<PAGE>
- --------------------------------------------------------------------------------
NICHOLAS=APPLEGATE-Registered Trademark- MUTUAL FUNDS
ANNUAL REPORT
MARCH 31, 1996
-------------
DOMESTIC PORTFOLIOS
INSTITUTIONAL SERIES
-------
MINI CAP GROWTH
EMERGING GROWTH
CORE GROWTH
INCOME & GROWTH
BALANCED GROWTH
<PAGE>
NICHOLAS=APPLEGATE-Registered Trademark- MUTUAL FUNDS
- -----------------------------------------------------------------------
600 West Broadway
San Diego, California 92101
800-551-8643
TRUSTEES OF NICHOLAS-APPLEGATE MUTUAL FUNDS
Fred C. Applegate, Chairman
Dr. Arthur B. Laffer
Charles E. Young
TRUSTEES OF NICHOLAS-APPLEGATE INVESTMENT TRUST
Arthur E. Nicholas, Chairman
Dann V. Angeloff
Walter A. Auch
Theodore J. Coburn
Darlene T. DeRemer
George F. Keane
OFFICERS
John D. Wylie, President
Peter J. Johnson, Vice President
Ashley T. Rabun, Vice President
Thomas Pindelski, Treasurer
E. Blake Moore, Jr., Secretary
INVESTMENT MANAGER
Nicholas-Applegate Capital Management
DISTRIBUTOR
Nicholas-Applegate Securities
CUSTODIAN
PNC Bank
TRANSFER AGENT
State Street Bank & Trust Company
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<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Letter to Shareholders................................................ 1
Organization.......................................................... 2
Capital Markets Review................................................ 3
Long-Term View of the U.S. Equity and Bond Markets.................... 4
The Portfolios' Overview, Fund Manager Q&A and the Funds' Schedules of
Investments
Mini Cap Growth..................................................... 5
Emerging Growth..................................................... 13
Core Growth......................................................... 29
Income & Growth..................................................... 36
Balanced Growth..................................................... 44
The Portfolios'
Financial Highlights................................................ 52
Statements of Assets and Liabilities................................ 54
Statements of Operations............................................ 55
Statements of Changes in Net Assets................................. 56
Notes to the Financial Statements................................... 58
Notes to the Funds' Financial Statements.............................. 64
Report of Independent Auditors
Nicholas-Applegate Mutual Funds..................................... 67
Nicholas-Applegate Investment Trust................................. 68
</TABLE>
- ------------
This report is authorized for distribution to shareholders and to others only
when preceded or accompanied by a currently effective prospectus for
Nicholas-Applegate Institutional Series Domestic Portfolios. Distributor:
Nicholas-Applegate Securities.
<PAGE>
(This page intentionally left blank)
<PAGE>
ORGANIZATION
- -------------------------------------------------------------------
Nicholas-Applegate Mutual Funds (the "Trust") is organized as a diversified,
open-end management investment company which offers 43 separate series comprised
of Portfolios A, with an initial sales charge, B, with a contingent deferred
sales charge, C, with a level asset-based sales charge, Institutional, with no
load, and Qualified, with no load (each a "Portfolio" and collectively the
"Portfolios"). The Portfolios of the Trust seek to achieve their respective
investment objectives by investing all of their assets in corresponding series
of Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company offering 12 investment vehicles (the
"Funds"). As of March 31, 1996, the Funds and corresponding Portfolios are as
follows:
<TABLE>
<CAPTION>
INCLUDED
IN INCLUDED IN
FUNDS OF THE PORTFOLIOS OF THIS ANOTHER
MASTER TRUST THE TRUST REPORT REPORT
- ----------------------- --------------------------------------------- ---------- -------------
<S> <C> <C> <C>
Mini Cap Growth Mini Cap Growth Institutional x
Emerging Growth Emerging Growth A x
Emerging Growth B x
Emerging Growth C x
Emerging Growth Institutional x
Emerging Growth Qualified x
Core Growth Core Growth A x
Core Growth B x
Core Growth C x
Core Growth Institutional x
Core Growth Qualified x
Income & Growth Income & Growth A x
Income & Growth B x
Income & Growth C x
Income & Growth Institutional x
Income & Growth Qualified x
Balanced Growth Balanced Growth A x
Balanced Growth B x
Balanced Growth C x
Balanced Growth Institutional x
Balanced Growth Qualified x
Government Income Government Income A x
Government Income B x
Government Income C x
Government Income Qualified x
Money Market Money Market Portfolio x
Worldwide Growth Worldwide Growth A x
Worldwide Growth B x
Worldwide Growth C x
Worldwide Growth Institutional x
Worldwide Growth Qualified x
International Growth International Growth A x
International Growth B x
International Growth C x
International Growth Institutional x
International Growth Qualified x
Emerging Countries Emerging Countries A x
Emerging Countries B x
Emerging Countries C x
Emerging Countries Institutional x
Emerging Countries Qualified x
Fully Discretionary Fully Discretionary Institutional x
Short-Intermediate Short-Intermediate Institutional x
</TABLE>
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2
<PAGE>
CAPITAL MARKETS REVIEW
- -------------------------------------------------------------------
Investors in U.S. financial markets experienced one of the most exciting and
rewarding periods in history during the fiscal year ended March 31, 1996. Major
stock indexes, such as the Dow Jones Industrial Average, the Standard & Poor's
500 Index (S&P 500), and the NASDAQ Composite, climbed steadily into new
territory, each setting an impressive series of record highs. Bond investors
also enjoyed exceptional returns.
The economic environment was extremely favorable. Slow to moderate economic
growth, coupled with low inflation and interest rates, created ideal conditions
for companies to improve their profit margins. Many companies reported earnings
that exceeded the expectations of investment analysts, and this positive news
buoyed the performance of their stocks.
Overall, the fiscal year was characterized by strong consumer confidence and
investor interest. Supply and demand for domestic equities played a role in
rallying the market. Mutual funds experienced heavy cash inflows during the
period, with much of that new capital designated for U.S. stocks. Individual
investors seemed to accept the responsibility of funding their own retirements.
As a result, many investors opted to invest their savings in the ownership of
companies through mutual funds, rather than purchase low-interest certificates
of deposit or create bank deposits.
The broad market rose sharply over the twelve-month period with the S&P 500
returning 32%. Larger company stocks tended to outperform small and mid-sized
company stocks overall, but in the closing months of the fiscal year small and
mid-sized company stocks added steam and larger-company stocks tapered off.
Healthcare, technology, financial services and capital goods stocks performed
particularly well throughout the period.
Bond prices rose steadily from August through January, with interest rates
falling to their lowest levels in two years. Although some of those gains were
erased in February and March, we believe the outlook for continued low inflation
and moderate domestic growth supports the likelihood of a positive market for
bonds.
With our company-by-company selection process for portfolio building, our
Portfolios benefited strongly from the year's market conditions. We are excited
about the prospects for the many dynamic, growing companies we are finding for
inclusion in our Portfolios. We believe financial markets will continue to
reward the success of America's most innovative companies.
- --------------------------------------------------------------------------------
3
<PAGE>
LONG-TERM VIEW OF THE U.S. EQUITY AND BOND MARKETS
- -------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LARGE COMPANY STOCK SMALL COMPANY STOCK LONG-TERM GOVERNMENT BONDS TREASURY BILLS
<S> <C> <C> <C> <C>
1925 1.000 1.000 1.000 1.000
1926 1.116 1.003 1.078 1.033
1927 1.535 1.224 1.174 1.065
1928 2.204 1.710 1.175 1.103
1929 2.016 0.832 1.215 1.155
1930 1.516 0.515 1.272 1.183
1931 0.859 0.259 1.204 1.196
1932 0.789 0.245 1.407 1.207
1933 1.214 0.594 1.406 1.211
1934 1.197 0.738 1.547 1.213
1935 1.767 1.035 1.624 1.215
1936 2.367 1.705 1.746 1.217
1937 1.538 0.716 1.750 1.221
1938 2.016 0.951 1.847 1.221
1939 2.008 0.954 1.957 1.221
1940 1.812 0.905 2.076 1.221
1941 1.602 0.823 2.096 1.222
1942 1.927 1.190 2.163 1.225
1943 2.427 2.242 2.208 1.229
1944 2.906 3.446 2.270 1.233
1945 3.965 5.983 2.514 1.237
1946 3.645 5.287 2.511 1.242
1947 3.853 5.335 2.445 1.248
1948 4.065 5.223 2.529 1.258
1949 4.829 6.254 2.692 1.272
1950 6.360 8.677 2.693 1.287
1951 7.888 9.355 2.587 1.306
1952 9.336 9.638 2.617 1.328
1953 9.244 9.013 2.713 1.352
1954 14.106 14.473 2.907 1.364
1955 18.561 17.431 2.870 1.385
1956 19.778 18.177 2.710 1.419
1957 17.646 15.529 2.912 1.464
1958 25.298 25.605 2.734 1.486
1959 28.322 29.804 2.673 1.530
1960 28.455 28.823 3.041 1.571
1961 36.106 38.072 3.070 1.604
1962 32.954 33.540 3.282 1.648
1963 40.469 41.444 3.322 1.700
1964 47.139 51.193 3.438 1.760
1965 53.008 72.567 3.463 1.829
1966 47.674 67.479 3.589 1.916
1967 59.104 123.670 3.259 1.997
1968 65.642 168.429 3.251 2.101
1969 60.059 126.233 3.086 2.239
1970 62.465 104.226 3.460 2.385
1971 71.406 121.423 3.917 2.490
1972 84.956 126.807 4.140 2.585
1973 72.500 87.618 4.094 2.764
1974 53.311 70.142 4.272 2.986
1975 73.144 107.189 4.665 3.159
1976 90.584 166.691 5.447 3.319
1977 84.077 211.500 5.410 3.489
1978 89.592 261.120 5.346 3.740
1979 106.113 374.614 5.280 4.128
1980 140.514 523.992 5.071 4.592
1981 133.616 596.717 5.166 5.267
1982 162.223 763.829 7.251 5.822
1983 198.745 1066.828 7.298 6.335
1984 211.199 995.680 8.427 6.959
1985 279.117 1241.234 11.037 7.496
1986 330.671 1326.275 13.745 7.958
1987 347.967 1202.966 13.372 8.393
1988 406.458 1478.135 14.665 8.926
1989 534.455 1628.590 17.322 9.673
1990 517.499 1277.449 18.392 10.429
1991 675.592 1847.629 21.942 11.012
1992 727.412 2279.039 23.709 11.398
1993 800.078 2757.147 28.034 11.728
1994 810.538 2842.773 25.856 12.186
1995 1113.918 3822.398 34.044 12.868
1996 1174.47 4065.16 31.69 13.03
Large Company Stock Small Company Stock Long-Term Government Bonds Treasury Bills
Cumulative 1,174.47 4,064.16 31.69 13.02
The Growth of $1.00 Invested at
Year-end 1925 through March 1996
Source: Ibbotson Associates
<CAPTION>
INFLATION
<S> <C>
1925 1.000
1926 0.985
1927 0.965
1928 0.955
1929 0.957
1930 0.899
1931 0.814
1932 0.730
1933 0.734
1934 0.749
1935 0.771
1936 0.780
1937 0.804
1938 0.782
1939 0.778
1940 0.786
1941 0.862
1942 0.942
1943 0.972
1944 0.993
1945 1.015
1946 1.199
1947 1.307
1948 1.343
1949 1.318
1950 1.395
1951 1.477
1952 1.490
1953 1.499
1954 1.492
1955 1.497
1956 1.540
1957 1.587
1958 1.615
1959 1.639
1960 1.663
1961 1.674
1962 1.695
1963 1.723
1964 1.743
1965 1.777
1966 1.836
1967 1.892
1968 1.981
1969 2.102
1970 2.218
1971 2.292
1972 2.371
1973 2.579
1974 2.894
1975 3.097
1976 3.246
1977 3.465
1978 3.778
1979 4.281
1980 4.812
1981 5.242
1982 5.445
1983 5.652
1984 5.875
1985 6.097
1986 6.166
1987 6.438
1988 6.722
1989 7.034
1990 7.464
1991 7.693
1992 7.916
1993 8.133
1994 8.351
1995 8.563
1996 8.680
Inflation
Cumulative 8.68
The Growth of $1.00 Invested at
Year-end 1925 through March 1996
Source: Ibbotson Associates
</TABLE>
IBBOTSON ASSOCIATES GROWTH OF $1.00 CHART
SMALL COMPANY STOCK
Small Company Stocks data represents the smallest one-fifth of NYSE stocks
from 1/1/26 through 12/31/81 and Dimensional Fund Advisors ("DFA") Small Company
Fund thereafter, with all income dividends and capital gains distributions, if
any, reinvested.
LARGE COMPANY STOCK
Large Company Stocks data represents the Standard & Poor's 500 Index which
contains 500 industrial, transportation, utility and financial companies
regarded as generally representative of the U.S. stock market.
LONG-TERM GOVERNMENT BONDS
Long Term Government Bond data is based on a one bond portfolio whose
rolling approximate maturity is twenty years.
TREASURY BILLS
Treasury bill data is measured by a portfolio having a minimum maturity of
one month.
INFLATION
The Consumer Price Index is a measure of change in consumer prices as
determined by a monthly survey of the U.S. Bureau of Labor Statistics. Many
pension and employment contracts are tied to changes in consumer prices, as
protection against inflation and reduced purchasing power.
Each equity and bond index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing (except for the DFA Small Company
Fund's returns which are net of transaction costs). All results are historical.
Past performance is no guarantee of future performance of any index or
Nicholas-Applegate Mutual Funds.
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4
<PAGE>
MINI CAP GROWTH PORTFOLIO
- -------------------------------------------------------------------
GOAL: Seeks to maximize long-term capital appreciation by investing for growth
primarily in mini cap companies of less than $100 million in market
capitalization.
REVIEW AND OUTLOOK: Since its launch in July, the Mini Cap Growth Portfolio
has delivered excellent returns from its investments in small-company stocks,
providing 80% higher returns than the benchmark Russell 2000 Growth Index. The
Portfolio benefited from excellent stock selections during its first eight and
one-half months. Strong returns from its holdings in technology, consumer
durables, financial services, and healthcare technology and services helped
contribute to the Portfolio's superior performance. The Portfolio is managed on
a bottom-up basis, meaning that its industry and sector concentrations result
from security selection and not vice versa. As a result of this investment
style, the Portfolio held 25.8% of assets in healthcare services, 23.1% in
technology and 9.1% in commercial and industrial services at the close of the
fiscal year on March 31, 1996.
Galoob Lewis Toys is a good example of a consumer durables holding that made
strong contributions to the Portfolio during the period. This once-faltering
California toy manufacturer has turned itself around, seizing market share in a
consolidating industry. Its imaginative and popular creations include the Sky
Dancers figures that have led lists of the most desired toys for girls, and the
popular Star Wars action figures for boys. Among technology stocks, software
company Datastream Systems has been a solid performer on the basis of its unique
and affordable software that helps industrial companies schedule and document
their maintenance operations. Finish Line is an example of an innovative
retailer that has provided strong returns to the Portfolio. The company boasts
an exceptionally strong management team that is successfully acting as
consolidator in the athletic shoe and apparel trade.
We are genuinely excited about the prospects for the mini cap segment of the
market. We continue to find excellent companies with strong products, services
and management teams, and we believe that economic and market conditions provide
many compelling reasons to believe that small company stocks will continue to
generate excellent returns relative to larger company stocks. Investors should
be aware that small-company stocks are subject to greater price fluctuations
than larger-company stocks.
A strengthening U.S. dollar has historically favored small company stocks over
large company stocks and the recent strengthening of the dollar has, once again,
coincided with small-company stock outperformance. Also, from a long-term
perspective, while small-company stocks have been outperforming large-company
stocks for most of the 1990s, this six-year trend represents a relatively short
outperformance cycle. Throughout this century, small-company stock
outperformance cycles have generally lasted nine to fourteen years, with the
greatest capital appreciation occurring in the second half of the cycle.
We believe the Nicholas-Applegate Mini Cap Growth Portfolio holds some of the
most exciting, dynamic stocks in the United States today. We appreciate your
continued investment in the Mini Cap Growth Portfolio.
REPRESENTATIVE HOLDINGS
Galoob Lewis Toys, Inc.
Reno Air, Inc.
Finish Line, Inc.
Cooker Restaurant Corp.
Youth Services International, Inc.
Bush Industries, Inc.
Datastream Systems, Inc.
Davox Corp.
Prime Medical Services, Inc.
Cryolife, Inc.
- --------------------------------------------------------------------------------
5
<PAGE>
A CONVERSATION WITH CATHERINE SOMHEGYI
- -------------------------------------------------------------------
Catherine Somhegyi
[PHOTO] Portfolio Manager
Mini Cap Growth Portfolio
Q. CATHERINE, FROM A HISTORICAL PERSPECTIVE, 1995
WAS A GREAT YEAR TO HOLD STOCKS OF U.S. COMPANIES OF ALL SIZES. IN CONTRAST, THE
FIRST QUARTER OF 1996 HAS REALLY BELONGED TO THE SMALLEST COMPANIES. WHAT HAS
CHANGED?
A. Yes, 1995 was a great year across the board for
U.S. stocks but on the whole it favored larger companies relative to smaller
ones. One of the things we saw in the first quarter of 1996 was smaller
companies catching up, but I don't think that explains everything we witnessed.
Estimates of future earnings growth for large companies have been declining
while earnings growth estimates for smaller companies have been improving. Part
of this may be related to exchange rates. The dollar has been getting stronger,
and a stronger dollar tends to hurt the earnings of those large U.S. companies
that have significant export sales.
But that doesn't explain the outlook for continued earnings improvements at
small companies. That's more a function of the fundamental strengths of smaller
companies. That's what we focus on in our stock selection decisions and it's
causing us to find good opportunities in small company stocks today. I think
another important factor is the long-term cyclical outperformance of smaller
companies' stocks. That has been going on since the start of the decade and I
think it will continue. When you look closely at the ability of these nimble,
innovative companies to develop products, services and processes and to identify
and command niche markets, then I think you can recognize the great potential
for growth that lies ahead in this market segment.
Q. THE FIRST QUARTER ALSO SAW THE MARKET
BESTOWING MUCH GREATER REWARDS ON COMPANIES PROJECTING HIGHER EARNINGS GROWTH,
ESPECIALLY SMALLER COMPANIES. TO WHAT DO YOU ATTRIBUTE THIS?
A. First, you have to remember that stock prices
generally reflect the expectations of future earnings by a company. The U.S.
economy has been in a slow-but-stable phase for more than a year and that has
caused the earnings growth for U.S. companies, in general, to decelerate. But
not every company conforms to this average. The types of companies we seek for
the Mini Cap Growth Portfolio are the ones that are using change advantageously
and that can rapidly grow earnings, regardless of economic conditions. In
periods, like the first quarter of 1996, when earnings growth is harder to find
in the broad market, these companies are in a position to command attention and
a premium price for their superior earnings growth.
Q. HEALTHCARE AND TECHNOLOGY STOCKS ENJOYED
EXCELLENT RETURNS IN BOTH THE MINI CAP GROWTH PORTFOLIO AND IN THE BROAD MARKET
DURING THE FISCAL YEAR, ENDED MARCH 31, 1996. THESE TWO SECTORS ACCOUNTED FOR
NEARLY HALF OF THE ASSETS IN THE PORTFOLIO AT THE END OF THE FISCAL YEAR. DO YOU
THINK THEY STILL HAVE ROOM TO RUN?
A. I think that the individual companies in the
Portfolio have excellent prospects for capital appreciation, and I make that
statement from a position of knowing the fundamental strengths of our portfolio
holdings. These companies did not get into the Portfolio because we made
top-down decisions to hold 12% of assets in software companies or 9% of assets
in medical-supply companies. Each of these companies earned a place in the
Portfolio by demonstrating greater fundamental strength than the other stocks in
this class, and to stay in the Portfolio they will have to continue to show
superior strength against stocks in any and all industries.
Q. CAN YOU GIVE US SOME EXAMPLES OF SOME
RECENT BUYS AND SELLS THAT HAVE RESULTED FROM THIS COMPETITION TO BE A PART OF
THE MINI CAP GROWTH PORTFOLIO?
A. We recently added Cryolife, a medical products
company that develops systems to repair and preserve human tissues in transplant
and other operations. We also added Rent Way, a chain of furniture rental stores
that is benefiting from consolidations in that industry. We sold Guest Supply, a
supplier of disposable products and toiletries for hotels. The company posted
disappointing earnings.
- --------------------------------------------------------------------------------
6
<PAGE>
MINI CAP GROWTH INSTITUTIONAL PORTFOLIO
- -------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
MINI CAP GROWTH INSTITUTIONAL PORTFOLIO WITH THE RUSSELL 2000 GROWTH INDEX.
TOTAL RETURN
SINCE INCEPTION
(07/12/95 -- 03/31/96)
26.80%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MINI CAP
<S> <C> <C>
Growth
Institutional Russell 2000 Growth
Portfolio Index
7/12/95 250000 250000
7/95 261400 259625
8/95 266200 262829
9/95 275600 268240
10/95 270200 255046
11/95 278200 266344
12/95 287000 272246
1/96 284600 269992
2/96 301400 282304
3/31/96 317000 287885
</TABLE>
This graph is furnished to you in accordance with SEC regulations. It compares a
$250,000 investment in the Mini Cap Growth Institutional Portfolio with the
Russell 2000 Growth Index, on a cumulative basis. All return calculations
reflect the reinvestment of income dividends and capital gains distributions, if
any, as well as all fees and expenses.
The total returns for the Portfolio reflect the fact that fees and expenses in
excess of certain expense limits specified in the investment management
agreement have been deferred by Nicholas-Applegate Capital Management. Total
return results would have been lower had there been no deferral of fees and
expenses in excess of expense limitations.
The Russell 2000 Growth Index is an unmanaged index containing those securities
in the Russell 2000 Index with a greater-than-average growth orientation.
Companies in this index generally have higher price-to-book and price-earnings
ratios. The Russell 2000 Index is an unmanaged index and is a widely regarded
small-cap index of the 2,000 smallest securities in the Russell 3000 Index which
comprises the 3,000 largest U.S. securities as determined by total market
capitalization.
Index returns reflect the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
7
<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.
- --------------------------------------------------------------------------------
8
<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.
- --------------------------------------------------------------------------------
9
<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.
- --------------------------------------------------------------------------------
10
<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.
- --------------------------------------------------------------------------------
11
<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.
- --------------------------------------------------------------------------------
12
<PAGE>
EMERGING GROWTH PORTFOLIO
- -------------------------------------------------------------------
GOAL: Seeks to maximize long-term capital appreciation through investment
primarily in equity securities of successful U.S. companies with less than $500
million in market capitalization.
REVIEW AND OUTLOOK: Shares of the Emerging Growth Portfolio generated
impressive returns for the fiscal year that ended March 31, 1996 with
exceptionally strong performance in the summer of 1995 and the winter and spring
of 1996. At the close of the fiscal year, 30% of the Portfolio's holdings were
in technology stocks, with software, telecommunications, computer and office
automation issues comprising the largest positions in this sector. Health-care
services accounted for 22% of the Portfolio, with medical supply companies and
biotechnology concerns leading this group. Consumer service industries such as
broadcasting, entertainment and leisure and gaming were also strongly
represented and contributed significantly to the Portfolio.
Stand-out performers for the period included Dura Pharmaceuticals, Career
Horizons and Veterinary Centers of America. Dura, which develops treatments for
asthma and allergies, is rapidly growing revenues and earnings. One of its most
innovative products is a powder-inhaler drug delivery system that has the
potential for applications beyond Dura's own line of pharmaceuticals. Career
Horizons offers temporary staffing and information technology services to U.S.
companies. It is rapidly improving margins and earnings as a result of growth in
its information technology services business. Veterinary Centers of America is
generating rapid earnings growth through acquisitions and consolidations in an
otherwise fragmented industry.
We are optimistic about the prospects for these and other emerging growth
stocks. Small-cap stocks have outperformed every financial asset class over the
long term, and their relative valuations are attractive. The dollar has
continued to strengthen and typically this has benefited small-company stocks
relative to large-company stocks. While earnings growth at larger companies is
slowing, smaller companies continue to grow earnings at impressive rates.
Finally, from a historical standpoint, we are relatively early in the current
long-term outperformance cycle for small-cap stocks, at six years. Since the
1930s, small-cap outperformance cycles have lasted nine to fourteen years and
have typically delivered the greatest capital appreciation in the second half of
the cycle.
We continue to seek and invest in dynamic, growing companies that are expected
to be the beneficiaries of change. Our holdings tend to be young,
entrepreneurial organizations offering innovative products and solutions,
companies that are developing and commanding lucrative niche markets. Investors
should know that stocks of such companies are subject to greater price
fluctuations than the stocks of larger, more established companies. We believe
that holding ownership interests in these companies through the Emerging Growth
Portfolio is an excellent way to achieve long-term growth of capital.
REPRESENTATIVE HOLDINGS
Dura Pharmaceuticals, Inc.
Ross Stores, Inc.
Fuisz Technologies, Inc.
Envoy Corp.
Veterinary Centers of America, Inc.
Career Horizons, Inc.
Brooktrout Technology, Inc.
Westell Technologies, Inc.
Davox Corp.
West Marine, Inc.
- --------------------------------------------------------------------------------
13
<PAGE>
A CONVERSATION WITH CATHERINE SOMHEGYI
- -------------------------------------------------------------------
Catherine Somhegyi
[PHOTO] Portfolio Manager
Emerging Growth Portfolio
Q: CATHERINE, THE EMERGING GROWTH PORTFOLIO
ENJOYED EXCELLENT PERFORMANCE IN THE FISCAL YEAR. WHAT WAS HAPPENING IN THE
MARKET FOR SMALL-CAP STOCKS, AND FOR THE PORTFOLIO IN PARTICULAR, TO ACCOUNT FOR
THIS PERFORMANCE?
A. Remember, this period was one of the best ever
for the U.S. stock market. And the forces that drove market performance -- low
interest rates, little inflationary pressure, and slow-but-steady economic
growth -- are highly conducive to the performance of dynamic smaller companies.
In the small-cap universe the rally has been especially broad. Energy,
technology, health technology, and insurance services are just a few of the
sectors that helped lift small caps throughout the period. These are also some
of the specific industries and sectors where our stock-picking expertise
delivered added return for investors.
Q: ARE YOU OPTIMISTIC ABOUT SMALL-CAP STOCKS FOR
THE COMING YEAR?
A: Yes, I am. We are in an environment where, on a
valuation basis, small-cap stocks are more attractive than large caps. And the
small companies we are encountering are showing strong fundamental qualities,
including excellent earnings growth, innovative products and services and some
very resourceful management teams. Also, we are perhaps less than halfway
through a long-term outperformance cycle for small-cap stocks. Since the 1930s,
small-cap outperformance cycles have lasted nine to fourteen years on average
and have delivered their best returns in the second half of the cycle.
Q: COULD YOU TELL US A LITTLE BIT ABOUT NICHOLAS-
APPLEGATE'S APPROACH TO PICKING SMALL-CAP GROWTH STOCKS?
A: We apply one equity philosophy across all
strategies: We seek to capitalize on the early recognition of positive changes.
We adhere to a bottom-up stock selection process and look for fundamentally
strong companies that demonstrate earnings acceleration. Our experience has
shown that this can lead to increased investor recognition and significant price
appreciation. Our process is very disciplined. Each company in the Portfolio
must satisfy three criteria. It must demonstrate positive change. That change
must be sustainable, and we want to be early in the recognition of that change.
Q: WITH SO MANY SMALL-CAP STOCKS OUT THERE TO BE
FOUND, WHAT RESOURCES DO YOU USE TO IDENTIFY GOOD POTENTIAL INVESTMENTS?
A: I believe this is our greatest strength. Our
investment universe contains more than 7,500 companies. Information about these
companies is inefficiently disseminated. Our competitive advantage lies in our
ability to manage this information. We have developed a broad range of resources
to verify and interpret company news and data. On average, there are two
analysts following each of these small-cap companies vs. 28 analysts per company
following the S&P 500 stocks, so it's very important to know where to go for the
information.
- --------------------------------------------------------------------------------
14
<PAGE>
- -------------------------------------------------------------------
We talk to over a hundred research firms throughout the country on these
individual companies. There are certain analysts who have expertise in certain
industries and regions. This is particularly important in the small-cap area. If
I'm looking at a small retail or restaurant concept in the Southeast, the type
of information I'm going to get from a regional analyst will probably be fresher
than the information I'm going to get out of an office in New York.
Q: IN TERMS OF THE MANAGEMENT STYLE, DO YOU
MANAGE THE EMERGING GROWTH PORTFOLIO PRETTY MUCH ALONE, OR DO YOU SHARE IDEAS
WITH THE OTHER PORTFOLIO MANAGERS AT NICHOLAS-APPLEGATE?
A: If you were to visit our office, you would see
that none of us has a private office. We all sit together. We work together in a
team environment. We also sit with our traders. It's as if there's an investment
meeting going on all day long. We are constantly checking and cross-checking
information.
Q: NICHOLAS-APPLEGATE SPENDS A GREAT DEAL OF
MONEY KEEPING ITS TECHNOLOGY UP-TO-DATE. DO TECHNOLOGICAL RESOURCES PLAY A LARGE
ROLE IN THE WAY THESE PORTFOLIOS ARE MANAGED?
A: Definitely. It enables us to manage information
efficiently. It leverages our time as portfolio managers so that we identify the
best investment opportunities by verifying and interpreting information quickly.
Q: IN MANY CASES, A SMALL-CAP PORTFOLIO IS HEAVILY
WEIGHTED IN TECHNOLOGY STOCKS. DO YOU PAY ATTENTION TO YOUR SECTOR WEIGHTINGS
AND DOES TECHNOLOGY PLAY A LARGE ROLE IN THE PORTFOLIO?
A: Technology currently plays a big role in the
Portfolio, but that's not because we made a top-down decision to invest a
specific percentage in technology. Rather, it is the result of our bottom-up
approach; it reflects where we are finding the best investment opportunities
today. If we find the fundamentals to be the strongest and the valuations to be
the most attractive in technology, then we'll be there. But that's also true of
health care and of retail. We truly seek out growth in any and all industries
and sectors.
Q. WHAT ARE SOME EXAMPLES OF COMPANIES YOU
HAVE RECENTLY ADDED TO OR DELETED FROM THE PORTFOLIO?
A. We added Impath, a company that provides
information and expertise to health-care professionals on the diagnosis,
treatment and care of difficult cancer cases. We purchased shares of Natural
Micro Systems, a company that designs, manufactures and markets
advanced-technology products for business telephone systems. We sold shares of
Utah Medical Products, a manufacturer of disposable health-care supplies. A key
distributor dropped one of Utah Medical's leading products from its line,
negatively affecting the outlook for sales growth. We also recently sold our
position in Microwave Power Devices, a manufacturer of infrastructure equipment
for the cellular telephone industry. The company experienced poor sales growth
because of a slowdown in approvals for new cellular base stations.
- --------------------------------------------------------------------------------
15
<PAGE>
EMERGING GROWTH INSTITUTIONAL PORTFOLIO
- -------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
EMERGING GROWTH INSTITUTIONAL PORTFOLIO WITH THE RUSSELL 2000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/96
1 YEAR 5 YEARS 10 YEARS
38.27% 17.00% 14.29%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING RUSSELL
<S> <C> <C>
Growth 6/09
Institutional Growth
Portfolio Index
7/31/85 250000 250000
9/85 235902 228349
12/85 278463 267425
3/86 321624 307046
6/86 352685 327142
9/86 285983 273988
12/86 296385 277004
3/87 361471 352326
6/87 361618 347425
9/87 382249 358710
12/87 285177 247984
3/88 336938 291164
6/88 367386 309646
9/88 359772 301127
12/88 362320 298502
3/89 402398 320660
6/89 420560 341411
9/89 471710 371913
12/89 462329 358702
3/90 470606 349173
6/90 500969 371207
9/90 385769 274340
12/90 423896 296251
3/91 558142 386759
6/91 529438 373345
9/91 611921 413636
12/91 662270 447893
3/92 661872 460151
6/92 588473 404885
9/92 624230 412728
12/92 746968 482694
3/93 742563 474044
6/93 769277 487678
9/93 867464 533181
12/93 867187 547182
3/94 814912 524920
6/94 754761 491981
9/94 834963 537851
12/94 836746 533875
3/95 885696 563151
6/95 987421 619015
9/95 1109032 689403
12/95 1137101 699699
3/31/96 1224695 739892
</TABLE>
This graph is furnished to you in accordance with SEC regulations. It compares a
$250,000 investment in the Emerging Growth Institutional Portfolio with the
Russell 2000 Growth Index, on a cumulative basis. All return calculations
reflect the reinvestment of income dividends and capital gains distributions, if
any, as well as all fees and expenses. Performance results reflect the total
returns of a predecessor limited partnership and a pooled trust managed by
Nicholas-Applegate Capital Management prior to the effective date of the
Portfolio's registration statement which was 10/1/93. Limited partnership/pooled
trust returns are restated to reflect all fees and expenses applicable to the
Portfolio and share class. If the limited partnership and pooled trust had been
registered as investment companies under the federal securities laws, their
performance might have been adversely affected because of the additional
restrictions applicable to registered investment companies.
The total returns for the Portfolio reflect the fact that fees and expenses in
excess of certain expense limits specified in the investment management
agreement have been deferred by Nicholas-Applegate Capital Management. Total
return results would have been lower had there been no deferral of fees and
expenses in excess of expense limitations.
The Russell 2000 Growth Index is an unmanaged index containing those securities
in the Russell 2000 Index with a greater-than-average growth orientation.
Companies in this index generally have higher price-to-book and price-earnings
ratios. The Russell 2000 Index is an unmanaged index and is a widely regarded
small-cap index of the 2,000 smallest securities in the Russell 3000 Index which
comprises the 3,000 largest U.S. securities as determined by total market
capitalization.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
16
<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.
- --------------------------------------------------------------------------------
17
<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.
- --------------------------------------------------------------------------------
18
<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
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
CONTRACT DRILLING (CONTINUED)
Nabors Industries, Inc.*................... 58,300 $ 830,775
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
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
19
<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 DATA PROCESSING (CONTINUED)
Envoy Corp.*............................... 63,700 $ 1,496,950
-----------
2,943,325
-----------
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
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ENVIRONMENTAL SERVICES
(CONTINUED)
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
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
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
20
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
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
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
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
LODGING (CONTINUED)
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
-----------
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
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
21
<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 -- 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
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
-----------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
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
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
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
22
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
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
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
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER COMMERCIAL/ INDUSTRIAL SERVICES
(CONTINUED)
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
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
-----------
</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>
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
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
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER TECHNOLOGY (CONTINUED)
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
-----------
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
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
24
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
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
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
-----------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
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
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
</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>
SOFTWARE (CONTINUED)
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
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
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE (CONTINUED)
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
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
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
26
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCK (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE (CONTINUED)
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
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
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS EQUIPMENT (CONTINUED)
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
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
-----------
</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>
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
-----------
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
-----------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TOTAL COMMON STOCKS
(Cost $415,151,661)................................... $575,781,838
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.4%
- ------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
28
<PAGE>
CORE GROWTH PORTFOLIO
- -------------------------------------------------------------------
GOAL: Seeks to maximize long-term capital appreciation through investment
primarily in U.S. companies, generally over $500 million in total stock market
value.
REVIEW AND OUTLOOK: The Core Growth Portfolio experienced steady overall
growth during the fiscal year ending March 31, 1996, outperforming the Standard
& Poor's indexes for large and mid-sized companies. The Portfolio experienced
particularly strong growth in the summer of 1995 and the winter months of 1995
and 1996.
Technology stocks contributed strongly to the overall performance of the
Portfolio. Health-technology and retail-trade stocks also made solid returns. At
the end of the fiscal year, technology stocks also accounted for the heaviest
sector weighting of the Portfolio. Health technology and consumer services
stocks were also among the Portfolio's largest sector weightings.
Some of the fiscal year's strongest performers in the Core Growth Portfolio
were: Accustaff, a temporary staffing agency for skilled professionals such as
attorneys, engineers, technicians, accountants, and computer experts; Ascend
Communications, a fast-growing developer of high-speed telecommunications
products that will allow people to exchange data, voice and video through wide
area networks; and Corrections Corporation of America, a company that builds and
operates prisons and jails for federal, state and local governments.
We select our growth stocks on the basis of three key characteristics: strong
signs of positive change, sustainable growth and recognition of the stock by
investors. We also distinguish between a good company and a good stock,
selecting the latter on the well-researched expectation of strong market
performance. Early recognition of these stocks has permitted us to capture
growth and to benefit from rapid share price appreciation. It enabled us to
deliver strong returns this past year.
We continue to find many exciting and dynamic medium-sized and large companies
that exhibit the sustainable earnings growth and market recognition we seek. We
believe these companies and the Core Growth Portfolio merit your continued
investment.
REPRESENTATIVE HOLDINGS
Cadence Design System, Inc.
Accustaff, Inc.
Gucci Group (ADR)
HFS, Inc.
Safeway, Inc.
Worldcom, Inc.
Nike, Inc.
Omnicare, Inc.
Infinity Broadcasting Corp.
Tidewater, Inc.
- --------------------------------------------------------------------------------
29
<PAGE>
A CONVERSATION WITH JACK MARSHALL
- -------------------------------------------------------------------
Jack Marshall
[PHOTO] Portfolio Manager
Core Growth Portfolio
Q. JACK, WOULD YOU DESCRIBE THE OVERALL
INVESTMENT PHILOSOPHY OF THE CORE GROWTH PORTFOLIO?
A. We want to own companies that are making
things happen in positive ways. We actively seek out companies that are
accelerating their own growth rates through positive fundamental change. We
don't set "hurdle" rates for the growth we seek. We're more focused on finding
acceleration in the growth curves of these companies, and we've designed our
entire process to find these kinds of companies.
Q. WHAT TYPE OF INVESTOR WOULD BE SUITABLE FOR
THIS APPROACH?
A. It would be suitable for any investor who wants
to benefit from owning companies that are among the best investments in America.
We build the Portfolio on a company-by-company basis. We'll own between 80 and
100 companies, and in our opinion, they are among the best companies out there.
We're not trying to predict what is going to happen with the economy in 1997 or
1998 and buy companies that are likely to do well under those conditions.
Instead, we're buying companies that are thriving today.
Q: THE PORTFOLIO CAN CONTAIN BOTH MID-SIZED AND
LARGE COMPANY STOCKS BUT, OVERALL, IT TENDS TO INVEST MOSTLY IN MID-SIZED
COMPANIES. WHY DO THESE COMPANIES OFFER THE STRONGEST OPPORTUNITIES FOR
LONG-TERM CAPITAL APPRECIATION?
A. With the Core Growth Portfolio, we invest in
companies where the total outstanding stock -- also known as the market
capitalization -- is worth more than $500 million. That represents about 1,700
companies out there in the marketplace. That's about 75 percent of the total
market capitalization of the U.S. stock market.
We cover the broad spectrum of companies, with our focus on finding positive
fundamental change and accelerating growth within our market-capitalization
range. We tend to have a mid-cap focus now because that's where we currently are
finding the exciting growth opportunities. Investors should know that mid-sized
companies have displayed more market price fluctuation than large company
stocks. For the most part, the companies we own in this portfolio are past their
entrepreneurial risk. They've been in business awhile, they're seasoned to some
degree, and yet they're growing faster right now than many of the larger
companies. This places us in the middle of this market, and to me it means we're
getting the best of both worlds.
Q. TYPICALLY IN AGGRESSIVE GROWTH FUNDS, YOU
WOULD FIND A FAIRLY STRONG COMMITMENT TO TECHNOLOGY STOCKS. WHAT IS YOUR
APPROACH TO TECHNOLOGY, AND HOW ARE YOU LOOKING AT THAT BROAD SECTOR?
A. Let me start by explaining how each of our
technology holdings ended up in the Portfolio. Every one of the 1,700 companies
I just mentioned competes for a right to get into the Portfolio. We are fully
invested managers. We do not hold cash or engage in any type of market timing.
We strive
- --------------------------------------------------------------------------------
30
<PAGE>
- -------------------------------------------------------------------
continually to own the best growth companies. Bringing in a new company means
that one that is not as strong is pushed out of the Portfolio.
This approach caused the percentage of our holdings in technology to be slightly
lower at the end of the fiscal year than at the beginning. About 22% of assets
are invested in technology companies. We were as high as 35% or 36% a year ago.
One of the technology companies we own is Cisco Systems, a manufacturer of
computer networking equipment. It manufactures routers and bridges that enable
computers to communicate with each other. We also own Cadence Design, which is
an electronic design automation software company. Cadence provides a lot of
unique software for engineers, architects, and other designers. These companies
are doing some exciting and innovative things, and that's what has earned them a
place in the Portfolio.
Q: LAST SUMMER YOU SOLD MANY COMPUTER-CHIP
COMPANY STOCKS. WHAT CAUSES YOU TO SELL A STOCK? WHAT DO YOU SEE THAT TRIGGERS
THAT DECISION?
A. We don't set any price targets when we buy a
company's stock. We are going to continue to own that company for as long as its
earnings growth is accelerating and is sustainable. If that begins to change, we
are going to sell it and move on to a company where we are earlier on in the
recognition of change. This happened with the computer-chip, or semiconductor,
group.
Last year, we started to see a couple of second- and third-tier companies in
this arena starting to have trouble. Then we saw all of the top-tier
semiconductor and semiconductor equipment companies coming to market with
secondary stock offerings, mainly to bring on more capacity. When you get all of
the competitors out there bringing more capacity to the marketplace, it causes
pressure on pricing. Obviously, this is something you don't want to be involved
in when you have margins at record highs and earnings at record highs. That's
really what caused us to move out of the semiconductor area. If we see a
negative change at the margin on a sustainable basis, we are going to sell the
company and purchase a more attractive stock.
Q: YOU'RE TALKING ABOUT THE FUNDAMENTAL
INDICATORS THAT HELP YOU SELL A STOCK. DO YOU USE ANY TECHNICAL ANALYSIS AT ALL?
A: The only technical indicator we use is relative
strength. It's one of our three purchase criteria. We want to see the stock
doing well on a relative basis. On the flip side, if a stock begins to
underperform in the marketplace, that's going to trigger us to perform thorough
research to ensure that the company's fundamental strengths are intact.
Q: WHAT ARE SOME RECENT EXAMPLES OF STOCKS YOU
HAVE ADDED OR DELETED?
A. We recently bought Harley Davidson, the
motorcycle manufacturer. The company sold its recreational vehicle business and
is concentrating on what it does best, produce high-quality motorcycles under
one of the most desired brand names in transportation. We added MCI
Communications to the Portfolio because we believe the company's added focus on
satellite communications will help fuel earnings growth. We sold fertilizer
company IMC Global as a result of a buildup of potash inventories globally that
we believe could reduce earnings growth. We also sold shares of Oak Technology
because we believe the company's high-technology products no longer command the
potential to ignite rapid sales and earnings growth.
- --------------------------------------------------------------------------------
31
<PAGE>
CORE GROWTH INSTITUTIONAL PORTFOLIO
- -------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
CORE GROWTH INSTITUTIONAL PORTFOLIO WITH THE S&P 500 INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/96
1 YEAR 5 YEARS 10 YEARS
35.81% 16.94% 16.56%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CORE
<S> <C> <C>
Growth Institutional S&P 500
Portfolio Index
09/30/85 250000 250000
12/85 311845 292860
3/86 388397 334118
6/86 437508 353762
9/86 388690 329063
12/86 414299 347444
3/87 508798 421503
6/87 523217 442611
9/87 570277 471735
12/87 429184 365741
3/88 439956 386614
6/88 488926 412140
9/88 478446 413572
12/88 483552 426260
3/89 509490 456652
6/89 542075 496597
9/89 637945 549614
12/89 647590 561013
3/90 655822 544538
6/90 753891 578425
9/90 618533 499388
12/90 652318 543946
3/91 822080 622905
6/91 785307 621480
9/91 886374 654716
12/91 1014500 709606
3/92 987752 691681
6/92 919329 704810
9/92 964695 727076
12/92 1151988 763705
3/93 1226048 797065
6/93 1305243 800858
9/93 1408010 821511
12/93 1379773 840600
3/94 1282663 808673
6/94 1208819 812061
9/94 1268501 851780
12/94 1234654 851663
3/95 1324943 934713
6/95 1472975 1023897
9/95 1659853 1105290
12/95 1710920 1171847
03/31/96 1799454 1234698
</TABLE>
This graph is furnished to you in accordance with SEC regulations. It compares a
$250,000 investment in Core Growth Institutional Portfolio with the Standard &
Poor's ("S&P") 500 Index, on a cumulative basis. All return calculations reflect
the reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses. Performance results reflect the total returns of
a predecessor limited partnership managed by Nicholas-Applegate Capital
Management prior to the effective date of the Portfolio's registration statement
which was 4/19/93. Limited partnership returns are restated to reflect all fees
and expenses applicable to the Portfolio and share class. If the limited
partnership had been registered as an investment company under the federal
securities laws, its performance might have been adversely affected because of
the additional restrictions applicable to registered investment companies.
The total returns for the Portfolio reflect the fact that fees and expenses in
excess of certain expense limits specified in the investment management
agreement have been deferred by Nicholas-Applegate Capital Management. Total
return results would have been lower had there been no deferral of fees and
expenses in excess of expense limitations.
The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies regarded as generally
representative of the U.S. stock market.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
32
<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.
- --------------------------------------------------------------------------------
33
<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
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
34
<PAGE>
- -------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
COMMON STOCKS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
SOFTWARE (CONTINUED)
Parametric Technology Corp.*............... 117,000 $ 4,577,625
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
------------
</TABLE>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
WHOLESALE DISTRIBUTION -- 1.3%
Danka Business Systems PLC Sponsored ADR
(Argentina).............................. 131,300 $ 5,547,425
------------
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.
- --------------------------------------------------------------------------------
35
<PAGE>
INCOME & GROWTH PORTFOLIO
- -------------------------------------------------------------------
GOAL: Seeks to maximize total return through investment primarily in
convertible and equity securities of U.S. companies.
REVIEW AND OUTLOOK: The Income and Growth Portfolio earned solid returns over
the past fiscal year on the strength of advancing issues in the basic materials,
consumer cyclicals and industrial manufacturing sectors.
The Portfolio invests in companies that have issued bonds or other securities
convertible into common stocks. These instruments provide investors an
opportunity to participate in the growth of rapidly developing companies while
receiving income, reducing risk, and benefiting from diversification. The
Portfolio also invests directly in common stocks and commercial paper.
At the end of the fiscal year, the largest convertible bond positions in the
Portfolio were in the technology healthcare services sectors. Computer and
office automation products companies and telecommunications equipment companies
are among the Portfolio's largest technology holdings. Pharmaceutical companies
led the healthcare sector, with convertible bonds for managed healthcare also
representing large Portfolio holdings.
Good securities selection combined with strength in oil and gas sectors
boosted the Portfolio's performance in the closing weeks of the fiscal year.
Securities such as Starbucks, General Motors, Pride Petroleum Services, Career
Horizons, a staffing services company, and Youth Services International, a
provider of educational and vocational training for troubled youth contributed
to solid gains in the Portfolio's fiscal year performance.
With both stock and bond markets performing well over the past year, the
Portfolio succeeded in capturing both yield and growth of capital. We remain
fully invested and well diversified among asset classes, and believe that
convertible securities continue to offer opportunities for excellent
performance.
REPRESENTATIVE HOLDINGS
Omnicom Group, Inc.
First Financial Management Corp.
SCI Financial LLC
Alco Standard Corp.
Ericsson L M Tel Co.
Staples, Inc.
Starbucks Corp.
Analog Devices, Inc.
Fifth Third Bancorp.
ADT Operations, Inc.
- --------------------------------------------------------------------------------
36
<PAGE>
A CONVERSATION WITH JOHN WYLIE
- -------------------------------------------------------------------
John Wylie
[PHOTO] Portfolio Manager
Income and Growth Porfolio
Q: JOHN, THIS WAS A GREAT YEAR FOR CONVERTIBLE
SECURITIES AND THE NICHOLAS-APPLEGATE INCOME AND GROWTH PORTFOLIO. WHAT HAPPENED
IN THE MARKET TO BRING ABOUT SUCH STRONG RESULTS?
A. In 1995, what led to a good year in stocks and
bonds was the realization that we were in a period of moderate economic growth
with very low inflation. That created a strong market because earnings continued
to be very positive at the same time that fears of inflation were dissipating.
The positive performance of both stocks and bonds contributed to the great year
for convertibles.
Q: WHAT SECTORS AND INDUSTRIES ARE YOU FINDING
THE GREATEST OPPORTUNITIES IN RIGHT NOW?
A. We are bottom-up oriented in our stock
selection, which means that we build our portfolios company by company. As a
result, we have investments in many technology companies, particularly in
companies like MFS Communications, which provides high-quality phone services to
companies, and 3COM, a leading computer networking company. We also have a
significant percentage of assets invested in healthcare companies. We own
companies such as Vencor, Healthsource and Healthsouth Rehabilitation, operators
of nursing homes, hospitals and other healthcare facilities.
Really, though, in looking at companies, I'm searching for the best growth
companies I can find, whether it's a company in the funeral home business, like
SCI Financial, or a company like Sanifill, which manages landfills.
Q: TECHNOLOGY WAS THE SECTOR IN THE SPOTLIGHT FOR
THE LAST YEAR, YET RECENTLY ITS PERFORMANCE FELL OFF A BIT. WHAT'S YOUR OUTLOOK
FOR TECHNOLOGY NOW?
A. In the last fifteen months we've really seen highs
and lows in technology. We still have a large exposure although the Portfolio's
individual investments in technology have changed dramatically over the last
nine months. While we were more heavily invested in some computer-chip companies
last year in the first and second quarters, we began lightening up in this arena
in the third and fourth quarters.
We're still very positive, however, on the fundamentals of individual
technology companies. The dramatic changes that are occurring in our lives are
largely due to technology, and it will continue to be a very important part of
those changes. As a result, we are seeking the companies that will be able to
succeed in a very competitive technological environment.
Q: WHAT IS YOUR OUTLOOK FOR CONVERTIBLE SECURITIES
FOR THE COMING YEAR?
A. I'm really excited about the performance of
growth companies. One reason is that as earnings estimates for the market as a
whole decelerate, the growth that we find from growth companies looks more and
more attractive. Also, I'm excited about smaller and mid-cap companies because I
think that in a slower-economic growth environment, those are the companies that
can compete more effectively, whether it's because of a new product or a new
environment, a new marketing philosophy or new technologies. Those are the types
of companies that historically have issued convertibles. They do it to
- --------------------------------------------------------------------------------
37
<PAGE>
- -------------------------------------------------------------------
raise financing to expand their growth, open new stores, or to fund research and
technology. I think this is an environment that will be very positive for the
convertible market as a whole.
Q: WHAT ARE SOME EXAMPLES OF SECURITIES THAT
YOU'VE RECENTLY BOUGHT AND SOLD FOR THE PORTFOLIO?
A. We've recently added Checkpoint Systems, a
manufacturer of anti-shoplifting devices for retailers. We're looking for
earnings growth of 25% a year if it continues to take market share away from
Sensormatic, its primary competitor. It's a really exciting story. We've also
added Elan Pharmaceuticals, a company that's involved in absorption technologies
for alternative drug delivery systems, such as transdermal patches. We're
looking for 30% earnings growth in Elan. We're also looking for 40% earnings
growth out of Starbucks as it continually expands the number of retail outlets
and as it expands the number of ways to obtain the product, through mail order,
or specialty arrangements with restaurants or even airlines.
We recently sold our interest in specialty computer chip maker Altera, after
one of the Company's competitors announced a softening of new orders that would
ultimately reach Altera and cause its estimated earnings and share price to
weaken. We also sold our interest in Riverwood International a paper and
packaging company that was purchased by the Clayton, Dubilier and Rice Group a
privately held company.
- --------------------------------------------------------------------------------
38
<PAGE>
INCOME & GROWTH INSTITUTIONAL PORTFOLIO
- -------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
INCOME & GROWTH INSTITUTIONAL PORTFOLIO WITH THE S&P 500 INDEX AND THE CS FIRST
BOSTON CONVERTIBLE INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/96 INCEPTION TO
1 YEAR 5 YEARS DATE
26.69% 15.25% 14.69%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INCOME &
<S> <C> <C> <C>
Growth First Boston
Institutional S&P 500 Convertible
Portfolio Index Index
12/31/86 250000 250000 250000
3/87 282650 303289 281944
6/87 283328 318476 288757
9/87 298974 339432 302043
12/87 242192 263165 249439
3/88 256810 278185 267254
6/88 277739 296551 280484
9/88 277006 297581 277535
12/88 290339 306711 282892
3/89 324952 328580 299377
6/89 343057 357321 313413
9/89 363686 395469 326634
12/89 372775 403671 321822
3/90 390390 391817 317883
6/90 412936 416200 325477
9/90 365477 359330 290715
12/90 379633 391391 299661
3/91 436754 448205 339938
6/91 444501 447180 343671
9/91 492799 471094 369371
12/91 525253 510590 386905
3/92 528862 497692 405298
6/92 509646 507139 415378
9/92 529749 523160 431500
12/92 576920 549517 454916
3/93 600581 573520 488214
6/93 652280 576249 501327
9/93 709414 591110 526248
12/93 733126 604845 539288
3/94 716057 581873 523670
6/94 683382 584310 509448
9/94 697860 612890 524679
12/94 677476 612806 513857
3/95 701600 672563 543962
6/95 751174 736735 593568
9/95 817560 795300 630348
12/95 828248 843191 635736
3/31/96 888828 888415 672870
</TABLE>
This graph is furnished to you in accordance with SEC regulations. It compares a
$250,000 investment in Income & Growth Institutional Portfolio with the Standard
& Poor's ("S&P") 500 Index and the CS First Boston Convertible ("First Boston
Convertible") Index, on a cumulative basis. All return calculations reflect the
reinvestment of income dividends and capital gains distributions, if any, as
well as all fees and expenses. Performance results reflect the total returns of
a predecessor limited partnership managed by Nicholas-Applegate Capital
Management prior to the effective date of the Portfolio's registration statement
which was 4/19/93. Limited partnership returns are restated to reflect all fees
and expenses applicable to the Portfolio and share class. If the limited
partnership had been registered as an investment company under the federal
securities laws, its performance might have been adversely affected because of
the additional restrictions applicable to registered investment companies.
The total returns for the Portfolio reflect the fact that fees and expenses in
excess of certain expense limits specified in the investment management
agreement have been deferred by Nicholas-Applegate Capital Management. Total
return results would have been lower had there been no deferral of fees and
expenses in excess of expense limitations.
The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies regarded as generally
representative of the U.S. stock market.
The First Boston Convertible Index is an unmanaged market weighted index
representing the universe of convertible securities whether they are convertible
preferred stocks or convertible bonds.
In future annual reports, Nicholas-Applegate will compare the Income & Growth
Portfolio only to the broader First Boston Convertible Index for the purposes of
showing annualized total returns. We believe this shift in benchmark measures is
appropriate since the composition of the Portfolio more closely matches the
composition of the First Boston Convertible Index.
The Indexes reflect the reinvestment of income dividends and capital gains
distributions, if any, but do not reflect fees, brokerage commissions, or other
expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
39
<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
- -----------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
40
<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.
- --------------------------------------------------------------------------------
41
<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.
- --------------------------------------------------------------------------------
42
<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.
- --------------------------------------------------------------------------------
43
<PAGE>
BALANCED GROWTH PORTFOLIO
- -------------------------------------------------------------------
GOAL: 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.
REVIEW AND OUTLOOK: The Balanced Growth Portfolio posted solid returns through
the fiscal year as moderate economic growth and low inflation proved favorable
to the Portfolio's mix of growth stocks and high-quality bonds. In late 1995,
optimism prevailed among investors that Congress would enact a budget with
significant cuts in deficit spending. This accelerated the bond market's rise
during that period. In the first quarter of 1996, however, a budget resolution
was not reached and bonds gave back some of their gains. Market participants
seemed to conclude that many economic benefits from such an accord would be
delayed and this also seemed to influence the recent sell-off in bonds.
Among the Portfolio's stock holdings, financial services, energy, and
technology issues generated the strongest returns. At the end of March, the
Portfolio was weighted 21.9% in technology, 8.1% in financial services, and 7.4%
in healthcare services. Portfolio performance was bolstered by exceptional
returns from companies like Ascend Communications, a telecommunications company
specializing in Internet infrastructure equipment; Atmel Corp., a leading
manufacturer of memory chips used in cars and appliances; and Altera Corp., a
developer of programmable logic devices used in communications, industrial and
computer applications.
The bond portion of the Portfolio earned strong returns for the period. Weak
retail sales, combined with slow economic growth outside the United States, and
strong buying from foreign central banks contributed to unusually strong
performance for U.S. government bonds. Weakness in the Japanese and Mexican
economies and slow growth in Europe attracted investors to U.S. government bond
markets throughout 1995. Although the bond market experienced a sell-off in
early 1996, we believe the economy's moderate growth environment, coupled with
low inflation, provides a positive environment for our bond portfolio.
We are optimistic that the dynamic growth companies and high-quality
government securities* in the Balanced Portfolio will continue to provide
investors with robust growth of capital. We remain actively engaged in
identifying and investing in companies whose innovative products, management and
ideas make such rapid growth possible. By maintaining our disciplined approach
to managing the Portfolio, we believe we offer investors an appealing way to
achieve long-term financial objectives.
REPRESENTATIVE HOLDINGS
U.S. Treasury Note, 7.500%, 11/15/01
Tennessee Valley Authority, Debenture,
6.375%, 6/15/05
U.S. Treasury Note, 6.250%, 8/31/00
U.S. Treasury Bond, 8.125%, 8/15/21
Ascend Communications, Inc.
Corrections Corp. of America
Health Management Associates, Inc.
America Online, Inc.
Bear Stearns Co.
McAfee Associations, Inc.
- ------------
* The government guarantee of the Fund's portfolio securities does not
guarantee the value of the Fund's shares. The Fund's share price will
generally fluctuate with changing interest rates or other market conditions.
- --------------------------------------------------------------------------------
44
<PAGE>
A CONVERSATION WITH LARRY SPEIDELL AND JOHN WYLIE
- -------------------------------------------------------------------
Larry Speidell
[PHOTO] Portfolio Co-Manager
Balanced Growth Portfolio
John Wylie
[PHOTO] Portfolio Co-Manager
Balanced Growth Portfolio
Q: LAST YEAR, BONDS AND STOCKS MOVED TOGETHER IN
THE MARKET. RECENTLY, HOWEVER, BONDS FELL OFF WHILE STOCKS CONTINUED TO MOVE
UPWARD. HOW MIGHT THIS AFFECT THE NICHOLAS-APPLEGATE BALANCED GROWTH PORTFOLIO?
JOHN: Stocks and bonds haven't move together all of
the time historically. This is the reason we have both stocks and bonds in the
Portfolio. It's called a balanced portfolio just for that reason, to balance out
the performance and the risk in the Portfolio.
Q: THE BALANCED GROWTH PORTFOLIO SHOWED
ESPECIALLY STRONG PERFORMANCE FROM MARCH TO JULY OF LAST YEAR. WHAT MARKET
CONDITIONS CREATED SUCH A FAVORABLE ENVIRONMENT?
LARRY:The moderate growth of the economy and
low inflation created a favorable environment for both stocks and bonds through
much of last year. It's difficult to identify why prices rose for any one short
period of time, but markets tend to advance at irregular rates over short
periods. That underscores the importance of our philosophy of staying fully
invested at all times. We don't want our investors to miss out on any of the
markets' best days. We believe that over the long term, market timing strategies
can cost investors dearly.
Q: WITH SO MANY STOCKS AVAILABLE IN THE DOMESTIC
MARKETS, HOW DO YOU DECIDE WHICH ONES TO SELECT FOR THE PORTFOLIO?
LARRY:Each company must pass a set of established
criteria. We're looking for companies where there is some sort of change that
will lead to earnings acceleration. Then we look for evidence that these
earnings accelerations are sustainable. Finally, we want to know that the
investment is timely; we want to be early on in the identification of change
that has the potential to lead to earnings growth. If the stock passes that
test, then we will put it in the Portfolio. We are constantly managing the
Portfolio so it is fully invested in the best set of growth companies we can
find.
Q: GROWTH STOCKS AND GOVERNMENT BONDS SEEM TO
BE AN UNUSUAL MIX OF SECURITIES. WHY HAVE YOU COMBINED THESE TWO CLASSES OF
ASSETS FOR THE BALANCED GROWTH PORTFOLIO?
JOHN: The objective of the Balanced Growth
Portfolio is to provide capital appreciation and current income with lower
volatility than an all-equity portfolio. We are able to achieve that objective
through the diversification with different asset classes. Stocks and bonds have
historically had low correlations, meaning they have tended to move in different
directions. In a balanced fund like ours, that can smooth out the ride for
investors.
- --------------------------------------------------------------------------------
45
<PAGE>
- -------------------------------------------------------------------
Q: WHAT ARE SOME OF EXAMPLES OF SECURITIES YOU
HAVE RECENTLY BOUGHT OR SOLD FOR THE PORTFOLIO?
LARRY:We recently added Ascend Communications, a
company that makes high-speed digital network access products. Another
interesting company is Corrections Corp. of America, a company that builds and
operates jails and prisons. One of the recurring economic themes of recent years
is the concept of outsourcing by corporations or privatizing by government
agencies. Corrections Corp. has been a prime beneficiary of that trend as
governments have contracted for the construction and management of correctional
institutions. A third company we recently added to the Portfolio is America
Online, an Internet-access and online-services company. Everybody has heard
about what's going on with the Internet and its great potential. This is a
company that is benefiting today from the dynamic growth of that industry.
We sold shares of Carpenter Technology, a manufacturer of specialty steels and
ceramics, because of pricing weakness for metals and because of slowing earnings
growth. We moved out of S3, a leading manufacturer of graphics systems for
personal computers, because of our concern that slowing sales of PCs could
dampen earnings growth.
- --------------------------------------------------------------------------------
46
<PAGE>
BALANCED GROWTH INSTITUTIONAL PORTFOLIO
- -------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
BALANCED GROWTH INSTITUTIONAL PORTFOLIO WITH A MODEL INDEX CONSISTING OF 60% S&P
500 INDEX/40% LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<S> <C>
ANNUALIZED TOTAL RETURN
SINCE INCEPTION ONE YEAR TOTAL RETURN
(10/01/93 -- 03/31/96) (04/01/95 -- 03/31/96)
7.50% 21.45%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
60% S&P 500
<S> <C> <C>
Index/40%
Lehman Brothers
Government/Corporate
Balanced Growth Bond
Institutional
Portfolio Index
10/01/93 250000 250000
12/93 242780 253187
3/94 235858 244253
6/94 224276 243689
9/94 235450 251328
12/94 231595 251733
3/95 246606 271449
6/95 270815 294028
9/95 292724 310270
12/95 288577 327299
03/31/96 299512 334618
</TABLE>
This graph is furnished to you in accordance with SEC regulations. It compares a
$250,000 investment in the Balanced Growth Institutional Portfolio with a model
index consisting of 60% Standard & Poor's ("S&P") 500 Index and 40% Lehman
Brothers Government/Corporate Bond Index, on a cumulative basis. All return
calculations reflect the reinvestment of income dividends and capital gains
distributions, if any, as well as all fees and expenses applicable to the
Portfolio.
The total returns for the Portfolio reflect the fact that fees and expenses in
excess of certain expense limits specified in the investment management
agreement have been deferred by Nicholas-Applegate Capital Management. Total
return results would have been lower had there been no deferral of fees and
expenses in excess of expense limitations.
The S&P 500 Index is an unmanaged index containing 500 industrial,
transportation, utility and financial companies regarded as generally
representative of the U.S. stock market.
The Lehman Brothers Government/Corporate Bond Index is an unmanaged
market-weighted index consisting of all public obligations of the U.S.
Government, its agencies and instrumentalities and all corporation issuers of
fixed rate, non-convertible, investment grade U.S. dollar denominated bonds
having maturities of greater than one year. It is generally regarded as
representative of the market for domestic bonds.
Each index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
Past performance is no guarantee of future performance. Investment return and
the principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
47
<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.
- --------------------------------------------------------------------------------
48
<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.
- --------------------------------------------------------------------------------
49
<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
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
50
<PAGE>
- -------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------
CORPORATE BONDS (Continued)
- ----------------------------------------------
<TABLE>
<S> <C> <C>
RETAIL/FOOD DISTRIBUTION -- 0.9%
Doskocil Cos., Inc.
9.75%, 07/15/00.................. $ 200,000 $ 207,760
-----------
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.
- --------------------------------------------------------------------------------
51
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------
INSTITUTIONAL SERIES PORTFOLIOS+
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED DISTRIBUTIONS
VALUES AT INVESTMENT AND UNREALIZED FROM NET
BEGINNING INCOME GAINS (LOSSES) INVESTMENT
OF PERIOD (DEFICIT) ON INVESTMENTS INCOME
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
MINI CAP GROWTH
Institutional (For the
period ended
03/31/96)............... $12.50 $(0.05) $ 3.40 --
EMERGING GROWTH
Institutional (For the
year ended 03/31/96).... 11.58 (0.11) 4.45 --
Institutional (For the
year ended 03/31/95).... 11.38 (0.05) 0.95 --
Institutional (For the
period ended
03/31/94)............... 12.50 (0.04) (0.69) --
CORE GROWTH
Institutional (For the
year ended 03/31/96).... 12.62 (0.03) 4.47 --
Institutional (For the
year ended 03/31/95).... 12.68 (0.01) 0.38 --
Institutional (For the
period ended
03/31/94)............... 12.50 (0.01) 0.92 --
INCOME & GROWTH
Institutional (For the
year ended 03/31/96).... 11.86 0.53 2.59 $(0.53)
Institutional (For the
year ended 03/31/95).... 13.39 0.54 (0.85) (0.54)
Institutional (For the
period ended
03/31/94)............... 12.50 0.42 2.12 (0.42)
BALANCED GROWTH
Institutional (For the
year ended 03/31/96).... 12.01 0.37 2.19 (0.37)
Institutional (For the
year ended 03/31/95).... 11.71 0.22 0.30 (0.22)
Institutional (For the
period ended
03/31/94)............... 12.50 0.08 (0.79) (0.08)
</TABLE>
- ------------
+Core Growth and Income & Growth Institutional Portfolios commenced operations
on April 19, 1993. Balanced Growth and Emerging Growth Institutional
Portfolios commenced operations on October 1, 1993. Mini Cap Institutional
Portfolio commenced operations on July 12, 1995.
++Includes expenses allocated from the Master Trust Funds. See Notes to Funds'
Financial Statements for amounts.
*Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
52
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET
DISTRIBUTIONS VALUES AT
FROM CAPITAL END OF TOTAL NET ASSETS AT
GAINS PERIOD RETURN END OF PERIOD
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
MINI CAP GROWTH
Institutional (For the
period ended
03/31/96)............... -- $15.85 26.80% $ 25,237,077
EMERGING GROWTH
Institutional (For the
year ended 03/31/96).... $(0.82) 15.10 38.27% 224,077,027
Institutional (For the
year ended 03/31/95).... (0.70) 11.58 8.69% 206,695,605
Institutional (For the
period ended
03/31/94)............... (0.39) 11.38 (6.06%) 165,939,862
CORE GROWTH
Institutional (For the
year ended 03/31/96).... (0.80) 16.26 35.81% 149,969,371
Institutional (For the
year ended 03/31/95).... (0.43) 12.62 3.30% 72,825,771
Institutional (For the
period ended
03/31/94)............... (0.73) 12.68 6.84% 77,947,252
INCOME & GROWTH
Institutional (For the
year ended 03/31/96).... -- 14.45 26.69% 17,239,363
Institutional (For the
year ended 03/31/95).... (0.68) 11.86 (2.02%) 12,506,203
Institutional (For the
period ended
03/31/94)............... (1.23) 13.39 20.18% 18,331,546
BALANCED GROWTH
Institutional (For the
year ended 03/31/96).... -- 14.20 21.45% 625,350
Institutional (For the
year ended 03/31/95).... -- 12.01 4.56% 283,586
Institutional (For the
period ended
03/31/94)............... -- 11.71 (5.66%) 142,745
<CAPTION>
RATIO OF NET RATIO OF NET
ASSETS, AFTER ASSETS, BEFORE ASSETS, AFTER ASSETS, BEFORE
EXPENSE EXPENSE EXPENSE EXPENSE
REIMBURSEMENT++ REIMBURSEMENT++ REIMBURSEMENT++ REIMBURSEMENT++
<S> <C> <C> <C> <C>
- ------------------------------
MINI CAP GROWTH
Institutional (For the
period ended
03/31/96)............... 1.55%* 2.46%* (0.98%)* (1.36%)*
EMERGING GROWTH
Institutional (For the
year ended 03/31/96).... 1.16% 1.20% (0.62%) (0.66%)
Institutional (For the
year ended 03/31/95).... 1.18% 1.24% (0.58%) (0.64%)
Institutional (For the
period ended
03/31/94)............... 1.17%* 1.18%* (0.83%)* (0.84%)*
CORE GROWTH
Institutional (For the
year ended 03/31/96).... 0.98% 1.06% (0.32%) (0.40%)
Institutional (For the
year ended 03/31/95).... 0.99% 1.07% (0.06%) (0.14%)
Institutional (For the
period ended
03/31/94)............... 0.97%* 1.14%* (0.07%)* (0.24%)*
INCOME & GROWTH
Institutional (For the
year ended 03/31/96).... 1.00% 1.53% 3.88% 3.34%
Institutional (For the
year ended 03/31/95).... 1.00% 1.48% 4.28% 3.80%
Institutional (For the
period ended
03/31/94)............... 0.99%* 1.50%* 3.36%* 2.85%*
BALANCED GROWTH
Institutional (For the
year ended 03/31/96).... 1.00% 9.90% 2.74% (5.74%)
Institutional (For the
year ended 03/31/95).... 1.00% 20.66% 2.06% (17.60%)
Institutional (For the
period ended
03/31/94)............... 0.99%* 43.16%* 1.59%* (40.58%)*
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
53
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES AS OF MARCH 31, 1996
- -------------------------------------------------------------------
INSTITUTIONAL SERIES PORTFOLIOS
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE INCOME & BALANCED
GROWTH GROWTH GROWTH GROWTH GROWTH
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------
ASSETS
Investments in Master Trust Fund, at
value*.................................. $25,238,596 $224,104,425 $149,989,288 $17,229,358 $630,681
Receivable for shares of beneficial
interest sold........................... 121,190 940,458 -- -- --
Receivable for investments sold in Master
Trust Fund.............................. 4,112 10,000,715 -- -- --
Due from advisor.......................... 16,389 12,576 14,551 17,286 3,209
Deferred organization costs............... 2,334 5,805 27,661 15,437 --
Prepaid expenses and other assets......... 175 3,571 2,179 275 7
--------------------------------------------------------------
Total assets.......................... 25,382,796 235,067,550 150,033,679 17,262,356 633,897
--------------------------------------------------------------
LIABILITIES:
Payable for investments purchased in
Master Trust Fund....................... 121,190 940,458 -- -- --
Payable for shares of beneficial interest
repurchased............................. 4,112 10,000,715 -- -- --
Dividend payable.......................... -- -- -- 3,118 --
Due to advisor............................ 2,670 -- -- -- --
Accrued expenses.......................... 17,747 49,350 64,308 19,875 8,547
--------------------------------------------------------------
Total liabilities..................... 145,719 10,990,523 64,308 22,993 8,547
--------------------------------------------------------------
NET ASSETS.................................. $25,237,077 $224,077,027 $149,969,371 $17,239,363 $625,350
--------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital........................... $22,215,329 $176,975,998 $125,283,677 $15,971,534 $560,083
Accumulated undistributed net investment
income (deficit)........................ (77,091) (2,914,124) (424,614) 2,962 24
Accumulated undistributed net realized
gains (losses) from security
transactions............................ (56,635) (13,072,987) (2,055,748) (728,277) 19,005
Net unrealized appreciation of
investments............................. 3,155,474 63,088,140 27,166,056 1,993,144 46,238
--------------------------------------------------------------
Net assets............................ $25,237,077 $224,077,027 $149,969,371 $17,239,363 $625,350
--------------------------------------------------------------
Shares of beneficial interest, no par
value, issued and outstanding (unlimited
shares authorized)...................... 1,592,133 14,834,897 9,221,300 1,193,034 44,039
--------------------------------------------------------------
COMPUTATION OF
Net asset value per share of beneficial
interest (Net assets/ Outstanding shares
of beneficial interest)................. $ 15.85 $ 15.10 $ 16.26 $ 14.45 $ 14.20
--------------------------------------------------------------
* Cost of investments in the Master Trust
Fund...................................... $22,212,904 $150,113,085 $113,788,452 $12,384,977 $547,587
--------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
54
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1996
- -------------------------------------------------------------------
INSTITUTIONAL SERIES PORTFOLIOS
<TABLE>
<CAPTION>
MINI CAP EMERGING INCOME & BALANCED
GROWTH* GROWTH CORE GROWTH GROWTH GROWTH
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------
INVESTMENT INCOME
Net investment income (deficit) from
Master Trust Fund....................... $ (73,147) $(1,191,864) $ (233,755) $ 536,772 $11,976
----------------------------------------------------------
EXPENSES
Accounting fees......................... 7,280 31,200 31,200 31,200 15,600
Administration fees..................... 3,945 5,001 10,653 3,968 582
Audit & tax services.................... 5,052 7,500 7,503 7,503 6,501
Insurance............................... 147 3,304 1,640 219 9
Legal fees.............................. 1,680 21,008 11,124 1,465 146
Miscellaneous........................... 134 6,973 3,997 1,978 1,652
Organization costs...................... 336 2,331 13,520 7,543 --
Registration fees....................... 8,549 12,079 7,382 2,987 3,407
Shareholder reporting fees.............. 548 64,473 57,097 7,861 1,000
Transfer agent fees..................... 5,318 37,501 28,219 15,416 7,725
Trustees' fee........................... 1,301 8,340 4,033 538 16
----------------------------------------------------------
Total expenses........................ 34,290 199,710 176,368 80,678 36,638
Less: Reimbursement from advisor........ (30,346) (94,447) (76,590) (73,847) (36,423 )
----------------------------------------------------------
Net expenses.......................... 3,944 105,263 99,778 6,831 215
----------------------------------------------------------
Net investment income (deficit)..... (77,091) (1,297,127) (333,533) 529,941 11,761
----------------------------------------------------------
NET REALIZED & UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) from security
transactions............................ (56,635) 36,854,224 13,876,018 1,265,964 38,873
Change in net unrealized appreciation of
investments............................. 3,155,474 33,557,773 17,420,211 1,584,928 22,385
----------------------------------------------------------
Net gain on investments............... 3,098,839 70,411,997 31,296,229 2,850,892 61,258
----------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ $3,021,748 $69,114,870 $30,962,696 $3,380,833 $73,019
----------------------------------------------------------
</TABLE>
- ---------------
*Commenced operations on July 12, 1995.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
55
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------
INSTITUTIONAL SERIES PORTFOLIOS
<TABLE>
<CAPTION>
MINI CAP
GROWTH EMERGING GROWTH
------------ --------------------------
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1996+ 1996 1995
<S> <C> <C> <C>
-----------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS
Net investment income
(deficit)............... $ (77,091) $ (1,297,127) $ (1,022,432)
Net realized gain (loss)
from security
transactions............ (56,635) 36,854,224 (19,724,608)
Change in net unrealized
appreciation of
investments............. 3,155,474 33,557,773 37,319,272
-----------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ 3,021,748 69,114,870 16,572,232
-----------------------------------------
DISTRIBUTIONS TO SHARES OF
BENEFICIAL INTEREST
Net investment income*.... -- -- --
Capital gain*............. -- (11,944,149) (10,693,053)
-----------------------------------------
Total distributions..... -- (11,944,149) (10,693,053)
-----------------------------------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Proceeds from sales....... 22,406,432 21,738,499 30,585,831
Proceeds from shares
issued for distribution
reinvestment............ -- 11,195,132 10,692,951
Cost of shares
repurchased............. (192,103) (72,722,930) (6,402,218)
-----------------------------------------
Increase (decrease) in net
assets derived from
transactions in shares
of beneficial
interest................ 22,214,329 (39,789,299) 34,876,564
-----------------------------------------
Total increase
(decrease) in net
assets................ 25,236,077 17,381,422 40,755,743
NET ASSETS:
BEGINNING OF PERIOD......... 1,000 206,695,605 165,939,862
-----------------------------------------
END OF PERIOD............... $25,237,077 $224,077,027 $206,695,605
-----------------------------------------
CHANGES IN SHARES OF
BENEFICIAL INTEREST
Beginning balance........... 80 17,845,788 14,576,639
Shares sold................. 1,605,094 1,606,361 2,887,314
Shares issued for
distributions
reinvested................ -- 823,777 1,037,144
Shares repurchased.......... (13,041) (5,441,029) (655,309)
-----------------------------------------
Ending Balance.............. 1,592,133 14,834,897 17,845,788
-----------------------------------------
</TABLE>
- -------------
*See Financial Highlights for per share distribution amounts.
+Commenced operations on July 12, 1995.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
56
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
CORE GROWTH INCOME & GROWTH BALANCED GROWTH
-------------------------- ------------------------ -----------------------
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, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS
Net investment income
(deficit)............... $ (333,533) $ (44,410) $ 529,941 $ 683,017 $ 11,761 $ 4,775
Net realized gain (loss)
from security
transactions............ 13,876,018 (4,872,966) 1,265,964 (1,779,392) 38,873 (12,200)
Change in net unrealized
appreciation of
investments............. 17,420,211 7,244,252 1,584,928 597,254 22,385 24,548
-----------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ 30,962,696 2,326,876 3,380,833 (499,121) 73,019 17,123
-----------------------------------------------------------------------------
DISTRIBUTIONS TO SHARES OF
BENEFICIAL INTEREST
Net investment income*.... -- -- (528,014) (683,134) (11,756) (4,767)
Capital gain*............. (4,998,748) (2,544,491) -- (768,642) -- --
-----------------------------------------------------------------------------
Total distributions..... (4,998,748) (2,544,491) (528,014) (1,451,776) (11,756) (4,767)
-----------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Proceeds from sales....... 59,521,255 23,632,447 4,259,507 1,552,115 330,767 162,027
Proceeds from shares
issued for distribution
reinvestment............ 4,613,020 2,432,896 515,752 1,424,207 11,755 4,766
Cost of shares
repurchased............. (12,954,623) (30,969,209) (2,894,918) (6,850,768) (62,021) (38,308)
-----------------------------------------------------------------------------
Increase (decrease) in net
assets derived from
transactions in shares
of beneficial
interest................ 51,179,652 (4,903,866) 1,880,341 (3,874,446) 280,501 128,485
-----------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ 77,143,600 (5,121,481) 4,733,160 (5,825,343) 341,764 140,841
NET ASSETS:
BEGINNING OF PERIOD......... 72,825,771 77,947,252 12,506,203 18,331,546 283,586 142,745
-----------------------------------------------------------------------------
END OF PERIOD............... $149,969,371 $ 72,825,771 $17,239,363 $12,506,203 $625,350 $283,586
-----------------------------------------------------------------------------
CHANGES IN SHARES OF
BENEFICIAL INTEREST
Beginning balance........... 5,768,800 6,145,675 1,054,784 1,369,540 23,604 12,194
Shares sold................. 3,993,369 1,934,559 315,794 124,529 24,001 14,309
Shares issued for
distributions
reinvested................ 312,747 213,787 38,265 119,942 857 414
Shares repurchased.......... (853,616) (2,525,221) (215,809) (559,227) (4,423) (3,313)
-----------------------------------------------------------------------------
Ending Balance.............. 9,221,300 5,768,800 1,193,034 1,054,784 44,039 23,604
-----------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
57
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS
- -------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Nicholas-Applegate Mutual Funds (the "Trust") is organized as a diversified,
open-end management investment company which offers 43 separate series comprised
of Portfolios A, with an initial sales charge, B, with a back-end sales charge,
C, with a level asset-based sales charge, Institutional, with no load, and
Qualified, with no load (each a "Portfolio" and collectively the "Portfolios").
The Portfolios of the Trust seek to achieve their respective investment
objectives by investing all of their assets in corresponding series of
Nicholas-Applegate Investment Trust (the "Master Trust"), a diversified,
open-end management investment company offering twelve investment vehicles (the
"Funds"). For a description of the investment objectives of each Fund, see Note
A to the accompanying Funds' financial statements.
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.
INVESTMENT INCOME
Each Portfolio accrues income, net of expenses, daily on its investment in the
applicable Fund. All of the net investment income (deficit) and realized and
unrealized gains and losses from the security transactions and foreign currency
of the Fund are allocated pro rata among the investors in the Fund at the time
of such determination.
FEDERAL INCOME TAXES
It is the Portfolios' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of their taxable income to their shareholders. Accordingly, no
federal income tax provisions are required if the Portfolios continue to comply
with such requirements.
The Funds are treated as partnerships for federal income tax purposes. Any
interest, dividends and gains or losses of the Funds will be deemed to have been
"passed through" to the Portfolios.
Net investment income and net realized gains for the year (or period where
appropriate) differ for financial statement and tax purposes primarily because
of one or all of the following: deferral of wash-sale losses, passive foreign
investments, unrealized appreciation/depreciation, and capital loss
carryforwards.
The character of distributions made during the year (or period where
appropriate) from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes due to book/tax
differences in the character of income and expense recognition.
DEFERRED ORGANIZATION COSTS
Organization costs incurred by the Trust have been allocated to certain
Portfolios based upon management's best estimate of the costs applicable to each
Portfolio. These costs have been deferred and will be amortized over a period of
60 months from the date the Portfolios commenced operations.
In the event that any of the initial shares are redeemed by the holder during
the period of amortization of the Portfolio's organization costs, the redemption
proceeds will be reduced by any such unamortized organization costs in the same
proportion as the number of initial shares being redeemed bears to the number of
those shares outstanding at the time of redemption.
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
- --------------------------------------------------------------------------------
58
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate" or "Investment Adviser"). The advisory fee is
computed daily for the Funds based upon the percentage of each Fund's average
daily net assets.
EXPENSE LIMITATIONS
Nicholas-Applegate and the Trust have undertaken to limit the Portfolios'
expenses to the following annual levels through March 31, 1997. In subsequent
years, overall operating expenses for each Portfolio will not fall below the
applicable 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 Portfolio will reimburse the Investment Adviser in
subsequent years when operating expenses (before reimbursement) are less than
the applicable percentage limitation.
<TABLE>
<S> <C>
Mini Cap Growth Institutional
Portfolio............................. 1.56%
Emerging Growth Institutional
Portfolio............................. 1.17%
Core Growth Institutional Portfolio.... 1.00%
Income & Growth Institutional
Portfolio............................. 1.00%
Balanced Growth Institutional
Portfolio............................. 1.00%
</TABLE>
These percentages are based on the average net assets of the Portfolios,
exclusive of interest, taxes, brokerage commissions and other costs incurred in
connection with portfolio securities transactions, capital expenditures, and
extraordinary expenses.
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Portfolios, during the period from inception (respectively) to March 31,
1996, are as follows:
<TABLE>
<S> <C>
Mini Cap Growth Institutional
Portfolio.......................... $30,346
Emerging Growth Institutional
Portfolio.......................... 192,271
Core Growth Institutional
Portfolio.......................... 251,413
Income & Growth Institutional
Portfolio.......................... 216,309
Balanced Growth Institutional
Portfolio.......................... 107,314
</TABLE>
Nicholas-Applegate advanced certain organization costs discussed in Note 1. As
of March 31, 1996, the Mini Cap Institutional Portfolio had $2,670 due to
Nicholas-Applegate for organizational costs advanced.
RELATED PARTIES
Certain officers of the Trust and the Master Trust are also officers of the
Investment Advisor.
3. INVESTMENT TRANSACTIONS
Additions and reductions in the investments in the respective Master Trust
Funds for the fiscal year ended March 31, 1996 were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
(000S) (000S)
--------- -----------
<S> <C> <C>
Mini Cap Growth Institutional
Portfolio........................ $ 22,421 $ 208
Emerging Growth Institutional
Portfolio........................ 21,813 73,678
Core Growth Institutional
Portfolio........................ 59,583 13,503
Income & Growth Institutional
Portfolio........................ 4,318 2,986
Balanced Growth Institutional
Portfolio........................ 369 105
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
59
<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.
- --------------------------------------------------------------------------------
60
<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.
- --------------------------------------------------------------------------------
61
<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.
- --------------------------------------------------------------------------------
62
<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>
- --------------------------------------------------------------------------------
63
<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
- --------------------------------------------------------------------------------
64
<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>
- --------------------------------------------------------------------------------
65
<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.
- --------------------------------------------------------------------------------
66
<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
- --------------------------------------------------------------------------------
67
<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
- --------------------------------------------------------------------------------
68
<PAGE>
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<PAGE>
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<PAGE>
NICHOLAS=APPLEGATE-Registered Trademark- MUTUAL FUNDS
- -------------------------------------------------------------------------------
600 West Broadway
BULK RATE
San Diego, California 92101
U.S. POSTAGE
800-551-8033
PAID
MERRILL/MAY, INC.
AN396GLOQ
