhibit 19.2 for the information of the
Commission.
(b) Exhibits.
1.1 Certificate of Trust of Registrant - filed as Exhibit 1.1 to
Amendment No. 1 to Registrant's Form N-1A Registration Statement
("Amendment No. 1") on March 17, 1993 and incorporated herein by
reference.
1.2 Certificate of Amendment of Certificate of Trust of Registrant -
filed as Exhibit 1.2 to Amendment No. 1 on March 17, 1993 and
incorporated herein by reference.
1.3 Declaration of Trust of Registrant - filed as Exhibit 1 to
Registrant's Form N-1A Registration Statement on December 31,
1992 and incorporated herein by reference.
1.4 Amended and Restated Declaration of Trust of Registrant - filed
as Exhibit 1.4 to Amendment No. 1 on March 17, 1993 and
incorporated herein by reference.
1.5 Certificate of Trustees dated August 6, 1993 establishing
Emerging Growth Fund -- filed as Exhibit 1.5 to Amendment No. 4
to Registrant's Form N-1A Registration Statement ("Amendment No.
4") on September 1, 1993 and incorporated herein by reference.
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<PAGE>
1.6 Certificate of Trustees establishing International Growth Fund --
filed as Exhibit 1.6 to Amendment No. 6 to Registrant's Form N-1A
Registration Statement ("Amendment No. 6") on August 1, 1994 and
incorporated herein by reference.
1.7 Certificate of Trustees establishing Emerging Countries Fund,
Global Growth & Income Fund and Mini-Cap Fund -- filed as Exhibit
1.7 to Amendment No. 7 to Registrant's Form N-1A Registration
Statement ("Amendment No. 7") on December 5, 1994 and
incorporated herein by reference.
1.8 Certificate of Trustees establishing Short-Intermediate and Fully
Discretionary Funds -- filed as Exhibit 1.8 to Amendment No. 9 to
Registrant's Form N-1A Registration Statement ("Amendment No. 9")
on July 31, 1995 and incorporated herein by reference.
1.9 Certificate of Trustees establishing Value Fund -- filed as
Exhibit 1.9 to Amendment 10 to Registrant's Form N-1A
Registration Statement ("Amendment No. 10") on May 2, 1996 and
incorporated herein by reference.
1.10 Certificate of Trustees establishing High Yield Bond and
Strategic Income Funds -- filed as Exhibit 1.20 to Amendment No.
11 to Registrant's Form N-1A Registration Statement ("Amendment
No. 11") on August 2, 1996 and incorporated herein by reference.
1.11 Form of Certificate of Trustees establishing Large Cap Growth and
International Core Growth Funds.
2 Amended Bylaws of Registrant - filed as Exhibit 2 to
Amendment No. 2 on April 6, 1993 and incorporated herein by
reference.
3 Not applicable.
4 Not applicable.
5.1 Investment Advisory Agreement between Registrant and Nicholas-
Applegate Capital Management dated April 19, 1993 -- filed as
Exhibit 5.1 to Amendment No. 6 on August 1, 1994 and incorporated
herein by reference.
5.2 Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated February 11, 1994, correcting Government
Income Fund fees -- filed as Exhibit 5.2 to Amendment No. 6 on
August 1, 1994 and incorporated herein by reference.
5.3 Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated May 17, 1993 adding Emerging Growth Fund
to Investment Advisory
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<PAGE>
Agreement -- filed as Exhibit 5.3 to Amendment No. 6 on August
1, 1994 and incorporated herein by reference.
5.4 Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated December 15, 1993 adding International
Growth Fund to Investment Advisory Agreement -- filed as Exhibit
5.4 to Amendment No. 6 on August 1, 1994 and incorporated herein
by reference.
5.5 Letter agreement between Registrant and Nicholas-Applegate
Capital Management adding Emerging Countries, Global Growth &
Income and Mini-Cap Funds to Investment Advisory Agreement --
filed as Exhibit 5.5 to Amendment No. 9 on July 31, 1995 and
incorporated herein by reference.
5.6 Letter agreement between Registrant and Nicholas-Applegate
Capital Management adding Short-Intermediate and Fully
Discretionary Funds to Investment Advisory Agreement -- filed as
Exhibit 5.6 to Amendment No. 9 on July 31, 1995 and incorporated
herein by reference.
5.7 Letter agreement between Registrant and Nicholas-Applegate
Capital Management amending fees paid with respect to Government
Income Fund under Investment Advisory Agreement -- filed as
Exhibit 5.7 to Amendment No. 9 on July 31, 1995 and incorporated
herein by reference.
5.8 Letter agreement between Registrant and Nicholas-Applegate
Capital Management adding Value Fund to Investment Advisory
Agreement -- filed as Exhibit 5.8 to Amendment No. 10 on May 2,
1996 and incorporated herein by reference.
5.9 Letter agreement between Registrant and Nicholas-Applegate
Capital Management adding High Yield Bond and Strategic Income
Funds to Investment Advisory Agreement -- filed as Exhibit 5.9 to
Amendment No. 11 on August 2, 1996 and incorporated herein by
reference.
5.10 Form of letter agreement between Registrant and Nicholas-
Applegate Capital Management adding Large Cap Growth and
International Core Growth Funds to Investment Advisory Agreement.
6 Not applicable.
7 None.
8.1 Custodian Services Agreement between Registrant and PNC Bank
dated April 1, 1993 -- filed as Exhibit 8.1 to Amendment No. 6 on
August 1, 1994 and incorporated herein by reference.
C-3
<PAGE>
8.2 Letter agreement between Registrant and PNC Bank dated August 20,
1993 adding Emerging Growth Fund to Custodian Services Agreement
-- filed as Exhibit 8.2 to Amendment No. 5 to Registration
Statement on December 20, 1993 and incorporated herein by
reference.
8.3 Letter agreement between Registrant and PNC Bank adding
International Fund to Custodian Services Agreement -- filed as
Exhibit 8.3 to Amendment No. 1 on August 1, 1994 and incorporated
herein by reference -- filed as Exhibit 8.3 to Amendment No. 6 on
August 1, 1994 and incorporated herein by reference.
8.4 Letter agreement between Registrant and PNC Bank adding Emerging
Countries, Global Growth & Income and Mini-Cap Fund to Custodian
Services Agreement -- filed as Exhibit 8.4 to Amendment No. 9 on
July 31, 1995 and incorporated herein by reference.
8.5 Letter agreement between Registrant and PNC Bank adding Short-
Intermediate and Fully Discretionary Funds to Custodian Services
Agreement -- filed as Exhibit 8.5 to Amendment No., 11 on
August 2, 1996 and incorporated herein by reference.
8.6 Letter agreement between Registrant and PNC Bank adding Value
Fund to Custodian Services Agreement -- filed as Exhibit 8.6 to
Amendment No., 11 on August 2, 1996 and incorporated herein by
reference.
8.7 Form of letter agreement between Registrant and PNC Bank adding
High Yield Bond and Strategic Income Funds to Custodian Services
Agreement -- filed as Exhibit 8.7 to Amendment No. 11 on August
2, 1996 and incorporated herein by reference.
8.8 Form of letter agreement between Registrant and PNC Bank adding
Large Cap Growth and International Core Growth Funds to Custodian
Services Agreement.
8.9 Sub-Custodian Agreement among Registrant, PNC Bank and Chase
Manhattan Bank, N.A. dated April 1, 1993 -- filed as Exhibit 8.5
to Amendment No. 6 on August 1, 1994 and incorporated herein by
reference.
8.10 Letter agreement among Registrant, PNC Bank and Chase Manhattan
Bank, N.A. dated August 20, 1993 adding Emerging Growth Fund to
Sub-Custodian Agreement -- filed as Exhibit 8.6 to Amendment No.
6 on August 1, 1994 and incorporated herein by reference.
8.11 Letter agreement among Registrant, PNC Bank and Chase Manhattan
Bank, N.A., adding International Growth Fund to Sub-Custodian
Agreement -- filed as Exhibit 8.8 to Amendment No. 9 on July 31,
1995 and incorporated herein by reference.
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<PAGE>
8.12 Letter agreement among Registrant, PNC Bank and Chase Manhattan
Bank, N.A., adding Emerging Countries, Global Growth & Income and
Mini-Cap Funds to Sub-Custodian Agreement -- filed as Exhibit 8.9
to Amendment No. 9 on July 31, 1995 and incorporated herein by
reference.
8.13 Letter agreement among Registrant, PNC Bank and Chase Manhattan
Bank, adding Short-Intermediate and Fully Discretionary Funds to
Sub-Custodian Agreement -- filed as Exhibit 8.12 to Amendment
No. 11 on August 2, 1996 and incorporated herein by reference.
8.14 Letter agreement among Registrant, PNC Bank, and Chase Manhattan
Bank, adding Value Fund to Sub-Custodian Agreement -- filed as
Exhibit 8.13 to Amendment No. 11 on August 2, 1996 and
incorporated herein by reference.
8.15 Form of letter agreement among Registrant, PNC Bank and Chase
Manhattan Bank, adding High Yield Bond and Strategic Income Funds
to Sub-Custodian Agreement -- filed as Exhibit 8.14 to Amendment
No. 11 on August 2, 1996 and incorporated herein by reference.
8.16 Form of letter agreement among Registrant, PNC Bank and Chase
Manhattan Bank, adding Large Cap Growth and International Core
Growth Funds to Sub-Custodian Agreement.
9.1 Administration Agreement between Registrant and Investment
Company Administration Corporation dated April 1, 1993 -- filed
as Exhibit 9.1 to Amendment No. 6 on August 1, 1994 and
incorporated herein by reference.
9.2 Accounting Services Agreement between Registrant and PFPC Inc
dated April 1, 1993 -- filed as Exhibit 9.2 to Amendment No. 6 on
August 1, 1994 and incorporated herein by reference.
9.3 Letter agreement between Registrant and PFPC, Inc. dated July 28,
1993 adding Emerging Growth Fund to Accounting Services Agreement
-- filed as Exhibit 9.3 to Amendment No. 6 on August 1, 1994 and
incorporated herein by reference.
9.4 Letter agreement between Registrant and PFPC Inc. dated December
15, 1993 adding International Growth Fund to Accounting Services
Agreement -- filed as Exhibit 9.4 to Amendment No. 6 on August 1,
1994 and incorporated herein by reference.
9.5 Letter agreement between Registrant and PFPC Inc., adding
Emerging Countries Fund, Global Growth Fund and Mini Cap Fund to
Accounting Services
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<PAGE>
Agreement --filed as Exhibit 9.5 to Amendment No. 9 on July 31,
1995 and incorporated herein by reference.
9.6 Letter agreement between Registrant and PFPC Inc. adding Short-
Intermediate and Fully Discretionary Funds to Accounting Services
Agreement -- filed as Exhibit ___ to Amendment No. 11 on
August 2, 1996 and incorporated herein by reference.
9.7 Letter agreement between Registrant and PFPC Inc. adding Value
Fund to Accounting Services Agreement -- filed as Exhibit 9.7 to
Amendment No. 11 on August 2, 1996 and incorporated herein by
reference.
9.8 Form of letter agreement between Registrant and PFPC Inc. adding
High Yield Bond and Strategic Income Funds to Accounting Services
Agreement -- filed as Exhibit 9.8 to Amendment No. 11 on August
2, 1996 and incorporated herein by reference.
9.9 Form of letter agreement between Registrant and PFPC Inc. adding
Large Cap Growth and International Core Growth Funds to
Accounting Services Agreement.
9.10 License Agreement between Registrant and Nicholas-Applegate
Capital Management dated December 17, 1992 -- filed as Exhibit
9.6 to Amendment No. 6 on August 1, 1994 and incorporated herein
by reference.
10 Not applicable.
11 Not applicable.
12 Not applicable.
13 None.
14 None.
15 None.
16 None.
17. Financial Data Schedules.
18. None
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<PAGE>
19.1 Financial statements of the Funds for the fiscal year ended March
31, 1996 (provided for the information of the Commission only,
pursuant to Rule 303 of Regulation S-T).
19.2 Financial statements of the Funds for the six months ended
September 30, 1996 (provided for the information of the
Commission only, pursuant to Rule 703 of Regulation S-T).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Substantially all of the outstanding Interests of the Funds are owned
by various series of Nicholas-Applegate Mutual Funds, a Delaware business trust,
as listed in Item 26 below.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of October 31, 1996, the Trust had 54 investors of record, as set
forth in item 15 of Part B.
ITEM 27. INDEMNIFICATION.
Article V of Registrant's Declaration of Trust, included as Exhibit 2
hereto and incorporated herein by reference, provides for the indemnification of
Registrant's trustees, officers, employees and agents.
Indemnification of the Registrant's Investment Adviser and Placement
Agent is provided for, respectively, in Section 8 of the Investment Advisory
Agreement, included as Exhibit 5.1 hereto and incorporated herein by reference,
and Section 5 of the Placement Agent Agreement, included as Exhibit 6 hereto and
incorporated herein by reference.
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions. In
no event will Registrant indemnify any of its trustees, officers, employees or
agents against any liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties or by reason of his reckless disregard of the duties
involved in the conduct of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act of 1933 and
Release 11330 under the Investment Company Act in connection with any
indemnification.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Nicholas-Applegate Capital Management, the Investment Adviser to the
Trust, is a California limited partnership, the general partner of which is
Nicholas-Applegate Capital Management Holdings, L.P. During the two fiscal
years ended December 31, 1995, the Investment Adviser has
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engaged principally in the business of providing investment services to
institutional and other clients. All of the additional information required by
this Item 28 with respect to the Investment Adviser is set forth in the Form
ADV, as amended, of Nicholas-Applegate Capital Management (File No. 801-21442),
which is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
Nicholas-Applegate Securities acts as the exclusive Placement Agent of
Interests of the Trust. The Placement Agent receives no additional compensation
for serving as Placement Agent. The Placement Agent is a California limited
partnership and its general partner is Nicholas-Applegate Capital Holdings,
L.P., a California limited partnership (the "General Partner"). Information is
furnished below with respect to the officers, partners and directors of the
Placement Agent (or its General Partner). The principal business address of
such persons is 600 West Broadway, 30th Floor, San Diego, California 92101,
except as otherwise indicated below.
Name and Principal Positions and Offices with Positions in Offices
BUSINESS ADDRESS PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- --------------------
Arthur E. Nicholas Chairman and President Chairman of the Board
of Trustees
John D. Wylie -- President
Thomas Pindelski Chief Financial Officer Chief Financial Officer
E. Blake Moore, Jr. General Counsel and Secretary Secretary
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act and the rules promulgated thereunder
will be maintained either at the offices of the Registrant (600 West Broadway,
30th Floor, San Diego, California 92101); the Investment Adviser, Nicholas-
Applegate Capital Management (600 West Broadway, 30th Floor, San Diego,
California 92101); the Administrator, Investment Company Administration
Corporation (4455 East Camelback Road, Suite 261-E, Phoenix, Arizona 85018); or
the Custodian, PNC Bank (Airport Business Center, International Court 2, 200
Stevens Drive, Lester, Pennsylvania 19113); or the Sub-Custodian, Chase
Manhattan Bank, N.A. (1211 Avenue of the Americas, 33rd Floor, New York, New
York 10036, Attention: Global Custody Division).
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
C-8
<PAGE>
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes that if it is requested by the holders of
at least 10% of its outstanding Interests to call a meeting of shareholders for
the purpose of voting upon the question of removal of a Trustee, it will do so
and will assist in communications with other shareholders as required by Section
16(c) of the Investment Company Act.
Registrant hereby undertakes to furnish each person to whom this
Registration Statement is delivered with a copy of Registrant's latest annual
report to Investors, upon request and without charge.
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Diego, State of California, on the 26th day of December, 1996.
NICHOLAS-APPLEGATE INVESTMENT TRUST
By /S/ E. BLAKE MOORE, JR.
--------------------------------
E. Blake Moore, Jr.
Secretary
C-9
<PAGE>
EXHIBIT INDEX
NICHOLAS-APPLEGATE INVESTMENT TRUST
AMENDMENT NO. 12 TO
FORM N-1A REGISTRATION STATEMENT
File No. 811-7384
Exhibit No. Title of Exhibit
- ----------- ----------------
1.1 Certificate of Trust of Registrant - filed as Exhibit 1.1 to
Amendment No. 1 on March 17,1993 and incorporated herein by
reference.
1.1 Certificate of Trust of Registrant - filed as Exhibit 1.1 to
Amendment No. 1 to Registrant's Form N-1A Registration Statement
("Amendment No. 1") on March 17, 1993 and incorporated herein by
reference.
1.2 Certificate of Amendment of Certificate of Trust of Registrant -
filed as Exhibit 1.2 to Amendment No. 1 on March 17, 1993 and
incorporated herein by reference.
1.3 Declaration of Trust of Registrant - filed as Exhibit 1 to
Registrant's Form N-1A Registration Statement on December 31,
1992 and incorporated herein by reference.
1.4 Amended and Restated Declaration of Trust of Registrant - filed
as Exhibit 1.4 to Amendment No. 1 on March 17, 1993 and
incorporated herein by reference.
1.5 Certificate of Trustees dated August 6, 1993 establishing
Emerging Growth Fund -- filed as Exhibit 1.5 to Amendment No. 4
to Registrant's Form N-1A Registration Statement ("Amendment No.
4") on September 1, 1993 and incorporated herein by reference.
1.6 Certificate of Trustees establishing International Growth Fund --
filed as Exhibit 1.6 to Amendment No. 6 to Registrant's Form N-1A
Registration Statement ("Amendment No. 6") on August 1, 1994 and
incorporated herein by reference.
1.7 Certificate of Trustees establishing Emerging Countries Fund,
Global Growth & Income Fund and Mini-Cap Fund -- filed as Exhibit
1.7 to Amendment No. 7 to Registrant's Form N-1A Registration
Statement ("Amendment No. 7") on December 5, 1994 and
incorporated herein by reference.
C-10
<PAGE>
1.8 Certificate of Trustees establishing Short-Intermediate and Fully
Discretionary Funds -- filed as Exhibit 1.8 to Amendment No. 9 to
Registrant's Form N-1A Registration Statement ("Amendment No. 9")
on July 31, 1995 and incorporated herein by reference.
1.9 Certificate of Trustees establishing Value Fund -- filed as
Exhibit 1.9 to Amendment 10 to Registrant's Form N-1A
Registration Statement ("Amendment No. 10") on May 2, 1996 and
incorporated herein by reference.
1.10 Certificate of Trustees establishing High Yield Bond and
Strategic Income Funds -- filed as Exhibit 1.20 to Amendment No.
11 to Registrant's Form N-1A Registration Statement ("Amendment
No. 11") on August 2, 1996 and incorporated herein by reference.
1.11 Form of Certificate of Trustees establishing Large Cap Growth and
International Core Growth Funds.
2 Amended Bylaws of Registrant - filed as Exhibit 2 to Amendment
No. 2 on April 6, 1993 and incorporated herein by reference.
3 Not applicable.
4 Not applicable.
5.1 Investment Advisory Agreement between Registrant and Nicholas-
Applegate Capital Management dated April 19, 1993 -- filed as
Exhibit 5.1 to Amendment No. 6 on August 1, 1994 and incorporated
herein by reference.
5.2 Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated February 11, 1994, correcting Government
Income Fund fees -- filed as Exhibit 5.2 to Amendment No. 6 on
August 1, 1994 and incorporated herein by reference.
5.3 Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated May 17, 1993 adding Emerging Growth Fund
to Investment Advisory Agreement -- filed as Exhibit 5.3 to
Amendment No. 6 on August 1, 1994 and incorporated herein by
reference.
5.4 Letter agreement between Registrant and Nicholas-Applegate
Capital Management dated December 15, 1993 adding International
Growth Fund to Investment Advisory Agreement -- filed as Exhibit
5.4 to Amendment No. 6 on August 1, 1994 and incorporated herein
by reference.
C-11
<PAGE>
5.5 Letter agreement between Registrant and Nicholas-Applegate
Capital Management adding Emerging Countries, Global Growth &
Income and Mini-Cap Funds to Investment Advisory Agreement --
filed as Exhibit 5.5 to Amendment No. 9 on July 31, 1995 and
incorporated herein by reference.
5.6 Letter agreement between Registrant and Nicholas-Applegate
Capital Management adding Short-Intermediate and Fully
Discretionary Funds to Investment Advisory Agreement -- filed as
Exhibit 5.6 to Amendment No. 9 on July 31, 1995 and incorporated
herein by reference.
5.7 Letter agreement between Registrant and Nicholas-Applegate
Capital Management amending fees paid with respect to Government
Income Fund under Investment Advisory Agreement -- filed as
Exhibit 5.7 to Amendment No. 9 on July 31, 1995 and incorporated
herein by reference.
5.8 Letter agreement between Registrant and Nicholas-Applegate
Capital Management adding Value Fund to Investment Advisory
Agreement -- filed as Exhibit 5.8 to Amendment No. 10 on May 2,
1996 and incorporated herein by reference.
5.9 Letter agreement between Registrant and Nicholas-Applegate
Capital Management adding High Yield Bond and Strategic Income
Funds to Investment Advisory Agreement -- filed as Exhibit 5.9 to
Amendment No. 11 on August 2, 1996 and incorporated herein by
reference.
5.10 Form of letter agreement between Registrant and Nicholas-
Applegate Capital Management adding Large Cap Growth and
International Core Growth Funds to Investment Advisory Agreement.
6 Not applicable.
7 None.
8.1 Custodian Services Agreement between Registrant and PNC Bank
dated April 1, 1993 -- filed as Exhibit 8.1 to Amendment No. 6 on
August 1, 1994 and incorporated herein by reference.
8.2 Letter agreement between Registrant and PNC Bank dated August 20,
1993 adding Emerging Growth Fund to Custodian Services Agreement
-- filed as Exhibit 8.2 to Amendment No. 5 to Registration
Statement on December 20, 1993 and incorporated herein by
reference.
C-12
<PAGE>
8.3 Letter agreement between Registrant and PNC Bank adding
International Fund to Custodian Services Agreement -- filed as
Exhibit 8.3 to Amendment No. 1 on August 1, 1994 and incorporated
herein by reference -- filed as Exhibit 8.3 to Amendment No. 6 on
August 1, 1994 and incorporated herein by reference.
8.4 Letter agreement between Registrant and PNC Bank adding Emerging
Countries, Global Growth & Income and Mini-Cap Fund to Custodian
Services Agreement -- filed as Exhibit 8.4 to Amendment No. 9 on
July 31, 1995 and incorporated herein by reference.
8.5 Letter agreement between Registrant and PNC Bank adding Short-
Intermediate and Fully Discretionary Funds to Custodian Services
Agreement -- filed as Exhibit 8.5 to Amendment No. 11 on
August 2, 1996 and incorporated herein by reference.
8.6 Letter agreement between Registrant and PNC Bank adding Value
Fund to Custodian Services Agreement -- filed as Exhibit 8.6 to
Amendment No. 11 on August 2, 1996 and incorporated herein by
reference.
8.7 Form of letter agreement between Registrant and PNC Bank adding
High Yield Bond and Strategic Income Funds to Custodian Services
Agreement -- filed as Exhibit 8.7 to Amendment No. 11 on August
2, 1996 and incorporated herein by reference.
8.8 Form of letter agreement between Registrant and PNC Bank adding
Large Cap Growth and International Core Growth Funds to Custodian
Services Agreement.
8.9 Sub-Custodian Agreement among Registrant, PNC Bank and Chase
Manhattan Bank, N.A. dated April 1, 1993 -- filed as Exhibit 8.5
to Amendment No. 6 on August 1, 1994 and incorporated herein by
reference.
8.10 Letter agreement among Registrant, PNC Bank and Chase Manhattan
Bank, N.A. dated August 20, 1993 adding Emerging Growth Fund to
Sub-Custodian Agreement -- filed as Exhibit 8.6 to Amendment No.
6 on August 1, 1994 and incorporated herein by reference.
8.11 Letter agreement among Registrant, PNC Bank and Chase Manhattan
Bank, N.A., adding International Growth Fund to Sub-Custodian
Agreement -- filed as Exhibit 8.8 to Amendment No. 9 on July 31,
1995 and incorporated herein by reference.
C-13
<PAGE>
8.12 Letter agreement among Registrant, PNC Bank and Chase Manhattan
Bank, N.A., adding Emerging Countries, Global Growth & Income and
Mini-Cap Funds to Sub-Custodian Agreement -- filed as Exhibit 8.9
to Amendment No. 9 on July 31, 1995 and incorporated herein by
reference.
8.13 Letter agreement among Registrant, PNC Bank and Chase Manhattan
Bank, adding Short-Intermediate and Fully Discretionary Funds to
Sub-Custodian Agreement -- filed as Exhibit 8.12 to Amendment
No. 11 on August 2, 1996 and incorporated herein by reference.
8.14 Letter agreement among Registrant, PNC Bank, and Chase Manhattan
Bank, adding Value Fund to Sub-Custodian Agreement -- filed as
Exhibit 8.13 to Amendment No. 11 on August 2, 1996 and
incorporated herein by reference.
8.15 Form of letter agreement among Registrant, PNC Bank and Chase
Manhattan Bank, adding High Yield Bond and Strategic Income Funds
to Sub-Custodian Agreement -- filed as Exhibit 8.14 to Amendment
No. 11 on August 2, 1996 and incorporated herein by reference.
8.16 Form of letter agreement among Registrant, PNC Bank and Chase
Manhattan Bank, adding Large Cap Growth and International Core
Growth Funds to Sub-Custodian Agreement.
9.1 Administration Agreement between Registrant and Investment
Company Administration Corporation dated April 1, 1993 -- filed
as Exhibit 9.1 to Amendment No. 6 on August 1, 1994 and
incorporated herein by reference.
9.2 Accounting Services Agreement between Registrant and PFPC Inc
dated April 1, 1993 -- filed as Exhibit 9.2 to Amendment No. 6 on
August 1, 1994 and incorporated herein by reference.
9.3 Letter agreement between Registrant and PFPC, Inc. dated July 28,
1993 adding Emerging Growth Fund to Accounting Services Agreement
-- filed as Exhibit 9.3 to Amendment No. 6 on August 1, 1994 and
incorporated herein by reference.
9.4 Letter agreement between Registrant and PFPC Inc. dated December
15, 1993 adding International Growth Fund to Accounting Services
Agreement -- filed as Exhibit 9.4 to Amendment No. 6 on August 1,
1994 and incorporated herein by reference.
9.5 Letter agreement between Registrant and PFPC Inc., adding
Emerging Countries Fund, Global Growth Fund and Mini Cap Fund to
Accounting Services
C-14
<PAGE>
Agreement -- filed as Exhibit 9.5 to Amendment No. 9 on July 31,
1995 and incorporated herein by reference.
9.6 Letter agreement between Registrant and PFPC Inc. adding Short-
Intermediate and Fully Discretionary Funds to Accounting Services
Agreement -- filed as Exhibit __ to Amendment No. 11 on August 2,
1996 and incorporated herein by reference.
9.7 Letter agreement between Registrant and PFPC Inc. adding Value
Fund to Accounting Services Agreement -- filed as Exhibit __ to
Amendment No. 11 on August 2, 1996 and incorporated herein by
reference.
9.8 Form of letter agreement between Registrant and PFPC Inc. adding
High Yield Bond and Strategic Income Funds to Accounting Services
Agreement -- filed as Exhibit 9.8 to Amendment No. 11 on August
2, 1996 and incorporated herein by reference.
9.9 Form of letter agreement between Registrant and PFPC Inc. adding
Large Cap Growth and International Core Growth Funds to
Accounting Services Agreement.
9.10 License Agreement between Registrant and Nicholas-Applegate
Capital Management dated December 17, 1992 -- filed as Exhibit
9.6 to Amendment No. 6 on August 1, 1994 and incorporated herein
by reference.
10 Not applicable.
11 Not applicable.
12 Not applicable.
13 None.
14 None.
15 None.
16 None.
17. Financial Data Schedules.
18. None
C-15
<PAGE>
19.1 Financial statements of the Funds for the fiscal year ended March
31, 1996 (provided for the information of the Commission only,
pursuant to Rule 303 of Regulation S-T).
19.2 Financial statements of the Funds for the six months ended
September 30, 1996 (provided for the information of the
Commission only, pursuant to Rule 703 of Regulation S-T).
C-16
<PAGE>
Exhibit 1.11
NICHOLAS-APPLEGATE INVESTMENT TRUST
ESTABLISHMENT OF ADDITIONAL SERIES
The undersigned, constituting a majority of the Trustees of Nicholas-
Applegate Investment Trust, a Delaware business trust, hereby establish the
following additional series of Interests of the Trust pursuant to Section 9.8 of
the Amended and Restated Declaration of Trust:
Large Cap Growth Fund
International Core Growth Fund
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of November 14, 1996.
s/Arthur E. Nicholas
-----------------------------------
Arthur E. Nicholas
s/Dann V. Angeloff
-----------------------------------
Dann V. Angeloff
s/Walter E. Auch
-----------------------------------
Walter E. Auch
s/Darlene T. DeRemer
-----------------------------------
Darlene T. DeRemer
s/George F. Keane
-----------------------------------
George F. Keane
s/Theodore J. Coburn
-----------------------------------
Theodore J. Coburn
C-17
<PAGE>
Exhibit 5.10
December 27, 1996
Nicholas-Applegate Investment Trust
600 West Broadway, 30th Floor
San Diego, California 92101
Nicholas-Applegate Capital Management
600 West Broadway, 30th Floor
San Diego, California 92101
Ladies and Gentlemen:
This will confirm our agreement that the Investment Advisory Agreement
between us dated April 19, 1993, as amended, is further amended by adding the
Large Cap Growth Fund series and International Core Growth Fund series as Funds
thereunder. The annual advisory fee with respect to the Large Cap Growth Fund
series shall be 0.75% of the first $500 million of the Fund's average daily net
assets, 0.675% of the next $500 million of net assets, and 0.65% of net assets
in excess of $1 billion, and the annual advisory fee with respect to the
International Core Growth Fund series shall be 1.00% of the first $500 million
of the Fund's average daily net assets, 0.90 of the next $500 million of net
assets, and 0.85% of net assets in excess of $1 billion..
In all other respects, the Investment Advisory Agreement, as
previously amended, will remain in full force and effect. Please sign this
letter below to confirm your agreement with this amendment.
Very truly yours,
s/E. Blake Moore, Jr.
-------------------------
E. Blake Moore, Jr.
Secretary
C-18
<PAGE>
AGREED:
Nicholas-Applegate Capital Management
By: Nicholas-Applegate Capital
Management Holdings, L.P., its
General Partner
By: Nicholas-Applegate Capital
Management Holdings, Inc., its
General Partner
s/E. Blake Moore, Jr.
By:
---------------------------
E. Blake Moore, Jr.
Secretary
C-19
<PAGE>
Exhibit 8.8
December 27, 1996
Nicholas-Applegate Investment Trust
600 West Broadway, 30th Floor
San Diego, California 92101
PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113
Ladies and Gentlemen:
Reference is made to the Custodian Services Agreement between us dated
April 1, 1993 (the "Agreement").
Pursuant to Section 2 of the Agreement, this will confirm that we wish
to appoint you to provide custodian services under the Agreement to our newly
established Large Cap Growth Fund and International Core Growth Fund.
Please indicate your acceptance of this appointment by signing the
letter below and returning a copy to us. Thank you for your assistance
regarding this matter.
Very truly yours,
E. Blake Moore, Jr.
Secretary
APPOINTED ACCEPTED:
PNC BANK, NATIONAL ASSOCIATION
By:
---------------------------
Title:
------------------------
C-20
<PAGE>
Exhibit 8.15
December 27, 1996
Nicholas-Applegate Investment Trust
600 West Broadway, 30th Floor
San Diego, California 92101
The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas, 32nd Floor
New York, New York 10036
Attention: Global Custody Division
PNC Bank, National Association
Airport Business Center
International Court 2
200 Stevens Drive
Lester, Pennsylvania 19113
Ladies and Gentlemen:
Reference is made to the Sub-Custodian Agreement dated as of April 1,
1993 among Nicholas-Applegate Investment Trust and you (the "Agreement").
Pursuant to Appendix A to the Agreement, we wish to add the Large Cap
Growth Fund and the Core Growth International Fund to the Agreement. Please
indicate your acceptance of this addition by signing two copies of this letter
below and returning them to us. Thank you for your assistance regarding this
matter.
Very truly yours,
E. Blake Moore, Jr.
Secretary
AGREED:
PNC BANK, NATIONAL ASSOCIATION
C-21
<PAGE>
By:
---------------------------
Title:
------------------------
C-22
<PAGE>
THE CHASE MANHATTAN BANK, N.A.
By:
---------------------------
Title:
------------------------
C-23
<PAGE>
Exhibit 9.9
December 27, 1996
Nicholas-Applegate Investment Trust
600 West Broadway, 30th Floor
San Diego, California 92101
PFPC INC.
103 Bellevue Parkway
Wilmington, Delaware 19809
Ladies and Gentlemen:
Reference is made to the Accounting Services Agreement between us
dated as of April 1, 1993 (the "Agreement").
Pursuant to Section 2 of the Agreement, we wish to add the Large Cap
Growth Fund and International Core Growth Fund to the Agreement.
Please indicate your acceptance of this addition by signing the letter
below and returning a copy to us. Thank you for your assistance regarding this
matter.
Very truly yours,
E. Blake Moore, Jr.
Secretary
APPOINTED ACCEPTED:
PFPC, INC.
By:
---------------------------
Title:
------------------------
C-24
<PAGE>
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
SoftSolution Network ID: LA-DPS-37800.14 Type: SMT
12/24/96 10:02 am
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
WORLDWIDE
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 98.0%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
ARGENTINA -- 0.7%
Compania Naviera Perez
SA-B................. 51,415 $ 292,551
Cresud SA.............. 225,000 443,250
------------
735,801
------------
AUSTRALIA -- 1.2%
Australian Gas & Light
Co. LTD.............. 120,000 505,440
Broken Hill Proprietary
Co. LTD.............. 1,620 23,023
F.H. Faulding & Co.
LTD.................. 4,200 21,130
Pioneer International
LTD.................. 98,000 292,001
Westfield Holdings
LTD.................. 30,000 421,200
------------
1,262,794
------------
BELGIUM -- 0.8%
Banque Bruxelles
Lambert SA........... 1,930 361,039
Barco NV............... 2,880 398,126
------------
759,165
------------
DENMARK -- 0.3%
Sparekassen Bikuben
A/S.................. 8,300 291,433
------------
FRANCE -- 5.3%
Accor SA............... 2,568 387,497
Axime Ex Segin*........ 5,700 725,248
Castorama Dubois....... 3,100 566,998
Cetelem................ 3,600 702,823
Christian Dior SA...... 4,200 560,278
Coflexip SA*........... 15,000 641,153
Lagardere Groupe SA.... 15,500 411,382
Salomon SA............. 470 302,744
Sidel SA............... 130 33,237
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
FRANCE (CONTINUED)
Total SA-B............. 14,200 $ 959,841
------------
5,291,201
------------
GERMANY -- 5.7%
Adidas AG.............. 10,000 738,983
Fresenius AG........... 6,700 1,233,254
Gerresheimer Glas AG... 2,900 544,610
Mannesmann AG.......... 2,400 877,831
RWE AG................. 18,000 726,102
SGL Carbon AG.......... 10,100 973,708
Siemens AG............. 1,100 603,919
------------
5,698,407
------------
GREECE -- 0.2%
OTE Hellenic*.......... 9,670 160,648
------------
HONG KONG -- 1.6%
C.P. Pokphand Co.
LTD.................. 482,000 229,064
Cheung Kong Holdings
LTD.................. 50,000 352,386
Hong Kong & China Gas
Co. LTD.............. 170,000 335,251
Hopewell Holdings
LTD.................. 11,000 6,401
HSBC Holdings LTD...... 30,000 450,019
Tai Cheung Holdings
LTD.................. 10,000 9,117
Tingyi (Cayman Island)
Holdings Co. LTD*.... 1,030,000 269,721
------------
1,651,959
------------
ITALY -- 1.1%
Ente Nazionale
Idrocarburi SpA...... 122,000 442,260
Telecom Italia SpA..... 182,000 287,886
Telecom Italia Mobile
SpA.................. 182,000 330,172
------------
1,060,318
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
WORLDWIDE
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
JAPAN -- 20.0%
Aida Engineering LTD... 14,000 $ 119,280
Canon, Inc............. 49,000 938,988
Daiichi Corp........... 43,000 1,001,738
Daiwa House Industry
Co. LTD.............. 104,000 1,641,257
Gunze LTD.............. 87,000 503,424
Hitachi Cable Co....... 75,000 608,708
Honda Motor Co. LTD.... 38,000 831,713
Hoya Corp.............. 25,000 864,215
Matsushita Industrial
Electric Co.......... 64,000 1,046,076
Minebea Co. LTD........ 98,000 842,328
Mitsubishi Bank LTD.... 47,250 1,003,100
Mitsubishi Estate Co.
LTD.................. 50,000 690,433
Mitsui Marine and Fire
Insurance Co......... 128,000 969,123
Nissan Motors Co.
LTD.................. 142,000 1,104,467
Olympus Optical Co.
LTD*................. 105,000 1,025,786
Onward Kashiyama Co.,
LTD.................. 35,000 532,619
Sanwa Bank LTD......... 50,000 1,009,816
Sekisui Chemical Co.... 43,000 565,497
Sekisui Plastics Co.
LTD.................. 79,000 457,132
Terumo Corp............ 82,000 916,631
Toyoda Machine Works
LTD.................. 100,000 1,080,269
Yamazen Corp.*......... 190,000 1,086,938
Yodogawa Steel Works
LTD.................. 90,000 709,314
Yokogawa Electric
Corp................. 45,000 473,439
------------
20,022,291
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
KOREA -- 0.6%
Korea Housing Bank*.... 15,000 $ 436,729
Korea Mobile
Telecommunications
Corp................. 180 228,119
------------
664,848
------------
MALAYSIA -- 1.2%
Hume Industries........ 47,000 237,599
Malayan Banking BHD.... 52,000 484,676
O.Y.L. Industries BHD.. 50,000 434,439
------------
1,156,714
------------
MEXICO -- 1.6%
Corporacion Industrial
San Luis SA de CV.... 88,000 474,304
Gruma SA............... 84,000 297,375
Grupo Industria Alfa,
SA de CV............. 22,000 291,408
Transportacion Maritima
Mexicana SA de CV.... 74,000 566,136
------------
1,629,223
------------
NETHERLANDS -- 2.5%
Hagemeyer NV........... 7,644 521,792
Hollandsche Beton Groep
NV................... 18 3,020
IHC Caland NV.......... 9,800 400,073
Koninklijke Volker
Stevin NV CVA........ 5,400 365,669
NV Holdingmaatschappij
De Telegraaf CVA..... 3,500 708,056
Oce-Van Der Grinten
NV................... 5,800 541,005
------------
2,539,615
------------
NORWAY -- 0.3%
Sensonor AS*........... 39,100 341,645
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
2
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
PHILIPPINES -- 0.3%
C&P Homes, Inc......... 150,000 $ 113,073
Fortune Cement
Corp.*............... 440,000 205,725
------------
318,798
------------
SINGAPORE -- 0.7%
City Developments
LTD.................. 50,000 444,207
DBS Land LTD........... 70,000 268,657
United Overseas Bank
LTD.................. 495 4,996
------------
717,860
------------
SOUTH AFRICA -- 0.1%
Liberty Life
Association of Africa
LTD.................. 4,000 125,313
------------
SPAIN -- 1.8%
Gas Natural SDG SA,
Class E.............. 4,000 691,645
Iberdrola SA........... 40,000 369,027
Telefonica de Espana
SA................... 48,000 761,905
------------
1,822,577
------------
SWEDEN -- 0.8%
Ericsson LM B-F........ 21,450 471,182
Nordbanken AB+......... 20,000 330,245
------------
801,427
------------
SWITZERLAND -- 2.7%
Ascom Holding AG....... 400 447,059
Ciba Geigy AG.......... 565 706,962
Holderbank Financiere
Glaris............... 10 7,546
Sandoz AG.............. 525 615,441
Schw
Rueckversicherungs... 450 456,050
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SWITZERLAND (CONTINUED)
Zurich
Versicherungsgesellschaft.. 1,500 $ 431,093
------------
2,664,151
------------
THAILAND -- 0.2%
K.R. Precision Public
Co. LTD -- Foreign... 34,860 176,821
------------
UNITED KINGDOM -- 6.3%
Bank of Scotland....... 2,020 7,347
British Aerospace PLC.. 48,000 628,788
British Petroleum Co.
PLC.................. 634 5,545
Danka Business Systems
PLC.................. 64,000 668,560
Dixons Group PLC....... 90,000 613,507
GKN PLC................ 64,400 933,977
Next PLC............... 100,000 773,937
Siebe PLC.............. 50,000 667,188
Smith (David S.)
Holdings PLC......... 110,000 516,670
Thorn EMI PLC.......... 19,126 491,175
Victrex PLC............ 48,000 217,404
WPP Group PLC.......... 260,000 793,000
------------
6,317,098
------------
UNITED STATES OF AMERICA++ -- 42.0%
Altera Corp.*+......... 14,600 815,775
America Online, Inc.*.. 8,200 459,200
Ascend Communications,
Inc.*................ 15,200 818,900
Aspect
Telecommunications,
Inc.*................ 9,200 420,900
Bed Bath & Beyond,
Inc.*................ 9,100 480,025
BMC Industries, Inc.... 13,300 285,950
Boston Chicken, Inc.*.. 6,800 231,625
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
3
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
WORLDWIDE
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
British Biotech PLC
(United Kingdom)*.... 8,000 $ 628,000
C Tec Corp.*........... 10,500 391,125
C-Cube Microsystems,
Inc.*................ 4,800 252,000
Cabletron Systems,
Inc.*................ 2,650 175,562
Cadence Design Systems,
Inc.*................ 7,700 339,762
Callaway Golf Co....... 14,400 385,200
Cambridge Tech
Partners, Inc.*...... 4,100 234,212
Camco International,
Inc.................. 11,900 374,850
Cellular
Communications,
Inc.*................ 1,700 86,912
Chesapeake Energy
Co.*................. 9,400 434,750
Cisco Systems, Inc.*... 7,400 343,175
Cognex Corp.*.......... 13,600 348,500
CompUSA, Inc.*......... 9,000 498,375
Concord EFS, Inc.*..... 5,500 145,750
Continental Airlines,
Inc.*................ 11,400 642,675
Danaher Corp........... 3,000 111,000
Elamex SA de CV
(Mexico)*............ 36,000 324,000
Elan Corp. PLC
Sponsored ADR
(Ireland)*........... 12,300 790,275
Electroglas, Inc.*..... 8,800 135,300
Electronics For
Imaging, Inc.*....... 12,800 556,800
Flextronics
International LTD
(Singapore)*......... 38,000 1,159,000
Fremont General
Corp................. 11,250 265,781
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
FSI International,
Inc.................. 12,400 $ 144,150
Gartner Group, Inc.*... 6,800 414,800
Gilead Sciences,
Inc.*................ 4,200 120,750
Grand Casinos, Inc.*... 12,350 370,500
Green Tree Financial
Corp................. 10,700 367,812
Grupo Tribasa SA de CV
Sponsored ADR
(Mexico)*............ 40,000 275,000
GTECH Holdings
Corp.*............... 10,400 322,400
Gucci Group NV
(Italy)*............. 14,800 710,400
HBO & Co............... 3,600 339,300
HFS Inc.*.............. 8,000 389,000
Hilton Hotels Corp..... 3,600 338,400
International Specialty
Products, Inc.*...... 24,000 303,000
Jones Medical
Industries, Inc...... 11,550 444,675
Kemet Corp.*........... 22,200 502,275
Kent Electonics
Corp.*............... 9,800 346,675
Koor Industries LTD
Sponsored ADR
(Israel)............. 16,900 327,437
Larsen & Toubro LTD
Sponsored GDR
(India).............. 30,000 471,000
Lattice Semiconductor
Corp.*............... 800 22,700
Lehman Brothers
Holdings, Inc........ 13,400 358,450
Lernout & Hauspie
Speech Products NV
(Belgium)*........... 35,000 1,128,750
L.G. Electronics, Inc.
Sponsored GDR New
(South Korea)*+...... 1,668 22,695
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
Linear Technology,
Inc.................. 8,300 $ 346,525
Liposome Company,
Inc.*................ 15,500 323,562
Liz Claiborne, Inc..... 9,200 315,100
Macromedia, Inc.*...... 6,700 286,425
Marshall Industries*... 10,900 332,450
Maxim Integrated
Products, Inc.*...... 10,000 310,000
McAfee Associates,
Inc.*................ 12,750 698,063
Medic Computer Systems,
Inc.*................ 6,200 469,650
Memtec LTD Sponsored
ADR (Australia)...... 19,000 510,625
Mentor Corp............ 11,800 275,825
Mercury General
Corp................. 5,800 241,425
Meredith Corp.......... 6,100 251,625
Microsoft Corp.*....... 3,500 360,938
Moneda Chile Fund LTD
(Chile)*............. 42,000 399,000
Money Store, Inc....... 15,750 439,031
Morgan Stanley Group,
Inc.................. 7,200 372,600
Nautica Enterprises,
Inc.*................ 7,300 348,575
Nice-Systems LTD
(Israel)*............ 40,000 520,000
North Fork
Bancorporation, Inc.. 8,500 202,938
Old Republic
International Corp... 12,300 399,750
Omnicare, Inc.......... 7,400 398,675
PT Telekomunikasi
Sponsored ADR
(Indonesia)*......... 16,000 494,000
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
Pairgain Technology,
Inc.*................ 6,000 $ 388,500
Penncorp Financial
Group, Inc........... 9,600 302,400
Peoplesoft Inc.*....... 7,200 414,000
Petro Canada........... 43,000 274,125
Phycor, Inc.*.......... 7,200 316,800
Picturetel Corp.*...... 7,800 241,800
Primark Corp........... 10,900 403,300
Quintiles Transnational
Corp.*............... 5,100 331,500
Reading & Bates
Corp.*............... 30,600 604,350
Robert Half
International,
Inc.*................ 18,700 909,288
Ross Stores, Inc....... 17,100 429,638
Saville Systems PLC
(Ireland)*........... 18,400 347,300
Seagate Technology,
Inc.*................ 11,952 654,372
Sonat Offshore Drilling
Co................... 8,900 453,900
Staples, Inc.*......... 15,300 311,738
Structural Dynamics
Research Corp.*...... 14,400 486,000
Student Loan Marketing
Association.......... 4,600 351,900
Sun Microsystems,
Inc.*................ 18,200 796,250
TCF Financial Corp..... 9,800 355,250
Telecom Corporation of
New Zealand Sponsored
ADR (New Zealand).... 5,000 358,125
Telefonos de Mexico SA
Sponsored ADR
(Mexico)............. 17,500 575,313
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
5
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
WORLDWIDE
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
Thermo Cardiosystems,
Inc.*................ 3,200 $ 216,800
Tidewater, Inc......... 13,700 520,600
Tuntex Distinct Corp.
(China).............. 5,001 31,911
Universal Health Realty
Income Trust*........ 5,600 297,500
U.S. Robotics Corp.*... 5,200 672,100
USA Waste Services,
Inc.*................ 10,100 257,550
Valero Energy Corp..... 10,700 263,488
Videotron Holdings PLC
Sponsored ADR (United
Kingdom)*............ 67,000 1,122,250
Watson
Pharmaceuticals*..... 7,600 304,000
Wyle Electronics,
Inc.................. 8,000 277,000
Xeikon NV Sponsored ADR
(Belgium)*........... 5,600 108,500
Xilinx, Inc.*.......... 4,300 136,525
Zions Bancorporation... 3,900 275,925
20th Century
Industries*.......... 10,300 172,525
------------
42,114,853
------------
TOTAL COMMON STOCKS
(Cost $83,191,256)................. 98,324,960
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
WARRANTS/RIGHTS -- 0.0%
- ---------------------------------------------------
SINGAPORE
United Overseas Bank
LTD, 06/17/97
(Cost $1,333)........ 208 $ 880
------------
TOTAL INVESTMENTS -- 98.0%
(Cost $83,192,589)................. $ 98,325,840
OTHER ASSETS IN EXCESS OF LIABILITIES
-- 2.0%............................ 2,017,186
------------
NET ASSETS -- 100.0%................. $100,343,026
------------
</TABLE>
- ------------
* Non-income producing security.
+ Rule 144A security.
++ Certain securities issued by foreign companies are classified as United
States securities as their underlying currency is the U.S. Dollar.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
INTERNATIONAL
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 95.1%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
ARGENTINA -- 0.7%
Compania Naviera Perez
SA.................. 10,170 $ 57,867
Cresud SA............. 56,000 110,320
-----------
168,187
-----------
AUSTRALIA -- 2.0%
Australian Gas & Light
Co. LTD............. 41,000 172,692
F.H. Faulding & Co.
LTD................. 1,000 5,031
Pioneer International
LTD................. 50,000 148,980
Westfield Holdings
LTD................. 11,600 162,864
-----------
489,567
-----------
BELGIUM -- 0.6%
Banque Bruxelles
Lambert SA.......... 380 71,085
Barco NV.............. 565 78,105
-----------
149,190
-----------
DENMARK -- 0.3%
Sparekassen Bikuben
A/S................. 1,800 63,202
-----------
FRANCE -- 6.9%
Accor SA.............. 800 120,716
Axime Ex Segin*....... 1,300 165,408
Castorama Dubois...... 800 146,322
Cetelem............... 1,000 195,229
Christian Dior SA..... 1,500 200,099
Coflexip SA*.......... 5,200 222,266
Lagardere Groupe SA... 5,000 132,704
Salomon SA............ 200 128,827
Sidel SA.............. 30 7,670
Total SA-B............ 4,800 324,453
-----------
1,643,694
-----------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
GERMANY -- 5.7%
Adidas AG............. 2,600 $ 192,136
Fresenius AG.......... 1,650 303,712
Gerresheimer Glas AG.. 800 150,237
Mannesmann AG......... 710 259,691
SGL Carbon AG......... 3,200 308,502
Siemens AG............ 270 148,235
-----------
1,362,513
-----------
GREECE -- 0.2%
OTE Hellenic*......... 3,260 54,117
-----------
HONG KONG -- 2.6%
C.P. Pokphand Co.
LTD................. 104,000 49,424
Cheung Kong Holdings
LTD................. 16,000 112,763
Hong Kong & China Gas
Co. LTD............. 56,000 110,436
Hopewell Holdings
LTD................. 2,523 1,468
HSBC Holdings LTD..... 12,000 180,008
Paliburg International
Holdings LTD........ 31,500 18,840
Tingyi (Cayman
Islands) Holding Co.
LTD*................ 520,000 136,170
-----------
609,109
-----------
ITALY -- 2.0%
Cn Eni SpA............ 30,000 108,752
Safilo SpA............ 12,000 252,069
Telecom Italia SpA.... 31,000 49,036
Telecom Italia Mobile
SpA................. 31,000 56,238
-----------
466,095
-----------
JAPAN -- 29.5%
Aida Engineering LTD.. 23,000 195,961
Canon, Inc............ 14,000 268,282
Daiichi Corp.......... 16,000 372,740
Daiwa House Industry
Co. LTD............. 25,000 394,533
Gunze LTD............. 43,000 248,819
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
INTERNATIONAL
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
JAPAN (CONTINUED)
Hitachi Cable Co...... 15,000 $ 121,742
Honda Motor Co. LTD... 11,000 240,759
Hoya Corp............. 6,000 207,412
Matsushita Electric
Co.................. 25,000 408,623
Minebea Co. LTD....... 29,000 249,260
Mitsubishi Bank LTD... 14,700 312,075
Mitsubishi Estate Co.
LTD................. 20,000 276,173
Mitsubishi Gas
Chemical Co. Inc.... 45,000 216,429
Mitsui Marine & Fire
Insurance Co........ 35,000 264,995
Nissan Motors Co.
LTD................. 43,000 334,451
Olympus Optical Co.
LTD................. 35,000 341,929
Sanwa Bank LTD........ 15,000 302,945
Sekisui Chemical
Co.................. 15,000 197,266
Sekisui Plastics Co.
LTD................. 32,000 185,167
Terumo Corp........... 25,000 279,461
Tokai Rika Co......... 30,000 281,809
Toyoda Machine Works
LTD................. 35,000 378,094
Yamazen Corp.*........ 73,000 417,613
Yodogawa Steel Works
LTD................. 31,000 244,319
Yokogawa Electric
Corp................ 27,000 284,064
-----------
7,024,921
-----------
KOREA -- 0.8%
Korea Housing Bank*... 4,000 116,461
Korea Mobile
Telecommunications... 60 76,040
-----------
192,501
-----------
MALAYSIA -- 1.4%
Hume Industries....... 24,000 121,327
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MALAYSIA (CONTINUED)
Malayan Banking BHD... 12,000 $ 111,848
O.Y.L. Industries
BHD................. 11,000 95,577
-----------
328,752
-----------
MEXICO -- 2.0%
Corporacion Industrial
San Luis, SA de CV.. 18,000 97,017
Grupo Industria Alfa,
SA de CV............ 7,000 92,721
Gruma SA*............. 50,000 177,009
Transportacion
Maritima Mexicana SA
de CV............... 15,000 114,757
-----------
481,504
-----------
NETHERLANDS -- 5.7%
Baan Co. NV*.......... 3,900 226,063
Hagemeyer NV.......... 3,233 220,690
Holdingsmaatschappij
de Telegraaf NV..... 1,100 222,532
IHC Caland NV......... 5,200 212,284
Oce-Van Der Grinten
NV.................. 1,800 167,898
Randstad Holdings NV.. 3,300 200,878
Volker Stevin NV...... 1,500 101,575
-----------
1,351,920
-----------
NORWAY -- 0.3%
Sensonor AS*.......... 8,000 69,902
-----------
PHILIPPINES -- 1.7%
C & P Homes, Inc...... 60,000 45,229
DMCI Holdings, Inc.*.. 364,000 236,183
Fortune Cement
Corp.*.............. 110,000 51,431
Republic Glass
Holdings Corp....... 192,400 69,029
-----------
401,872
-----------
SINGAPORE -- 1.4%
City Developments
LTD................. 20,000 177,683
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SINGAPORE (CONTINUED)
DBS Land LTD.......... 41,000 $ 157,356
-----------
335,039
-----------
SOUTH AFRICA -- 0.2%
Liberty Life
Association of
Africa LTD.......... 1,500 46,992
-----------
SPAIN -- 1.7%
Acerinox SA........... 80 9,024
Gas Natural SDG SA,
Class E............. 900 155,620
Iberdrola SA.......... 8,000 73,806
Telefonica de Espana
SA.................. 10,000 158,730
-----------
397,180
-----------
SWEDEN -- 1.1%
Ericsson LM B-F....... 7,040 154,644
Nordbanken AB......... 6,400 105,679
-----------
260,323
-----------
SWITZERLAND -- 3.1%
Ascom Holding AG...... 135 150,882
Ciba Geigy AG......... 190 237,739
Holderbank Financiere
Glaris.............. 5 3,773
Sandoz AG............. 170 199,286
Swiss Reinsurance
Co.................. 150 152,017
-----------
743,697
-----------
THAILAND -- 0.2%
K.R. Precision Public
Co. LTD -- Foreign.. 8,400 42,607
-----------
UNITED KINGDOM -- 10.2%
Bank of Scotland...... 707 2,571
British Aerospace
PLC................. 15,000 196,496
British Petroleum Co.
PLC................. 162 1,416
Danka Business Systems
PLC................. 18,000 188,033
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Dixons Group PLC...... 34,000 $ 231,770
GKN PLC............... 18,000 261,050
Next PLC.............. 27,000 208,963
Provident Financial
PLC................. 17,000 235,010
RTZ Corp. PLC......... 98 1,418
Siebe PLC............. 21,000 280,219
Smith (David S.)
Holdings PLC........ 32,000 150,304
Thorn EMI PLC......... 8,838 226,969
Victrex PLC........... 42,000 190,229
WPP Group PLC......... 87,000 265,350
-----------
2,439,798
-----------
UNITED STATES OF AMERICA++ -- 14.8%
British Biotech PLC
(United Kingdom)*... 3,700 290,450
Elamex SA de CV
(Mexico)............ 13,000 117,000
Elan Corp. PLC
Sponsored ADR
(Ireland)*.......... 6,400 411,200
Flextronics
International, LTD
(Singapore)*........ 11,700 356,850
Grupo Tribasa SA de CV
Sponsored ADR
(Mexico)*........... 8,000 55,000
Gucci Group NV
(Italy)*............ 6,200 297,600
Koor Industries LTD
Sponsored ADR
(Israel)............ 3,900 75,562
Larsen & Toubro LTD
Sponsored GDR
(India)............. 8,117 127,437
Lernout & Hauspie
Speech Products NV
(Belgium)*.......... 6,700 216,075
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
INTERNATIONAL
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
L.G. Electronics, Inc.
Sponsored GDR New
(South Korea)*+..... 372 $ 5,061
Memtec LTD Sponsored
ADR (Australia)..... 9,000 241,875
Moneda Chile Fund
Limited (Chile)*.... 8,000 76,000
Nice-Systems LTD
(Israel)*........... 13,000 169,000
Pliva Sponsored GDR
(United Kingdom)*... 2,500 46,775
PT Telekomunikasi
Indonesia Sponsored
ADR (Indonesia)*.... 3,600 111,150
Saville Systems PLC
(Ireland)*.......... 7,000 132,125
Telecom Corporation of
New Zealand
Sponsored ADR (New
Zealand)............ 3,800 272,175
Telefonos de Mexico SA
Sponsored ADR
(Mexico)............ 6,700 220,263
Videotron Holdings PLC
Sponsored ADR
(United Kingdom)*... 10,000 167,500
Xeikon NV Sponsored
ADR (Belgium)*...... 7,000 135,625
-----------
3,524,723
-----------
TOTAL COMMON STOCKS
(Cost $20,111,780)................ 22,647,405
-----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
REPURCHASE AGREEMENT -- 0.4%
- -------------------------------------------------
J.P. Morgan & Co.,
Inc.,
$73,000 at 5.35%
(Agreement dated
03/29/96, to be
repurchased at
$100,045 on
04/01/96;
collateralized by
$100,000 United
States Treasury
10.625%, due
08/15/15.)
(Cost $100,000)..... $ 100,000 $ 100,000
- -------------------------------------------------
COMMERCIAL PAPER -- 4.3%
- -------------------------------------------------
Associates Corporation
of America 5.43%,
04/01/96 (Cost
$1,016,693)......... 1,017,000 1,016,693
-----------
TOTAL INVESTMENTS -- 99.8%
(Cost $21,228,473)................ $23,764,098
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.2%............... 41,530
-----------
NET ASSETS -- 100.0%................ $23,805,628
-----------
</TABLE>
- ------------
* Non-income producing security.
+ Rule 144A restricted security.
++ These securities are classified as United States securities as their
underlying currency is the U.S. Dollar.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
EMERGING
COUNTRIES FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 95.6%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
ARGENTINA -- 3.8%
Cresud SA.................................. 101,000 $ 198,970
Compania Naviera Perez SA -- B............. 68,873 391,887
Siderca SA -- A............................ 166,000 166,830
----------
757,687
----------
BRAZIL -- 6.3%
Companhia Cervejaria Brahma *.............. 775,000 392,207
Ficap Marvin SA -- Preferred *............. 939,000 35,165
Itausa Investimentos SA.................... 284,000 192,591
Refripar S.A. *............................ 68,000,000 178,947
Tam Transportes Aereos Regionais SA *...... 5,030,000 218,917
Telec do Rio *............................. 2,576,000 190,071
Unipar-Uniao de Industrias Petroquimicas SA
-- Preferred B........................... 51,863 44,619
----------
1,252,517
----------
CHINA -- 1.0%
Shanghai Post & Telecommunications "B"
Shares *................................. 330,000 190,080
----------
190,080
----------
GREECE -- 2.7%
Alfa Beta Vassilopoulos.................... 6,000 83,665
Alte Technological......................... 4,133 73,154
Hellenic Bottle Co. SA..................... 5,000 186,546
OTE Hellenic *............................. 11,150 185,093
----------
528,458
----------
HONG KONG -- 5.6%
C. P. Pokphand Co. LTD..................... 364,000 172,986
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
HONG KONG (CONTINUED)
Peregrine Investments Holdings LTD......... 164,000 $ 264,037
Sinocan Holdings LTD....................... 748,000 282,930
Tingy (Cayman Islands) Holdings Co. LTD *.. 1,480,000 387,560
----------
1,107,513
----------
INDONESIA -- 3.5%
PT Indorama Synthetics -- Foreign.......... 3,500 11,711
PT Roda Vivatex -- Foreign................. 50,500 32,393
PT Semen Gresik -- Foreign................. 44,000 155,698
PT Sorini Corporation -- Foreign........... 13,000 68,377
PT Tigaraksa Satria -- Foreign............. 50,000 248,022
PT Wicaksana Overseas -- Foreign........... 60,000 174,471
----------
690,672
----------
KOREA -- 5.6%
Cho Hung Bank Co. LTD...................... 6,500 88,023
Daehan City *.............................. 1,270 107,327
Korea Electric Power Corp.................. 3,980 164,386
Korea Housing Bank *....................... 8,000 232,922
Korea Mobile Telecommunications, Corp...... 60 76,040
LG Info & Communications LTD............... 2,100 206,580
Samsung Electronics -- (New) *............. 15 1,763
Seoul City Gas Co. LTD..................... 1900 150,119
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
KOREA (CONTINUED)
Shinhan Bank............................... 3500 $ 81,997
----------
1,109,157
----------
MALAYSIA -- 6.1%
Fraser & Neave............................. 45,000 199,052
Fraser & Neave Rights *.................... 18,000 11,161
Hume Industries............................ 31,000 156,714
Jaya Tiasa Holdings BHD.................... 61,000 390,284
Malayan Banking BHD........................ 20,000 186,415
O. Y. L. Industries BHD.................... 31,000 269,352
----------
1,212,978
----------
MEXICO -- 6.0%
Corporacion Interamericana de Entertainment
SA *..................................... 199,000 343,012
Corporacion Industrial San Luis SA de CV... 36,000 194,033
Gruma SA *................................. 43,000 152,228
Grupo Industrial Alfa, SA de CV............ 12,000 158,950
Industrias Penoles SA -- CP................ 25,000 106,736
Tablex SA de CV............................ 52,000 93,768
Transportacion Maratima Mexicana SA -- A... 9,000 68,855
Transportacion Maratima Mexicana SA -- L... 10,000 82,206
----------
1,199,788
----------
PERU -- 1.8%
Cementos Norte Pacasmayo................... 35,749 46,886
CPT Telefonica de Peru SA -- B............. 116,664 240,162
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
PERU (CONTINUED)
Enrique Ferreyros SA....................... 48,874 $ 61,196
----------
348,244
----------
PHILIPPINES -- 6.6%
DMCI Holdings *............................ 475,000 308,206
C & P Homes, Inc........................... 26,500 19,976
Filinvest Land Inc. *...................... 200,000 93,511
Fortune Cement Corp. *..................... 420,000 196,374
Marsman & Co., Inc......................... 315,000 189,361
Republic Glass Holdings Corp............... 1,375,000 493,321
Selecta Dairy Products, Inc................ 50,000 2,901
----------
1,303,650
----------
POLAND -- 0.9%
Elektrim Spolda Akcyjna SA................. 15,000 88,542
Zaklady Przemyslu Cukierniczego Jutrzenka
SA....................................... 6,000 100,463
----------
189,005
----------
SINGAPORE -- 1.9%
City Development LTD....................... 22,000 195,451
DBS Land LTD............................... 50,000 191,898
----------
387,349
----------
SOUTH AFRICA -- 4.5%
Barlow LTD................................. 18,000 230,075
Dorbyl LTD................................. 9,200 131,429
Liberty Life Association of Africa LTD..... 4,500 140,977
Metro Cash & Carry......................... 28,000 121,053
Pick'n Pay Stores LTD...................... 76,000 268,571
----------
892,105
----------
THAILAND -- 8.3%
Grammy Entertainment PLC -- Foreign *...... 39,000 355,459
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
12
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING
COUNTRIES FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
THAILAND (CONTINUED)
K.R. Precision Public Co., LTD --
Foreign.................................. 33,040 $ 167,589
Serm Suk Co. LTD -- Local.................. 2,000 41,371
Serm Suk Co. LTD -- Foreign................ 3,700 110,260
Srithai Superware Company LTD -- Foreign... 24,300 183,923
Thai Farmers Bank -- Foreign............... 29,000 340,162
Thai Stanley Electric Co., LTD --
Foreign.................................. 15,000 70,141
Tipco Asphalt Co. LTD -- Foreign........... 62,800 328,496
United Communication Industry -- Foreign... 4,000 54,844
----------
1,652,245
----------
TURKEY -- 3.5%
Anadolu Biracilik ve Malt Sanayii S.A...... 1,200,000 110,138
Demirbank T. A. S.......................... 3,283,000 127,482
Eregli Demir Ve Celik Fabrikalari T.A.S.... 1,230,000 144,154
Raks Electroni *........................... 230,000 90,935
Tukas *.................................... 340,000 88,817
Turk Siemens Kablo Ve Elektrik Sanayii A.
S........................................ 400,000 141,203
----------
702,729
----------
UNITED STATES OF AMERICA++ -- 27.5%
Banco Frances del Rio de la Plata SA
(Argentina).............................. 10,100 276,488
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
Banco Industrial Colombiano Sponsored ADR
-- (Colombia)............................ 4,000 $ 74,000
Banque Marocaine (Morocco) *............... 14,000 177,800
BSES LTD (India) *......................... 10,000 165,000
Cementos Diamante SA (Peru)................ 3,400 67,283
Czech Republic Fund, Inc. (Czech
Republic)................................ 10,134 140,609
Elamex SA de CV (Mexico)................... 31,000 279,000
Erciyas Biracilik VE Malt Sanayii
(Turkey)................................. 4,000 48,000
First New Independent States Regional *.... 15,000 120,000
Flextronics International LTD (Singapore)
*........................................ 14,100 430,050
Gilat Satellite Networks LTD *(Israel)..... 6,000 145,500
Grasim Industries (India).................. 13,300 232,750
Gujarat Ambuja Cements Sponsored GDR
(India).................................. 22,600 276,737
India Growth Fund, Inc (India)............. 3,867 56,555
Koor Industries LTD Sponsored ADR
(Israel)................................. 4,600 89,125
La Cementos Nacional (Ecuador) 144A *+..... 1,270 196,850
Larsen & Toubro LTD Sponsored GDR
(India).................................. 14,000 219,800
Moneda Chile Fund LTD (Chile) *............ 10,000 95,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
13
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
Morgan Stanley India Investment Fund, Inc.
(India) *................................ 10,000 $ 111,250
Nice Systems LTD (Israel).................. 30,700 399,100
PT Telekomunikasi Sponsored ADR (Indonesia)
*........................................ 7,300 225,387
Pakistan Investment Fund, Inc. (Pakistan).. 18,100 110,862
Pliva Sponsored GDR (United Kingdom)....... 5,500 102,905
ROC Taiwan Fund (Taiwan) *................. 1,000 10,375
Samsung Electronics
Co. -- Voting Sponsored GDR (Korea) *.... 32 1,896
Samsung Electronics
Co. -- New GDS (Korea) *................. 10 571
Saville Systems PLC (Ireland) *............ 10,800 203,850
SDL, Inc. *................................ 1,950 58,500
Siderurgica Venezolana Sivensa, Saica
S.A.C.A. (Venezuela)..................... 47,300 94,600
Taiwan Fund, Inc. (Taiwan)................. 3,750 85,313
Telecomunicacoes Brasileiras S.A. -- ADR
(Brazil)................................. 3,600 179,100
Teledata Communication * (Israel).......... 22,400 238,000
Telefonos De Mexico SA Sponsored ADR
(Mexico)................................. 5,800 190,675
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA++ (CONTINUED)
Total Access Communication (Thailand)...... 31,000 $ 272,800
Wockhardt LTD * (India).................... 14,000 115,500
----------
5,491,231
----------
TOTAL COMMON STOCKS
(Cost $17,636,887)...................................... $19,015,408
----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
COMMERCIAL PAPER -- 7.2%
- -----------------------------------------------------------------------
Associates Corporation of America,
5.43%, 04/01/96.......................... $ 485,000 485,000
UBS Finance Delaware Inc.
5.43%, 04/01/96.......................... 952,000 952,000
----------
TOTAL COMMERCIAL PAPER
(Cost $1,437,000)....................................... 1,437,000
----------
TOTAL INVESTMENTS -- 102.8%
(Cost $19,073,887)...................................... $20,452,408
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.8%)...........
(553,422)
----------
NET ASSETS -- 100.0%...................................... $19,898,986
----------
</TABLE>
- ------------
* Non-income producing security
+ Rule 144A restricted security
++ Certain securities issued by foreign companies are classified as United
States securities and their underlying currency is the U.S. Dollar.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
WORLDWIDE INTERNATIONAL EMERGING
GROWTH GROWTH COUNTRIES
FUND FUND FUND
--------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investments, at value*............................................. $ 98,325,840 $ 23,764,098 $ 20,452,408
Foreign currencies, at value**..................................... 1,820,893 739,804 40,833
Cash............................................................... 110,721 3,917 12,396
Receivable for investment securities sold.......................... 2,328,956 860,105 371,163
Receivable for interests sold...................................... 188,918 44,576 194,538
Dividends and interest receivable.................................. 282,917 66,818 19,845
Due from advisor................................................... -- 27,007 29,500
Deferred organization costs........................................ 12,927 829 --
Other assets....................................................... 663 191 2,806
-----------------------------------------------
Total assets..................................................... 103,071,835 25,507,345 21,123,489
-----------------------------------------------
LIABILITIES
Payable for investment securities purchased........................ 2,277,497 1,649,877 1,159,097
Payable for interests repurchased.................................. 261,296 -- 9,049
Accrued expenses................................................... 190,016 51,840 56,357
-----------------------------------------------
Total liabilities................................................ 2,728,809 1,701,717 1,224,503
-----------------------------------------------
NET ASSETS........................................................... $ 100,343,026 $ 23,805,628 $ 19,898,986
-----------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital.................................................... $ 76,264,978 $ 21,186,125 $ 18,753,381
Accumulated net investment income.................................. 545,343 110,388 48,405
Accumulated net realized gain (loss)............................... 7,494,440 (189,498) (256,470)
Accumulated net realized foreign exchange gain (loss).............. 907,863 165,204 (24,857)
Net unrealized foreign exchange gain (loss)........................ (2,849) (2,216) 6
Net unrealized appreciation of investments and foreign currency.... 15,133,251 2,535,625 1,378,521
-----------------------------------------------
Net assets....................................................... $ 100,343,026 $ 23,805,628 $ 19,898,986
-----------------------------------------------
*Investments, at cost................................................ $ 83,192,589 $ 21,228,473 $ 19,073,887
-----------------------------------------------
**Foreign currencies, at cost........................................ $ 1,820,308 $ 738,051 $ 42,545
-----------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
15
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
WORLDWIDE INTERNATIONAL EMERGING
GROWTH GROWTH COUNTRIES
FUND FUND FUND
-------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME
Dividends........................................................... $ 1,303,881 $ 291,589 $ 115,314
Interest............................................................ 171,883 34,048 48,637
--------------------------------------------
Total income...................................................... 1,475,764 325,637 163,951
--------------------------------------------
EXPENSES
Advisory fee........................................................ 980,556 187,128 107,680
Accounting fee...................................................... 75,052 75,000 69,519
Administration fee.................................................. 34,149 6,507 2,940
Audit & tax services................................................ 27,488 4,777 2,331
Custodian fee....................................................... 65,994 57,911 34,923
Insurance........................................................... 2,381 458 233
Legal fee........................................................... 1,731 514 179
Miscellaneous....................................................... 32,555 28,856 15,349
Organization costs.................................................. 6,313 300 --
Trustees' fee....................................................... 8,411 8,450 8,450
--------------------------------------------
Total expenses.................................................... 1,234,630 369,901 241,604
Less: Reimbursement from advisor.................................... (58,228) (117,279) (103,775)
--------------------------------------------
Net expenses...................................................... 1,176,402 252,622 137,829
--------------------------------------------
Net investment income........................................... 299,362 73,015 26,122
--------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Security transactions............................................... 8,223,209 61,956 (35,846)
Foreign exchanges................................................... 792,348 197,499 (25,318)
Change in net unrealized appreciation of investments and foreign
currency............................................................ 9,091,917 2,584,830 1,751,439
--------------------------------------------
Net gain on investments............................................. 18,107,474 2,844,285 1,690,275
--------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ 18,406,836 $ 2,917,300 $ 1,716,397
--------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
16
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
EMERGING COUNTRIES FUND
WORLDWIDE GROWTH FUND INTERNATIONAL GROWTH FUND -------------------------
------------------------- ------------------------- FOR THE
FOR THE FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1996 1995 1996 1995 1996 1995*
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net investment income.................. $ 299,362 $ 240,302 $ 73,015 $ 33,806 $ 26,122 $ 22,283
Net realized gain (loss) from security
transactions and foreign exchange.... 9,015,557 (1,521,055) 259,455 (323,554) (61,164) (220,163)
Change in net unrealized appreciation
(depreciation) of investments and
foreign currency..................... 9,091,917 277,524 2,584,830 (270,042) 1,751,439 (372,912)
---------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations.................... 18,406,836 (1,003,229) 2,917,300 (559,790) 1,716,397 (570,792)
---------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners.............. 17,650,729 39,169,871 6,044,445 15,092,291 16,175,253 5,244,412
Withdrawals by partners................ (33,276,911) (30,285,996) (2,768,514) (609,534) (1,272,742) (1,393,542)
---------------------------------------------------------------------------------
Net increase (decrease) in net assets
from transactions in interests..... (15,626,182) 8,883,875 3,275,931 14,482,757 14,902,511 3,850,870
---------------------------------------------------------------------------------
Total increase in net assets......... 2,780,654 7,880,646 6,193,231 13,922,967 16,618,908 3,280,078
NET ASSETS:
BEGINNING OF PERIOD...................... 97,562,372 89,681,726 17,612,397 3,689,430 3,280,078 --
---------------------------------------------------------------------------------
END OF PERIOD............................ $100,343,026 $97,562,372 $23,805,628 $17,612,397 $19,898,986 $3,280,078
---------------------------------------------------------------------------------
</TABLE>
- ---------------
*Commenced operations on November 28, 1994.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
17
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company organized as a Delaware business trust,
is comprised of twelve investment vehicles (each a "Fund" and collectively the
"Funds") as of March 31, 1996. Each Fund has up to five Portfolios which have
invested in the respective series of the Master Trust to achieve their
investment objective.
The investment objectives of the Funds are as follows:
Worldwide Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in growth stocks of U.S. and foreign companies.
International Growth Fund seeks to maximize long-term capital appreciation
through investment primarily in equity securities of non-U.S. companies.
Emerging Countries Fund seeks to maximize long-term capital appreciation
through investment primarily in equity securities of companies in developing
countries of the world.
SECURITIES TRANSACTIONS
Equity securities are valued at the last sale price (for exchange-listed
securities) or the mean between the last bid and asked price (if lacking any
sales and for over-the-counter securities). Debt securities generally are valued
at the mean between the last bid and asked prices. Securities with 60 days or
less remaining to maturity are valued on an amortized cost basis which
approximates market value.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under the direction of the Master
Trust's Board of Trustees.
Securities transactions are recognized on the trade date. Realized gains and
losses from securities transactions are calculated using the first-in, first-out
method. Dividend income is recognized on the ex-dividend date, and interest
income is recorded on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
FOREIGN CURRENCY TRANSLATION
Foreign currency balances of the Worldwide Growth Fund, International Growth
Fund and Emerging Countries Fund, other than the cost of investments, are
translated into U.S. dollar values at the bid price of such currency against the
U.S. dollar last quoted on the valuation date.
Gains and losses on securities transactions resulting from fluctuations in
foreign currency exchange rates are not isolated. The Funds report these foreign
currency related transactions as components of realized and unrealized gains for
financial reporting purposes, whereas such components are treated as ordinary
income for Federal income tax purposes.
FEDERAL INCOME TAXES
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Portfolios.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Master Trust have been allocated to the
various Funds based upon management's best estimate of the costs applicable to
each Fund. These costs have been deferred and will be amortized over a period of
60 months from the date the Funds commenced operations.
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 of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
- --------------------------------------------------------------------------------
18
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate"). The advisory fee is computed daily for the
Funds based upon the following percentages of each Fund's average daily net
assets:
<TABLE>
<CAPTION>
FIRST $500 NEXT $500 EXCESS OF
MILLION MILLION $1 BILLION
------------- ------------- ------------
<S> <C> <C> <C>
Worldwide Growth Fund........ 1.00% 0.90% 0.85%
International Growth Fund.... 1.00% 0.90% 0.85%
Emerging Countries Fund...... 1.25% 1.25% 1.25%
</TABLE>
EXPENSE LIMITATIONS
Nicholas-Applegate and the Master Trust have undertaken to limit the Funds'
expenses to certain annual levels through March 31, 1997. In subsequent years,
overall operating expenses for each Fund will not fall below the percentage
limitation until the Investment Adviser has been fully reimbursed for fees
foregone or expenses paid by the Investment Adviser under this agreement, as
each Fund will reimburse the Investment Advisor in subsequent years when
operating expenses (before reimbursement) are less than the applicable
percentage limitation.
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the period from inception (respectively) to March 31, 1996 are
as follows:
<TABLE>
<S> <C>
Worldwide Growth Fund............... $ 233,923
International Growth Fund........... 195,657
Emerging Countries Fund............. 111,773
</TABLE>
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the fiscal year ended March 31, 1996, were as
follows (in 000's):
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Worldwide Growth Fund........... $ 123,233 $ 138,719
International Growth Fund....... 27,950 25,118
Emerging Countries Fund......... 23,411 9,294
</TABLE>
At March 31, 1996, the net unrealized appreciation (depreciation) based on the
cost of investments for Federal income tax purposes was as follows (in 000's):
<TABLE>
<CAPTION>
TAX GROSS GROSS NET
COST OF UNREALIZED UNREALIZED UNREALIZED
INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Worldwide Growth
Fund............ $ 83,201 $ 16,965 $ 1,840 $ 15,125
International
Growth Fund..... 21,238 2,765 236 2,529
Emerging
Countries Fund.. 19,074 1,905 527 1,378
</TABLE>
D. OFF BALANCE SHEET RISKS
The Worldwide Growth, International Growth and Emerging Countries Funds'
investment in foreign securities may entail risks due to the potential of
political and economic instability in the countries where the securities are
being offered. In addition, foreign exchange fluctuations could affect the value
of positions held. It is the Funds' policy to continuously monitor its exposure
to these risks.
- --------------------------------------------------------------------------------
19
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
E. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF RATIO OF
RATIO OF RATIO OF NET INVESTMENT NET INVESTMENT
EXPENSES TO EXPENSES TO INCOME TO INCOME (DEFICIT)
AVERAGE AVERAGE AVERAGE TO AVERAGE
NET ASSETS, NET ASSETS, NET ASSETS, NET ASSETS, PORTFOLIO
AFTER EXPENSE BEFORE EXPENSE AFTER EXPENSE BEFORE EXPENSE TURNOVER
REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS RATE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WORLDWIDE GROWTH FUND*
For the year ended 03/31/96..... 1.20% 1.26% 0.31% 0.25% 132.20%
For the year ended 03/31/95..... 1.20% 1.30% 0.24% 0.14% 98.54%
For the period ended
03/31/94+..................... 1.20% 1.36% 0.01% (0.15)% 95.09%
INTERNATIONAL GROWTH FUND*
For the year ended 03/31/96..... 1.35% 1.98% 0.39% (0.24)% 141.02%
For the year ended 03/31/95..... 1.35% 1.85% 0.24% (0.26%) 74.85%
For the period ended
03/31/94+..................... 1.35% 2.28% 0.41% (0.52%) 23.71%
EMERGING COUNTRIES FUND*
For the year ended 03/31/96..... 1.60% 2.80% 0.30% (0.90%) 118.21%
For the period ended
03/31/95+..................... 1.60% 1.81% 1.73% 1.52% 60.79%
<CAPTION>
BROKERAGE
COMMISSIONS
PER SHARE
- ----------------------------------
<S> <C>
WORLDWIDE GROWTH FUND*
For the year ended 03/31/96..... $ 0.0187
For the year ended 03/31/95..... --
For the period ended
03/31/94+..................... --
INTERNATIONAL GROWTH FUND*
For the year ended 03/31/96..... $ 0.0128
For the year ended 03/31/95..... --
For the period ended
03/31/94+..................... --
EMERGING COUNTRIES FUND*
For the year ended 03/31/96..... $ 0.0022
For the period ended
03/31/95+..................... --
</TABLE>
- -------------
*Worldwide Growth Fund, International Growth Fund and Emerging Countries Fund
commenced operations on April 19, 1993, January 3, 1994 and November 28, 1994,
respectively.
+Annualized
- --------------------------------------------------------------------------------
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
ERNST & YOUNG LLP
515 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
PHONE: 213 977 3200
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
NICHOLAS-APPLEGATE MUTUAL FUNDS
We have audited the accompanying statements of assets and liabilities of the
following portfolios of Nicholas-Applegate Mutual Funds: Worldwide Growth A, B &
C Portfolios, International Growth A, B & C Portfolios, and Emerging Countries
A, B & C Portfolios (hereinafter the "Portfolios"), as of March 31, 1996, and
the related statements of operations and changes in net assets and the financial
highlights for the fiscal year then ended. These financial statements and
financial highlights are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The statements of changes in net
assets and the financial highlights of the A & C Portfolios for the fiscal year
ended March 31, 1995 and the financial highlights of Worldwide Growth A & C
Portfolios for the fiscal year ended March 31, 1994 were audited by other
auditors whose report dated May 12, 1995 expressed an unqualified opinion on
those financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
the Portfolios as of March 31, 1996, and the results of their operations,
changes in their net assets and the financial highlights for the fiscal year
then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
May 10, 1996
- --------------------------------------------------------------------------------
21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
ERNST & YOUNG LLP
515 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
PHONE: 213 977 3200
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
NICHOLAS-APPLEGATE INVESTMENT TRUST
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the following series of Nicholas-Applegate
Investment Trust: Worldwide Growth Fund, International Growth Fund, and Emerging
Countries Fund (hereinafter the "Funds"), as of March 31, 1996, and the related
statements of operations and changes in net assets for the fiscal year then
ended. These financial statements are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The statement of changes in net assets of the
Funds for the fiscal year ended March 31, 1995 were audited by other auditors
whose report dated May 12, 1995 expressed an unqualified opinion on those
financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 March 31, 1996, by correspondence with
the custodians. 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 1996 financial statements referred to above present fairly,
in all material respects, the financial positions of the Funds as of March 31,
1996, and the results of their operations and changes in their net assets for
the fiscal year then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
May 10, 1996
- --------------------------------------------------------------------------------
22
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
EMERGING
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK -- 98.6%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
ADVERTISING -- 0.4%
CKS Group*................................. 65,000 $ 1,657,500
Eagle River Interactive, Inc.*............. 40,000 520,000
------------
2,177,500
------------
AEROSPACE -- 0.5%
Hexcel Corp.*.............................. 43,600 512,300
Rohr Industries, Inc.*..................... 90,000 1,620,000
Tracor, Inc.*.............................. 40,000 697,500
------------
2,829,800
------------
AGRICULTURE -- 0.5%
Dekalb Genetics Corp. Class B.............. 19,500 1,447,875
Delta & Pine Land Co....................... 30,000 1,668,750
------------
3,116,625
------------
AIR FREIGHT/SHIPPING -- 0.3%
Atlas Air, Inc.*........................... 42,600 1,597,500
------------
AIRLINES -- 2.6%
Alaska Air Group, Inc.*.................... 55,200 1,476,600
America West Airlines, Inc.*............... 125,400 2,680,425
Mesa Airlines, Inc.*....................... 225,000 2,418,750
Midwest Express Holdings, Inc.*............ 40,000 1,500,000
Reno Air, Inc.*............................ 20,000 250,000
Trans World Airlines, Inc.*................ 335,000 6,700,000
------------
15,025,775
------------
ALCOHOLIC BEVERAGES -- 0.1%
Mondavi (Robert) Corp.*.................... 21,900 563,925
------------
APPAREL -- 3.3%
Authentic Fitness Corp..................... 59,500 1,539,562
Cole Kenneth Productions, Inc.*............ 106,000 1,894,750
Donnkenny, Inc.*........................... 99,000 1,596,375
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
APPAREL (CONTINUED)
Marisa Christina, Inc.*.................... 40,400 $ 813,050
Nautica Enterprises, Inc.*................. 108,825 5,196,394
Quiksilver, Inc.*.......................... 46,200 1,466,850
St. John Knits, Inc........................ 24,000 1,617,000
Urban Outfitters, Inc.*.................... 20,000 605,000
Vans, Inc.*................................ 60,000 832,500
Wolverine Worldwide, Inc................... 139,800 3,914,400
------------
19,475,881
------------
BIOTECHNOLOGY -- 5.2%
Alteon, Inc.*.............................. 60,000 615,000
Applied Bioscience International, Inc.*.... 80,000 730,000
Arthrocare Corp.*.......................... 27,200 598,400
Biochem Pharma, Inc.*...................... 10,300 422,300
Carrington Laboratories, Inc.*............. 8,500 244,375
Cytel Corp.*............................... 30,000 225,000
Cytyc Corp.*............................... 7,000 117,250
Depotech Corp.*............................ 20,000 490,000
Endovascular Technologies, Inc.*........... 40,000 400,000
Femrx, Inc.*............................... 20,000 195,000
Genome Therapeutics Corp.*................. 37,000 383,875
Gilead Sciences, Inc.*..................... 45,000 1,293,750
IDEXX Laboratories Inc.*................... 29,800 1,251,600
Integra Lifesciences Corp.*................ 23,000 270,250
Interneuron Pharmaceuticals, Inc.*......... 63,400 2,353,725
Martek Biosciences Corp.*.................. 65,800 2,368,800
Matritech, Inc.*........................... 13,000 151,125
Medimmune, Inc.*........................... 55,000 866,250
Mentor Corp................................ 144,200 3,370,675
Neurex Corp.*.............................. 120,000 2,490,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
23
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
BIOTECHNOLOGY (CONTINUED)
Neurogen Corp.*............................ 52,000 $ 1,794,000
Nexstar Pharmaceuticals, Inc.*............. 50,000 987,500
Pharmaceutical Product Development,
Inc.*.................................... 9,000 317,250
Protein Design Laboratories, Inc.*......... 72,000 1,773,000
Quintiles Transnational Corp.*............. 48,600 3,159,000
Regeneron Pharmaceuticals, Inc.*........... 40,000 510,000
Sequana Therapeutics, Inc.*................ 8,000 156,000
Sequus Pharmaceuticals, Inc.*.............. 194,100 2,681,006
Theratech, Inc.*........................... 16,400 348,500
------------
30,563,631
------------
BROADCASTING -- 2.3%
American Radio Systems Corp.*.............. 59,400 2,004,750
Argyle Television, Inc.*................... 22,000 478,500
Chancellor Broadcasting Corp.*............. 45,000 990,000
Data Broadcasting Corp.*................... 60,000 637,500
E Z Communications, Inc.*.................. 10,000 215,000
Emmis Broadcasting Corp.*.................. 35,100 1,351,350
Evergreen Media Corp.*..................... 69,400 2,498,400
Renaissance Communications Corp.*.......... 68,250 1,697,719
Saga Communications, Inc.*................. 40,050 851,062
SFX Broadcasting, Inc.*.................... 12,000 409,500
United Video Satellite Group, Inc.*........ 36,600 768,600
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
BROADCASTING (CONTINUED)
Westwood One, Inc.*........................ 72,200 $ 1,326,675
Young Broadcasting Inc.*................... 11,400 339,150
------------
13,568,206
------------
BUILDING MATERIALS -- 0.2%
NCI Building Systems*...................... 20,000 685,000
Watsco, Inc................................ 10,000 260,000
------------
945,000
------------
CATALOG/OUTLET STORES -- 0.2%
The Sports Authority, Inc.*................ 32,800 897,800
------------
CHEMICALS -- 0.6%
Mississippi Chemical Corp.................. 96,800 1,960,200
OM Group, Inc.............................. 42,000 1,559,250
------------
3,519,450
------------
CLOTHING CHAINS -- 0.7%
Charming Shoppes, Inc.*.................... 310,000 1,598,437
Ross Stores, Inc........................... 98,300 2,469,787
------------
4,068,224
------------
COAL MINING -- 0.1%
Zeigler Coal Holding Company............... 25,000 362,500
------------
COMMERCIAL/INDUSTRIAL SERVICES -- 0.8%
BT Office Products Int'l, Inc.*............ 33,000 556,875
Caribiner International, Inc.*............. 7,000 180,250
Ideon Group, Inc........................... 34,000 378,250
Personnel Group Inc.*...................... 30,000 547,500
Physician Support Systems Inc.*............ 23,000 393,875
Pia Merchandising Services, Inc.*.......... 23,300 433,962
Pre Paid Legal Services, Inc.*............. 55,500 825,563
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
24
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
COMMERCIAL/INDUSTRIAL SERVICES (CONTINUED)
Profit Recovery Group, Inc.*............... 15,000 $ 232,500
Protection One Inc.*....................... 78,000 1,150,500
Superior Services, Inc.*................... 9,000 119,250
------------
4,818,525
------------
COMPUTERS/OFFICE AUTOMATION -- 4.9%
Auspex Systems, Inc.*...................... 140,300 2,507,862
Brooktrout Technology, Inc.*............... 12,000 414,000
Cognex Corp.*.............................. 117,400 3,008,375
Computer Horizons Corp.*................... 96,300 3,635,325
Computervision Corp.*...................... 54,400 564,400
Data General Corp.*........................ 139,700 2,043,112
Eltron International, Inc.*................ 39,150 1,291,950
IDX Systems Corp.*......................... 8,000 232,000
Microcom, Inc.*............................ 119,900 3,582,012
Micros Systems, Inc.*...................... 67,700 1,692,500
Mylex Corp.*............................... 80,000 1,900,000
Network Appliance, Inc.*................... 7,000 222,250
Safeguard Scientifics, Inc.*............... 58,650 3,438,356
Security Dynamics Technology, Inc.*........ 17,500 927,500
Telxon Corp.*.............................. 151,600 3,221,500
Xeikon NV Sponsored ADR*................... 7,500 145,313
------------
28,826,455
------------
CONTAINERS -- 0.2%
Aptargroup, Inc............................ 14,500 601,750
U.S. Can Corp.*............................ 20,000 340,000
------------
941,750
------------
CONTRACT DRILLING -- 1.2%
Global Marine, Inc.*....................... 107,000 1,070,000
Nabors Industries, Inc.*................... 58,300 830,775
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
CONTRACT DRILLING (CONTINUED)
Noble Drillings, Corp.*.................... 185,700 $ 2,298,037
Reading & Bates Corp.*..................... 149,100 2,944,725
------------
7,143,537
------------
DEPARTMENT/DISCOUNT STORES -- 0.3%
Carson, Pirie Scott & Co.*................. 34,500 776,250
Proffits, Inc.*............................ 25,200 793,800
------------
1,570,050
------------
DRUGS/PHARMACEUTICALS -- 3.3%
Biovail Corp.*............................. 53,000 1,503,875
Columbia Laboratories, Inc.*............... 30,000 356,250
Curative Technologies, Inc.*............... 80,000 1,480,000
Dura Pharmaceuticals, Inc.*................ 104,500 5,185,812
Fuisz Technologies, Inc.*.................. 85,000 2,295,000
IDEC Pharmaceuticals Corp.*................ 64,000 1,424,000
Jones Medical Industries, Inc.............. 18,750 721,875
Matrix Pharmaceutical, Inc.*............... 40,000 925,000
Nabi, Inc.*................................ 129,600 1,709,100
Noven Pharmaceuticals, Inc.*............... 70,000 1,006,250
Pathogenesis Corp.*........................ 40,000 655,000
Sangstat Medical Corp.*.................... 10,000 161,250
Sepracor, Inc.*............................ 125,000 1,828,125
------------
19,251,537
------------
ELECTRONIC DATA PROCESSING -- 0.5%
Affiliated Computer Services, Inc.*........ 34,800 1,446,375
Envoy Corp.*............................... 63,700 1,496,950
------------
2,943,325
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
25
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 2.6%
Belden, Inc................................ 38,800 $ 1,144,600
Checkpoint Systems, Inc.*.................. 224,800 5,591,900
Coherent, Inc.*............................ 96,300 4,092,750
Cyberoptics Corp.*......................... 48,600 1,397,250
Itron, Inc.*............................... 41,000 1,834,750
Robotic Vision Systems, Inc.*.............. 33,200 535,350
Trident International, Inc.*............... 18,000 342,000
------------
14,938,600
------------
ENTERTAINMENT -- 0.5%
Family Golf Centers, Inc.*................. 20,000 535,000
Hollywood Entertainment Corp.*............. 40,000 530,000
Premiere Radio Network, Inc.*.............. 26,400 495,000
Regal Cinemas, Inc.*....................... 32,925 1,218,225
------------
2,778,225
------------
ENVIRONMENTAL SERVICES -- 1.8%
Allied Waste Industries, Inc.*............. 40,000 365,000
Continental Waste Industries, Inc.*........ 58,333 634,371
Newpark Resources, Inc.*................... 20,585 612,404
Tetra Technologies, Inc.*.................. 42,300 729,675
United Waste Systems, Inc.*................ 86,600 4,330,000
U.S. Filter Corp.*......................... 47,600 1,332,800
U.S.A. Waste Services, Inc.*............... 103,700 2,644,350
------------
10,648,600
------------
FINANCE COMPANIES -- 1.6%
AmeriCredit Corp.*......................... 99,000 1,373,625
CMAC Investment Corp....................... 42,300 2,389,950
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
FINANCE COMPANIES (CONTINUED)
First Merchants Acceptance, Inc.*.......... 16,300 $ 360,637
Imperial Credit Industries, Inc.*.......... 91,800 2,249,100
North American Mortgage Co................. 72,200 1,480,100
Resource Bancshares Mortgage Group, Inc.*.. 11,900 185,937
WestCor., Inc.............................. 56,100 1,037,850
------------
9,077,199
------------
FINANCIAL SERVICES -- 0.2%
Cityscape Financial*....................... 25,000 900,000
------------
GAMBLING -- 0.7%
Grand Casinos, Inc.*....................... 98,200 2,946,000
Sodak Gaming, Inc.*........................ 30,000 712,500
WMS Industries, Inc.*...................... 5,400 93,825
------------
3,752,325
------------
HEALTH TECHNOLOGY/SERVICES -- 0.0%
Prime Medical Services, Inc.*.............. 18,000 234,000
------------
HOME FURNISHINGS -- 0.4%
Bush Industries, Inc. Class A.............. 12,000 303,000
Cort Business Services Corp.*.............. 30,000 540,000
Furniture Brands International, Inc.*...... 20,000 185,000
Renters Choice, Inc.*...................... 80,000 1,390,000
------------
2,418,000
------------
HOMEBUILDING -- 1.4%
American Homestar Corp.*................... 10,000 198,750
Beazer Homes USA, Inc.*.................... 12,000 210,000
Champion Enterprises, Inc.*................ 39,700 1,136,413
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
26
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
HOMEBUILDING (CONTINUED)
Hovnanian Enterprises, Inc. Class A*....... 20,000 $ 141,250
Kaufman & Broad Home Corp.................. 80,000 1,280,000
NVR, Inc.*................................. 15,000 143,437
Oakwood Homes Corp......................... 37,400 1,855,975
Redman Industries, Inc.*................... 27,800 562,950
Toll Brothers, Inc.*....................... 65,400 1,128,150
United States Home Corp.*.................. 66,100 1,702,075
------------
8,359,000
------------
HOSPITALS -- 0.3%
Impath, Inc.*.............................. 9,000 132,750
National Surgery Centers, Inc.*............ 37,000 1,193,250
NCS Healthcare*............................ 8,600 210,700
Renal Care Group, Inc.*.................... 7,000 194,250
Vitalcom, Inc.*............................ 10,300 137,765
------------
1,868,715
------------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 0.5%
Granite Construction, Inc.................. 50,000 1,475,000
Greenwich Air Services, Inc.*.............. 37,000 1,572,500
------------
3,047,500
------------
LIFE INSURERS -- 0.3%
American Travellers Corp.*................. 53,000 1,570,125
------------
LODGING -- 0.8%
Bristol Hotel Company*..................... 40,400 1,100,900
Doubletree Corp.*.......................... 14,300 391,463
Prime Hospitality Corp.*................... 187,500 2,554,688
Studio Plus Hotels, Inc.*.................. 31,500 874,125
------------
4,921,176
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MACHINERY/EQUIPMENT -- 1.3%
Computational Systems, Inc.*............... 20,000 $ 355,000
Digitran Systems, Inc.*.................... 14,500 145
Duriron Company, Inc....................... 61,900 1,702,250
Etec Systems, Inc.*........................ 15,000 210,000
Global Industrial Technologies*............ 10,700 256,800
Greenfield Industries, Inc................. 61,500 2,129,438
JLG Industries, Inc........................ 53,500 2,447,625
Miller Industries, Inc./ Tenn.*............ 14,000 476,000
------------
7,577,258
------------
MANAGED HEALTHCARE/HMO'S/PPO'S -- 1.8%
CRA Managed Care, Inc.*.................... 19,100 682,825
Health Management Systems, Inc.*........... 139,800 3,949,350
Inphynet Medical Management, Inc.*......... 14,200 253,825
Maxicare Health Plans, Inc.*............... 101,000 2,518,687
Medcath, Inc.*............................. 28,200 824,850
OccuSystems, Inc.*......................... 48,800 1,110,200
Orthodontic Centers of America, Inc.*...... 39,200 1,176,000
------------
10,515,737
------------
MEDICAL SPECIALTIES -- 1.0%
Express Scripts, Inc.*..................... 21,600 1,009,800
Visx, Inc.*................................ 134,900 4,923,850
------------
5,933,650
------------
MEDICAL SUPPLIES -- 5.6%
AVECOR Cardiovascular, Inc.*............... 24,100 328,362
Capstone Pharmacy Services*................ 10,000 90,000
Conmed Corp.*.............................. 13,350 327,075
Gulf South Medical Supply, Inc.*........... 51,800 1,955,450
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
27
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
MEDICAL SUPPLIES (CONTINUED)
Hologic, Inc.*............................. 74,100 $ 1,685,775
Invacare Corp.............................. 95,000 2,683,750
Iridex Corp.*.............................. 16,000 164,000
Kensey Nash Corp.*......................... 15,600 222,300
Keravision, Inc.*.......................... 40,000 495,000
Lunar Corp.*............................... 30,000 1,282,500
Metra Biosystems, Inc.*.................... 34,000 484,500
Minimed, Inc.*............................. 20,000 360,000
Nellcor Puritan Bennett, Inc.*............. 14,400 927,000
Neuromedical Systems Inc.*................. 115,000 2,501,250
Omnicare, Inc.............................. 94,600 5,096,575
Oncogene Sciences, Inc.*................... 30,000 273,750
Orthologic Corp.*.......................... 40,000 1,015,000
Osteotech, Inc.*........................... 15,000 112,500
Physio-Controls International Corp.*....... 70,900 1,418,000
Quest Medical, Inc.*....................... 55,000 666,875
ResMed, Inc.*.............................. 20,900 276,925
Serologicals Corp.*........................ 15,000 412,500
Steris Corp.*.............................. 74,000 2,220,000
Target Therapeutics, Inc.*................. 84,100 5,098,563
Uromed Corp.*.............................. 49,500 569,250
Vital Signs, Inc........................... 42,700 1,046,150
Vivus, Inc.*............................... 20,000 620,000
------------
32,333,050
------------
MEDICAL/NURSING/HEALTH SERVICES -- 3.4%
ABR Information Services, Inc.*............ 37,125 1,726,312
Arbor Health Care Co.*..................... 40,000 1,060,000
EmCare Holdings, Inc.*..................... 42,300 1,147,388
Grancare, Inc.*............................ 20,000 360,000
Mariner Health Group, Inc.*................ 110,500 1,823,250
Multicare Companies*....................... 42,600 1,208,775
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MEDICAL/NURSING/HEALTH SERVICES (CONTINUED)
Pediatric Services of America, Inc.*....... 26,900 $ 682,587
Phycor, Inc.*.............................. 73,025 3,213,100
Physician Sales & Services, Inc.*.......... 80,200 1,984,950
Regency Health Services, Inc.*............. 25,000 281,250
Renal Treatment Centers, Inc.*............. 79,800 1,895,250
Rotech Medical Corp.*...................... 112,300 4,155,100
Sterling Healthcare Group*................. 12,000 171,000
------------
19,708,962
------------
METALS -- 1.3%
Agnico Eagle Mines, Ltd.................... 129,500 2,314,812
Commonwealth Aluminum Corp................. 100,000 1,775,000
Mueller Industries, Inc.*.................. 84,600 2,992,725
Schnitzer Steel Industries, Inc. Class A... 600 15,675
UNR Industries, Inc........................ 46,600 372,800
------------
7,471,012
------------
MILITARY/DEFENSE TECHNOLOGY -- 0.2%
Watkins-Johnson Co......................... 29,300 1,047,475
------------
MULTI-LINE INSURERS -- 0.3%
Penncorp Financial Group, Inc.............. 54,600 1,719,900
------------
OIL/GAS PRODUCTION -- 0.8%
Barrett Resources Corp.*................... 47,900 1,197,500
Brown (Tom), Inc.*......................... 71,000 1,002,875
Global Natural Resources, Inc.*............ 48,800 646,600
Lomak Petroleum, Inc....................... 18,000 211,500
Newfield Exploration Co.*.................. 20,000 610,000
Nuevo Energy Co.*.......................... 10,000 287,500
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
28
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
OIL/GAS PRODUCTION (CONTINUED)
Vintage Petroleum, Inc..................... 31,400 $ 639,775
------------
4,595,750
------------
OILFIELD SERVICES/EQUIPMENT -- 4.2%
BJ Services Co.*........................... 122,300 4,097,050
Camco International, Inc................... 39,700 1,250,550
Dawson Production Services, Inc.*.......... 15,000 168,750
Energy Venture, Inc.*...................... 15,000 399,375
Falcon Drilling, Inc.*..................... 100,000 2,225,000
Global Industries LTD.*.................... 36,000 756,000
Marine Drilling Company, Inc.*............. 375,000 2,953,125
Oceaneering International, Inc.*........... 99,000 1,348,875
Pool Energy Service Co.*................... 20,200 224,725
Pride Petroleum Services, Inc.*............ 78,400 1,107,400
Seacor Holdings, Inc.*..................... 77,100 2,843,063
Smith International, Inc.*................. 75,100 1,896,275
Tuboscope Vetco International, Corp.*...... 80,000 780,000
Varco International, Inc.*................. 99,700 1,208,863
Weatherford Enterra, Inc.*................. 89,500 3,121,313
------------
24,380,364
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 1.7%
Accustaff, Inc.*........................... 38,400 969,600
Copart, Inc.*.............................. 41,100 1,017,225
Corestaff, Inc.*........................... 15,000 457,500
G&K Services, Inc.......................... 16,450 440,038
Learning Tree*............................. 16,000 316,000
Meta Group, Inc.*.......................... 21,000 593,250
National Education Corp.*.................. 110,000 1,292,500
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER COMMERCIAL/ INDUSTRIAL SERVICES
(CONTINUED)
National Wireless Holdings, Inc.*.......... 9,500 $ 147,250
Norrell Corp............................... 21,900 725,437
On Assignment, Inc.*....................... 7,700 292,600
PMT Services, Inc.*........................ 62,100 1,490,400
Robert Half International, Inc.*........... 35,800 1,740,775
Romac International, Inc.*................. 20,000 615,000
------------
10,097,575
------------
OTHER CONSUMER DURABLES -- 0.4%
Sola International, Inc.*.................. 80,000 2,490,000
------------
OTHER CONSUMER NON-DURABLES -- 0.6%
Blyth Industries, Inc.*.................... 54,000 1,795,500
USA Detergents, Inc.*...................... 59,650 1,938,625
------------
3,734,125
------------
OTHER CONSUMER SERVICES -- 1.0%
Amre, Inc.*................................ 50,000 931,250
Apollo Group, Inc. Class A*................ 41,698 1,626,222
Career Horizons, Inc.*..................... 40,000 1,190,000
U.S. Order, Inc.*.......................... 34,000 697,000
Wackenhut Corrections Corp.*............... 28,000 1,092,000
------------
5,536,472
------------
OTHER FINANCIAL SERVICES -- 0.1%
WFS Financial, Inc.*....................... 30,000 562,500
------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 1.3%
Enterprise Systems, Inc.*.................. 7,800 215,475
Horizon Mental Health Management, Inc.*.... 15,600 329,550
Parexel International Corp.*............... 19,400 839,050
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
29
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
OTHER HEALTH TECHNOLOGY/ SERVICES (CONTINUED)
Physician Computer Network, Inc.*.......... 200,000 $ 2,725,000
RTW, Inc.*................................. 29,400 1,087,800
Summit Medical Systems, Inc.*.............. 31,000 604,500
Veterinary Centers America, Inc.*.......... 72,000 1,944,000
------------
7,745,375
------------
OTHER INSURANCE SERVICES -- 0.1%
Fidelity National Financial, Inc........... 24,860 385,330
First American Financial Corp.............. 11,400 327,750
------------
713,080
------------
OTHER PRODUCERS/MANUFACTURING -- 0.7%
BMC Industries, Inc........................ 79,600 1,711,400
Chicago Miniature Lamp, Inc.*.............. 11,400 370,500
Galoob Lewis Toys, Inc.*................... 40,000 810,000
Rexel, Inc.*............................... 30,000 367,500
Wolverine Tube, Inc.*...................... 19,100 775,938
------------
4,035,338
------------
OTHER TECHNOLOGY -- 1.0%
Computer Products, Inc.*................... 86,000 1,161,000
Henry (Jack) & Associates, Inc............. 24,100 587,438
Renaissance Solutions, Inc.*............... 23,100 669,900
Technology Solutions Company*.............. 33,000 895,125
Uniphase Corp.*............................ 30,000 1,162,500
3D Systems Corp.*.......................... 66,900 1,404,900
------------
5,880,863
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER TRANSPORTATION -- 0.1%
United Transnet, Inc.*..................... 20,000 $ 472,500
------------
PROPERTY-CASUALTY INSURERS -- 1.0%
Allied Group, Inc.......................... 23,000 914,250
Capmac Holdings, Inc....................... 40,000 980,000
HCC Insurance Holdings, Inc.*.............. 20,000 1,097,500
LaSalle Re Holdings Ltd.................... 49,300 1,059,950
US Facilities Corp......................... 24,100 451,875
Vesta Insurance Group, Inc................. 34,950 1,140,244
------------
5,643,819
------------
PUBLISHING -- 0.0%
Norwood Promotional Products, Inc.*........ 10,800 224,100
------------
RAILROADS -- 0.1%
Railtex, Inc.*............................. 32,000 820,000
------------
REAL ESTATE BROKERS/SERVICES -- 0.6%
Amresco, Inc............................... 122,900 1,797,412
Insignia Financial Group, Inc. Class A*.... 40,000 975,000
NHP, Inc.*................................. 25,000 462,500
Redwood Trust, Inc......................... 19,000 389,500
------------
3,624,412
------------
REGIONAL BANKS -- 0.1%
Provident Bankshares Corp.................. 22,000 731,500
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.8%
CWM Mortgage Holdings, Inc................. 140,500 2,265,562
FelCor Suite Hotels, Inc................... 19,100 592,100
Shurgard Storage Centers, Inc. Class A..... 25,100 658,875
Storage USA, Inc........................... 24,300 835,313
------------
4,351,850
------------
RESTAURANTS -- 1.5%
Apple South, Inc........................... 77,000 1,886,500
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
30
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
RESTAURANTS (CONTINUED)
CKE Restaurants, Inc....................... 67,500 $ 1,130,625
Foodmaker, Inc.*........................... 190,000 1,330,000
Longhorn Steaks, Inc.*..................... 30,500 701,500
Manhattan Bagel Company, Inc.*............. 32,300 750,975
Papa John's International, Inc.*........... 18,300 816,637
Quality Dining, Inc.*...................... 16,900 498,550
Rainforest Cafe, Inc.*..................... 20,000 630,000
Showbiz Pizza Time, Inc.*.................. 60,000 1,155,000
------------
8,899,787
------------
RETAIL/TRADE -- 0.0%
Genesco Inc.*.............................. 19,000 90,250
Madden Steven, Ltd.*....................... 4,900 31,850
------------
122,100
------------
RETAIL/FOOD DISTRIBUTION -- 0.5%
Performance Food Group Co.*................ 17,000 416,500
Richfood Holdings, Inc..................... 98,000 2,762,375
------------
3,178,875
------------
SAVINGS & LOAN ASSOCIATIONS -- 0.8%
Coast Savings Financial, Inc.*............. 90,200 2,818,750
Commercial Federal Corp.................... 43,000 1,671,625
------------
4,490,375
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 3.0%
C.P. Clare Corp.*.......................... 5,700 111,150
Emerson Radio Corp.*....................... 33,600 86,100
Epic Design Technology, Inc.*.............. 84,600 2,585,587
Flextronics International, LTD.*........... 89,800 2,738,900
IMP, Inc.*................................. 53,000 371,000
Intermagnetics General Corp.*.............. 67,400 1,145,800
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SEMICONDUCTORS/ELECTRONIC COMPONENTS
(CONTINUED)
Kent Electronics Corp.*.................... 30,000 $ 1,061,250
Level One Communications, Inc.*............ 52,000 1,443,000
NU Horizons Electronics Corp.*............. 20,000 272,500
Radisys Corp.*............................. 9,000 144,000
Sanmina Corp.*............................. 140,000 4,165,000
SDL, Inc.*................................. 55,600 1,668,000
Smart Modular Technologies, Inc.*.......... 26,000 406,250
Wyle Electronics, Inc...................... 40,000 1,385,000
------------
17,583,537
------------
SOFTWARE -- 13.0%
Applied Microsystems Corp.*................ 13,000 121,875
Applix, Inc.*.............................. 65,400 2,289,000
Aspen Technology, Inc.*.................... 40,000 1,720,000
Astea International, Inc.*................. 35,000 1,032,500
Atria Software, Inc.*...................... 47,200 2,584,200
Bachman Information Systems*............... 40,000 335,000
BDM International, Inc.*................... 35,000 1,338,750
Borland International, Inc.*............... 154,000 2,772,000
Business Objects SA Sponsored ADR*......... 58,400 4,964,000
CBT Group PLC Sponsored ADR*............... 40,800 2,998,800
Ciber, Inc.*............................... 16,600 543,650
Clarify, Inc.*............................. 20,000 785,000
Cognos, Inc.*.............................. 76,100 4,318,675
Comshare, Inc.*............................ 20,000 460,000
Continuum, Inc.*........................... 19,600 815,850
Cooper & Chyan Technology, Inc.*........... 35,000 490,000
Cylink Corp.*.............................. 9,000 159,750
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
31
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE (CONTINUED)
Datastream Systems, Inc.*.................. 21,600 $ 469,800
Dataworks Corp.*........................... 35,000 446,250
Dendrite International, Inc.*.............. 31,500 689,063
Engineering Animation, Inc.*............... 8,000 167,000
Fulcrum Technologies, Inc.*................ 12,300 461,250
Harbinger Corp.*........................... 70,500 1,251,375
HCIA, Inc.*................................ 20,000 940,000
Health Systems Design Corp.*............... 7,000 96,250
HNC Software, Inc.*........................ 60,400 4,107,200
IKOS Systems, Inc.*........................ 41,600 696,800
Imnet Systems, Inc.*....................... 30,000 907,500
Indus Group, Inc.*......................... 20,500 399,750
Inference Corp. Class A*................... 4,000 74,000
Integrated Systems, Inc.*.................. 36,400 1,756,300
JDA Software Group, Inc.*.................. 45,000 534,375
Lernout & Hauspie Speech Products NV*...... 35,000 1,128,750
Maxis, Inc.*............................... 23,600 584,100
McAfee Associates, Inc.*................... 42,400 2,321,400
MDL Information Systems, Inc.*............. 24,100 507,606
Mecon, Inc.*............................... 19,000 375,250
Medic Computer Systems, Inc.*.............. 19,100 1,446,825
Meta Tools, Inc.*.......................... 30,000 562,500
Meta-Software, Inc.*....................... 40,000 670,000
National Instruments Corp.*................ 61,000 1,281,000
Novadigm, Inc.*............................ 26,000 393,250
Perceptron, Inc.*.......................... 35,700 923,738
Powercerv Corp.*........................... 42,400 631,362
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE (CONTINUED)
Premenos Technology Corp.*................. 80,200 $ 1,443,600
Prism Solutions, Inc.*..................... 4,800 127,200
Pure Software, Inc.*....................... 25,000 862,500
Quality Systems, Inc.*..................... 15,000 330,000
Quick Response Services, Inc.*............. 15,000 386,250
Rational Software Corp.*................... 71,800 2,836,100
Saville Systems PLC Sponsored ADR*......... 24,800 468,100
Scopus Technology, Inc.*................... 39,000 585,000
Segue Software*............................ 8,000 168,000
SQA, Inc.*................................. 25,000 681,250
Sterling Software, Inc.*................... 51,500 3,630,750
Structural Dynamics Research Corp.*........ 168,700 5,693,625
TCSI Corp.*................................ 37,700 1,149,850
Techforce Corp.*........................... 20,000 210,000
Triple PNV*................................ 30,000 337,500
Veritas Software Co.*...................... 12,300 398,213
Verity, Inc.*.............................. 40,000 1,350,000
Viasoft, Inc.*............................. 54,900 1,544,063
Visio Corp.*............................... 5,400 151,200
Wind River Systems, Inc.*.................. 20,800 639,600
Workgroup Technology Corp.*................ 26,500 573,063
Zoran Corp.*............................... 38,600 858,850
7th Level, Inc.*........................... 11,500 116,438
------------
76,092,896
------------
SPECIALTY CHAINS -- 2.7%
Duty Free International, Inc............... 56,400 747,300
Garden Ridge Corp.*........................ 12,500 571,875
Inacom Corp.*.............................. 60,000 1,027,500
Just for Feet, Inc.*....................... 72,800 3,030,300
Men's Warehouse, Inc.*..................... 77,700 2,447,550
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
32
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SPECIALTY CHAINS (CONTINUED)
Orchard Supply Hardware Stores Corp.*...... 40,000 $ 945,000
Party City Corp.*.......................... 8,000 116,000
Petco Animal Supplies, Inc.*............... 21,100 944,225
Pier 1 Imports, Inc........................ 192,700 2,432,837
Regis Corp................................. 14,500 445,875
West Marine, Inc.*......................... 5,000 232,500
Williams-Sonoma, Inc.*..................... 134,200 3,053,050
------------
15,994,012
------------
SPECIALTY INSURERS -- 0.2%
Amerin Corp.*.............................. 25,000 681,250
United Dental Care, Inc.*.................. 17,300 670,375
------------
1,351,625
------------
TELECOMMUNICATIONS EQUIPMENT -- 5.8%
Aspect Telecommunications Corp.*........... 169,100 7,736,325
Broadband Technologies, Inc.*.............. 20,000 510,000
Cable Design Technologies, Inc.*........... 58,500 2,149,875
California Amplifier, Inc.*................ 50,800 1,358,900
Coherent Communications Systems Corp.*..... 38,400 797,400
Comverse Technology, Inc.*................. 40,000 965,000
Davox Corp.*............................... 10,000 177,500
Gilat Satellite Networks Ltd.*............. 64,200 1,556,850
Inter-Tel, Inc.*........................... 35,700 647,062
Intercel, Inc.*............................ 89,400 2,011,500
IPC Information Systems, Inc.*............. 22,200 521,700
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS EQUIPMENT (CONTINUED)
Microwave Power Devices, Inc.*............. 2,200 $ 18,150
Natural Microsystems Corp.*................ 40,000 1,200,000
Network Equipment Technologies, Inc.*...... 132,900 4,036,837
Nice-Systems Ltd. Sponsored ADR*........... 26,000 338,000
P Com, Inc.*............................... 51,400 1,034,425
Pairgain Technologies, Inc.*............... 86,100 5,574,975
Premiere Technologies, Inc.*............... 12,000 279,000
Teltrend, Inc.*............................ 33,200 1,510,600
Trescom International, Inc.*............... 64,800 955,800
Westell Technologies, Inc.*................ 20,000 740,000
------------
34,119,899
------------
TELEPHONE -- 0.2%
Intermedia Communications of Florida,
Inc.*.................................... 49,800 915,075
Pricellular Corp. Class A*................. 6,375 85,266
------------
1,000,341
------------
TOBACCO PRODUCTS -- 0.3%
Mafco Consolidated Group, Inc.*............ 98,800 1,531,400
------------
TRANSPORTATION -- 0.1%
Avondale Industries, Inc.*................. 35,000 608,125
------------
TRUCKING -- 0.3%
Landstar System, Inc.*..................... 73,700 1,842,500
Swift Transportation Co.*.................. 10,000 177,500
------------
2,020,000
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
33
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
WHOLESALE DISTRIBUTION -- 1.4%
Anicom, Inc.*.............................. 9,000 $ 121,500
Central Garden & Pet Co.*.................. 43,000 408,500
Daisytek International Corp.*.............. 3,800 125,400
GEAC Computer Corp. LTD*................... 41,200 645,638
Tech Data Corp.*........................... 256,000 4,288,000
U.S. Office Products Co.*.................. 81,700 2,532,700
------------
8,121,738
------------
TOTAL COMMON STOCKS
(Cost $415,151,661)...................................... 575,781,838
------------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<CAPTION>
COMMERCIAL PAPER -- 2.4%
<S> <C> <C>
- ------------------------------------------
Associates
Corporation of
America
5.43%,
04/01/96 (Cost
$14,134,735).. $14,139,000 $14,134,735
----------
TOTAL INVESTMENTS -- 101.0%
(Cost $429,286,396)......... $589,916,573
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (1.0%)............ (5,830,191)
----------
NET ASSETS -- 100.0%.......... $584,086,382
----------
<FN>
- ------------
* Non-income producing security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
34
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
CORE
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 95.0%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
AIRLINES -- 2.0%
Comair Holdings, Inc....................... 101,550 $ 3,528,862
Southwest Airlines Co...................... 160,000 4,740,000
-----------
8,268,862
-----------
ALCOHOLIC BEVERAGES -- 1.2%
Panamerican Beverages, Inc. Class B........ 125,000 5,046,875
-----------
APPAREL -- 4.5%
Gucci Group NV*............................ 170,000 8,160,000
Nike, Inc. Class B......................... 72,300 5,874,375
Tommy Hilfiger Corp.*...................... 110,000 5,046,250
-----------
19,080,625
-----------
AUTOMOBILES -- 1.2%
Chrysler Corp.............................. 79,500 4,948,875
-----------
BIOTECHNOLOGY -- 5.5%
Amgen, Inc.*............................... 93,800 5,452,125
Biochem Pharma, Inc.*...................... 159,500 6,539,500
Biogen, Inc.*.............................. 63,300 3,766,350
Genetics Institute, Inc.*.................. 70,000 4,567,500
IDEXX Laboratories, Inc.*.................. 72,000 3,024,000
-----------
23,349,475
-----------
BROADCASTING -- 3.6%
British Sky Broadcasting Sponsored ADR
(United Kingdom)......................... 77,200 3,097,650
Infinity Broadcasting Corp. Class A*....... 108,150 4,691,006
Tele-Communications, Inc. Class A* Liberty
Media Group.............................. 101,100 2,666,513
Tele-Communications, Inc. Class A* TCI
Group.................................... 249,900 4,638,769
-----------
15,093,938
-----------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
CATALOG/OUTLET STORES -- 1.1%
Viking Office Products, Inc.*.............. 85,000 $ 4,728,125
-----------
COMPUTERS/OFFICE AUTOMATION -- 7.8%
Ceridian Corp.*............................ 156,300 6,720,900
Cisco Systems, Inc.*....................... 128,000 5,936,000
Computer Sciences Corp.*................... 74,600 5,249,975
Newbridge Networks Corp.*.................. 85,800 4,826,250
Solectron Corp.*........................... 95,000 4,180,000
Sun Microsystems, Inc.*.................... 84,700 3,705,625
3 Com Corp.*............................... 58,400 2,328,700
-----------
32,947,450
-----------
DEPARTMENT/DISCOUNT STORES -- 1.3%
Kohls Corp.*............................... 85,000 5,386,875
-----------
DRUGS/PHARMACEUTICALS -- 1.4%
Elan Corp. PLC ADR*........................ 28,200 1,811,850
Genzyme Corp. -- General Division*......... 14,400 792,000
Watson Pharmaceuticals, Inc.*.............. 77,600 3,104,000
-----------
5,707,850
-----------
ELECTRONIC DATA PROCESSING -- 1.1%
First Data Corp............................ 66,977 4,721,879
-----------
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 1.4%
Fore Systems, Inc.*........................ 80,000 5,720,000
-----------
ENTERTAINMENT -- 0.9%
Viacom, Inc. Class B*...................... 86,500 3,643,813
-----------
FINANCE COMPANIES -- 0.5%
Green Tree Financial Corp.................. 61,000 2,096,875
-----------
FINANCIAL SERVICES -- 0.1%
Advanta Corp............................... 10,600 551,200
-----------
FOOD CHAINS -- 1.8%
Safeway, Inc.*............................. 258,400 7,364,400
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
35
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
CORE
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
GAMBLING -- 4.2%
International Game Technology.............. 350,000 $ 4,768,750
ITT Corp.*................................. 131,200 7,872,000
Mirage Resorts, Inc.*...................... 111,200 4,878,900
-----------
17,519,650
-----------
HOMEBUILDING -- 0.6%
Pulte Corp................................. 89,800 2,413,375
-----------
HOSPITALS -- 2.5%
Columbia HCA Healthcare Corp............... 98,000 5,659,500
Tenet Healthcare Corp.*.................... 225,000 4,725,000
-----------
10,384,500
-----------
LODGING -- 3.4%
HFS, Inc.*................................. 156,400 7,604,950
Host Marriott Corp.*....................... 237,700 3,208,950
Renaissance Hotel Group*................... 166,000 3,569,000
-----------
14,382,900
-----------
MANAGED HEALTH CARE/HMO'S/PPO'S -- 2.6%
Healthsource, Inc.*........................ 160,000 6,200,000
United Healthcare Corp.*................... 74,300 4,569,450
-----------
10,769,450
-----------
MEDICAL SUPPLIES -- 4.1%
Boston Scientific Corp.*................... 122,700 5,644,200
Medtronic, Inc............................. 34,600 2,063,025
Nellcor Puritan Bennett, Inc.*............. 76,000 4,883,000
Omnicare, Inc.............................. 90,000 4,848,750
-----------
17,438,975
-----------
OIL/GAS PRODUCTION -- 2.3%
Enron Oil & Gas Co......................... 120,000 3,165,000
Mitchell Energy & Development Class B...... 98,700 1,702,575
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OIL/GAS PRODUCTION (CONTINUED)
Triton Energy Corp.*....................... 85,000 $ 4,738,750
-----------
9,606,325
-----------
OILFIELD SERVICES/EQUIPMENT -- 4.2%
BJ Services Co.*........................... 145,000 4,857,500
Ensco International, Inc.*................. 140,000 3,902,500
Tidewater, Inc............................. 92,400 3,511,200
Western Atlas, Inc.*....................... 89,300 5,358,000
-----------
17,629,200
-----------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 5.6%
Accustaff, Inc.*........................... 330,000 8,332,500
Corrections Corp. of America*.............. 115,000 6,555,000
CUC International, Inc.*................... 117,662 3,441,613
MFS Communications, Inc.*.................. 87,000 5,415,750
-----------
23,744,863
-----------
OTHER CONSUMER SERVICES -- 1.0%
America Online, Inc.*...................... 74,400 4,166,400
-----------
OTHER FINANCIAL SERVICES -- 2.6%
Equifax, Inc............................... 232,600 4,681,075
Sunamerica, Inc............................ 127,650 6,430,369
-----------
11,111,444
-----------
PROPERTY -- CASUALTY INSURERS -- 1.3%
Allstate Corp.............................. 127,700 5,379,362
-----------
RECREATION PRODUCTS -- 1.3%
Harley-Davidson, Inc....................... 140,000 5,442,500
-----------
SOFTWARE -- 6.9%
Baan Co. NV*............................... 96,000 5,532,000
Cadence Design Systems, Inc.*.............. 200,250 8,836,031
Informix Corp.*............................ 140,000 3,692,500
Oracle Corp.*.............................. 47,050 2,217,231
Parametric Technology Corp.*............... 117,000 4,577,625
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
36
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE (CONTINUED)
Synopsys, Inc.*............................ 146,100 $ 4,675,200
-----------
29,530,587
-----------
SPECIALTY CHAINS -- 5.7%
Autozone, Inc.*............................ 160,000 5,420,000
Borders Group, Inc.*....................... 182,600 5,204,100
Gap, Inc................................... 100,000 5,537,500
Micro Warehouse,
Inc.*.................................... 37,000 1,535,500
Staples, Inc.*............................. 323,100 6,583,163
-----------
24,280,263
-----------
SPECIALTY INSURERS -- 0.7%
MGIC Investment Corp. ..................... 51,300 2,795,850
-----------
TELECOMMUNICATIONS EQUIPMENT -- 4.0%
Ascend Communications, Inc.*............... 100,000 5,387,500
Aspect Telecommunications Corp.*........... 125,000 5,718,750
ECI Telecommunications Limited............. 140,000 3,132,500
Glenayre Technologies, Inc.*............... 66,875 2,557,969
-----------
16,796,719
-----------
TELEPHONE -- 5.3%
LCI International, Inc.*................... 250,400 6,134,800
MCI Communications Corp.................... 160,000 4,840,000
Paging Network, Inc.*...................... 175,300 4,382,500
WorldCom, Inc.*............................ 147,300 6,775,800
-----------
22,133,100
-----------
WHOLESALE DISTRIBUTION -- 1.3%
Danka Business Systems PLC Sponsored ADR
(Argentina).............................. 131,300 5,547,425
-----------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TOTAL COMMON STOCKS
(Cost $310,976,331)........................................
$399,730,005
-----------
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------
COMMERCIAL PAPER -- 4.1%
- -----------------------------------------------------------------------------
Associates Corporation of America
5.43%, 04/01/96.......................... $ 2,995,000 2,994,097
UBS Finance Delaware, Inc.
5.43%, 04/01/96.......................... 14,267,000 14,262,695
-----------
TOTAL COMMERCIAL PAPER
(Cost $17,256,792).........................................
17,256,792
-----------
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.9%
- -----------------------------------------------------------------------------
J.P. Morgan & Co., Inc. $7,835,000 at
5.35%, (Agreement dated 03/29/96; to be
repurchased at $7,838,493 on 04/01/96;
collateralized by $5,615,000 U. S.
Treasury Notes, 7.50% due 11/15/16)
(Cost $7,835,000)........................ $ 7,835,000 7,835,000
-----------
TOTAL INVESTMENTS -- 101.0%
(Cost $336,068,123)........................................
$424,821,797
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.0%)..............
(4,279,194)
-----------
NET ASSETS -- 100.0%.........................................
$420,542,603
-----------
<FN>
- ------------
* Non-income producing security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
37
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
INCOME &
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 11.7%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
COMPUTER/OFFICE AUTOMATION -- 3.8%
General Motors Corp. Class E............... 63,048 $ 3,593,736
Seagate
Technology, Inc.*........................ 13,029 713,338
------------
4,307,074
------------
HOSPITALS -- 0.0%
Vencor, Inc.*.............................. 384 13,248
------------
MANAGED HEALTHCARE -- 0.1%
FHP International Corp..................... 2,510 70,280
------------
OTHER CONSUMER DURABLE -- 0.2%
AJL Peps Trust............................. 8,610 191,573
------------
PIPELINES -- 1.3%
Enron Corp................................. 56,105 1,423,664
------------
REAL ESTATE INVESTMENT TRUSTS -- 3.0%
Cali Realty Co............................. 39,920 893,210
Equity Inns, Inc........................... 43,700 557,175
Reckson Associates Realty Corp............. 49,530 1,516,856
Weeks Corp................................. 16,820 420,500
------------
3,387,741
------------
TELECOMMUNICATIONS -- 2.1%
Ericsson Telephone Co. ADR................. 788,900 2,342,047
MFS
Communications, Inc.*.................... 473 29,444
------------
2,371,491
------------
TELEPHONE -- 1.2%
Nortel Inversora SA*....................... 31,200 1,310,400
TOTAL COMMON STOCKS
(Cost $10,302,111)........................................ 13,075,471
------------
- -----------------------------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS -- 12.6%
- -----------------------------------------------------------------------------
ELECTRONIC DATA PROCESSING -- 1.0%
Ceridian Corp., 5.50%...................... 11,195 1,080,318
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT COMPANIES -- 1.3%
Merrill Lynch & Co., Inc. (STRYPES),
6.50%.................................... 27,930 $ 1,487,273
------------
MEDICAL SUPPLIES -- 0.3%
United States Surgical Corp. Series A,
$2.20.................................... 10,920 356,265
------------
MULTI-LINE INSURERS -- 0.3%
Allstate Corp., 6.75%...................... 9,720 379,080
------------
OIL/GAS PRODUCTION -- 2.9%
Occidental Petroleum Corp., $3.00.......... 23,800 1,490,475
Williams Co................................ 20,595 1,683,641
------------
3,174,116
------------
OTHER CONSUMER SERVICES -- 2.6%
SCI Finance LLC, $3.125.................... 35,270 2,953,863
------------
TELECOMMUNICATIONS -- 1.7%
MFS Communications Company, Inc., 8.0%*.... 34,980 1,928,272
------------
WHOLESALE DISTRIBUTION -- 2.5%
Alco Standard Corp. Series BB, $5.04....... 30,040 2,823,760
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $11,712,396)........................................ 14,182,947
------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------
CONVERTIBLE CORPORATE
BONDS -- 70.5%
- -----------------------------------------------------------------------------
ADVERTISING -- 2.9%
Omnicom Group,++
4.50%, 09/01/00.......................... $1,995,000 3,192,000
------------
BROADCASTING -- 0.5%
Comcast Corp.++
3.375%, 09/09/05......................... 560,000 526,400
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
38
<PAGE>
- -------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CONVERTIBLE CORPORATE
BONDS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
COMPUTERS/OFFICE AUTOMATION -- 8.2%
Applied Magnetics Corp.
7.00%, 03/15/06.......................... $ 650,000 $ 689,000
Conner Peripherals, Inc.
6.50%, 03/01/02.......................... 670,000 759,613
Conner Peripherals, Inc.
6.75%, 03/01/01.......................... 245,000 258,781
Danka Business Systems PLC+
6.75%, 04/01/02.......................... 1,500,000 2,405,625
EMC Corp.
4.25%, 01/01/01.......................... 1,800,000 2,153,250
Safeguard Scientifics
6.00%, 02/15/03.......................... 1,635,000 1,851,638
Telxon Corp.
5.75%, 01/01/03.......................... 1,000,000 1,035,000
------------
9,152,907
------------
DEPARTMENT/DISCOUNT STORES -- 1.1%
Proffitt's, Inc.
4.75%, 11/01/03.......................... 1,315,000 1,268,975
------------
DRUGS/PHARMACEUTICALS -- 10.9%
Cetus Corp.
5.25%, 05/21/02.......................... 1,375,000 1,400,781
Elan International Finance*
0.00%, 10/16/12.......................... 2,485,000 1,727,075
Ivax Corp.
6.50%, 11/15/01.......................... 2,095,000 2,168,325
Nabi, Inc.
6.50%, 02/01/03.......................... 1,020,000 1,155,150
Roche Holdings, Inc.*+ (LYONS)
0.00%, 04/20/10.......................... 2,460,000 1,113,150
Sandoz Capital
2.00%, 10/06/02.......................... 2,370,000 2,642,550
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
DRUGS/PHARMACEUTICALS (CONTINUED)
Sepracor, Inc.+
7.00%, 12/01/02.......................... $ 850,000 $ 869,125
Smithkline Beecham++
0.00%, 12/31/01.......................... 1,400,000 1,107,750
------------
12,183,906
------------
ELECTRONIC DATA PROCESSING -- 3.8%
First Financial Management Corp.
5.00%, 12/15/99.......................... 1,835,000 3,130,969
Automatic Data*
0.00%, 02/20/12.......................... 2,065,000 1,104,775
------------
4,235,744
------------
ELECTRONIC INSTRUMENTS -- 2.7%
ADT Operations, Inc.* (LYONS)
0.00%, 07/06/10.......................... 1,550,000 813,750
Checkpoint Systems
5.25%, 11/01/05.......................... 1,145,000 1,668,981
Checkpoint Systems Euro
5.25%, 11/01/05.......................... 395,000 577,688
------------
3,060,419
------------
ENVIRONMENTAL SERVICES -- 2.7%
U.S. Filter Corp.
6.00%, 09/15/05.......................... 2,150,000 2,620,312
Sanifill, Inc.
5.00%, 03/01/06.......................... 420,000 413,175
------------
3,033,487
------------
FOOD CHAINS -- 2.0%
Starbucks Corp.
4.25%, 11/01/02.......................... 1,975,000 2,184,844
------------
HOME BUILDING -- 1.1%
Continental Homes
6.875%, 11/01/02......................... 1,060,000 1,208,400
------------
HOSPITALS -- 1.6%
Healthsouth Corp.
5.00%, 04/01/01.......................... 435,000 835,200
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
39
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
INCOME &
GROWTH FUND PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CONVERTIBLE CORPORATE
BONDS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
HOSPITALS (CONTINUED)
PHP Healthcare
6.50%, 12/15/02.......................... $ 900,000 $ 983,250
------------
1,818,450
------------
INSURANCE SERVICES -- 2.3%
American Travellers
6.50%, 10/01/05.......................... 1,065,000 1,566,881
Mutual Risk Management*
0.00%, 10/30/15.......................... 2,560,000 1,036,800
------------
2,603,681
------------
INVESTMENTS -- 0.7%
Aames Financial Corp.
5.50%, 03/15/06.......................... 780,000 810,225
------------
LODGING -- 0.5%
Marriott International*
0.00%, 03/25/11.......................... 1,100,000 583,000
------------
MACHINERY/EQUIPMENT -- 2.9%
Thermo Electron Corp.
4.25%, 01/01/03.......................... 2,605,000 3,242,300
MANAGED HEALTHCARE -- 2.8%
Tenet Healthcare Corp.
6.00%, 12/01/05.......................... 1,305,000 1,448,550
Healthsource, Inc.+
5.00%, 03/01/03.......................... 1,610,000 1,666,350
------------
3,114,900
------------
MEDICAL/NURSING/HEALTH SERVICES -- 1.5%
Phycor, Inc.
4.50%, 02/15/03.......................... 1,640,000 1,640,000
------------
OIL/GAS PRODUCTION -- 2.6%
Noble Affiliates, Inc.
4.25%, 11/01/03.......................... 2,120,000 2,183,600
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OIL/GAS PRODUCTION (CONTINUED)
Pride Petroleum
Services, Inc.
6.25%, 02/15/06.......................... $ 520,000 $ 676,000
------------
2,859,600
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 3.1%
Career Horizons+
7.00%, 11/01/02.......................... 520,000 949,650
Olsten Corp.
4.875%, 05/15/03......................... 880,000 1,218,800
Youth Services International
7.00%, 02/01/06.......................... 1,000,000 1,330,000
------------
3,498,450
------------
OTHER PRODUCTION/MANUFACTURING -- 1.2%
ALFA S.A. Convertible Debenture+
8.00%, 09/15/00.......................... 1,400,000 1,394,750
------------
PIPELINES -- 0.9%
SFP Pipeline Holdings, Inc.*++
0.00%, 08/15/10.......................... 740,000 984,200
------------
PUBLISHING -- 2.3%
News America Holdings* 0.00%, 03/11/13..... 5,270,000 2,575,712
------------
REGIONAL BANKS -- 1.9%
Fifth Third Bancorp
4.25%, 01/15/98.......................... 1,550,000 2,123,500
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 2.8%
3Com Corp.
10.25%, 11/01/01......................... 955,000 1,353,713
Analog Devices
3.50%, 12/01/00.......................... 1,260,000 1,499,400
Emerson Radio
8.50%, 08/15/02.......................... 284,000 238,560
------------
3,091,673
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
40
<PAGE>
- -------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CONVERTIBLE CORPORATE
BONDS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SPECIALTY CHAINS -- 2.1%
Staples Inc.+
4.50%, 10/01/00.......................... $2,099,000 $ 2,329,890
------------
SOAPS/COSMETICS -- 0.6%
Alberto Culver Corp.
5.50%, 06/30/05.......................... 215,000 267,675
Alberto Culver Corp., Euro.
5.50%, 06/30/05.......................... 285,000 362,663
------------
630,338
------------
TELECOMMUNICATIONS EQUIPMENT -- 1.7%
Motorola, Inc.* (LYONS)
0.00%, 09/27/13.......................... 2,555,000 1,897,087
------------
TELEPHONE -- 2.6%
LDDS
Communications, Inc.
5.00%, 08/15/03.......................... 1,435,000 1,793,750
U.S. West, Inc.*
0.00%, 06/25/11.......................... 3,255,000 1,131,112
------------
2,924,862
------------
WHOLESALE DISTRIBUTION -- 0.5%
U.S. Office Products
5.50%, 02/01/01.......................... 480,000 588,000
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $69,736,419)........................................ 78,757,700
------------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
COMMERCIAL PAPER -- 4.9%
- -----------------------------------------------------------------------------
Associates Corporation of America
5.43%, 04/01/96
(Cost $5,466,350)........................ $5,468,000 $ 5,466,350
------------
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.1%
- -----------------------------------------------------------------------------
J.P. Morgan & Co., Inc.....................
$100,000 at 5.35%, (Agreement dated
03/29/96, to be repurchased at $100,045
on 04/01/96; collateralized by $73,000
U.S. Treasury Notes, 10.625% due
08/15/15)
(Cost $100,000)............................ 100,000 100,000
------------
TOTAL INVESTMENTS -- 99.8%
(Cost $97,317,276)........................................ $111,582,468
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%...............
175,468
------------
NET ASSETS -- 100.0%........................................ $111,757,936
------------
</TABLE>
- ------------
* Non-income producing security.
+ Rule 144A restricted security.
++ Variable rate security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
41
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
BALANCED
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 57.4%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
AIRLINES -- 0.7%
Continental Airlines Holding,
Inc.*............................ 3,100 $ 174,762
-----------
BIOTECHNOLOGY -- 1.3%
Liposome Co., Inc.*................ 7,300 152,387
Medtronic, Inc..................... 2,500 149,062
-----------
301,449
-----------
BUILDING MATERIALS -- 0.7%
Texas Industries, Inc.............. 2,600 165,425
-----------
COMMERCIAL/INDUSTRIAL SERVICES -- 2.2%
Corrections Corp. of America*...... 3,400 193,800
Primark Corp.*..................... 4,000 148,000
Quintiles Transnational Corp.*..... 2,800 182,000
-----------
523,800
-----------
COMPUTERS/OFFICE AUTOMATION -- 3.8%
Adaptec, Inc.*..................... 3,400 164,050
Bay Networks, Inc.*................ 3,150 96,862
Cabletron Systems, Inc.*........... 1,200 79,500
HBO & Company...................... 1,800 169,650
Iomega Corp.*...................... 11,700 299,812
Komag, Inc.*....................... 4,400 106,700
-----------
916,574
-----------
CONSUMER SERVICES -- 0.4%
Robert Half International, Inc.*... 2,100 102,113
-----------
CONTRACT DRILLING -- 2.0%
Reading & Bates Corp.*............. 13,600 268,600
Sonat Offshore Drilling Co......... 3,900 198,900
-----------
467,500
-----------
DEPARTMENT/DISCOUNT STORES -- 0.7%
Ross Stores, Inc................... 7,200 180,900
-----------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
DRUG CHAINS -- 0.2%
Longs Drug Store Corp.............. 900 $ 42,525
-----------
DRUGS/PHARMACEUTICALS
-- 0.8%
Gilead Sciences, Inc.*............. 2,200 63,250
Watson Pharmaceuticals, Inc.*...... 3,300 132,000
-----------
195,250
-----------
ELECTRONIC DATA PROCESSING
-- 0.7%
Seagate Technology, Inc.*.......... 3,000 164,250
-----------
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 2.3%
BMC Industries, Inc................ 6,500 139,750
C-Cube Microsystems, Inc.*......... 2,300 120,750
Cognex Corp.*...................... 4,400 112,750
Electroglas, Inc.*................. 4,000 61,500
Macromedia, Inc.*.................. 3,000 128,250
-----------
563,000
-----------
ENTERTAINMENT -- 1.2%
Gtech Holding*..................... 4,500 139,500
Regal Cinemas, Inc.*............... 4,100 151,700
-----------
291,200
-----------
FINANCIAL COMPANIES
-- 1.3%
Green Tree Financial Corp.......... 4,700 161,562
Salomon, Inc....................... 4,000 150,000
-----------
311,562
-----------
GAMBLING -- 0.5%
Grand Casinos, Inc.*............... 3,750 112,500
-----------
INSURANCE AGENTS/BROKERS -- 0.7%
Conseco, Inc....................... 2,200 159,225
-----------
INVESTMENT COMPANIES -- 3.8%
Bear Stearns Co.................... 6,100 150,975
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
42
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT COMPANIES (CONTINUED)
Lehman Brothers Holdings, Inc...... 5,200 $ 139,100
The Money Store, Inc............... 6,500 181,188
Morgan Stanley Group, Inc.......... 2,800 144,900
Student Loan Marketing
Association...................... 1,800 137,700
Sunamerica, Inc.................... 2,900 146,088
-----------
899,951
-----------
LIFE INSURERS -- 1.2%
Penncorp Financial................. 4,000 126,000
Reinsurance Group of America....... 4,300 157,488
-----------
283,488
-----------
LODGING -- 1.3%
HFS, Inc.*......................... 3,400 165,325
Hilton Hotels Corp................. 1,500 141,000
-----------
306,325
-----------
MANAGED HEALTHCARE -- 0.7%
Health Management Associates,
Inc.*............................ 4,600 161,000
-----------
MEDICAL SUPPLIES -- 3.1%
Boston Scientific Corp.*........... 3,900 179,400
IDEXX Laboratories, Inc.*.......... 2,800 117,600
Mentor Corp........................ 5,100 119,212
Nellcor Puritan Bennett, Inc.*..... 2,700 173,475
Target Therapeutics, Inc.*......... 2,700 163,688
-----------
753,375
-----------
MILITARY/DEFENSE TECHNOLOGY -- 0.4%
Harsco Corp........................ 1,400 92,750
-----------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MONEY-CENTER BANKS -- 0.4%
North Fork Bancorporation, Inc..... 4,100 $ 97,888
-----------
MULTI-LINE INSURERS -- 1.7%
Fremont General Corp............... 5,350 126,394
Loews Corp......................... 1,800 136,125
Old Republic International Corp.... 4,200 136,500
-----------
399,019
-----------
OILFIELD SERVICES/EQUIPMENT -- 2.1%
Camco International, Inc........... 4,700 148,050
Chesapeake Energy Corp.*........... 3,300 152,625
Tidewater, Inc..................... 5,000 190,000
-----------
490,675
-----------
OIL/GAS PRODUCTION -- 1.8%
Noram Energy Corp.................. 15,400 142,450
Valero Energy Corp................. 5,100 125,588
Williams Companies, Inc............ 3,200 161,200
-----------
429,238
-----------
OTHER FINANCIAL SERVICES -- 1.2%
First USA, Inc..................... 2,600 147,225
MBNA Corp.......................... 4,800 142,200
-----------
289,425
-----------
PUBLISHING -- 1.1%
Gartner Group, Inc.*............... 2,600 158,600
Meredith Corp...................... 2,500 103,125
-----------
261,725
-----------
SAVINGS & LOAN ASSOCIATIONS -- 1.3%
Charter One Financial, Inc......... 4,600 155,250
TCF Financial Corp................. 4,400 159,500
-----------
314,750
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
43
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
BALANCED
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 5.9%
Altera Corp.*...................... 9,400 $ 525,225
Applied Materials,
Inc.*............................ 2,600 90,675
Atmel Corp.*....................... 11,000 280,500
Kent Electronics Corp.*............ 5,000 176,875
Lattice Semiconductor Corp.*....... 2,400 68,100
Maxim Integrated Products, Inc.*... 3,800 117,800
S3, Inc.*.......................... 2,100 25,069
Xilinx, Inc.*...................... 3,600 114,300
-----------
1,398,544
-----------
SOFTWARE -- 5.3%
American Online, Inc.*............. 2,600 145,600
Cadence Design Systems, Inc.*...... 3,400 150,025
Cisco Systems, Inc.*............... 3,200 148,400
Computer Associates International,
Inc.............................. 1,900 136,088
McAfee Associates, Inc.*........... 2,800 153,300
Pairgain Technologies, Inc.*....... 2,700 174,825
Peoplesoft, Inc.*.................. 2,700 155,250
Structural Dynamics Research
Corp.*........................... 5,800 195,750
-----------
1,259,238
-----------
SPECIALTY CHAINS -- 0.6%
Staples, Inc.*..................... 7,200 146,700
-----------
TELECOMMUNICATIONS EQUIPMENT -- 6.0%
Ascend Communications, Inc.*....... 13,600 732,700
Aspect
Telecommunications, Inc.*........ 3,700 169,275
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS EQUIPMENT
(CONTINUED)
Cascade Communications, Inc.*...... 1,700 $ 152,575
Picturetel Corp.*.................. 3,300 102,300
U.S. Robotics Corp.*............... 2,200 284,350
-----------
1,441,200
-----------
TOTAL COMMON STOCKS
(Cost $10,831,736)................................ 13,697,326
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- --------------------------------------------------------------------
CORPORATE BONDS -- 18.3%
- --------------------------------------------------------------------
CLOTHING CHAINS -- 4.2%
TJX Companies, Inc.
6.625%, 06/15/00................. $1,000,000 990,038
-----------
COMMERCIAL/INDUSTRIAL SERVICES -- 0.8%
Foodmaker, Inc.
9.25%, 03/01/99.................. 200,000 196,506
-----------
ELECTRIC UTILITIES -- 5.2%
Tennessee Valley Authority Note
6.375%, 06/15/05................. 1,250,000 1,234,375
-----------
FINANCIAL SERVICES -- 2.8%
Penncorp Financial Group
9.250%, 12/15/03................. 650,000 656,500
-----------
GAMBLING -- 0.6%
Bally's Grand, Inc.
10.375%, 12/15/03................ 150,000 153,755
-----------
OIL/GAS PRODUCTION -- 0.8%
Mesa Capitol Corp.+
0.000%, 06/30/98................. 200,000 196,010
-----------
RETAIL/FOOD DISTRIBUTION -- 0.9%
Doskocil Cos., Inc.
9.75%, 07/15/00.................. 200,000 207,760
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
44
<PAGE>
- -------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CORPORATE BONDS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SOAPS/COSMETICS -- 0.6%
Revlon Consumer Products Corp.
10.500%, 02/15/03................ $ 150,000 $ 152,438
-----------
SPECIALTY CHAINS -- 1.2%
CompUSA, Inc.
9.500%, 06/15/00................. 150,000 149,629
Orchard Supply Hardware, Inc.
9.375%, 02/15/02................. 150,000 145,880
-----------
295,509
-----------
TELECOMMUNICATIONS -- 1.2%
Telemundo Group, Inc.
7.000%, 02/15/06................. 75,000 68,159
Winstar Communications*+
0.000%, 10/15/05................. 375,000 216,950
-----------
285,109
-----------
TOTAL CORPORATE BONDS
(Cost $4,359,289)................................. 4,368,000
-----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 18.7%
- --------------------------------------------------------------------
U.S. TREASURY BONDS
8.125%, 08/15/21................. $ 690,000 $ 792,327
-----------
U.S. TREASURY NOTES
6.250%, 08/31/00................. 1,000,000 1,004,900
7.500%, 11/15/01................. 1,500,000 1,592,685
7.500%, 05/15/02................. 1,000,000 1,065,290
-----------
3,662,875
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,584,907)................................. 4,455,202
-----------
- --------------------------------------------------------------------
COMMERCIAL PAPER -- 3.6%
- --------------------------------------------------------------------
Associates Corporation of America
5.43%, 04/01/96
(Cost $853,742).................. 854,000 853,742
-----------
TOTAL INVESTMENTS -- 98.0%
(Cost $20,629,674)................................ $23,374,270
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.0%.......
470,281
-----------
NET ASSETS -- 100.0%................................ $23,844,551
-----------
<FN>
- ------------
* Non-income producing security.
+ Variable rate security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
45
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
GOVERNMENT
INCOME FUND PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 65.6%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
U.S. TREASURY NOTES
6.250%, 08/31/00........................... $1,100,000 $1,105,390
7.500%, 11/15/01........................... 1,100,000 1,167,969
7.500%, 05/15/02........................... 620,000 660,480
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $3,011,192)......................................... 2,933,839
----------
- ---------------------------------------------------------------------------
CORPORATE BONDS -- 16.7%
- ---------------------------------------------------------------------------
CIGNA CORPORATION -- 7.5%
7.650%, 03/01/23......................... 350,000 337,313
TELECOMMUNICATIONS -- 9.2%
10.125%, 04/15/22........................ 350,000 409,937
----------
TOTAL CORPORATE BONDS
(Cost $719,205)........................................... 747,250
----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
AGENCY OBLIGATIONS -- 11.0%
- ---------------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY
6.375%, 06/15/05
(Cost $518,200)............................ $ 500,000 $ 493,750
----------
- ---------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.9%
- ---------------------------------------------------------------------------
ASSOCIATES CORPORATION OF AMERICA
5.43%, 04/01/96
(Cost $132,000)............................ 132,000 132,000
----------
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.2%
- ---------------------------------------------------------------------------
J.P. MORGAN & CO., INC.
$100,000 at 5.35%,
(Agreement dated 3/29/96; to be repurchased at $100,045 on
4/1/96; collateralized by $73,000 U.S. Treasury Note,
10.625% due 08/15/15)
(Cost $100,000)............................ 100,000 100,000
----------
TOTAL INVESTMENTS -- 98.4%..................................
(Cost $4,480,597).......................... $4,406,839
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.60%..............
71,155
----------
NET ASSETS -- 100.00% $4,477,994
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
46
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
MONEY
MARKET FUND PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
AGENCY OBLIGATIONS -- 41.7%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
FEDERAL HOME LOAN BANK DISCOUNT NOTES -- 31.7%
5.48%, 06/13/96............................ $ 150,000 $ 148,333
5.32%, 07/03/96............................ 100,000 98,626
5.38%, 07/03/96............................ 250,000 246,525
5.41%, 07/12/96............................ 100,000 98,467
5.29%, 07/26/96............................ 125,000 122,869
4.91%, 08/28/96............................ 100,000 97,968
5.14%, 10/25/96............................ 100,000 97,045
5.12%, 12/17/96............................ 100,000 96,302
----------
1,006,135
----------
FEDERAL FARM CREDIT BANK DISCOUNT NOTES -- 10.0%
5.17%, 09/03/96............................ 150,000 146,661
5.08%, 09/11/96............................ 100,000 97,709
5.20%, 11/15/96............................ 75,000 72,530
----------
316,900
----------
TOTAL AGENCY OBLIGATIONS
(Cost $1,323,035)........................................ 1,323,035
----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
REPURCHASE AGREEMENT -- 58.8%
- --------------------------------------------------------------------------
J. P. Morgan & Co. $1,865,000 at 5.35%
(Agreement dated 03/29/96, to be
repurchased) at $1,865,831
on 04/01/96; collateralized by $1,381,000
U. S. Treasury Notes 11.625% due
11/15/04) (Cost $1,865,000).............. $1,865,000 $1,865,000
----------
TOTAL INVESTMENTS -- 100.5%
(Cost $3,188,035)........................................ $3,188,035
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (0.5%)................................... (14,188)
----------
NET ASSETS -- 100.0%....................................... $3,173,847
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
47
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
EMERGING CORE INCOME & BALANCED GOVERNMENT MONEY
GROWTH GROWTH GROWTH GROWTH INCOME MARKET
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
ASSETS:
Investments, at value*.................... $ 589,916,573 $ 424,821,797 $ 111,582,468 $ 23,374,270 $4,406,839 $ 3,188,035
Cash...................................... 6,624 104,687 1,068,976 1,215 804 925
Receivable for investment securities
sold.................................... 8,892,675 6,485,822 1,054,430 232,027 -- --
Receivable for interests sold............. 1,781,237 1,065,892 435,420 105,206 30,831 --
Dividends receivable...................... 79,939 63,712 111,346 3,164 -- --
Interest receivable....................... 4,265 8,701 799,241 177,304 82,891 831
Due from advisor.......................... -- -- -- -- 16,215 18,467
Deferred organization costs............... 22,962 31,883 15,812 11,280 10,375 9,491
Other assets.............................. 8,958 2,990 730 48 -- 120
-----------------------------------------------------------------------------------
Total assets.......................... 600,713,233 432,585,484 115,068,423 23,904,514 4,547,955 3,217,869
-----------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased............................... 4,605,614 11,360,399 3,052,126 -- -- --
Payable for interests repurchased......... 11,374,104 303,649 131,446 30,270 22,974 --
Due to advisor............................ -- -- 192 -- 24,688 24,688
Accrued expenses.......................... 647,133 378,833 126,723 29,693 22,299 19,334
-----------------------------------------------------------------------------------
Total liabilities..................... 16,626,851 12,042,881 3,310,487 59,963 69,961 44,022
-----------------------------------------------------------------------------------
NET ASSETS.................................. $ 584,086,382 $ 420,542,603 $ 111,757,936 $ 23,844,551 $4,477,994 $ 3,173,847
-----------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital........................... $ 405,315,616 $ 313,544,763 $ 82,905,884 $ 18,981,131 $3,797,724 $ 3,174,172
Accumulated net investment income
(deficit)............................... (6,202,213) (683,173) 11,637,836 1,409,039 755,564 --
Accumulated net realized gain (loss)...... 24,342,802 18,927,339 2,949,024 709,785 (1,536) (325)
Net unrealized appreciation (depreciation)
of investments.......................... 160,630,177 88,753,674 14,265,192 2,744,596 (73,758) --
-----------------------------------------------------------------------------------
Net assets............................ $ 584,086,382 $ 420,542,603 $ 111,757,936 $ 23,844,551 $4,477,994 $ 3,173,847
-----------------------------------------------------------------------------------
*Investments, at cost....................... $ 429,286,396 $ 336,068,123 $ 97,317,276 $ 20,629,674 $4,480,597 $ 3,188,035
-----------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
48
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
EMERGING CORE INCOME & BALANCED GOVERNMENT MONEY
GROWTH GROWTH GROWTH GROWTH INCOME MARKET
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Dividends............................... $ 1,179,992 $ 1,114,996 $ 1,152,827 $ 112,176 $ -- $ --
Interest................................ 1,620,601 1,157,351 3,989,027 741,327 321,658 217,637
-------------------------------------------------------------------------------
Total income.......................... 2,800,593 2,272,347 5,141,854 853,503 321,658 217,637
-------------------------------------------------------------------------------
Expenses:
Advisory fee............................ 5,190,853 2,563,061 789,222 169,416 20,408 9,402
Accounting fee.......................... 172,731 138,472 76,569 75,000 75,000 75,000
Administration fee...................... 35,001 118,532 36,632 7,859 1,663 1,311
Audit & tax services.................... 136,316 93,588 26,856 6,295 1,207 8,421
Custodian fee........................... 151,066 64,667 31,624 27,384 15,220 16,346
Insurance............................... 9,983 9,416 2,796 681 158 105
Legal fee............................... 8,636 8,990 2,913 617 135 954
Miscellaneous........................... 24,391 3,943 10,451 7,746 3,773 4,924
Organization costs...................... 8,539 15,585 7,730 5,516 5,073 111
Trustees' fee........................... 8,450 8,450 8,450 8,450 8,451 3,673
-------------------------------------------------------------------------------
Total expenses........................ 5,745,966 3,024,704 993,243 308,964 131,088 120,247
Less: Reimbursement to (from)
advisor............................. -- -- 6,439 (94,370) (101,143) (103,377)
-------------------------------------------------------------------------------
Net expenses.......................... 5,745,966 3,024,704 999,682 214,594 29,945 16,870
-------------------------------------------------------------------------------
Net investment income (deficit)....... (2,945,373) (752,357) 4,142,172 638,909 291,713 200,767
-------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions............................ 78,797,996 50,587,998 10,319,301 2,837,068 363,388 (325)
Change in net unrealized appreciation
(depreciation) of investments........... 91,635,716 52,583,826 10,732,341 742,010 (175,424) --
-------------------------------------------------------------------------------
Net gain (loss) on investments.......... 170,433,712 103,171,824 21,051,642 3,579,078 187,964 (325)
-------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ $ 167,488,339 $ 102,419,467 $ 25,193,814 $ 4,217,987 $ 479,677 $ 200,442
-------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
49
<PAGE>
(This page intentionally left blank)
- --------------------------------------------------------------------------------
50
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
EMERGING GROWTH CORE GROWTH
--------------------------------- ---------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
<S> <C> <C> <C> <C>
---------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(deficit)............... $ (2,945,373) $ (2,224,592) $ (752,357) $ 136,431
Net realized gain (loss)
from security
transactions............ 78,797,996 (48,388,925) 50,587,998 (27,617,865)
Change in net unrealized
appreciation
(depreciation) of
investments............. 91,635,716 88,372,950 52,583,826 36,375,233
---------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations............ 167,488,339 37,759,433 102,419,467 8,893,799
---------------------------------------------------------------------
DISTRIBUTIONS TO PARTNERS
Net investment income..... -- -- -- --
---------------------------------------------------------------------
TRANSACTIONS IN INTERESTS:
Contributions by
partners................ 107,044,506 77,212,401 113,757,799 76,785,761
Withdrawals by partners... (161,495,614) (57,696,150) (79,489,585) (91,624,360)
---------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in
interests............. (54,451,108) 19,516,251 34,268,214 (14,838,599)
---------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 113,037,231 57,275,684 136,687,681 (5,944,800)
NET ASSETS:
BEGINNING OF PERIOD......... 471,049,151 413,773,467 283,854,922 289,799,722
---------------------------------------------------------------------
END OF PERIOD............... $ 584,086,382 $ 471,049,151 $ 420,542,603 $ 283,854,922
---------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
51
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME & GROWTH BALANCED GROWTH
--------------------------------- ---------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
<S> <C> <C> <C> <C>
---------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(deficit)............... $ 4,142,172 $ 5,103,250 $ 638,909 $ 477,083
Net realized gain (loss)
from security
transactions............ 10,319,301 (13,408,682) 2,837,068 (1,500,269)
Change in net unrealized
appreciation
(depreciation) of
investments............. 10,732,341 5,539,419 742,010 1,850,658
---------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations............ 25,193,814 (2,766,013) 4,217,987 827,472
---------------------------------------------------------------------
DISTRIBUTIONS TO PARTNERS
Net investment income..... -- -- -- --
---------------------------------------------------------------------
TRANSACTIONS IN INTERESTS:
Contributions by
partners................ 15,608,507 32,875,977 4,914,004 4,819,959
Withdrawals by partners... (35,130,807) (42,582,471) (7,102,941) (6,527,607)
---------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in
interests............. (19,522,300) (9,706,494) (2,188,937) (1,707,648)
---------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 5,671,514 (12,472,507) 2,029,050 (880,176)
NET ASSETS:
BEGINNING OF PERIOD......... 106,086,422 118,558,929 21,815,501 22,695,677
---------------------------------------------------------------------
END OF PERIOD............... $ 111,757,936 $ 106,086,422 $ 23,844,551 $ 21,815,501
---------------------------------------------------------------------
<CAPTION>
GOVERNMENT INCOME MONEY MARKET
--------------------------------- ---------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(deficit)............... $ 291,713 $ 365,015 $ 200,767 $ 179,428
Net realized gain (loss)
from security
transactions............ 363,388 (447,930) (325) 17
Change in net unrealized
appreciation
(depreciation) of
investments............. (175,424) 305,693 -- --
Net increase (decrease)
in net assets from
operations............ 479,677 222,778 200,442 179,445
DISTRIBUTIONS TO PARTNERS
Net investment income..... -- -- (200,767) (179,428)
TRANSACTIONS IN INTERESTS:
Contributions by
partners................ 3,577,045 10,057,391 22,251,491 13,398,906
Withdrawals by partners... (4,912,231) (13,048,663) (22,108,039) (10,440,597)
Net increase (decrease)
in net assets from
transactions in
interests............. (1,335,186) (2,991,272) 143,452 2,958,309
Total increase
(decrease) in net
assets................ (855,509) (2,768,494) 143,127 2,958,326
NET ASSETS:
BEGINNING OF PERIOD......... 5,333,503 8,101,997 3,030,720 72,394
END OF PERIOD............... $ 4,477,994 $ 5,333,503 $ 3,173,847 $ 3,030,720
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
52
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company organized as a Delaware business trust,
is comprised of twelve investment vehicles (each a "Fund" and collectively the
"Funds") as of March 31, 1996. Each Fund has up to five Portfolios which have
invested in the respective series of the Master Trust to achieve their
investment objective.
The investment objectives of the Funds are as follows:
Emerging Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies with less than $500
million in market capitalization.
Core Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in U.S. companies, generally over $500 million in total
stock market value.
Income & Growth Fund seeks to maximize total return through investment
primarily in convertible and equity securities of U.S. companies.
Balanced Growth Fund seeks to provide a balance of long-term capital
appreciation and current income by investing approximately 60% of its total
assets in equity and convertible securities of primarily U.S. companies and 40%
of its total assets in debt securities, money market instruments and other
short-term investments.
Government Income Fund seeks to maximize current income through investment
primarily in intermediate-term debt securities of the U.S. government and its
agencies and instrumentalities.
Money Market Fund seeks to achieve a high level of current income consistent
with preservation of capital and maintenance of liquidity through investment in
investment grade securities with an average maturity of 90 days.
SECURITIES TRANSACTIONS
Equity securities are valued at the last sale price (for exchange-listed
securities) or the mean between the last bid and asked price (if lacking any
sales and for over-the-counter securities). Debt securities generally are valued
at the mean between the last bid and asked prices. Securities with 60 days or
less remaining to maturity and securities held in the Money Market Fund are
valued on an amortized cost basis which approximates market value.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under the direction of the Master
Trust's Board of Trustees.
Securities transactions are recognized on the trade date. Realized gains and
losses from securities transactions are calculated using the first-in, first-out
method. Dividend income is recognized on the ex-dividend date, and interest
income is recorded on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
FEDERAL INCOME TAXES
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Portfolios.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Master Trust have been allocated to the
various Funds based upon management's best estimate of the costs applicable to
each Fund. These costs have been deferred and will be amortized over a period of
60 months from the date the Funds commenced operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles
- --------------------------------------------------------------------------------
53
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate"). The advisory fee is computed daily for the
Funds based upon the following percentages of each Fund's average daily net
assets:
<TABLE>
<CAPTION>
FIRST EXCESS OF
$500 NEXT $500 $1
MILLION MILLION BILLION
--------- --------- ---------
<S> <C> <C> <C>
Emerging Growth Fund.......... 1.00% 1.00% 1.00%
Core Growth Fund.............. .75% .675% .65%
Income & Growth Fund.......... .75% .675% .65%
Balanced Growth Fund.......... .75% .675% .65%
Government Income Fund........ .40% .55% .55%
Money Market Fund............. .25% .2275% .2275%
</TABLE>
EXPENSE LIMITATIONS
Nicholas-Applegate and the Master Trust have undertaken to limit the Funds'
expenses to certain annual levels through March 31, 1997. In subsequent years,
overall operating expenses for each Fund will not fall below the percentage
limitation until the Investment Adviser has been fully reimbursed for fees
foregone or expenses paid by the Investment Adviser under this agreement, as
each Fund will reimburse the Investment Adviser in subsequent years when
operating expenses (before reimbursement) are less than the applicable
percentage limitation.
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the period from inception (respectively) to March 31, 1996,
are as follows:
<TABLE>
<S> <C>
Income & Growth Fund................ $ 37,500
Balanced Growth Fund................ 244,871
Government Income Fund.............. 255,677
Money Market Fund................... 281,901
</TABLE>
Nicholas-Applegate advanced certain organization costs discussed in Note A. As
of March 31, 1996, the following Funds have amounts due to Nicholas-Applegate
for organizational costs advanced:
<TABLE>
<S> <C>
Government Income Fund.............. $ 24,688
Money Market Fund................... 24,688
</TABLE>
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the fiscal year ended March 31, 1996, were as
follows (in 000's):
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Emerging Growth Fund............ $ 641,224 $ 681,706
Core Growth Fund................ 396,795 369,702
Income & Growth Fund............ 147,316 166,406
Balanced Growth Fund............ 42,668 41,675
Government Income Fund.......... 8,677 9,831
</TABLE>
- --------------------------------------------------------------------------------
54
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
At March 31, 1996, the net unrealized appreciation (depreciation) based on the
cost of investments for Federal income tax purposes was as follows (in 000's):
<TABLE>
<CAPTION>
NET
TAX GROSS GROSS UNREALIZED
COST OF UNREALIZED UNREALIZED APPRECIATION
INVESTMENTS APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
EMERGING
GROWTH FUND. $ 429,278 $ 170,460 $ 9,901 $ 160,559
CORE GROWTH
FUND........ 336,068 92,929 4,175 88,754
INCOME &
GROWTH FUND. 97,318 14,508 244 14,264
BALANCED
GROWTH FUND. 20,630 3,296 552 2,744
GOVERNMENT
INCOME FUND. 4,481 38 112 (74)
MONEY MARKET
FUND........ 3,188 -- 1 (1)
</TABLE>
- --------------------------------------------------------------------------------
55
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
D. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF RATIO OF INVESTMENT RATIO OF NET
EXPENSES TO EXPENSES TO INCOME INVESTMENT
AVERAGE NET AVERAGE NET (DEFICIT) TO INCOME (DEFICIT)
ASSETS, ASSETS, AVERAGE NET TO AVERAGE NET
AFTER BEFORE ASSETS, AFTER ASSETS, BEFORE
EXPENSE EXPENSE EXPENSE EXPENSE BROKER
REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS PORTFOLIO COMMISSIONS
(RECOUPMENT) (RECOUPMENT) (RECOUPMENT) (RECOUPMENT) TURNOVER RATE PER SHARE
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH*
For the year ended
03/31/96.................. 1.11% 1.11% (0.57%) (0.57%) 129.59% $ 0.0523
For the year ended
03/31/95.................. 1.12% 1.11% (0.53%) (0.52%) 100.46% --
For the period ended
03/31/94+................. 1.12% 1.16% (0.80%) (0.84%) 50.51% --
CORE GROWTH*
For the year ended
03/31/96.................. 0.89% 0.89% (0.22%) (0.22%) 114.48% $ 0.0593
For the year ended
03/31/95.................. 0.89% 0.89% 0.05% 0.05% 98.09% --
For the period ended
03/31/94+................. 0.92% 0.92% (0.03%) (0.03%) 84.84% --
INCOME & GROWTH*
For the year ended
03/31/96.................. 0.95% 0.94% 3.94% 3.94% 144.97% $ 0.0597
For the year ended
03/31/95.................. 0.93% 0.95% 4.37% 4.35% 125.51% --
For the period ended
03/31/94+................. 0.94% 0.97% 3.51% 3.48% 177.52% --
BALANCED GROWTH*
For the year ended
03/31/96.................. 0.95% 1.37% 2.83% 2.37% 197.19% $ 0.0594
For the year ended
03/31/95.................. 0.95% 1.33% 2.13% 1.75% 110.40% --
For the period ended
03/31/94+................. 0.94% 1.37% 1.93% 1.50% 85.43% --
GOVERNMENT INCOME*
For the year ended
03/31/96.................. 0.60% 2.75% 6.12% 4.00% 190.47% --
For the year ended
03/31/95.................. 0.80% 2.21% 5.32% 3.91% 258.72% --
For the period ended
03/31/94+................. 0.80% 2.80% 3.43% 1.43% 159.17% --
MONEY MARKET*
For the year ended
03/31/96.................. 0.45% 3.20% 5.34% 2.59% n/a --
For the year ended
03/31/95.................. 0.31% 3.23% 4.61% 1.69% n/a --
For the period ended
03/31/94+................. 0.24% 151.02% 2.12% (148.66%) n/a --
</TABLE>
- -------------
*All Funds commenced operations on April 19, 1993, except Emerging Growth Fund
which commenced operations on October 1, 1993.
+Annualized.
- --------------------------------------------------------------------------------
56
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
ERNST & YOUNG LLP
515 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
PHONE: 213 977 3200
To the Shareholders and Board of Trustees of
Nicholas-Applegate Mutual Funds
We have audited the accompanying statements of assets and liabilities of the
following portfolios of Nicholas-Applegate Mutual Funds: Emerging Growth A, B &
C Portfolios, Core Growth A, B & C Portfolios, Income & Growth A, B & C
Portfolios, Balanced Growth A, B & C Portfolios, Government Income A, B & C
Portfolios, and Money Market Portfolio (hereinafter the "Portfolios"), as of
March 31, 1996, and the related statements of operations and changes in net
assets and the financial highlights for the fiscal year then ended. These
financial statements and financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
statements of changes in net assets and the financial highlights of the A & C
Portfolios for the fiscal year ended March 31, 1995 and the financial highlights
for the fiscal year ended March 31, 1994 were audited by other auditors whose
report dated May 12, 1995 expressed an unqualified opinion on those financial
statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
the Portfolios as of March 31, 1996, and the results of their operations,
changes in their net assets and the financial highlights for the fiscal year
then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
May 10, 1996
- --------------------------------------------------------------------------------
57
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
ERNST & YOUNG LLP
515 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
PHONE: 213 977 3200
To the Shareholders and Board of Trustees of
Nicholas-Applegate Investment Trust
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the following series of Nicholas-Applegate
Investment Trust: Emerging Growth Fund, Core Growth Fund, Income & Growth Fund,
Balanced Growth Fund, Government Income Fund, and Money Market Fund (hereinafter
the "Funds"), as of March 31, 1996, and the related statements of operations and
changes in net assets for the fiscal year then ended. These financial statements
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements based on our audits. The
statements of changes in net assets of the Funds for the fiscal year ended March
31, 1995 were audited by other auditors whose report dated May 12, 1995
expressed an unqualified opinion on those financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 March 31, 1996, by correspondence with
the custodian. 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 1996 financial statements referred to above present fairly,
in all material respects, the financial positions of the Funds as of March 31,
1996, and the results of their operations and changes in their net assets for
the fiscal year then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
May 10, 1996
- --------------------------------------------------------------------------------
58
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
MINI CAP
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 95.4%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
AIRLINES -- 1.9%
Mesaba Holdings, Inc.*..................... 25,100 $ 277,669
Reno Air, Inc.*............................ 15,200 190,000
------------
467,669
------------
APPAREL -- 4.7%
Chaus (Bernard), Inc.*..................... 16,300 73,350
Cole Kenneth Productions, Inc.............. 5,400 96,525
Cutter & Buck, Inc.*....................... 10,900 109,000
Donnkenny, Inc.*........................... 10,500 169,312
Genesco, Inc.*............................. 17,500 83,125
Madden Steven*............................. 6,000 39,000
Marisa Christina, Inc.*.................... 7,500 150,937
Pacific Sunware of California, Inc.*....... 7,300 89,425
Quiksilver, Inc.*.......................... 6,200 196,850
Vans, Inc.*................................ 13,300 184,537
------------
1,192,061
------------
AUTOMOTIVE EQUIPMENT -- 0.7%
Strattec Security Corp.*................... 7,500 123,750
Supreme Industries, Inc. Class A*.......... 6,250 45,312
------------
169,062
------------
BIOTECHNOLOGY -- 5.7%
Cambridge Neuroscience, Inc.*.............. 6,800 81,600
Cryolife, Inc.*............................ 5,600 120,400
Cytel Corp.*............................... 19,200 144,000
Genelabs Technologies, Inc.*............... 33,500 226,125
Guilford Pharmaceuticals*.................. 8,500 190,185
Magainin Pharmaceuticals, Inc.*............ 5,900 61,950
Martek Biosciences Corp.*.................. 2,800 100,800
Matritech, Inc.*........................... 29,600 344,100
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
BIOTECHNOLOGY (CONTINUED)
Oncogene Science, Inc.*.................... 18,500 $ 168,813
------------
1,437,973
------------
BROADCASTING -- 1.8%
Argyle Television, Inc.*................... 6,100 132,675
Multi-Market Radio, Inc. Class A*.......... 9,500 95,000
United Video Satellite Group Class A*...... 11,100 233,100
------------
460,775
------------
BUILDING MATERIALS -- 1.1%
Hexcel Corp.*.............................. 11,900 139,825
Shaw Group, Inc.*.......................... 7,800 135,525
------------
275,350
------------
BUILDING MATERIAL CHAINS -- 0.6%
Orchard Supply Hardware*................... 6,900 163,013
------------
CLOTHING CHAINS -- 0.9%
Buckle, Inc.*.............................. 9,400 239,700
------------
COMPUTERS/OFFICE AUTOMATION -- 0.9%
Brooktrout Technology, Inc.*............... 6,900 238,050
------------
CONTRACT DRILLING -- 0.3%
Unit Corp.*................................ 11,000 63,250
------------
DRUGS/PHARMACEUTICALS -- 2.8%
Curative Technologies, Inc.*............... 9,800 181,300
IBAH, Inc.*................................ 15,500 108,500
IDEC Pharmaceuticals Corp.*................ 9,200 204,700
Inhale Therapeutic Systems*................ 6,200 94,550
Sangstat Medical Corp.*.................... 7,400 119,325
------------
708,375
------------
ELECTRONIC DATA PROCESSING -- 0.7%
Cycare Systems, Inc.*...................... 6,000 171,000
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
59
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 1.9%
Checkmate Electronics, Inc.*............... 11,800 $ 153,400
Lecroy Corp.*.............................. 8,500 123,250
Powell Industries, Inc.*................... 11,400 111,150
Robotic Vision Systems, Inc.*.............. 5,300 85,462
------------
473,262
------------
ENTERTAINMENT -- 0.4%
Ambassador International, Inc.*............ 8,700 95,700
------------
ENVIRONMENTAL SERVICES -- 0.7%
Continental Waste Industries, Inc.*........ 17,266 187,768
------------
FINANCE COMPANIES -- 1.8%
Imperial Credit Industries, Inc.*.......... 5,730 140,385
Resource Bancshares Mortgage Group, Inc.*.. 6,560 102,500
Sirrom Capital Corp........................ 9,400 215,025
------------
457,910
------------
GAMBLING -- 0.7%
Penn National Gaming, Inc.*................ 9,400 165,675
------------
HOME FURNISHING -- 0.6%
Bush Industries, Inc. Class A.............. 6,100 154,025
------------
HOMEBUILDING -- 2.6%
Cavalier Homes, Inc........................ 11,300 175,150
Continental Homes Holding Corp............. 11,200 257,600
Crossmann Communities, Inc.*............... 7,500 135,000
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
HOMEBUILDING (CONTINUED)
M / I Schottenstein Homes*................. 9,400 $ 96,350
------------
664,100
------------
HOSPITALS -- 0.7%
Health Management Systems, Inc.*........... 5,950 168,087
------------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 1.8%
Greenwich Air Services, Inc.*.............. 8,800 374,000
Starrett Corp.............................. 8,000 86,000
------------
460,000
------------
LODGING -- 0.7%
Studio Plus Hotels, Inc.*.................. 6,100 169,275
------------
MACHINERY/EQUIPMENT -- 1.8%
Computational Systems, Inc.*............... 5,600 99,400
LSI Industries, Inc........................ 9,600 172,800
Miller Industries Inc./ Tenn.*............. 5,400 183,600
------------
455,800
------------
MANAGED HEALTH CARE/HMO'S/PPO'S -- 0.7%
Corvel Corp.*.............................. 5,400 189,000
------------
MEDICAL SPECIALTIES -- 0.3%
Impath, Inc................................ 5,200 76,700
------------
MEDICAL SUPPLIES -- 8.7%
AVECOR Cardiovascular, Inc.*............... 8,800 119,900
Capstone Pharmacy Services*................ 18,500 166,500
Conmed Corp.*.............................. 17,150 420,175
Hologic, Inc.*............................. 9,800 222,950
Inamed Corp.*.............................. 10,500 128,625
Kensey Nash Corp.*......................... 9,400 133,950
Lunar Corp.*............................... 5,850 250,087
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
60
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
MINI CAP
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
MEDICAL SUPPLIES (CONTINUED)
Meridian Diagnostics, Inc.*................ 19,100 $ 202,937
Minimed, Inc.*............................. 11,200 201,600
Osteotech, Inc.*........................... 9,000 67,500
Protocol Systems, Inc.*.................... 8,300 140,063
Vitalcom, Inc.*............................ 11,300 151,138
------------
2,205,425
------------
MEDICAL/NURSING/HEALTH SERVICES -- 3.0%
ABR Information Services, Inc.*............ 2,525 117,413
Equimed, Inc.*............................. 15,400 202,125
Pediatric Services of America, Inc.*....... 9,000 228,375
Prime Medical Services, Inc.*.............. 12,500 162,500
Sterling Healthcare Group*................. 3,400 48,450
------------
758,863
------------
MILITARY/DEFENSE TECHNOLOGY -- 0.6%
Tracor, Inc.*.............................. 8,900 155,194
------------
MULTI-LINE INSURERS -- 0.6%
Delphi Financial Group, Inc. Class A*...... 6,100 146,400
------------
OIL/GAS PRODUCTION -- 0.5%
Lomak Petroleum, Inc....................... 11,200 131,600
------------
OILFIELD SERVICES/EQUIPMENT -- 0.7%
Dreco Energy Services LTD, Class A*........ 9,300 186,000
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 3.5%
National Wireless, Holdings Inc.*.......... 8,100 125,550
On Assignment, Inc.*....................... 5,000 190,000
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER COMMERCIAL/ INDUSTRIAL SERVICES
(CONTINUED)
PMT Services, Inc.*........................ 10,400 $ 249,600
Right Management Consultants, Inc.*........ 800 23,600
Techforce Corp.*........................... 10,400 109,200
Youth Services International, Inc.*........ 7,600 193,800
------------
891,750
------------
OTHER CONSUMER SERVICES -- 1.2%
Amre, Inc.*................................ 11,200 208,600
TRM Copy Centers Corp.*.................... 8,500 93,500
------------
302,100
------------
OTHER FINANCIAL SERVICES -- 0.5%
Dignity Partners, Inc.*.................... 10,700 125,725
------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 3.0%
Horizon Mental Health Management, Inc.*.... 9,600 202,800
National Dentex Corp.*..................... 5,400 118,125
Transcend Services, Inc.*.................. 22,800 205,200
Veterinary Centers of America, Inc.*....... 8,500 229,500
------------
755,625
------------
OTHER PRODUCERS/MANUFACTURING -- 0.4%
Schnitzer Steel Industries, Inc. Class A... 300 7,838
Vista 2000, Inc.*.......................... 8,200 82,000
------------
89,838
------------
OTHER RETAIL TRADE -- 0.6%
Motorcar Parts............................. 10,200 160,650
------------
OTHER TECHNOLOGY -- 1.5%
Computer Products, Inc.*................... 15,700 211,950
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
61
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
OTHER TECHNOLOGY (CONTINUED)
Renaissance Solutions, Inc.*............... 5,500 $ 159,500
------------
371,450
------------
PRINTING/FORMS -- 0.6%
Norwood Promotional Products*.............. 7,800 161,850
------------
REAL ESTATE BROKERS/SERVICES -- 0.9%
Redwood Trust, Inc......................... 10,700 219,350
------------
RECREATIONAL PRODUCTS -- 0.9%
Galoob Lewis Toys, Inc.*................... 11,200 226,800
------------
RENTAL/LEASING COMPANIES -- 0.4%
Rent Way, Inc.*............................ 11,000 111,375
------------
RESTAURANTS -- 4.4%
Cooker Restaurant Corp..................... 12,700 177,800
Longhorn Steaks, Inc.*..................... 9,000 207,000
Manhattan Bagel, Inc.*..................... 7,300 169,725
Quality Dining, Inc.*...................... 6,100 179,950
Rainforest Cafe, Inc.*..................... 8,300 261,450
Schlotzsky's, Inc.*........................ 10,500 107,625
------------
1,103,550
------------
SAVINGS & LOAN ASSOCIATIONS -- 0.5%
Norwich Financial Corp..................... 8,400 116,550
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 1.5%
Emerson Radio Corp.*....................... 23,100 59,194
NU Horizons Electronics Corp.*............. 13,200 179,850
Radisys Corp.*............................. 8,500 136,000
------------
375,044
------------
SOAPS/COSMETICS -- 0.5%
Parlux Fragrances, Inc.*................... 10,000 123,750
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE -- 11.5%
Applied Microsystem Corp.*................. 12,300 $ 115,313
Bachman Information Systems*............... 11,200 93,800
Ciber, Inc.*............................... 4,100 134,275
Cimatron LTD.*............................. 10,000 72,500
Datastream Systems, Inc.*.................. 7,300 158,775
Engineering Animation, Inc.*............... 5,500 114,813
GSE Systems, Inc.*......................... 5,500 79,063
Health Systems Design Corp.*............... 8,300 114,125
IKOS Systems, Inc.*........................ 12,700 212,725
Inference Corp. Class A*................... 7,800 144,300
MDL Information Systems, Inc.*............. 11,200 235,900
Mecon, Inc.*............................... 6,600 130,350
Meridian Data, Inc.*....................... 7,900 81,963
Meta-Software, Inc.*....................... 9,400 157,450
Micrografx, Inc.*.......................... 10,600 137,800
Perceptron, Inc.*.......................... 5,000 129,375
TRO Learning, Inc.*........................ 10,600 144,425
Unison Software, Inc.*..................... 4,700 108,100
Veritas Software Co.*...................... 5,900 191,013
Viasoft, Inc.*............................. 5,800 163,125
Wind River Systems, Inc.*.................. 5,700 175,275
------------
2,894,465
------------
SPECIALTY CHAINS -- 4.5%
Finish Line, Inc., Class A*................ 11,100 188,700
Garden Ridge Corp.*........................ 17,800 814,350
West Marine, Inc.*......................... 3,100 144,150
------------
1,147,200
------------
SPECIALTY INSURERS -- 0.2%
First Commonwealth*........................ 2,200 56,650
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
62
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
MINI CAP
GROWTH FUND NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS EQUIPMENT -- 4.2%
California Amplifier, Inc.*................ 8,200 $ 219,350
Davox Corp.*............................... 8,800 156,200
Microwave Power Devices, Inc.*............. 1,200 9,900
Performance Technologies, Inc.*............ 11,000 127,875
Proxim, Inc.*.............................. 10,800 271,350
Remec, Inc.*............................... 10,500 131,250
Teledata Communications LTD*............... 13,800 146,625
------------
1,062,550
------------
TELEPHONE -- 0.9%
Pricellular Corp. Class A*................. 9,750 130,406
USCI, Inc.*................................ 8,900 84,550
------------
214,956
------------
TRUCKING -- 0.3%
Knight Transportation Inc.*................ 5,600 84,000
------------
WHOLESALE DISTRIBUTION -- 2.5%
Anicom, Inc.*.............................. 10,500 141,750
Central Garden & Pet Co.*.................. 14,300 135,850
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
WHOLESALE DISTRIBUTION (CONTINUED)
Daisytek International Corp.*.............. 5,400 $ 178,200
Nuco2, Inc.*............................... 9,500 165,063
------------
620,863
------------
TOTAL COMMON STOCKS
(Cost $20,942,902)..................................... $ 24,103,153
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------
COMMERCIAL PAPER -- 3.1%
- -----------------------------------------------------------------------
Associates Corporation of America 5.43%,
04/01/96 (Cost $771,767)................. $ 772,000 771,767
TOTAL INVESTMENTS -- 98.5%
(Cost $21,714,669)..................................... $ 24,874,920
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%............ 389,049
------------
NET ASSETS -- 100.0%..................................... $ 25,263,969
------------
<FN>
- ------------
* Non-income producing security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
63
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE INCOME & BALANCED
GROWTH GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------
ASSETS
Investments, at value* $ 24,874,920 $ 589,916,573 $ 424,821,797 $ 111,582,468 $ 23,374,270
Cash....................................... 822 6,624 104,687 1,068,976 1,215
Receivable for investment securities
sold..................................... 121,190 8,892,675 6,485,822 1,054,430 232,027
Receivable for interests sold.............. 5,416 1,781,237 1,065,892 435,420 105,206
Dividends receivable....................... 591,227 79,939 63,712 111,346 3,164
Interest receivable........................ 233 4,265 8,701 799,241 177,304
Deferred organization costs................ -- 22,962 31,883 15,812 11,280
Other assets............................... 143 8,958 2,990 730 48
-----------------------------------------------------------------------
Total assets........................... 25,593,951 600,713,233 432,585,484 115,068,423 23,904,514
-----------------------------------------------------------------------
LIABILITIES
Payable for investment securities
purchased................................ 284,115 4,605,614 11,360,399 3,052,126 --
Payable for interests repurchased.......... 4,112 11,374,104 303,649 131,446 30,270
Due to advisor............................. -- -- -- 192 --
Accrued expenses........................... 41,755 647,133 378,833 126,723 29,693
-----------------------------------------------------------------------
Total liabilities...................... 329,982 16,626,851 12,042,881 3,310,487 59,963
-----------------------------------------------------------------------
NET ASSETS................................... $ 25,263,969 $ 584,086,382 $ 420,542,603 $ 111,757,936 $ 23,844,551
-----------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital.............................. $ 22,232,904 $ 405,315,616 $ 313,544,763 $ 82,905,884 $ 18,981,131
Accumulated net investment income
(deficit).................................. (73,292) (6,202,213) (683,173) 11,637,836 1,409,039
Accumulated net realized gain (loss)......... (55,894) 24,342,802 18,927,339 2,949,024 709,785
Net unrealized appreciation of investments... 3,160,251 160,630,177 88,753,674 14,265,192 2,744,596
-----------------------------------------------------------------------
Net assets............................. $ 25,263,969 $ 584,086,382 $ 420,542,603 $ 111,757,936 $ 23,844,551
-----------------------------------------------------------------------
- -------------
*Investments, at cost $ 21,714,669 $ 429,286,396 $ 336,068,123 $ 97,317,276 $ 20,629,674
-----------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
64
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE INCOME & BALANCED
GROWTH GROWTH GROWTH GROWTH GROWTH
FUND* FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends................................... $ 13,951 $ 1,179,992 $ 1,114,996 $ 1,152,827 $ 112,176
Interest.................................... 30,882 1,620,601 1,157,351 3,989,027 741,327
--------------------------------------------------------------------
Total income.............................. 44,833 2,800,593 2,272,347 5,141,854 853,503
--------------------------------------------------------------------
Expenses:
Advisory fee................................ 97,817 5,190,853 2,563,061 789,222 169,416
Accounting fee.............................. 17,500 172,731 138,472 76,569 75,000
Administration fee.......................... 2,638 35,001 118,532 36,632 7,859
Audit & tax services........................ 2,489 136,316 93,588 26,856 6,295
Custodian fee............................... 28,682 151,066 64,667 31,624 27,384
Insurance................................... 178 9,983 9,416 2,796 681
Legal fee................................... 118 8,636 8,990 2,913 617
Miscellaneous............................... 3,289 24,391 3,943 10,451 7,746
Organization costs.......................... -- 8,539 15,585 7,730 5,516
Trustees' fee............................... 6,137 8,450 8,450 8,450 8,450
--------------------------------------------------------------------
Total expenses............................ 158,848 5,745,966 3,024,704 993,243 308,964
Less: Reimbursement to (from) advisor..... (40,723) -- -- 6,439 (94,370)
--------------------------------------------------------------------
Net expenses.............................. 118,125 5,745,966 3,024,704 999,682 214,594
--------------------------------------------------------------------
Net investment income (deficit)......... (73,292) (2,945,373) (752,357) 4,142,172 638,909
--------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions................................ (55,894) 78,797,996 50,587,998 10,319,301 2,837,068
Change in net unrealized appreciation of
investments................................. 3,160,251 91,635,716 52,583,826 10,732,341 742,010
--------------------------------------------------------------------
Net gain on investments................... 3,104,357 170,433,712 103,171,824 21,051,642 3,579,078
--------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................... $ 3,031,065 $ 167,488,339 $ 102,419,467 $ 25,193,814 $ 4,217,987
--------------------------------------------------------------------
</TABLE>
- -------------
*Commenced operations on July 12, 1995.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
65
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
MINI CAP
GROWTH FUND EMERGING GROWTH FUND
-------------- -------------------------------
FOR THE PERIOD FOR THE FOR THE
ENDED MARCH YEAR ENDED YEAR ENDED
31, 1996* MARCH 31, 1996 MARCH 31, 1995
<S> <C> <C> <C>
------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(deficit)............... $ (73,292) $ (2,945,373) $ (2,224,592)
Net realized gain (loss)
from security
transactions............ (55,894) 78,797,996 (48,388,925)
Change in net unrealized
appreciation of
investments............. 3,160,251 91,635,716 88,372,950
------------------------------------------------
Net increase (decrease)
in net assets from
operations............ 3,031,065 167,488,339 37,759,433
------------------------------------------------
TRANSACTIONS IN INTERESTS:
Contributions by
partners................ 22,441,390 107,044,506 77,212,401
Withdrawals by partners... (208,486) (161,495,614) (57,696,150)
------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 22,232,904 (54,451,108) 19,516,251
------------------------------------------------
Total increase
(decrease) in net
assets................ 25,263,969 113,037,231 57,275,684
NET ASSETS:
BEGINNING OF PERIOD......... -- 471,049,151 413,773,467
------------------------------------------------
END OF PERIOD............... $25,263,969 $ 584,086,382 $ 471,049,151
------------------------------------------------
</TABLE>
- -------------
* COMMENCED OPERATIONS ON JULY 12, 1995.
- --------------------------------------------------------------------------------
66
<PAGE>
----------------------------------------------------------------
<TABLE>
<CAPTION>
CORE GROWTH FUND INCOME & GROWTH FUND BALANCED GROWTH FUND
------------------------------- ------------------------------- -------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(deficit)............... $ (752,357) $ 136,431 $ 4,142,172 $ 5,103,250 $ 638,909 $ 477,083
Net realized gain (loss)
from security
transactions............ 50,587,998 (27,617,865) 10,319,301 (13,408,682) 2,837,068 (1,500,269)
Change in net unrealized
appreciation of
investments............. 52,583,826 36,375,233 10,732,341 5,539,419 742,010 1,850,658
---------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations............ 102,419,467 8,893,799 25,193,814 (2,766,013) 4,217,987 827,472
---------------------------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS:
Contributions by
partners................ 113,757,799 76,785,761 15,608,507 32,875,977 4,914,004 4,819,959
Withdrawals by partners... (79,489,585) (91,624,360) (35,130,807) (42,582,471) (7,102,941) (6,527,607)
---------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 34,268,214 (14,838,599) (19,522,300) (9,706,494) (2,188,937) (1,707,648)
---------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 136,687,681 (5,944,800) 5,671,514 (12,472,507) 2,029,050 (880,176)
NET ASSETS:
BEGINNING OF PERIOD......... 283,854,922 289,799,722 106,086,422 118,558,929 21,815,501 22,695,677
---------------------------------------------------------------------------------------------------
END OF PERIOD............... $ 420,542,603 $ 283,854,922 $ 111,757,936 $ 106,086,422 $ 23,844,551 $ 21,815,501
---------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
67
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company organized as a Delaware business trust,
is comprised of twelve investment vehicles (each a "Fund" and collectively the
"Funds") as of March 31, 1996. Each Fund has up to five Portfolios which have
invested in the respective series of the Master Trust to achieve their
investment objective.
The investment objectives of the Funds are as follows:
Mini Cap Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies whose earnings and
stock prices are expected to grow faster than the average rate of companies in
the Standard & Poor's 500 Stock Price Index.
Emerging Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies with less than $500
million in market capitalization.
Core Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in U.S. companies, generally over $500 million in total
stock market value.
Income & Growth Fund seeks to maximize total return through investment
primarily in convertible and equity securities of U.S. companies.
Balanced Growth Fund seeks to provide a balance of long-term capital
appreciation and current income by investing approximately 60% of its total
assets in equity and convertible securities of primarily U.S. companies and 40%
of its total assets in debt securities, money market instruments and other
short-term investments.
SECURITIES TRANSACTIONS
Equity securities are valued at the last sale price (for exchange-listed
securities) or the mean between the last bid and asked price (if lacking any
sales and for over-the-counter securities). Debt securities generally are valued
at the mean between the last bid and asked prices. Securities with 60 days or
less remaining to maturity are valued on an amortized cost basis which
approximates market value.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under the direction of the Master
Trust's Board of Trustees.
Securities transactions are recognized on the trade date. Realized gains and
losses from securities transactions are calculated using the first-in, first-out
method. Dividend income is recognized on the ex-dividend date, and interest
income is recorded on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
FEDERAL INCOME TAXES
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Portfolios.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Master Trust have been allocated to the
various Funds based upon management's best estimate of the costs applicable to
each Fund. These costs have been deferred and will be amortized over a period of
60 months from the date the Funds commenced operations.
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 of assets and
- --------------------------------------------------------------------------------
68
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate"). The advisory fee is computed daily for the
Funds based upon the following percentages of each Fund's average daily net
assets:
<TABLE>
<CAPTION>
FIRST $500 NEXT $500 EXCESS OF
MILLION MILLION $1 BILLION
----------- ----------- -----------
<S> <C> <C> <C>
Mini Cap Growth Fund........ 1.25% 1.25% 1.25%
Emerging Growth............. 1.00% 1.00% 1.00%
Core Growth Fund............ .75% .675% .65%
Income & Growth Fund........ .75% .675% .65%
Balanced Growth Fund........ .75% .675% .65%
</TABLE>
EXPENSE LIMITATIONS
Nicholas-Applegate and the Master Trust have undertaken to limit the Funds'
expenses to certain annual levels through March 31, 1997. In subsequent years,
overall operating expenses for each Fund will not fall below the percentage
limitation until the Investment Adviser has been fully reimbursed for fees
foregone or expenses paid by the Investment Adviser under this agreement, as
each Fund will reimburse the Investment Advisor in subsequent years when
operating expenses (before reimbursement) are less than the applicable
percentage limitation.
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the period from inception (respectively) to March 31, 1996,
are as follows:
<TABLE>
<S> <C>
Mini Cap Growth Fund................. $ 40,723
Income & Growth Fund................. 37,500
Balanced Growth Fund................. 244,871
</TABLE>
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the fiscal year ended March 31, 1996, were as
follows (in 000's):
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Mini Cap Growth Fund............ $ 32,553 $ 11,554
Emerging Growth Fund............ 641,224 681,706
Core Growth Fund................ 396,795 369,702
Income & Growth Fund............ 147,316 166,406
Balanced Growth Fund............ 42,668 41,675
</TABLE>
At March 31, 1996, the net unrealized appreciation (depreciation) based on the
cost of investments for Federal income tax purposes was as follows (in 000's):
<TABLE>
<CAPTION>
TAX GROSS GROSS NET
COST OF UNREALIZED UNREALIZED UNREALIZED
INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Mini Cap
Growth
Fund...... $ 21,718 $ 3,507 $ 374 $ 3,133
Emerging
Growth
Fund...... 429,278 170,460 9,901 160,559
Core Growth
Fund...... 336,068 92,929 4,175 88,754
Income &
Growth
Fund...... 97,318 14,508 244 14,264
Balanced
Growth
Fund...... 20,630 3,296 552 2,744
</TABLE>
- --------------------------------------------------------------------------------
69
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
D. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF NET RATIO OF NET
RATIO OF EXPENSES RATIO OF EXPENSES INVESTMENT INCOME INVESTMENT INCOME
TO AVERAGE NET TO AVERAGE NET (DEFICIT) TO (DEFICIT) TO
ASSETS, AFTER ASSETS, BEFORE AVERAGE NET ASSETS, AVERAGE NET ASSETS,
EXPENSE EXPENSE AFTER EXPENSE BEFORE EXPENSE PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(RECOUPMENT) (RECOUPMENT) (RECOUPMENT) (RECOUPMENT) RATE
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
MINI CAP GROWTH*
For the period ended
03/31/96+.................. 1.50% 2.02% (0.93%) (1.44%) 106.99%
EMERGING GROWTH*
For the year ended
03/31/96................... 1.11% 1.11% (0.57%) (0.57%) 129.59%
For the year ended
03/31/95................... 1.12% 1.11% (0.53%) (0.52%) 100.46%
For the period ended
03/31/94+.................. 1.12% 1.16% (0.80%) (0.84%) 50.51%
CORE GROWTH*
For the year ended
03/31/96................... 0.89% 0.89% (0.22%) (0.22%) 114.48%
For the year ended
03/31/95................... 0.89% 0.89% 0.05% 0.05% 98.09%
For the period ended
03/31/94+.................. 0.92% 0.92% (0.03%) (0.03%) 84.84%
INCOME & GROWTH*
For the year ended
03/31/96................... 0.95% 0.94% 3.94% 3.94% 144.97%
For the year ended
03/31/95................... 0.93% 0.95% 4.37% 4.35% 125.51%
For the period ended
03/31/94+.................. 0.94% 0.97% 3.51% 3.48% 177.52%
BALANCED GROWTH*
For the year ended
03/31/96................... 0.95% 1.37% 2.83% 2.37% 197.19%
For the year ended
03/31/95................... 0.95% 1.33% 2.13% 1.75% 110.40%
For the period ended
03/31/94+.................. 0.94% 1.37% 1.93% 1.50% 85.43%
<CAPTION>
BROKER
COMMISSIONS
PER SHARE
<S> <C>
- -------------------------------
MINI CAP GROWTH*
For the period ended
03/31/96+.................. $ 0.0529
EMERGING GROWTH*
For the year ended
03/31/96................... $ 0.0523
For the year ended
03/31/95................... --
For the period ended
03/31/94+.................. --
CORE GROWTH*
For the year ended
03/31/96................... $ 0.0593
For the year ended
03/31/95................... --
For the period ended
03/31/94+.................. --
INCOME & GROWTH*
For the year ended
03/31/96................... $ 0.0597
For the year ended
03/31/95................... --
For the period ended
03/31/94+.................. --
BALANCED GROWTH*
For the year ended
03/31/96................... $ 0.0594
For the year ended
03/31/95................... --
For the period ended
03/31/94+.................. --
</TABLE>
- ------------
+Annualized
*All Funds commenced operations on April 19, 1993, except Emerging Growth Fund
and Mini Cap Growth Fund which commenced operations on October 1, 1993 and July
12, 1995, respectively.
- --------------------------------------------------------------------------------
70
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
ERNST & YOUNG LLP
515 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
PHONE: 213 977 3200
To the Shareholders and Board of Trustees of
Nicholas-Applegate Mutual Funds
We have audited the accompanying statements of assets and liabilities of the
following portfolios of Nicholas-Applegate Mutual Funds: Mini Cap Growth
Institutional Portfolio, Emerging Growth Institutional Portfolio, Core Growth
Institutional Portfolio, Income & Growth Institutional Portfolio, and Balanced
Growth Institutional Portfolio (hereinafter the "Portfolios"), as of March 31,
1996, and the related statements of operations and changes in net assets and the
financial highlights for the fiscal year then ended. These financial statements
and financial highlights are the responsibility of the Portfolios' management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The statements of changes in net
assets and the financial highlights of the Portfolios except Mini Cap Growth
Institutional Portfolio for the fiscal year ended March 31, 1995 and the
financial highlights for the fiscal year ended March 31, 1994 were audited by
other auditors whose report dated May 12, 1995 expressed an unqualified opinion
on those financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
the Portfolios as of March 31, 1996, and the results of their operations,
changes in their net assets and the financial highlights for the fiscal year
then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
May 10, 1996
- --------------------------------------------------------------------------------
71
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
ERNST & YOUNG LLP
515 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
PHONE: 213 977 3200
To the Shareholders and Board of Trustees of
Nicholas-Applegate Investment Trust
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the following series of Nicholas-Applegate
Investment Trust: Mini Cap Growth Fund, Emerging Growth Fund, Core Growth Fund,
Income & Growth Fund, and Balanced Growth Fund (hereinafter the "Funds"), as of
March 31, 1996, and the related statements of operations and changes in net
assets for the fiscal year then ended. These financial statements are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements based on our audits. The statements of
changes in net assets of the Funds for the fiscal year ended March 31, 1995
except Mini Cap Growth Fund were audited by other auditors whose report dated
May 12, 1995 expressed an unqualified opinion on those financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 March 31, 1996, by correspondence with
the custodian. 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 1996 financial statements referred to above present fairly,
in all material respects, the financial positions of the Funds as of March 31,
1996, and the results of their operations and changes in their net assets for
the fiscal year then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
May 10, 1996
- --------------------------------------------------------------------------------
72
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
GOVERNMENT
INCOME FUND PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 65.6%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
U.S. TREASURY NOTES
6.250%, 08/31/00........................... $1,100,000 $1,105,390
7.500%, 11/15/01........................... 1,100,000 1,167,969
7.500%, 05/15/02........................... 620,000 660,480
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $3,011,192)..................................... 2,933,839
----------
- --------------------------------------------------------------------
CORPORATE BONDS -- 16.7%
- --------------------------------------------------------------------
CIGNA CORPORATION -- 7.5%
7.650%, 03/01/23......................... 350,000 337,313
TELECOMMUNICATIONS -- 9.2%
10.125%, 04/15/22........................ 350,000 409,937
----------
TOTAL CORPORATE BONDS
(Cost $719,205)....................................... 747,250
----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
AGENCY OBLIGATIONS -- 11.0%
- --------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY
6.375%, 06/15/05
(Cost $518,200)............................ $ 500,000 $ 493,750
----------
- --------------------------------------------------------------------
COMMERCIAL PAPER -- 2.9%
- --------------------------------------------------------------------
ASSOCIATES CORPORATION OF AMERICA
5.43%, 04/01/96
(Cost $132,000)............................ 132,000 132,000
----------
- --------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.2%
- --------------------------------------------------------------------
J.P. MORGAN & CO., INC.
$100,000 at 5.35%,
(Agreement dated 3/29/96; to be repurchased at
$100,045 on 4/1/96; collateralized by $73,000 U.S.
Treasury Note, 10.625% due 08/15/15)
(Cost $100,000)............................ 100,000 100,000
----------
TOTAL INVESTMENTS -- 98.4%..............................
(Cost $4,480,597).......................... $4,406,839
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.60%..........
71,155
----------
NET ASSETS -- 100.00% $4,477,994
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
73
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
EMERGING CORE INCOME &
GROWTH GROWTH GROWTH BALANCED GOVERNMENT
FUND FUND FUND GROWTH FUND INCOME FUND
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------
ASSETS
Investments, at value*........................ $589,916,573 $424,821,797 $111,582,468 $23,374,270 $4,406,839
Cash.......................................... 6,624 104,687 1,068,976 1,215 804
Receivable for investment securities sold..... 8,892,675 6,485,822 1,054,430 232,027 --
Receivable for interests sold................. 1,781,237 1,065,892 435,420 105,206 30,831
Dividends receivable.......................... 79,939 63,712 111,346 3,164 --
Interest receivable........................... 4,265 8,701 799,241 177,304 82,891
Due from advisor.............................. -- -- -- -- 16,215
Deferred organization costs................... 22,962 31,883 15,812 11,280 10,375
Other assets.................................. 8,958 2,990 730 48 --
------------------------------------------------------------------
Total assets.............................. 600,713,233 432,585,484 115,068,423 23,904,514 4,547,955
------------------------------------------------------------------
LIABILITIES
Payable for investment securities purchased... 4,605,614 11,360,399 3,052,126 -- --
Payable for interests repurchased............. 11,374,104 303,649 131,446 30,270 22,974
Due to advisor................................ -- -- 192 -- 24,688
Accrued expenses.............................. 647,133 378,833 126,723 29,693 22,299
------------------------------------------------------------------
Total liabilities......................... 16,626,851 12,042,881 3,310,487 59,963 69,961
------------------------------------------------------------------
NET ASSETS...................................... $584,086,382 $420,542,603 $111,757,936 $23,844,551 $4,477,994
------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid in capital............................... $405,315,616 $313,544,763 $ 82,905,884 $18,981,131 $3,797,724
Accumulated net investment income (deficit)... (6,202,213) (683,173) 11,637,836 1,409,039 755,564
Accumulated net realized gain (loss).......... 24,342,802 18,927,339 2,949,024 709,785 (1,536 )
Net unrealized appreciation (depreciation) of
investments................................. 160,630,177 88,753,674 14,265,192 2,744,596 (73,758 )
------------------------------------------------------------------
Net assets................................ $584,086,382 $420,542,603 $111,757,936 $23,844,551 $4,477,994
------------------------------------------------------------------
* Investments, at cost $429,286,396 $336,068,123 $ 97,317,276 $20,629,674 $4,480,597
------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
74
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
EMERGING CORE INCOME & BALANCED GOVERNMENT
GROWTH GROWTH GROWTH GROWTH INCOME
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends......................................... $ 1,179,992 $ 1,114,996 $ 1,152,827 $ 112,176 $ --
Interest.......................................... 1,620,601 1,157,351 3,989,027 741,327 321,658
--------------------------------------------------------------------
Total income.................................... 2,800,593 2,272,347 5,141,854 853,503 321,658
--------------------------------------------------------------------
EXPENSES
Advisory fee...................................... 5,190,853 2,563,061 789,222 169,416 20,408
Accounting fee.................................... 172,731 138,472 76,569 75,000 75,000
Administration fee................................ 35,001 118,532 36,632 7,859 1,663
Audit & tax services.............................. 136,316 93,588 26,856 6,295 1,207
Custodian fee..................................... 151,066 64,667 31,624 27,384 15,220
Insurance......................................... 9,983 9,416 2,796 681 158
Legal fee......................................... 8,636 8,990 2,913 617 135
Miscellaneous..................................... 24,391 3,943 10,451 7,746 3,773
Organization costs................................ 8,539 15,585 7,730 5,516 5,073
Trustees' fee..................................... 8,450 8,450 8,450 8,450 8,451
--------------------------------------------------------------------
Total expenses.................................. 5,745,966 3,024,704 993,243 308,964 131,088
Less: Reimbursement to (from) advisor............. -- -- 6,439 (94,370) (101,143 )
--------------------------------------------------------------------
Net expenses.................................... 5,745,966 3,024,704 999,682 214,594 29,945
--------------------------------------------------------------------
Net investment income (deficit)............... (2,945,373) (752,357) 4,142,172 638,909 291,713
--------------------------------------------------------------------
NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from security transactions........ 78,797,996 50,587,998 10,319,301 2,837,068 363,388
Change in net unrealized appreciation (depreciation)
of investments.................................... 91,635,716 52,583,826 10,732,341 742,010 (175,424 )
--------------------------------------------------------------------
Net gain on investments........................... 170,433,712 103,171,824 21,051,642 3,579,078 187,964
--------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... $ 167,488,339 $ 102,419,467 $ 25,193,814 $ 4,217,987 $ 479,677
--------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
75
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
EMERGING GROWTH FUND CORE GROWTH FUND
--------------------------------- ---------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995
<S> <C> <C> <C> <C>
---------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(deficit)............... $ (2,945,373) $ (2,224,592) $ (752,357) $ 136,431
Net realized gain (loss)
from security
transactions............ 78,797,996 (48,388,925) 50,587,998 (27,617,865)
Change in net unrealized
appreciation
(depreciation) of
investments............. 91,635,716 88,372,950 52,583,826 36,375,233
---------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations............ 167,488,339 37,759,433 102,419,467 8,893,799
---------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by
partners................ 107,044,506 77,212,401 113,757,799 76,785,761
Withdrawals by partners... (161,495,614) (57,696,150) (79,489,585) (91,624,360)
---------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in
interests............. (54,451,108) 19,516,251 34,268,214 (14,838,599)
---------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 113,037,231 57,275,684 136,687,681 (5,944,800)
NET ASSETS:
BEGINNING OF PERIOD......... 471,049,151 413,773,467 283,854,922 289,799,722
---------------------------------------------------------------------
END OF PERIOD............... $ 584,086,382 $ 471,049,151 $ 420,542,603 $ 283,854,922
---------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
76
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT
INCOME & GROWTH FUND BALANCED GROWTH FUND INCOME FUND
--------------------------------- --------------------------------- ---------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(deficit)............... $ 4,142,172 $ 5,103,250 $ 638,909 $ 477,083 $ 291,713
Net realized gain (loss)
from security
transactions............ 10,319,301 (13,408,682) 2,837,068 (1,500,269) 363,388
Change in net unrealized
appreciation
(depreciation) of
investments............. 10,732,341 5,539,419 742,010 1,850,658 (175,424)
---------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations............ 25,193,814 (2,766,013) 4,217,987 827,472 479,677
---------------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by
partners................ 15,608,507 32,875,977 4,914,004 4,819,959 3,577,045
Withdrawals by partners... (35,130,807) (42,582,471) (7,102,941) (6,527,607) (4,912,231)
---------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in
interests............. (19,522,300) (9,706,494) (2,188,937) (1,707,648) (1,335,186)
---------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 5,671,514 (12,472,507) 2,029,050 (880,176) (855,509)
NET ASSETS:
BEGINNING OF PERIOD......... 106,086,422 118,558,929 21,815,501 22,695,677 5,333,503
---------------------------------------------------------------------------------------
END OF PERIOD............... $ 111,757,936 $ 106,086,422 $ 23,844,551 $ 21,815,501 $ 4,477,994
---------------------------------------------------------------------------------------
<CAPTION>
FOR THE
YEAR ENDED
MARCH 31, 1995
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income
(deficit)............... $ 365,015
Net realized gain (loss)
from security
transactions............ (447,930)
Change in net unrealized
appreciation
(depreciation) of
investments............. 305,693
Net increase (decrease)
in net assets from
operations............ 222,778
TRANSACTIONS IN INTERESTS
Contributions by
partners................ 10,057,391
Withdrawals by partners... (13,048,663)
Net increase (decrease)
in net assets from
transactions in
interests............. (2,991,272)
Total increase
(decrease) in net
assets................ (2,768,494)
NET ASSETS:
BEGINNING OF PERIOD......... 8,101,997
END OF PERIOD............... $ 5,333,503
</TABLE>
- --------------------------------------------------------------------------------
77
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company organized as a Delaware business trust,
is comprised of twelve investment vehicles (each a "Fund" and collectively the
"Funds") as of March 31, 1996. Each Fund has up to five Portfolios which have
invested in the respective series of the Master Trust to achieve their
investment objective.
The investment objectives of the Funds are as follows:
Emerging Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies with less than $500
million in market capitalization.
Core Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in U.S. companies, generally over $500 million in total
stock market value.
Income & Growth Fund seeks to maximize total return through investment
primarily in convertible and equity securities of U.S. companies.
Balanced Growth Fund seeks to provide a balance of long-term capital
appreciation and current income by investing approximately 60% of its total
assets in equity and convertible securities of primarily U.S. companies and 40%
of its total assets in debt securities, money market instruments and other
short-term investments.
Government Income Fund seeks to maximize current income through investment
primarily in intermediate-term debt securities of the U.S. government and its
agencies and instrumentalities.
SECURITIES TRANSACTIONS
Equity securities are valued at the last sale price (for exchange-listed
securities) or the mean between the last bid and asked price (if lacking any
sales and for over-the-counter securities). Debt securities generally are valued
at the mean between the last bid and asked prices. Securities with 60 days or
less remaining to maturity are valued on an amortized cost basis which
approximates market value.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under the direction of the Master
Trust's Board of Trustees.
Securities transactions are recognized on the trade date. Realized gains and
losses from securities transactions are calculated using the first-in, first-out
method. Dividend income is recognized on the ex-dividend date, and interest
income is recorded on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
FEDERAL INCOME TAXES
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Portfolios.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Master Trust have been allocated to the
various Funds based upon management's best estimate of the costs applicable to
each Fund. These costs have been deferred and will be amortized over a period of
60 months from the date the Funds commenced operations.
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 of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
78
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate"). The advisory fee is computed daily for the
Funds based upon the following percentages of each Fund's average daily net
asset:
<TABLE>
<CAPTION>
FIRST $500 NEXT $500 EXCESS OF
MILLION MILLION $1 BILLION
----------- ----------- -----------
<S> <C> <C> <C>
Emerging Growth Fund........ 1.00% 1.00% 1.00%
Core Growth Fund............ .75% .675% .65%
Income & Growth Fund........ .75% .675% .65%
Balanced Growth Fund........ .75% .675% .65%
Government Income Fund...... .40% .55% .55%
</TABLE>
EXPENSE LIMITATIONS
Nicholas-Applegate and the Master Trust have undertaken to limit the Funds'
expenses to certain annual levels through March 31, 1997. In subsequent years,
overall operating expenses for each Fund will not fall below the percentage
limitation until the Investment Adviser has been fully reimbursed for fees
foregone or expenses paid by the Investment Adviser under this agreement, as
each Fund will reimburse the Investment Adviser in subsequent years when
operating expenses (before reimbursement) are less than the applicable
percentage limitation.
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the period from inception (respectively) to March 31, 1996 are
as follows:
<TABLE>
<S> <C>
Income & Growth Fund................ $ 37,500
Balanced Growth Fund................ 244,871
Government Income Fund.............. 255,677
</TABLE>
Nicholas-Applegate advanced certain organization costs discussed in Note A. As
of March 31, 1996, Government Income Fund has $24,688 due to Nicholas-Applegate
for organizational costs advanced.
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the fiscal year ended March 31, 1996, were as
follows (in 000's):
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Emerging Growth Fund............ $ 641,224 $ 681,706
Core Growth Fund................ 396,795 369,702
Income & Growth Fund............ 147,316 166,406
Balanced Growth Fund............ 42,668 41,675
Government Income Fund.......... 8,677 9,831
</TABLE>
At March 31, 1996, the net unrealized appreciation (depreciation) based on the
cost of investments for Federal income tax purposes was as follows (in 000's):
<TABLE>
<CAPTION>
TAX GROSS GROSS NET UNREALIZED
COST OF UNREALIZED UNREALIZED APPRECIATION
INVESTMENTS APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ --------------- --------------
<S> <C> <C> <C> <C>
Emerging
Growth
Fund........ $ 429,278 $ 170,460 $ 9,901 $ 160,559
Core Growth
Fund........ 336,068 92,929 4,175 88,754
Income &
Growth
Fund........ 97,318 14,508 244 14,264
Balanced
Growth
Fund........ 20,630 3,296 552 2,744
Government
Income
Fund........ 4,481 38 112 (74)
</TABLE>
- --------------------------------------------------------------------------------
79
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
D. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF NET RATIO OF NET
INVESTMENTS INVESTMENT
RATIO OF RATIO OF INCOME INCOME
EXPENSES TO EXPENSES TO (DEFICIT) TO (DEFICIT) TO
AVERAGE NET AVERAGE NET AVERAGE NET AVERAGE NET
ASSETS, AFTER ASSETS, BEFORE ASSETS, AFTER ASSETS, BEFORE
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO BROKER
REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS TURNOVER COMMISSIONS
(RECOUPMENT) (RECOUPMENT) (RECOUPMENT) (RECOUPMENT) RATE PER SHARE
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH*
For the year ended 03/31/96.......... 1.11% 1.11% (0.57)% (0.57)% 129.59% $ 0.0523
For the year ended 03/31/95.......... 1.12% 1.11% (0.53)% (0.52)% 100.46% --
For the period ended 03/31/94+....... 1.12% 1.16% (0.80)% (0.84)% 50.51% --
CORE GROWTH*
For the year ended 03/31/96.......... 0.89% 0.89% (0.22)% (0.22)% 114.48% $ 0.0593
For the year ended 03/31/95.......... 0.89% 0.89% 0.05% 0.05% 98.09% --
For the period ended 03/31/94+....... 0.92% 0.92% (0.03)% (0.03)% 84.84% --
INCOME & GROWTH*
For the year ended 03/31/96.......... 0.95% 0.94% 3.94% 3.94% 144.97% $ 0.0597
For the year ended 03/31/95.......... 0.93% 0.95% 4.37% 4.35% 125.51% --
For the period ended 03/31/94+....... 0.94% 0.97% 3.51% 3.48% 177.52% --
BALANCED GROWTH*
For the year ended 03/31/96.......... 0.95% 1.37% 2.83% 2.37% 197.19% $ 0.0594
For the year ended 03/31/95.......... 0.95% 1.33% 2.13% 1.75% 110.40% --
For the period ended 03/31/94+....... 0.94% 1.37% 1.93% 1.50% 85.43% --
GOVERNMENT INCOME*
For the year ended 03/31/96.......... 0.60% 2.75% 6.12% 4.00% 190.47% --
For the year ended 03/31/95.......... 0.80% 2.21% 5.32% 3.91% 258.72% --
For the period ended 03/31/94+....... 0.80% 2.80% 3.43% 1.43% 159.17% --
</TABLE>
- ------------
*All Funds commenced operations on April 19, 1993, except Emerging Growth Fund
which commenced operations on October 1, 1993.
+Annualized
- --------------------------------------------------------------------------------
80
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
[LOGO]
To the Shareholders and Board of Trustees of
Nicholas-Applegate Mutual Funds
We have audited the accompanying statements of assets and liabilities of the
following portfolios of Nicholas-Applegate Mutual Funds: Emerging Growth
Qualified Portfolio, Core Growth Qualified Portfolio, Income & Growth Qualified
Portfolio, Balanced Growth Qualified Portfolio, and Government Income Qualified
Portfolio (hereinafter the "Portfolios"), as of March 31, 1996, and the related
statements of operations and changes in net assets and the financial highlights
for the fiscal year then ended. These financial statements and financial
highlights are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The statement of changes in net assets
and the financial highlights of the Core Growth Qualified Portfolio for the
fiscal year ended March 31, 1995 were audited by other auditors whose report
dated May 12, 1995 expressed an unqualified opinion on such financial statement
and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
the Portfolios as of March 31, 1996, and the results of their operations,
changes in their net assets and the financial highlights for the fiscal year
then ended, in conformity with generally accepted accounting principles.
[SIG]
May 10, 1996
- --------------------------------------------------------------------------------
81
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
[LOGO]
To the Shareholders and Board of Trustees of
Nicholas-Applegate Investment Trust
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the following series of Nicholas-Applegate
Investment Trust: Emerging Growth Fund, Core Growth Fund, Income & Growth Fund,
Balanced Growth Fund, and Government Income Fund (hereinafter the "Funds"), as
of March 31, 1996, and the related statements of operations and changes in net
assets for the fiscal year then ended. These financial statements are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements based on our audits. The statements of
changes in net assets of the Funds for the fiscal year ended March 31, 1995 were
audited by other auditors whose report dated May 12, 1995 expressed an
unqualified opinion on those financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 March 31, 1996, by correspondence with
the custodian. 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 1996 financial statements referred to above present fairly,
in all material respects, the financial positions of the Funds as of March 31,
1996, and the results of their operations and changes in their net assets for
the fiscal year then ended, in conformity with generally accepted accounting
principles.
[SIG]
May 10, 1996
- --------------------------------------------------------------------------------
82
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
FULLY DISCRETIONARY
FIXED INCOME FUND PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 22.8%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
U.S. TREASURY BONDS
12.00%, 08/15/13........................... $537,000 $ 775,208
10.63%, 08/15/15........................... 120,000 168,750
7.63%, 02/15/25............................ 60,000 66,028
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,038,915).................................... 1,009,986
----------
- -------------------------------------------------------------------
AGENCY OBLIGATIONS -- 53.8%
- -------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 22.5%
POOL 50700
11.50%, 02/15/12......................... 9,366 10,611
POOL 64054
11.50%, 02/15/13......................... 8,410 9,527
POOL 57459
12.00%, 02/15/13......................... 3,459 3,995
POOL 125096
12.00%, 03/15/15......................... 2,331 2,693
POOL 141741
11.00%, 11/15/15......................... 16,512 18,576
POOL 321741
7.50%, 01/15/23.......................... 405,599 406,309
POOL 336173
7.50%, 04/15/23.......................... 394,459 395,149
POOL 352025
7.50%, 11/15/23.......................... 153,248 152,912
----------
999,772
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 24.5%
POOL 050341
9.50%, 09/01/05.......................... 209,264 221,362
POOL 303481
10.00%, 10/01/05......................... 193,655 206,242
POOL 303758
9.50%, 07/01/06.......................... 190,916 201,953
1993 116E
6.50%, 07/25/22.......................... 200,000 193,624
1993 138K
6.75%, 11/25/22.......................... 80,000 76,825
1993 183K
6.50%, 07/25/23.......................... 200,000 187,500
----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$1,087,506
----------
FEDERAL HOME LOAN MORTGAGE ASSOCIATION -- 6.8%
POOL 380032
10.00%, 10/01/03......................... $149,778 159,209
POOL 200112
9.50%, 11/01/05.......................... 134,375 141,996
----------
301,205
----------
TOTAL AGENCY OBLIGATIONS
(Cost $2,432,177).................................... 2,388,483
- -------------------------------------------------------------------
CORPORATE BONDS -- 12.4%
- -------------------------------------------------------------------
AMRO BANK, N.Y.
7.00%, 04/01/08.......................... 45,000 44,865
GTE FLORIDA, INC.
7.25%, 10/15/25.......................... 100,000 94,514
US WEST COMMUNICATIONS
6.88%, 09/15/33.......................... 150,000 133,793
PACIFIC BELL
6.63%, 10/15/34.......................... 155,000 135,977
BELL SOUTH TELECOM
7.00%, 12/01/45.......................... 150,000 141,977
----------
TOTAL CORPORATE BONDS
(Cost $602,212)...................................... 551,126
----------
- -------------------------------------------------------------------
FOREIGN BOND -- 6.1%
- -------------------------------------------------------------------
TREUHANDANSTALT
6.25%, 03/04/04
(Cost $276,922)........................DM 400,000 271,066
----------
- -------------------------------------------------------------------
DISCOUNT NOTE -- 3.8%
- -------------------------------------------------------------------
FEDERAL FARM CREDIT BANK
5.28%, 04/03/96
(Cost $169,950).......................... 170,000 169,950
----------
TOTAL INVESTMENTS -- 98.9%
(Cost $4,520,176).................................... $4,390,611
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.1%.................................. 49,474
----------
NET ASSETS -- 100.0%................................... $4,440,085
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
83
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996
- ------------------------------------------------------------------------
SHORT-INTERMEDIATE
FIXED INCOME FUND PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
U. S. TREASURY OBLIGATIONS -- 28.7%
- ----------------------------------------------
<TABLE>
<S> <C> <C>
U.S. TREASURY NOTES
5.125%, 11/30/98........................... $1,000,000 $ 980,780
7.750%, 11/30/99........................... 365,000 385,301
----------
TOTAL U. S. TREASURY NOTES
(Cost $1,375,039)...................................... 1,366,081
----------
- ---------------------------------------------------------------------
AGENCY OBLIGATIONS -- 24.8%
- ---------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 17.1%
POOL 380032
10.00%, 10/01/03......................... 9,041 9,610
POOL 380062
9.50%, 11/01/04.......................... 303,724 320,951
POOL 380078
9.00%, 04/01/05.......................... 171,658 179,696
POOL 200112
9.50%, 11/01/05.......................... 192,626 203,551
POOL G10453
9.00%, 06/01/07.......................... 97,705 102,896
----------
816,704
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 0.4%
POOL 50155
10.00%, 12/01/03......................... 8,338 8,849
POOL 2454
14.75%, 10/01/12......................... 8,098 9,652
----------
18,501
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 7.3%
POOL 780328
10.00%, 10/15/06......................... 194,275 209,331
POOL 64054
11.50%, 02/15/13......................... 8,410 9,527
POOL 59779
11.50%, 03/15/13......................... 3,396 3,847
POOL 65569
12.00%, 09/15/13......................... 726 838
POOL 67134
12.00%, 09/15/13......................... 1,819 2,101
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
POOL 780179
12.00%, 10/15/15......................... $ 84,614 $ 97,570
POOL 141741
11.00%, 11/15/15......................... 11,610 13,061
POOL 200947
9.50%, 12/15/17.......................... 9,772 10,615
----------
346,890
----------
TOTAL AGENCY OBLIGATIONS
(Cost $1,182,582)...................................... 1,182,095
----------
- ---------------------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES -- 42.0%
- ---------------------------------------------------------------------
AUTOS -- 10.0%
BANC ONE AUTO TRUST 1995-A
6.650%, 05/15/97......................... 108,527 108,697
PREMIER AUTO TRUST 1994-4
6.200%, 10/02/97......................... 159,903 160,202
DAIMLER-BENZ AUTO GRANTOR TRUST 1993-A
3.900%, 10/15/98......................... 3,253 3,215
CARCO AUTO LOAN MASTER TRUST 1994-2
7.875%, 07/15/99......................... 200,000 204,874
----------
476,988
----------
BANKS -- 16.7%
FIRST DEPOSIT MASTER TRUST 1993-1
4.900%, 06/15/00......................... 50,000 49,968
BANC ONE CREDIT CARD MASTER TRUST 1994-C
7.800%, 12/15/00......................... 305,000 316,819
STANDARD CREDIT CARD MASTER TRUST 1995-10
5.900%, 02/07/01......................... 200,000 198,186
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
84
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1996 -- CONTINUED
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE
FIXED INCOME FUND PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
BANKS (CONTINUED)
SIGNET CREDIT CARD MASTER TRUST
5.200%, 02/15/02......................... $ 235,000 $ 229,931
----------
794,904
----------
FINANCE -- 6.8%
DISCOVER CARD TRUST 1991-D
8.000%, 10/16/00......................... 100,000 103,718
AT&T UNIVERSAL CARD MASTER TRUST
5.950%, 10/17/02......................... 225,000 221,272
----------
324,990
----------
RETAIL -- 8.5%
SEARS CREDIT ACCOUNT TRUST 1991-D
7.750%, 09/15/98......................... 200,000 201,874
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
RETAIL (CONTINUED)
SEARS CREDIT ACCOUNT MASTER TRUST 1994-2
7.250%, 07/16/01......................... $ 200,000 $ 203,562
----------
405,436
----------
TOTAL CMO'S AND ASSET-BACKED SECURITIES
(Cost $2,023,481)...................................... 2,002,318
----------
- ---------------------------------------------------------------------
DISCOUNT NOTES
- ---------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 7.6%
5.280%, 04/02/96
(Cost $359,948)........................ 360,000 359,948
----------
TOTAL INVESTMENTS -- 103.1%
(Cost $4,941,050)...................................... $4,910,442
LIABILITIES IN EXCESS OF OTHER ASSETS -- (3.1%).......... (149,219)
----------
NET ASSETS -- 100.0%..................................... $4,761,223
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
85
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
FULLY SHORT-
DISCRETIONARY INTERMEDIATE
FIXED INCOME FIXED INCOME
FUND FUND
<S> <C> <C>
-----------------------------
ASSETS
Investments, at value*................................................... $4,390,611 $4,910,442
Cash..................................................................... 3,974 1,342
Interest receivable...................................................... 42,197 54,902
Receivable for investment securities sold................................ -- 202,125
Due from advisor......................................................... 7,381 10,043
Deferred organization costs.............................................. 1,954 1,954
Prepaid expenses and other assets........................................ 8,975 17,671
-----------------------------
Total assets......................................................... 4,455,092 5,198,479
-----------------------------
LIABILITIES
Payable for investment securities purchased.............................. -- 423,614
Due to advisor........................................................... 2,240 2,240
Accrued expenses......................................................... 12,767 11,402
-----------------------------
Total liabilities.................................................... 15,007 437,256
-----------------------------
NET ASSETS................................................................. $4,440,085 $4,761,223
-----------------------------
COMPOSITION OF NET ASSETS
Paid-in capital.......................................................... $4,534,476 $4,671,581
Accumulated undistributed net investment income.......................... 56,158 114,124
Accumulated undistributed net realized gain (loss)....................... (21,828) 6,126
Accumulated undistributed net realized foreign exchange gain............. 862 --
Net unrealized foreign exchange (loss)................................... (18) --
Net unrealized (depreciation) on investments............................. (129,565) (30,608)
-----------------------------
Net assets........................................................... $4,440,085 $4,761,223
-----------------------------
*Investments, at cost...................................................... $4,520,176 $4,941,050
-----------------------------
</TABLE>
- --------------------------------------------------------------------------------
86
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE PERIOD ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
FULLY SHORT-
DISCRETIONARY INTERMEDIATE
FIXED INCOME FIXED INCOME
FUND* FUND*
<S> <C> <C>
---------------------------
INVESTMENT INCOME
Interest................................................................. $ 59,680 $120,029
---------------------------
EXPENSES
Accounting fee......................................................... 9,375 9,375
Administration fee..................................................... 290 662
Advisory fee........................................................... 3,962 5,905
Audit & tax services................................................... 252 590
Custodian fee.......................................................... 3,000 2,853
Miscellaneous.......................................................... 1,602 2,275
Organization costs..................................................... 285 286
Trustees' fee.......................................................... 4,838 4,838
---------------------------
Total expenses....................................................... 23,604 26,784
Less: Reimbursement from advisor....................................... (20,082) (20,879)
---------------------------
Net expenses......................................................... 3,522 5,905
---------------------------
Net investment income.............................................. 56,158 114,124
---------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from security transactions...................... (21,828) 6,126
Net realized foreign exchange gain....................................... 862 --
Change in net unrealized depreciation of investments and foreign
currency............................................................... (129,583) (30,608)
---------------------------
Net loss on investments.............................................. (150,549) (24,482)
---------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............ $ (94,391) $ 89,642
---------------------------
</TABLE>
- ------------
*Commenced operations on August 31, 1995.
- --------------------------------------------------------------------------------
87
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE PERIOD ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
FULLY SHORT-
DISCRETIONARY INTERMEDIATE
FIXED INCOME FIXED INCOME
FUND* FUND*
<S> <C> <C>
-----------------------------
INCREASE IN NET ASSETS
OPERATIONS
Net investment income.................................................. $ 56,158 $ 114,124
Net realized gain (loss) from security transactions and foreign
exchange............................................................. (20,966) 6,126
Change in net unrealized (depreciation) of investments and foreign
currency............................................................. (129,583) (30,608)
-----------------------------
Net increase (decrease) in net assets resulting from operations...... (94,391) 89,642
-----------------------------
TRANSACTIONS IN INTEREST
Contributions by partners.............................................. 4,542,991 4,708,688
Withdrawals by partners................................................ (8,515) (37,107)
-----------------------------
Net increase in net assets from transactions in interests............ 4,534,476 4,671,581
-----------------------------
Total increase in net assets......................................... 4,440,085 4,761,223
NET ASSETS:
BEGINNING OF PERIOD...................................................... -- --
-----------------------------
END OF PERIOD............................................................ $ 4,440,085 $ 4,761,223
-----------------------------
</TABLE>
- ------------
*Commenced operations on August 31, 1995.
- --------------------------------------------------------------------------------
88
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company organized as a Delaware business trust,
is comprised of twelve investment vehicles (each a "Fund" and collectively the
"Funds") as of March 31, 1996. Each Fund has up to five Portfolios which have
invested in the respective series of the Master Trust to achieve their
investment objective.
The investment objectives of the Funds are as follows:
Fully Discretionary Fixed Income Fund seeks to maximize total return through
investment primarily in investment grade fixed-income securities with an average
portfolio duration between two and eight years.
Short-Intermediate Fixed Income Fund seeks to preserve principal and liquidity
and realize a relatively high level of current income through investment
primarily in investment grade fixed-income securities with a maximum average
dollar-weighted portfolio maturity of five years.
SECURITIES TRANSACTIONS
Debt securities generally are valued at the last bid price. Securities with 60
days or less remaining to maturity are valued on an amortized cost basis which
approximates market value.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under the direction of the Master
Trust's Board of Trustees.
Securities transactions are recognized on the trade date. Realized gains and
losses from securities transactions are calculated using the first-in, first-out
method. Dividend income is recognized on the ex-dividend date, and interest
income is recorded on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities. The
prospectus for the Nicholas-Applegate Mutual Funds describes each Fund's
policies with respect to declaration and payment of dividends and distribution
of capital gains.
FEDERAL INCOME TAXES
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Portfolios.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Master Trust have been allocated to the
various Funds based upon management's best estimate of the costs applicable to
each Fund. These costs have been deferred and will be amortized over a period of
60 months from the date the Funds commenced operations.
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 of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
89
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate"). The advisory fee is computed daily for the
Funds based upon the following percentages of each Fund's average daily net
assets: for the Short-Intermediate Fund, 0.30% of the first $250 million of the
Fund's average net assets and 0.25% of average net assets in excess of $250
million; for the Fully Discretionary Fund, 0.45% of the first $500 million of
the Fund's average net assets, 0.40% of the next $250 million of average net
assets, and 0.35% of average net assets in excess of $750 million.
EXPENSE LIMITATIONS
Nicholas-Applegate and the Master Trust have undertaken to limit the Funds'
expenses to certain annual levels through March 31, 1997. In subsequent years,
overall operating expenses for each Fund will not fall below the percentage
limitation until the Investment Adviser has been fully reimbursed for fees
foregone or expenses paid by the Investment Adviser under this agreement, as
each Fund will reimburse the Investment Adviser in subsequent years when
operating expenses (before reimbursement) are less than the applicable
percentage limitation.
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the period from inception (respectively) to March 31, 1996 are
as follows:
<TABLE>
<S> <C>
Fully Discretionary Fixed Income
Fund................................ $ 20,082
Short-Intermediate Fixed Income
Fund................................ 20,879
</TABLE>
Nicholas-Applegate advanced certain organization costs discussed in Note A. As
of March 31, 1996, the following Funds have amounts due to Nicholas-Applegate
for organizational costs advanced:
<TABLE>
<S> <C>
Fully Discretionary Fixed Income
Fund................................. $ 2,240
Short-Intermediate Fixed Income
Fund................................. 2,240
</TABLE>
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the fiscal year ended March 31, 1996, were as
follows (in 000's):
<TABLE>
<CAPTION>
PURCHASES SALES
----------- ---------
<S> <C> <C>
Fully Discretionary Fixed Income
Fund.............................. $ 5,442 $ 1,065
Short-Intermediate Fixed Income
Fund.............................. 8,394 3,801
</TABLE>
At March 31, 1996, the net unrealized appreciation (depreciation) based on the
cost of investments for Federal income tax purposes was as follows (in 000's):
<TABLE>
<CAPTION>
TAX GROSS
COST OF GROSS UNREALIZED UNREALIZED NET UNREALIZED
INVESTMENTS APPRECIATION DEPRECIATION DEPRECIATION
------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Fully
Discretionary
Fixed Income
Fund........... $ 4,520 $ 2 $ 132 $ (130)
Short-Intermediate
Fixed Income
Fund........... 4,941 4 35 (31)
</TABLE>
- --------------------------------------------------------------------------------
90
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
D. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF NET RATIO OF NET
RATIO OF RATIO OF INVESTMENT INVESTMENT
EXPENSES EXPENSES INCOME TO INCOME TO
TO AVERAGE TO AVERAGE AVERAGE AVERAGE
NET ASSETS, NET ASSETS, NET ASSETS, NET ASSETS, PORTFOLIO
AFTER EXPENSE BEFORE EXPENSE AFTER EXPENSE BEFORE EXPENSE TURNOVER
REIMBURSEMENTS+ REIMBURSEMENTS+ REIMBURSEMENTS+ REIMBURSEMENTS+ RATE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
FULLY DISCRETIONARY FIXED INCOME*
For the period ended 03/31/96......... 0.45% 2.69% 6.44% 4.12% 60.06%
SHORT-INTERMEDIATE FIXED INCOME*
For the period ended 03/31/96......... 0.30% 1.36% 5.85% 4.77% 114.38%
</TABLE>
- ------------
*Commenced operations on August 31, 1995
+Annualized
- --------------------------------------------------------------------------------
91
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
[LOGO]
To the Shareholders and Board of Trustees of
Nicholas-Applegate Mutual Funds
We have audited the accompanying statements of assets and liabilities of the
following portfolios of Nicholas-Applegate Mutual Funds: Fully Discretionary
Fixed Income Institutional Portfolio and Short-Intermediate Fixed Income
Institutional Portfolio (hereinafter the "Portfolios"), as of March 31, 1996,
and the related statements of operations and changes in net assets and the
financial highlights for the fiscal year then ended. These financial statements
and financial highlights are the responsibility of the Portfolios' 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 positions of the
Portfolios as of March 31, 1996, and the results of their operations, changes in
their net assets and the financial highlights for the fiscal year then ended, in
conformity with generally accepted accounting principles.
[LOGO]
May 10, 1996
- --------------------------------------------------------------------------------
92
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------
[LOGO]
To the Shareholders and Board of Trustees of
Nicholas-Applegate Investment Trust
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the following series of Nicholas-Applegate
Investment Trust: Fully Discretionary Fixed Income Fund and Short-Intermediate
Fixed Income Fund (hereinafter the "Funds"), as of March 31, 1996, and the
related statements of operations and changes in net assets for the fiscal year
then ended. These financial statements are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 March 31, 1996, by correspondence with
the custodian. 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 referred to above present fairly, in
all material respects, the financial positions of the Funds as of March 31,
1996, and the results of their operations and changes in their net assets for
the fiscal year then ended, in conformity with generally accepted accounting
principles.
[LOGO]
May 10, 1996
- --------------------------------------------------------------------------------
93
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
EMERGING GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK -- 94.7%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ADVERTISING -- 1.7%
CKS Group*................................. 78,500 $ 1,854,562
Eagle River Interactive, Inc.*............. 37,800 387,450
Ha-Lo Industries, Inc.*.................... 24,900 722,100
Lamar Advertising Co.*..................... 61,000 2,531,500
National Media Corp.*...................... 17,000 252,875
Outdoor Systems, Inc.*..................... 23,850 1,120,950
Universal Outdoor Holdings, Inc.*.......... 71,000 2,556,000
------------
9,425,437
------------
AGRICULTURE -- 0.3%
Dekalb Genetics Corp. Class B.............. 51,200 1,740,800
------------
AIR FREIGHT/SHIPPING -- 0.1%
Airnet Systems, Inc.*...................... 36,600 521,550
------------
AIRLINES -- 0.1%
Midwest Express Holdings, Inc.*............ 22,400 669,200
------------
ALCOHOLIC BEVERAGES -- 0.2%
Mondavi Robert Corp.*...................... 35,500 1,162,625
------------
APPAREL -- 3.3%
Cole Kenneth Productions, Inc.*............ 104,000 1,963,000
Donnkenny, Inc.*........................... 89,000 1,524,125
Genesco, Inc.*............................. 27,600 258,750
Nautica Enterprises, Inc.*................. 136,350 4,397,287
St. John Knits, Inc........................ 48,000 2,406,000
Stein Mart, Inc.*.......................... 93,500 2,068,688
Vans, Inc.*................................ 97,300 1,860,863
Wolverine Worldwide, Inc................... 198,300 5,502,825
------------
19,981,538
------------
BEVERAGES/SOFT DRINKS -- 0.3%
Cott Corp.................................. 244,500 1,849,031
------------
BIOTECHNOLOGY -- 2.8%
Advanced Techonology Labs, Inc.*........... 51,900 1,660,800
Biopsys Medical, Inc.*..................... 9,500 140,125
Depotech Corp.*............................ 20,000 345,000
Endovascular Technology, Inc.*............. 47,200 566,400
Guilford Pharmaceuticals, Inc.*............ 25,000 687,500
Martek Biosciences Corp.*.................. 63,600 1,590,000
Matritech, Inc.*........................... 30,000 388,125
Mentor Corp................................ 129,800 3,569,500
Neurex Corp.*.............................. 108,300 2,071,237
Neurogen Corp.*............................ 35,000 883,750
Nexstar Pharmaceuticals, Inc.*............. 50,000 1,050,000
Pharmaceutical Product Development,
Inc.*.................................... 14,054 379,457
Quintiles Transnational Corp.*............. 8,600 629,950
Regeneron Pharmaceuticals, Inc.*........... 37,300 750,663
Sequus Pharmaceuticals, Inc.*.............. 96,800 1,524,600
Sonus Pahrmaceuticals, Inc.*............... 17,800 343,763
Vertex Pharmaceuticals, Inc.*.............. 19,700 581,150
------------
17,162,020
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
BROADCASTING -- 2.7%
American Radio Systems Corp.*.............. 72,400 $ 2,696,900
Argyle Television, Inc. Class A*........... 21,400 601,875
Chancellor Corp.*.......................... 58,400 2,423,600
Emmis Broadcasting Corp. Class A*.......... 43,600 2,016,500
Evergreen Media Corp. Class A*............. 93,450 2,920,313
Premiere Radio Networks, Inc. Class A*..... 33,600 361,200
Saga Communications, Inc. Class A*......... 50,062 1,120,137
SFX Broadcasting, Inc. Class A*............ 42,500 1,933,750
Telemundo Group, Inc. Class A*............. 18,000 616,500
United Video Satellite Group, Inc. Class
A*....................................... 35,000 708,750
Westwood One, Inc.*........................ 71,000 1,304,625
------------
16,704,150
------------
BUILDING MATERIALS -- 0.6%
Falcon Building Products, Inc. Class A*.... 45,000 585,000
Hexcel Corp.*.............................. 102,600 1,987,875
NCI Building Systems, Inc.*................ 26,600 864,500
------------
3,437,375
------------
BUILDING MATERIAL CHAIN -- 0.4%
Eagle Hardware & Garden, Inc............... 85,000 2,295,000
------------
CHEMICALS -- 0.2%
OM Group, Inc.............................. 38,300 1,455,400
------------
CLOTHING CHAINS -- 2.5%
American Eagle Outfitters, Inc.*........... 26,500 563,125
Baker (J), Inc............................. 20,000 122,187
Buckle, Inc. (The)*........................ 2,400 76,200
Charming Shoppes, Inc.*.................... 544,500 3,267,000
Gadzooks, Inc.*............................ 69,000 2,397,750
Loehmanns, Inc.*........................... 53,200 1,426,425
Ross Stores, Inc........................... 109,900 3,956,400
Wet Seal, Inc. Class A*.................... 86,300 3,106,800
99 Cents Only Stores*...................... 30,300 424,200
------------
15,340,087
------------
COAL MINING -- 0.1%
Zeigler Coal Holding Company............... 25,000 431,250
------------
COMPUTER/OFFICE AUTOMATION -- 1.8%
Amati Communications Corp.*................ 71,000 1,562,000
Auspex Systems, Inc.*...................... 135,600 2,084,850
Brooktrout Technology, Inc.*............... 39,700 1,449,050
Discreet Logic, Inc.*...................... 96,000 732,000
Eltron International, Inc.*................ 47,750 1,545,906
Encad, Inc.*............................... 10,000 418,750
GEAC Computer Corp. LTD*................... 40,500 493,540
IDX Systems Corp.*......................... 8,000 280,000
Network Appliance, Inc.*................... 53,000 1,590,000
Safeguard Scientifics, Inc.*............... 23,100 921,113
Sunquest Information Systems, Inc.*........ 9,000 166,500
------------
11,243,709
------------
CONTAINERS -- 0.0%
U.S. Can Corp.*............................ 18,600 299,925
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
CONTRACTING DRILLING -- 1.4%
Cliffs Drilling Co.*....................... 35,500 $ 1,224,750
Falcon Drilling, Inc.*..................... 82,400 2,142,400
Marine Drilling Co., Inc.*................. 311,400 2,997,225
Noble Drilling Corp.*...................... 71,700 1,084,462
Reading & Bates Corp.*..................... 40,100 1,087,713
------------
8,536,550
------------
DEPARTMENT/DISCOUNT STORES -- 0.1%
Carson Pirie Scott & Co.*.................. 28,500 758,812
------------
DRUGS/PHARMACEUTICALS -- 3.0%
Anesta Corp.*.............................. 58,500 826,312
Columbia Laboratories, Inc.*............... 30,000 367,500
Curative Health Services, Inc.*............ 67,400 1,297,450
Dura Pharmaceuticals, Inc.*................ 142,200 5,243,625
Incyte Pharmaceuticals, Inc.*.............. 51,000 2,524,500
Inhale Therapeutic Systems*................ 11,500 148,062
Jones Medical Industries, Inc.............. 28,125 1,364,062
Medicis Pharmaceutical Corp. Class A*...... 16,900 815,425
MIM Corp.*................................. 40,500 587,250
Nabi, Inc.*................................ 137,900 1,637,562
NCS Healthcare, Inc. Class A*.............. 19,100 599,263
Noven Pharmaceuticals, Inc.*............... 30,700 387,587
Parexel International Corp.*............... 19,400 1,222,200
Pathogenesis Corp.*........................ 51,300 910,575
Sangstat Medical Corp.*.................... 9,300 237,150
------------
18,168,523
------------
ELECTRONIC DATA PROCESSING -- 1.5%
Affiliated Computer Services, Inc. Class
A*....................................... 30,900 1,815,375
Checkfree Corp.*........................... 45,000 900,000
Envoy Corp.*............................... 81,200 3,146,500
Industry-Matematik International*.......... 79,000 977,625
Object Design, Inc.*....................... 70,000 1,128,750
Peerless Systems Corp.*.................... 14,500 166,750
Versant Object Technology Corp.*........... 37,500 890,625
------------
9,025,625
------------
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 1.8%
Belden, Inc.*.............................. 38,800 1,125,200
Checkpoint Systems, Inc.*.................. 167,400 4,436,100
Coherent, Inc.*............................ 56,600 1,995,150
Lernout & Hauspie Speech*.................. 42,300 1,004,625
Orbotech LTD*.............................. 16,000 190,000
Uniphase Corp.*............................ 45,300 1,913,925
------------
10,665,000
------------
ELECTRONICS/MUSIC CHAINS -- 0.5%
Inacom Corp.*.............................. 87,000 2,979,750
------------
ENTERTAINMENT -- 0.3%
Family Golf Centers, Inc.*................. 20,000 580,000
Hollywood Entertainment Corp.*............. 73,300 1,502,650
------------
2,082,650
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ENVIRONMENTAL SERVICES -- 1.8%
Newpark Resources, Inc.*................... 26,585 $ 967,029
Superior Services, Inc.*................... 17,000 272,000
Tetra Technologies, Inc.*.................. 42,300 777,263
United Waste Systems, Inc.*................ 156,600 5,441,850
U.S. Filter Corp.*......................... 71,400 2,436,525
U.S.A. Waste Services, Inc.*............... 26,800 844,200
------------
10,738,867
------------
FINANCE COMPANIES -- 1.4%
AmeriCredit Corp.*......................... 115,400 2,120,475
Cityscape Financial Corp.*................. 47,000 1,245,500
Imperial Credit Industries, Inc.*.......... 109,200 3,999,450
Westcorp., Inc............................. 56,205 1,215,433
------------
8,580,858
------------
FOOD CHAINS -- 0.1%
Quality Food Centers, Inc.*................ 13,000 451,750
------------
HOME FURNISHINGS -- 0.6%
Bush Industries, Inc. Class A.............. 20,000 367,500
Cort Business Services Corp.*.............. 30,000 611,250
Ethan Allen Interiors, Inc................. 24,000 747,000
Furniture Brands International, Inc.*...... 47,600 696,150
Renters Choice, Inc.*...................... 71,600 1,342,500
------------
3,764,400
------------
HOMEBUILDING -- 1.2%
American Homestar Corp.*................... 24,700 600,519
Cavalier Homes, Inc........................ 2,100 38,850
Champion Enterprises, Inc.*................ 93,700 2,119,962
Diamond Home Services, Inc.*............... 29,700 861,300
Oakwood Homes Corp......................... 74,800 2,057,000
Redman Industries, Inc.*................... 36,800 1,030,400
United States Home Corp.*.................. 40,000 820,000
------------
7,528,031
------------
HOSPITALS -- 0.7%
Health Management Systems, Inc.*........... 88,400 2,585,700
National Surgery Centers, Inc.*............ 52,600 1,472,800
------------
4,058,500
------------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 0.6%
Granite Construction, Inc.................. 69,900 1,450,425
Greenwich Air Services, Inc. Class B*...... 42,500 881,875
Greenwich Air Services, Inc. Class A....... 40,400 1,131,200
------------
3,463,500
------------
LEISURE/GAMING -- 0.9%
Anchor Gaming*............................. 40,400 2,514,900
Sodak Gaming, Inc.*........................ 119,000 2,737,000
------------
5,251,900
------------
LIFE INSURERS -- 0.1%
Delphi Financial Group, Inc. Class A*...... 900 25,200
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
2
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
LIFE INSURERS (CONTINUED)
Protective Life Corp....................... 8,900 $ 335,975
------------
361,175
------------
LODGING -- 1.1%
Bristol Hotel Co.*......................... 40,400 1,075,650
Doubletree Corp.*.......................... 24,600 980,925
Prime Hospitality Corp.*................... 174,200 2,874,300
Studio Plus Hotels, Inc.*.................. 45,750 754,875
Suburban Lodges of America*................ 27,200 571,200
Wyndham Hotel Corp.*....................... 26,500 483,625
------------
6,740,575
------------
MACHINERY/EQUIPMENT -- 1.1%
Digitran Systems, Inc.*.................... 14,500 145
Elbit Vision Systems LTD*.................. 17,500 126,875
Etec Systems, Inc.*........................ 49,600 1,686,400
Greenfield Industries, Inc................. 57,700 1,384,800
Iwerks Entertainment, Inc.*................ 72,500 507,500
JLG Industries, Inc........................ 6,800 127,500
Kuhlman Corp............................... 20,800 304,200
Miller Industries, Inc.*................... 35,600 1,406,200
Robbins & Myers, Inc....................... 34,000 769,250
Watsco, Inc. Class A....................... 13,950 284,231
------------
6,597,101
------------
MANAGED HEALTHCARE/HMO'S/PPO'S -- 0.8%
CRA Managed Care, Inc.*.................... 17,600 950,400
FPA Medical Management, Inc.*.............. 44,700 1,178,962
Medcath, Inc.*............................. 52,200 887,400
OccuSystems, Inc.*......................... 68,800 2,064,000
------------
5,080,762
------------
MEDICAL SPECIALTIES -- 0.0%
Impath, Inc.*.............................. 5,200 63,700
------------
MEDICAL SUPPLIES -- 3.2%
Adac Laboratories.......................... 113,500 2,284,187
Capstone Pharmacy Services*................ 48,400 598,950
ESC Medical Systems LTD*................... 36,000 1,152,000
Femrx, Inc.*............................... 18,600 153,450
Invacare Corp.............................. 49,900 1,397,200
Iridex Corp.*.............................. 15,100 124,575
Keravision, Inc.*.......................... 36,100 541,500
Lunar Corp.*............................... 8,500 272,000
Minimed, Inc.*............................. 18,600 467,325
Orthologic Corp.*.......................... 91,600 973,250
Physio-Control International Corp.*........ 78,400 1,979,600
ResMed, Inc.*.............................. 18,800 371,300
Safeskin Corp.*............................ 62,500 2,171,875
Serologicals Corp.*........................ 13,600 472,600
Steris Corp.*.............................. 36,200 1,226,275
Target Therapeutics, Inc.*................. 96,900 4,142,475
Urologix, Inc.*............................ 8,000 123,000
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MEDICAL SUPPLIES (CONTINUED)
Vivus, Inc.*............................... 27,300 $ 1,037,400
------------
19,488,962
------------
MEDICAL/HEALTH SERVICES -- 2.0%
ABR Information Services, Inc.*............ 39,125 2,817,000
American Homepatient, Inc.*................ 22,100 491,725
Collaborative Clinical Research, Inc.*..... 32,000 432,000
EmCare Holdings, Inc.*..................... 58,700 1,584,900
Multicare Companies, Inc.*................. 63,900 1,389,825
Pediatric Services of America, Inc.*....... 21,700 401,450
Pediatrix Medical Group, Inc.*............. 6,800 340,850
Prime Medical Services, Inc.*.............. 35,000 463,750
Renal Care Group, Inc.*.................... 32,000 1,184,000
Renal Treatment Centers, Inc.*............. 79,800 2,653,350
Sterling Healthcare Group*................. 12,000 259,500
------------
12,018,350
------------
METALS -- 1.7%
Gibraltar Steel Corp....................... 26,800 603,000
Mueller Industries, Inc.*.................. 76,500 3,107,812
Olympic Steel, Inc.*....................... 73,000 1,961,875
Oregon Metallurgical Corp.*................ 70,000 2,275,000
RMI Titanium Co.*.......................... 86,000 2,171,500
UNR Industries, Inc........................ 46,600 308,725
------------
10,427,912
------------
MILITARY /DEFENSE TECHNOLOGY -- 0.9%
Avondale Industries, Inc.*................. 32,600 607,175
Rohr Industries, Inc.*..................... 88,900 1,744,663
Stanford Telecommunications, Inc.*......... 46,500 2,325,000
Tracor, Inc.*.............................. 28,700 591,938
------------
5,268,776
------------
MULTI-LINE INSURERS -- 0.3%
Penncorp Financial Group, Inc.............. 54,600 1,760,850
------------
OIL/GAS PRODUCTION -- 1.8%
Abacan Resource Corp.*..................... 50,000 343,750
Barrett Resources Corp.*................... 19,900 701,475
Belden & Blake Corp........................ 17,000 395,250
Brown (Tom), Inc.*......................... 50,600 955,075
Cross Timbers Oil Co....................... 34,000 816,000
Global Natural Resources, Inc.*............ 57,800 1,004,275
Houston Exploration Co.*................... 17,000 289,000
KCS Energy, Inc............................ 34,500 1,229,062
Lomak Petroleum, Inc....................... 18,000 236,250
Newfield Exploration Co.*.................. 17,600 792,000
Nuevo Energy Co.*.......................... 18,500 751,562
Petroleum Securities Australia LTD*........ 34,000 790,500
Plains Resources, Inc.*.................... 17,500 242,813
Swift Energy Co.*.......................... 70,500 1,692,000
Tesoro Petroleum Corp.*.................... 17,000 218,875
Vintage Petroleum, Inc..................... 17,900 525,813
------------
10,983,700
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
3
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OILFIELD SERVICES/EQUIPMENT -- 3.3%
BJ Services Co.*........................... 104,400 $ 3,784,500
Camco International, Inc................... 56,700 2,119,162
Energy Ventures, Inc.*..................... 31,700 1,283,850
Global Industries, LTD*.................... 107,000 1,698,625
Oceaneering International, Inc.*........... 52,600 894,200
Pool Energy Services Co.*.................. 71,200 898,900
Pride Petroleum Services, Inc.*............ 129,400 1,827,775
Seacor Holdings, Inc.*..................... 63,400 3,217,550
Tuboscope Vetco International, Corp.*...... 82,100 1,282,813
Varco International, Inc.*................. 123,700 2,180,213
Veritas DGC, Inc.*......................... 35,000 630,000
------------
19,817,588
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICE -- 4.5%
ATC Communications, Inc.................... 18,000 315,000
Caribiner International, Inc............... 28,900 1,221,025
Claremont Technology Group, Inc.*.......... 25,500 918,000
Corestaff, Inc.*........................... 22,500 601,875
G&K Services, Inc., Class A................ 16,050 469,462
ICTS International NV*..................... 8,700 106,575
Learning Tree International*............... 12,100 447,700
Mastec, Inc.*.............................. 36,000 1,233,000
Meta Group, Inc.*.......................... 21,000 582,750
National Education Corp.*.................. 107,700 2,059,762
National Techteam, Inc.*................... 34,000 922,250
National Wireless Holdings, Inc.*.......... 15,800 252,800
Norrell Corp............................... 43,800 1,379,700
Nova Corp.*................................ 24,200 798,600
Personnel Group of America, Inc.*.......... 56,500 1,469,000
PMT Services, Inc.*........................ 90,350 1,829,588
Pre Paid Legal Services, Inc.*............. 90,500 1,165,188
Protection One, Inc.*...................... 96,300 1,215,788
Rental Service Corp.*...................... 14,000 302,750
Robert Half International, Inc.*........... 17,600 649,000
Romac International, Inc.*................. 59,300 1,808,650
Seattle Filmworks, Inc.*................... 26,500 583,000
Techforce Corp.*........................... 18,600 137,175
The Registry, Inc.*........................ 10,000 380,000
Vincam Group, Inc.*........................ 22,500 860,625
Wackenhut Corp. Series B................... 45,000 703,125
Wackenhut Corrections Corp.*............... 63,000 1,401,750
Western Staff Services, Inc.*.............. 18,300 276,788
Whittman-Hart, Inc.*....................... 57,400 2,712,150
Youth Services International, Inc.*........ 27,000 374,625
------------
27,177,701
------------
OTHER CONSUMER DURABLES -- 0.4%
Sola International, Inc.*.................. 68,900 2,566,525
------------
OTHER CONSUMER NON-DURABLES -- 0.0%
Blyth Industries, Inc.*.................... 30,600 1,484,100
------------
OTHER CONSUMER SERVICES -- 0.4%
American Residential Services, Inc.*....... 11,500 219,937
Amre, Inc.*................................ 51,600 715,950
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER CONSUMER SERVICES (CONTINUED)
Apollo Group, Inc. Class A*................ 34,647 $ 926,807
ITT Educational Services*.................. 11,800 413,000
------------
2,275,694
------------
OTHER FINANCIAL SERVICES -- 0.9%
Ocwen Financial Corp.*..................... 17,000 346,375
RAC Financial Group, Inc.*................. 85,000 3,878,125
Southern Pacific Funding Corp.*............ 17,200 434,300
WFS Financial, Inc.*....................... 33,000 676,500
------------
5,335,300
------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 1.6%
Clintrials, Inc.*.......................... 71,000 2,893,250
Enterprise Systems, Inc.*.................. 16,000 412,000
Horizon Mental Health Management, Inc.*.... 15,600 386,100
Physician Computer Network, Inc.*.......... 188,700 2,004,938
Physician Support Systems, Inc.*........... 23,000 557,750
RTW, Inc.*................................. 38,700 1,117,463
Summit Medical Systems, Inc.*.............. 31,000 434,000
Veterinary Centers America, Inc.*.......... 76,500 1,678,219
------------
9,483,720
------------
OTHER PRODUCERS/MANUFACTURING -- 1.2%
BE Aerospace, Inc.*........................ 32,200 664,125
BMC Industries, Inc........................ 82,600 2,364,425
Chicago Miniature Lamp, Inc.*.............. 29,400 889,350
Foamex International, Inc.*................ 140,000 2,275,000
Memtec LTD Sponsored ADR................... 17,000 476,000
Rexel, Inc.*............................... 27,900 439,425
------------
7,108,325
------------
OTHER RETAIL TRADE -- 0.0%
Cost Plus*................................. 66,800 1,544,750
------------
OTHER TECHNOLOGY -- 1.2%
Compucom Systems, Inc.*.................... 18,300 160,125
Computer Products, Inc.*................... 89,400 1,955,625
Henry (Jack) & Associates.................. 24,100 765,175
Renaissance Solutions, Inc.*............... 22,100 936,488
Technology Solutions Company*.............. 48,750 1,700,156
Vanstar Corp.*............................. 63,000 1,527,750
------------
7,045,319
------------
OTHER TRANSPORTATION -- 0.3%
Coach USA, Inc.*........................... 23,000 615,250
Trico Marine Services, Inc.*............... 38,200 1,165,100
------------
1,780,350
------------
PAPER -- 0.2%
American Pad & Paper Co.*.................. 60,000 1,275,000
------------
PRINTING/FORMS -- 0.0%
Applied Graphics Technologies, Inc.*....... 18,600 276,675
------------
PROPERTY-CASUALTY INSURERS -- 0.8%
Capmac Holdings, Inc....................... 38,500 1,280,125
HCC Insurance Holdings, Inc................ 48,100 1,388,887
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
PROPERTY-CASUALTY INSURERS (CONTINUED)
La Salle Re Holdings LTD................... 49,300 $ 1,158,550
Vesta Insurance Group, Inc................. 34,350 1,318,181
------------
5,145,743
------------
PUBLISHING -- 0.2%
Golden Books Family Entertainment, Inc.*... 90,000 1,046,250
------------
RAILROADS -- 0.2%
Railtex, Inc.*............................. 40,000 952,500
------------
REAL ESTATE BROKERS/SERVICES -- 0.8%
Amresco, Inc.*............................. 144,700 3,310,012
Insignia Financial Group, Inc. Class A*.... 26,300 670,650
NHP, Inc.*................................. 23,300 441,244
Redwood Trust, Inc......................... 17,700 566,400
------------
4,988,306
------------
RECREATIONAL PRODUCTS -- 0.4%
Coachmen Industries, Inc................... 35,500 914,125
Galoob Lewis T*............................ 38,000 1,111,500
Rockshox*.................................. 9,000 135,000
Tyco Toys, Inc.*........................... 34,300 197,225
------------
2,357,850
------------
REGIONAL BANKS -- 0.1%
Provident Bankshares Corp.................. 19,700 696,888
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.2%
FelCor Suite Hotels, Inc................... 19,100 615,975
Storage USA, Inc........................... 24,000 798,000
------------
1,413,975
------------
RENTAL/LEASING COMPANIES -- 0.2%
Team Rental Group, Inc.*................... 22,400 425,600
Leasing Solutions, Inc.*................... 34,000 977,500
Winthrop Resources Corp.................... 900 24,300
------------
1,427,400
------------
RESTAURANTS -- 1.7%
Apple South, Inc........................... 65,300 873,387
CKE Restaurants, Inc....................... 76,000 2,337,000
Foodmaker, Inc.*........................... 253,200 2,532,000
Logan's Roadhouse, Inc.*................... 27,000 543,375
Papa John's International, Inc.*........... 17,900 939,750
Rainforest Cafe, Inc.*..................... 63,550 1,970,050
Showbiz Pizza Time, Inc.*.................. 71,300 1,292,313
Taco Cabana Class A*....................... 3,700 21,275
------------
10,509,150
------------
RETAIL/FOOD DISTRIBUTION -- 0.5%
Richfood Holdings, Inc..................... 87,700 3,266,825
------------
SEMICONDUCTORS/ELECTRONIC COMPONENT -- 3.4%
Actel Corp.*............................... 144,300 2,777,775
Flextronics International, LTD*............ 62,300 1,721,037
Radisys Corp.*............................. 19,400 960,300
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SEMICONDUCTORS/ELECTRONIC COMPONENT (CONTINUED)
Sawtek, Inc.*.............................. 90,700 $ 2,358,200
SDL, Inc.*................................. 100,400 2,058,200
S3, Inc.*.................................. 246,700 4,872,325
Trident Microsystems, Inc.*................ 68,000 1,028,500
Vitesse Semiconductor Corp.*............... 125,800 4,859,025
------------
20,635,362
------------
SOFTWARE -- 14.0%
Amisys Managed Care Systems*............... 36,000 859,500
Applix, Inc.*.............................. 16,500 433,125
Aspen Technology, Inc.*.................... 42,400 2,872,600
Avant Corp.*............................... 46,500 1,395,000
BDM International, Inc.*................... 32,600 1,939,700
CBT Group PLC Sponsored ADR*............... 80,400 3,778,800
Ciber, Inc.*............................... 61,500 2,337,000
Clarify, Inc.*............................. 33,500 2,077,000
Cognos, Inc.*.............................. 183,600 5,989,950
Cooper & Chyan Technology, Inc.*........... 38,700 948,150
Datastream Systems, Inc.*.................. 57,600 1,742,400
Dataworks Corp.*........................... 33,200 863,200
Dendrite International, Inc.*.............. 31,500 952,875
Geoworks*.................................. 21,700 564,200
Harbinger Corp.*........................... 61,700 1,542,500
HCIA, Inc.*................................ 17,700 1,062,000
HNC Software, Inc.*........................ 99,000 3,960,000
HPR, Inc.*................................. 17,500 280,000
Ikos Systems, Inc.*........................ 41,600 826,800
Indus Group, Inc.*......................... 21,000 420,000
Integrated Systems, Inc.*.................. 78,200 2,580,600
JDA Software Group, Inc.*.................. 69,800 1,919,500
Legato Systems, Inc.*...................... 81,800 3,885,500
Manugistics Group, Inc.*................... 12,800 515,200
MDL Information Systems, Inc.*............. 30,700 970,888
Mecon, Inc.*............................... 19,000 475,000
National Instruments Corp.*................ 61,000 1,616,500
Onewave, Inc.*............................. 8,500 128,562
Pegasystems, Inc.*......................... 17,500 455,000
Perceptron, Inc.*.......................... 32,700 825,675
Platinum Software Corp.*................... 1,795 19,969
Pure Atria Corp.*.......................... 116,005 4,379,189
Quick Response Services, Inc.*............. 14,800 551,300
Rational Software Corp.*................... 155,200 5,296,200
Sapient Corp.*............................. 12,200 542,900
Saville Systems Ireland PLC*............... 63,700 2,245,425
Scopus Technology, Inc.*................... 55,000 1,663,750
Seibel Systems, Inc.*...................... 43,500 1,810,688
SPSS, Inc.*................................ 18,000 499,500
SQA, Inc.*................................. 23,600 637,200
Sykes Enterprises, Inc.*................... 82,350 3,973,388
Systemsoft Corp.*.......................... 156,300 5,353,275
Verilink Corp.*............................ 5,900 144,550
Veritas Software Co.*...................... 34,000 2,405,500
Viasoft, Inc.*............................. 69,800 2,931,600
Viewlogic Systems, Inc.*................... 71,600 832,350
Visio Corp.*............................... 27,500 1,251,250
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
5
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE (CONTINUED)
Wind River Systems, Inc.*.................. 49,800 $ 2,203,650
------------
84,958,909
------------
SPECIALTY CHAINS -- 2.9%
Cross Continenet Auto Retailers, Inc.*..... 12,000 276,000
Duty Free International, Inc............... 56,400 775,500
Finish Line, Inc. Class A*................. 24,000 1,140,000
Insight Enterprises, Inc.*................. 13,600 508,300
Just for Feet, Inc.*....................... 58,100 2,912,262
Men's Wearhouse, Inc.*..................... 25,300 632,500
Microage, Inc.*............................ 103,000 1,944,125
Party City Corp.*.......................... 8,000 150,000
Petco Animal Supplies, Inc.*............... 40,650 1,107,712
Pier 1 Imports, Inc........................ 116,200 1,873,725
Rexall Sundown, Inc.*...................... 51,600 1,883,400
West Coast Entertainment Corp.*............ 13,500 136,688
West Marine, Inc.*......................... 22,800 752,400
Williams-Sonoma, Inc.*..................... 135,300 3,839,138
------------
17,931,750
------------
TELECOMMUNICATIONS EQUIPMENT -- 4.2%
ACT Networks, Inc.*........................ 74,300 2,080,400
AML Communications, Inc.*.................. 1,100 17,875
Aspect Telecommunications Corp.*........... 107,300 6,679,425
Cable Design Technologies, Inc.*........... 50,000 2,000,000
Coherent Communications Systems Corp.*..... 46,400 881,600
Comverse Technology, Inc.*................. 43,200 1,679,400
Davox Corp.*............................... 19,000 717,250
Digital Systems International, Inc.*....... 36,000 643,500
Inter-Tel, Inc.*........................... 35,200 712,800
Lightbridge, Inc.*......................... 9,360 109,980
Natural Microsystems Corp.*................ 39,000 1,876,875
Nice-Systems LTD*.......................... 33,500 767,359
Ortel Corp.*............................... 54,000 1,296,000
P Com, Inc.*............................... 51,400 1,272,150
Periphonics Corp.*......................... 22,000 858,000
Remec, Inc.*............................... 17,100 241,538
TCSI Corp.*................................ 57,500 761,875
Teledata Communications LTD.*.............. 5,000 91,875
Teltrend, Inc.*............................ 34,200 1,453,500
Westell Technologies, Inc.*................ 28,600 1,265,550
------------
25,406,952
------------
TELEPHONE -- 2.4%
ACC Corp.*................................. 52,900 2,499,525
Clearnet Communications Class A*........... 18,000 294,750
ICG Communications, Inc.*.................. 70,000 1,470,000
Intercel, Inc.*............................ 83,500 1,753,500
Intermedia Communications of Florida,
Inc.*.................................... 58,100 1,699,425
Midcom Connumications, Inc.*............... 69,000 948,750
Pacific Gateway Exchange, Inc.*............ 38,200 1,126,900
Pricellular Corp., Class A*................ 40,375 $ 580,391
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELEPHONE (CONTINUED)
Tel-Save Holdings, Inc.*................... 72,000 2,070,000
Winstar Communications*.................... 123,800 2,058,175
------------
14,501,416
------------
TOBACCO PRODUCTS -- 0.3%
Mafco Consolidated Group, Inc.*............ 68,800 2,107,000
------------
TRUCKING -- 0.6%
Knight Transportation, Inc.*............... 17,000 371,875
Landstar System, Inc.*..................... 76,500 2,046,375
Swift Transportation Co.*.................. 17,000 372,938
USFreightways Corp......................... 51,000 1,045,500
------------
3,836,688
------------
WHOLESALE DISTRIBUTION -- 1.4%
Anicom, Inc.*.............................. 10,700 189,925
Central Garden & Pet Co.*.................. 74,900 1,507,362
Daisytek International Corp.*.............. 3,800 164,350
Fresh America Corp.*....................... 800 15,450
Hughes Supply, Inc.*....................... 3,600 133,200
Tech Data Corp.*........................... 238,300 6,642,613
------------
8,652,900
------------
TOTAL COMMON STOCKS
(COST $402,514,887)...................................... 575,572,587
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------
<CAPTION>
COMMERCIAL PAPER -- 5.6%
<S> <C> <C>
- ----------------------------------------------
Associates Corp. -- 0.7%
5.80%, 10/01/96................ 4,068 4,068,000
Merrill Lynch & Co.
5.85%, 10/01/96................ 29,614 29,614,000
------------
TOTAL COMMERCIAL PAPER
(COST $33,682,000)............................. 33,682,000
- ---------------------------------------------------------
<CAPTION>
REPURCHASE AGREEMENT -- 0.2%
<S> <C> <C>
- ----------------------------------------------
J. P. Morgan & Co., Inc.
$1,667,000 at 5.65%, (Agreement
dated 09/30/96; to be
repurchased at $1,667,262 on
10/01/96; collateralized by
$1,665,000 FHMA Note, 7.16% due
01/10/97)(VALUE $1,708,661)
(COST $1,667,000) 1,667,000 1,667,000
------------
TOTAL INVESTMENTS -- 100.5%
(COST $437,863,887)............................ 610,921,587
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5%)..... (2,979,076)
------------
NET ASSETS 100.0%................................ $607,942,511
------------
<FN>
- ---------------
* Non-Income Producing Security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
CORE GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 96.6%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
AIRLINES -- 0.7%
Comair Holdings, Inc....................... 152,325 $ 3,579,637
------------
APPAREL -- 4.5%
Gucci Group NV............................. 135,000 9,787,500
Nike, Inc. Class B......................... 52,600 6,390,900
Tommy Hilfiger Corp.*...................... 110,000 6,517,500
------------
22,695,900
------------
BIOTECHNOLOGY -- 0.8%
Genetics Institute, Inc.................... 59,200 4,114,400
------------
BROADCASTING -- 2.7%
Evergreen Media Corp.*..................... 135,000 4,218,750
Infinity Broadcasting Corp. Class A*....... 119,025 3,749,287
Tele-Communications, Inc. Class A Liberty
Media Group*............................. 101,100 2,893,988
Tele-Communications, Inc. Class A TCI
Group*................................... 188,100 2,809,744
------------
13,671,769
------------
BUILDING MATERIALS -- 1.2%
Lowe's Companies, Inc...................... 142,300 5,816,513
------------
CLOTHING CHAINS -- 1.8%
Fila Holdings SPA.......................... 63,000 6,055,875
Intimate Brands, Inc....................... 155,700 2,841,525
------------
8,897,400
------------
COMPUTERS/OFFICE AUTOMATION -- 6.8%
Ceridian Corp.*............................ 156,300 7,815,000
Cisco Systems, Inc.*....................... 73,500 4,561,594
Compaq Computer Corp.*..................... 94,100 6,034,162
Computer Sciences Corp.*................... 74,600 5,734,875
Dell Computer Corp.*....................... 60,100 4,672,775
Sun Microsystems, Inc.*.................... 84,700 5,261,988
------------
34,080,394
------------
COMPUTERS & OFFICE EQUIPMENT -- 1.4%
Gateway 2000, Inc.*........................ 135,000 6,463,125
------------
DEPARTMENT/DISCOUNT STORES -- 2.2%
Consolidated Stores Corp.*................. 144,500 5,780,000
Kohls Corp.*............................... 145,000 5,220,000
------------
11,000,000
------------
DRUGS/PHARMACEUTICALS -- 2.5%
Cardinal Health, Inc....................... 78,500 6,486,062
Dura Pharmaceuticals....................... 160,000 5,900,000
------------
12,386,062
------------
ELECTRONIC DATA PROCESSING -- 0.8%
First Data Corp............................ 49,777 4,063,048
------------
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 1.2%
Fore Systems, Inc.*........................ 146,500 6,061,437
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ELECTRONICS/MUSIC CHAINS -- 1.4%
Compusa, Inc.*............................. 130,000 $ 7,020,000
------------
FINANCE COMPANIES -- 1.2%
Green Tree Financial Corp.................. 156,200 6,130,850
------------
FINANCIAL SERVICES -- 2.5%
Associates First Capital Corp.............. 160,000 6,560,000
Household International, Inc............... 73,700 6,061,825
------------
12,621,825
------------
FOOD CHAINS -- 1.6%
Safeway, Inc.*............................. 192,800 8,218,100
------------
GAMBLING -- 2.0%
International Game Technology.............. 350,000 7,175,000
Mirage Resorts, Inc.*...................... 108,000 2,767,500
------------
9,942,500
------------
HOME FURNISHINGS -- 1.2%
Mohawk Industries, Inc*.................... 232,900 5,968,063
------------
HOSPITALS -- 2.5%
Healthsouth Corp.*......................... 169,000 6,485,375
Tenet Healthcare Corp.*.................... 261,400 5,816,150
------------
12,301,525
------------
LODGING -- 0.5%
Host Marriott Corp.*....................... 177,800 2,578,100
------------
MEDICAL SUPPLIES -- 1.3%
Boston Scientific Corp.*................... 111,500 6,411,250
------------
OIL/GAS PRODUCTION -- 4.0%
Burlington Resources, Inc.................. 116,000 5,147,500
Enron Oil & Gas Co......................... 120,000 2,985,000
Triton Energy Corp.*....................... 76,800 3,436,800
United Meridian Corp.*..................... 185,600 8,444,800
------------
20,014,100
------------
OILFIELD SERVICES/EQUIPMENT -- 4.9%
BJ Services Co.*........................... 145,000 5,256,250
Diamond Offshore Drilling, Inc.*........... 100,000 5,500,000
Ensco International, Inc.*................. 140,000 4,550,000
Tidewater, Inc............................. 91,900 3,434,763
Western Atlas, Inc.*....................... 89,300 5,558,925
------------
24,299,938
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 7.4%
Accustaff, Inc.*........................... 205,100 5,306,962
Corestaff, Inc.*........................... 157,500 4,213,125
Corrections Corp. of America*.............. 213,200 6,662,500
CUC International, Inc.*................... 151,162 6,027,585
MFS Communications, Inc.*.................. 89,500 3,904,438
Republic Waste Industries*................. 175,000 5,075,000
USA Waste Services, Inc.*.................. 185,600 5,846,400
------------
37,036,010
------------
OTHER FINANCIAL SERVICES -- 2.7%
Equifax, Inc............................... 232,600 6,134,825
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
CORE GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 96.6%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER FINANCIAL SERVICES (CONTINUED)
Sunamerica Inc............................. 205,100 $ 7,075,950
------------
13,210,775
------------
PIPELINES -- 1.1%
Williams Companies, Inc.................... 108,200 5,518,200
------------
RECREATION PRODUCTS -- 1.2%
Harley-Davidson, Inc....................... 140,000 6,020,000
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 3.9%
Intel Corp................................. 77,000 7,348,687
S3, Inc.*.................................. 322,000 6,359,500
Vitesse Semiconductor*..................... 150,000 5,793,750
------------
19,501,937
------------
SOFTWARE -- 11.1%
Baan Co. NV*............................... 94,900 3,167,287
BMC Software*.............................. 70,000 5,565,000
Cadence Design Systems, Inc.*.............. 128,625 4,598,344
Computer Associates International, Inc..... 105,000 6,273,750
Microsoft Corp.*........................... 44,000 5,802,500
Netscape Communications, Inc.*............. 124,000 5,750,500
Parametric Technology Corp.*............... 117,000 5,776,875
Rational Software Corp.*................... 220,000 7,507,500
Sterling Commerce, Inc.*................... 160,000 4,720,000
Synopsys, Inc.*............................ 130,600 6,023,925
------------
55,185,681
------------
SPECIALTY CHAINS -- 4.9%
Borders Group, Inc.*....................... 182,600 6,801,850
Home Depot, Inc............................ 102,000 5,801,250
Staples, Inc.*............................. 240,700 5,340,531
Tech Data Corp.*........................... 230,000 6,411,250
------------
24,354,881
------------
SPECIALTY INSURERS -- 1.2%
MGIC Investment Corp....................... 87,100 5,868,363
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS EQUIPMENT -- 9.7%
ADC Telecommunications*.................... 110,000 $ 7,040,000
Andrew Corp.*.............................. 110,000 5,486,250
Aspect Telecommunications Corp.*........... 82,300 5,123,175
Cascade Communications Corp*............... 78,200 6,373,300
DSP Communications, Inc.*.................. 152,300 8,509,762
ICG Communications*........................ 215,000 4,515,000
Nokia Corp................................. 133,000 5,885,250
Telebras-Sponsored ADR..................... 68,000 5,338,000
------------
48,270,737
------------
TELEPHONE -- 3.7%
LCI International, Inc.*................... 195,700 6,164,550
Nextel Communications, Inc.*............... 170,000 3,145,000
Teleport Comm.*............................ 310,000 7,323,750
WorldCom, Inc.*............................ 90,200 1,928,025
------------
18,561,325
------------
TOTAL COMMON STOCKS
(Cost $372,559,894)........................................ 481,863,845
------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------
COMMERCIAL PAPER -- 4.0%
- ------------------------------------------------------------------------------
Merrill Lynch & Co.
5.85%, 10/01/96
(Cost $19,644,000)....................... $19,644,000 19,644,000
------------
TOTAL INVESTMENTS -- 100.6%
(Cost $392,203,894)........................................ $501,507,845
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.6%) . (2,865,689)
------------
NET ASSETS -- 100.0%......................................... $498,642,156
------------
</TABLE>
- ---------------
* Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
INCOME & GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 14.2%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ADVERTISING -- 2.4%
Omnicom Group, Inc......................... 61,429 $ 2,871,806
------------
ELECTRICAL UTILITIES -- 0.6%
AES Corp.*................................. 17,980 707,962
------------
FINANCIAL SERVICES -- 0.2%
First Chicago NBD Corp..................... 11,700 223,762
------------
GAS UTILITIES -- 0.9%
MCN Corp................................... 41,860 1,124,987
------------
INVESTMENTS -- 1.7%
Merrill 6.25% "IGL"-Strypes................ 51,526 2,073,921
------------
INSURANCE SERVICES -- 1.0%
Penncorp Financial Group................... 20,805 1,178,083
------------
MACHINERY/EQUIPMENT -- 0.5%
Cooper Industry, Inc....................... 26,400 541,200
------------
SOAPS/COSMETICS -- 0.1%
AJL Peps Trust............................. 8,610 170,048
------------
REAL ESTATE INVESTMENT TRUSTS -- 6.1%
Cali Realty Corp........................... 39,920 1,082,830
CenterPoint Properties Corp................ 30,000 806,250
Patriot American Hospitality, Inc.......... 25,830 868,534
Reckson Associates Realty Corp............. 49,530 1,838,801
Spieker Properties, Inc.................... 20,300 596,313
Weeks Corp................................. 55,120 1,570,920
Starwood Lodging Trust..................... 14,900 623,937
------------
7,387,585
------------
TELECOMMUNICATIONS -- 0.0%
MFS Communications Co., Inc................ 1,232 53,746
------------
TELEPHONE -- 0.7%
ICG Communications*........................ 31,766 667,086
------------
TOTAL COMMON STOCKS
(Cost $14,240,312)....................................... 17,000,186
------------
- ----------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 27.1%
- ----------------------------------------------------------------------------
BROADCASTING -- 3.7%
American Radio Systems Corp., 7.0%*........ 39,100 $ 2,130,950
SFX Broadcasting, Inc., Series D, 6.5%*.... 40,080 2,304,600
------------
4,435,550
------------
ELECTRICAL UTILITIES -- 3.0%
California Energy Capital Trust*........... 27,380 1,635,955
Devon Energy 144A Pfd*..................... 30,148 1,575,233
Santa Fe Energy Res. Inc., $.732........... 31,100 388,750
------------
3,599,938
------------
ELECTRONIC DATA PROCESSING -- 2.0%
Ceridian Corp., 5.5%....................... 21,975 2,400,769
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
GAS UTILITIES -- 1.5%
Noram Financing I, 6.25%................... 29,100 $ 1,786,013
------------
MACHINERY/EQUIPMENT -- 0.6%
Greenfield Capital Trust, 6.0%*............ 16,510 718,185
------------
MEDICAL DEVICES -- 0.9%
United States Surgical Corp., Series A,
$2.20.................................... 24,720 1,022,790
------------
MULTI-LINE INSURERS -- 1.2%
Allstate Corp., $2.30...................... 29,900 1,390,350
------------
OIL/GAS PRODUCTION -- 1.2%
Occidental Petroleum Corp., $3.00.......... 23,800 1,398,250
------------
OTHER CONSUMER SERVICES -- 2.8%
SCI Finance LLC, Series A, $3.125.......... 34,690 3,555,725
------------
REGIONAL BANKS -- 1.3%
Sakura Finance Trust, 0.75%................ 26 1,523,104
------------
PIPELINES -- 1.4%
Williams Cos., $3.50....................... 20,595 1,681,067
------------
RESTAURANTS -- 1.5%
Wendy's Financing CV Pfd................... 35,300 1,817,950
------------
SPECIALTY INSURERS -- 1.8%
American Bankers Insurance, Series B,
6.25%.................................... 36,290 2,141,110
------------
TELECOMMUNICATIONS -- 2.2%
LM Ericsson Telephone Co., 4.25%........... 767,670 2,638,866
------------
TELEPHONE -- 0.8%
Nortel Inversora S A....................... 24,910 1,005,741
------------
WHOLESALE DISTRIBUTION -- 1.2%
Alco Standard Corp. Series BB, $5.040...... 16,540 1,505,140
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $28,502,445)....................................... 32,620,548
------------
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ----------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 56.3%
- ----------------------------------------------------------------------------
BROADCASTING -- 0.4%
Comcast Corp.
3.375%, 09/09/05......................... $ 60,000 $ 52,575
Telemundo Group, Inc.
7.000%, 02/15/06......................... 225,000 215,437
------------
268,012
------------
BUILDING MATERIALS -- 2.1%
Hexcel Corp.
7.000%, 08/01/03......................... 840,000 1,187,550
Home Depot, Inc.
3.250%, 10/01/01......................... 1,310,000 1,334,563
------------
2,522,113
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
INCOME & GROWTH FUND
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CONVERTIBLE CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
CLOTHING CHAINS -- 3.2%
Charming Shoppes, Inc.
7.500%, 07/15/06......................... $1,365,000 $ 1,470,787
Nine West Group, Inc.*
5.500%, 07/15/03......................... 1,220,000 1,314,550
Saks Holdings, Inc.
5.500%, 09/15/06......................... 1,040,000 1,101,100
------------
3,886,437
------------
COMPUTERS/OFFICE AUTOMATION -- 2.8%
Conner Peripherals, Inc.
6.500%, 03/01/02......................... 1,320,000 1,518,000
Safeguard Scientifics*
6.000%, 02/01/06......................... 1,375,000 1,832,188
------------
3,350,188
------------
DEPARTMENT/DISCOUNT STORES -- 3.2%
Proffitt's, Inc.*
4.750%, 11/01/03......................... 1,758,000 1,826,123
Price Co.
0.055%, 02/28/12......................... 1,904,000 1,968,260
------------
3,794,383
------------
DRUGS/PHARMACEUTICALS -- 3.1%
Elan International Finance*
0.000%, 10/16/12......................... 1,718,000 1,108,110
Sandoz Capital BVI LTD*
2.000%, 10/06/02......................... 900,000 2,660,325
Sandoz Euro
2.000%, 10/06/02......................... 1,470,000
------------
3,768,435
------------
ELECTRIC UTILITIES -- 1.2%
AES Corp.
10.250%, 07/15/06........................ 1,385,000 1,471,562
------------
ELECTRONICS -- 2.2%
Analog Devices
3.500%, 12/01/00......................... 1,060,000 1,294,525
Sanmina Corp.
5.500%, 08/15/02......................... 920,000 1,404,150
------------
2,698,675
------------
ELECTRONIC DATA PROCESSING -- 3.2%
C-Cube Microsystems, Inc.
5.875%, 11/01/05......................... 185,000 273,337
First Financial Management Corp.
5.000%, 12/15/99......................... 715,000 1,353,138
Automatic Data Process*
0.000%, 02/20/12......................... 3,985,000 2,281,412
------------
3,907,887
------------
ELECTRONIC INSTRUMENTS -- 1.7%
ADT Operations, Inc.*
0.000%, 07/06/10......................... 3,093,000 1,848,067
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ELECTRONIC INSTRUMENTS (CONTINUED)
Checkpoint Systems, Inc. Euro
5.250%, 11/01/05......................... $ 100,000 $ 154,750
------------
2,002,817
------------
ENVIRONMENTAL SERVICES -- 5.5%
U.S. Filter Corp.*
6.000%, 09/15/05......................... 1,538,000 2,970,263
Sanifill, Inc.
5.000%, 03/01/06......................... 1,918,000 2,416,680
United Waste Systems, Inc.*
4.500%, 06/01/01......................... 1,060,000 1,287,900
------------
6,674,843
------------
FOOD CHAINS -- 2.6%
Food Lion, Inc.
5.000%, 06/01/03......................... 949,000 1,161,339
Starbucks Corp.
4.250%, 11/01/02......................... 1,280,000 1,926,400
------------
3,087,739
------------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 1.0%
Empresas ICA Sociedad
5.000%, 03/15/04......................... 1,726,000 1,210,358
------------
INSURANCE SERVICES -- 2.1%
American Travellers Corp.
6.500%, 10/01/05......................... 1,123,000 2,521,135
------------
INVESTMENT COMPANIES -- 0.6%
Morgan Stanley Group*
0.000%, 09/30/00......................... 690,000 747,788
------------
LODGING -- 2.5%
Marriott International
0.000%, 03/25/11......................... 3,125,000 1,707,031
Hilton Hotels Corp.
5.000%, 05/15/06......................... 1,210,000 1,300,750
------------
3,007,781
------------
MACHINERY/EQUIPMENT -- 2.8%
Thermo Electron Corp.
4.250%, 01/01/03......................... 1,675,000 2,049,781
Thermo Electron Corp. Euro*
4.250%, 01/01/03......................... 1,110,000 1,340,325
------------
3,390,106
------------
MEDICAL/NURSING/HEALTH SERVICES -- 2.1%
Phycor, Inc.
4.500%, 02/15/03......................... 710,000 803,188
Renal Treatment Centers, Inc.*
5.625%, 07/15/06......................... 1,480,000 1,716,800
------------
2,519,988
------------
OIL/GAS PRODUCTION -- 6.1%
Baker Hughes, Inc.*
0.000%, 05/05/08......................... 2,520,000 1,764,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
- -------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CONVERTIBLE CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OIL/GAS PRODUCTION (CONTINUED)
Cliffs Drilling Co.
10.250%, 05/15/03........................ $ 400,000 $ 417,000
Noble Affiliates, Inc.
0.0425, 11/01/03......................... 2,120,000 2,427,400
Pride Petroleum Services, Inc.
0.0625, 02/15/06......................... 1,208,000 1,603,620
Nabors Industries, Inc.
5.000%, 05/15/06......................... 1,160,000 1,173,050
------------
7,385,070
------------
OTHER PRODUCTION/MANUFACTURING -- 0.9%
ALFA S.A. DE C.V.*
8.000%, 09/15/00......................... 1,000,000 1,068,750
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 1.8%
3Com Corp.
10.250%, 11/01/01........................ 665,000 1,267,656
S3 Inc.
5.750%, 10/01/03......................... 680,000 842,350
------------
2,110,006
------------
SPECIALTY CHAINS -- 2.0%
Staples, Inc.*
4.50%, 10/01/00.......................... 2,099,000 2,453,206
------------
TECHNOLOGY -- 1.0%
Intermedia Communications, Inc.*
0.000%, 05/15/06......................... 175,000 109,812
National Education Corporation
6.500%, 05/15/11......................... 955,000 897,700
Sygnet Wireless, Inc.
11.500%, 10/01/06........................ 150,000 154,875
------------
1,162,387
------------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS -- 0.9%
Midcom Communications, Inc.*
8.25% 08/15/03........................... $ 785,000 $ 887,050
Pricecellular Wire*
14.000%, 11/15/01........................ 250,000 225,000
------------
1,112,050
------------
WHOLESALE DISTRIBUTORS -- 1.2%
Danka Business Systems PLC
6.750%, 04/01/02......................... 1,000,000 1,443,750
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $58,657,859)....................................... 67,565,466
------------
- ----------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.6%
- ----------------------------------------------------------------------------
Merrill Lynch & Co.
5.85% 10/01/96
(Cost $3,153,000)........................ $3,153,000 $ 3,153,000
------------
TOTAL INVESTMENTS -- 100.1%
(Cost $104,553,616)...................................... $120,339,200
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1%)............
(70,689)
------------
NET ASSETS -- 100.0%....................................... $120,268,511
------------
<FN>
- ---------------
* Non-Income Producing Security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
BALANCED GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
AIRLINES -- 1.0%
AMR Corp.*................................. 1,700 $ 135,363
Continental Airlines Holding, Inc. - Class
B*....................................... 6,200 138,725
------------
274,088
------------
APPAREL -- 0.6%
Stein Mart, Inc.*.......................... 7,200 159,300
------------
AUTOMOBILES -- 0.5%
Chrysler Corp.............................. 4,900 140,263
------------
AUTOMOTIVE EQUIPMENT -- 0.3%
Gentex Corp.*.............................. 3,700 84,175
------------
BIOTECHNOLOGY -- 0.8%
Quintiles Transnational Corp.*............. 2,800 205,100
Mentor Corp................................ 900 24,750
------------
229,850
------------
BUILDING MATERIALS -- 0.4%
Texas Industries, Inc...................... 1,900 113,763
------------
BUILDING MATERIAL CHAINS -- 0.7%
Eagle Hardware & Garden, Inc.*............. 7,000 189,000
------------
CATALOG/OUTLET STORES -- 0.6%
Lands' End, Inc............................ 7,300 156,950
------------
CHEMICALS -- 0.6%
Cytec Industries, Inc.*.................... 4,400 171,050
------------
CLOTHING CHAINS -- 2.2%
Claire's Stores, Inc....................... 8,550 182,756
Ross Stores, Inc........................... 7,200 259,200
TJX Companies.............................. 4,600 165,025
------------
606,981
------------
COMPUTERS/OFFICE AUTOMATION -- 1.9%
Cisco Systems, Inc.*....................... 3,200 198,600
Iomega Corp.*.............................. 6,600 160,050
Storage Technology Corp.*.................. 3,900 147,713
------------
506,363
------------
CONTRACT DRILLING -- 2.9%
Global Marine, Inc.*....................... 11,100 174,825
Reading & Bates Corp.*..................... 13,600 368,900
Transocean Offshore, Inc................... 3,900 238,875
------------
782,600
------------
DEPARTMENT/DISCOUNT STORES -- 0.6%
Woolworth Corp.*........................... 7,400 152,625
------------
DRUGS/PHARMACEUTICALS -- 1.6%
Dura Pharmaceuticals, Inc.*................ 5,600 206,500
Jones Medical Industries, Inc.............. 4,650 225,525
------------
432,025
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ELECTRONICS/MUSIC CHAINS -- 1.0%
CompUSA, Inc.*............................. 4,800 $ 259,200
------------
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 0.8%
Dynatech Corp.*............................ 4,800 219,600
------------
ENTERTAINMENT -- 0.4%
Regal Cinemas, Inc.*....................... 4,050 101,250
------------
FINANCIAL COMPANIES -- 3.4%
Aames Financial Corp....................... 2,800 141,050
First USA, Inc............................. 1,600 88,600
Green Tree Financial Corp.................. 4,700 184,475
Imperial Credit Industries, Inc.*.......... 5,600 205,100
MBNA Corp.................................. 3,200 111,200
The Money Store, Inc....................... 1,900 50,350
Student Loan Marketing Association......... 1,800 134,325
------------
915,100
------------
GAMBLING -- 1.2%
Anchor Gaming*............................. 2,600 161,850
Hilton Hotels Corp......................... 6,000 170,250
------------
332,100
------------
HOME FURNISHINGS -- 0.6%
Bed Bath & Beyond, Inc.*................... 6,000 164,250
------------
HOSPITALS -- 0.3%
Health Management Associates, Inc. - Class
A*....................................... 3,400 84,575
------------
INVESTMENT COMPANIES -- 1.4%
Bear Stearns Co............................ 4,305 100,091
Morgan Stanley Group, Inc.................. 2,800 139,300
Salomon, Inc............................... 2,800 127,750
------------
367,141
------------
LIFE INSURERS -- 0.8%
Conseco, Inc............................... 4,400 216,700
------------
LODGING -- 1.5%
Doubletree Corp.*.......................... 4,200 167,475
HFS, Inc.*................................. 3,400 227,375
------------
394,850
------------
MACHINERY/EQUIPMENT -- 0.5%
JLG Industries, Inc........................ 7,200 135,000
------------
MANAGED HEALTHCARE -- 0.8%
Oxford Health Plans, Inc.*................. 4,600 228,850
------------
MEDICAL SUPPLIES -- 0.6%
Guidant Corp............................... 2,900 160,225
------------
METALS -- 0.1%
Harsco Corp................................ 600 37,800
------------
OILFIELD SERVICES/EQUIPMENT -- 1.1%
Camco International, Inc................... 4,700 175,663
Tidewater, Inc............................. 3,600 134,550
------------
310,213
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
12
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
BALANCED GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OIL/GAS PRODUCTION -- 1.1%
Chesapeake Energy Corp.*................... 4,950 $ 309,994
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 2.0%
Corrections Corp. of America*.............. 6,800 212,500
National Education Corp.*.................. 5,700 109,013
PMT Services, Inc.*........................ 6,200 125,550
Robert Half International, Inc.*........... 2,300 84,813
------------
531,875
------------
OTHER CONSUMER PRODUCTS -- 0.6%
Blyth Industries, Inc.*.................... 3,500 169,750
------------
OTHER FINANCIAL SERVICES -- 0.7%
Sunamerica, Inc............................ 5,800 200,100
------------
OTHER HEALTH SERVICES -- 0.9%
HBO & Company.............................. 3,600 240,300
------------
OTHER PRODUCERS/MANUFACTURING -- 0.6%
BMC Industries, Inc........................ 5,800 166,025
------------
OTHER RETAIL TRADE -- 0.6%
CDW Computer Centers, Inc.*................ 2,500 170,625
------------
PAPER -- 0.6%
Fort Howard Corp.*......................... 6,400 156,000
------------
PIPELINES -- 0.2%
Williams Companies, Inc.................... 1,200 61,200
------------
PUBLISHING -- 1.2%
Gartner Group, Inc.*....................... 3,500 119,000
Harte-Hanks Communications................. 5,800 161,675
Meredith Corp.............................. 800 39,500
------------
320,175
------------
RECREATIONAL PRODUCTS -- 0.6%
Fleetwood Enterprises...................... 5,100 156,825
------------
SAVINGS & LOAN ASSOCIATIONS -- 1.5%
Charter One Financial, Inc................. 4,830 193,200
Greenpoint Financial Corp.................. 4,600 175,375
TCF Financial Corp......................... 900 33,863
------------
402,438
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 2.5%
Atmel Corp.*............................... 8,900 274,788
Vitesse Semiconductor Corp.*............... 5,100 196,987
Western Digital Corp.*..................... 5,500 220,687
------------
692,462
------------
SOFTWARE -- 7.9%
Aspen Technology Inc.*..................... 2,400 162,600
BMC Software, Inc.*........................ 2,700 214,650
Cadence Design System, Inc.*............... 5,100 182,325
Computer Associates International, Inc..... 2,850 170,288
Compuware Corp.*........................... 4,300 196,725
Integrated Systems, Inc.*.................. 5,800 191,400
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE (CONTINUED)
McAfee Associations, Inc.*................. 4,200 $ 289,800
Oracle Corp.*.............................. 4,000 170,250
Parametric Technology Co.*................. 3,600 177,750
Peoplesoft, Inc.*.......................... 2,700 224,774
Rational Software Corp.*................... 5,000 170,624
------------
2,151,186
------------
SPECIALTY CHAINS -- 1.2%
Gap, Inc. Del.............................. 5,100 147,262
Rexall Sundown, Inc.*...................... 4,900 178,850
------------
326,112
------------
TELECOMMUNICATIONS EQUIPMENT -- 5.7%
Ascend Communications, Inc.*............... 5,200 343,850
Aspect Telecommunications, Inc.*........... 3,700 230,325
Cascade Communications, Inc.*.............. 3,400 277,100
Pairgain Technologies, Inc.*............... 5,400 421,875
TCSI Corp.*................................ 3,500 46,375
U.S. Robotics Corp.*....................... 3,400 219,725
------------
1,539,250
------------
TELEPHONE -- 0.6%
LCI International, Inc.* . 5,100 160,650
------------
TEXTILES -- 0.6%
Carlisle Cos, Inc.......................... 3,000 166,500
------------
TOTAL COMMON STOCKS
(Cost $11,953,375)....................................... 15,847,354
------------
<CAPTION>
Principal
Amount
<S> <C> <C>
- ----------------------------------------------------------------------------
CORPORATE BONDS -- 17.6%
- ----------------------------------------------------------------------------
AEROSPACE -- 0.9%
Lockheed Martin Corp.
7.75%, 05/01/26.......................... $ 250,000 248,750
------------
BROADCASTING -- 1.0%
Sinclair Broadcasting Group
10.00%, 09/30/96......................... 200,000 203,000
Telemundo Group, Inc.
7.00%, 02/15/06.......................... 75,000 71,813
------------
274,813
------------
CLOTHING CHAINS -- 3.6%
TJX Companies, Inc.
6.625%, 06/15/00......................... 1,000,000 986,250
------------
FINANCE COMPANIES -- 2.5%
Contifinancial Corp.
8.3755%, 08/15/03........................ 500,000 497,500
Ocwen Financial Corp.
11.875%, 10/01/03........................ 175,000 183,750
------------
681,250
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
13
<PAGE>
- -------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
GAMBLING -- 2.3%
Bally's Grand, Inc.
10.375%, 12/15/03........................ $ 150,000 $ 165,000
Casino Magic - Louisiana
13.00%, 08/15/03......................... 200,000 204,250
Majestic Star Casino
12.75%, 05/15/03......................... 250,000 275,000
------------
644,250
------------
LIFE INSURERS -- 1.9%
Penncorp Financial Group
9.25%, 12/15/03.......................... 500,000 509,375
------------
OIL/GAS PRODUCTION -- 0.3%
KCS Energy, Inc.
11.00%, 01/15/03......................... 75,000 81,750
------------
OILFIELD SERVICES/EQUIPMENT -- 0.8%
Cliffs Drilling
10.25%, 05/15/03......................... 200,000 208,500
------------
OTHER COMMUNICATION/INDUSTRIAL SERVICES -- 0.4%
Iron Mountain, Inc.
10.125%, 10/01/06........................ 100,000 102,500
------------
OTHER PRODUCERS/MANUFACTURING -- 0.6%
J.B. Poindexter & Co.
12.50%, 05/15/04......................... 175,000 168,438
------------
SOAPS/COSMETICS -- 0.6%
Revlon Consumer Products Corp.
10.50%, 02/15/03......................... 150,000 156,750
------------
SPECIALTY CHAINS -- 0.3%
CompUSA, Inc.
9.50%, 06/15/00.......................... 75,000 77,250
------------
TELECOMMUNICATIONS EQUIPMENT -- 0.9%
Net Sat Servicos Ltd. A
12.75%, 08/05/04......................... 225,000 240,187
------------
TELEPHONE -- 1.5%
Intermedia Communications of Florida
0.00%, 05/15/06.......................... 100,000 62,750
PriceCellular Wire
14.00%, 11/15/01......................... 200,000 180,000
Teleport Communications
9.875%, 07/01/06......................... 25,000 25,812
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELEPHONE (CONTINUED)
Winstar Communications
0.00%, 10/15/05.......................... $ 225,000 $ 128,250
------------
396,812
------------
TOTAL CORPORATE BONDS
(Cost $4,663,779)........................................ $ 4,776,874
------------
U.S. TREASURY OBLIGATIONS -- 19.6%
- ----------------------------------------------------------------------------
U.S.TREASURY BONDS -- 3.5%
8.125%, 08/15/21......................... 830,000 $ 931,741
U.S.TREASURY NOTES -- 16.1%
7.875%, 04/15/98......................... 180,000 184,883
6.250%, 08/31/00......................... 1,000,000 994,800
7.500%, 11/15/01......................... 1,040,000 1,085,500
7.500%, 05/15/02......................... 1,000,000 1,047,310
7.000%, 07/15/06......................... 750,000 765,855
6.000%, 02/15/26......................... 350,000 307,766
------------
4,386,114
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,480,253)........................................ $ 5,317,855
------------
- ----------------------------------------------------------------------------
AGENCY OBLIGATIONS -- 2.7%
- ----------------------------------------------------------------------------
Tennessee Valley Authority Notes
6.375%, 06/15/05 (Cost $760,580)......... 750,000 720,000
------------
- ----------------------------------------------------------------------------
COMMERCIAL PAPER -- 1.6%
- ----------------------------------------------------------------------------
Merrill Lynch & Co.
5.85%, 10/01/96
(Cost $430,000).......................... 430,000 430,000
------------
TOTAL INVESTMENTS -- 99.8%
(Cost $23,287,987)....................................... 27,092,084
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%.............. 67,599
------------
NET ASSETS -- 100.0%....................................... $ 27,159,683
------------
<FN>
- ---------------
* Non-income producing security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
GOVERNMENT INCOME FUND
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
U. S. TREASURY OBLIGATIONS -- 73.7%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
U. S. TREASURY NOTES
7.875%, 04/15/98................... $1,835,000 $ 1,884,784
6.250%, 08/31/00................... 1,100,000 1,094,280
7.500%, 11/15/01................... 350,000 365,312
7.000%, 07/15/06................... 750,000 765,855
6.000%, 02/15/26................... 775,000 681,481
-----------
TOTAL U. S. TREASURY OBLIGATIONS
(Cost $4,832,243)................................. 4,791,712
-----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
CORPORATE BONDS -- 20.4%
- --------------------------------------------------------------------
CIGNA CORPORATION -- 5.1%
7.650% , 03/01/23.................. $ 350,000 $ 332,937
LOCKHEED MARTIN -- 15.3%
7.750% , 05/01/26.................. 1,000,000 995,000
-----------
TOTAL CORPORATE BONDS
(Cost $1,304,309)................................. 1,327,937
-----------
- --------------------------------------------------------------------
AGENCY OBLIGATIONS -- 3.7%
- --------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY
6.375%, 06/15/05
(Cost $258,725).................... 250,000 240,000
-----------
TOTAL INVESTMENTS -- 97.8%
(Cost $6,395,277).................. $ 6,359,649
OTHER ASSETS LESS LIABILITIES -- 2.2%............... 140,268
-----------
NET ASSETS -- 100.0%................................ $ 6,499,917
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
15
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
MONEY MARKET FUND
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
AGENCY OBLIGATIONS -- 8.0%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
FEDERAL FARM CREDIT BANK DISCOUNT NOTES -- 0.4%
5.40%, 11/26/96............................ $ 60,000 $ 59,496
FEDERAL HOME LOAN BANK DISCOUNT NOTES -- 3.9%
5.14%, 10/25/96............................ 100,000 99,657
5.12%, 12/17/96............................ 100,000 98,905
5.56%, 04/30/97............................ 100,000 96,741
5.41%, 05/01/97............................ 150,000 145,221
5.52%, 03/03/97............................ 120,000 117,185
------------
557,709
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 3.7%
5.40%, 12/13/96............................ 95,000 93,960
5.34%, 05/23/97............................ 150,000 144,794
5.59%, 06/13/97............................ 300,000 288,121
------------
526,875
------------
TOTAL AGENCY OBLIGATIONS
(Cost $1,144,080)........................................ 1,144,080
------------
- ----------------------------------------------------------------------------
COMMERCIAL PAPER -- 33.9%
- ----------------------------------------------------------------------------
ASSOCIATES CORP. -- 1.7%
5.43%, 10/23/96............................ 250,000 249,170
AMERICAN TELEPHONE & TELEGRAPH CO. -- 0.6%
5.38%, 11/12/96............................ 100,000 99,372
AMERICAN TELEPHONE & TELEGRAPH CO. -- 1.0%
5.42%, 10/15/96............................ 140,000 139,705
AVNET, INC. -- 1.2%
5.33%, 10/03/96............................ 170,000 169,950
BELL SOUTH TELECOMMUNICATIONS -- 1.8%
5.32%, 10/04/96............................ 252,000 251,888
CARGILL, INC. -- 1.2%
5.41%, 10/10/96............................ 175,000 174,763
COCA-COLA CO. -- 0.9%
5.40%, 11/05/96............................ 129,000 128,323
DUPONT -- 1.7%
5.40%, 11/22/96............................ 250,000 248,050
GANNETT CO. -- 2.1%
5.43%, 10/17/96............................ 300,000 299,276
GENERAL ELECTRIC CAPITAL CORP. -- 1.8%
5.44%, 10/17/96............................ 250,000 249,396
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
HEINZ CO. -- 1.1%
5.35%, 10/07/96............................ $ 155,000 $ 154,862
HEWLETT PACKARD CO. -- 1.2%
5.41%, 10/11/96............................ 175,000 174,737
INTERNATIONAL LEASE FINANCE CORP. -- 1.8%
5.43%, 10/15/96............................ 250,000 249,472
LACLEDE GAS CO. -- 2.1%
5.50%, 11/13/96............................ 300,000 298,029
MOTOROLA, INC. -- 2.1%
5.42%, 10/02/96............................ 300,000 299,955
NORWEST FINANCIAL, INC. -- 2.1%
5.41%, 01/27/97............................ 300,000 294,680
PHILIP MORRIS CO., INC. -- 1.8%
5.43%, 10/15/96............................ 250,000 249,472
PITNEY BOWES CREDIT CORP. -- 1.8%
5.44%, 10/16/96............................ 250,000 249,433
PROCTER & GAMBLE CO. -- 1.4%
5.33%, 10/08/96............................ 200,000 199,793
SCHERING CORP. -- 2.1%
5.32%, 01/29/97............................ 300,000 294,680
US WEST COMMUNICATIONS, INC. -- 0.7%
5.41%, 10/15/96............................ 100,000 99,790
USAA CAPITAL CORP. -- 1.7%
5.44%, 02/03/97............................ 250,000 245,278
------------
TOTAL COMMERCIAL PAPER(Cost $4,820,074).................... 4,820,074
------------
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 58.5%
- ----------------------------------------------------------------------------
Morgan J. P. & Co. $8,333,000 at 5.65%
(Agreement dated 09/30/96, to be
repurchased at $8,334,308 on 10/01/96;
collateralized by $8,450,000 FNMA 5.25%
due 05/13/98) (Value $8,671,583) (Cost
$8,333,000).............................. 8,333,000 8,333,000
------------
TOTAL INVESTMENTS -- 100.4%
(Cost $14,297,154)....................................... $ 14,297,154
LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.4%.............. (59,888)
------------
NET ASSETS -- 100.0%....................................... $ 14,237,266
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
16
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
EMERGING COUNTRIES FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 97.4%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ARGENTINA -- 3.3%
Cresud SA.................................. 309,500 $ 526,150
Compania Naviera Perez Companc
S.A. -- B................................ 91,973 579,430
Importadora y Exportadora de la
Patagonia S.A............................ 23,000 315,100
Siderca S.A. -- A.......................... 415,900 615,532
-----------
2,036,212
-----------
BRAZIL -- 8.5%
Banco Bradesco S.A......................... 92,248,000 781,839
Companhia Cervejaria Brahma S.A............ 2,425,000 1,504,042
Elevadores Atlas S.A.*..................... 14,000 150,892
Itausa Investimentos S.A................... 654,000 512,640
Lojas Arapua S.A........................... 43,300,000 729,728
Lojas Renner S.A........................... 11,300,000 653,243
Tam TransportesAereos Regionais S.A........ 6,140,000 379,012
Telec de Rio Janeiro S.A................... 4,736,000 519,725
Telec de Rio Janeiro PN*................... 99,496 11,289
-----------
5,242,410
-----------
CHINA -- 0.2%
Shanghai Post & Telecommunications......... 330,000 141,240
-----------
GREECE -- 0.4%
Sarantis S.A............................... 25,900 268,416
-----------
HONG KONG -- 7.2%
Anhui Gujing Distillery Co. *.............. 248,200 180,381
Cheung Kong Holdings LTD................... 35,000 269,300
Qingling Motors Co......................... 720,000 276,995
Guangdong Investments Holdings LTD......... 752,000 529,988
Guangnan Holdings LTD...................... 440,000 293,030
HSBC Holdings LTD.......................... 31,200 578,973
Peregrine Investments Holdings LTD......... 424,000 671,667
Peregrine Investments Warrants*............ 42,400 7,950
Shanghai Industrial Holdings LTD*.......... 325,000 745,991
Shenzhen Fangda Co. LTD.................... 410,000 244,420
Sinocan Holdings LTD....................... 1,428,000 637,088
-----------
4,435,783
-----------
HUNGARY -- 1.5%
Gedeon Richter............................. 17,400 920,489
-----------
INDONESIA -- 2.4%
PT Bank Bira -- Foreign.................... 300,000 307,377
PT Bukaka Teknik Utama -- Foreign*......... 120,000 97,067
PT Citra Marga -- Foreign.................. 260,000 176,661
PT Gudang Garam -- Foreign................. 32,000 120,794
PP London Sumatra Indonesia -- Foreign*.... 92,000 228,214
PT Medco Energi Corp. -- Foreign........... 17,000 18,335
PT Semen Gresik -- Foreign................. 90,000 267,903
PT Tigaraksa Satria -- Foreign............. 90,000 178,602
PT Wicaksana Overseas -- Foreign........... 79,000 95,427
-----------
1,490,380
-----------
KOREA -- 3.5%
Cho Hung Bank Co., LTD..................... 50,000 548,246
Korea Electric Power Corp.................. 3,980 132,376
Korea Housing Bank*........................ 8,000 190,058
Korea Mobile Telecommunications Corp....... 440 481,298
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
KOREA (CONTINUED)
LG Info & Communications LTD............... 5,100 $ 630,665
LG Info & Communications LTD (New)......... 579 69,835
Samsung Electronics -- (New)*.............. 3 237
Shinhan Bank............................... 3500 80,780
-----------
2,133,495
-----------
MALAYSIA -- 7.9%
Ekran BHD.................................. 128,000 551,592
Fraser & Neave *........................... 158,000 756,524
Fraser & Neave Warrants*................... 18,000 25,138
Hume Industries............................ 78,000 413,933
Jaya Tiasa Holdings BHD.................... 152,000 946,134
Kian Joo Can Factory BHD................... 84,000 462,533
Lityan Holdings BHD ......... 9,000 72,899
Malayan Banking BHD........................ 28,000 278,190
O. Y. L. Industries BHD.................... 43,000 437,515
O. Y. L. Industries BHD-Rights*............ 4,300 43,752
Technology Resources Industries BHD*....... 120,000 316,016
United Engineers LTD....................... 40,000 309,632
Westmont Industries BHD.................... 130,000 242,758
-----------
4,856,616
-----------
MEXICO -- 8.5%
Acer Computec Latino
America, S.A. de C.V.*................... 78,000 275,841
Apasco S.A................................. 61,200 424,752
Bafar S.A.*................................ 131,000 215,152
Cemex S.A.................................. 42,270 175,239
Consorcia S.A.*............................ 317,000 680,185
Convertidora Industrial S.A. de C.V.*...... 401,200 462,310
Corporacion Interamericana de Entertainment
S.A.*.................................... 570,900 1,404,943
Gruma S.A.*................................ 85,000 533,080
Grupo Carso S.A............................ 126,000 584,106
Tablex S.A. de C.V......................... 186,000 468,080
-----------
5,223,688
-----------
PAKISTAN -- 0.7%
SUI Northern Gas Pipelines*................ 405,000 408,509
-----------
PERU -- 0.5%
Cementos Norte Pacasmayo................... 1 1
Telefonica de Peru S.A. -- B............... 116,664 263,435
-----------
263,436
-----------
PHILIPPINES -- 3.7%
Belle Corp.*............................... 860,000 252,459
Empire East Land Holdings, Inc.*........... 1,820,000 971,407
Far East Bank.............................. 6,080 213,252
Hi Cemente Corp.*.......................... 398,000 133,526
Marsman & Co., Inc......................... 755,000 273,447
Selecta Dairy Products, Inc................ 50,000 1,944
Solid Group,Inc.*.......................... 1,901,000 427,598
-----------
2,273,633
-----------
POLAND -- 5.5%
Agros Holdings S.A.*....................... 21,300 644,421
Bank Rozwoju Eksportu S.A.................. 20,800 710,732
Bank Slaski S.A............................ 6,400 626,446
Elektrim Spolda Akcyjna S.A................ 65,000 636,234
Mostosal-Export S.A........................ 196,000 558,106
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
17
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
POLAND (CONTINUED)
Zaklady Przemyslu Cukierniczego Jutrzenka
S.A...................................... 8,700 $ 190,443
-----------
3,366,382
-----------
PORTUGAL -- 0.7%
Portugal Telecom S.A....................... 15,650 402,044
-----------
SINGAPORE -- 0.5%
Far East Levin............................. 70000 330,564
-----------
SOUTH AFRICA -- 2.9%
De Beers Centenary AG...................... 10,000 310,812
King Food Holdings*........................ 1,413,000 348,850
Liberty Life Association of Africa LTD..... 14,500 438,692
Metro Cash & Carry LTD..................... 80,000 273,339
Western Areas Gold Mining Co., LTD......... 25,248 397,935
-----------
1,769,628
-----------
THAILAND -- 5.8%
Grammy Entertainment PLC -- Foreign*....... 49000 585,995
K.R. Precision Public Co., LTD -- Foreign.. 9,440 159,989
K.R. Precision Public Co., LTD -- Local.... 45,000 146,263
Nation Multimedia Group PLC -- Local....... 85,000 289,241
Pizza Co. LTD -- Foreign................... 21,000 137,136
Quality House Public Co. LTD -- Foreign.... 170,000 381,196
Serm Suk Co., LTD -- Local................. 2,000 43,273
Serm Suk Co., LTD -- Foreign............... 10,700 328,324
Thai Engine -- Foreign..................... 52,000 474,587
Thai Farmers Bank -- Foreign............... 61,000 643,115
Thai Farmers Bank -- Warrants*............. 10,250 10,081
Tipco Asphalt Co., LTD -- Foreign.......... 68,800 392,447
-----------
3,591,647
-----------
TURKEY -- 0.8%
Aygaz A.S.................................. 1,340,000 171,739
Otosan Otomobil Sanayii A.S................ 695,000 200,890
Turk Siemens Kablo Ve Elektrik Sanayii
A.S...................................... 400,000 107,984
-----------
480,613
-----------
UNITED STATES OF AMERICA+ -- 32.9%
Abacan Resource Corp. (Nigeria)*........... 20,000 137,500
Acer Computec Latino America, S.A. de C.V.
(Mexico)*................................ 54,000 951,750
Banque Marocaine Commerce -- GDR
(Morroco)*............................... 26,000 412,750
Basic Petroleum International, LTD
(Guatemala)*............................. 8,800 244,200
BSES LTD -- GDR (India).................... 11,000 192,500
BSES LTD -- GDR 144A (India)............... 10,000 175,000
China Steel Co. (Taiwan)*.................. 33,000 676,500
CIA Telecom de Chile -- ADR (Chile)........ 7,200 695,700
Commercial International Bank of Egypt
(Egypt)*................................. 42,105 652,628
Credicorp LTD (Peru)....................... 25,700 488,300
Crompton Greaves LTD (India)*.............. 35,000 179,375
Elbit Vision Systems LTD (Israel)*......... 28,000 203,000
First NIS Regional Fund (Russia)*.......... 15,000 157,500
Flextronics International LTD
(Singapore)*............................. 13,800 381,225
Grupo Industrial Maseca S.A. (Mexico)...... 41,900 790,862
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA+ (CONTINUED)
Gujarat Ambuja Cements -- GDR (India)...... 42,600 $ 372,750
Hilfiger, Tommy Corp. (Hong Kong).......... 5,200 308,100
Laboratorio Chile S.A. (Chile)............. 34,300 561,662
Larsen & Toubro Limited -- GDR (India)..... 40,000 584,000
M-Systems Flash Disk Pioneer (Israel)*..... 40,000 355,000
Mahindra & Mahindra -- GDR (India)*........ 55,000 563,750
Moneda Chile Fund Limited (Chile)*......... 10,000 90,000
Mosenergo -- ADR 144A (Russia)*............ 5,900 158,562
NICE-System, LTD (Israel)*................. 30,700 703,222
Lukoil Holding -- ADR (Russia)............. 8,600 318,200
Orbotech LTD (Israel)*..................... 10,200 121,125
P.T. Telekomunikasi (Indonesia)............ 10,000 311,250
Pliva D.D. -- GDR (Croatia)*............... 9,000 447,750
Portugal Telecom S.A. (Portugal)........... 3,400 87,550
ROC Taiwan Fund (Taiwan)*.................. 45,000 483,750
Samsung Electronics Co. -- New GDS
(Korea)*................................. 14 350
Samsung Electronics Co. -- Voting GDR
(Korea)*................................. 6,000 300,600
Saville Systems Ireland PLC (Ireland)*..... 10,800 380,700
Siderurgica Venezolana Sivensa, Saica
S.A.C.A. (Venezuela)..................... 269,300 993,044
Taiwan Fund, Inc........................... 3,750 86,719
Tata Engineering & Locomotive Co. LTD
(India)*................................. 60,000 780,000
Tecnomatix Technologies LTD (Israel)*...... 18,000 312,750
Telecomunicacoes Brasileiras S.A. -- ADR
(Brazil)................................. 21,400 1,679,900
Teledata Communications LTD (Israel)*...... 58,400 1,073,100
Telefonica DelPeru S.A. (Peru)............. 22,000 503,250
Total Access Communication Public Co.
(Thailand)............................... 43,000 318,200
Tubos de Acero de Mexico S.A. (Mexico)*.... 78,200 850,425
TV Filme, Inc. (Brazil)*................... 40,400 555,500
Wockhardt LTD (India)*..................... 22,000 159,500
Zagrebacka Banka -- GDR (Croatia)*......... 20,000 387,500
-----------
20,186,999
-----------
TOTAL COMMON STOCKS
(Cost $54,718,875)...................................... 59,822,184
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------
COMMERCIAL PAPER -- 4.3%
- ------------------------------------------------------------------------
Merrill Lynch
(Cost $2,631,000)
5.85%, 10/01/96.......................... $2,631,000 $ 2,631,000
-----------
TOTAL INVESTMENTS -- 101.7%
(Cost $57,349,875)...................................... 62,453,184
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.7%)........... (1,025,559)
-----------
NET ASSETS -- 100.0%...................................... $61,427,625
-----------
</TABLE>
- ---------------
*Non-Income Producing Security.
+Certain securities issued by foreign companies are classified as United States
securities as their underlying currency is the United States Dollar.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
18
<PAGE>
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 100.4%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ARGENTINA -- 0.9%
Compania Naviera Perez SA.................. 41,870 $ 263,781
Siderca S.A................................ 80,800 119,584
------------
383,365
------------
AUSTRALIA -- 0.5%
Australian Gas Light Co., LTD.............. 1,083 5,830
Westfield Holdings LTD..................... 14,600 232,332
------------
238,162
------------
BELGIUM -- 0.9%
Barco N.V.................................. 2,465 406,194
------------
BRAZIL -- 0.6%
Companhia Cervejaria Brahma................ 454,000 278,606
------------
FINLAND -- 1.7%
Raision Tehtaat Oy......................... 7,500 451,254
Valmet Corp. Oy............................ 15,500 255,360
------------
706,614
------------
FRANCE -- 3.8%
Cap Gemini Sogeti S.A.*.................... 9,400 411,275
Coflexip S.A............................... 7,700 329,442
Lagardere Groupe S.A. (Non-voting)......... 238 5,875
Lagardere Groupe S.A....................... 11,500 283,860
Salomon S.A................................ 425 377,246
Sidel S.A.................................. 5,320 319,278
------------
1,726,976
------------
GERMANY -- 6.5%
CKAG Colonia Konzern AG.................... 6,000 460,571
Continental AG............................. 25,000 457,002
Daimler-Benz AG*........................... 7,200 394,944
Fresenius AG............................... 2,150 399,217
Gehe AG.................................... 4,500 300,629
Gerresheimer Glas AG....................... 4,800 98,150
SGL Carbon AG.............................. 4,200 489,651
Volkswagen AG.............................. 900 334,818
------------
2,934,982
------------
HONG KONG -- 4.0%
Cheung Kong Holdings LTD................... 59,000 453,964
Guangdong Investments...................... 596,000 420,044
Hong Kong & China Gas Co., LTD*............ 67,200 114,274
HSBC Holdings LTD.......................... 24,800 460,209
Qingling Motors Company.................... 580,000 223,135
Shanghai Industrial Holdings LTD*.......... 60,000 137,721
------------
1,809,347
------------
ITALY -- 0.6%
Cn Eni SpA................................. 39,000 199,288
Telecom Italia SpA......................... 40,000 88,874
------------
288,162
------------
JAPAN -- 26.7%
Aim Services Co., LTD...................... 8,000 182,755
Asatsu, Inc................................ 17,000 670,101
Bridgestone Corp........................... 12,000 216,081
Canon, Inc................................. 31,000 608,197
Daiichi Corp............................... 22,000 571,557
Fuji Photo Film Co......................... 11,000 334,065
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
JAPAN (CONTINUED)
Hokuto Corp................................ 10,000 $ 426,428
Honda Motor Co., LTD....................... 23,000 576,932
Kawasaki Heavy Industries.................. 83,000 399,292
Kyocera Corp............................... 6,000 427,324
Laox Co.................................... 31,900 600,134
Matsushita Electric Co..................... 30,000 502,576
Minebea Co., LTD........................... 50,000 443,001
Mitsui Fudosan............................. 44,000 583,382
Mycal Corp................................. 22,000 350,817
NEC Corp................................... 33,000 387,279
Nichii Gakken Co........................... 3,000 151,579
Nissan Motors Co.,......................... 30,000 241,613
Sharp Corp................................. 35,000 580,067
Shinko Electric Industries................. 13,000 427,413
Sony Corp.................................. 12,000 755,745
TDK Corp................................... 12,000 744,994
Terumo Corp................................ 60,000 768,644
Tokai Rika Co.............................. 34,000 316,775
Toshiba Corp............................... 57,000 393,702
Toyoda Machine Works LTD................... 41,000 407,704
------------
12,068,157
------------
KOREA -- 1.9%
Cho Hung Bank Co., LTD..................... 16,000 175,439
Korea Housing Bank*........................ 4,000 95,029
Korea Mobile Telecommunications Corp....... 3,100 339,096
LG Information & Communication LTD......... 2,000 247,320
------------
856,884
------------
MALAYSIA -- 2.6%
Fraser & Neave Holdings BHD*............... 16,000 76,610
Hume Industries BHD........................ 24,000 127,364
Malayan Banking BHD........................ 20,000 198,707
Metroplex BHD.............................. 85,000 103,783
O.Y.L. Industries BHD...................... 14,000 142,447
O.Y.L. Industries BHD-New*................. 2,100 21,367
Technology Resources Industry BHD*......... 90,000 237,012
United Engineers BHD....................... 35,000 270,928
------------
1,178,218
------------
MEXICO -- 1.5%
Apasco S.A................................. 49,400 342,856
Cemex S.A.................................. 34,780 144,187
Convertidora Industrial SA de CV*.......... 178,600 198,707
------------
685,750
------------
NETHERLANDS -- 4.7%
Baan Co., N.V.*............................ 10,200 344,249
IHC Caland N.V............................. 6,800 357,748
ING Groep N.V.............................. 10,000 311,807
Internatio-Muller N.V...................... 12,000 291,487
Kon Ahrend N.V.*........................... 8,000 408,734
Koninklijke Volker Stevin N.V.-CVA......... 1,500 133,131
Oce-Van Der Grinten N.V.................... 2,423 264,428
------------
2,111,584
------------
NORWAY -- 1.0%
Sensonor A/S*.............................. 26,500 191,456
Tomra Systems A/S.......................... 23,000 254,558
------------
446,014
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
19
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
PHILIPPINES -- 0.4%
Empire East Land Holdings, Inc.*........... 358,000 $ 191,079
------------
POLAND -- 1.1%
Agros Holdings............................. 16,000 484,072
------------
SINGAPORE -- 0.5%
Far East Levingston Shipbuilding LTD....... 46,000 217,228
------------
SOUTH AFRICA -- 0.6%
King Food Holdings LTD*.................... 472,000 114,449
Liberty Life Association of Africa LTD..... 5,500 166,400
------------
280,849
------------
SPAIN -- 0.4%
Telefonica de Espana SA.................... 10,000 185,661
------------
SWEDEN -- 3.0%
Autoliv AB................................. 8,800 379,894
Hennes & Mauritz AB........................ 4,000 490,868
Nordbanken AB.............................. 18,400 472,151
------------
1,342,913
------------
SWITZERLAND -- 1.1%
Sandoz AG.................................. 270 323,974
Swiss Reinsurance Co....................... 150 157,995
------------
481,969
------------
THAILAND -- 1.0%
K.R. Precision Public Co.,- Foreign........ 2,400 13,501
Thai Farmers Bank Public Co., LTD-
Foreign.................................. 19,000 200,315
Tipco Asphalt Public Co., LTD-Foreign...... 40,000 228,167
------------
441,983
------------
UNITED KINGDOM -- 16.7%
Barratt Developments PLC................... 100,000 422,766
British Aerospace PLC...................... 26,000 430,110
Dixons Group PLC........................... 43,000 353,143
EMI Group PLC.............................. 38 794
GKN PLC.................................... 23,295 409,071
Goldsmiths Group PLC....................... 75,000 402,215
Granada Group PLC.......................... 29,000 388,921
Kingfisher PLC............................. 57,000 565,402
Logica PLC................................. 36,000 424,175
Next PLC................................... 48,000 425,772
PizzaExpress PLC........................... 54,900 409,611
Powerscreen International PLC.............. 58,000 499,036
Provident Financial PLC.................... 44,460 342,856
Reuters Holdings PLC....................... 35,300 408,189
Rolls-Royce PLC............................ 110,000 412,510
Shell Transport & Trading Co. PLC.......... 27,000 412,197
Siebe PLC.................................. 27,400 432,247
Thorn EMI PLC.............................. 38 216
Victrex PLC................................ 90,000 395,286
WPP Group PLC.............................. 113,000 414,914
------------
7,549,431
------------
UNITED STATES OF AMERICA+ -- 17.7%
Abacan Resources Corp., (Nigeria)*......... 71,000 488,125
Basic Peteroleum International, LTD
(Guatemala)*............................. 6,400 177,600
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA+ (CONTINUED)
British Biotech PLC-ADR (United
Kingdom)*................................ 8,400 $ 284,025
Commercial International Bank (Egypt)*..... 21,050 326,275
Elan Corp. PLC -ADR (Ireland).............. 12,800 382,400
Flamel Technologies S.A.-ADR (France)*..... 32,000 244,000
Flextronics International, LTD
(Singapore)*............................. 10,300 284,538
Gucci Group N.V. (Italy)................... 4,600 333,500
ICTS International NV (Netherlands)*....... 20,000 245,000
Larsen & Toubro LTD-GDR (India)............ 8,117 115,667
Lernout & Hauspie Speech Products N.V.
(Belgium)*............................... 16,800 399,000
L.G. Electronics, Inc.-GDR (South
Korea)*.................................. 372 3,263
Memtec LTD-ADR (Australia)................. 9,000 252,000
Nice-Systems, LTD (Israel)*................ 8,000 183,250
P.T. Telekomunikasi-ADR (Indonesia)........ 7,500 233,438
Professional Staff PLC (United Kingdom)*... 28,000 297,500
Qiagen N. V. (Netherlands)*................ 19,500 575,249
Rofin-Sinar Technologies, Inc.
(Germany)*............................... 23,700 257,738
Samsung Electronics LTD-GDR (Korea)*....... 5,000 250,000
Samsung Electronics LTD-GDR New (Korea)*... 10 500
Saville Systems PLC-ADR (Ireland)*......... 12,400 437,100
Tag Heuer International S.A.-ADR
(Switzerland)*........................... 14,500 286,375
Tata Engineering & Locomotive Co.
(India)*................................. 12,000 157,200
Tecnomatix Technologies LTD (Israel)*...... 14,000 243,250
Telecomunicacoes Brasileiras - ADR
(Brazil)................................. 4,000 314,000
Telefonos De Mexico S.A.-ADR (Mexico)...... 9,150 293,944
Tommy Hilfiger Corporation (Hong Kong)*.... 6,700 396,975
Tubos De Acero De Mexico-ADR (Mexico)*..... 19,000 206,625
TV Filme, Inc. (Brazil)*................... 13,500 185,625
Videotron Holdings PLC-ADR (United
Kingdom)................................. 8,000 136,000
------------
7,990,162
------------
TOTAL COMMON STOCKS
(Cost $41,609,691)....................................... 45,284,362
------------
- ----------------------------------------------------------------------------
RIGHTS/WARRANTS -- 0.0%
- ----------------------------------------------------------------------------
HONG KONG
Hong Kong & China Gas Co., LTD-Warrants*... 5,600 1,702
------------
THAILAND
Thai Farmers Bank Public Co., LTD-
Warrants*................................ 3,250 3,197
------------
TOTAL RIGHTS/WARRANTS
(Cost $3,205)............................................ 4,899
------------
TOTAL INVESTMENTS -- 100.4%
(Cost $41,612,896)....................................... $ 45,289,261
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.4%)............ (202,682)
------------
NET ASSETS -- 100.0%....................................... $ 45,086,579
------------
<FN>
- ---------------
* Non-Income Producing Securities.
+ Certain securities issued by foreign companies are classified as United States
securities as their underlying currency is the U.S. Dollar.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
20
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK -- 97.5%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ARGENTINA -- 0.8%
Compania Naviera Periz SA.................. 82,715 $ 521,104
Siderca SA................................. 193,200 285,936
------------
807,040
------------
AUSTRALIA -- 0.5%
Australian Gas & Light Co., LTD............ 3,170 17,066
Westfield Holdings LTD..................... 30,000 477,395
------------
494,461
------------
BELGIUM -- 1.4%
Banque Bruxelles Lambert SA................ 1,430 280,223
Barco N.V.................................. 6,620 1,090,873
------------
1,371,096
------------
BRAZIL -- 0.6%
Companhia Cervejaria Brahma................ 900,000 552,302
------------
FINLAND -- 1.3%
Raision Tehtaat Oy......................... 14,300 860,390
Valmet Oy.................................. 25,000 411,872
------------
1,272,262
------------
FRANCE -- 2.8%
Cap Gemini Sogeti S.A.*.................... 16,000 700,042
Coflexip S.A.*............................. 14,800 633,213
Lagardere Groupe S.A. (Non Trading)........ 377 9,306
Lagardere Groupe S.A....................... 18,200 449,239
Salomon S.A................................ 570 505,953
Sidel S.A.................................. 8,000 480,118
------------
2,777,871
------------
GERMANY -- 5.2%
CKAG Colonia Konzern AG.................... 10,000 767,619
Continental AG............................. 60,000 1,096,804
Daimler Benz AG*........................... 10,000 548,533
Fresenius AG............................... 5,450 1,011,969
Gerresheimer Glas AG....................... 14,100 288,317
SGL Carbon AG.............................. 7,700 897,694
Volkswagen AG.............................. 1,700 632,434
------------
5,243,370
------------
HONG KONG -- 2.7%
Cheung Kong Holdings, LTD.................. 89,000 684,792
Guangdong Investments, LTD................. 898,000 632,885
Hong Kong & China Gas Co., LTD*............ 204,000 346,903
HSBC Holdings, LTD......................... 37,200 690,314
Qingling Motors, LTD....................... 860,000 330,855
------------
2,685,749
------------
ITALY -- 1.0%
Ente Nazionale Idrocarburi SpA............. 122,000 623,413
Telecom Italia SpA......................... 182,000 404,378
------------
1,027,791
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
JAPAN -- 19.7%
Asatsu, Inc................................ 27,000 $ 1,064,278
Bank of Tokyo-Mitsubishi................... 2,000 43,539
Bridgestone Corp........................... 29,000 522,195
Canon, Inc................................. 50,000 980,963
DDI Corp................................... 80 645,733
Dalichi Corp............................... 52,000 1,350,952
Hirose Electric............................ 9,000 549,877
Honda Motor Co., LTD....................... 30,000 752,519
Ibiden Co., Ltd............................ 36,000 351,534
Kawasaki Heavy Industries.................. 125,000 601,344
Laox Co.................................... 54,000 1,117,492
Matsushita Electric Co..................... 50,000 837,626
Minebea Co., LTD........................... 176,000 1,559,364
Mitsui Fudosan Co.......................... 86,000 1,140,246
NEC Corp................................... 68,000 798,029
Nippon Telephone & Telegraph............... 100 734,602
Nissan Motors Co........................... 70,000 563,763
Sharp Corp................................. 75,000 1,243,001
Sony Corp.................................. 22,000 1,385,532
TDK Corp................................... 28,000 1,738,320
Terumo Corp................................ 85,000 1,088,914
Toshiba Corp............................... 115,000 794,311
------------
19,864,134
------------
KOREA -- 1.2%
Cho Hung Bank Co., LTD..................... 22,000 241,228
Korea Housing Bank*........................ 15,000 356,360
Korea Mobile Telecommunications Corp....... 180 196,895
LG Information & Communicaiton LTD......... 3,000 370,979
------------
1,165,462
------------
MALAYSIA -- 2.0%
Hume Industries BHD........................ 47,000 249,422
Malayan Banking BHD........................ 33,000 327,867
Metroplex BHD.............................. 200,000 244,194
O.Y.L. Industries BHD...................... 32,400 329,662
O.Y.L. Ind. Rights* W*..................... 5,000 50,874
Technology Resource Industries BHD*........ 155,000 408,188
United Engineers BHD....................... 50,000 387,040
------------
1,997,247
------------
MEXICO -- 1.6%
Apasco S.A................................. 114,100 791,899
Cemex S.A.................................. 81,110 336,257
Convertidora Industrial S.A. de CV*........ 399,700 460,582
------------
1,588,738
------------
NETHERLANDS -- 2.8%
IHC Caland N.V............................. 12,900 678,670
ING Groep N.V.............................. 17,000 530,071
Kon Ahrend NV.............................. 12,000 613,103
Koninklijke Volker Stevin N.V.-CVA......... 5,400 479,271
Oce-Van Der Grinten N.V.................... 5,155 562,577
------------
2,863,692
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
21
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
NORWAY -- 0.9%
Sensonor A/S*.............................. 54,100 $ 390,860
Tomra Systems A/S.......................... 44,500 492,514
------------
883,374
------------
PHILIPPINES -- 0.2%
Empire East Land Holdings, Inc.*........... 436,000 232,711
------------
POLAND -- 0.9%
Agros Holdings S.A.*....................... 30,000 907,635
------------
SINGAPORE -- 0.3%
Far East Levingston Shipbuilding LTD....... 69,000 325,841
United Overseas Bank LTD................... 495 4,816
------------
330,657
------------
SOUTH AFRICA -- 0.5%
Liberty Life Association of Africa LTD..... 18,000 544,583
------------
SPAIN
Telefonica De Espana SA.................... 34,000 631,247
------------
SWEDEN -- 3.2%
Autoliv AB................................. 16,500 712,302
Ericsson................................... 27,000 680,604
Hennes & Mauritz AB........................ 8,000 981,736
Nordbanken AB.............................. 33,000 846,792
------------
3,221,434
------------
SWITZERLAND -- 1.1%
Sandoz AG.................................. 525 629,950
Swiss Reinsurance Co....................... 450 473,986
------------
1,103,936
------------
THAILAND -- 0.8%
K.R. Precision Public Co., LTD --
Foreign.................................. 9,960 56,030
Thai Farmers Bank Public Co., LTD --
Foreign.................................. 32,000 337,372
Tipco Asphalt Public Co., LTD -- Foreign... 75,000 427,813
------------
821,215
------------
UNITED KINGDOM -- 11.6%
Barratt Developments PLC................... 150,000 634,149
British Aerospace PLC...................... 48,000 794,049
Dixons Group PLC........................... 90,000 739,136
EMI Group PLC.............................. 126 2,634
GKN PLC*................................... 44,055 798,210
Granada Group PLC.......................... 47,700 639,708
Kingfisher PLC............................. 90,000 892,741
Next PLC................................... 85,000 753,972
PizzaExpress PLC........................... 100,000 746,104
Powerscreen International PLC.............. 73,000 628,097
Reuters Holdings PLC....................... 93,400 1,080,025
Rolls-Royce PLC............................ 295,000 1,106,277
Shell Transport & Trading Co. PLC.......... 48,000 732,794
Siebe PLC.................................. 50,279 793,173
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Thorn EMI PLC.............................. 126 $ 717
Victrex PLC................................ 98,000 430,423
WPP Group PLC.............................. 260,000 954,668
------------
11,726,877
------------
UNITED STATES OF AMERICA+ -- 33.8%
Abacan Resource Corp. (Nigeria)............ 120,000 825,000
Affiliated Computer Services, Inc.*........ 4,000 235,000
Anchor Gaming Inc.......................... 3,400 211,650
Ascend Communications, Inc.*............... 6,200 409,975
Aspect Telecommunications, Inc.*........... 7,600 473,100
Aspen Technologies, Inc.*.................. 4,100 277,775
Atlantic Coast Airlines, Inc.*............. 2,800 32,900
Baan Co., N.V. (Netherlands)*.............. 25,400 847,725
Basic Petroleum International, LTD
(Guatemela)*............................. 7,300 202,575
Bed Bath & Beyond, Inc.*................... 14,000 383,250
BMC Industries, Inc........................ 10,600 303,425
Boston Chicken, Inc.*...................... 5,400 190,350
British Biotech PLC (United Kingdom)*...... 11,900 402,369
BSES Limited GDR (India)................... 17,000 297,500
Cadence Design Systems, Inc.*.............. 9,250 330,688
Callaway Golf Co........................... 11,500 392,438
Cambridge Tech Partners, Inc.*............. 7,900 238,975
Camco International, Inc................... 9,600 358,800
Caraustar Industries, Inc.................. 7,100 210,781
Cascade Communication Corp.*............... 3,300 268,950
Central Garden and Pet Co.*................ 8,900 179,112
Chesapeake Energy Co.*..................... 7,400 463,425
Children's Comprehensive Services, Inc..... 8,800 156,200
China Steel Co. (Taiwan)*.................. 12,500 256,250
Cisco Systems, Inc.*....................... 6,000 372,375
Coachmen Industries, Inc................... 11,200 288,400
Commercial International Bank (Egypt)*..... 42,105 652,828
CompUSA, Inc.*............................. 9,000 486,000
Compuware Inc.*............................ 4,300 196,725
Concord EFS, Inc.*......................... 4,150 106,863
Continental Airlines, Inc., Class B........ 18,200 407,225
Danaher Corp............................... 2,500 103,437
Elan Corp. PLC-ADR (Ireland)*.............. 24,600 734,925
Electronics For Imaging, Inc.*............. 5,100 365,925
Encad, Inc.*............................... 7,400 309,875
Executive Risk, Inc........................ 5,400 207,900
Finish Line, Inc.*......................... 8,100 384,750
Flamel Technologies S.A. (France)*......... 48,600 370,575
Foamex International, Inc.*................ 13,800 224,250
Gartner Group, Inc., Class A*.............. 7,500 255,000
Gucci Group N.V. (Italy)................... 10,800 783,000
Guidant Corp............................... 3,700 204,425
HBO & Co................................... 5,700 380,475
HFS, Inc.*................................. 6,500 434,688
Hologic, Inc.*............................. 4,900 137,200
Integrated Systems, Inc.*.................. 7,700 254,100
International Specialty Products, Inc.*.... 15,500 155,000
Iomega Corp.*.............................. 8,800 213,400
Jones Medical Industries, Inc.............. 13,625 660,813
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
22
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA+ (CONTINUED)
Larsen & Toubro LTD-GDR (India)............ 30,000 $ 438,000
Lemout & Hauspie Speech Products N.V.
(Belgium)*............................... 35,000 831,250
L.G. Electronics, Inc., GDR New (South
Korea)*.................................. 1,668 14,632
Liz Claiborne, Inc......................... 7,500 279,375
McAfee Associates, Inc.*................... 4,000 276,000
Medic Computer Systems, Inc.*.............. 10,000 363,750
Medicis Pharmaceutical Corp.*.............. 5,200 250,900
Memtec LTD-ADR (Australia)................. 19,000 532,000
Money Store, Inc........................... 8,750 231,875
Morgan Stanley Group, Inc.................. 6,000 298,500
Nautica Enterprises, Inc.*................. 7,900 254,775
NBTY, Inc.*................................ 18,900 311,850
New York Bancorp, Inc...................... 1,300 41,112
Nice-Systems, LTD (Israel)*................ 40,000 916,250
P.T. Telekomunikasi (Indonesia)............ 14,000 435,750
Pacific Sunwear of California*............. 9,100 299,162
Pairgain Technology, Inc.*................. 5,800 453,125
Peoplesoft, Inc.*.......................... 3,300 274,725
Petro Canada (Canada)...................... 43,000 419,250
PMT Services, Inc.......................... 8,300 168,075
Professional Staff PLC (United Kingdom)*... 47,000 499,375
Quintiles Transnational Corp.*............. 4,200 307,650
Reading & Bates Corp.*..................... 15,400 417,725
Rexall Sundown, Inc.*...................... 6,200 226,300
Riser Foods, Inc........................... 7,600 197,600
Robert Half International, Inc.*........... 14,300 527,312
Rofin-Sinar Technologies, Inc. (Germany)*.. 16,600 180,525
Ross Stores Inc............................ 13,600 489,600
Safeskin Corp.*............................ 5,100 177,225
Samsung Electronics LTD-GDR (Korea)*....... 7,000 350,000
Samsung Electronics LTD-GDR New (Korea)*... 172 8,600
Saville Systems PLC (Ireland)*............. 27,400 965,850
Showbiz Pizza Time, Inc.*.................. 11,900 215,687
SPX Corp................................... 8,200 244,975
Student Loan Marketing Association......... 3,800 283,575
Sun Microsystems, Inc.*.................... 5,100 316,837
Supertex, Inc.*............................ 12,800 232,000
TCF Financial Corp......................... 2,000 75,250
Technitrol, Inc............................ 6,100 169,275
Tecnomatix Technology LTD (Israel)*........ 23,000 399,625
Telecomunicacoes Brasileiras -
ADR (Brazil)............................. 9,600 753,600
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
UNITED STATES OF AMERICA+ (CONTINUED)
Telefonos de Mexico S.A.-ADR (Mexico)...... 20,850 $ 659,806
Tidewater, Inc............................. 9,400 351,325
Transocean Offshore, Inc................... 7,000 428,750
Tubos de Acero De Mexico-ADR (Mexico)*..... 47,000 511,125
Tuntex Distinct Corp. (Taiwan)*............ 5,001 35,123
TV Filme, Inc. ADR (Brazil)*............... 10,500 144,375
Universal Health Realty Income Trust*...... 6,000 163,500
Videotron Holdings PLC-ADR (United
Kingdom)*................................ 41,800 710,600
Zions Bancorporation....................... 3,100 274,350
------------
34,056,063
------------
TOTAL COMMON STOCKS
(Cost $83,163,049).......................................
98,170,947
------------
- ----------------------------------------------------------------------------
WARRANTS/RIGHTS --
- ----------------------------------------------------------------------------
HONG KONG
Hong Kong & China Gas Co., LTD-Warrants.... 17,000 5,168
------------
SINGAPORE
United Overseas Bank LTD-Warrants.......... 208 761
------------
THAILAND
Thai Farmers Bank-Warrants................. 5,375 5,286
------------
TOTAL WARRANTS/RIGHTS
(Cost $6,631)............................................
11,213
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------
<CAPTION>
COMMERCIAL PAPER -- 1.8%
<S> <C> <C>
- ----------------------------------------------
Merrill Lynch 5.85%, 10/01/96
(Cost $1,839,000).............. $ 1,839,000 $ 1,839,000
------------
TOTAL INVESTMENTS -- 99.3%
(Cost $85,008,680)...............................
$100,021,160
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.7%......
737,287
------------
NET ASSETS -- 100.0%...............................
$100,758,447
------------
<FN>
- ---------------
* Non-Income Producing Security.
+ Certain securities issued by companies are classified as United States securi-
ties as their underlying currency is the U.S. Dollar.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
23
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EMERGING CORE INCOME &
GROWTH GROWTH GROWTH
FUND FUND FUND
<S> <C> <C> <C>
---------------------------------------------------
ASSETS
Investments, at value *..... $ 610,921,587 $ 501,507,845 $ 120,339,331
Foreign currencies, at
value**................... -- -- --
Cash........................ -- 4,046 900
Receivable for investment
securities sold........... 4,455,633 4,402,001 1,701,034
Receivable for interests
sold...................... 1,367,624 566,885 323,581
Dividends receivable........ 79,563 56,430 215,769
Interest receivable......... 262 -- 621,033
Due from adviser............ -- -- --
Deferred organization
costs..................... 18,693 24,091 11,947
Other assets................ 3,879 25,137 532
---------------------------------------------------
Total assets.............. 616,847,241 506,586,435 123,214,127
---------------------------------------------------
LIABILITIES
Payable for investment
securities purchased...... -- -- --
Payable for interests
repurchased............... 7,426,621 7,012,750 2,792,669
Due to adviser.............. 743,930 534,968 48,882
Accrued expenses and other
liabilities............... 734,179 396,561 104,065
---------------------------------------------------
Total liabilities......... 8,904,730 7,944,279 2,945,616
---------------------------------------------------
NET ASSETS.................... $ 607,942,511 $ 498,642,156 $ 120,268,511
---------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital............. $ 355,184,425 $ 343,504,966 $ 81,533,055
Accumulated net investment
income (deficit).......... (8,203,977) (1,423,696) 13,587,460
Accumulated net realized
gain (loss)............... 87,904,363 47,256,935 9,362,281
Accumulated net realized
foreign exchange gain
(loss).................... -- -- --
Net unrealized foreign
exchange gain (loss)...... -- -- --
Net unrealized appreciation
(depreciation) on
investments............... 173,057,700 109,303,951 15,785,715
---------------------------------------------------
Net assets................ $ 607,942,511 $ 498,642,156 $ 120,268,511
---------------------------------------------------
* Investments, at cost..... $ 437,863,887 $ 392,203,894 $ 104,553,616
---------------------------------------------------
** Foreign currencies, at
cost...................... -- -- --
---------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
24
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED GOVERNMENT MONEY EMERGING INTERNATIONAL
GROWTH INCOME MARKET COUNTRIES GROWTH
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
ASSETS
Investments, at value *..... $ 27,092,084 $ 6,359,649 $ 14,297,154 $ 62,453,184 $ 45,289,261
Foreign currencies, at
value**................... -- -- -- 346,142 1,429,378
Cash........................ 651 33,349 1,194 666 --
Receivable for investment
securities sold........... 1,110,525 -- -- 935,576 41,818
Receivable for interests
sold...................... 26,500 74 -- 507,199 1,431,833
Dividends receivable........ 3,759 -- -- 46,169 110,535
Interest receivable......... 204,673 138,781 1,308 -- --
Due from adviser............ -- -- 5,238 -- --
Deferred organization
costs..................... 8,522 7,839 7,022 -- 679
Other assets................ 61 9 100 2,800 1,032
---------------------------------------------------------------------------------------
Total assets.............. 28,446,775 6,539,701 14,312,016 64,291,736 48,304,536
---------------------------------------------------------------------------------------
LIABILITIES
Payable for investment
securities purchased...... -- -- 41,605 2,764,775 3,039,586
Payable for interests
repurchased............... 1,126,250 -- -- 9,137 --
Due to adviser.............. 139,356 90 -- -- --
Accrued expenses and other
liabilities............... 21,486 39,694 33,145 90,199 178,371
---------------------------------------------------------------------------------------
Total liabilities......... 1,287,092 39,784 74,750 2,864,111 3,217,957
---------------------------------------------------------------------------------------
NET ASSETS.................... $ 27,159,683 $ 6,499,917 $ 14,237,266 $ 61,427,625 $ 45,086,579
---------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital............. $ 19,872,942 $ 5,780,066 $ 14,237,637 $ 56,430,674 $ 40,848,416
Accumulated net investment
income (deficit).......... 1,740,133 891,155 -- 84,234 119,725
Accumulated net realized
gain (loss)............... 1,742,511 (135,676) (371) (134,561) 349,175
Accumulated net realized
foreign exchange gain
(loss).................... -- -- -- (57,873) 95,152
Net unrealized foreign
exchange gain (loss)...... -- -- -- 1,842 (2,254)
Net unrealized appreciation
(depreciation) on
investments............... 3,804,097 (35,628) -- 5,103,309 3,676,365
---------------------------------------------------------------------------------------
Net assets................ $ 27,159,683 $ 6,499,917 $ 14,237,266 $ 61,427,625 $ 45,086,579
---------------------------------------------------------------------------------------
* Investments, at cost..... $ 23,287,987 $ 6,395,277 $ 14,297,154 $ 57,349,875 $ 41,612,896
---------------------------------------------------------------------------------------
** Foreign currencies, at
cost...................... -- -- -- $ 345,999 $ 1,439,151
---------------------------------------------------------------------------------------
<CAPTION>
WORLDWIDE
GROWTH
FUND
<S> <C>
ASSETS
Investments, at value *..... $ 100,021,160
Foreign currencies, at
value**................... 2,666,936
Cash........................ 530
Receivable for investment
securities sold........... 1,969,837
Receivable for interests
sold...................... 122,036
Dividends receivable........ 201,917
Interest receivable......... --
Due from adviser............ --
Deferred organization
costs..................... 9,703
Other assets................ 351
Total assets.............. 104,992,470
LIABILITIES
Payable for investment
securities purchased...... 3,978,944
Payable for interests
repurchased............... 135,963
Due to adviser.............. --
Accrued expenses and other
liabilities............... 119,116
Total liabilities......... 4,234,023
NET ASSETS.................... $ 100,758,447
COMPOSITION OF NET ASSETS
Paid-in capital............. $ 69,608,120
Accumulated net investment
income (deficit).......... 488,560
Accumulated net realized
gain (loss)............... 14,898,238
Accumulated net realized
foreign exchange gain
(loss).................... 757,906
Net unrealized foreign
exchange gain (loss)...... (6,857)
Net unrealized appreciation
(depreciation) on
investments............... 15,012,480
Net assets................ $ 100,758,447
* Investments, at cost..... $ 85,008,680
** Foreign currencies, at
cost...................... $ 2,691,094
</TABLE>
- --------------------------------------------------------------------------------
25
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE YEAR ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EMERGING CORE GROWTH INCOME &
GROWTH FUND FUND GROWTH FUND
<S> <C> <C> <C>
------------------------------------------
INVESTMENT INCOME:
Dividends................... $ 465,839 $ 535,873 $ 749,168
Interest.................... 847,900 719,415 1,736,898
------------------------------------------
Total income................ 1,313,739 1,255,288 2,486,066
------------------------------------------
EXPENSES:
Advisory fee................ 3,017,321 1,712,555 423,507
Accounting fee.............. 92,788 80,662 39,399
Administration fee.......... 17,500 70,223 17,372
Audit & tax fees............ 75,900 57,549 14,237
Custodian fee............... 67,232 38,123 11,582
Insurance................... 7,775 2,861 668
Legal fee................... 3,402 2,579 638
Miscellaneous............... 25,752 19,904 4,830
Organization costs.......... 4,269 7,792 3,865
Trustees' fee............... 3,564 3,564 3,564
------------------------------------------
Total expense............... 3,315,503 1,995,812 519,662
Reimbursement to (from)
adviser................... -- -- 16,780
------------------------------------------
Net expenses................ 3,315,503 1,995,812 536,442
------------------------------------------
Net investment income
(deficit)................. (2,001,764) (740,524) 1,949,624
------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security
transactions.............. 63,561,561 28,329,596 6,413,257
Net realized foreign
exchange loss............. -- -- --
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currencies................ 12,427,523 20,550,277 1,520,523
------------------------------------------
Net gain (loss) on
investments............... 75,989,084 48,879,873 7,933,780
------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $ 73,987,320 $ 48,139,349 $ 9,883,404
------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
26
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING
BALANCED GOVERNMENT MONEY MARKET COUNTRIES INTERNATIONAL WORLDWIDE
GROWTH FUND INCOME FUND FUND FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................... $ 30,032 -- -- $ 323,642 $ 244,293 $ 507,538
Interest.................... 422,677 $ 149,963 $ 173,628 59,829 30,185 42,376
----------------------------------------------------------------------------------
Total income................ 452,709 149,973 173,628 383,471 274,478 549,914
----------------------------------------------------------------------------------
EXPENSES:
Advisory fee................ 96,012 9,588 8,015 271,596 196,401 505,580
Accounting fee.............. 37,500 37,500 37,500 45,266 37,500 37,733
Administration fee.......... 3,937 736 981 6,654 6,031 15,562
Audit & tax fees............ 3,228 606 811 5,481 4,954 12,757
Custodian fee............... 11,681 7,278 7,791 12,202 17,797 60,163
Insurance................... 91 110 31 132 168 735
Legal fee................... 145 27 37 246 222 572
Miscellaneous............... 1,095 207 275 1,859 1,681 4,328
Organization costs.......... 2,758 2,536 2,469 -- 150 3,156
Trustees' fee............... 3,564 3,564 3,564 3,564 3,564 3,564
----------------------------------------------------------------------------------
Total expense............... 160,011 62,152 61,474 347,000 268,468 644,150
Reimbursement to (from)
adviser................... (38,396) (47,770) (47,047) 642 (3,327) (37,454)
----------------------------------------------------------------------------------
Net expenses................ 121,615 14,382 14,427 347,642 265,141 606,696
----------------------------------------------------------------------------------
Net investment income
(deficit)................. 331,094 135,591 159,201 35,829 9,337 (56,782)
----------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security
transactions.............. 1,032,726 (134,140) (46) 121,909 538,673 7,403,797
Net realized foreign
exchange loss............. -- -- -- (33,016) (70,052) (149,957)
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currencies................ 1,059,501 38,130 -- 3,726,624 1,140,702 (124,779)
----------------------------------------------------------------------------------
Net gain (loss) on
investments............... 2,092,227 (96,010) (46) 3,815,517 1,609,323 7,129,061
----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $ 2,423,321 $ 39,581 $ 159,155 $ 3,851,346 $ 1,618,660 $ 7,072,279
----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
EMERGING GROWTH FUND CORE GROWTH FUND
--------------------------------- ---------------------------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, FOR THE SEPTEMBER 30, FOR THE
1996 YEAR ENDED 1996 YEAR ENDED
(UNAUDITED) MARCH 31, 1996 (UNAUDITED) MARCH 31, 1996
<S> <C> <C> <C> <C>
---------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ (2,001,764) $ (2,945,373) $ (740,524) $ (752,357)
Net realized gain (loss)
from security transactions
and foreign exchange...... 63,561,561 78,797,996 28,329,596 50,587,998
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. 12,427,523 91,635,716 20,550,277 52,583,826
---------------------------------------------------------------------
Net increase in net
assets from
operations............ 73,987,320 167,488,339 48,139,349 102,419,467
---------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 151,775,458 107,044,506 72,503,285 113,757,799
Withdrawals by partners..... (201,906,649) (161,495,614) (42,543,081) (79,489,585)
---------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in
interests............. (50,131,191) (54,451,108) 29,960,204 34,268,214
---------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 23,856,129 113,037,231 78,099,553 136,687,681
NET ASSETS
BEGINNING OF PERIOD......... 584,086,382 471,049,151 420,542,603 283,854,922
---------------------------------------------------------------------
END OF PERIOD............... $ 607,942,511 $ 584,086,382 $ 498,642,156 $ 420,542,603
---------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
28
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT
INCOME & GROWTH FUND BALANCED GROWTH FUND INCOME FUND
--------------------------------- --------------------------------- ---------------
FOR THE FOR THE FOR THE
PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, FOR THE SEPTEMBER 30, FOR THE SEPTEMBER 30,
1996 YEAR ENDED 1996 YEAR ENDED 1996
(UNAUDITED) MARCH 31, 1996 (UNAUDITED) MARCH 31, 1996 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 1,949,624 $ 4,142,172 $ 331,094 $ 638,909 $ 135,591
Net realized gain (loss)
from security transactions
and foreign exchange...... 6,413,257 10,319,301 1,032,726 2,837,068 (134,140)
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. 1,520,523 10,732,341 1,059,501 742,010 38,130
---------------------------------------------------------------------------------------
Net increase in net
assets from
operations............ 9,883,404 25,193,814 2,423,321 4,217,987 39,581
---------------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 14,602,221 15,608,507 4,474,202 4,914,004 3,928,620
Withdrawals by partners..... (15,975,050) (35,130,807) (3,582,391) (7,102,941) (1,946,278)
---------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in
interests............. (1,372,829) (19,522,300) 891,811 (2,188,937) 1,982,342
---------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 8,510,575 5,671,514 3,315,132 2,029,050 2,021,923
NET ASSETS
BEGINNING OF PERIOD......... 111,757,936 106,086,422 23,844,551 21,815,501 4,477,994
---------------------------------------------------------------------------------------
END OF PERIOD............... $ 120,268,511 $ 111,757,936 $ 27,159,683 $ 23,844,551 $ 6,499,917
---------------------------------------------------------------------------------------
<CAPTION>
FOR THE
YEAR ENDED
MARCH 31, 1996
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 291,713
Net realized gain (loss)
from security transactions
and foreign exchange...... 363,388
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. (175,424)
Net increase in net
assets from
operations............ 479,677
TRANSACTIONS IN INTERESTS
Contributions by partners... 3,577,045
Withdrawals by partners..... (4,912,231)
Net increase (decrease)
in net assets from
transactions in
interests............. (1,335,186)
Total increase
(decrease) in net
assets................ (855,509)
NET ASSETS
BEGINNING OF PERIOD......... 5,333,503
END OF PERIOD............... $ 4,477,994
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
29
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST --
Continued
<TABLE>
<CAPTION>
MONEY MARKET FUND
---------------------------------
FOR THE
PERIOD ENDED
SEPTEMBER 30, FOR THE
1996 YEAR ENDED
(UNAUDITED) MARCH 31, 1996
<S> <C> <C>
---------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 159,201 $ 200,767
Net realized gain (loss)
from security transactions
and foreign exchange...... (46) (325)
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. -- --
---------------------------------
Net increase (decrease)
in net assets from
operations............ 159,155 200,442
---------------------------------
DISTRIBUTIONS TO PARTNERS
Net investment income....... (159,201) (200,767)
---------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 96,795,508 22,265,784
Withdrawals by partners..... (85,732,043) (22,108,039)
---------------------------------
Net increase (decrease)
in net assets from
transactions in
interests............. 11,063,465 143,452
---------------------------------
Total increase
(decrease) in net
assets................ 11,063,419 143,127
NET ASSETS
BEGINNING OF PERIOD......... 3,173,847 3,030,720
---------------------------------
END OF PERIOD............... $ 14,237,266 $ 3,173,847
---------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
30
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
WORLDWIDE
EMERGING COUNTRIES FUND INTERNATIONAL GROWTH FUND GROWTH FUND
--------------------------------- --------------------------------- ---------------
FOR THE FOR THE FOR THE
PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, FOR THE SEPTEMBER 30, FOR THE SEPTEMBER 30,
1996 YEAR ENDED 1996 YEAR ENDED 1996
(UNAUDITED) MARCH 31, 1996 (UNAUDITED) MARCH 31, 1996 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 35,829 $ 26,122 $ (56,782) $ 73,015 $ (56,782)
Net realized gain (loss)
from security transactions
and foreign exchange...... 88,893 (61,164) 7,253,840 259,455 7,253,840
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. 3,726,624 1,751,439 (124,779) 2,584,830 (124,779)
---------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations............ 3,851,346 1,716,397 7,072,279 2,917,300 7,072,279
---------------------------------------------------------------------------------------
DISTRIBUTIONS TO PARTNERS
Net investment income....... -- -- -- -- --
---------------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 39,571,901 16,175,253 6,500,703 6,044,445 6,500,703
Withdrawals by partners..... (1,894,608) (1,272,742) (13,157,561) (2,768,514) (13,157,561)
---------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in
interests............. 37,677,293 14,902,511 (6,656,858) 3,275,931 (6,656,858)
---------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 41,528,639 16,618,908 415,421 6,193,231 415,421
NET ASSETS
BEGINNING OF PERIOD......... 19,898,986 3,280,078 23,805,628 17,612,397 100,343,026
---------------------------------------------------------------------------------------
END OF PERIOD............... $ 61,427,625 $ 19,898,986 $ 45,086,579 $ 23,805,628 $ 100,758,447
---------------------------------------------------------------------------------------
<CAPTION>
FOR THE
YEAR ENDED
MARCH 31, 1996
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 299,362
Net realized gain (loss)
from security transactions
and foreign exchange...... 9,015,557
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. 9,091,917
Net increase (decrease)
in net assets from
operations............ 18,406,836
DISTRIBUTIONS TO PARTNERS
Net investment income....... --
TRANSACTIONS IN INTERESTS
Contributions by partners... 17,650,729
Withdrawals by partners..... (33,276,911)
Net increase (decrease)
in net assets from
transactions in
interests............. (15,626,182)
Total increase
(decrease) in net
assets................ 2,780,654
NET ASSETS
BEGINNING OF PERIOD......... 97,562,372
END OF PERIOD............... $ 100,343,026
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
31
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company organized as a Delaware business trust,
is comprised of fifteen investment vehicles (each a "Fund" and collectively the
"Funds") as of September 30, 1996. Up to five Portfolios of Nicholas-Applegate
Mutual Funds have invested in the respective Funds of the Master Trust to
achieve their investment objective.
The investment objectives of the Funds are as follows:
Emerging Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies with less than $500
million in market capitalization.
Core Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in U.S. companies, generally over $500 million in total
stock market value.
Income & Growth Fund seeks to maximize total return through investment
primarily in convertible and equity securities of U.S. companies.
Balance Growth Fund seeks to provide a balance of long-term capital
appreciation and current income by investing approximately 60% of its total
assets in equity and convertible securities of primarily U.S. companies and 40%
of its total assets in debt securities, money market instruments and other
short-term investments.
Government Income Fund seeks to maximize current income through investment
primarily in intermediate-term debt securities of the U.S. government and its
agencies and instrumentalities.
Money Market Fund seeks to achieve a high level of current income consistent
with preservation of capital and maintenance of liquidity through investment in
investment grade securities with an average maturity of 90 days.
Worldwide Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in growth stocks of U.S. and foreign companies.
International Growth Fund seeks to maximize long-term capital appreciation
through investment primariily in equity securities of non-U.S. companies.
Emerging Countries Fund seeks to maximize long-term capital appreciation
through investment primarily in equity securities of companies in developing
countries of the world.
Pursuant to Rule 24f-2 under the Investment Company Act, the Trust has elected
to register an indefinite number of shares. The Trust commenced operations on
April 19, 1993.
SECURITIES TRANSACTIONS
Equity securities are valued at the last sale price (for exchange-listed
securities) or the mean between the last bid and asked price (if lacking any
sales and for over-the-counter securities). Debt securities generally are valued
at the mean between the last bid and asked prices. Securities with 60 days or
less remaining to maturity are valued on an amortized cost basis which
approximates market value.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under the direction of the Master
Trust's Board of Trustees.
Securities transactions are recognized on the trade date. Realized gains and
losses from securities transactions are calculated using the first-in, first-out
method. Dividend income is recognized on the ex-dividend date, and interest
income is recorded on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities. The
prospectus for Nicholas-Applegate
- --------------------------------------------------------------------------------
32
<PAGE>
- -------------------------------------------------------------------
Mutual Funds describes each Portfolio's policies with respect to declaration and
payment of dividends and distribution of capital gains.
FEDERAL INCOME TAXES
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Portfolios.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Master Trust have been allocated to the
various Funds based upon management's best estimate of the costs applicable to
each Fund. These costs have been deferred and will be amortized over a period of
60 months from the date the Funds commenced operations.
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 of assets and liabilities and disclosure of
contingent assets and liabilities at the date the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate") The advisory fee is computed daily for the
Funds based upon the following percentages of each Fund's average daily net
assets:
<TABLE>
<CAPTION>
FIRST $500 NEXT $500 EXCESS OF
FUND MILLION MILLION $1 BILLION
- --------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Emerging Growth
Fund................ 1.00% 1.00% 1.00%
Core Growth Fund..... 0.75% 0.675% 0.65%
Income & Growth
Fund................ 0.75% 0.675% 0.65%
Balanced Growth
Fund................ 0.75% 0.675% 0.65%
Government Income
Fund................ 0.40% 0.35% 0.35%
Money Market Fund.... 0.25% 0.2275% 0.2275%
Emerging Countries
Fund................ 1.25% 1.25% 1.25%
International Growth
Fund................ 1.00% 0.90% 0.85%
Worldwide Growth
Fund................ 1.00% 0.90% 0.85%
</TABLE>
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the period from inception (respectively) to September 30,
1996, are as follows:
<TABLE>
<CAPTION>
FUND
- ---------------------------------------------
<S> <C>
Income & Growth Fund......................... $ 20,720
Balanced Growth Fund......................... 283,267
Government Income Fund....................... 303,447
Money Market Fund............................ 328,948
Emerging Countries Fund...................... 111,131
International Growth Fund.................... 198,984
Worldwide Growth Fund........................ 271,377
</TABLE>
Nicholas-Applegate advanced certain organization costs discussed in Note 1. As
of September 30, 1996, the following Funds have amounts due to
Nicholas-Applegate for organizational costs advanced:
<TABLE>
<S> <C>
Government Income Fund.............. $ 24,688
Money Market Fund................... 24,688
</TABLE>
- --------------------------------------------------------------------------------
33
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the period ended September 30, 1996, were as follows
(in 000's):
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ----------------------------------- --------- ---------
<S> <C> <C>
Emerging Growth Fund............... 268,714 344,899
Core Growth Fund................... 281,890 248,636
Income & Growth Fund............... 87,859 84,911
Balanced Growth Fund............... 20,119 18,083
Government Income Fund............. 6,392 4,092
Emerging Countries Fund............ 63,858 26,898
International Growth Fund.......... 51,800 31,043
Worldwide Growth Fund.............. 76,814 84,240
</TABLE>
At September 30, 1996, the net unrealized appreciation (depreciation) based on
the cost of investments for Federal income tax purposes was as follows (in
000's):
<TABLE>
<CAPTION>
GROSS GROSS NET
TAX COST OF UNREALIZED UNREALIZED UNREALIZED
FUND INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
- ------------ ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Emerging
Growth
Fund....... $ 437,864 $ 182,579 $ 9,521 $ 173,058
Core Growth
Fund....... 392,204 115,777 6,473 109,304
Income &
Growth
Fund....... 104,554 16,211 425 15,786
Balanced
Growth
Fund....... 23,288 4,216 412 3,804
Government
Income
Fund....... 6,395 44 79 (35)
Money Market
Fund....... 14,297 -- -- --
Emerging
Countries
Fund....... 57,350 7,307 2,204 5,103
International
Growth
Fund....... 41,613 4,656 980 3,676
Worldwide
Growth
Fund....... 85,009 16,885 1,873 15,012
</TABLE>
D. OFF BALANCE SHEET RISKS
The Nicholas-Applegate Mutual Funds' investment in foreign securities may
entail risks due to the potential of political and economic instability in the
countries where the securities are being offered. In addition, foreign exchange
fluctuations could affect the value of positions held. It is the Master Trust's
policy to continuously monitor its exposure to these risks.
- --------------------------------------------------------------------------------
34
<PAGE>
- -------------------------------------------------------------------
E. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF RATIO OF RATIO OF NET
EXPENSES TO EXPENSES TO INVESTMENT RATIO OF NET
AVERAGE NET AVERAGE NET INCOME INVESTMENT
ASSETS, ASSETS, (DEFICIT) TO INCOME (DEFICIT)
AFTER BEFORE AVERAGE NET TO AVERAGE NET
EXPENSE EXPENSE ASSETS, AFTER ASSETS, BEFORE
REIMBURSEMENTS REIMBURSEMENTS EXPENSE EXPENSE PORTFOLIO
(RECOUPMENT) (RECOUPMENT) REIMBURSEMENTS REIMBURSEMENTS TURNOVER RATE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH(2)
For the period ended
09/30/96*#..................... 1.10% 1.10% (0.66%) (0.66%) 46.42%
For the year ended 03/31/96...... 1.11% 1.11% (0.57%) (0.57%) 129.59%
For the year ended 03/31/95...... 1.12% 1.11% (0.53%) (0.52%) 100.46%
For the period ended 03/31/94*... 1.12% 1.16% (0.80%) (0.84%) 50.51%
CORE GROWTH(3)
For the period ended
09/30/96*#..................... 0.87% 0.87% (0.32%) (0.32%) 57.67%
For the year ended 03/31/96...... 0.89% 0.89% (0.22%) (0.22%) 114.48%
For the year ended 03/31/95...... 0.89% 0.89% 0.05% 0.05% 98.09%
For the period ended 03/31/94*... 0.92% 0.92% (0.03%) (0.03%) 84.84%
INCOME & GROWTH(3)
For the period ended
09/30/96*#..................... 0.95% 0.92% 3.45% 3.48% 77.49%
For the year ended 03/31/96...... 0.95% 0.94% 3.94% 3.94% 144.97%
For the year ended 03/31/95...... 0.93% 0.95% 4.37% 4.35% 125.51%
For the period ended 03/31/94*... 0.94% 0.97% 3.51% 3.48% 177.52%
BALANCED GROWTH(3)
For the period ended
09/30/96*#..................... 0.95% 1.25% 2.59% 2.29% 73.43%
For the year ended 03/31/96...... 0.95% 1.37% 2.83% 2.37% 197.19%
For the year ended 03/31/95...... 0.95% 1.33% 2.13% 1.75% 110.40%
For the period ended 03/31/94*... 0.94% 1.37% 1.93% 1.50% 85.43%
GOVERNMENT INCOME FUND(3)
For the period ended
09/30/96*#..................... 0.60% 2.59% 5.66% 3.66% 86.79%
For the year ended 03/31/96...... 0.60% 2.72% 6.12% 4.00% 190.47%
For the year ended 03/31/95...... 0.80% 2.21% 5.32% 3.91% 258.72%
For the period ended 03/31/94*... 0.80% 2.80% 3.43% 1.43% 159.17%
MONEY MARKET FUND(3)
For the period ended
09/30/96*#..................... 0.45% 1.92% 4.97% 3.50%
For the year ended 03/31/96...... 0.45% 3.20% 5.34% 2.59% n/a
For the year ended 03/31/95...... 0.31% 3.23% 4.61% 1.69% n/a
For the period ended 03/31/94*... 0.24% 151.02% 2.12% (148.66%) n/a
EMERGING COUNTRIES FUND(4)
For the period ended
09/30/96*#..................... 1.60% 1.60% 0.16% 0.17% 60.16%
For the year ended 03/31/96...... 1.60% 2.80% 0.30% (0.90%) 118.21%
For the period ended 03/31/95*... 1.60% 1.81% 1.73% 1.52% 60.79%
INTERNATIONAL GROWTH FUND(5).......
For the period ended
09/30/96*#..................... 1.35% 1.37% 0.05% 0.03% 82.38%
For the year ended 03/31/96...... 1.35% 1.98% 0.39% (0.24%) 141.02%
For the year ended 03/31/95...... 1.35% 1.85% 0.24% (0.26%) 74.88%
For the period ended 03/31/94*... 1.35% 2.28% 0.41% (0.52%) 23.71%
WORLDWIDE GROWTH FUND(3)
For the period ended
09/30/96*#..................... 1.20% 1.27% (0.11%) (0.19%) 78.42%
For the year ended 03/31/96...... 1.20% 1.26% 0.31% 0.25% 132.20%
For the year ended 03/31/95...... 1.20% 1.30% 0.24% 0.14% 98.54%
For the period ended 03/31/94*... 1.20% 1.36% 0.01% (0.15%) 95.09%
<CAPTION>
BROKER
COMMISSIONS
PER SHARE
<S> <C>
- -----------------------------------
EMERGING GROWTH(2)
For the period ended
09/30/96*#..................... $0.0551
For the year ended 03/31/96...... $0.0523
For the year ended 03/31/95...... --
For the period ended 03/31/94*... --
CORE GROWTH(3)
For the period ended
09/30/96*#..................... $0.0567
For the year ended 03/31/96...... $0.0593
For the year ended 03/31/95...... --
For the period ended 03/31/94*... --
INCOME & GROWTH(3)
For the period ended
09/30/96*#..................... $0.0569
For the year ended 03/31/96...... $0.0597
For the year ended 03/31/95...... --
For the period ended 03/31/94*... --
BALANCED GROWTH(3)
For the period ended
09/30/96*#..................... $0.0593
For the year ended 03/31/96...... $0.0594
For the year ended 03/31/95...... --
For the period ended 03/31/94*... --
GOVERNMENT INCOME FUND(3)
For the period ended
09/30/96*#..................... --
For the year ended 03/31/96...... --
For the year ended 03/31/95...... --
For the period ended 03/31/94*... --
MONEY MARKET FUND(3)
For the period ended
09/30/96*#..................... --
For the year ended 03/31/96...... --
For the year ended 03/31/95...... --
For the period ended 03/31/94*... --
EMERGING COUNTRIES FUND(4)
For the period ended
09/30/96*#..................... $0.0015
For the year ended 03/31/96...... $0.0022
For the period ended 03/31/95*... --
INTERNATIONAL GROWTH FUND(5).......
For the period ended
09/30/96*#..................... $0.0208
For the year ended 03/31/96...... $0.0128
For the year ended 03/31/95...... --
For the period ended 03/31/94*... --
WORLDWIDE GROWTH FUND(3)
For the period ended
09/30/96*#..................... $0.0173
For the year ended 03/31/96...... $0.0187
For the year ended 03/31/95...... --
For the period ended 03/31/94*... --
</TABLE>
- -----------------
(1) Commenced operations on July 12, 1995.
(2) Commenced operations on October 1, 1993.
(3) Commenced operations on April 19, 1993.
(4) Commenced operations on November 28, 1994.
(5) Commenced operations on January 3, 1994.
* Annualized
# Unaudited
- --------------------------------------------------------------------------------
35
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- -------------------------------------------------------------------
MINI CAP GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 95.0%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
AIRLINES -- 0.7%
Atlantic Coast Airlines, Inc.*............. 6,800 $ 79,900
Mesaba Holdings, Inc.*..................... 11,700 127,237
------------
207,137
------------
APPAREL -- 5.8%
Cole Kenneth Productions, Inc.*............ 8,400 158,550
Deckers Outdoor Corp.*..................... 12,900 116,100
Donnkenny, Inc.*........................... 8,900 152,413
Genesco, Inc.*............................. 27,700 259,688
Movado Group, Inc.......................... 6,900 174,225
Pacific Sunwear of California, Inc.*....... 8,600 282,725
Paul Harris Stores, Inc.*.................. 19,800 198,000
Sport - Haley, Inc.*....................... 12,000 150,000
Vans, Inc.*................................ 12,700 242,887
------------
1,734,588
------------
BIOTECHNOLOGY -- 2.2%
Cryolife, Inc.*............................ 11,200 142,800
Guilford Pharmaceuticals*.................. 10,600 291,500
Matritech, Inc.*........................... 20,000 258,750
------------
693,050
------------
BROADCASTING - 1.9%
Argyle Television, Inc.*................... 6,700 188,438
Granite Broadcasting*...................... 11,700 166,725
United Video Satellite G Class A*.......... 11,400 230,850
------------
586,013
------------
BUILDING MATERIALS -- 1.0%
Shaw Group, Inc.*.......................... 8,300 288,425
------------
CLOTHING CHAINS -- 1.3%
Baker J, Inc.*............................. 17,400 106,303
Buckle, Inc.*.............................. 10,100 320,675
------------
426,978
------------
COMPUTER/OFFICE AUTOMATION -- 2.8%
Brooktrout Technology, Inc.*............... 11,200 408,800
CHS Electronics, Inc.*..................... 11,700 159,413
Pomeroy Computer Resources*................ 8,000 262,000
------------
830,213
------------
CONTAINERS -- 0.8%
Seda Specialty*............................ 12,000 231,000
------------
CONTRACTING DRILLING -- 0.3%
Unit Corp.*................................ 16,000 94,000
------------
DRUGS/PHARMACEUTICALS -- 1.7%
Curative Technologies,Inc.*................ 13,900 267,575
Inhale Therapeutic Systems*................ 4,200 54,075
Sangstat Medical Corp.*.................... 8,000 204,000
------------
525,650
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 3.5%
Checkmate Electronics, Inc.*............... 12,800 $ 192,000
Lecroy Corp.*.............................. 12,000 312,000
Powell Industries, Inc.*................... 12,500 115,625
Printrak Intl.*............................ 10,900 106,275
Ultrak Inc.*............................... 11,600 319,000
------------
1,044,900
------------
ENTERTAINMENT -- 0.5%
Cinar Films, Inc.*......................... 5,400 140,738
------------
ENVIRONMENTAL SERVICES -- 0.4%
American Disposal Services, Inc.*.......... 6,000 108,750
------------
FINANCE COMPANIES -- 1.7%
Central Financial*......................... 8,900 171,881
Sirrom Capital Corp........................ 10,900 329,725
------------
501,606
------------
GROCERY PRODUCTS -- 0.7%
Worthington Foods, Inc..................... 8,300 207,500
------------
HOME FURNISHINGS -- 1.2%
Bush Industries, Inc. Class A.............. 13,050 239,794
O'Sullivan Industries*..................... 14,500 128,687
------------
368,481
------------
HOMEBUILDING -- 1.0%
Cavalier Homes, Inc........................ 16,400 303,400
------------
INDUSTRIAL ENGINEER/CONSTRUCTION -- 1.6%
Greenwich Air Services, Inc. Class A....... 6,300 176,400
Greenwich Air Services, Inc. Class B*...... 9,400 195,050
Starrett Corp.............................. 8,900 97,900
------------
469,350
------------
LEISURE/GAMING -- 2.6%
Acres Gaming, Inc.*........................ 14,900 203,013
Mikohn Gaming Corp.*....................... 18,800 166,850
Penn National Gaming, Inc.*................ 13,500 418,500
------------
788,363
------------
LIFE INSURERS -- 0.5%
Provident American Corp.*.................. 9,500 136,562
------------
LODGING -- 0.5%
Studio Plus Hotels, Inc.*.................. 9,850 162,525
------------
MACHINERY/EQUIPMENT -- 2.4%
Ballantyne Omaha, Inc.*.................... 11,400 156,750
Gardner Denver*............................ 4,800 146,400
LSI Industries, Inc........................ 10,900 174,400
Miller Industries, Inc./Tenn.*............. 3,800 150,100
Thermatrix , Inc.*......................... 11,200 93,800
------------
721,450
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
36
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED) -- CONTINUED
- --------------------------------------------------------------------------------
MINI CAP GROWTH FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MEDICAL SPECIALTIES -- 0.2%
Impath, Inc.*.............................. 4,500 $ 55,125
------------
MEDICAL SUPPLIES -- 3.2%
Capstone Pharmaceutical Corp.*............. 21,000 259,875
Meridian Diagnostics, Inc.................. 21,000 280,875
Merit Medical Systems, Inc.*............... 14,000 108,500
Minimed, Inc.*............................. 12,800 321,600
------------
970,850
------------
MEDICAL/NURSING/HEALTH SERVICES -- 3.1%
Diagnostic Health Services, Inc.*.......... 15,700 131,488
Pediatric Services of America*............. 9,300 172,050
PMR Corp.*................................. 7,600 219,450
Prime Medical Services, Inc.*.............. 13,200 174,900
Raytel Medical Corp.*...................... 12,000 162,000
Sterling Healthcare Group*................. 3,500 75,687
------------
935,575
------------
MILITARY/DEFENSE TECHNOLOGY -- 0.5%
Tracor, Inc.*.............................. 7,200 148,500
------------
MULTI-LINE INSURERS -- 0.8%
Delphi Financial Group, Inc.Class A*....... 8,760 245,280
------------
OIL/GAS PRODUCTION -- 0.8%
Coho Energy, Inc.*......................... 12,100 86,213
Lomak Pete, Inc.*.......................... 12,800 168,000
------------
254,213
------------
OILFIELD SERVICES/EQUIPMENT -- 0.6%
Maverick Tube Corp.*....................... 12,000 168,000
------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 5.5%
Abacus Direct Corp.*....................... 12,000 252,000
Computer Learning Centers*................. 5,400 151,200
ICTS Holland P*............................ 11,900 145,775
National Wireless Holdings*................ 7,800 124,800
Nobel Ed Dynamics, Inc.*................... 5,900 82,600
Professional Staff*........................ 19,100 202,937
Remedytemp, Inc. Class A*.................. 8,900 189,125
Right Management Consultants, Inc.*........ 4,600 111,550
Techforce Corp.*........................... 11,500 84,812
Wackenhut Corp. Class A.................... 5,400 99,225
Wackenhut Corp. Class B.................... 2,600 40,625
Youth Services International, Inc.*........ 12,000 166,500
------------
1,651,149
------------
OTHER CONSUMER NON-DURABLES -- 0.6%
Amrion, Inc.*.............................. 8,900 190,238
------------
OTHER CONSUMER SERVICES -- 1.5%
Amre, Inc.*................................ 11,700 162,338
Childrens Comprehensive Services*.......... 8,400 149,100
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER CONSUMER SERVICES (CONTINUED)
Warrantech Corp.*.......................... 15,700 $ 153,075
------------
464,513
------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 4.9%
Horizon Mental Health MG*.................. 9,700 240,075
Medquist, Inc.*............................ 17,100 346,275
National Dentex Corp.*..................... 5,900 112,837
Physician Support Systems, Inc.*........... 7,400 179,450
Proxymed Pharmacy, Inc.*................... 11,700 117,000
Res - Care, Inc.*.......................... 7,950 135,150
Sterile Recoveries, Inc.*.................. 9,000 130,500
Veterinary Centers of America, Inc.*....... 9,300 204,018
------------
1,465,305
------------
OTHER PRODUCERS/MANUFACTURING -- 0.5%
Northwest Pipe Co.*........................ 7,500 142,500
------------
OTHER TECHNOLOGY -- 1.4%
Computer Products, Inc.*................... 7,700 168,438
Renaissance Solutions, Inc.*............... 5,800 245,775
------------
414,213
------------
REAL ESTATE BROKERS/SERVICES -- 1.2%
Redwood Trust, Inc......................... 11,200 358,400
------------
RECREATIONAL PRODUCTS -- 1.8%
Galoob Lewis Toys, Inc.*................... 8,900 260,325
Tyco Toys, Inc.*........................... 48,800 280,600
------------
540,925
------------
RENTAL/LEASING COMPANIES -- 2.0%
Alrenco, Inc.*............................. 9,200 193,200
Leasing Solutions, Inc.*................... 5,900 169,625
Rent Way, Inc.*............................ 20,000 252,500
------------
615,325
------------
RESTAURANTS -- 3.4%
Cooker Restaurant Corp..................... 19,500 231,563
Logans Roadhouse, Inc.*.................... 10,100 203,263
Rainforest Cafe, Inc.*..................... 13,850 429,350
Schlotzsky's, Inc.*........................ 11,300 127,125
Taco Cabana, Inc.*......................... 4,700 27,025
------------
1,018,326
------------
RETAIL/DISCOUNT -- 0.9%
Tuesday Morning Corp.*..................... 14,100 259,087
------------
RETAIL/ELECTRONICS -- 0.4%
Creative Computers, Inc.*.................. 13,100 124,450
------------
SEMICONDUCTORS/ELECTRONIC
COMPONENTS -- 2.6%
Intevac, Inc.*............................. 5,100 86,700
JPM Company*............................... 14,100 132,188
M Systems Flash Disk Pioneer*.............. 13,800 122,475
Qlogic Corp.*.............................. 600 7,725
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
37
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SEMICONDUCTORS/ELECTRONIC (CONTINUED)
Radisys Corp.*............................. 6,200 $ 306,900
Tower Semiconductor Ltd.*.................. 16,700 121,075
------------
777,063
------------
SOAPS/COSMETICS -- 0.2%
Chattem , Inc.*............................ 6,500 65,813
------------
SOFTWARE -- 10.6%
Aladdin Knowledge Systems*................. 6,600 66,000
Axent Technologies, Inc.*.................. 14,400 338,400
Ciber, Inc.*............................... 8,500 323,000
Cotelligent Group, Inc.*................... 10,900 171,675
Datastream Systems, Inc.*.................. 7,500 226,875
Document Sciences Corp.*................... 1,400 17,675
IKOS Systems, Inc.*........................ 14,300 286,894
Intelligroup, Inc.*........................ 5,400 74,925
MDL Information Systems, Inc.*............. 12,000 379,500
Mechanical Dynamics, Inc.*................. 11,900 210,481
Mecon, Inc.*............................... 7,000 175,000
Perceptron, Inc.*.......................... 9,100 229,775
Tecnomatix Technologies, LTD*.............. 9,300 161,587
Unison Software*........................... 11,600 298,700
Versant Object Technology Corp.*........... 7,500 178,125
4Front Software International*............. 9,200 36,800
------------
3,175,412
------------
SPECIALTY CHAINS -- 3.6%
Finish Line, Inc., Class A*................ 7,700 365,750
Insight Enterprises, Inc.*................. 13,100 489,612
Marks Brothers Jewelers, Inc.*............. 8,600 232,200
------------
1,087,562
------------
TELECOMMUNICATIONS EQUIPMENT -- 5.1%
Aml Communications*........................ 8,900 144,625
Celeritek, Inc.*........................... 14,400 176,400
Davox Corp.*............................... 9,300 351,075
Performance Technologies, Inc.*............ 12,000 145,500
Remec, Inc.*............................... 11,300 159,612
Teledata Communications, LTD*.............. 17,900 328,912
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS EQUIPMENT (CONTINUED)
Tessco Technologies, Inc.*................. 5,800 $ 242,150
------------
1,548,274
------------
TELEPHONE -- 0.5%
Pricellular Corp. Class A*................. 9,950 143,031
------------
TRUCKING -- 0.8%
Knight Transportation, Inc.*............... 6,100 133,438
U S Xpress Enterprises, Inc. Class A*...... 10,800 98,550
------------
231,988
------------
WHOLESALE DISTRIBUTION -- 3.2%
Anicom, Inc.*.............................. 13,700 243,175
Central Garden & Pet Co.*.................. 15,200 305,900
Daisytek International Corp.*.............. 5,900 255,175
Fresh America Corp.*....................... 8,100 156,431
------------
960,681
------------
TOTAL COMMON STOCKS
(Cost $22,742,696)..................................... $ 28,582,477
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
COMMERCIAL PAPER -- 6.4%
- -----------------------------------------------------------------------
Associates Corp. -- 1.4%
5.80% ,10/01/96.......................... $ 413,000 413,000
Merrill Lynch & Co. -- 5.0%
5.85% ,10/01/96.......................... 1,495,000 1,495,000
---------- ------------
TOTAL COMMERCIAL PAPER
(Cost $1,908,000).......................... 1,908,000 $ 1,908,000
---------- ------------
TOTAL INVESTMENTS -- 101.4%
(Cost $24,650,696)..................................... $ 30,490,477
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.4%).......... (407,516)
------------
NET ASSETS -- 100.0%..................................... $ 30,082,961
------------
<FN>
- ---------------
* Non-Income Producing Security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
38
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE
GROWTH GROWTH GROWTH
FUND FUND FUND
<S> <C> <C> <C>
-----------------------------------------------
ASSETS
Investments, at value*...... $ 30,490,477 $ 610,921,587 $ 501,507,845
Foreign currencies, at
value**................... -- -- --
Cash........................ 476 -- 4,046
Receivable for investment
securities sold........... 461,275 4,455,633 4,402,001
Receivable for interests
sold...................... 21,000 1,367,624 566,885
Dividends receivable........ 5,285 79,563 56,430
Interest receivable......... -- 262 --
Deferred organization
costs..................... -- 18,693 24,091
Other assets................ 91 3,879 25,137
-----------------------------------------------
Total assets.............. 30,978,604 616,847,241 506,586,435
-----------------------------------------------
LIABILITIES
Payable for investment
securities purchased.... 857,304 -- --
Payable for interests
repurchased............. -- 7,426,621 7,012,750
Due to adviser............ -- 743,930 534,968
Accrued expenses and other
liabilities............. 38,339 734,179 396,561
-----------------------------------------------
Total liabilities......... 895,643 8,904,730 7,944,279
-----------------------------------------------
NET ASSETS.................... $ 30,082,961 $ 607,942,511 $ 498,642,156
-----------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital............. $ 23,368,865 $ 355,184,425 $ 343,504,966
Accumulated net investment
income (deficit).......... (236,541) (8,203,977) (1,423,696)
Accumulated net realized
gain (loss)............... 1,110,856 87,904,363 47,256,935
Accumulated net realized
foreign exchange gain
(loss).................... -- -- --
Net unrealized foreign
exchange gain (loss)...... -- -- --
Net unrealized appreciation
(depreciation) on
investments............... 5,839,781 173,057,700 109,303,951
-----------------------------------------------
Net assets................ $ 30,082,961 $ 607,942,511 $ 498,642,156
-----------------------------------------------
* Investments, at cost..... $ 24,650,696 $ 437,863,887 $ 392,203,894
-----------------------------------------------
** Foreign currencies, at
cost...................... -- -- --
-----------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
39
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME & BALANCED GOVERNMENT EMERGING INTERNATIONAL WORLDWIDE
GROWTH GROWTH INCOME COUNTRIES GROWTH GROWTH
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
ASSETS
Investments, at value*...... $ 120,339,331 $ 27,092,084 $ 6,359,649 $ 62,453,184 $ 45,289,261 $ 100,021,160
Foreign currencies, at
value**................... -- -- -- 346,142 1,429,378 2,666,936
Cash........................ 900 651 33,349 666 -- 530
Receivable for investment
securities sold........... 1,701,034 1,110,525 -- 935,576 41,818 1,969,837
Receivable for interests
sold...................... 323,581 26,500 74 507,199 1,431,833 122,036
Dividends receivable........ 215,769 3,759 -- 46,169 110,535 201,917
Interest receivable......... 621,033 204,673 138,781 -- -- --
Deferred organization
costs..................... 11,947 8,522 7,839 -- 679 9,703
Other assets................ 532 61 9 2,800 1,032 351
-------------------------------------------------------------------------------------------
Total assets.............. 123,214,127 28,446,775 6,539,701 64,291,736 48,304,536 104,992,470
-------------------------------------------------------------------------------------------
LIABILITIES
Payable for investment
securities purchased.... -- -- -- 2,764,775 3,039,586 3,978,944
Payable for interests
repurchased............. 2,792,669 1,126,250 -- 9,137 -- 135,963
Due to adviser............ 48,882 139,356 90 -- -- --
Accrued expenses and other
liabilities............. 104,065 21,486 39,694 90,199 178,371 119,116
-------------------------------------------------------------------------------------------
Total liabilities......... 2,945,616 1,287,092 39,784 2,864,111 3,217,957 4,234,023
-------------------------------------------------------------------------------------------
NET ASSETS.................... $ 120,268,511 $ 27,159,683 $ 6,499,917 $ 61,427,625 $ 45,086,579 $ 100,758,447
-------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital............. $ 81,533,055 $ 19,872,942 $ 5,780,066 $ 56,430,674 $ 40,848,416 $ 69,608,120
Accumulated net investment
income (deficit).......... 13,587,460 1,740,133 891,155 84,234 119,725 488,560
Accumulated net realized
gain (loss)............... 9,362,281 1,742,511 (135,676) (134,561) 349,175 14,898,238
Accumulated net realized
foreign exchange gain
(loss).................... -- -- -- (57,873) 95,152 757,906
Net unrealized foreign
exchange gain (loss)...... -- -- -- 1,842 (2,254) (6,857)
Net unrealized appreciation
(depreciation) on
investments............... 15,785,715 3,804,097 (35,628) 5,103,309 3,676,365 15,012,480
-------------------------------------------------------------------------------------------
Net assets................ $ 120,268,511 $ 27,159,683 $ 6,499,917 $ 61,427,625 $ 45,086,579 $ 100,758,447
-------------------------------------------------------------------------------------------
* Investments, at cost..... $ 104,553,616 $ 23,287,987 $ 6,395,277 $ 57,349,875 $ 41,612,896 $ 85,008,680
-------------------------------------------------------------------------------------------
** Foreign currencies, at
cost...................... -- -- -- $ 345,999 $ 1,439,151 $ 2,691,094
-------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
40
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE YEAR ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE GROWTH
GROWTH FUND GROWTH FUND FUND
<S> <C> <C> <C>
------------------------------------------
INVESTMENT INCOME:
Dividends................... $ 21,214 $ 465,839 $ 535,873
Interest.................... 34,108 847,900 719,415
------------------------------------------
Total income.............. 55,322 1,313,739 1,255,288
------------------------------------------
EXPENSES:
Advisory Fee................ 180,936 3,017,321 1,712,555
Accounting Fee.............. 35,625 92,788 80,662
Administration.............. 4,452 17,500 70,223
Audit & tax fees............ 3,639 75,900 57,549
Custodian fee............... 21,462 67,232 38,123
Insurance................... 175 7,775 2,861
Legal fee................... 163 3,402 2,579
Miscellaneous............... 1,235 25,752 19,904
Organization costs.......... -- 4,269 7,792
Trustees' fee............... 4,319 3,564 3,564
------------------------------------------
Total expense............. 252,006 3,315,503 1,995,812
Less: Reimbursement to
(from) adviser............ (33,435) -- --
------------------------------------------
Net expenses.............. 218,571 3,315,503 1,995,812
------------------------------------------
Net investment income
(deficit)............... (163,249) (2,001,764) (740,524)
------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security
transactions.............. 1,166,750 63,561,561 28,329,596
Net realized foreign
exchange loss............. -- -- --
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currencies................ 2,679,530 12,427,523 20,550,277
------------------------------------------
Net gain (loss) on
investments............. 3,846,280 75,989,084 48,879,873
------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 3,683,031 $ 73,987,320 $ 48,139,349
------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
41
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING
INCOME & BALANCED GOVERNMENT COUNTRIES INTERNATIONAL WORLDWIDE
GROWTH FUND GROWTH FUND INCOME FUND FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................... $ 749,168 $ 30,032 -- $ 323,642 $ 244,293 $ 507,538
Interest.................... 1,736,898 422,677 $ 149,973 59,829 30,185 42,376
---------------------------------------------------------------------------------
Total income.............. 2,486,066 452,709 149,973 383,471 274,478 549,914
---------------------------------------------------------------------------------
EXPENSES:
Advisory Fee................ 423,507 96,012 9,588 271,596 196,401 505,580
Accounting Fee.............. 39,399 37,500 37,500 45,266 37,500 37,733
Administration.............. 17,372 3,937 736 6,654 6,031 15,562
Audit & tax fees............ 14,237 3,228 606 5,481 4,954 12,757
Custodian fee............... 11,582 11,681 7,278 12,202 17,797 60,163
Insurance................... 668 91 110 132 168 735
Legal fee................... 638 145 27 246 222 572
Miscellaneous............... 4,830 1,095 207 1,859 1,681 4,328
Organization costs.......... 3,865 2,758 2,536 -- 150 3,156
Trustees' fee............... 3,564 3,564 3,564 3,564 3,564 3,564
---------------------------------------------------------------------------------
Total expense............. 519,662 160,011 62,152 347,000 268,468 644,150
Less: Reimbursement to
(from) adviser............ 16,780 (38,396) (47,770) 642 (3,327) (37,454)
---------------------------------------------------------------------------------
Net expenses.............. 536,442 121,615 14,382 347,642 265,141 606,696
---------------------------------------------------------------------------------
Net investment income
(deficit)............... 1,949,624 331,094 135,591 35,829 9,337 (56,782)
---------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security
transactions.............. 6,413,257 1,032,726 (134,140) 121,909 538,673 7,403,797
Net realized foreign
exchange loss............. -- -- -- (33,016) (70,052) (149,957)
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currencies................ 1,520,523 1,059,501 38,130 3,726,624 1,140,702 (124,779)
---------------------------------------------------------------------------------
Net gain (loss) on
investments............. 7,933,780 2,092,227 (96,010) 3,815,517 1,609,323 7,129,061
---------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 9,883,404 $ 2,423,321 $ 39,581 $ 3,851,346 $ 1,618,660 $ 7,072,279
---------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
42
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
MINI CAP GROWTH FUND
---------------------------- EMERGING GROWTH FUND
FOR THE --------------------------------
PERIOD ENDED FOR THE FOR THE PERIOD FOR THE
SEPTEMBER 30, PERIOD ENDED ENDED SEPTEMBER YEAR ENDED
1996 MARCH 31, 30, 1996 MARCH 31,
(UNAUDITED) 1996+ (UNAUDITED) 1996
<S> <C> <C> <C> <C>
--------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ (163,249) $ (73,292) $ (2,001,764) $ (2,945,373)
Net realized gain (loss)
from security
transactions.............. 1,166,750 (55,894) 63,561,561 78,797,996
Change in net unrealized
appreciation
(depreciation) of
investments............... 2,679,530 3,160,251 12,427,523 91,635,716
--------------------------------------------------------------
Net increase in net assets
from operations......... 3,683,031 3,031,065 73,987,320 167,488,339
--------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 6,060,120 22,441,390 151,775,458 107,044,506
Withdrawals by partners..... (4,924,159) (208,486) (201,906,649) (161,495,614)
--------------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 1,135,961 22,232,904 (50,131,191) (54,451,108)
--------------------------------------------------------------
Total increase in net
assets.................. 4,818,992 25,263,969 23,856,129 113,037,231
NET ASSETS
BEGINNING OF PERIOD......... 25,263,969 -- 584,086,382 471,049,151
--------------------------------------------------------------
END OF PERIOD............... $ 30,082,961 $ 25,263,969 $ 607,942,511 $ 584,086,382
--------------------------------------------------------------
</TABLE>
- ------------
+Commenced operations on July 12, 1995.
- --------------------------------------------------------------------------------
43
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
CORE GROWTH FUND INCOME & GROWTH FUND BALANCED GROWTH FUND
------------------------------ ------------------------------ ----------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE
ENDED FOR THE ENDED FOR THE PERIOD ENDED FOR THE
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1996 MARCH 31, 1996 MARCH 31, 1996 MARCH 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ (740,524) $ (752,357) $ 1,949,624 $ 4,142,172 $ 331,094 $ 638,909
Net realized gain (loss)
from security
transactions.............. 28,329,596 50,587,998 6,413,257 10,319,301 1,032,726 2,837,068
Change in net unrealized
appreciation
(depreciation) of
investments............... 20,550,277 52,583,826 1,520,523 10,732,341 1,059,501 742,010
--------------------------------------------------------------------------------------------
Net increase in net assets
from operations......... 48,139,349 102,419,467 9,883,404 25,193,814 2,423,321 4,217,987
--------------------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 72,503,285 113,757,799 14,602,221 15,608,507 4,474,202 4,914,004
Withdrawals by partners..... (42,543,081) (79,489,585) (15,975,050) (35,130,807) (3,582,391) (7,102,941)
--------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 29,960,204 34,268,214 (1,372,829) (19,522,300) 891,811 (2,188,937)
--------------------------------------------------------------------------------------------
Total increase in net
assets.................. 78,099,553 136,687,681 8,510,575 5,671,514 3,315,132 2,029,050
NET ASSETS
BEGINNING OF PERIOD......... 420,542,603 283,854,922 111,757,936 106,086,422 23,844,551 21,815,501
--------------------------------------------------------------------------------------------
END OF PERIOD............... $ 498,642,156 $ 420,542,603 $ 120,268,511 $ 111,757,936 $ 27,159,683 $ 23,844,551
--------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
44
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
GOVERNMENT INCOME FUND EMERGING COUNTRIES FUND
---------------------------- ----------------------------
FOR THE FOR THE
PERIOD ENDED FOR THE PERIOD ENDED FOR THE
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1996 MARCH 31, 1996 MARCH 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
<S> <C> <C> <C> <C>
----------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 135,591 $ 291,713 $ 35,829 $ 26,122
Net realized gain (loss)
from security transactions
and foreign exchange...... (134,140) 363,388 88,893 (61,164)
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. 38,130 (175,424) 3,726,624 1,751,439
----------------------------------------------------------
Net increase (decrease) in
net assets from
operations.............. 39,581 479,677 3,851,346 1,716,397
----------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 3,928,620 3,577,045 39,571,901 16,175,253
Withdrawals by partners..... (1,946,278) (4,912,231) (1,894,608) (1,272,742)
----------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 1,982,342 (1,335,186) 37,677,293 14,902,511
----------------------------------------------------------
Total increase (decrease)
in net assets........... 2,021,923 (855,509) 41,528,639 16,618,908
NET ASSETS
BEGINNING OF PERIOD......... 4,477,994 5,333,503 19,898,986 3,280,078
----------------------------------------------------------
END OF PERIOD............... $ 6,499,917 $ 4,477,994 $ 61,427,625 $ 19,898,986
----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
45
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND WORLDWIDE GROWTH FUND
----------------------------- ------------------------------
FOR THE PERIOD FOR THE PERIOD
ENDED FOR THE ENDED FOR THE
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1996 MARCH 31, 1996 MARCH 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
<S> <C> <C> <C> <C>
-------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ (56,782) $ 73,015 $ (56,782) $ 299,362
Net realized gain (loss)
from security transactions
and foreign exchange...... 7,253,840 259,455 7,253,840 9,015,557
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. (124,779) 2,584,830 (124,779) 9,091,917
-------------------------------------------------------------
Net increase (decrease) in
net assets from
operations.............. 7,072,279 2,917,300 7,072,279 18,406,836
-------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 6,500,703 6,044,445 6,500,703 17,650,729
Withdrawals by partners..... (13,157,561) (2,768,514) (13,157,561) (33,276,911)
-------------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... (6,656,858) 3,275,931 (6,656,858) (15,626,182)
-------------------------------------------------------------
Total increase (decrease)
in net assets........... 415,421 6,193,231 415,421 2,780,654
NET ASSETS
BEGINNING OF PERIOD......... 23,805,628 17,612,397 100,343,026 97,562,372
-------------------------------------------------------------
END OF PERIOD............... $ 45,086,579 $ 23,805,628 $ 100,758,447 $ 100,343,026
-------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
46
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company organized as a Delaware business trust,
is comprised of fifteen investment vehicles (each a "Fund" and collectively the
"Funds") as of September 30, 1996. Up to five Portfolios of Nicholas-Applegate
Mutual Funds have invested in the respective Funds of the Master Trust to
achieve their investment objective.
The investment objectives of the Funds are as follows:
Mini Cap Growth Fund seeks to maximize long-term capital appreciation through
investment primariliy in equity securities of U.S. companies whose earnings and
stock prices are expected to grow faster than the average rate of companies in
the Standard & Poor's 500 Stock Price Index.
Emerging Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies with less than $500
million in market capitalization.
Core Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in U.S. companies, generally over $500 million in total
stock market value.
Income & Growth Fund seeks to maximize total return through investment
primarily in convertible and equity securities of U.S. companies.
Balance Growth Fund seeks to provide a balance of long-term capital
appreciation and current income by investing approximately 60% of its total
assets in equity and convertible securities of primarily U.S. companies and 40%
of its total assets in debt securities, money market instruments and other
short-term investments.
Government Income Fund seeks to maximize current income through investment
primarily in intermediate-term debt securities of the U.S. government and its
agencies and instrumentalities.
Emerging Countries Fund seeks to maximize long-term capital appreciation
through investment primarily in equity securities of companies in developing
countries of the world.
International Growth Fund seeks to maximize long-term capital appreciation
through investment primariily in equity securities of non-U.S. companies.
Worldwide Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in growth stocks of U.S. and foreign companies.
Pursuant to Rule 24f-2 under the Investment Company Act, the Trust has elected
to register an indefinite number of shares. The Trust commenced operations on
April 19, 1993.
SECURITIES TRANSACTIONS
Equity securities are valued at the last sale price (for exchange-listed
securities) or the mean between the last bid and asked price (if lacking any
sales and for over-the-counter securities). Debt securities generally are valued
at the mean between the last bid and asked prices. Securities with 60 days or
less remaining to maturity are valued on an amortized cost basis which
approximates market value.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under the direction of the Master
Trust's Board of Trustees.
Securities transactions are recognized on the trade date. Realized gains and
losses from securities transactions are calculated using the first-in, first-out
method. Dividend income is recognized on the ex-dividend date, and interest
income is recorded on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities. The
prospectus for Nicholas-Applegate
- --------------------------------------------------------------------------------
47
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
Mutual Funds describes each Portfolio's policies with respect to declaration and
payment of dividends and distribution of capital gains.
FEDERAL INCOME TAXES
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Portfolios.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Master Trust have been allocated to the
various Funds based upon management's best estimate of the costs applicable to
each Fund. These costs have been deferred and will be amortized over a period of
60 months from the date the Funds commenced operations.
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 of assets and liabilities and disclosure of
contingent assets and liabilities at the date the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate") The advisory fee is computed daily for the
Funds based upon the following percentages of each Fund's average daily net
asset
<TABLE>
<CAPTION>
FIRST $500 NEXT $500 EXCESS OF
MILLION MILLION $1 BILLION
----------- ----------- -----------
<S> <C> <C> <C>
Mini Cap Growth Fund........ 1.25% 1.25% 1.25%
Emerging Growth Fund........ 1.00% 1.00% 1.00%
Core Growth Fund............ 0.75% 0.675% 0.65%
Income & Growth Fund........ 0.75% 0.675% 0.65%
Balanced Growth Fund........ 0.75% 0.675% 0.65%
Government Income Fund...... 0.40% 0.35% 0.35%
Worldwide Growth Fund....... 1.00% 0.90% 0.85%
International Growth Fund... 1.00% 0.90% 0.85%
Emerging Countries Fund..... 1.25% 1.25% 1.25%
</TABLE>
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Fund's, during the periods from inception (respectively) to September 30,
1996 are as follows:
<TABLE>
<S> <C>
Mini Cap Growth Fund................ $ 74,158
Income & Growth Fund................ 20,720
Balanced Growth Fund................ 283,267
Government Income Fund.............. 303,447
</TABLE>
Nicholas-Applegate advanced certain organization costs discussed in Note 1. As
of September 30, 1996, the following Funds have amounts due to
Nicholas-Applegate for organizational costs advanced:
<TABLE>
<S> <C>
Government Income Fund............... $24,688
</TABLE>
- --------------------------------------------------------------------------------
48
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the period ended September 30, 1996, were as follows
(in 000's):
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Mini Cap Growth Fund............ $ 22,920 $ 22,287
Emerging Growth Fund............ 268,714 344,899
Core Growth Fund................ 281,890 248,636
Income & Growth Fund............ 87,859 84,911
Balanced Growth Fund............ 20,119 18,083
Government Income Fund.......... 6,392 4,092
Emerging Countries Fund......... 63,858 26,898
International Growth Fund....... 51,800 31,043
Worldwide Growth Fund........... 76,814 84,240
</TABLE>
At September 30, 1996, the net unrealized appreciation (depreciation) based on
the cost of investments for Federal income tax purposes was as follows (in
000's):
<TABLE>
<CAPTION>
GROSS GROSS NET
TAX COST OF UNREALIZED UNREALIZED UNREALIZED
INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
----------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
Mini Cap
Growth
Fund..... $ 24,651 $ 6,556 $ 716 $ 5,840
Emerging
Growth
Fund..... 437,864 182,579 9,521 173,058
Core Growth
Fund..... 392,204 115,777 6,473 109,304
Income &
Growth
Fund..... 104,554 16,211 425 15,786
Balanced
Growth
Fund..... 23,288 4,216 412 3,804
Government
Income
Fund..... 6,395 44 79 (35)
Emerging
Countries
Fund..... 57,350 7,307 2,204 5,103
International
Growth
Fund..... 41,613 4,656 980 3,676
Worldwide
Growth
Fund..... 85,009 16,885 1,873 15,012
</TABLE>
D. OFF BALANCE SHEET RISKS
The Nicholas-Applegate Mutual Funds' investment in foreign securities may
entail risks due to the potential of political and economic instability in the
countries where the securities are being offered. In addition, foreign exchange
fluctuations could affect the value of positions held. It is the Master Trust's
policy to continuously monitor its exposure to these risks.
- --------------------------------------------------------------------------------
49
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
E. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF RATIO OF RATIO OF NET
EXPENSES TO EXPENSES TO INVESTMENT RATIO OF NET
AVERAGE NET AVERAGE NET INCOME INVESTMENT
ASSETS, ASSETS, (DEFICIT) TO INCOME (DEFICIT)
AFTER BEFORE AVERAGE NET TO AVERAGE NET
EXPENSE EXPENSE ASSETS, AFTER ASSETS, BEFORE
REIMBURSEMENTS REIMBURSEMENTS EXPENSE EXPENSE PORTFOLIO
(RECOUPMENT) (RECOUPMENT) REIMBURSEMENTS REIMBURSEMENTS TURNOVER RATE
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
MINI CAP GROWTH(1)
For the period ended 09/30/96*+.... 1.51% 1.74% (1.13%) (1.36%) 79.75%
For the period ended 03/31/96*..... 1.50% 2.02% (0.93%) (1.44%) 106.99%
EMERGING GROWTH(2)
For the period ended 09/30/96*+.... 1.10% 1.10% (0.66%) (0.66%) 46.42%
For the year ended 03/31/96........ 1.11% 1.11% (0.57%) (0.57%) 129.59%
For the year ended 03/31/95........ 1.12% 1.11% (0.53%) (0.52%) 100.46%
For the period ended 03/31/94*..... 1.12% 1.16% (0.80%) (0.84%) 50.51%
CORE GROWTH(3)
For the period ended 09/30/96*+.... 0.87% 0.87% (0.32%) (0.32%) 57.67%
For the year ended 03/31/96........ 0.89% 0.89% (0.22%) (0.22%) 114.48%
For the year ended 03/31/95........ 0.89% 0.89% 0.05% 0.05% 98.09%
For the period ended 03/31/94*..... 0.92% 0.92% (0.03%) (0.03%) 84.84%
INCOME & GROWTH(4)
For the period ended 09/30/96*+.... 0.95% 0.92% 3.45% 3.48% 77.49%
For the year ended 03/31/96........ 0.95% 0.94% 3.94% 3.94% 144.97%
For the year ended 03/31/95........ 0.93% 0.95% 4.37% 4.35% 125.51%
For the period ended 03/31/94*..... 0.94% 0.97% 3.51% 3.48% 177.52%
BALANCED GROWTH(3)
For the period ended 09/30/96*+.... 0.95% 1.25% 2.59% 2.29% 73.43%
For the year ended 03/31/96........ 0.95% 1.37% 2.83% 2.37% 197.19%
For the year ended 03/31/95........ 0.95% 1.33% 2.13% 1.75% 110.40%
For the period ended 03/31/94*..... 0.94% 1.37% 1.93% 1.50% 85.43%
GOVERNMENT INCOME FUND(3)
For the period ended 09/30/96*+.... 0.60% 2.59% 5.66% 3.66% 86.79%
For the year ended 03/31/96........ 0.60% 2.72% 6.12% 4.00% 190.47%
For the year ended 03/31/95........ 0.80% 2.21% 5.32% 3.91% 258.72%
For the period ended 03/31/94...... 0.80% 2.80% 3.43% 1.43% 159.17%
EMERGING COUNTRIES FUND(4)
For the period ended 09/30/96*+.... 1.60% 1.60% 0.16% 0.17% 60.16%
For the year ended 03/31/96........ 1.60% 2.80% 0.30% (0.90%) 118.21%
For the period ended 03/31/95*..... 1.60% 1.81% 1.73% 1.52% 60.79%
INTERNATIONAL GROWTH FUND(5)
For the period ended 09/30/96*+.... 1.35% 1.37% 0.05% 0.03% 82.38%
For the year ended 03/31/96........ 1.35% 1.98% 0.39% (0.24%) 141.02%
For the year ended 03/31/95........ 1.35% 1.85% 0.24% (0.26%) 74.88%
For the period ended 03/31/94*..... 1.35% 2.28% 0.41% (0.52%) 23.71%
WORLDWIDE GROWTH FUND(3)
For the period ended 09/30/96*+.... 1.20% 1.27% (0.11%) (0.19%) 78.42%
For the year ended 03/31/96........ 1.20% 1.26% 0.31% 0.25% 132.20%
For the year ended 03/31/95........ 1.20% 1.30% 0.24% 0.14% 98.54%
For the period ended 03/31/94*..... 1.20% 1.36% 0.01% (0.15%) 95.09%
<CAPTION>
BROKER
COMMISSIONS
PER SHARE
<S> <C>
MINI CAP GROWTH(1)
For the period ended 09/30/96*+.... $0.0499
For the period ended 03/31/96*..... $0.0529
EMERGING GROWTH(2)
For the period ended 09/30/96*+.... $0.0551
For the year ended 03/31/96........ $0.0523
For the year ended 03/31/95........ --
For the period ended 03/31/94*..... --
CORE GROWTH(3)
For the period ended 09/30/96*+.... $0.0567
For the year ended 03/31/96........ $0.0593
For the year ended 03/31/95........ --
For the period ended 03/31/94*..... --
INCOME & GROWTH(4)
For the period ended 09/30/96*+.... $0.0569
For the year ended 03/31/96........ $0.0597
For the year ended 03/31/95........ --
For the period ended 03/31/94*..... --
BALANCED GROWTH(3)
For the period ended 09/30/96*+.... $0.0593
For the year ended 03/31/96........ $0.0594
For the year ended 03/31/95........ --
For the period ended 03/31/94*..... --
GOVERNMENT INCOME FUND(3)
For the period ended 09/30/96*+.... --
For the year ended 03/31/96........ --
For the year ended 03/31/95........ --
For the period ended 03/31/94...... --
EMERGING COUNTRIES FUND(4)
For the period ended 09/30/96*+.... $0.0015
For the year ended 03/31/96........ $0.0022
For the period ended 03/31/95*..... --
INTERNATIONAL GROWTH FUND(5)
For the period ended 09/30/96*+.... $0.0208
For the year ended 03/31/96........ $0.0128
For the year ended 03/31/95........ --
For the period ended 03/31/94*..... --
WORLDWIDE GROWTH FUND(3)
For the period ended 09/30/96*+.... $0.0173
For the year ended 03/31/96........ $0.0187
For the year ended 03/31/95........ --
For the period ended 03/31/94*..... --
</TABLE>
- -----------------
(1)Commenced operations on July 12, 1995.
(2)Commenced operations on October 1, 1993.
(3)Commenced operations on April 19, 1993.
(4)Commenced operations on November 28, 1994.
(5)Commenced operations on January 3, 1994.
*Annualized
+Unaudited
- --------------------------------------------------------------------------------
50
<PAGE>
(This page intentionally left blank)
51
<PAGE>
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
FULLY DISCRETIONARY FIXED INCOME FUND
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 19.8%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
U.S. TREASURY BONDS -- 7.3%
8.50%, 02/15/20............................ $ 120,000 $ 139,406
6.25%, 08/15/23............................ 50,000 45,180
7.63%, 02/15/25............................ 85,000 91,269
6.88%, 08/15/25............................ 50,000 49,258
------------
325,113
------------
U.S. TREASURY NOTES -- 7.5%
7.38%, 11/15/97............................ 105,000 106,657
5.88%, 08/15/98............................ 235,000 234,008
------------
340,665
------------
U.S. TREASURY STRIPS -- 5.0%
0.00%, 08/15/04............................ 385,000 228,555
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $897,547).......................................... 894,333
------------
- ----------------------------------------------------------------------------
AGENCY OBLIGATIONS -- 55.4%
- ----------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 20.2%
POOL 50700
11.50%, 02/15/12......................... 9,262 10,533
POOL 64054
11.50%, 02/15/13......................... 8,225 9,328
POOL 57459
12.00%, 02/15/13......................... 2,324 2,698
POOL 125096
12.00%, 03/15/15......................... 2,312 2,691
POOL 141741
11.00%, 11/15/15......................... 14,617 16,434
POOL 321741
7.50%, 01/15/23.......................... 371,539 368,752
POOL 336173
7.50%, 04/15/23.......................... 364,534 362,030
POOL 352025
7.50%, 11/15/23.......................... 145,285 144,195
------------
916,661
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 19.3%
POOL 303481
10.00%, 10/01/05......................... 162,942 173,381
POOL 303758
9.50%, 07/01/06.......................... 163,503 172,240
1993 87 HA
6.00%, 10/25/21.......................... 125,000 117,070
1993 160PK
6.50%, 11/25/22.......................... 160,000 150,349
1993 138K
6.75%, 11/25/22.......................... 80,000 76,374
1993 183K
6.50%, 07/25/23.......................... 200,000 183,000
------------
872,414
------------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 15.9%
POOL 380032
10.00%, 10/01/03......................... $ 126,675 $ 134,196
POOL 200112
9.50%, 11/01/05.......................... 114,399 120,083
POOL 1702 A
6.50%, 04/15/22.......................... 90,000 85,444
POOL 1669 G
6.50%, 02/15/23.......................... 190,000 182,043
POOL 1836 H
6.50%, 09/15/24.......................... 95,000 89,597
POOL 1906 D
7.50%, 05/15/26.......................... 115,000 110,472
------------
721,835
------------
TOTAL AGENCY OBLIGATIONS
(Cost $2,545,263)........................................
2,510,910
------------
- ----------------------------------------------------------------------------
CORPORATE BONDS -- 4.5%
- ----------------------------------------------------------------------------
AT&T UNIVERSAL CARD MASTER TRUST
5.95%, 10/17/02.......................... 70,000 68,163
AMRO BANK, N.Y.
7.00%, 04/01/08.......................... 45,000 43,639
BELL SOUTH TELECOM.........................
7.00%, 12/01/45.......................... 100,000 92,976
------------
TOTAL CORPORATE BONDS
(Cost $217,077)..........................................
204,778
------------
- ----------------------------------------------------------------------------
FOREIGN BONDS -- 17.4%
- ----------------------------------------------------------------------------
DENMARK BULLET
9.00%, 11/15/00........................DK 1,000,000 192,514
FEDERAL NATIONAL MORTGAGE ASSOCATION GLOBAL
5.00%, 02/16/01........................DM 600,000 392,429
GERMANY UNITY FUND
8.50%, 02/20/01........................DM 275,000 204,917
------------
TOTAL FOREIGN BONDS
(Cost $786,484)..........................................
789,860
------------
- ----------------------------------------------------------------------------
DISCOUNT NOTES -- 6.1%
- ----------------------------------------------------------------------------
FEDERAL HOME LOAN BANK
5.18%, 10/02/96
(Cost $274,960).......................... 275,000 274,960
------------
TOTAL INVESTMENTS -- 103.2%
(Cost $4,721,331)........................................
$ 4,674,841
LIABILITIES IN EXCESS OF OTHER ASSETS -- (3.2%)............
(144,301)
------------
NET ASSETS -- 100.0%.......................................
$ 4,530,540
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
52
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED INCOME FUND
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 6.0%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
U.S. TREASURY NOTES
4.75%, 10/31/98............................ $100,000 $ 97,328
5.50%, 11/15/98............................ 200,000 197,406
------------
TOTAL U. S. TREASURY OBLIGATIONS
(Cost $294,399).......................................... 294,734
------------
- ----------------------------------------------------------------------------
AGENCY OBLIGATIONS -- 39.2%
- ----------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 28.2%
POOL 380032
10.00%, 10/01/03......................... 7,420 7,860
POOL 380062
9.50%, 11/01/04.......................... 267,519 281,397
POOL 1472E
6.25%, 02/15/05.......................... 200,000 198,936
POOL 380078
9.00%, 04/01/05.......................... 149,158 154,751
POOL 200112
9.50%, 11/01/05.......................... 163,991 172,139
POOL G10453
9.00%, 06/01/07.......................... 84,079 87,284
POOL 1552 EA
5.85%, 01/15/17.......................... 185,000 180,375
POOL 1836D
6.25%, 04/15/26.......................... 300,000 294,188
------------
TOTAL FHLMCS................................. 1,376,930
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 4.9%
POOL 50155
10.00%, 12/01/03......................... 7,585 8,088
POOL 1991-95Z
8.50%, 11/25/05.......................... 221,495 223,953
POOL 2454
14.75%, 10/01/12......................... 7,037 8,453
------------
TOTAL FNMAS.................................. 240,494
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 6.1%
POOL 780328
10.00%, 10/15/06......................... 163,042 172,621
POOL 64054
11.50%, 02/15/13......................... 8,225 9,328
POOL 59779
11.50%, 03/15/13......................... 3,357 3,818
POOL 65569
12.00%, 09/15/13......................... 700 734
POOL 67134
12.00%, 09/15/13......................... 1,804 2,095
POOL 780179
12.00%, 10/15/15......................... 74,570 86,968
POOL 141741
11.00%, 11/15/15......................... 10,277 11,555
POOL 200947
9.50%, 12/15/17.......................... 8,398 9,059
------------
TOTAL GNMAS.................................. 296,178
------------
TOTAL AGENCY OBLIGATIONS
(Cost $1,911,791)........................................ 1,913,602
------------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
CMOs AND ASSET-BACKED SECURITIES -- 47.4%
- ----------------------------------------------------------------------------
AUTOS -- 19.2%
DAIMLER-BENZ AUTO GRANTOR TRUST 1993-A
3.90%, 10/15/98.......................... $ 1,889 $ 1,872
CARCO AUTO LOAN MASTER TRUST 1994-2
7.88%, 07/15/99.......................... 200,000 202,936
NATIONS BANK AUTO TRUST 1996-A2
6.13%, 07/15/99.......................... 200,000 200,124
PREMIER AUTO TRUST 1994-4
6.20%, 10/02/97.......................... 29,536 29,555
PREMIER AUTO TRUST 1995-2A5
7.15%, 02/04/99.......................... 250,000 252,699
PREMIER AUTO TRUST 1995-3A4
6.10%, 07/06/99.......................... 250,000 250,077
------------
TOTAL AUTOS.................................. 937,263
------------
BANKS -- 8.8%
SIGNET CREDIT CARD MASTER TRUST
5.20%, 02/15/02.......................... 235,000 229,931
STANDARD CREDIT CARD MASTER TRUST 1995-10A
5.90%, 02/07/01.......................... 200,000 197,562
------------
TOTAL BANKS.................................. 427,493
------------
FINANCE -- 15.3%
AMERICAN EXPRESS 1992-1
6.05%, 07/15/97.......................... 200,000 200,000
AT&T UNIVERSAL CARD MASTER TRUST
5.95%, 10/17/02.......................... 225,000 219,094
BANC ONE CREDIT CARD 94-B
7.55%, 12/15/99.......................... 175,000 177,597
FIRST DEPOSIT MASTER TRUST 1995-2
6.05%, 08/15/02.......................... 150,000 149,625
------------
TOTAL FINANCE................................ 746,316
------------
RETAIL -- 4.1%
SEARS CREDIT ACCOUNT MATER TRUST 1994-2
7.25%, 07/16/01.......................... 200,000 202,062
------------
TOTAL CMO'S AND ASSET-BACKED SECURITIES
(Cost $2,331,422)........................................ 2,313,134
------------
- ----------------------------------------------------------------------------
DISCOUNT NOTES -- 6.3%
- ----------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK
5.18%, 10/01/96.......................... $ 15,000 $ 15,000
5.18%, 10/01/96.......................... 290,000 290,000
------------
TOTAL DISCOUNT NOTES
(Cost $305,000).......................................... 305,000
------------
TOTAL INVESTMENTS -- 98.9%
(Cost $4,842,612)........................................ $ 4,826,470
OTHER ASSETS LESS LIABILITIES -- 1.1%...................... 52,232
------------
NET ASSETS -- 100.0%....................................... $ 4,878,702
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
53
<PAGE>
SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
STRATEGIC INCOME FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS -- 10.2%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT COMPANY -- 2.6%
Merrill Lynch "IGL", (Strypes)...................... 2,500 $ 100,937
-----------
MEDICAL SUPPLIES -- 3.3%
United States Surgical Corp......................... 3,000 127,500
-----------
SOAPS/COSMETICS -- 2.2%
AJL Peps Trust...................................... 4,300 84,925
-----------
TELEPHONE -- 2.1%
Nortel Inversora SA................................. 2,000 80,750
-----------
TOTAL COMMON STOCKS
(Cost $370,127).............................................. 394,112
-----------
- ---------------------------------------------------------
<CAPTION>
CONVERTIBLE PREFERRED STOCKS -- 6.3%
<S> <C> <C>
- ----------------------------------------------
FINANCE COMPANY -- 3.0%
Ahmanson H.F. and Company........................... 1,900 116,850
-----------
GAS UTILITIES -- 1.0%
MCN Corp............................................ 1,300 36,319
-----------
MULTI-LINE INSURERS -- 2.3%
American Bankers Insurance Group.................... 1,500 88,781
-----------
TOTAL PREFERRED STOCKS
(Cost $225,504).............................................. 241,950
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------
<CAPTION>
CONVERTIBLE CORPORATE BONDS -- 48.0%
<S> <C> <C>
- ----------------------------------------------
BROADCASTING -- 2.7%
Sinclair Broadcasting Group, Inc.
10.000%, 09/30/05................................. $100,000 $ 101,500
-----------
COMPUTERS/OFFICE AUTOMATION -- 2.6%
Data General Corp.
7.750%, 06/01/01.................................. 100,000 99,625
-----------
CONTRACT DRILLING -- 2.7%
Cliffs Drilling
10.250%, 05/15/03................................. 100,000 104,250
-----------
COSMETICS - SOAPS -- 2.0%
Revlon Consumer Products Corp.
10.500%, 02/15/03................................. 75,000 78,375
-----------
ENVIRONMENTAL SERVICES -- 2.7%
Molten Metals Technology, Inc.
5.500%, 05/01/06.................................. 100,000 101,000
-----------
FINANCIAL SERVICES -- 2.7%
Ocwen Financial Corp.
11.875%, 01/01/03................................. 100,000 105,000
-----------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 2.5%
Empresas CA, Sociedad
5.000%, 03/15/04.................................. 135,000 94,669
-----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
LEISURE/GAMING -- 6.3%
Bally's Grand, Inc.
10.375%, 12/15/03................................. $ 75,000 $ 82,500
Casino Magic Louisiana
13.000%, 08/15/03................................. 75,000 76,594
Majestic Star Casino
12.750%, 05/15/03................................. 75,000 82,500
-----------
241,594
-----------
LIFE INSURER -- 1.3%
Penncorp Financial Group
09.250%, 12/15/03................................. 50,000 50,938
-----------
OIL/GAS PRODUCTION -- 3.6%
KCS Energy, Inc.
11.000%, 01/15/03................................. 125,000 136,250
-----------
OTHER COMMUNICATIONS/INDUSTRIAL SERVICES -- 1.3%
Iron Mountain, Inc.
10.125%, 10/01/06................................. 50,000 51,250
-----------
OTHER PRODUCERS/MANUFACTURING -- 3.8%
Gencorp Inc.
08.000%, 08/01/02................................. 70,000 73,588
Poindexter J B, Inc.
12.500%, 05/15/04................................. 75,000 72,187
-----------
145,775
-----------
RESTAURANTS -- 2.0%
Foodmaker, Inc.
09.250%, 03/01/99................................. 75,000 75,375
-----------
SPECIALITY CHAINS -- 2.0%
Compusa, Inc.
09.500%, 06/15/00................................. 75,000 77,250
-----------
TELEPHONE -- 7.7%
PriCellular Wire
00.000% to 11/15/97
14.000%, 11/15/01................................. 100,000 90,000
Sygnet Wireless, Inc.
11.500%, 10/01/06................................. 100,000 103,250
Teleport Communications Group Inc.
09.875%, 07/01/06................................. 100,000 103,250
-----------
296,500
-----------
TELECOMMUNICATIONS EQUIPMENT -- 2.1%
Net Sat Services (B2,B)
12.750%, 08/05/04................................. 75,000 80,062
-----------
TOTAL CORPORATE BONDS
(Cost $1,775,928).............................................. 1,839,413
-----------
- ---------------------------------------------------------
<CAPTION>
AGENCY OBLIGATIONS -- 27.8%
<S> <C> <C>
- ----------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 10.8%
Pool 2468
10.50%, 12/01/00.................................. 120,169 127,491
Pool 50319
09.50%, 06/01/05.................................. 68,926 72,674
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
54
<PAGE>
- -------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
AGENCY OBLIGATIONS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
1991 95Z
08.50%, 11/25/05.................................. $ 53,238 $ 53,829
1993 202H
06.00%, 02/25/22.................................. 25,000 23,195
1993 183k
06.50%, 07/25/23.................................. 75,000 68,625
1993 160PK
06.50%, 11/25/22.................................. 75,000 70,476
-----------
416,290
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 7.5%
Pool 380003
09.50%, 06/01/02.................................. 36,997 38,373
Pool 380062
09.50%, 11/01/04.................................. 80,726 84,913
Pool 1356J
05.50%, 10/15/20.................................. 35,000 30,953
Pool 1610PM
06.25%, 04/15/22.................................. 30,000 28,359
Pool 1722PH
06.50%, 08/15/22.................................. 110,000 105,325
-----------
287,923
-----------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 9.5%
Pool 357262
07.50%, 09/15/23.................................. $139,084 $ 138,041
Pool 370281
07.50%, 11/15/23.................................. 227,043 225,340
-----------
363,381
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $1,063,328).............................................. 1,067,594
-----------
- ---------------------------------------------------------
<CAPTION>
COMMERCIAL PAPER -- 7.4%
<S> <C> <C>
- ----------------------------------------------
Associates Corp of North America
5.80%, 10/01/96
(Cost $282,000)................................... 141,000 141,000
Merrill Lynch, Pierce, Fenner, and Smith
5.85%, 10/01/96................................... 141,000 141,000
-----------
TOTAL COMMERCIAL PAPER
(Cost $282,000)................................................ 282,000
-----------
TOTAL INVESTMENTS -- 99.7%
(Cost $3,716,887).............................................. $ 3,825,069
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%.................... 10,064
-----------
NET ASSETS -- 100.0%............................................. $ 3,835,133
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
55
<PAGE>
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------
HIGH YIELD BOND FUND
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK -- 0.2%
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
FINANCE COMPANY
Ocwen Financial*
(Cost $7,500)......................... 500 $ 10,188
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------
CORPORATE BONDS -- 92.0%
- -----------------------------------------------------------------
BROADCASTING -- 9.2%
Sinclair Broadcasting Group, Incorp.
10.000%, 09/30/96..................... $200,000 203,000
Telemundo Group, Incorp.
07.000%, 02/15/96..................... 200,000 191,500
------------
394,500
------------
BUSINESS SERVICES -- 2.4%
Iron Mountain, Incorp.
10.125%, 10/01/06..................... 100,000 102,500
------------
COSMETICS - SOAPS -- 5.5%
Revlon Consumer Products Corp.
10.500%, 02/15/03..................... 225,000 235,125
------------
FINANCE COMPANY -- 5.5%
Ocwen Financial
11.875%, 10/01/03..................... 225,000 236,250
------------
LESIURE/GAMING -- 15.8%
Bally's Grand, Incorp.
10.375%, 12/15/03..................... 225,000 247,500
Casino Magic
13.000%, 08/15/03..................... 225,000 229,781
Majestic Star Casino
12.750%, 05/15/03..................... 175,000 192,500
------------
669,781
------------
LIFE INSURER -- 2.4%
Penncorp Financial Group
09.250%, 12/15/03..................... 100,000 101,875
------------
OIL/GAS PRODUCTION -- 5.7%
KCS Energy, Incorp.
11.000%, 01/15/03..................... 225,000 245,250
------------
OILFIELD SERVICES/EQUIPMENT -- 7.3%
Cliffs Drilling Co.
10.250%, 05/15/03..................... 300,000 312,750
------------
</TABLE>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER PRODUCERS/MANUFACTURING -- 4.5%
Poindexter J B, Incorp.
12.500%, 05/15/04..................... $200,000 $ 192,500
------------
RESTAURANTS -- 4.1%
Foodmaker, Incorp.
09.250%, 03/01/99..................... 175,000 175,875
------------
SPECIALTY CHAINS -- 3.6%
Compusa, Incorp.
9.500%, 06/15/00...................... 150,000 154,500
------------
TELEPHONE -- 21.0%
Intermedia Communications
0.000% to 5/01/97; 14.000%,
11/15/01.............................. 150,000 94,125
Pricellular Wire*
0.000% to 11/15/97; 14.000%,
11/15/01.............................. 200,000 180,000
Sygnet Wireless,
11.500%, 10/01/06..................... 250,000 258,125
Teleport Communications
09.875%, 07/01/06..................... 300,000 309,750
Winstar Communications
14.000%, 10/15/05..................... 100,000 57,000
------------
899,000
------------
TELECOMMUNICATIONS EQUIPMENT -- 5.0%
Net Sat Services
12.750%, 08/05/04..................... 200,000 213,500
------------
TOTAL CORPORATE BONDS
(Cost $3,833,187)................................ $ 3,933,406
------------
- -----------------------------------------------------------------
ZERO COUPON BONDS -- 5.2%
- -----------------------------------------------------------------
SOAP/COSMETICS
Revlon Worldwide Co.*
(Cost $213,815)....................... $250,000 220,312
------------
- -----------------------------------------------------------------
COMMERCIAL PAPER -- 3.4%
- -----------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
5.850%, 10/01/96 (Cost$145,000)....... 145,000 145,000
------------
TOTAL INVESTMENTS -- 100.8%
(Cost$4,199,502)................................. $ 4,308,906
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8%).... (34,686)
------------
NET ASSETS -- 100.0%............................... $ 4,274,220
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
56
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE INCOME & BALANCED
GROWTH GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------
ASSETS
Investments, at value*...... $ 30,490,477 $ 610,921,587 $ 501,507,845 $ 120,339,331 $ 27,092,084
Foreign currencies, at
value**................... -- -- -- -- --
Cash........................ 476 -- 4,046 900 651
Receivable for investment
securities sold........... 461,275 4,455,633 4,402,001 1,701,034 1,110,525
Receivable for interests
sold...................... 21,000 1,367,624 566,885 323,581 26,500
Dividends receivable........ 5,285 79,563 56,430 215,769 3,759
Interest receivable......... -- 262 -- 621,033 204,673
Due from adviser............ -- -- -- -- --
Deferred organization
costs..................... -- 18,693 24,091 11,947 8,522
Other assets................ 91 3,879 25,137 532 61
-----------------------------------------------------------------------
Total assets............ 30,978,604 616,847,241 506,586,435 123,214,127 28,446,775
-----------------------------------------------------------------------
LIABILITIES
Payable for investment
securities purchased...... 857,304 -- -- -- --
Payable for interests
repurchased............... -- 7,426,621 7,012,750 2,792,669 1,126,250
Due to adviser.............. -- 743,930 534,968 48,882 139,356
Accrued expenses............ 38,339 572,559 396,561 104,065 21,486
Cash overdraft.............. -- 161,620 -- -- --
-----------------------------------------------------------------------
Total liabilities....... 895,643 8,904,730 7,944,279 2,945,616 1,287,092
-----------------------------------------------------------------------
NET ASSETS.................... $ 30,082,961 $ 607,942,511 $ 498,642,156 $ 120,268,511 $ 27,159,683
-----------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital............. $ 23,368,865 $ 355,184,425 $ 343,504,966 $ 81,533,055 $ 19,872,942
Accumulated net investment
income (deficit).......... (236,541) (8,203,977) (1,423,696) 13,587,460 1,740,133
Accumulated net realized
gain (loss)............... 1,110,856 87,904,363 47,256,935 9,362,281 1,742,511
Accumulated net realized
foreign exchange gain
(loss).................... -- -- -- -- --
Net unrealized foreign
exchange gain (loss)...... -- -- -- -- --
Net unrealized appreciation
(depreciation) on
investments............... 5,839,781 173,057,700 109,303,951 15,785,715 3,804,097
-----------------------------------------------------------------------
Net assets.............. $ 30,082,961 $ 607,942,511 $ 498,642,156 $ 120,268,511 $ 27,159,683
-----------------------------------------------------------------------
*Investments, at cost $ 24,650,696 $ 437,863,887 $ 392,203,894 $ 104,553,616 $ 23,287,987
-----------------------------------------------------------------------
**Foreign currencies, at cost -- -- -- -- --
-----------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
57
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY SHORT-
EMERGING INTERNATIONAL WORLDWIDE DISCRETIONARY INTERMEDIATE STRATEGIC
VALUE COUNTRIES GROWTH GROWTH FIXED INCOME FIXED INCOME INCOME
FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
ASSETS
Investments, at value*...... $ 2,362,775 $ 62,453,184 $ 45,289,261 $ 100,021,160 $4,674,841 $4,826,470 $ 3,825,069
Foreign currencies, at
value**................... -- 346,142 1,429,378 2,666,936 -- -- --
Cash........................ 2,558 666 -- 530 3,119 1,577 253
Receivable for investment
securities sold........... -- 935,576 41,818 1,969,837 275,298 -- --
Receivable for interests
sold...................... -- 507,199 1,431,833 122,036 12,860 -- 10,534
Dividends receivable........ 6,292 46,169 110,535 201,917 -- -- 12,552
Interest receivable......... -- -- -- -- 65,185 35,896 40,434
Due from adviser............ 1,351 -- -- -- 6,965 7,861 --
Deferred organization
costs..................... -- -- 679 9,703 1,709 1,709 --
Other assets................ -- 2,800 1,032 351 5,334 18,535 --
-----------------------------------------------------------------------------------------------
Total assets............ 2,372,976 64,291,736 48,304,536 104,992,470 5,045,311 4,892,048 3,888,842
-----------------------------------------------------------------------------------------------
LIABILITIES
Payable for investment
securities purchased...... -- 2,764,775 3,039,586 3,978,944 499,319 -- 50,000
Payable for interests
repurchased............... -- 9,137 -- 135,963 -- -- --
Due to adviser.............. -- -- -- -- -- -- --
Accrued expenses............ 4,639 90,199 37,547 119,116 15,452 13,346 3,709
Cash overdraft.............. -- -- 140,824 -- -- -- --
-----------------------------------------------------------------------------------------------
Total liabilities....... 4,639 2,864,111 3,217,957 4,234,023 514,771 13,346 53,709
-----------------------------------------------------------------------------------------------
NET ASSETS.................... $ 2,368,337 $ 61,427,625 $ 45,086,579 $ 100,758,447 $4,530,540 $4,878,702 $ 3,835,133
-----------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital............. $ 2,133,216 $ 56,430,674 $ 40,848,416 $ 69,608,120 $4,517,079 $4,665,418 $ 3,627,021
Accumulated net investment
income (deficit).......... 19,886 84,234 119,725 488,560 198,617 261,241 46,628
Accumulated net realized
gain (loss)............... 95,192 (134,561) 349,175 14,898,238 (151,156) (31,815) 53,302
Accumulated net realized
foreign exchange gain
(loss).................... -- (57,873) 95,152 757,906 (146) -- --
Net unrealized foreign
exchange gain (loss)...... -- 1,842 (2,254) (6,857) 12,636 -- --
Net unrealized appreciation
(depreciation) on
investments............... 120,043 5,103,309 3,676,365 15,012,480 (46,490) (16,142) 108,182
-----------------------------------------------------------------------------------------------
Net assets.............. $ 2,368,337 $ 61,427,625 $ 45,086,579 $ 100,758,447 $4,530,540 $4,878,702 $ 3,835,133
-----------------------------------------------------------------------------------------------
*Investments, at cost $ 2,242,732 $ 57,349,875 $ 41,612,896 $ 85,008,680 $4,721,331 $4,842,612 $ 3,716,887
-----------------------------------------------------------------------------------------------
**Foreign currencies, at cost -- $ 345,999 $ 1,439,151 $ 2,691,094 -- -- --
-----------------------------------------------------------------------------------------------
<CAPTION>
HIGH YIELD
BOND
FUND
<S> <C>
ASSETS
Investments, at value*...... $ 4,308,906
Foreign currencies, at
value**................... --
Cash........................ 515
Receivable for investment
securities sold........... --
Receivable for interests
sold...................... --
Dividends receivable........ --
Interest receivable......... 68,423
Due from adviser............ --
Deferred organization
costs..................... --
Other assets................ --
Total assets............ 4,377,844
LIABILITIES
Payable for investment
securities purchased...... 100,000
Payable for interests
repurchased............... --
Due to adviser.............. --
Accrued expenses............ 3,624
Cash overdraft.............. --
Total liabilities....... 103,624
NET ASSETS.................... $ 4,274,220
COMPOSITION OF NET ASSETS
Paid-in capital............. $ 4,029,069
Accumulated net investment
income (deficit).......... 59,425
Accumulated net realized
gain (loss)............... 76,322
Accumulated net realized
foreign exchange gain
(loss).................... --
Net unrealized foreign
exchange gain (loss)...... --
Net unrealized appreciation
(depreciation) on
investments............... 109,404
Net assets.............. $ 4,274,220
*Investments, at cost $ 4,199,502
**Foreign currencies, at cost --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
58
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE PERIOD ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE INCOME & BALANCED
GROWTH GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------
INVESTMENT INCOME:
Dividends................... $ 21,214 $ 465,839 $ 535,873 $ 749,168 $ 30,032
Interest.................... 34,108 847,900 719,415 1,736,898 422,677
-----------------------------------------------------------------
Total income.............. 55,322 1,313,739 1,255,288 2,486,066 452,709
-----------------------------------------------------------------
EXPENSES:
Advisory fee................ 180,936 3,017,321 1,712,555 423,507 96,012
Accounting fee.............. 35,625 92,788 80,662 39,399 37,500
Administration fee.......... 4,452 17,500 70,223 17,372 3,937
Audit & tax fees............ 3,639 75,900 57,549 14,237 3,228
Custodian fee............... 21,462 67,232 38,123 11,582 11,681
Insurance................... 175 7,775 2,861 668 91
Legal fee................... 163 3,402 2,579 638 145
Miscellaneous............... 1,235 25,752 19,904 4,830 1,095
Organization costs.......... -- 4,269 7,792 3,865 2,758
Trustees' fee............... 4,319 3,564 3,564 3,564 3,564
-----------------------------------------------------------------
Total expense............. 252,006 3,315,503 1,995,812 519,662 160,011
Less: Reimbursement to
(from) adviser............ (33,435) -- -- 16,780 (38,396)
-----------------------------------------------------------------
Net expenses............ 218,571 3,315,503 1,995,812 536,442 121,615
-----------------------------------------------------------------
Net investment income
(deficit)........... (163,249) (2,001,764) (740,524) 1,949,624 331,094
-----------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security
transactions.............. 1,166,750 63,561,561 28,329,596 6,413,257 1,032,726
Net realized foreign
exchange gain (loss)...... -- -- -- -- --
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currencies................ 2,679,530 12,427,523 20,550,277 1,520,523 1,059,501
-----------------------------------------------------------------
Net gain (loss) on
investments........... 3,846,280 75,989,084 48,879,873 7,933,780 2,092,227
-----------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS................... $ 3,683,031 $ 73,987,320 $ 48,139,349 $ 9,883,404 $ 2,423,321
-----------------------------------------------------------------
</TABLE>
- -------------
+Commenced operations on April 30, 1996.
++Commenced operations on July 31, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
59
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY SHORT-
EMERGING INTERNATIONAL WORLDWIDE DISCRETIONARY INTERMEDIATE STRATEGIC HIGH YIELD
VALUE COUNTRIES GROWTH GROWTH FIXED INCOME FIXED INCOME INCOME BOND
FUND+ FUND FUND FUND FUND FUND FUND++ FUND++
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................... $ 26,384 $ 323,642 $ 244,293 $ 507,538 $ 151,459 $ 154,377 $ 45,089 $ 64,091
Interest.................... 2,258 59,829 30,185 42,376 -- -- 5,922 --
----------------------------------------------------------------------------------------------------
Total income.............. 28,642 383,471 274,478 549,914 151,459 154,377 51,011 64,091
----------------------------------------------------------------------------------------------------
EXPENSES:
Advisory fee................ 6,867 271,596 196,401 505,580 10,125 7,260 3,757 3,999
Accounting fee.............. 3,750 45,266 37,500 37,733 31,250 31,250 -- --
Administration fee.......... 282 6,654 6,031 15,562 693 745 189 201
Audit & tax fees............ 231 5,481 4,954 12,757 568 612 157 167
Custodian fee............... 1,964 12,202 17,797 60,163 6,168 5,918 1,210 760
Insurance................... -- 132 168 735 9 91 -- --
Legal fee................... 10 246 222 572 26 27 7 7
Miscellaneous............... 78 1,859 1,681 4,328 193 208 53 57
Organization costs.......... -- -- 150 3,156 245 245 -- --
Trustees' fee............... 2,070 3,564 3,564 3,564 4,147 4,147 1,388 1,388
----------------------------------------------------------------------------------------------------
Total expense............. 15,252 347,000 268,468 644,150 53,424 50,503 6,761 6,579
Less: Reimbursement to
(from) adviser............ (6,496) 642 (3,327) (37,454) (44,424) (43,243) (2,378) (1,913)
----------------------------------------------------------------------------------------------------
Net expenses............ 8,756 347,642 265,141 606,696 9,000 7,260 4,383 4,666
----------------------------------------------------------------------------------------------------
Net investment income
(deficit)........... 19,886 35,829 9,337 (56,782) 142,459 147,117 46,628 59,425
----------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security
transactions.............. 95,192 121,909 538,673 7,403,797 (129,328) (37,941) 53,302 76,322
Net realized foreign
exchange gain (loss)...... -- (33,016) (70,052) (149,957) (1,008) -- -- --
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currencies................ 120,043 3,726,624 1,140,702 (124,779) 95,729 14,466 108,182 109,404
----------------------------------------------------------------------------------------------------
Net gain (loss) on
investments........... 215,235 3,815,517 1,609,323 7,129,061 (34,607) (23,475) 161,484 185,726
----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $ 235,121 $ 3,851,346 $1,618,660 $ 7,072,279 $ 107,852 $ 123,642 $ 208,112 $ 245,151
----------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
60
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
MINI CAP GROWTH FUND EMERGING GROWTH FUND
--------------------------- ----------------------------
FOR THE FOR THE
PERIOD ENDED FOR THE PERIOD ENDED FOR THE
SEPTEMBER 30, PERIOD ENDED SEPTEMBER 30, YEAR ENDED
1996 MARCH 31, 1996 MARCH 31,
(UNAUDITED) 1996+ (UNAUDITED) 1996
<S> <C> <C> <C> <C>
---------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ (163,249) $ (73,292) $ (2,001,764) $ (2,945,373)
Net realized gain (loss)
from security
transactions.............. 1,166,750 (55,894) 63,561,561 78,797,996
Change in net unrealized
appreciation
(depreciation) of
investments............... 2,679,530 3,160,251 12,427,523 91,635,716
---------------------------------------------------------
Net increase (decrease) in
net assets from
operations.............. 3,683,031 3,031,065 73,987,320 167,488,339
---------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 6,060,120 22,441,390 151,775,458 107,044,506
Withdrawals by partners..... (4,924,159 ) (208,486 ) (201,906,649) (161,495,614)
---------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 1,135,961 22,232,904 (50,131,191) (54,451,108)
---------------------------------------------------------
Total increase
(decrease) in net
assets................ 4,818,992 25,263,969 23,856,129 113,037,231
NET ASSETS
BEGINNING OF PERIOD......... 25,263,969 -- 584,086,382 471,049,151
---------------------------------------------------------
END OF PERIOD............... $ 30,082,961 $25,263,969 $ 607,942,511 $ 584,086,382
---------------------------------------------------------
</TABLE>
- -------------
+ Commenced operations on July 12, 1995.
++ Commenced operations on April 30, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
61
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORE GROWTH FUND INCOME & GROWTH FUND BALANCED GROWTH FUND
CORE GROWTH FUND INCOME & GROWTH FUND BALANCED GROWTH FUND
---------------------------- ---------------------------- ---------------------------
---------------------------- ---------------------------- ---------------------------
FOR THE FOR THE FOR THE
PERIOD ENDED FOR THE PERIOD ENDED FOR THE PERIOD ENDED FOR THE
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1996 MARCH 31, 1996 MARCH 31, 1996 MARCH 31,
(UNAUDITED) 1996 (UNAUDITED) 1996 (UNAUDITED) 1996
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ (740,524) $ (752,357) $ 1,949,624 $ 4,142,172 $ 331,094 $ 638,909
Net realized gain (loss)
from security
transactions.............. 28,329,596 50,587,998 6,413,257 10,319,301 1,032,726 2,837,068
Change in net unrealized
appreciation
(depreciation) of
investments............... 20,550,277 52,583,826 1,520,523 10,732,341 1,059,501 742,010
---------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from
operations.............. 48,139,349 102,419,467 9,883,404 25,193,814 2,423,321 4,217,987
---------------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 72,503,285 113,757,799 14,602,221 15,608,507 4,474,202 4,914,004
Withdrawals by partners..... (42,543,081) (79,489,585) (15,975,050) (35,130,807) (3,582,391 ) (7,102,941)
---------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 29,960,204 34,268,214 (1,372,829) (19,522,300) 891,811 (2,188,937)
---------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 78,099,553 136,687,681 8,510,575 5,671,514 3,315,132 2,029,050
NET ASSETS
BEGINNING OF PERIOD......... 420,542,603 283,854,922 111,757,936 106,086,422 23,844,551 21,815,501
---------------------------------------------------------------------------------------
END OF PERIOD............... $ 498,642,156 $ 420,542,603 $ 120,268,511 $ 111,757,936 $ 27,159,683 $ 23,844,551
---------------------------------------------------------------------------------------
<CAPTION>
VALUE FUND
VALUE FUND
-------------
-------------
FOR THE
PERIOD ENDED
SEPTEMBER 30,
1996
(UNAUDITED)++
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 19,886
Net realized gain (loss)
from security
transactions.............. 95,192
Change in net unrealized
appreciation
(depreciation) of
investments............... 120,043
Net increase (decrease) in
net assets from
operations.............. 235,121
TRANSACTIONS IN INTERESTS
Contributions by partners... 2,206,940
Withdrawals by partners..... (73,724 )
Net increase (decrease) in
net assets from
transactions in
interests............... 2,133,216
Total increase
(decrease) in net
assets................ 2,368,337
NET ASSETS
BEGINNING OF PERIOD......... --
END OF PERIOD............... $ 2,368,337
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
62
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
EMERGING COUNTRIES FUND INTERNATIONAL GROWTH FUND
--------------------------- ---------------------------
FOR THE FOR THE
PERIOD ENDED FOR THE PERIOD ENDED FOR THE
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1996 MARCH 31, 1996 MARCH 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
<S> <C> <C> <C> <C>
--------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 35,829 $ 26,122 $ (56,782) $ 73,015
Net realized gain (loss)
from security transactions
and foreign exchange...... 88,893 (61,164) 7,253,840 259,455
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. 3,726,624 1,751,439 (124,779) 2,584,830
--------------------------------------------------------
Net increase (decrease) in
net assets from
operations.............. 3,851,346 1,716,397 7,072,279 2,917,300
--------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 39,571,901 16,175,253 6,500,703 6,044,445
Withdrawals by partners..... (1,894,608 ) (1,272,742) (13,157,561 ) (2,768,514)
--------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 37,677,293 14,902,511 (6,656,858 ) 3,275,931
--------------------------------------------------------
Total increase
(decrease) in net
assets................ 41,528,639 16,618,908 415,421 6,193,231
NET ASSETS
BEGINNING OF PERIOD......... 19,898,986 3,280,078 23,805,628 17,612,397
--------------------------------------------------------
END OF PERIOD............... $ 61,427,625 $ 19,898,986 $ 45,086,579 $ 23,805,628
--------------------------------------------------------
</TABLE>
- -------------
+ Commenced operations on August 31, 1995.
++ Commenced operations on July 31, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
63
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY DISCRETIONARY SHORT-INTERMEDIATE
WORLDWIDE GROWTH FUND FULLY DISCRETIONARY SHORT-INTERMEDIATE
FIXED INCOME FUND FIXED INCOME FUND
WORLDWIDE GROWTH FUND FIXED INCOME FUND FIXED INCOME FUND
---------------------------- --------------------------- ---------------------------
---------------------------- --------------------------- ---------------------------
FOR THE FOR THE FOR THE
PERIOD ENDED FOR THE PERIOD ENDED FOR THE PERIOD ENDED FOR THE
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, PERIOD ENDED SEPTEMBER 30, PERIOD ENDED
1996 MARCH 31, 1996 MARCH 31, 1996 MARCH 31,
(UNAUDITED) 1996 (UNAUDITED) 1996+ (UNAUDITED) 1996+
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ (56,782) $ 299,362 $ 142,459 $ 56,158 $ 147,117 $ 114,124
Net realized gain (loss)
from security transactions
and foreign exchange...... 7,253,840 9,015,557 (130,336) (20,966) (37,941) 6,126
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. (124,779) 9,091,917 95,729 (129,583) 14,466 (30,608)
--------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from
operations.............. 7,072,279 18,406,836 107,852 (94,391 ) 123,642 89,642
--------------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 6,500,703 17,650,729 167,563 4,542,991 592,048 4,708,688
Withdrawals by partners..... (13,157,561) (33,276,911) (184,960 ) (8,515 ) (598,211 ) (37,107)
--------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... (6,656,858) (15,626,182) (17,397 ) 4,534,476 (6,163 ) 4,671,581
--------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 415,421 2,780,654 90,455 4,440,085 117,479 4,761,223
NET ASSETS
BEGINNING OF PERIOD......... 100,343,026 97,562,372 4,440,085 -- 4,761,223 --
--------------------------------------------------------------------------------------
END OF PERIOD............... $ 100,758,447 $ 100,343,026 $ 4,530,540 $ 4,440,085 $ 4,878,702 $ 4,761,223
--------------------------------------------------------------------------------------
<CAPTION>
STRATEGIC
STRATEGIC
INCOME FUND
INCOME FUND HIGH YIELD
------------- BOND FUND
------------- -------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1996
(UNAUDITED)++ (UNAUDITED)++
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS
Net investment income
(deficit)................. $ 46,628 $ 59,425
Net realized gain (loss)
from security transactions
and foreign exchange...... 53,302 76,322
Change in net unrealized
appreciation
(depreciation) of
investments and foreign
currency.................. 108,182 109,404
Net increase (decrease) in
net assets from
operations.............. 208,112 245,151
TRANSACTIONS IN INTERESTS
Contributions by partners... 3,772,529 4,093,822
Withdrawals by partners..... (145,508 ) (64,753 )
Net increase (decrease) in
net assets from
transactions in
interests............... 3,627,021 4,029,069
Total increase
(decrease) in net
assets................ 3,835,133 4,274,220
NET ASSETS
BEGINNING OF PERIOD......... -- --
END OF PERIOD............... $ 3,835,133 $ 4,274,220
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
64
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company organized as a Delaware business trust,
is comprised of fifteen investment vehicles (each a "Fund" and collectively the
"Funds") as of September 30, 1996. Up to five Portfolios of Nicholas-Applegate
Mutual Funds have invested in the respective Funds of the Master Trust to
achieve their investment objective.
The investment objectives of the Funds are as follows:
Mini Cap Growth Fund seeks to maximize long-term capital appreciation through
investment primariliy in equity securities of U.S. companies whose earnings and
stock prices are expected to grow faster than the average rate of companies in
the Standard & Poor's 500 Stock Price Index.
Emerging Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies with less than $500
million in market capitalization.
Core Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in U.S. companies, generally over $500 million in total
stock market value.
Income & Growth Fund seeks to maximize total return through investment
primarily in convertible and equity securities of U.S. companies.
Balance Growth Fund seeks to provide a balance of long-term capital
appreciation and current income by investing approximately 60% of its total
assets in equity and convertible securities of primarily U.S. companies and 40%
of its total assets in debt securities, money market instruments and other
short-term investments.
Value Fund seeks to provide a total return consisting of capital appreciation
plus dividend and interest income that exceeds the total return on the Standard
& Poor's 500 Stock Price Index by investing primarily in a diversified portfolio
of equity securities of issuers with larger market capitalizations.
Emerging Countries Fund seeks to maximize long-term capital appreciation
through investment primarily in equity securities of companies in developing
countries of the world.
International Growth Fund seeks to maximize long-term capital appreciation
through investment primarily in equity securities of non-U.S. companies.
Worldwide Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in growth stocks of U.S. and foreign companies.
Fully Discretionary Fixed Income Fund seeks to maximize total return through
investment primarily in investment grade fixed-income securities with an average
portfolio duration between two and eight years.
Short-Intermediate Fixed Income Fund seeks to preserve principal and liquidity
and realize a relatively high level of current income through investment
primarily in investment grade fixed-income securities with a maximum average
dollar-weighted portfolio maturity of five years.
Strategic Income Fund seeks to provide a high level of current income by
investing primarily in convertible, lower quality and mortgage-backed debt
securities.
High Yield Bond Fund seeks to provide a higher level of income and capital
growth by investing primarily in debt and equity securities, with an emphasis on
lower quality debt securities.
SECURITIES TRANSACTIONS
Equity securities are valued at the last sale price (for exchange-listed
securities) or the mean between the last bid and asked price (if lacking any
sales and
- --------------------------------------------------------------------------------
65
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
for over-the-counter securities). Debt securities generally are valued at the
mean between the last bid and asked prices. Securities with 60 days or less
remaining to maturity are valued on an amortized cost basis which approximates
market value.
Securities for which market quotations are not readily available are valued at
fair value determined in good faith by or under the direction of the Master
Trust's Board of Trustees.
Securities transactions are recognized on the trade date. Realized gains and
losses from securities transactions are calculated using the first-in, first-out
method. Dividend income is recognized on the ex-dividend date, and interest
income is recorded on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities. The
prospectus for Nicholas-Applegate Mutual Funds describes each Portfolio's
policies with respect to declaration and payment of dividends and distribution
of capital gains.
FEDERAL INCOME TAXES
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of a Fund will be deemed to have been
"passed through" to the Portfolios.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Master Trust have been allocated to the
various Funds based upon management's best estimate of the costs applicable to
each Fund. These costs have been deferred and will be amortized over a period of
60 months from the date the Funds commenced operations.
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 of assets and liabilities and disclosure of
contingent assets and liabilities at the date the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate"). The advisory fee is computed daily for the
Funds based upon the following percentages of each Fund's average daily net
assets:
<TABLE>
<CAPTION>
FIRST $500 NEXT $500 EXCESS OF
MILLION MILLION $1 BILLION
----------- ----------- -----------
<S> <C> <C> <C>
Mini Cap Growth Fund........ 1.25% 1.25% 1.25%
Emerging Growth Fund........ 1.00% 1.00% 1.00%
Core Growth Fund............ 0.75% 0.675% 0.65%
Income & Growth Fund........ 0.75% 0.675% 0.65%
Balanced Growth Fund........ 0.75% 0.675% 0.65%
Value Fund.................. 0.75% 0.75% 0.75%
Worldwide Growth Fund....... 1.00% 0.90% 0.85%
International Growth Fund... 1.00% 0.90% 0.85%
Emerging Countries Fund..... 1.25% 1.25% 1.25%
Fully Discretionary Fixed
Income Fund............... See Footnote 1
Short-Intermediate Fixed
Income Fund............... See Footnote 1
Strategic Income Fund....... 0.60% 0.60% 0.60%
High Yield Bond Fund........ 0.60% 0.60% 0.60%
</TABLE>
(1) The advisory fee for Fully Discretionary Fixed Income Fund is computed as
follows: 0.45% of the first $500 million of the Fund's average net assets, 0.40%
of the next $250 million of average net assets, and 0.35% of average net assets
in excess of $750 million. The advisory fee for Short-Intermediate Fixed Income
Fund is computed as follows: 0.30% of the first $250 million of the Fund's
average net assets and 0.25% of average net assets in excess of $250 million.
- --------------------------------------------------------------------------------
66
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the periods from inception to September 30, 1996, are as
follows:
<TABLE>
<S> <C>
Mini Cap Growth Fund................. $ 74,158
Income & Growth Fund................. 20,720
Balanced Growth Fund................. 283,267
Value Fund........................... 6,496
Emerging Countries Fund.............. 111,131
International Growth Fund............ 198,984
Worldwide Growth Fund................ 271,377
Fully Discretionary Fixed Income
Fund............................... 64,506
Short-Intermediate Fixed Income
Fund............................... 64,122
Strategic Income Fund................ 2,378
High Yield Bond Fund................. 1,913
</TABLE>
Nicholas-Applegate advanced certain organization costs discussed in Note A. As
of September 30, 1996, the following Funds have amounts due to
Nicholas-Applegate for organizational costs advanced:
<TABLE>
<S> <C>
Fully Discretionary Fixed Income
Fund............................... 2,240
Short-Intermediate Fixed Income
Fund............................... 2,240
</TABLE>
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the period ended September 30, 1996, were as follows
(in 000's):
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Mini Cap Growth Fund............ $ 22,920 $ 22,287
Emerging Growth Fund............ 268,714 344,899
Core Growth Fund................ 281,890 248,636
Income & Growth Fund............ 87,859 84,911
Balanced Growth Fund............ 20,119 18,083
Value Fund...................... 4,501 2,354
Emerging Countries Fund......... 63,858 26,898
International Growth Fund....... 51,800 31,043
Worldwide Growth Fund........... 76,814 84,240
Fully Discretionary Fixed Income
Fund.......................... 4,024 4,252
Short-Intermediate Fixed Income
Fund.......................... 2,939 2,937
Strategic Income Fund........... 5,834 2,458
High Yield Bond Fund............ 9,872 5,900
</TABLE>
- --------------------------------------------------------------------------------
67
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
At September 30, 1996, the net unrealized appreciation (depreciation) based on
the cost of investments for Federal income tax purposes was as follows (in
000's):
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
TAX COST OF UNREALIZED UNREALIZED APPRECIATION
INVESTMENTS APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Mini Cap
Growth
Fund....... $ 24,651 $ 6,556 $ 716 $ 5,840
Emerging
Growth
Fund....... 437,864 182,579 9,521 173,058
Core Growth
Fund....... 392,204 115,777 6,473 109,304
Income &
Growth
Fund....... 104,554 16,211 425 15,786
Balanced
Growth
Fund....... 23,288 4,216 412 3,804
Value Fund.... 2,243 188 68 120
Emerging
Countries
Fund....... 57,350 7,307 2,204 5,103
International
Growth
Fund....... 41,613 4,656 980 3,676
Worldwide
Growth
Fund....... 85,009 16,885 1,873 15,012
Fully
Discretionary
Fixed
Income
Fund....... 4,721 24 70 (46)
Short-
Intermediate
Fixed
Income
Fund....... 4,843 10 26 (16)
Strategic
Income
Fund....... 3,717 116 8 108
High Yield
Bond
Fund....... 4,200 121 11 109
</TABLE>
D. OFF BALANCE SHEET RISKS
The Master Trust's investment in foreign securities may entail risks due to
the potential of political and economic instability in the countries where the
securities are being offered. In addition, foreign exchange fluctuations could
affect the value of positions held. It is the Master Trust's policy to
continuously monitor its exposure to these risks.
- --------------------------------------------------------------------------------
68
<PAGE>
NICHOLAS APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS
- -------------------------------------------------------------------
E. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF RATIO OF RATIO OF NET
EXPENSES TO EXPENSES TO INVESTMENT RATIO OF NET
AVERAGE NET AVERAGE NET INCOME INVESTMENT
ASSETS, ASSETS, (DEFICIT) TO INCOME (DEFICIT)
AFTER BEFORE AVERAGE NET TO AVERAGE NET
EXPENSE EXPENSE ASSETS, AFTER ASSETS, BEFORE
REIMBURSEMENTS REIMBURSEMENTS EXPENSE EXPENSE
(RECOUPMENT) (RECOUPMENT) REIMBURSEMENTS REIMBURSEMENTS
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
MINI CAP GROWTH(1)
For the period ended 09/30/96*#.............................. 1.51% 1.74% (1.13%) (1.36%)
For the period ended 03/31/96*............................... 1.50% 2.02% (0.93%) (1.44%)
EMERGING GROWTH(2)
For the period ended 09/30/96*#.............................. 1.10% 1.10% (0.66%) (0.66%)
For the year ended 03/31/96.................................. 1.11% 1.11% (0.57%) (0.57%)
For the year ended 03/31/95.................................. 1.12% 1.11% (0.53%) (0.52%)
For the period ended 03/31/94*............................... 1.12% 1.16% (0.07%) (0.84%)
CORE GROWTH(3)
For the period ended 09/30/96*#.............................. 0.87% 0.87% (0.32%) (0.32%)
For the year ended 03/31/96.................................. 0.89% 0.89% (0.22%) (0.22%)
For the year ended 03/31/95.................................. 0.89% 0.89% 0.05% 0.05%
For the period ended 03/31/94*............................... 0.92% 0.92% (0.03%) (0.03%)
INCOME & GROWTH(3)
For the period ended 09/30/96*#.............................. 0.95% 0.92% 3.45% 3.48%
For the year ended 03/31/96.................................. 0.95% 0.94% 3.94% 3.94%
For the year ended 03/31/95.................................. 0.93% 0.95% 4.37% 4.35%
For the period ended 03/31/94*............................... 0.94% 0.97% 3.51% 3.48%
BALANCED GROWTH(3)
For the period ended 09/30/96*#.............................. 0.95% 1.25% 2.59% 2.29%
For the year ended 03/31/96.................................. 0.95% 1.37% 2.83% 2.37%
For the year ended 03/31/95.................................. 0.95% 1.33% 2.13% 1.75%
For the period ended 03/31/94*............................... 0.94% 1.37% 1.93% 1.50%
VALUE FUND(4)
For the period ended 09/30/96*#.............................. 0.93% 1.63% 2.12% 1.43%
EMERGING COUNTRIES FUND(5)
For the period ended 09/30/96*#.............................. 1.60% 1.60% 0.16% 0.17%
For the year ended 03/31/96.................................. 1.60% 2.80% 0.30% (0.90%)
For the period ended 03/31/95*............................... 1.60% 1.81% 1.73% 1.52%
INTERNATIONAL GROWTH FUND(5)...................................
For the period ended 09/30/96*#.............................. 1.35% 1.37% 0.05% 0.03%
For the year ended 03/31/96.................................. 1.35% 1.98% 0.39% (0.24%)
For the year ended 03/31/95.................................. 1.35% 1.85% 0.24% (0.26%)
For the period ended 03/31/94*............................... 1.35% 2.28% 0.41% (0.52%)
WORLDWIDE GROWTH FUND(3)
For the period ended 09/30/96*#.............................. 1.20% 1.27% (0.11%) (0.19%)
For the year ended 03/31/96.................................. 1.20% 1.26% 0.31% 0.25%
For the year ended 03/31/95.................................. 1.20% 1.30% 0.24% 0.14%
For the period ended 03/31/94*............................... 1.20% 1.36% 0.01% (0.15%)
FULLY DISCRETIONARY FIXED INCOME(7)
For the period ended 09/30/96*#.............................. 0.40% 2.37% 6.08% 4.36%
For the year ended 03/31/96*................................. 0.45% 3.49% 7.38% 60.06%
SHORT-INTERMEDIATE FIXED INCOME(7)
For the period ended 09/30/96*#.............................. 0.30% 2.09% 4.08% 4.29%
For the period ended 03/31/96*............................... 0.30% 3.24% 2.76% 114.38%
STRATEGIC INCOME FUND(8)
For the period ended 09/30/96*#.............................. 0.70% 1.08% 7.45% 7.07%
HIGH YIELD BOND FUND(8)
For the period ended 09/30/96*#.............................. 0.70% 0.99% 8.92% 8.63%
<CAPTION>
BROKER
PORTFOLIO COMMISSIONS
TURNOVER RATE PER SHARE
<S> <C> <C>
- ---------------------------------------------------------------
MINI CAP GROWTH(1)
For the period ended 09/30/96*#.............................. 79.73% $0.0499
For the period ended 03/31/96*............................... 106.99% $0.0529
EMERGING GROWTH(2)
For the period ended 09/30/96*#.............................. 46.42% $0.0537
For the year ended 03/31/96.................................. 129.59% $0.0523
For the year ended 03/31/95.................................. 100.46% --
For the period ended 03/31/94*............................... 50.51% --
CORE GROWTH(3)
For the period ended 09/30/96*#.............................. 57.67% $0.0567
For the year ended 03/31/96.................................. 144.48% $0.0593
For the year ended 03/31/95.................................. 96.09% --
For the period ended 03/31/94*............................... 84.84% --
INCOME & GROWTH(3)
For the period ended 09/30/96*#.............................. 77.49% $0.0569
For the year ended 03/31/96.................................. 144.97% $0.0597
For the year ended 03/31/95.................................. 125.51% --
For the period ended 03/31/94*............................... 177.52% --
BALANCED GROWTH(3)
For the period ended 09/30/96*#.............................. 73.43% $0.0593
For the year ended 03/31/96.................................. 197.19% $0.0594
For the year ended 03/31/95.................................. 110.40% --
For the period ended 03/31/94*............................... 85.43% --
VALUE FUND(4)
For the period ended 09/30/96*#.............................. 107.55% $0.0584
EMERGING COUNTRIES FUND(5)
For the period ended 09/30/96*#.............................. 60.16% $0.0015
For the year ended 03/31/96.................................. 118.21% $0.0022
For the period ended 03/31/95*............................... 60.79% --
INTERNATIONAL GROWTH FUND(5)...................................
For the period ended 09/30/96*#.............................. 82.38% $0.0208
For the year ended 03/31/96.................................. 141.02% $0.0128
For the year ended 03/31/95.................................. 74.88% --
For the period ended 03/31/94*............................... 23.71% --
WORLDWIDE GROWTH FUND(3)
For the period ended 09/30/96*#.............................. 78.42% $0.0173
For the year ended 03/31/96.................................. 132.20% $0.0187
For the year ended 03/31/95.................................. 98.54% --
For the period ended 03/31/94*............................... 95.09% --
FULLY DISCRETIONARY FIXED INCOME(7)
For the period ended 09/30/96*#.............................. 97.77% 0.00
For the year ended 03/31/96*................................. 60.09% 0.00
SHORT-INTERMEDIATE FIXED INCOME(7)
For the period ended 09/30/96*#.............................. 63.75% 0.00
For the period ended 03/31/96*............................... 114.38% 0.00
STRATEGIC INCOME FUND(8)
For the period ended 09/30/96*#.............................. 68.24% $0.0590
HIGH YIELD BOND FUND(8)
For the period ended 09/30/96*#.............................. 145.73% $0.0300
</TABLE>
- --------------------
(1) Commenced Operations on July 12, 1995.
(2) Commenced Operations on October 1, 1993.
(3) Commenced Operations on April 19, 1993.
(4) Commenced Operations on April 30, 1996.
(5) Commenced Operations on November 26, 1994.
(6) Commenced Operations on January 3, 1994.
(7) Commenced Operations on August 31, 1993.
(8) Commenced Operations on July 31, 1996.
* Annualized
# Unaudited
- --------------------------------------------------------------------------------
69
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70
<PAGE>
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71
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