<PAGE>
NICHOLAS APPLEGATE-Registered Trademark-
MUTUAL FUNDS, ANNUAL REPORT
INSTITUTIONAL PORTFOLIOS
MARCH 31, 1998
WE SEE THE WORLD DIFFERENTLY
[PHOTO]
<PAGE>
DEAR FELLOW SHAREHOLDERS,
It's been an exciting year for investors, with stock markets climbing to
record levels and bond markets enjoying steady growth. Mid and small-sized
companies are beginning to reassert themselves after a long period of investor
preference for large company stocks.
The U.S. market continues to grow with a strong economy and currency as well
as low inflation and interest rates. High consumer confidence has led to
exceptional growth. An example of a company benefiting from this trend is Ethan
Allen Interiors, a retailer of quality home furnishings which we hold in our
Emerging Growth Fund. This nationwide chain continues to establish its presence
in premium locations, introduce innovative products and expand its sales base
among new home buyers, all contributing to profitability.
[PHOTO]
ARTHUR E. NICHOLAS
Managing Partner
Chief Investment Officer
[PHOTO]
<PAGE>
[PHOTO]
Europe is also experiencing one of its most dynamic growth periods ever, with
healthy trends toward deregulation and consolidation of industries, particularly
in the financial sector. Credito Italiano is one of Italy's largest banks, and
is a primary example of a European financial institution benefiting from falling
interest rates and a shift toward investing in stocks.
Asia, of course, presents the biggest challenges, with currencies and stock
markets experiencing drastic declines. Some countries are working fervently to
reform their economies toward recovery while others stubbornly resist change. We
have lowered our exposure significantly, though our style of investing continues
to uncover good opportunities. For example, Sony generates high consumer demand
worldwide, resulting in record earnings and profits, in spite of Japan's
stagnant economy.
[PHOTO]
Nicholas-Applegate's process is focused on investment leadership in a changing
world. Our goal has always been superior performance and client service. We go
after the best opportunities by setting our sights on change wherever it occurs.
We're after companies demonstrating growing earnings and the potential to exceed
<PAGE>
[PHOTO]
the expectations we set for them. A growing company only meets our criteria when
it shows it can sustain this potential a year or more down the road. And the
change must be timely. A company may be doing well financially and demonstrate
sustainability, though it must also keep pace with market and technological
developments to capture our interest. As you'll see throughout this report, our
portfolio managers apply these tenets to invest in exciting opportunities
worldwide.
Perhaps one area that demonstrates positive change most clearly is emerging
markets, where modern technology is opening up business opportunities that were
non-existent only a few years ago. Take, for example, Hungary's telephone
company, Matav, which we held in our Emerging Countries Fund. This is the only
telephone company in Hungary. As modernization proceeds and more private
residences acquire telephones, Matav enjoys dramatic growth. This is the kind of
positive change we're after.
We find it with superior information management. We build our research on
relationships with expert analysts around the world. We've pioneered an exchange
program bringing analysts to work at our offices in the United States and
sending our people overseas to learn first hand how things work in different
markets. In addition, our proprietary database tracks over 20,000 companies
worldwide.
<PAGE>
Once we gather information, we put it to work. Our portfolio managers thrive
on communication, so we've structured our trading floors in open environments.
When news in one area of the market affects Nicholas-Applegate holdings in
another, information flows swiftly to the portfolio management team that can use
it.
We're also acutely aware that when the U.S. market is closed, the rest of the
world is still open for business. We don't miss opportunities just because they
are happening in different time zones.
All of these elements account for Nicholas-Applegate's ability to find
compelling opportunities, not only in strong markets such as Europe and the
United States, but also in challenging markets including Latin America and
Eastern Europe. We believe the future for continued long-term growth is bright,
even in Asia, and encourage investors to share our disciplined, long-term
perspective.
Thank you for your support of the Nicholas-Applegate Mutual Funds. We welcome
your comments and look forward to continuing our work with you in the coming
years.
Sincerely yours,
/s/ ART NICHOLAS
Art Nicholas
[PHOTO]
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Portfolios' Review and Outlook, Performance and the Funds' Schedules
of Investments
Mini Cap Growth....................................................... 1
Emerging Growth....................................................... 6
Core Growth........................................................... 14
Large Cap Growth...................................................... 18
Value................................................................. 21
Income & Growth....................................................... 25
Balanced Growth....................................................... 30
Emerging Countries.................................................... 36
International Small Cap Growth........................................ 42
International Core Growth............................................. 47
Worldwide Growth...................................................... 52
Fully Discretionary Fixed Income...................................... 58
Short-Intermediate Fixed Income....................................... 63
Strategic Income...................................................... 67
The Portfolios'
Financial Highlights.................................................. 72
Statements of Assets and Liabilities.................................. 74
Statements of Operations.............................................. 76
Statements of Changes in Net Assets................................... 78
Notes to the Financial Statements..................................... 84
Notes to the Funds' Financial Statements................................ 99
Report of Independent Auditors
Nicholas-Applegate Mutual Funds....................................... 105
Nicholas-Applegate Investment Trust................................... 106
</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 Portfolios. Distributor: Nicholas-
Applegate Securities.
<PAGE>
MINI CAP GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Thomas E. Bleakley,
Partner, Portfolio Manager
John C. McCraw,
Portfolio Manager
Aaron M. Harris,
Portfolio Manager
GOAL: The Nicholas-Applegate Mini Cap Growth Fund seeks to maximize long-term
capital appreciation by investing primarily in U.S. micro-capitalized companies.
REVIEW AND OUTLOOK: The Nicholas-Applegate Mini Cap Growth Fund delivered
strong gains in the period April 1, 1997 through March 31, 1998. The Fund gained
68.9%, far outpacing its benchmark, the Russell 2000 Growth Index, which rose
41.2%. Stock selection in the technology, retail trade, transportation,
commercial/industrial, and financial services sectors boosted returns for the
Fund.
Small-capitalization growth stocks benefited from a sustained upturn in the
first six months of the Fund's fiscal year. Inspired by favorable macro-economic
factors such as the low interest-rate environment and robust corporate earnings,
the small-cap segment of the market enjoyed a period of outperformance starting
in May. Attractive valuation levels relative to large caps and superior earnings
growth created increased demand for small-cap stocks.
However, as uncertainties over the Asian currency and economic crises
escalated toward the final months of 1997, investor preference for more liquid,
large-cap names drove smaller-cap equities lower. From October to December, the
Fund registered an 8.0% decline versus an 8.2% drop for the Russell 2000 Growth
Index.
While Asian-related concerns persisted through this year, the Fund rebounded
strongly in the first three months of 1998, advancing 15.7% during the period as
against an 11.9% gain for the Index.
The Fund continues to invest in companies with exceptional earnings growth,
and those adapting successfully to change. As of March 31, 1998, the median
earnings growth rate for holdings in our Mini Cap Growth Fund stood at 21.9%
versus 16.3% for the Russell 2000 Growth Index.
As a result of our bottom-up approach, we increased the Fund's weighting in
the commercial/ industrial services, transportation, consumer durables, retail
trade, and healthcare services sectors during the 12-month period, as we found
stocks in these areas meeting our investment criteria.
Among the holdings which contributed strongly to performance was Aavid Thermal
Technologies, a leading provider of thermal engineering and management
solutions. Aavid has successfully established itself as an authority in thermal
design across a variety of markets, from computers and peripherals to power
supplies and motor controls.
Going forward, we remain optimistic about the prospects for mini-cap stocks,
as they continue to offer a source of attractive investment opportunities.
REPRESENTATIVE HOLDINGS
Aavid Thermal Technologies
Ashworth
Automobile Protection
Healthcare Financial Partners
Heska
Medquist
Mesaba Holdings
Optimal Robotics
SOS Staffing
Travis Boats & Motors
- --------------------------------------------------------------------------------
1
<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.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
68.89% As of 03/31/98 34.18%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MINI CAP GROWTH RUSSELL 2000
INSTITUTIONAL GROWTH
PORTFOLIO INDEX
<S> <C> <C>
12-Jul-95 $ 250,000.00 $ 250,000.00
30-Sep-95 275,600.01 268,240.42
31-Dec-95 287,000.01 272,246.38
31-Mar-96 317,000.01 287,884.97
30-Jun-96 371,600.02 304,705.45
30-Sep-96 359,600.00 302,100.16
31-Dec-96 369,458.15 302,909.82
31-Mar-97 329,371.54 270,930.45
30-Jun-97 408,924.88 318,478.57
30-Sep-97 522,779.15 372,345.50
31-Dec-97 480,997.70 341,815.62
31-Mar-98 556,278.50 382,444.62
</TABLE>
This graph compares a $250,000 investment in the Mini Cap Growth Institutional
Portfolio with the Russell 2000 Growth Index, on a cumulative and average annual
total return 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
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 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.
- --------------------------------------------------------------------------------
2
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
MINI CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
COMMON STOCKS -- 98.4%
- --------------------------------------------------------------------------
AIRLINES -- 3.9%
Atlantic Coast Airlines, Inc.*............. 31,200 $ 1,497,600
Mesaba Holdings, Inc.*..................... 56,000 1,760,500
-------------
3,258,100
-------------
APPAREL -- 3.8%
Ashworth, Inc.*............................ 62,900 1,077,162
Cutter & Buck, Inc.*....................... 31,500 815,062
Genesco, Inc.*............................. 55,800 1,011,375
Tropical Sportswear International Corp.*... 15,400 217,525
-------------
3,121,124
-------------
BIOTECHNOLOGY -- 0.7%
Arqule, Inc.*.............................. 26,100 580,725
-------------
BROADCASTING -- 0.4%
VDI Media, Inc.*........................... 18,900 307,125
-------------
CATALOG/OUTLET STORES -- 0.7%
DM Management Co.*......................... 26,000 549,250
-------------
CHEMICALS -- 0.6%
ECO Soil Systems, Inc.*.................... 50,400 491,400
-------------
CLOTHING CHAINS -- 1.4%
Chico's Fas, Inc.*......................... 28,000 245,000
Pacific Sunwear of California, Inc.*....... 22,800 946,200
-------------
1,191,200
-------------
COMPUTER/OFFICE AUTOMATION -- 2.1%
Apex PC Solutions, Inc.*................... 20,700 556,312
Extended Systems, Inc.*.................... 13,900 114,675
Optimal Robotics Corp.*.................... 11,200 154,000
Qlogic Corp.*.............................. 10,500 372,750
Tava Technologies, Inc.*................... 42,300 555,187
-------------
1,752,924
-------------
CONTRACT DRILLING -- 0.8%
Patterson Energy, Inc.*.................... 18,300 210,450
Unit Corp.*................................ 53,100 431,437
-------------
641,887
-------------
DEPARTMENT/DISCOUNT STORES -- 0.4%
Bon-Ton Stores, Inc.*...................... 22,600 344,650
-------------
DRUGS/PHARMACEUTICALS -- 0.9%
Inhale Therapeutic Systems Co.*............ 27,400 743,225
-------------
ELECTRONIC DATA PROCESSING -- 2.2%
Analytical Surveys, Inc.................... 27,000 1,383,750
TSI International Software, Inc.*.......... 23,500 414,187
-------------
1,797,937
-------------
ELECTRONIC INSTRUMENTS -- 1.0%
Oyo Geospace Corp.*........................ 16,000 332,000
Veeco Instruments, Inc.*................... 12,500 464,844
-------------
796,844
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
ELECTRONICS MUSIC CHAINS -- 2.2%
Musicland Stores Corp.*.................... 61,500 $ 695,719
Trans World Entertainment Corp.*........... 39,800 1,104,450
-------------
1,800,169
-------------
ENTERTAINMENT -- 0.7%
Cinar Films, Inc.*......................... 12,800 545,600
-------------
ENVIRONMENTAL SERVICES -- 1.3%
KTI, Inc.*................................. 43,100 740,781
Superior Services, Inc.*................... 10,900 339,944
-------------
1,080,725
-------------
GROCERY PRODUCTS -- 0.8%
Celestial Seasonings, Inc.*................ 16,300 668,300
-------------
HOME FURNISHINGS -- 0.5%
Winsloew Furniture, Inc.*.................. 18,500 407,000
-------------
HOMEBUILDING -- 0.8%
Engle Homes, Inc........................... 21,300 356,775
MI Schottenstein Homes, Inc................ 15,200 332,500
-------------
689,275
-------------
INDUSTRIAL ENGINEERING/CONSRUCTION -- 0.8%
GP Strategies Corp.*....................... 39,900 690,769
-------------
INTEGRATED OIL COMPANIES -- 0.5%
Dawson Geophysical Co.*.................... 25,700 407,987
-------------
LEISURE/GAMING -- 0.9%
Power House Technologies, Inc.*............ 49,200 701,100
-------------
MACHINERY/EQUIPMENT -- 2.1%
Gardner Denver, Inc.*...................... 29,550 875,419
Gehl Co.*.................................. 31,200 666,900
Thermedics Detection, Inc.*................ 14,000 160,125
-------------
1,702,444
-------------
MEDICAL SPECIALTIES -- 2.8%
Hanger Orthopedic Group, Inc.*............. 52,700 886,019
Impath, Inc.*.............................. 15,700 600,525
Osteotech, Inc.*........................... 31,000 802,125
-------------
2,288,669
-------------
MEDICAL SUPPLIES -- 1.5%
Cholestech Corp.*.......................... 17,800 267,000
Eclipse Surgical Technologies, Inc.*....... 22,700 280,912
Milestone Scientific, Inc.* 22,400 445,200
Vision Twenty-One, Inc.*................... 20,900 245,575
-------------
1,238,687
-------------
MEDICAL/NURSING/HEALTH SERVICES -- 3.3%
Assisted Living Concepts, Inc.*............ 47,500 1,027,187
Diagnostic Health Services, Inc.*.......... 43,700 557,175
Hooper Holmes, Inc......................... 52,200 1,115,775
-------------
2,700,137
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
3
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
MINI CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
MILITARY/DEFENSE TECHNOLOGY -- 0.7%
Aeroflex, Inc.*............................ 46,400 $ 614,800
-------------
OIL/GAS PRODUCTION -- 1.5%
Basin Exploration, Inc.*................... 27,300 563,063
Key Production, Inc.*...................... 54,900 638,213
-------------
1,201,276
-------------
OILFIELD SERVICES/EQUIPMENT -- 0.4%
Superior Energy Services, Inc.*............ 33,400 325,650
-------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 15.5%
Automobile Production Corp.*............... 62,100 826,706
Bright Horizons, Inc.*..................... 14,900 379,950
Cornell Corrections, Inc.*................. 26,200 641,900
Data Processing Resources Corp.*........... 28,200 875,963
ECsoft Group, Inc.*........................ 30,700 767,500
International Total Services, Inc.*........ 44,000 819,500
Kellstrom Industries, Inc.*................ 37,100 934,456
Lamalie Associates, Inc.*.................. 34,900 776,525
NCO Group, Inc.*........................... 39,750 993,750
Palex, Inc.*............................... 17,600 233,200
Preview Travel, Inc.*...................... 18,900 614,250
Pro Business Services, Inc.*............... 34,400 1,008,350
Remedytemp, Inc.*.......................... 29,700 961,538
SOS Staffing Services, Inc.*............... 66,700 1,767,550
SPR, Inc.*................................. 22,700 749,100
Tier Technologies, Inc.*................... 27,000 465,750
-------------
12,815,988
-------------
OTHER CONSUMER DURABLES -- 1.5%
Movado Group, Inc.......................... 42,825 1,236,572
-------------
OTHER CONSUMER SERVICES -- 0.5%
Children's Comprehensive Services, Inc.*... 23,000 437,000
-------------
OTHER FINANCIAL SERVICES -- 1.2%
Healthcare Financial Partners, Inc.*....... 21,400 1,013,825
-------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 5.9%
Balanced Care Corp.*....................... 78,000 770,250
Heska Corp.*............................... 41,400 615,825
Medquist, Inc.*............................ 67,300 2,477,481
Orthalliance, Inc.*........................ 28,800 403,200
Sterigenics International, Inc.*........... 27,900 613,800
-------------
4,880,556
-------------
OTHER PRODUCERS/MANUFACTURING -- 1.2%
Denali, Inc.*.............................. 33,800 574,600
Shelby Williams Industries, Inc............ 26,500 395,844
Vista 2000, Inc.*.......................... 6,167 617
-------------
971,061
-------------
OTHER RETAIL TRADE -- 1.2%
Fred's, Inc................................ 38,875 967,016
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
</TABLE>
OTHER RETAIL TRADE (CONTINUED)
<TABLE>
<S> <C> <C>
RDO Equipment Co........................... 3,300 $ 49,500
-------------
1,016,516
-------------
PAPER -- 1.2%
Fibermark, Inc.*........................... 42,350 987,284
-------------
RECREATION PRODUCTS/SERVICES -- 1.6%
Monaco Coach Corp.*........................ 19,800 777,150
The First Years, Inc.*..................... 15,300 537,413
-------------
1,314,563
-------------
REGIONAL/COMMERCIAL BANKS -- 1.1%
Sterling Bancorp Co........................ 33,000 895,125
-------------
RENTAL/LEASING COMPANIES -- 1.9%
Rent Way, Inc.*............................ 67,500 1,603,125
-------------
RESTAURANTS -- 0.2%
Star Buffet, Inc.*......................... 10,200 169,575
-------------
RETAIL/FOOD DISTRIBUTION -- 0.4%
Authentic Speciality Food, Inc.*........... 27,500 331,719
-------------
SAVINGS & LOAN ASSOCIATIONS -- 1.1%
SIS Bancorp, Inc........................... 22,900 921,725
-------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 3.3%
Aavid Thermal Technologies, Inc.*.......... 12,600 389,025
Anaren Microwave, Inc.*.................... 27,800 611,600
EFTC Corp.*................................ 15,200 199,500
Integrated Silicon Solution, Inc.*......... 29,000 262,813
Microsemi Corp.*........................... 43,300 714,450
STB Systems, Inc.*......................... 27,750 555,000
-------------
2,732,388
-------------
SOAPS/COSMETICS -- 1.4%
Chattem, Inc.*............................. 20,000 505,000
French Fragrances, Inc.*................... 40,000 680,000
-------------
1,185,000
-------------
SOFTWARE -- 6.0%
Best Software, Inc.*....................... 18,300 276,787
Credit Management Solutions, Inc........... 11,300 96,050
Engineering Animation, Inc................. 29,250 1,213,875
Information Management Associates, Inc.*... 47,400 633,975
ITEQ, Inc.*................................ 68,200 971,850
Omtool, LTD................................ 44,600 624,400
SS&C Technologies, Inc.*................... 31,000 523,125
Symix Systems, Inc.*....................... 16,100 289,800
Timberline Software Corp................... 20,900 327,869
-------------
4,957,731
-------------
SPECIALTY CHAINS -- 2.0%
Finlay Enterprises, Inc.*.................. 19,900 506,206
Party City Corp.*.......................... 34,350 1,163,606
-------------
1,669,812
-------------
TELECOMMUNICATION EQUIPMENT -- 7.5%
Advanced Radio Telecommunications Co.*..... 56,800 901,700
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
TELECOMMUNICATION EQUIPMENT (CONTINUED)
<TABLE>
<S> <C> <C>
Amerilink Corp.*........................... 23,400 $ 585,000
Applied Signal Technology, Inc.*........... 26,000 468,000
Applied Voice Technology, Inc.*............ 31,100 1,212,900
Microwave Power Devices, Inc.*............. 52,400 458,500
Remec, Inc.*............................... 14,400 413,100
Tollgrade Communications, Inc.*............ 34,350 790,050
World Access, Inc.*........................ 41,800 1,358,500
-------------
6,187,750
-------------
TRUCKING -- 3.0%
Johnstown America, Inc.*................... 24,000 393,000
MS Carriers, Inc.*......................... 21,600 731,700
Smithway Motor Xpress Corp.*............... 20,300 301,963
U S Xpress Enterprises, Inc.*.............. 50,400 1,045,800
-------------
2,472,463
-------------
WHOLESALE DISTRIBUTION -- 1.0%
Anicom, Inc.*.............................. 57,700 822,225
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $53,827,593)......................... $ 81,260,982
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- --------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.3%
- --------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 4/01/98
(Cost $1,889,000)........................ $ 1,889,000 $ 1,889,000
-------------
TOTAL INVESTMENTS -- 100.7%
(Cost $55,716,593)...................................... 83,149,982
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.7%)........... (551,706)
-------------
NET ASSETS -- 100.0%...................................... $ 82,598,276
-------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
5
<PAGE>
EMERGING GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Thomas E. Bleakley,
Partner, Portfolio Manager
John C. McCraw,
Portfolio Manager
Aaron M. Harris,
Portfolio Manager
GOAL: The Nicholas-Applegate Emerging Growth Fund seeks to maximize long-term
capital appreciation by investing primarily in U.S. equity securities of
small-capitalization companies.
REVIEW AND OUTLOOK: In the midst of a volatile year for small-company stocks,
the Nicholas-Applegate Emerging Growth Fund advanced 47.4%, outperforming the
Russell 2000 Growth Index, which returned 41.2%. The Fund's relative
outperformance may be largely attributed to our selection of stocks of small
companies demonstrating positive, sustainable, and timely growth.
The Fund posted solid gains in May and June of 1997, following a significant
period of relative underperformance by the small-cap asset class. The Asian
economic crisis in October caused a temporary setback in the rally, especially
among technology stocks affected by the region's financial woes. However, the
small-cap rally resumed shortly thereafter. The Fund benefited from superior
selection of stocks that were able to take advantage of a strong U.S. economy
and falling interest rates.
Key factors positively impacting the Fund's performance included superior
earnings growth and increased investor recognition of compelling valuation
levels among the Fund's holdings relative to large caps. Expectations that
large-cap earnings would slow also boosted returns for small caps.
During the fiscal year, we invested in stocks of several retailers exhibiting
solid earnings growth. One example was Linens N Things Inc., a specialty
retailer, which thrives on favorable sales trends and new store openings. Home
furnishings store Ethan Allen Interiors was another strong contributor to
performance. The company was able to take advantage of an extremely strong
housing market and more consumers spending a significant portion of disposable
income on their homes.
While the technology sector experienced a great deal of volatility during the
12-month period, the Fund benefited from our focus on investing in companies
with little or no Asian exposure. The stocks of software companies CBT Group,
Visio Corp. and Veritas Software, were among the Fund's top performers in the
fiscal year.
We remain optimistic in our outlook for the Emerging Growth Fund, as we
continue to find many small companies displaying solid fundamentals and strong
earnings potential. As investors continue to shift their preference to
smaller-cap stocks, we see this asset class offering exciting opportunities
moving forward.
REPRESENTATIVE HOLDINGS
Action Performance
Alaska Airlines
Eastern Environmental
Franchise Mortgage Acceptance
Linens N Things
Lycos
Natures Bounty
Personnel Group of America
Sangstat Medical
Veritas
- --------------------------------------------------------------------------------
6
<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 03/31/98 SINCE
1 YEAR 3 YEARS INCEPTION
47.38% 24.35% 16.36%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING GROWTH RUSSELL 2000
INSTITUTIONAL
PORTFOLIO GROWTH INDEX
<S> <C> <C>
10/1/93 $250,000.00 $250,000.00
10/31/93 $250,400.00 $257,230.00
11/30/93 $237,400.00 $246,825.05
12/31/93 $249,920.00 $256,564.76
1/31/94 $257,143.12 $263,394.52
2/28/94 $255,285.75 $262,235.58
3/31/94 $234,854.63 $246,126.45
4/30/94 $235,473.76 $246,503.02
5/31/94 $229,076.14 $240,978.89
6/30/94 $217,519.14 $230,681.86
7/31/94 $222,678.51 $233,969.08
8/31/94 $237,743.88 $251,137.73
9/30/94 $240,633.13 $252,190.00
10/31/94 $243,935.13 $254,875.82
11/30/94 $231,552.63 $244,563.54
12/31/94 $241,146.93 $250,325.46
1/31/95 $231,007.29 $245,226.33
2/28/95 $243,351.19 $256,558.24
3/31/95 $255,254.24 $264,052.31
4/30/95 $259,442.35 $268,023.65
5/31/95 $261,426.19 $271,534.76
6/30/95 $284,571.01 $290,246.22
7/31/95 $312,124.36 $312,868.01
8/31/95 $313,006.06 $316,728.81
9/30/95 $319,618.87 $323,250.25
10/31/95 $307,054.54 $307,349.57
11/30/95 $320,721.00 $320,965.16
12/31/95 $327,708.03 $328,077.75
1/31/96 $323,033.16 $325,361.26
2/29/96 $342,667.60 $340,197.74
3/31/96 $352,952.30 $346,923.45
4/30/96 $389,649.99 $373,556.76
5/31/96 $411,388.11 $392,720.22
6/30/96 $386,377.58 $367,193.41
7/31/96 $341,966.37 $322,359.09
8/31/96 $372,352.99 $346,223.33
9/30/96 $397,129.77 $364,053.84
10/31/96 $379,832.77 $348,363.12
11/30/96 $383,573.74 $358,047.61
12/31/96 $389,595.30 $365,029.54
1/31/97 $394,412.55 $373,863.25
2/28/97 $351,960.52 $351,281.91
3/31/97 $332,992.58 $326,491.95
4/30/97 $327,874.25 $322,704.64
5/31/97 $379,960.80 $371,207.15
6/30/97 $407,660.00 $383,791.07
7/31/97 $436,864.59 $403,441.17
8/31/97 $445,294.78 $415,544.41
9/30/97 $487,144.67 $448,704.85
10/31/97 $452,520.66 $421,737.69
11/30/97 $435,016.67 $411,683.47
12/31/97 $436,748.43 $411,914.01
1/31/98 $426,704.25 $406,435.55
2/28/98 $464,802.85 $442,319.75
3/31/98 $494,273.00 $460,875.06
</TABLE>
This graph compares a $250,000 investment in the Emerging Growth Institutional
Portfolio with the Russell 2000 Growth Index, on a cumulative and average annual
total return 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
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.
- --------------------------------------------------------------------------------
7
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
EMERGING GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMON STOCKS -- 99.2%
- ---------------------------------------------------------------------------------
ADVERTISING -- 0.4%
Abacus Direct Corp.*....................... 45,700 $ 2,387,825
Getty Images, Inc.*........................ 37,900 952,237
-------------
3,340,062
-------------
AEROSPACE -- 0.4%
AAR Corp................................... 103,200 2,812,200
-------------
AIR FREIGHT/SHIPPING -- 0.9%
Airnet Systems, Inc.*...................... 37,100 1,075,900
Expeditors International Of Washington,
Inc...................................... 125,300 5,372,237
-------------
6,448,137
-------------
AIRLINES -- 2.6%
Alaska Air Group, Inc.*.................... 125,000 6,773,437
Atlantic Coast Airlines, Inc.*............. 47,500 2,280,000
Mesaba Holdings, Inc.*..................... 12,400 389,825
Midwest Express Holdings, Inc.*............ 76,600 3,753,400
Ryanair Holdings PLC Sponsored ADR*........ 26,800 991,600
SkyWest, Inc............................... 29,300 1,069,450
Trans World Airlines, Inc.................. 260,900 3,212,331
Virgin Express Holdings PLC -- ADR*........ 41,400 983,250
-------------
19,453,293
-------------
ALCOHOLIC BEVERAGES -- 0.6%
Beringer Wine Estates Holdings, Inc.*...... 33,800 1,744,925
Canandaigua Wine Co. Class A*.............. 44,400 2,536,350
-------------
4,281,275
-------------
APPAREL -- 1.1%
Ashworth, Inc.*............................ 17,000 291,125
Authentic Fitness Corp..................... 87,300 1,735,087
Big Dog Holdings, Inc...................... 2,500 16,562
Columbia Sportswear Co.*................... 32,700 690,788
Cutter & Buck, Inc.*....................... 26,500 685,687
Genesco, Inc.*............................. 91,300 1,654,812
Nautica Enterprises, Inc.*................. 32,750 1,007,062
Wolverine World Wide, Inc.................. 67,200 1,898,400
-------------
7,979,523
-------------
AUTOMOBILES -- 0.0%
Group 1 Automotive, Inc.................... 11,100 121,406
-------------
AUTOMOTIVE EQUIPMENT -- 0.4%
Aftermarket Technology Corp.*.............. 62,900 1,391,662
O'Reilly Automotive, Inc.*................. 57,100 1,573,819
-------------
2,965,481
-------------
BIOTECHNOLOGY -- 0.6%
Arqule, Inc.*.............................. 47,500 1,056,875
BioReliance Corp.*......................... 13,300 219,589
Coulter Pharmaceutical, Inc.*.............. 69,800 1,910,775
Neurex Corp.*.............................. 10,100 241,137
NeXstar Pharmaceuticals, Inc.*............. 55,600 639,400
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
BIOTECHNOLOGY (CONTINUED)
<TABLE>
<S> <C> <C>
Pharmacopeia, Inc.*........................ 25,200 $ 472,500
-------------
4,540,276
-------------
BROADCASTING -- 1.9%
Chancellor Media Corp.*.................... 208,500 9,564,937
Emmis Broadcasting Corp. Class A*.......... 63,000 3,323,250
Saga Communications, Inc. Class A*......... 55,277 1,153,907
-------------
14,042,094
-------------
BUILDING MATERIALS -- 1.3%
Advanced Lighting Technologies, Inc.*...... 25,800 667,575
AFC Cable Systems, Inc.*................... 35,125 1,365,484
Comfort Systems USA, Inc.*................. 132,600 2,867,475
Hexcel Corp.*.............................. 148,500 4,083,750
Simpson Manufacturing Co., Inc.*........... 5,000 203,750
Triangle Pacific Corp.*.................... 19,500 741,000
-------------
9,929,034
-------------
BUILDING MATERIALS CHAINS -- 0.1%
White Cap Industries, Inc.*................ 35,700 821,100
-------------
CATALOG/OUTLET STORES -- 0.3%
Coldwater Creek............................ 18,000 436,500
Insight Enterprises, Inc.*................. 53,400 2,169,375
-------------
2,605,875
-------------
CHEMICALS -- 0.9%
O.M. Group, Inc............................ 83,250 3,506,906
Scotts Co. (The) Class A*.................. 73,700 2,551,862
Spartech Corp.............................. 26,700 585,731
-------------
6,644,499
-------------
CLOTHING CHAINS -- 3.1%
99 Cents Only Stores*...................... 74,125 2,589,742
American Eagle Outfitters, Inc.*........... 27,100 1,192,400
Buckle, Inc.*.............................. 66,500 3,333,312
Gadzooks, Inc.............................. 17,100 382,612
Men's Wearhouse, Inc.*..................... 93,800 3,470,600
Pacific Sunwear of California*............. 58,050 2,409,075
Stage Stores, Inc.*........................ 108,600 5,606,475
Stein Mart, Inc.*.......................... 49,400 1,759,875
The Wet Seal, Inc. Class A*................ 66,100 2,499,406
-------------
23,243,497
-------------
COMPUTER/OFFICE AUTOMATION -- 2.5%
Advanced Digital Information Corp.*........ 78,500 1,236,375
Apex PC Solutions, Inc.*................... 65,900 1,771,062
Diamond Multimedia Systems, Inc.*.......... 39,100 581,613
Discreet Logic, Inc........................ 6,400 104,400
Geac Computer Corp. LTD*................... 81,000 3,388,931
MICROS Systems, Inc.*...................... 11,700 703,462
Network Appliance, Inc.*................... 277,800 9,861,900
QLogic Corp.*.............................. 4,800 170,400
Safeguard Scientifics, Inc.*............... 12,600 474,075
Visual Networks, Inc.*..................... 11,100 288,600
-------------
18,580,818
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
CONTRACTING DRILLING -- 0.5%
Atwood Oceanics, Inc.*..................... 26,700 $ 1,443,469
Cliff's Drilling Co.*...................... 26,000 1,074,125
Patterson Energy, Inc.*.................... 79,200 910,800
Unit Corp.*................................ 34,300 278,687
-------------
3,707,081
-------------
DEPARTMENT/DISCOUNT STORES -- 0.4%
Ames Department Stores, Inc.*.............. 124,000 2,619,500
Bon-Ton Stores, Inc.*...................... 26,100 398,025
-------------
3,017,525
-------------
DRUGS/PHARMACEUTICALS -- 4.3%
Boron Lepore & Associates, Inc.*........... 77,500 2,567,187
Curative Health Services, Inc.*............ 68,500 2,281,906
Incyte Pharmaceuticals, Inc.*.............. 56,200 2,627,350
Inhale Therapeutic Systems*................ 35,900 973,787
NBTY, Inc.*................................ 75,800 4,604,850
NCS Healthcare, Inc. Class A*.............. 52,800 1,768,800
Paraxel International Corp.*............... 77,600 2,425,000
PathoGenesis Corp.*........................ 73,000 2,445,500
Sangstat Medical Corp.*.................... 63,800 2,033,625
Sepracor, Inc.*............................ 135,000 5,754,375
Theragenics Corp.*......................... 77,200 4,916,675
-------------
32,399,055
-------------
ELECTRONIC DATA PROCESSING -- 0.2%
Analytical Surveys, Inc.................... 7,300 374,125
Deltek Systems, Inc.*...................... 27,400 486,350
Factset Research Systems, Inc.*............ 14,400 511,200
-------------
1,371,675
-------------
ELECTRONIC INSTRUMENTS/DIVERSIFIED -- 0.8%
Avid Technology, Inc.*..................... 84,800 3,487,400
Triumph Group, Inc.*....................... 38,700 1,717,312
Veeco Instruments, Inc.*................... 31,100 1,156,531
-------------
6,361,243
-------------
ELECTRONICS/MUSIC CHAINS -- 0.3%
Musicland Stores Corp.*.................... 75,400 852,962
Trans World Entertainment Corp.*........... 50,600 1,404,150
-------------
2,257,112
-------------
ENTERTAINMENT -- 0.7%
American Classic Voyages Co.*.............. 50,200 1,154,600
Championship Auto Racing Teams, Inc.*...... 38,000 703,000
Cinar Films, Inc. Class B*................. 24,800 1,057,100
Family Golf Centers, Inc.*................. 62,000 2,511,000
-------------
5,425,700
-------------
ENVIRONMENTAL SERVICES -- 1.1%
American Disposal Services, Inc.*.......... 46,500 1,755,375
Casella Waste Systems, Inc. Class A*....... 69,000 1,824,187
Eastern Environmental Services, Inc.*...... 81,000 2,055,375
Superior Services, Inc.*................... 64,300 2,005,356
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
ENVIRONMENTAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Tetra Tech, Inc.*.......................... 24,125 $ 585,031
-------------
8,225,324
-------------
FINANCE COMPANIES -- 1.5%
American Capital Strategies LTD............ 33,900 750,037
Medallion Financial Corp................... 31,900 865,287
Cowen Financial Corp.*..................... 141,300 3,921,075
Sirrom Capital Corp........................ 184,000 5,531,500
-------------
11,067,899
-------------
FOOD CHAINS -- 0.2%
Wild Oats Markets, Inc.*................... 38,600 1,375,125
-------------
GROCERY PRODUCTS -- 0.3%
American Italian Pasta Co.*................ 19,000 686,375
Michael Foods, Inc......................... 49,500 1,324,125
-------------
2,010,500
-------------
HOME FURNISHINGS -- 1.7%
Ethan Allen Interiors, Inc................. 182,200 10,886,450
Windmere-Durable Holdings, Inc............. 68,000 1,768,000
-------------
12,654,450
-------------
HOMEBUILDING -- 1.2%
American Homestar Corp.*................... 60,900 1,381,669
Crossmann Communities, Inc.*............... 35,400 1,050,937
M.D.C. Holdings, Inc....................... 82,400 1,462,600
M/I Schottenstein Homes, Inc............... 46,700 1,021,562
Ryland Group, Inc.......................... 77,600 2,143,700
Standard-Pacific Corp...................... 127,400 1,934,887
-------------
8,995,355
-------------
INDUSTRIAL ENGINEERING/CONSTRUCTION -- 0.4%
Dycom Industries, Inc.*.................... 75,600 2,121,525
Modtech, Inc.*............................. 52,700 1,083,644
-------------
3,205,169
-------------
INVESTMENT COMPANIES -- 0.9%
Affiliated Managers Group, Inc.*........... 91,100 3,177,112
AmeriTrade Holding Corp. Class A*.......... 81,000 2,247,750
Everen Capital Corp........................ 28,600 1,261,975
-------------
6,686,837
-------------
LIFE INSURERS -- 0.1%
Protective Life Corp....................... 11,600 846,800
-------------
LODGING -- 0.7%
Capstar Hotel Co.*......................... 125,250 4,344,609
Silverleaf Resorts, Inc.*.................. 35,900 863,844
Trendwest Resorts, Inc.*................... 19,000 358,625
-------------
5,567,078
-------------
MACHINERY/EQUIPMENT -- 2.0%
DT Industries, Inc......................... 51,000 1,957,125
Gardner Denver, Inc.*...................... 18,150 537,694
Kuhlman Corp............................... 82,100 3,997,244
Motivepower Industries, Inc.*.............. 98,377 2,717,665
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
MACHINERY/EQUIPMENT (CONTINUED)
<TABLE>
<S> <C> <C>
OmniQuip International, Inc................ 50,500 $ 1,249,875
Terex Corp.*............................... 72,500 1,962,031
Varlen Corp................................ 53,750 2,069,375
Wabash National Corp....................... 21,200 614,800
-------------
15,105,809
-------------
MANAGED HEALTH CARE/HMO'S/PPO'S -- 0.2%
Healthcare Recoveries, Inc.*............... 39,300 913,725
Specialty Care Network, Inc.*.............. 29,200 355,875
-------------
1,269,600
-------------
MEDICAL SPECIALTIES -- 0.6%
Hanger Orthopedic Group, Inc.*............. 31,600 531,275
Impath, Inc.*.............................. 36,200 1,384,650
Osteotech, Inc.*........................... 27,600 714,150
VISX, Inc.*................................ 86,600 2,165,000
-------------
4,795,075
-------------
MEDICAL SUPPLIES -- 3.0%
Biosite Diagnostics, Inc.*................. 58,100 947,756
Milestone Scientific, Inc.*................ 18,500 367,687
Minimed, Inc.*............................. 61,100 2,703,675
Molecular Devices Corp.*................... 41,300 795,025
Ocular Sciences, Inc.*..................... 46,100 1,469,437
OEC Medical Systems, Inc.*................. 32,100 758,362
PharMerica, Inc.*.......................... 55,400 824,075
Sabratek Corp.*............................ 76,600 2,681,000
Safeskin Corp.*............................ 104,900 7,749,487
Serologicals Corp.*........................ 29,450 831,962
Ventana Medical Systems, Inc.*............. 29,500 785,437
Vision Twenty-One, Inc.*................... 9,500 111,625
Vista Medical Technologies, Inc.*.......... 28,500 317,062
Wesley Jessen VisionCare, Inc.*............ 41,800 1,374,175
Young Innovations, Inc.*................... 38,700 599,850
-------------
22,316,615
-------------
MEDICAL/NURSING/HEALTH SERVICES -- 1.9%
ABR Information Services, Inc.*............ 77,400 2,176,875
Assisted Living Concepts, Inc.*............ 43,800 947,175
Atria Communities, Inc.*................... 124,000 2,387,000
CareMatrix Corp.*.......................... 13,600 418,200
Centennial Healthcare Corp.*............... 5,300 133,162
Coast Dental Services, Inc.*............... 40,700 1,144,687
Concentra Managed Care, Inc.*.............. 96,304 2,961,348
Dental Care Alliance, Inc.*................ 25,100 320,025
Diagnostic Health Services, Inc.*.......... 33,100 422,025
Hooper Holmes, Inc......................... 32,500 694,687
Rehabcare Group, Inc.*..................... 24,700 657,637
Sunrise Assisted Living, Inc.*............. 49,200 2,201,700
-------------
14,464,521
-------------
METALS -- 0.6%
Mueller Industries, Inc.*.................. 77,300 4,894,056
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
MILITARY/DEFENSE TECHNOLOGY -- 0.3%
Aeroflex, Inc.*............................ 20,300 $ 268,975
Tracor, Inc.*.............................. 67,800 2,173,837
-------------
2,442,812
-------------
MULTI-LINE INSURERS -- 0.2%
Delphi Financial Group, Inc. Class A*...... 26,452 1,408,569
-------------
OIL REFINING/MARKETING -- 0.1%
Tesoro Petroleum Corp.*.................... 27,900 498,712
-------------
OIL/GAS PRODUCTION -- 0.7%
Harken Energy Corp.*....................... 271,800 1,749,712
Petsec Energy LTD*......................... 63,600 1,192,500
St. Mary Land & Exploration Co............. 34,600 1,322,369
Vintage Petroleum, Inc..................... 51,400 1,079,400
-------------
5,343,981
-------------
OILFIELD SERVICES/EQUIPMENT -- 3.1%
Cal Dive International, Inc.*.............. 47,500 1,567,500
Dril-Quip, Inc.*........................... 21,200 689,000
Global Industries LTD*..................... 94,400 1,923,400
Oceaneering International, Inc.*........... 88,000 1,738,000
Pool Energy Services Co.*.................. 54,900 1,283,287
Pride International, Inc.*................. 106,100 2,533,137
Seitel, Inc.*.............................. 15,500 234,437
Stolt Comex Seaway S. A.*.................. 88,400 2,226,575
Superior Energy Services, Inc.*............ 47,900 467,025
Transcoastal Marine Services, Inc.*........ 45,400 485,213
Tuboscope, Inc.*........................... 198,400 3,769,600
Veritas DGC, Inc.*......................... 119,400 6,037,163
Willbros Group, Inc.*...................... 18,300 300,806
-------------
23,255,143
-------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 12.0%
Administaff, Inc.*......................... 63,800 2,747,388
Affiliated Computer Services, Inc. Class
A*....................................... 89,400 2,966,963
Billing Information Concepts*.............. 189,800 4,922,938
CCC Information Services Group*............ 79,600 2,189,000
Complete Business Solutions, Inc.*......... 94,600 3,393,775
Computer Task Group, Inc................... 179,800 7,405,513
Cornell Corrections, Inc.*................. 42,900 1,051,050
Cotelligent Group, Inc.*................... 15,000 444,375
Data Processing Resources Corp.*........... 71,100 2,208,544
ECsoft Group PLC -- ADR*................... 8,500 212,500
First Consulting Group*.................... 8,000 165,000
Forrester Research, Inc.*.................. 57,100 2,027,050
G & K Services, Inc. Class A............... 22,950 1,006,931
Host Marriott Services Corp.*.............. 46,800 661,050
Information Management Resources, Inc.*.... 94,200 5,546,025
Innovative Valve Technologies, Inc.*....... 25,000 478,125
International Telecommunications Data
Systems, Inc.*........................... 107,400 2,805,825
Kellstrom Industries, Inc.*................ 42,000 1,057,875
Labor Ready, Inc.*......................... 114,750 3,693,516
Lason Holdings, Inc.*...................... 54,300 2,049,825
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Metro Information Services, Inc.*.......... 47,300 $ 1,614,113
Metzler Group, Inc.*....................... 77,500 3,855,625
NCO Group, Inc.*........................... 52,350 1,308,750
Nova Corp.*................................ 22,200 667,388
Novacare Employee Services, Inc.*.......... 80,000 565,000
On Assignment, Inc.*....................... 63,200 1,872,300
Outsource International, Inc.*............. 16,200 388,800
Palex, Inc.*............................... 4,400 58,300
Personnel Group of America, Inc.*.......... 151,000 3,435,250
PMT Services, Inc.*........................ 104,350 1,871,778
Preview Travel, Inc*....................... 30,500 991,250
Pro Business Services, Inc.*............... 8,400 246,225
RemedyTemp, Inc.*.......................... 24,300 786,713
Romac International, Inc.*................. 171,800 4,724,500
RWD Technologies, Inc.*.................... 23,600 649,000
SOS Staffing Services, Inc.*............... 40,100 1,062,650
SPR, Inc.*................................. 40,400 1,333,200
Staff Leasing, Inc.*....................... 42,200 1,171,050
StaffMark, Inc.*........................... 33,400 1,369,400
Steiner Leisure LTD*....................... 41,900 2,129,044
Steven Myers & Associates, Inc.*........... 10,500 186,375
Technology Solutions Co.*.................. 87,300 2,313,450
Vincam Group, Inc.*........................ 54,600 1,583,400
Whittman-Hart, Inc.*....................... 196,900 8,909,725
Youth Services International, Inc.*........ 27,700 512,450
-------------
90,639,004
-------------
OTHER CONSUMER DURABLES -- 0.8%
Action Performance Cos., Inc.*............. 146,600 5,158,488
Movado Group, Inc.......................... 24,612 710,672
-------------
5,869,160
-------------
OTHER CONSUMER NON-DURABLES -- 0.2%
Helen of Troy LTD*......................... 75,200 1,395,900
-------------
OTHER CONSUMER SERVICES -- 1.2%
Bally Total Fitness Holding Corp.*......... 113,100 3,562,650
Career Education Corp.*.................... 4,000 88,000
Coinmach Laundry Corp.*.................... 48,300 1,020,338
Equity Corp. International*................ 22,800 545,775
MemberWorks, Inc........................... 49,400 1,475,825
Strayer Education, Inc..................... 77,250 2,568,563
-------------
9,261,151
-------------
OTHER FINANCIAL SERVICES -- 0.7%
Franchise Mortgage Acceptance Co.*......... 98,600 2,477,325
Healthcare Financial Partners, Inc.*....... 61,500 2,913,563
-------------
5,390,888
-------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 0.4%
Advance Paradigm, Inc.*.................... 40,700 1,612,738
MedQuist, Inc.*............................ 33,300 1,225,856
-------------
2,838,594
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
OTHER PRODUCERS/MANUFACTURING -- 1.3%
BE Aerospace, Inc.*........................ 76,500 $ 2,151,563
Chicago Miniature Lamp, Inc.*.............. 95,250 3,702,844
Compx International , Inc.*................ 21,000 490,875
Griffon Corp.*............................. 70,000 1,111,250
Interface, Inc. Class A.................... 50,300 2,090,594
Special Metals Corp.*...................... 17,900 290,875
-------------
9,838,001
-------------
OTHER RETAIL TRADE -- 0.4%
Fred's, Inc................................ 34,500 858,188
ONSALE, Inc.*.............................. 27,900 864,900
RDO Equipment Co. Class A.................. 3,800 57,000
Renters Choice, Inc.*...................... 37,100 908,950
-------------
2,689,038
-------------
OTHER TECHNOLOGY -- 0.6%
CHS Electronics, Inc.*..................... 65,700 1,231,875
Henry(Jack) & Associates................... 88,650 3,191,400
Pegasus Systems, Inc.*..................... 6,000 154,500
-------------
4,577,775
-------------
OTHER TRANSPORTATION -- 0.3%
Coach USA, Inc.*........................... 47,400 2,061,900
-------------
PAPER -- 0.0%
Fibermark, Inc.*........................... 9,100 212,144
-------------
PRINTING/FORMS -- 1.7%
Applied Graphics Technologies, Inc.*....... 78,800 3,792,250
Consolidated Graphics, Inc.*............... 92,200 5,336,075
Mail-Well, Inc.*........................... 98,900 3,745,838
-------------
12,874,163
-------------
PUBLISHING -- 0.1%
NewsEdge Corp.*............................ 37,900 535,337
-------------
REITS -- 2.1%
American General Hospitality Corp.......... 54,000 1,495,125
Annaly Mortgage Managment, Inc............. 18,000 201,375
FelCor Suite Hotels, Inc................... 27,800 1,030,338
Golf Trust Of America, Inc................. 48,600 1,524,825
Health Care REIT, Inc...................... 43,500 1,196,250
Imperial Credit Commercial Mortgage
Investment Corp.......................... 86,400 1,296,000
Innkeepers USA Trust....................... 118,400 1,938,800
Kilroy Realty Corp......................... 107,825 3,079,752
Patriot American Hospitality, Inc.......... 60,093 1,622,511
Storage USA, Inc........................... 34,700 1,331,613
Walden Residential Properties, Inc......... 43,600 1,100,900
-------------
15,817,489
-------------
REAL ESTATE BROKERS/SERVICES -- 0.2%
Lasalle Partners, Inc.*.................... 57,600 1,872,000
-------------
RECREATION PRODUCTS -- 0.2%
Monaco Coach Corp.*........................ 2,600 102,050
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
11
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
RECREATION PRODUCTS (CONTINUED)
<TABLE>
<S> <C> <C>
National RV Holdings, Inc.*................ 30,100 $ 1,087,363
-------------
1,189,413
-------------
REGIONAL BANKS -- 1.0%
Peoples Heritage Financial Group, Inc...... 68,200 3,290,650
Provident Bankshares Corp.................. 105,170 3,720,389
Sterling Bancorp Co........................ 7,100 192,588
-------------
7,203,627
-------------
RENTAL/LEASING COMPANIES -- 0.4%
Avis Rent A Car, Inc.*..................... 18,000 583,875
Dollar Thrifty Automotive Goup, Inc.*...... 50,000 1,125,000
LINC Capital, Inc.*........................ 15,000 255,000
Rent-Way, Inc.*............................ 16,000 380,000
T & W Financial Corp.*..................... 31,900 917,125
-------------
3,261,000
-------------
RESTAURANTS -- 2.4%
CKE Restaurants, Inc....................... 241,615 8,879,351
Dave & Buster's, Inc.*..................... 57,700 1,565,113
Foodmaker, Inc.*........................... 158,400 3,069,000
Sonic Corp.*............................... 130,100 4,358,350
Star Buffet, Inc.*......................... 14,700 244,388
-------------
18,116,202
-------------
RETAIL/FOOD DISTRIBUTION -- 0.4%
Suiza Foods Corp.*......................... 55,600 3,419,400
-------------
SAVINGS & LOAN ASSOCIATIONS -- 0.3%
First Savings Bank of Washington Bancorp,
Inc...................................... 30,500 802,531
MAF Bancorp, Inc........................... 30,550 1,162,809
SIS Bancorp, Inc........................... 5,100 205,275
-------------
2,170,615
-------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 3.6%
3Dfx Interactive, Inc...................... 30,000 847,500
Aavid Thermal Technologies, Inc.*.......... 36,100 1,114,588
Alpha Industries, Inc.*.................... 15,100 233,106
Anaren Microwave, Inc.*.................... 28,300 622,600
Applied Micro Circuits Corp.*.............. 49,000 1,102,500
C&D Technologies, Inc...................... 18,800 978,775
DII Group, Inc............................. 68,900 1,481,350
Docucorp International, Inc.*.............. 2,520 24,885
Dupont Photomasks, Inc.*................... 53,000 2,292,250
EFTC Corp.*................................ 43,300 568,313
Integrated Silicon Solution, Inc.*......... 69,500 629,844
Kulicke & Soffa Industries, Inc.*.......... 84,600 1,840,050
Microsemi Corp.*........................... 9,600 158,400
Moog, Inc. Class A*........................ 24,100 1,015,213
MRV Communications, Inc.*.................. 23,500 549,313
PMC-Sierra, Inc.*.......................... 44,500 1,691,000
Power-One, Inc.*........................... 39,900 678,300
PRI Automation, Inc........................ 23,800 623,263
Sipex Corp.*............................... 168,700 5,567,100
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
SEMICONDUCTORS/ELECTRONIC COMPONENTS (CONTINUED)
<TABLE>
<S> <C> <C>
STB Systems, Inc.*......................... 73,425 $ 1,468,500
Uniphase Corp.*............................ 89,800 3,777,213
-------------
27,264,063
-------------
SOFTWARE -- 10.9%
Advantage Learning Systems, Inc.*.......... 35,100 1,206,563
Aspen Technology, Inc.*.................... 53,800 2,219,250
AXENT Technologies, Inc.*.................. 70,600 2,153,300
Business Objects S.A. ADR*................. 90,700 1,371,838
CBT Group PLC Sponsored ADR*............... 164,600 8,518,050
Credit Management Solutions, Inc.*......... 5,300 45,050
Datastream Systems, Inc.*.................. 33,100 732,337
DataWorks Corp.*........................... 98,900 2,608,488
Documentum, Inc.*.......................... 47,600 2,576,350
DSET Corp.*................................ 4,000 74,750
Engineering Animation, Inc.*............... 35,750 1,483,625
Excite, Inc.*.............................. 69,100 3,519,781
Geotel Communications Corp.*............... 40,900 1,129,863
Hyperion Software Corp.*................... 58,200 2,575,350
Industri-Matematik International Corp.*.... 41,000 1,286,375
Infinium Software, Inc.*................... 69,700 1,389,644
ITEQ, Inc.*................................ 58,200 829,350
Lycos, Inc.*............................... 64,700 2,862,975
Manugistics Group, Inc.*................... 38,800 2,175,225
Memco Software LTD*........................ 42,300 1,321,875
Mercury Interactive Corp.*................. 104,700 3,821,550
National Instruments Corp.*................ 185,500 6,330,188
Open Text Corp.*........................... 87,100 1,578,688
Oshap Technologies LTD*.................... 36,500 365,000
Peregrine Systems, Inc.*................... 17,600 336,600
Pervasive Software, Inc.*.................. 27,000 391,500
QuadraMed Corp.*........................... 73,500 2,453,063
QuickResponse Services, Inc.*.............. 21,200 1,134,200
Software AG Systems, Inc.*................. 61,600 1,632,400
Summit Design, Inc.*....................... 88,200 1,311,975
Syntel, Inc.*.............................. 52,100 2,136,100
Veritas Software Co.*...................... 125,400 7,414,275
Visio Corp.*............................... 182,200 7,834,600
Wind River Systems, Inc.*.................. 129,800 5,159,550
-------------
81,979,728
-------------
SPECIALTY CHAINS -- 5.0%
Budget Group, Inc.*........................ 29,000 1,087,500
Cort Business Services Corp.*.............. 104,600 4,968,500
Finish Line, Inc. Class A*................. 57,800 1,372,750
Finlay Enterprises, Inc.*.................. 14,700 373,931
Garden Ridge Corp.*........................ 62,800 1,358,050
Guitar Center, Inc.*....................... 63,100 1,490,738
Hollywood Entertainment Corp.*............. 200,100 2,801,400
Linens 'N Things, Inc.*.................... 151,700 8,334,019
Marks Bros. Jewelers, Inc.*................ 30,900 612,206
Micro Warehouse, Inc.*..................... 155,700 2,539,856
Party City Corp.*.......................... 61,350 2,078,231
Pier 1 Imports, Inc........................ 272,300 7,386,138
Rental Service Corp.*...................... 71,200 1,655,400
Sonic Automotive, Inc.*.................... 24,000 414,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
12
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
SPECIALTY CHAINS (CONTINUED)
<TABLE>
<S> <C> <C>
Sunglass Hut International, Inc.*.......... 97,800 $ 1,026,900
-------------
37,499,619
-------------
SPECIALTY INSURERS -- 0.1%
Century Business Services, Inc.*........... 66,600 1,177,988
-------------
TELECOMMUNICATIONS EQUIPMENT -- 3.9%
Advanced Radio Telecom Corp.*.............. 18,500 293,688
Applied Signal Technology, Inc.*........... 9,800 176,400
Applied Voice Technology, Inc.*............ 48,200 1,879,800
Comverse Technology, Inc.*................. 48,500 2,370,438
Davox Corp................................. 75,250 2,342,156
GST Telecommunications, Inc.*.............. 99,100 1,492,694
IFR Systems, Inc........................... 32,850 730,913
Metromedia Fiber Network, Inc. Class A*.... 18,000 605,250
Natural Microsystems Corp.................. 81,700 3,237,363
Nice Systems LTD*.......................... 49,900 2,295,400
Premisys Communications, Inc.*............. 93,700 2,688,019
Quanta Services, Inc.*..................... 13,700 226,906
Remec, Inc.*............................... 60,750 1,742,766
Stanford Telecommunications, Inc.*......... 47,300 798,188
Superior TeleCom, Inc...................... 47,875 1,998,781
Tekelec*................................... 82,600 3,747,975
World Access, Inc.*........................ 81,100 2,635,750
-------------
29,262,487
-------------
TELECOMMUNICATIONS SERVICES -- 1.8%
Advanced Communications Group, Inc.*....... 30,000 478,125
IDT Corp.*................................. 122,100 4,578,750
Pacific Gateway Exchange, Inc.*............ 45,900 2,627,775
Star Telecommunications, Inc.*............. 86,600 4,817,125
SmarTalk Teleservices, Inc................. 3,700 118,169
Telegroup, Inc.*........................... 65,200 1,320,300
-------------
13,940,244
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
TELEPHONE -- 0.2%
Primus Telecommunications Group, Inc.*..... 62,900 $ 1,824,100
-------------
TEXTILES -- 0.6%
Novel Demim Holdings LTD*.................. 45,200 1,237,350
Pillowtex Corp............................. 69,400 3,361,563
-------------
4,598,913
-------------
TRUCKING -- 0.7%
Jevic Transportation, Inc.*................ 32,200 483,000
Johnstown America, Inc.*................... 74,400 1,218,300
Knight Transportation, Inc.*............... 10,900 348,800
M.S. Carriers, Inc.*....................... 25,000 846,875
Swift Transportation Co., Inc.*............ 70,200 1,684,800
U S Xpress Enterprises, Inc. Class A*...... 47,200 979,400
-------------
5,561,175
-------------
WHOLESALE DISTRIBUTION -- 0.6%
Anicom, Inc.*.............................. 85,800 1,222,650
Aviall, Inc.*.............................. 83,800 1,257,000
Inacom Corp.*.............................. 26,700 737,588
U.S.A. Floral Products, Inc.*.............. 47,800 1,084,463
-------------
4,301,701
-------------
TOTAL COMMON STOCK
(Cost $489,840,872)......................................... 747,420,210
-------------
TOTAL INVESTMENTS -- 99.2%
(Cost $489,840,872)......................................... 747,420,210
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8%................. 5,675,716
-------------
NET ASSETS -- 100.0%.......................................... $ 753,095,926
-------------
</TABLE>
- ---------------
* Non-income producing security
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
13
<PAGE>
CORE GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Arthur E. Nicholas
Managing Partner
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Andrew B. Gallagher,
Partner, Portfolio Manager
Thomas J. Sullivan,
Portfolio Manager
GOAL: The Nicholas-Applegate Core Growth Fund seeks to maximize long-term
capital appreciation by investing primarily in U.S. mid-cap companies.
REVIEW AND OUTLOOK: Investors turned their attention back to mid-cap stocks in
May of 1997, following an extended period of large-cap outperformance. While the
Asian economic crisis temporarily interrupted this mid-cap rebound, the
beginning of 1998 witnessed a shift of investor preference back to mid-sized
company stocks. Mid caps are currently exhibiting compelling earnings growth
rates and valuations relative to large caps. While the Fund experienced some
volatility throughout the year, we believe it is well positioned going forward.
For the fiscal year ending March 31, 1998, the Fund gained 42.5% versus 42.4%
for the Russell Midcap Growth and 48.0% for the S&P 500 Index. We maintained our
bottom-up philosophy of selecting stocks of mid-sized companies with strong
fundamentals and poised to capitalize on positive change.
During the period, technology stocks experienced volatility amid uncertainties
regarding the continuing effects of the Southeast Asian economic crisis. Despite
the difficult environment, software holdings such as Compuware performed very
well. Compuware is a computer consulting firm that has benefited from its
ability to work with companies affected by the year 2000 computer problem.
The Fund was negatively affected during the year by semiconductor companies
including DII Group, Inc., which did not fare as well. Especially during the
period following the onset of South East Asia's economic troubles, we focused on
investment in companies with little or no exposure to the region.
Retail stocks made a positive contribution to the Fund during the fiscal year
amid a strong domestic economy, falling interest rates and a high level of
consumer confidence. TJX Companies, Costco, and Dollar Tree stores all delivered
solid returns.
Toward the end of the year, we reduced our weighting in the energy sector due
to the negative effects of falling oil prices on the sector and the Fund. We
increased our weightings in the financial services and consumer non-durables
sectors.
We retain a positive outlook for mid-cap growth investing based on several
factors. During the last quarter of 1997, the majority of earnings
disappointments came from large-cap stocks while mid caps reported numerous
positive earnings surprises. This may be a continuation of the mid-cap rebound
that began in May 1997, and was interrupted by the Asian economic crisis.
Coupled with attractive valuations, we see market fundamentals favoring mid-cap
stocks.
REPRESENTATIVE HOLDINGS
Allied Waste
Carnival
Centex
Chancellor Media
Costco
Peoplesoft
Robert Half International
Saville Systems
TJX
Veritas DGC
- --------------------------------------------------------------------------------
14
<PAGE>
CORE GROWTH INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
CORE GROWTH INSTITUTIONAL PORTFOLIO WITH THE RUSSELL MID CAP GROWTH INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/98
1 YEAR 5 YEARS 10 YEARS
42.49% 16.30% 19.48%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CORE GROWTH
INSTITUTIONAL
PORTFOLIO RUSSELL MID CAP GROWTH INDEX
<S> <C> <C>
9/30/85 $ 250,000.00 $250,000.00
12/31/85 311,844.71 250,000.00
12/31/86 414,298.60 293,875.99
12/31/87 429,184.05 301,984.30
12/31/88 483,552.01 341,012.60
12/31/89 647,589.51 448,379.58
12/31/90 652,317.71 425,364.42
12/31/91 1,014,500.39 625,418.63
12/31/92 1,151,987.77 679,904.76
12/31/93 1,379,773.32 756,008.21
12/31/94 1,234,653.54 739,632.42
12/31/95 1,710,920.31 991,040.20
12/31/96 1,992,544.95 1,164,278.99
12/31/97 2,324,431.52 1,427,210.66
3/31/98 2,608,714.51 1,597,567.45
</TABLE>
This graph compares a $250,000 investment in Core Growth Institutional Portfolio
with the Russell Mid Cap Growth Index, on a cumulative and average annual total
return 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. 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
The Russell Mid Cap Growth Index measures the performance of those companies
among the 800 smallest companies in the Russell 1000 Index with higher than
average price-to-book ratios and forecasted growth. The average market
capitalization is $4 billion. The Russell Mid Cap Growth Index is considered
generally representative of the U.S. market for mid cap stocks.
Index returns 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.
- --------------------------------------------------------------------------------
15
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
CORE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMON STOCKS -- 99.9%
- ---------------------------------------------------------------------------------
ADVERTISING -- 0.8%
Outdoor Systems, Inc.*..................... 114,400 $ 4,011,150
-------------
AIRLINES -- 2.1%
Comair Holdings, Inc....................... 127,100 3,368,150
Southwest Airlines Co...................... 142,800 4,221,525
Trans World Airlines, Inc.................. 217,100 2,673,044
-------------
10,262,719
-------------
ALCOHOLIC BEVERAGES -- 0.9%
Canandaigua Brands, Inc. -- Class A........ 77,400 4,421,475
-------------
BIOTECHNOLOGY -- 2.4%
Centocor, Inc.............................. 59,600 2,659,650
Medimmune, Inc.*........................... 114,300 6,300,787
Millennium Pharmaceuticals, Inc.*.......... 150,000 2,793,750
-------------
11,754,187
-------------
BROADCASTING -- 7.1%
Chancellor Media Corp.*.................... 238,800 10,954,950
Clear Channel Communications, Inc.*........ 76,300 7,477,400
Cox Communications, Inc.*.................. 113,100 4,750,200
Jacor Communications, Inc.*................ 98,900 5,835,100
USA Networks, Inc.*........................ 207,800 5,662,550
-------------
34,680,200
-------------
CLOTHING CHAINS -- 2.3%
Stage Stores, Inc.*........................ 52,700 2,720,637
TJX Companies, Inc......................... 184,300 8,339,575
-------------
11,060,212
-------------
COMPUTER/OFFICE AUTOMATION -- 3.0%
Computer Horizons Corp.*................... 85,700 4,306,425
Computer Sciences Corp.*................... 43,800 2,409,000
Network Appliance, Inc.*................... 130,500 4,632,750
Sterling Commerce, Inc.*................... 68,500 3,176,687
-------------
14,524,862
-------------
CONTRACT DRILLING -- 0.6%
R & B Falcon Corp.*........................ 96,800 2,867,700
-------------
DEPARTMENT/DISCOUNT STORES -- 7.0%
Costco Companies, Inc.*.................... 206,200 11,031,700
Dollar Tree Stores, Inc.*.................. 116,400 6,183,750
Family Dollar Stores, Inc.................. 104,900 3,986,200
Fred Meyer, Inc.*.......................... 126,000 5,819,625
Kohls Corp.*............................... 85,100 6,956,925
-------------
33,978,200
-------------
DRUGS/PHARMACEUTICALS -- 6.3%
ALZA Corp.*................................ 88,300 3,956,944
Elan Corp. PLC -- Sponsored ADR*........... 175,800 11,361,075
NBTY, Inc.*................................ 83,500 5,072,625
Sepracor, Inc.*............................ 51,000 2,173,875
Watson Pharmaceuticals, Inc.*.............. 226,000 8,136,000
-------------
30,700,519
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.6%
AES Corp.*................................. 146,600 $ 7,687,337
-------------
ELECTRONIC DATA PROCESSING -- 0.4%
Concord EFS, Inc.*......................... 58,800 2,032,275
-------------
ENVIRONMENTAL SERVICES -- 2.1%
Allied Waste Industries, Inc.*............. 310,600 7,755,294
American Disposal Services, Inc.*.......... 60,600 2,287,650
-------------
10,042,944
-------------
FINANCE COMPANIES -- 3.3%
Finova Group, Inc.......................... 122,700 7,223,962
MBNA Corp.................................. 169,100 6,055,894
Newcourt Credit Group, Inc................. 57,700 2,885,000
-------------
16,164,856
-------------
FOOD CHAINS -- 2.5%
Safeway, Inc.*............................. 124,000 4,580,250
Whole Foods Market, Inc.*.................. 105,100 7,330,725
-------------
11,910,975
-------------
GROCERY PRODUCTS -- 0.8%
International Home Foods, Inc.*............ 49,300 1,639,225
Keebler Foods Co.*......................... 67,100 2,013,000
-------------
3,652,225
-------------
HOMEBUILDING -- 2.7%
Centex Corp................................ 123,100 4,693,187
Champion Enterprises, Inc.*................ 114,400 3,053,050
Kaufman & Broad Home Corp.................. 73,600 2,396,600
Oakwood Homes Corp......................... 81,300 2,977,612
-------------
13,120,449
-------------
HOSPITALS -- 1.7%
Health Management Associates Inc., Class
A........................................ 291,700 8,349,912
-------------
INVESTMENT COMPANIES -- 0.8%
Merrill Lynch & Co., Inc.*................. 47,300 3,925,900
-------------
LEISURE/GAMING -- 2.0%
Carnival Corp. -- Class A.................. 142,400 9,932,400
-------------
MANAGED HEALTH CARE/HMO'S/PPO'S -- 0.3%
Coventry Corp.*............................ 73,900 1,187,019
-------------
MEDICAL SUPPLIES -- 4.0%
Biomet, Inc.*.............................. 89,900 2,697,000
Omnicare, Inc.............................. 160,300 6,351,887
PharMerica, Inc.*.......................... 167,800 2,496,025
Safeskin Corp.*............................ 46,200 3,413,025
Sybron International Corp.*................ 165,400 4,321,075
-------------
19,279,012
-------------
MEDICAL/HEALTH SERVICES -- 0.3%
Sunrise Assisted Living, Inc.*............. 36,500 1,633,375
-------------
OIL/GAS PRODUCTION -- 0.8%
Valero Energy Corp......................... 117,800 3,931,575
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
16
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OILFIELD SERVICES/EQUIPMENT -- 4.4%
BJ Services Co.*........................... 105,900 $ 3,858,731
Global Industries, LTD*.................... 311,400 6,344,775
Tuboscope, Inc.*........................... 149,400 2,838,600
Veritas DGC, Inc.*......................... 107,100 5,415,244
Western Atlas, Inc.*....................... 39,300 3,040,838
-------------
21,498,188
-------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 5.3%
Billing Information Concepts Corp.*........ 155,000 4,020,312
Cendant Corp.*............................. 102,300 4,053,637
Paychex, Inc............................... 60,200 3,472,787
Renaissance Worldwide, Inc.*............... 169,600 4,653,400
Robert Half International, Inc.*........... 202,700 9,729,600
-------------
25,929,736
-------------
OTHER FINANCIAL SERVICES -- 0.6%
The CIT Group, Inc.*....................... 95,000 3,099,375
-------------
OTHER HEALTH SERVICES -- 0.4%
McKesson Corp.............................. 33,900 1,957,725
-------------
OTHER PRODUCERS/MANUFACTURING -- 1.3%
Knoll, Inc.*............................... 160,000 6,170,000
-------------
OTHER TECHNOLOGY -- 0.6%
CHS Electronics, Inc.*..................... 151,600 2,842,500
-------------
PAPER -- 1.0%
Bowater, Inc............................... 56,600 3,194,363
Fort James Corp............................ 32,000 1,466,000
-------------
4,660,363
-------------
PUBLISHING -- 1.4%
Valassis Communications, Inc.*............. 170,000 6,970,000
-------------
RESTAURANTS -- 1.1%
CKE Restaurants, Inc....................... 144,100 5,295,675
-------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 3.2%
Advanced Micro Devices, Inc.*.............. 118,400 3,441,000
ASM Lithography Holding NV*................ 32,200 2,976,488
DII Group, Inc............................. 46,200 993,300
Level One Communications, Inc.*............ 141,900 3,334,650
Uniphase Corp.*............................ 119,100 5,009,644
-------------
15,755,082
-------------
SOFTWARE -- 12.7%
AXENT Technologies, Inc.*.................. 66,700 2,034,350
BMC Software, Inc.*........................ 80,500 6,746,906
Compuware Corp.*........................... 185,700 9,168,938
Hyperion Software Corp.*................... 53,600 2,371,800
Industri-Matematik International Corp.*.... 171,100 5,368,263
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
SOFTWARE (CONTINUED)
<TABLE>
<S> <C> <C>
PeopleSoft, Inc.*.......................... 147,000 $ 7,745,063
Platinum Technology, Inc.*................. 250,300 6,445,225
Saville Systems, PLC -- Sponsored ADR*..... 133,300 6,831,625
Siebl Systems, Inc.*....................... 131,800 3,789,250
Veritas Software Corp.*.................... 112,900 6,675,213
Visio Corp.*............................... 102,200 4,394,600
-------------
61,571,233
-------------
SPECIALTY CHAINS -- 3.8%
Borders Group, Inc.*....................... 190,200 6,478,688
General Nutrition Companies, Inc.*......... 224,400 8,919,900
Office Depot, Inc.*........................ 97,000 3,019,125
-------------
18,417,713
-------------
TELECOMMUNICATION SERVICES -- 3.6%
ICG Communications, Inc.*.................. 146,300 5,449,675
IDT Corp.*................................. 90,100 3,378,750
LCI International, Inc..................... 160,000 6,160,000
Pacific Gateway Exchange, Inc.*............ 41,500 2,375,875
-------------
17,364,300
-------------
TELECOMMUNICATIONS EQUIPMENT -- 3.6%
Advanced Fibre Communications, Inc.*....... 170,600 6,205,575
CIENA Corp.*............................... 107,500 4,582,188
Omnipoint Corp.*........................... 232,400 6,855,800
-------------
17,643,563
-------------
TEXTILES -- 1.1%
Westpoint Stevens, Inc.*................... 186,200 5,329,975
-------------
TOTAL COMMON STOCKS
(Cost $373,354,527)......................................... 485,616,906
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMERCIAL PAPER -- 0.9%
- ---------------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 04/01/98
(Cost $4,594,000)........................ $ 4,594,000 4,594,000
-------------
TOTAL INVESTMENTS -- 100.8%
(Cost $377,948,527)......................................... 490,210,906
LIABILITIES IN EXCESS OF OTHER ASSETS (0.8%).................. (3,707,968)
-------------
NET ASSETS -- 100.0%.......................................... $ 486,502,938
-------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
17
<PAGE>
LARGE CAP GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Arthur E. Nicholas,
Managing Partner
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Andrew Gallagher,
Partner, Portfolio Manager
GOAL: The Nicholas-Applegate Large Cap Growth Fund seeks to maximize long-term
capital appreciation by investing in the equity securities of U.S. growth
companies, emphasizing large-sized firms.
REVIEW AND OUTLOOK: The Fund performed exceptionally well during the fiscal
year as stocks of large companies attained record highs. The Fund returned 63.3%
for the fiscal year, outperforming its benchmark, the S&P 500 Index, which
returned 48.0%. In the 12 months ended March 31, the Fund's total return ranked
it 21 out of 858 growth funds in the Lipper Analytical Services universe.(1)
Worries over the impact of the South East Asian economic crisis on the U.S.
economy benefited large-cap stocks as investors flocked to the perceived safety
of large-cap names. This, combined with the strength of the domestic economy,
falling interest rates, and consumer confidence reaching an all-time high,
contributed to extremely positive performance for the asset class. The Large Cap
Growth Fund invested in the stocks of many companies that performed
exceptionally well in this environment.
For example, many technology companies, while suffering a temporary setback in
the wake of the South East Asian economic crisis, performed very well during the
fiscal year. We remained focused on the stocks of companies that were either
minimally impacted or actually benefited from Asia's economic troubles, such as
several software and telecommunications companies. For example, Compuware, a
computer consulting firm, performed very well for the Fund. Compuware benefited
from its ability to work with companies affected by the year 2000 problem.
Tellabs was another contributor to the Fund's solid performance. Tellabs
benefited by its continuing to sell computer parts to China, a region not as
severely impacted by the South East Asian crisis.
The year's consumer-driven economy boosted the business of many financial and
consumer-services companies. For example, American Express was among the Fund's
top performers for the year based on its benefiting from favorable credit
quality trends. Media company Time Warner benefited from high demand for motion
pictures, as well as increasing its services to existing cable subscribers. We
also invested in the stocks of several successful retailers, such as department
store chain Dayton Hudson, which delivered solid earnings growth as a result of
strong in-store sales.
Looking forward, we maintain our positive outlook for the Large Cap Growth
Fund as we continue to find plentiful opportunities for positive, sustainable
and timely growth among the larger-cap segment.
REPRESENTATIVE HOLDINGS
Airtouch
American Express
Compuware
Dayton Hudson
HBO
Tellabs
Time Warner
US West Media
Warner-Lambert
Worldcom
- ------------
(1) Lipper rankings are based on total return, including reinvestment of
dividends and capital gains for the stated period. Past performance is no
guarantee of future performance.
- --------------------------------------------------------------------------------
18
<PAGE>
LARGE CAP GROWTH INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
LARGE CAP GROWTH INSTITUTIONAL PORTFOLIO WITH THE RUSSELL 1000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
63.32% As of 03/31/98 52.39%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Large Cap Growth Institutional Portfolio Russell 1000 Growth Index
<S> <C> <C>
27-Dec-96 $ 250,000.00 $250,000.00
31-Jan-97 $272,399.99 $263,452.07
28-Feb-97 $267,800.00 $261,660.59
31-Mar-97 $260,000.00 $247,499.52
30-Apr-97 $269,999.99 $263,933.49
31-May-97 $300,200.00 $282,981.57
30-Jun-97 $311,400.01 $294,300.83
31-Jul-97 $350,200.02 $320,317.03
31-Aug-97 $342,200.00 $301,578.48
30-Sep-97 $359,600.00 $316,419.16
31-Oct-97 $359,200.00 $304,711.65
30-Nov-97 $354,896.62 $317,652.75
31-Dec-97 $361,073.21 $321,210.46
31-Jan-98 $366,477.73 $330,814.66
28-Feb-98 $400,191.62 $355,698.54
31-Mar-98 $424,640.63 $369,876.68
</TABLE>
This graph compares a $250,000 investment in the Large Cap Growth Institutional
Portfolio with the Russell 1000 Growth Index, on a cumulative and average annual
total return 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
The Russell 1000 Growth Index is an unmanaged index containing those companies
among the Russell 1000 Index securities with higher than average price-to-book
ratios and forecasted growth. The Russell 1000 Index contains the top 1,000
securities of the Russell 3000 Index, which comprises the 3,000 largest U.S.
securities as determined by total market capitalization. The Russell 1000 Growth
Index is considered generally representative of the U.S. market for large cap
stocks.
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.
- --------------------------------------------------------------------------------
19
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
LARGE CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------------
COMMON STOCKS -- 96.7%
- ------------------------------------------------------------------------
AIRLINES -- 2.5%
AMR Corp.*................................. 2,100 $ 300,694
-------------
BIOTECHNOLOGY -- 1.3%
Medimmune, Inc.*........................... 2,800 154,350
-------------
BROADCASTING -- 2.9%
Tele-Communications, Inc. Class A*......... 11,400 354,469
-------------
BUILDINGS MATERIALS' CHAINS -- 0.9%
Home Depot, Inc............................ 1,600 107,900
-------------
COMPUTER/OFFICE AUTOMATION -- 7.4%
Bay Networks, Inc.......................... 7,500 203,437
Computer Sciences Corp..................... 6,400 352,000
Sterling Commerce, Inc.*................... 7,500 347,812
-------------
903,249
-------------
DEPARTMENT/DISCOUNT STORES -- 9.8%
Costco Companies, Inc.*.................... 6,000 321,000
Dayton Hudson Corp......................... 3,700 325,600
K-Mart Corp.*.............................. 21,400 357,112
Wal-Mart Stores, Inc....................... 3,800 193,087
-------------
1,196,799
-------------
DRUGS/PHARMACEUTICALS -- 8.9%
Alza Corp.*................................ 8,500 380,906
Forest Laboratories, Inc. Class A*......... 4,800 180,000
Schering-Plough Corp....................... 3,400 277,737
Warner-Lambert Co.......................... 1,500 255,469
-------------
1,094,112
-------------
ELECTRONICS/MUSIC CHAINS -- 2.9%
Tandy Corp................................. 7,600 357,200
-------------
ENTERTAINMENT -- 2.3%
Time Warner, Inc........................... 4,000 288,000
-------------
FINANCE COMPANIES -- 5.0%
American Express Co........................ 3,100 284,619
Newcourt Credit Group...................... 6,500 325,000
-------------
609,619
-------------
GROCERY PRODUCTS -- 0.5%
Keebler Foods Co........................... 2,200 66,000
-------------
INVESTMENT COMPANIES -- 5.9%
Merrill Lynch & Co.*....................... 1,400 116,200
Tele-Communications TCI Venture Group Class
A........................................ 17,200 302,075
Waddell & Reed Financial, Inc.............. 11,700 304,200
-------------
722,475
-------------
MANAGED HEALTH CARE/HMO'S/PPO'S -- 2.7%
United Heathcare Corp...................... 5,100 330,225
-------------
MILITARY/DEFENSE -- 2.8%
General Motors Corp. Class H*.............. 7,500 339,375
-------------
MONEY-CENTER BANKS -- 1.9%
PNC Bank Corp.............................. 3,900 233,756
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------------
OILFIELD SERVICES/EQUIPMENT -- 2.3%
Schlumberger, Ltd.......................... 3,800 $ 287,850
-------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 2.4%
Cendant Corp.*............................. 7,500 297,187
-------------
OTHER CONSUMER SERVICES -- 0.3%
America Online, Inc.*...................... 600 40,987
-------------
OTHER HEALTH TECHNOLOGY/SERVICES -- 1.4%
HBO & Co................................... 2,900 175,087
-------------
OTHER PRODUCERS/MANUFACTURING -- 2.6%
Tyco International, Ltd.................... 5,900 322,288
-------------
RESTAURANTS -- 2.2%
McDonald's Corp............................ 4,400 264,000
-------------
SOFTWARE -- 2.1%
Compuware Corp.*........................... 5,300 261,688
-------------
SPECIALTY CHAINS -- 2.4%
Gap, Inc................................... 6,600 297,000
-------------
SPECIALTY INSURERS -- 1.6%
MGIC Investment Corp....................... 2,900 190,494
-------------
TELECOMMUNICATIONS EQUIPMENT -- 8.4%
Ascend Communications, Inc.*............... 7,400 280,275
Ciena Corp.*............................... 4,100 174,763
Loral Space and Communications, Ltd.*...... 5,600 156,450
Lucent Technologies, Inc................... 700 89,513
Tellabs, Inc.*............................. 4,900 328,913
-------------
1,029,914
-------------
TELECOMMUNICATIONS SERVICES -- 10.4%
Airtouch Communications, Inc.*............. 7,400 362,138
Nextel Communications, Inc. Class A*....... 6,400 216,000
U.S. West, Inc.*........................... 9,000 312,750
WorldCom, Inc.*............................ 8,800 378,950
-------------
1,269,838
-------------
TELEPHONE -- 2.9%
AT&T Corp.................................. 3,000 196,875
Global Telesystems Group, Inc.*............ 3,400 158,950
-------------
355,825
-------------
TOTAL COMMON STOCKS
(Cost $10,195,677).................................... 11,850,381
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.4%
- ------------------------------------------------------------------------
Associates First Capital Corp. 6.050%,
04/01/98 (Cost $424,000)................. $424,000 424,000
-------------
TOTAL INVESTMENTS -- 100.1%
(Cost $10,619,677).................................... 12,274,381
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1%)......... (15,034)
-------------
NET ASSETS -- 100.0%.................................... $ 12,259,347
-------------
</TABLE>
- ------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
20
<PAGE>
VALUE FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Lawrence S. Speidell,
CFA, Partner, Director of Global/Systematic Portfolio Management and Research
John J. Kane,
Partner, Senior Portfolio Manager
Mark Stuckelman,
Portfolio Manager
GOAL: The Nicholas-Applegate Value Fund seeks to provide total return through
long-term capital appreciation plus dividend income. Holdings reflect a
diversified portfolio comprised predominantly of U.S. companies with larger
market capitalization.
REVIEW AND OUTLOOK: A favorable mix of economic factors catapulted
large-capitalization stocks to record highs from April 1, 1997 through March 31,
1998. The combination of moderate economic growth and subdued inflation, as well
as continued solid corporate earnings results, fueled the large-cap market's
ascent for the most part of the 12-month period. The Nicholas-Applegate Value
Fund delivered outstanding returns, surging 57.8% versus a 48.0% increase for
the S&P 500 Index.
In managing the Fund, we look for attractively valued companies where we can
confirm improving prospects and underlying business strength. Valuation measures
such as low price-to-earnings and price-to-book ratios, and above-market
dividend yields characterize the Fund's holdings.
Over the past 12 months, relative performance has been driven by strong stock
selection in the technology, consumer durables, retail trade, and insurance
services sectors. In the consumer durables sector, performance was driven by
strong returns posted by Ford. Company management has undertaken a number of
initiatives to enhance shareholder value.
The leading auto manufacturer has been aggressively cutting costs worldwide at
a much higher rate than expected, which has led to improved earnings, and has
been divesting its non-automotive businesses. In April, Ford completed the
previously announced spin off of its remaining stake in Associates First
Capital.
The Fund also benefited from an overweight position in the financial services
sector relative to the S&P 500 Index. The low interest-rate environment and
continuing industry consolidation propelled stocks in the sector. Some of the
Fund's holdings in this area are Bank of America, Bankers Trust, Bear Stearns,
and Fannie Mae.
During the fiscal year, we have reduced the Fund's exposure to technology and
energy stocks and increased its exposure to the telecommunications and
producers/manufacturing sectors on a stock specific basis.
The Fund continues to find stocks with attractive valuations. We are confident
that strict adherence to our objectives and our bottom-up stock selection
approach should reward shareholders with both long-term capital appreciation and
current income.
REPRESENTATIVE HOLDINGS
Allstate
Ameritech
AMR
Bank America
Caterpillar
Dayton Hudson
Dell
Ford
Inland Steel
Public Services Enterprises
- --------------------------------------------------------------------------------
21
<PAGE>
VALUE INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
VALUE INSTITUTIONAL PORTFOLIO WITH THE S&P 500 INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
57.78% As of 03/31/98 43.55%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE INSTITUTIONAL
PORTFOLIO S&P 500 INDEX
<S> <C> <C>
4/30/97 $250,000.00 $250,000
6/30/96 263,799.99 257,424.51
9/30/96 278,799.98 265,382.62
12/31/96 310,622.01 287,516.03
3/31/97 316,935.45 295,184.39
6/30/97 369,757.99 346,593.29
9/30/97 428,683.58 372,584.81
12/31/97 436,586.20 383,296.20
3/31/98 500,064.74 436,778.75
</TABLE>
This graph compares a $250,000 investment in the Value Institutional Portfolio
with the S&P 500 Index, on a cumulative and average annual total return 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
The S&P 500 Index containing 500 industrial, transportation, utility and
financial companies and is considered to be generally representative of the U.S.
stock market.
Index returns 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.
- --------------------------------------------------------------------------------
22
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
VALUE FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS -- 96.7%
- -------------------------------------------------------------------------------
AIRLINES -- 2.8%
AMR Corp.*................................. 1,400 $ 200,462
Delta Air Lines, Inc....................... 700 82,775
------------
283,237
------------
ALCOHOLIC BEVERAGES -- 1.2%
Canandaigua Brands, Inc., Class A*......... 2,100 119,962
------------
AUTOMOBILES -- 5.3%
Ford Motor Co.............................. 5,400 349,987
General Motors Corp........................ 2,900 195,569
------------
545,556
------------
BUILDING MATERIALS -- 1.5%
Southdown, Inc............................. 2,200 153,312
------------
CHEMICALS -- 3.8%
Dexter Corp................................ 800 33,100
Dow Chemical Co............................ 2,600 252,850
Wellman, Inc............................... 4,800 103,800
------------
389,750
------------
CLOTHING CHAINS -- 0.8%
TJX Cos., Inc.............................. 1,800 81,450
------------
COMPUTER/OFFICE AUTOMATION -- 3.7%
Compaq Computer Corp....................... 2,800 72,450
Dell Computer Corp.*....................... 4,600 312,200
------------
384,650
------------
DEPARTMENT/DISCOUNT STORES -- 4.3%
Dayton Hudson Corp......................... 3,700 325,600
Shopko Stores, Inc.*....................... 3,600 114,075
------------
439,675
------------
DRUGS/PHARMACEUTICALS -- 4.3%
Bristol-Myers Squibb Co.................... 1,900 198,194
Merck & Co., Inc........................... 700 89,862
Pfizer, Inc................................ 1,600 159,500
------------
447,556
------------
ELECTRIC UTILITIES -- 4.6%
Central Hudson Gas & Electric.............. 1,300 56,711
Entergy Corp............................... 6,300 187,425
Public Service Enterprise Group, Inc....... 6,100 231,038
------------
475,174
------------
FINANCE COMPANIES -- 3.4%
American Express Co........................ 500 45,906
Federal National Mortgage Association...... 4,800 303,600
------------
349,506
------------
GAS UTILITIES -- 0.8%
Laclede Gas Co............................. 3,500 87,719
------------
HOME FURNISHINGS -- 0.5%
Kimball International, Inc. Class B........ 2,200 50,600
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
HOMEBUILDING -- 1.5%
Lennar Corp................................ 4,400 $ 151,525
------------
INTEGRATED OIL COMPANIES -- 2.9%
Exxon Corp................................. 2,800 189,350
Phillips Petroleum Co...................... 2,200 109,863
------------
299,213
------------
INVESTMENT COMPANIES -- 2.5%
Bear Stearns Cos., Inc..................... 4,970 255,334
------------
LIFE INSURERS -- 2.6%
Conseco Inc................................ 2,200 124,575
Equitable Cos., Inc........................ 2,500 141,094
------------
265,669
------------
MACHINERY/EQUIPMENT -- 4.1%
Caterpillar, Inc........................... 5,400 297,338
Ingersoll-Rand Co.......................... 2,700 129,431
------------
426,769
------------
METALS -- 3.3%
Asarco, Inc................................ 1,600 42,700
Inland Steel Industries, Inc............... 4,700 129,838
Timken Co.................................. 2,200 74,388
USX-US Steel Group, Inc.................... 2,500 94,375
------------
341,301
------------
MONEY-CENTER BANKS -- 5.2%
BankAmerica Corp........................... 3,400 280,925
Bankers Trust New York Corp................ 2,100 252,656
------------
533,581
------------
MULTI-LINE INSURERS -- 1.4%
Travelers Group, Inc....................... 2,399 143,940
------------
OIL REFINING/MARKETING -- 1.1%
Tesoro Petroleum Corp.*.................... 6,200 110,825
------------
OIL/GAS PRODUCTION -- 1.0%
Chevron Corp............................... 1,300 104,406
------------
OILFIELD SERVICES/EQUIPMENT -- 0.4%
Input/Output, Inc.*........................ 1,900 44,413
------------
OTHER HEALTH SERVICES -- 2.6%
McKesson Corp.............................. 4,600 265,650
------------
OTHER INSURANCE SERVICES -- 1.2%
First American Financial Corp.............. 1,950 124,800
------------
OTHER PRODUCERS/MANUFACTURING -- 3.3%
Parker-Hannifin Corp....................... 4,100 210,125
Premark International, Inc................. 4,000 132,500
------------
342,625
------------
OTHER TECHNOLOGY -- 0.8%
CHS Electronics, Inc.*..................... 4,700 88,125
------------
PROPERTY-CASUALTY INSURERS -- 2.1%
Allstate Corp.............................. 2,300 211,456
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
23
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
VALUE FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
REGIONAL/COMMERCIAL BANKS -- 1.3%
Southtrust Corp............................ 3,150 $ 131,906
------------
SAVINGS & LOAN ASSOCIATIONS -- 1.5%
Golden West Financial Corp................. 1,600 153,300
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 1.4%
National Semiconductor Corp.*.............. 3,200 67,000
Park Electrochemical Corp.*................ 3,000 77,438
------------
144,438
------------
SOFTWARE -- 3.0%
Compuware Corp.*........................... 2,600 128,375
Microsoft Corp.*........................... 2,000 179,000
------------
307,375
------------
SPECIALTY INSURERS -- 2.0%
Exel LTD................................... 2,700 209,250
------------
TELECOMMUNICATION SERVICES -- 3.5%
Ameritech Corp............................. 7,200 355,950
------------
TELECOMMUNICATION EQUIPMENT -- 0.5%
Applied Signal Technology, Inc.*........... 2,600 46,800
------------
TELEPHONE -- 4.2%
Telefonica de Espana-Sponsored ADR*........ 1,100 145,475
US WEST Communications Group............... 5,200 284,700
------------
430,175
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
TEXTILES -- 3.0%
Burlington Industries, Inc.*............... 9,300 $ 163,331
Mohawk Industries, Inc.*................... 4,700 148,050
------------
311,381
------------
TOBACCO PRODUCTS -- 3.3%
Philip Morris Cos., Inc.................... 2,400 100,050
RJR Nabisco Holdings Corp.................. 4,000 125,250
Universal Corp............................. 2,600 114,563
------------
339,863
------------
TOTAL COMMON STOCKS
(Cost $7,578,460).......................................... 9,948,217
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.8%
- -------------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 04/01/98 (Cost $293,000)......... $ 293,000 293,000
------------
TOTAL INVESTMENTS -- 99.5%
(Cost $7,871,460).......................................... 10,241,217
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5%................ 53,137
------------
NET ASSETS -- 100.0%......................................... $ 10,294,354
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
24
<PAGE>
INCOME & GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Sandra K. Durn,
Portfolio Manager
GOAL: The Nicholas-Applegate Income & Growth Fund seeks to maximize total
return by investing primarily in convertible and equity securities of U.S.
companies.
REVIEW AND OUTLOOK: Bolstered by a strong bond market and solid returns among
U.S. equities, the Income & Growth Fund delivered outstanding results from April
1, 1997 through March 31, 1998. The Fund rose 31.8% during the 12-month period,
outperforming its benchmark, the First Boston Convertible Index, which was up
25.9%. Issue selection and the advance in small- and mid-cap stocks during the
first six months of the fiscal year contributed to the Fund's gains.
The Fund is comprised primarily of convertible securities issued by small- and
mid-cap companies. Reflecting the smaller-cap nature of the convertible market,
of the total number of firms issuing convertible securities, about two-thirds
have market capitalization less than $2 billion.
During the fiscal year, the Fund continued to deliver returns consistent with
our objective of achieving asymmetrical market participation. We seek to capture
approximately 70% to 80% of the upside performance of the underlying equities
with only 50% or less of the downside exposure. From April 1 through December
31, 1997, the Fund participated in 72.3% of the gain of the S&P 500 Index, which
was up 29.8% in the period.
As an example of downside protection, when the S&P 500 Index dipped 5.6% in
August amid the downturn in the large- and mid-cap segments of the market, the
Income & Growth Fund was off just 1.3% -- a participation rate of 22.5%.
During the fiscal year, we increased the Fund's allocation among select issues
in the consumer services, retail trade, commercial/industrial services, and
healthcare services sectors.
Among the Fund's best-performing holdings was Home Depot, North America's
largest home improvement retailer currently operating 584 warehouse-style home
centers. The company benefits from being a leading innovator in home
improvement. Home Depot expects to be operating over 1,100 stores in the
Americas by the end of the year 2000.
Airtouch Communications, a major wireless telecommunications holding company,
also made a positive contribution to the Fund in the fiscal year. Airtouch has
significant cellular interests in the United States, Europe, and Asia. The
company is one of the largest providers of paging services in the United States,
and is forecast to benefit from the long-term growth in infrastructure and
technology development.
We believe convertibles continue to provide investors with appreciation
potential and downside protection. Looking ahead, we remain confident of our
bottom-up approach and our ability to reward shareholders with long-term results
and limited downside risk.
REPRESENTATIVE HOLDINGS
Airtouch Communications
Affiliated Computer
America Online
Central Garden & Pet
Ciber
Evergreen Media
Family Golf Centers
Home Depot
K Mart
Loral Space & Communication
- --------------------------------------------------------------------------------
25
<PAGE>
INCOME & GROWTH INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
INCOME & GROWTH INSTITUTIONAL PORTFOLIO WITH THE CS FIRST BOSTON CONVERTIBLE
INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/98
1 YEAR 5 YEARS 10 YEARS
31.78% 17.41% 17.96%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INCOME & FIRST BOSTON
GROWTH INSTITUTIONAL CONVERTIBLE
PORTFOLIO INDEX
<S> <C> <C>
12-31-86 $250,000.00 $250,000.00
12-31-87 $242,192.20 $249,438.54
12-31-88 $290,338.67 $282,892.46
12-31-89 $372,774.53 $321,822.20
12-31-90 $379,633.21 $299,660.78
12-31-91 $525,253.10 $386,904.65
12-31-92 $576,920.28 $454,915.53
12-31-93 $733,125.90 $539,287.59
12-31-94 $677,475.98 $513,857.47
12-31-95 $828,248.30 $635,736.19
12-31-96 $1,002,323.52 $723,744.87
12-31-97 $1,235,942.36 $846,216.97
3-31-98 $1,339,721.60 $915,682.03
</TABLE>
This graph compares a $250,000 investment in Income & Growth Institutional
Portfolio with the CS First Boston Convertible ("First Boston Convertible")
Index, on a cumulative and average annual total return 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. 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
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.
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.
- --------------------------------------------------------------------------------
26
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
INCOME & GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMON STOCKS -- 6.0%
- ---------------------------------------------------------------------------------
GAS UTILITIES -- 1.9%
MCN Energy Group, Inc...................... 69,530 $ 2,598,684
MCN Energy Group, Inc., (Prides)........... 68,700 2,241,337
-------------
4,840,021
-------------
REGIONAL/COMMERCIAL BANKS -- 0.5%
First Security Corp........................ 51,500 1,226,344
-------------
REITS -- 3.6%
CenterPoint Properties Corp................ 53,800 1,866,187
CRIIMI MAE, Inc............................ 104,500 1,613,219
Mack-Cali Realty Corp...................... 51,089 1,995,664
Reckson Associates Realty Corp............. 74,366 1,961,403
Spieker Properties, Inc.................... 41,621 1,716,866
-------------
9,153,339
-------------
TOTAL COMMON STOCKS
(Cost $12,401,813).......................................... 15,219,704
-------------
- ---------------------------------------------------------------------------------
PREFERRED STOCK -- 35.6%
- ---------------------------------------------------------------------------------
ADVERTISING -- 1.3%
Snyder Strypes Trust, 6.50%................ 77,400 3,279,825
-------------
AIRLINES -- 0.5%
Trans World Airlines, $4.625............... 15,000 1,260,000
-------------
AUTOMATIVE EQUIPMENT -- 0.9%
Federal-Mogul Finance Trust, 7.00%......... 37,500 2,221,875
-------------
BROADCASTING -- 5.4%
Chancellor Media Corp., $3.00.............. 17,300 1,649,987
Chancellor Media Corp., Series A, 12.25%... 11,700 1,664,325
CSC Holdings, Inc., Series I, 8.50%........ 60,000 3,082,500
Evergreen Media Corp., $3.00............... 41,310 3,939,941
Merrill Lynch & Co., Series COX, 6.00%
(Strypes)................................ 94,700 3,338,175
-------------
13,674,928
-------------
DEPT/DISCOUNT STORES -- 0.9%
Kmart Financing I, 7.75%................... 35,400 2,221,350
-------------
DRUGS/PHARMACEUTICALS -- 2.0%
McKesson Financing Trust., 5.00%........... 60,700 4,962,225
-------------
ELECTRIC UTILITIES -- 1.0%
AES Trust II, 5.50%........................ 47,000 2,649,625
-------------
ENTERTAINMENT -- 0.4%
Royal Caribbean Cruises, Series A, 7.25%... 9,600 1,060,800
-------------
FINANCE COMPANIES -- 4.0%
Finova Finance Trust, 5.50%................ 46,920 3,683,220
Salomon Smith Barney Holding, Series CSN,
6.25%.................................... 39,250 2,619,937
H.F. Ahmanson, Series D, 6.00%............. 23,698 3,774,641
-------------
10,077,798
-------------
GROCERY PRODUCTS -- 0.6%
Suiza Capital Trust II, 5.50%.............. 30,300 1,522,575
-------------
LIFE INSURERS -- 2.4%
Conseco Finance Trust IV, Series F, 7.00%
(Prides)................................. 50,300 3,033,719
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
LIFE INSURERS (CONTINUED)
<TABLE>
<S> <C> <C>
Protective Life Capital Trust II, 6.50%
(Prides)................................. 48,100 $ 2,970,175
-------------
6,003,894
-------------
OIL REFINING/MARKETING -- 0.6%
Tosco Financing Trust, 5.75%............... 26,200 1,606,387
-------------
OIL/GAS PRODUCTION -- 0.8%
Devon Financing Trust, $3.25............... 5,700 397,931
Devon Financing Trust, $3.25............... 24,576 1,715,712
-------------
2,113,643
-------------
OTHER COMM/INDUSTRIES SERVICES -- 1.0%
Merrill Lynch & Co., "CBR", 7.875%......... 36,800 2,502,400
-------------
PIPELINES -- 1.8%
Williams Companies, Inc., $3.50............ 30,300 4,444,646
-------------
PUBLISHING -- 1.3%
Houston Industries, Inc., 7.00% (Aces)..... 53,900 3,493,394
-------------
SAVINGS & LOAN/THRIFTS -- 1.0%
Sovereign Bancorp, Series B, 6.25%......... 19,140 2,545,620
-------------
SPECIALTY INSURERS -- 1.4%
Merrill, 6.50%, "MTG" (Strypes)............ 30,900 3,437,625
-------------
TELECOMMUNICATION EQUIPMENT -- 2.3%
LM Ericcson Telephone Co., 4.25%........... 476,370 3,155,951
Loral Space & Communications Ltd*.......... 34,600 2,631,762
-------------
5,787,713
-------------
TELECOMMUNICATION SERVICES -- 4.0%
Airtouch Communications, Series C, 4.25%... 53,618 3,806,878
Intermedia Communication, Series E,
7.00%*................................... 25,000 884,375
SBC Communications, Inc., "TMX" (DECS),
7.75%.................................... 51,000 2,607,375
Worldcom, Inc., 8.00%...................... 18,140 2,707,395
-------------
10,006,023
-------------
TELEPHONE -- 2.0%
Nextlink Communications 6.50%.............. 31,000 1,495,750
US West Inc., Series D, 4.50%.............. 52,900 3,782,350
-------------
5,281,100
-------------
TOTAL PREFERRED STOCK
(Cost $71,225,030).......................................... 90,150,446
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------------------------
CORPORATE BONDS -- 57.4%
- ---------------------------------------------------------------------------------
ADVERTISING -- 2.1%
Omnicom Group, CV
4.250%, 01/03/07......................... $ 3,441,000 5,367,960
-------------
BIOTECHNOLOGY -- 1.1%
Aviron, CV
5.750%, 04/01/05......................... 1,164,000 1,117,440
Centocor, Inc., CV
4.750%, 02/15/05......................... 1,530,000 1,679,175
-------------
2,796,615
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
27
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
INCOME & GROWTH FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
BROADCASTING -- 1.2%
Clear Channel Communication, CV
2.625%, 04/01/03......................... $ 3,009,000 $ 3,001,478
-------------
BUILDING MATERIALS -- 0.6%
Hexcel Corp., CV
7.000%, 08/01/03......................... 844,000 1,540,300
-------------
BUILDING MATERIALS CHAINS -- 2.5%
Home Depot Inc., CV
3.250%, 10/01/01......................... 4,201,000 6,327,756
-------------
COMPUTERS/OFFICE AUTOMATION -- 3.6%
EMC Corp., CV
3.250%, 03/15/02......................... 1,595,000 2,823,150
EMC Corp., CV
3.250%, 03/15/02......................... 1,185,000 2,097,450
Safeguard Scientifics, CV
6.000%, 02/01/06......................... 1,245,000 1,606,050
Veritas Software Corp., CV
5.250%, 11/01/04......................... 2,268,000 2,704,590
-------------
9,231,240
-------------
CONTRACT DRILLING -- 1.8%
Loews Corp., CV
3.125%, 09/15/07......................... 4,554,000 4,485,690
-------------
DEPARTMENT/DISCOUNT STORES -- 2.9%
Costco Companies Inc., CV*
0.000%, 08/19/17......................... 6,678,000 4,482,607
Federated Department Stores, CV
5.000%, 10/01/03......................... 1,861,000 2,931,075
-------------
7,413,682
-------------
DRUG CHAINS -- 1.9%
Rite Aid Corp., CV
5.250%, 09/15/02......................... 4,083,000 4,715,865
-------------
DRUGS/PHARMACEUTICALS -- 6.4%
Alpharma, Inc., CV
5.750%, 04/01/05......................... 1,550,000 1,534,500
Athena Neurosciences, Inc., CV
4.750%, 11/15/04......................... 1,635,000 1,898,644
Athena Neurosciences, Inc., CV
4.750%, 11/15/04......................... 2,111,000 2,435,566
Ominicare, Inc., CV
5.000%, 12/01/07......................... 1,910,000 2,306,325
Sandoz Capital BVI Ltd., CV
2.000%, 10/06/02......................... 900,000 1,500,570
Sandoz Capital BVI Ltd., Euro, CV
2.000%, 10/06/02......................... 1,470,000 2,450,931
Sepracor, Inc., CV
6.250%, 02/15/05......................... 1,075,000 1,218,781
Sepracor, Inc., CV
7.000%, 12/01/02......................... 685,000 1,508,713
Sepracor, Inc., Euro, CV
7.000%, 12/01/02......................... 649,000 1,429,423
-------------
16,283,453
-------------
ELECTRONIC DATA PROCESSING -- 2.7%
Automatic Data Processing, CV*
0.000%, 02/20/12......................... 5,177,000 4,575,174
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
ELECTRONIC DATA PROCESSING (CONTINUED)
<TABLE>
<S> <C> <C>
Affiliated Computer Services, CV
4.000%, 03/15/05......................... $ 2,288,000 $ 2,290,860
-------------
6,866,034
-------------
ELECTRONIC INSTRUMENTS -- 2.6%
ADT Operations, Inc., CV*
0.000%, 07/06/10......................... 3,358,000 4,974,038
SCI Systems, Inc., CV
5.000%, 05/01/06......................... 878,000 1,433,335
-------------
6,407,373
-------------
ENTERTAINMENT -- 1.6%
Family Golf Centers, Inc., CV
5.750%, 10/15/04......................... 2,106,000 2,643,030
Imax Corp., CV
5.750%, 04/01/03......................... 1,000,000 1,441,250
-------------
4,084,280
-------------
ENVIRONMENTAL SERVICES -- 1.8%
USA Waste Services, Inc., CV
4.500%, 06/01/01......................... 2,015,000 3,123,250
USA Waste Services, Inc., CV
4.000%, 02/01/02......................... 1,297,000 1,533,703
-------------
4,656,953
-------------
FOOD CHAINS -- 1.0%
Whole Foods Market, Inc., CV*
0.000%, 03/02/18......................... 5,727,000 2,462,610
-------------
LODGING -- 2.6%
Carematrix Corp., CV
6.250%, 08/15/04......................... 1,914,000 2,299,193
Hilton Hotels Corp., CV
5.000%, 05/15/06......................... 3,809,000 4,304,170
-------------
6,603,363
-------------
MACHINERY/EQUIPMENT -- 1.5%
Thermo Electron Corp., CV
4.250%, 01/01/03......................... 3,329,000 3,878,285
-------------
MEDICAL/HEALTH SERVICES -- 2.1%
Alternative Living Services, CV
5.250%, 12/15/02......................... 2,000,000 2,595,000
Total Renal Care Holdings Inc., CV
5.625%, 07/15/06......................... 1,856,000 2,635,520
-------------
5,230,520
-------------
MULTI-LINE INSURERS -- 0.7%
Republic of Italy, CV
5.000%, 06/28/01......................... 960,000 1,858,800
-------------
OILFIELD SERVICES/EQUIPMENT -- 0.8%
Baker Hughes, Inc., CV*
0.000%, 05/05/08......................... 2,498,000 2,074,901
-------------
OTHER COMMERCIAL/INDUSTRIAL SERVICES -- 3.5%
Data Processing Resource, CV
5.250%, 04/01/05......................... 2,295,000 2,481,469
CUC International, Inc., CV
3.000%, 02/15/02......................... 4,492,000 6,291,630
-------------
8,773,099
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
28
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
OTHER CONSUMER SERVICES -- 1.9%
America Online, Inc., CV
4.000%, 11/15/02......................... $ 3,243,000 $ 4,750,995
-------------
OTHER HEALTH SERVICES -- 0.5%
Sunrise Assisted Living, CV
5.500%, 06/15/02......................... 911,000 1,204,798
-------------
PRINTING/FORMS -- 0.9%
Mail-Well, Inc., CV
5.000%, 11/01/02......................... 1,917,000 2,319,570
-------------
PROPERTY-CASUALTY INSURANCE -- 1.3%
Mutual Risk Management, Inc., CV*
0.000%, 10/30/15......................... 4,591,000 3,374,385
-------------
RESTAURANTS -- 1.0%
CKE Restaurants, Inc., CV
4.250%, 03/15/04......................... 2,671,000 2,657,645
-------------
SAVINGS & LOAN/THRIFTS -- 0.7%
BankAtlantic Bancorp, Inc., CV
5.625%, 12/01/07......................... 1,435,000 1,739,938
-------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 0.5%
Xilinx, Inc., CV
5.250%, 11/01/02......................... 1,147,000 1,148,434
-------------
SOFTWARE -- 2.4%
Network Associates, Inc.,*
0.000%, 02/13/18......................... 6,501,000 2,966,081
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
SOFTWARE (CONTINUED)
<TABLE>
<S> <C> <C>
Platinum Technology, Inc., CV
6.250%, 12/15/02......................... $ 3,041,000 $ 3,162,640
-------------
6,128,721
-------------
SPECIALTY CHAINS -- 1.7%
Staples, Inc. Euro, CV
4.500%, 10/01/00......................... 150,000 241,125
Staples, Inc., CV
4.500%, 10/01/00......................... 2,544,000 4,089,480
-------------
4,330,605
-------------
TELECOMMUNICATIONS SERVICES -- 1.1%
Smartalk Teleservices, CV
5.750%, 09/15/04......................... 2,025,000 2,667,938
-------------
WHOLESALE DISTRIBUTION -- 0.4%
Central Garden & Pet Co., CV
6.000%, 11/15/03......................... 708,000 1,061,115
-------------
TOTAL CORPORATE BONDS
(Cost $120,807,286)......................................... 145,444,401
-------------
TOTAL INVESTMENTS -- 99.0%
(Cost $204,434,129)......................................... 250,814,551
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%................. 2,513,179
-------------
NET ASSETS -- 100.0%.......................................... $ 253,327,730
-------------
</TABLE>
- ---------------
* Non-Income Producing Security
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
29
<PAGE>
BALANCED GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Fred S. Robertson,
Partner, Chief Investment Officer, Fixed Income
Lawrence S. Speidell,
CFA, Partner, Director of Global/Systematic Portfolio Management and Research
John J. Kane,
Partner, Senior Portfolio Manager
Susan Malone,
Portfolio Manager
James E. Kellerman,
Partner, Portfolio Manager
Malcom S. Day,
CFA, Portfolio Manager
GOAL: The Balanced Growth Fund seeks to provide capital appreciation and
current income by investing approximately 60% of total assets in equity and
convertible securities, primarily of U.S. companies, and 40% of total assets in
debt securities, money market instruments, and short-term investments.
REVIEW AND OUTLOOK: During the 12-month period ending March 31, 1998, the
Balanced Growth Fund gained 40.4% versus a 32.9% gain for a balanced index
comprised of 60% S&P 500 Index and 40% Lehman Government/Corporate Bond Index.
A powerful domestic economy, low inflation, and stable interest rates
contributed to a positive environment for U.S. stocks throughout the fiscal
year. This environment favored companies with strong pricing power fueled by
high consumer demand. Transportation companies, including Airborne Freight,
recorded positive gains, as did technology companies in spite of initial
setbacks caused by the Asian economic crisis. Telecommunications equipment
manufacturer Tekelek was one of the Fund's better-performing technology
holdings.
For the fiscal year, the positive, long-term fundamentals for the U.S. fixed
income market overcame cyclically strong economic activities. The period was
characterized by the presence of low inflation and declining long-term interest
rates in conflict with tight labor markets, economic strength, and low
unemployment. The Asian economic and monetary crises also affected the fixed
income market as expectations for a significant change in the balance of trade
with Asian nations affected forecasts for U.S. economic activity. While the
Federal Reserve Board left interest rates unchanged during the period, the bond
market fluctuated as expectations of future Fed activity shifted.
Looking ahead, we believe the long-term prospects for fixed income investing
remain promising based upon conservative U.S. fiscal policy and increased global
competition which is contributing to a disinflationary trend. However, in the
short-to-intermediate term, a relatively strong economy, strong money growth,
and tight labor markets create an environment where interest rates may need to
be raised to ease cyclical pressures on inflation. While maintaining our current
neutral to slightly defensive stance on interest rates, we seek to add
additional value through tactical yield-curve decisions and by identifying
opportunities among diverse sectors. Similarly, we remain confident of our
ability to deliver favorable long-term results through stock selection.
REPRESENTATIVE HOLDINGS
Ameritech
AT&T
Chase Manhattan
Dell Computer
Schering Plough
United Technologies
Australia 7.5% 7/15/05
Foodmaker 9.25% 3/1/99
IMCHE 97-5 A5
KN Energy 7.45% 3/1/2098
- --------------------------------------------------------------------------------
30
<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> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/98 SINCE
1 YEAR 3 YEARS INCEPTION
40.38% 22.37% 16.42%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED GROWTH INSTUTITUTIONAL PORTFOLIO BALANCED 60/40 INDEX
<S> <C> <C>
19-Apr-93 $250,000.00 $250,000.00
30-Jun-93 $276,291.08 $254,197.37
30-Sep-93 $292,488.26 $261,513.61
31-Dec-93 $284,953.05 $264,847.82
31-Mar-94 $276,828.36 $255,502.35
30-Jun-94 $263,235.16 $254,911.78
30-Sep-94 $276,349.49 $262,902.43
31-Dec-94 $271,824.98 $263,326.37
31-Mar-95 $289,443.27 $283,950.18
30-Jun-95 $317,857.39 $307,568.91
30-Sep-95 $343,572.51 $324,558.87
31-Dec-95 $338,705.84 $342,372.21
31-Mar-96 $351,539.71 $350,028.15
30-Jun-96 $372,953.92 $360,091.37
30-Sep-96 $387,104.75 $369,497.41
31-Dec-96 $397,663.39 $392,531.65
01-Apr-01 $377,780.22 $397,611.43
01-Jul-01 $426,832.02 $444,397.45
01-Oct-01 $489,847.06 $470,867.59
01-Jan-02 $482,665.24 $485,277.24
01-Apr-02 $530,334.78 $528,480.47
</TABLE>
This graph 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
and average annual total return basis. The Portfolio calculates its performance
based upon the historical performance of its corresponding series ("Fund") of
Nicholas-Applegate Investment Trust, adjusted to reflect sales charges and
Portfolio operating expenses. The Portfolio commenced operations on 10/1/93. 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
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.
- --------------------------------------------------------------------------------
31
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
BALANCED GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS -- 58.3%
- ----------------------------------------------------------------------------
AEROSPACE -- 1.8%
United Technologies Corp................... 6,400 $ 590,800
------------
AIR FREIGHT/SHIPPING -- 0.7%
Airborne Freight Corp...................... 5,600 210,700
------------
AIRLINES -- 0.3%
AMR Corp.*................................. 700 100,231
------------
ALCOHOLIC BEVERAGES -- 0.8%
Canandaigua Brands, Inc. Class A*.......... 4,800 274,200
------------
APPAREL -- 0.9%
Jones Apparel Group, Inc.*................. 2,700 148,669
Stride Rite Corp........................... 11,100 150,544
------------
299,213
------------
AUTOMOBILES -- 1.1%
General Motors Corp........................ 5,600 377,650
------------
AUTOMOTIVE EQUIPMENT -- 1.3%
Federal-Mogul Corp......................... 2,400 127,650
SPX Corp.*................................. 4,000 305,250
------------
432,900
------------
BEVERAGES/SOFT DRINKS -- 1.8%
Pepsico, Inc............................... 14,100 601,894
------------
BUILDING MATERIALS CHAINS -- 0.7%
Centex Construction Products, Inc.......... 6,600 240,487
------------
CHEMICALS -- 2.3%
Dow Chemical Co.*.......................... 5,100 495,975
Lyondell Petrochemical Co.................. 7,500 255,469
------------
751,444
------------
CLOTHING CHAINS -- 2.8%
Ross Stores, Inc........................... 11,400 503,025
TJX Companies, Inc......................... 9,200 416,300
------------
919,325
------------
COMPUTERS/OFFICE AUTOMATION -- 2.4%
Compaq Computer Corp....................... 4,900 126,787
Dell Computer Corp.*....................... 9,800 663,950
------------
790,737
------------
DRUGS/PHARMACEUTICALS -- 3.4%
Abbott Labs, Inc........................... 2,000 150,625
Johnson & Johnson, Inc..................... 3,500 256,594
Schering Plough Corp....................... 8,700 710,681
------------
1,117,900
------------
ELECTRIC UTILITIES -- 1.0%
FPL Group, Inc............................. 5,100 327,675
------------
ENTERTAINMENT -- 0.6%
Walt Disney Co.*........................... 1,700 181,475
------------
FINANCE COMPANIES -- 2.4%
Federal National Mortgage Association...... 8,000 506,000
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
FINANCE COMPANIES (CONTINUED)
<TABLE>
<S> <C> <C>
SLM Holding Corp........................... 6,300 $ 274,837
------------
780,837
------------
FOOD CHAINS -- 1.0%
Albertsons, Inc.*.......................... 6,400 336,800
------------
GROCERY PRODUCTS -- 1.4%
Dean Foods Co.............................. 4,000 201,250
Interstate Bakeries Corp................... 7,600 245,575
------------
446,825
------------
INTEGRATED OIL COMPANIES -- 4.0%
Exxon Corp................................. 6,700 453,087
Mobil Corp................................. 7,300 559,362
Phillips Petroleum Co...................... 6,000 299,625
------------
1,312,074
------------
INVESTMENT COMPANIES -- 0.7%
Bear Stearns Co., Inc...................... 2,020 103,778
Morgan Stanley Dean Witter Discover &
Co.*..................................... 1,800 131,175
------------
234,953
------------
MACHINERY/EQUIPMENT -- 0.3%
Caterpillar, Inc........................... 1,900 104,619
------------
METALS -- 0.6%
Bethlehem Steel Corp.*..................... 15,500 210,219
------------
MONEY-CENTER BANKS -- 2.1%
Chase Manhattan Corp....................... 4,200 566,475
Suntrust Banks, Inc........................ 1,500 113,062
------------
679,537
------------
MULTI-LINE INSURERS -- 1.2%
Torchmark Corp............................. 5,000 229,062
Travelers Group, Inc....................... 2,700 162,000
------------
391,062
------------
OTHER CONSUMER NON-DURABLES -- 1.9%
Procter & Gamble Co........................ 7,600 641,250
------------
OTHER FINANCIAL SERVICES -- 1.3%
SunAmerica, Inc............................ 8,700 416,513
------------
OTHER PRODUCERS/MANUFACTURING -- 1.1%
Crane Co................................... 4,300 227,900
Tyco International Ltd..................... 2,200 120,175
------------
348,075
------------
PAPER -- 1.0%
Fort James Corp............................ 7,300 334,431
------------
PROPERTY-CASUALTY INSURERS -- 2.4%
Allstate Corp.*............................ 5,500 505,656
Orion Capital Corp......................... 5,400 295,313
------------
800,969
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
32
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
PUBLISHING -- 0.8%
Valassis Communication, Inc................ 6,200 $ 254,200
------------
RECREATIONAL PRODUCTS -- 0.3%
Mattel, Inc.*.............................. 2,200 87,175
------------
RESTAURANTS -- 0.5%
Foodmaker, Inc.*........................... 8,100 156,938
------------
SAVINGS & LOAN ASSOCIATIONS -- 0.8%
GreenPoint Financial Corp.................. 7,000 251,563
------------
SEMICONDUCTORS/ELECTRONIC COMPONENTS -- 0.9%
Intel Corp................................. 3,900 304,444
------------
SOAPS/COSMETICS -- 0.9%
Colgate-Palmolive Co....................... 1,600 138,600
Gillette Co................................ 1,400 166,162
------------
304,762
------------
SOFTWARE -- 2.2%
BMC Software, Inc.*........................ 5,400 452,588
Microsoft Corp.*........................... 3,200 286,400
------------
738,988
------------
TELECOMMUNICATIONS EQUIPMENT -- 0.9%
Tekelec, Inc.*............................. 6,600 299,475
------------
TELECOMMUNICATIONS SERVICES -- 2.6%
AirTouch Communications, Inc.*............. 5,300 259,369
Ameritech Corp............................. 12,300 608,081
------------
867,450
------------
TELEPHONE -- 3.7%
AT&T Corp.*................................ 7,700 505,312
Bellsouth Corp............................. 10,700 722,919
------------
1,228,231
------------
TEXTILES -- 0.7%
Carlisle Cos., Inc......................... 4,500 221,062
------------
TOBACCO PRODUCTS -- 0.7%
Philip Morris Co., Inc..................... 5,800 241,788
------------
TOTAL COMMON STOCK
(Cost $14,193,969)....................................... 19,210,871
------------
- ----------------------------------------------------------------------------
PREFERRED STOCK -- 0.8%
- ----------------------------------------------------------------------------
BROADCASTING -- 0.4%
Chancellor Media Corp. Series A, 12.25%.... 1,000 142,250
------------
TELECOMMUNICATIONS -- 0.4%
IXC Communications, Inc., 12.50%*.......... 1,060 129,320
------------
TOTAL PREFERRED STOCK
(Cost $241,051).......................................... 271,570
------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
WARRANTS -- 0.0%
- ----------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS -- 0.0%
Electronic Retailing Systems, Inc.*........ 50 $ 1,250
------------
TOTAL WARRANTS
(Cost $2,036)............................................ 1,250
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------------
CORPORATE BONDS -- 16.5%
- ----------------------------------------------------------------------------
AIRLINES -- 0.6%
Continental Airlines
6.648%, 09/15/17......................... $135,000 134,823
Trans World Airlines
11.375%, 03/01/06........................ 50,000 50,625
------------
185,448
------------
BANKS -- 1.1%
Bank of Scotland
7.000%, 11/29/49......................... 125,000 125,625
First Union Corp.
6.875%, 09/15/05......................... 225,000 231,907
------------
357,532
------------
BEVERAGES (NON-ALCOHOLIC) -- 0.9%
Coca-Cola Enterprises
6.000%, 03/15/01......................... 110,000 109,645
Coca-Cola Enterprises
6.750%, 01/15/38......................... 175,000 173,190
------------
282,835
------------
COMMERCIAL/INDUSTRIAL SERVICES -- 0.4%
Cellulosa Arauco Constitution
6.950%, 09/15/05......................... 125,000 122,812
------------
CONSTRUCTION -- 0.2%
Standard Pacific Corp.
10.500%, 03/01/00........................ 49,000 51,695
------------
ELECTRONIC INSTRUMENTS -- 0.1%
Electronic Retailing Systems, Inc.
0.000%, 02/01/04*........................ 50,000 29,000
------------
ELECTRIC UTILITIES -- 0.8%
Tenaga Nasional Berhad
7.625%, 04/29/07......................... 100,000 89,256
Yorkshire Power
6.154%, 02/25/03......................... 175,000 173,581
------------
262,837
------------
ELECTRONICS -- 0.5%
Rockwell International Corp.
5.200%, 01/15/49......................... 200,000 149,895
------------
ENTERTAINMENT -- 0.3%
Imax Corp.
10.000%, 03/01/01........................ 100,000 104,500
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
33
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
BALANCED GROWTH FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
FINANCIAL SERVICES -- 3.7%
American Resource Corp.
7.450%, 12/15/26......................... $225,000 $ 243,493
Amresco Inc.
9.875%, 03/15/05......................... 50,000 50,875
AON Capital Trust A
8.205%, 01/01/27......................... 100,000 113,122
Corp. Andina Fom
6.750%, 03/15/05......................... 125,000 124,245
Credit Suisse-London
7.900%, 05/01/07......................... 95,000 100,927
Hutchison Whampoa
7.500%, 08/01/27......................... 100,000 90,321
Lehman Brothers Holdings
6.625%, 12/27/02......................... 200,000 202,356
MCII Holdings
0.000%, 11/15/02*........................ 50,000 47,250
Cowen Financial Corp.
11.875, 10/01/03......................... 75,000 85,500
Resource America, Inc.
12.000%, 08/01/04........................ 150,000 157,500
------------
1,215,589
------------
FOOD -- 0.4%
Tyson Foods
7.000%, 01/15/28......................... 150,000 148,224
------------
INSURANCE -- 0.3%
Jackson National Life Insurance Co.
8.150%, 03/15/27......................... 100,000 111,486
------------
MACHINERY -- 0.3%
Interlake Corp.
12.125%, 03/01/02........................ 100,000 103,000
------------
MULTI-LINE INSURANCE -- 0.3%
Travelers Group
6.875%, 02/15/49......................... 110,000 107,284
------------
NATURAL GAS UTILITIES -- 1.1%
Kn Energy Inc.
7.450%, 03/01/47......................... 180,000 181,407
Kn Energy Inc.
6.450%, 03/01/03......................... 170,000 170,136
------------
351,543
------------
OIL -- 0.5%
Lasmo, Inc.
6.750%, 12/15/07......................... 160,000 158,000
------------
OIL WELL SERVICES -- 0.6%
Petroleum Geo-Services
7.125%, 03/30/28......................... 210,000 210,666
------------
PRODUCERS/MANUFACTURING -- 0.2%
Figgie International, Inc.
9.875%, 10/01/99......................... 50,000 52,000
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
REAL ESTATE/MORTGAGE -- 0.2%
Criimi Mae, Inc.
9.125%, 12/01/02......................... $ 75,000 $ 75,468
------------
RENTAL/LEASING COMPANIES -- 0.5%
Hertz Corp.
7.000%, 01/15/28......................... 125,000 121,808
Railcar Leasing LLC
7.125%, 01/15/13......................... 55,000 57,681
------------
179,489
------------
RESTAURANTS -- 0.2%
Foodmaker, Inc.
9.250%, 03/01/99......................... 71,000 71,887
------------
SPECIALITY RETAILING -- 1.2%
Musicland Group
9.000%, 06/15/03......................... 150,000 148,500
Tandy Corp.
6.090%, 01/09/02......................... 245,000 242,459
------------
390,959
------------
TELECOMMUNICATIONS -- 1.2%
Cable & Wireless Communications
6.375%, 03/06/03......................... 165,000 165,094
Panamsat Corp.
6.125%, 01/15/05......................... 250,000 245,698
------------
410,792
------------
TELEPHONE -- 0.6%
US West Capital Funding
7.950%, 02/01/47......................... 170,000 193,800
------------
WASTE MANAGEMENT -- 0.3%
WMX Technologies, Inc.
7.100%, 08/01/26......................... 90,000 93,264
------------
TOTAL CORPORATE BONDS
(Cost $5,359,788)........................................ 5,420,005
------------
- ----------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS -- 5.3%
- ----------------------------------------------------------------------------
AUSTRALIA -- 3.6%
Australian Government
7.500%, 07/15/05......................... 800,000 590,478
Queensland Treasury Global
8.000%, 05/14/03......................... 780,000 572,250
------------
1,162,728
------------
GERMANY -- 1.7%
German Government Unity Fund
8.000%, 01/21/02......................... 945,000 573,947
------------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $1,775,479)........................................ 1,736,675
------------
- ----------------------------------------------------------------------------
FOREIGN CORPORATE BONDS -- 0.2%
- ----------------------------------------------------------------------------
INDONESIA -- 0.2%
PT Polysindo Eka Perkasa Interest
Promissory Note*......................... 5,000 2,950
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
34
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
FOREIGN CORPORATE BONDS (Continued)
- ---------------------------------------------------------
INDONESIA (CONTINUED)
<TABLE>
<S> <C> <C>
PT Polysindo Eka Perkasa Interest
Promissory Note*......................... $ 5,000 $ 2,950
PT Polysindo Eka Perkasa Principal
Promissory Note*......................... 100,000 59,000
------------
TOTAL FOREIGN CORPORATE BONDS
(Cost $90,726)........................................... 64,900
------------
- ----------------------------------------------------------------------------
AGENCY OBLIGATIONS -- 3.2%
- ----------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 0.4%
Series #2020E
7.000%, 01/15/28......................... 130,000 133,697
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 2.3%
Pool #1994-27 PJ
6.500%, 06/25/23......................... 350,000 350,763
Pool #1996-59 K
6.500%, 07/25/23......................... 400,000 396,000
------------
746,763
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.5%
Pool #348872
7.000%, 07/15/08......................... 159,002 162,336
------------
TOTAL AGENCY OBLIGATIONS
(Cost $981,642).......................................... 1,042,796
------------
- ----------------------------------------------------------------------------
CMO'S AND ASSET BACKED SECURITIES -- 7.3%
- ----------------------------------------------------------------------------
AUTO -- 0.8%
AESOP Funding II 1998-a A
6.140%, 05/20/06......................... 265,000 262,598
------------
BANKS -- 0.4%
BankBoston Marine Asset Backed Trust 1997-2
A5
6.570%, 11/15/09......................... 120,000 121,219
------------
MORTGAGE COMMERCIAL -- 3.0%
Aames Mortgage Trust 1997-D A2A
5.875%, 12/15/27......................... 250,337 250,415
DLJ Mortgage Acceptance Corp. 1998-CF1, A1B
6.410%, 02/15/08......................... 225,000 225,000
Morgan Stanley Capital I 1998 Hf1 A2
6.600%, 01/15/08......................... 260,000 262,031
Nomura Asset Security Corp. 1998-D6, A1B
6.590%, 03/15/30......................... 260,000 263,819
------------
1,001,265
------------
MORTGAGE HOME EQUITY -- 3.1%
EQCC Home Equity Loan Trust 1996-4 A4
6.470%, 08/15/10......................... 255,000 256,355
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
MORTGAGE HOME EQUITY (CONTINUED)
<TABLE>
<S> <C> <C>
IMC Home Equity Loan Trust 1997-5 A5
6.610%, 06/20/13......................... $235,000 $ 235,698
The Money Store Residential Trust 98-1 A2
6.200%, 03/15/08......................... 130,000 129,959
The Money Store Residential Trust 98-1 A3
6.215%, 02/15/11......................... 260,000 259,594
SL Commercial Mortgage Trust 1997-C1
6.875%, 07/25/04......................... 143,357 146,112
------------
1,027,718
------------
TOTAL CMO'S AND ASSET BACKED SECURITIES
(Cost $2,416,734)........................................ 2,412,800
------------
- ----------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 1.5%
- ----------------------------------------------------------------------------
U.S. TREASURY BILLS -- 0.9%
9.250%, 02/15/16........................... 220,000 298,006
------------
U.S. TREASURY BONDS -- 0.6%
8.500%, 02/15/20........................... 155,000 201,379
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $496,707).......................................... 499,385
------------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- ----------------------------------------------------------------------------
MUTUAL FUND -- 3.3%
- ----------------------------------------------------------------------------
BLACKROCK 2001 TERM -- 1.6%
60,000 517,500
------------
BLACKROCK STRATEGIC TERM TRUST, INC. -- 1.7%
65,800 567,525
------------
TOTAL MUTUAL FUND
(Cost $1,054,536)........................................ 1,085,025
------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.5%
- ----------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 04/01/98
(Cost $835,000).......................... $835,000 835,000
------------
TOTAL INVESTMENTS -- 98.9%
(Cost $27,447,668))...................................... 32,580,277
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.1%.............. 363,328
------------
NET ASSETS -- 100.0%....................................... $ 32,943,605
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
35
<PAGE>
EMERGING COUNTRIES FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Lawrence S. Speidell,
CFA, Partner, Director of Global/Systematic Portfolio Management and Research
Pedro V. Marcal,
Partner, Portfolio Manager
Eswar Menon,
Portfolio Manager
Jon Borchardt,
Portfolio Manager
Jessica Hilinski,
Portfolio Manager
Aaron M. Harris,
Portfolio Manager
Ernesto Ramos, Ph.D.,
Senior Portfolio Manager
Aylin Uckunkaya,
Investment Analyst
GOAL: The Emerging Countries Fund seeks to provide long-term capital
appreciation through investing in companies of developing countries around the
world.
REVIEW AND OUTLOOK: The Emerging Countries Fund delivered outstanding returns
during the fiscal year ending March 31, 1998 on the strength of our superior
stock selection. The Fund gained 8.8% in the period, outperforming its
benchmark, the MSCI Emerging Markets Free Index, which fell 13.4%.
Using our bottom-up stock selection process of investing based on company
fundamentals, we were able to avoid the negative impact of the economic crisis
in South East Asia. Prior to the beginning of the crisis, we eliminated most of
our holdings in the region as we found very few stocks meeting our investment
criteria. However, the Fund invested in several solid companies in Hong Kong and
China, including Peak International, a Hong Kong-based precision-packaging
materials producer with manufacturing facilities in China. The company is a
leading low-cost provider of protective packages used for shipping integrated
circuits.
The Fund drew its strength throughout the year from the stocks of companies in
more economically prosperous areas such as Latin America, South Africa, Israel,
and Eastern Europe.
In Mexico, entertainment firm Corporacion Interamericana de Entretenimiento
(CIE) was a strong performer as the company continues to benefit from a
consumer-led economic recovery. Toward the end of the year, we reduced our
weighting in Mexico and invested more heavily in Brazil where many companies
benefited from trends toward restructuring and infrastructure rebuilding.
In South Africa, where companies have been freed from restrictions on
international investment, computer consultant Dimension Data made a positive
contribution to the Fund. In Israel, we invested in the stocks of start-up
technology companies, leveraging off a tax-exempt status.
Eastern European stocks also performed well in an environment of falling
interest rates and the benefits of the impending European Monetary Union (EMU).
Gedeon Richter, a Hungarian pharmaceutical company, and Banco Portugues de
Investimento (BPI), a Portuguese bank, contributed significantly to performance
during the fiscal year.
We continue to have a positive outlook for the Fund based on our bottom-up
method of stock selection and plentiful investment opportunities.
REPRESENTATIVE HOLDINGS
BPI BCO Port Invest, Portugal
Corp Inter Entertainment, Mexico
Gedeon Richter, Hungary
Grupo Televisa, Mexico
Magyar Tavkozlesi, Hungary
Mol Magyar Olaj ES Gazip, Hungary
Portugal Telecom, Portugal
Telebras, Brazil
Telec Do Rio Janeiro, Brazil
Telesp, Brazil
- --------------------------------------------------------------------------------
36
<PAGE>
EMERGING COUNTRIES INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
EMERGING COUNTRIES INSTITUTIONAL PORTFOLIO WITH THE MSCI EMERGING MARKETS FREE
INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/98 SINCE
1 YEAR 3 YEARS INCEPTION
8.77% 20.77% 13.79%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING COUNTRIES MSCI EMF
INSTITUTIONAL
PORTFOLIO INDEX
<S> <C> <C>
28-Nov-94 $ 250,000.00 $250,000.00
31-Dec-94 $ 237,014.39 234,359.19
31-Mar-95 $ 218,397.55 205,294.09
30-Jun-95 $ 251,427.43 226,601.59
30-Sep-95 $ 267,041.55 225,146.69
31-Dec-95 $ 253,510.76 222,111.98
31-Mar-96 $ 281,857.34 235,947.61
30-Jun-96 $ 310,807.03 245,795.83
30-Sep-96 $ 317,441.35 236,913.95
31-Dec-96 $ 324,696.06 235,517.31
31-Mar-97 $ 353,679.52 255,447.47
30-Jun-97 $ 406,782.12 277,308.82
30-Sep-97 $ 421,983.24 252,445.73
31-Dec-97 $357,562.74 208,217.12
31-Mar-98 $384,705.20 221,112.93
</TABLE>
This graph compares a $250,000 investment in the Emerging Countries
Institutional Portfolio with the MSCI Emerging Markets Free Index ("EMF"), on a
cumulative and average annual total return 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
The MSCI EMF is a market capitalization weighted index composed of companies
representative of the market structure of 22 Emerging Market countries in
Europe, Latin America, and the Pacific Basin. The Index excludes closed markets
and those shares in otherwise free markets which are not purchasable by
foreigners.
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.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's Share price is expected to be
more volatile than that of a U.S. only fund. These risks are generally
intensified for investments in emerging markets.
- --------------------------------------------------------------------------------
37
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
EMERGING COUNTRIES FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
COMMON STOCKS -- 95.0%
- --------------------------------------------------------------------------
ARGENTINA -- 2.1%
Banco de Galicia Y Buenos Aires S.A. de
C.V. -- ADR.............................. 96,200 $ 2,356,900
Disco S.A. -- ADR*......................... 21,900 881,475
Telefonica de Argentina S.A. -- ADR........ 71,200 2,710,050
-------------
5,948,425
-------------
BERMUDA -- 0.2%
First South Africa Corp., Ltd.*............ 62,500 472,656
-------------
BRAZIL -- 18.5%
Banco do Estado de Sao Paulo S.A. --
Preferred................................ 55,315,000 3,682,640
Banco Itau S.A. -- Preferred............... 6,450,000 4,129,690
Companhia Energetica de Minas Gerais PN.... 84,666,900 4,117,743
Companhia Paranaense de Energia-Copel...... 267,176,000 3,846,507
Companhia Paulista de Forca de Luz......... 16,414,700 2,223,177
Companhia Vale do Rio Doce................. 47,000 1,120,179
Makro Atacadista S.A. -- GDR*.............. 31,800 405,450
Petroleo Brasileiro S.A.................... 11,040,000 2,621,521
Telecomunicacoes Brasileiras S.A. -- ADR... 85,500 11,098,969
Telecomunicacoes de Sao Paulo S.A. --
Preferred................................ 33,911,088 10,885,667
Telecomunicacoes do Rio de Janeiro S.A. --
Preferred................................ 37,370,000 5,274,953
Uniao de Bancos Brasileiros S.A. -- GDR.... 70,800 2,566,500
-------------
51,972,996
-------------
CANADA -- 0.1%
Sedna Geotech, Inc. -- Secondary*.......... 118,890 100,328
-------------
CHILE -- 2.4%
Compania Cervecerias Unidos S.A. -- ADR.... 94,900 2,870,725
Linea Aerea Nacional Chile S.A. -- ADR*.... 179,000 2,461,250
Vina Concha y Toro S.A. -- ADR............. 44,500 1,457,375
-------------
6,789,350
-------------
CROATIA -- 1.1%
Pliva d.d. -- GDR.......................... 156,500 2,934,375
-------------
CZECH REPUBLIC -- 1.0%
SPT Telecom AS*............................ 22,200 2,873,808
-------------
EGYPT -- 0.9%
Arabian International Construction Co.*.... 29,500 1,238,502
Egypt Gas.................................. 13,500 1,352,881
-------------
2,591,383
-------------
GREECE -- 1.6%
Hellenic Bottling Co. S.A.................. 158,140 4,549,787
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
HONG KONG -- 6.8%
Cheung Kong Holdings, Ltd.................. 181,000 $ 1,284,838
China Merchants Holdings International Co.,
Ltd...................................... 1,361,000 1,264,729
China Resources Beijing Land............... 978,000 523,834
China Telecom, Ltd.*....................... 1,462,000 2,962,471
Chongqing Changan Automobile Co., Ltd...... 263,900 92,303
HSBC Holdings PLC.......................... 110,000 3,364,713
Hutchison Whampoa, Ltd..................... 212,000 1,491,212
Peak International, Ltd.*.................. 115,800 2,938,425
Shanghai Industrial Holdings, Ltd.......... 352,000 1,440,154
Shenzhen Fangda Co., Ltd................... 1,137,000 1,238,540
Sun Hung Kai Properties, Ltd............... 166,000 1,130,154
Yanzhou Coal Mining Co., Ltd.*............. 4,904,000 1,544,356
-------------
19,275,729
-------------
HUNGARY -- 8.6%
Gedeon Richter -- GDR*..................... 7,000 736,596
Magyar Tavkozlesi Rt....................... 143,900 887,153
Magyar Tavkozlesi Rt. -- ADR............... 187,500 5,835,938
Mol Magyar Olaj-Es Gazipari Rt............. 197,200 6,046,396
OTP Bank Rt................................ 62,840 3,196,523
Pick Szeged Rt. -- GDR*.................... 90,800 1,128,644
Richter Gedeon Rt.......................... 61,191 6,439,010
-------------
24,270,260
-------------
INDIA -- 5.3%
Bharat Heavy Electricals Ltd............... 45,000 410,320
BSES Ltd. -- GDR........................... 26,000 461,500
BSES Ltd. -- GDR........................... 30,000 532,500
Hindalco Industries, Ltd. -- ADR........... 13,400 234,500
Hindalco Industries, Ltd. -- GDR........... 26,600 465,500
Housing Development Finance Corp., Ltd..... 9,300 748,827
Infosys Technologies, Ltd.................. 57,000 2,638,757
ITLC, Ltd.................................. 33,000 596,788
ITC Limited................................ 24,400 601,460
Mahanagar Telephone Nigam, Ltd. -- GDR*.... 55,000 944,625
Mahindra & Mahindra, Ltd. -- ADR........... 12,500 104,688
Mahindra & Mahindra, Ltd. -- GDR........... 64,000 536,000
NIIT, Ltd.................................. 128,000 2,645,501
Oriental Bank of Commerce, Ltd............. 418,000 693,996
Punjab Tractors, Ltd....................... 25,000 430,425
State Bank of India, Ltd................... 125,000 892,826
State Bank of India -- ADR................. 63,600 1,136,532
State Bank of India -- GDR................. 50,000 893,500
-------------
14,968,245
-------------
ISRAEL -- 6.3%
Agan Chemical Manufacturers, Ltd........... 22,245 786,108
Bank Hapolin, Ltd.......................... 540,600 1,479,702
Bank Leumi Le-Israel....................... 2,114,500 3,997,386
Elbit Systems, Ltd......................... 15,200 191,899
Formula Systems (1985), Ltd.*.............. 111,406 4,558,557
Koor Industries, Ltd....................... 10,900 1,355,582
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
38
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
ISRAEL (CONTINUED)
<TABLE>
<S> <C> <C>
Makhteshim Chemical Works, Ltd.*........... 81,100 $ 695,666
New Dimension Software, Ltd.*.............. 86,600 1,932,263
NICE-Systems, Ltd. -- ADR*................. 61,500 2,829,000
-------------
17,826,163
-------------
KOREA -- 1.2%
Daewoo Heavy Industries.................... 507,800 2,603,240
LG Information & Communication, Ltd........ 25,000 868,257
-------------
3,471,497
-------------
LUXEMBOURG -- 0.1%
First NIS Regional Fund.................... 15,000 285,000
-------------
MEXICO -- 10.5%
Cifra S.A. de C.V. -- C.................... 2,189,699 3,917,799
Consorcio Hogar S.A. de C.V. -- B*......... 908,200 1,908,566
Corporacion Geo S.A. de C.V. -- B*......... 331,697 2,161,260
Corporacion Interamericana de
Entretenimiento S.A.*.................... 1,041,500 8,094,496
Grupo Televisa, S.A. -- GDR*............... 156,300 5,724,487
Grupo Tribasa, S.A. de C.V. -- ADR*........ 243,700 1,507,894
Kimberly-Clark de Mexico, S.A. de C.V...... 731,000 3,776,092
Panamerican Berverages, Inc................ 64,400 2,584,050
-------------
29,674,644
-------------
PAKISTAN -- 0.5%
Hub Power Co............................... 635,000 675,973
Pakistan State Oil Co., Ltd................ 65,964 383,970
SUI Northern Gas Pipelines................. 535,612 283,873
-------------
1,343,816
-------------
PERU -- 1.4%
Cementos Lima S.A.......................... 54,400 1,065,364
Cerveceria Backus & Johnston S.A........... 2,207,104 1,626,783
Enrique Ferreyros S.A...................... 1,201,198 1,304,520
-------------
3,996,667
-------------
PHILIPPINES -- 1.1%
Jollibee Foods Corporation................. 1,570,100 735,358
Music Corporation.......................... 6,005,200 2,337,184
-------------
3,072,542
-------------
POLAND -- 1.6%
Bank Handlowy W. Warszawie*................ 80,600 1,295,505
Bank Przemyslowo-Handlowy S.A.............. 16,200 1,290,205
Exbud S.A. -- GDR*......................... 165,600 1,929,240
-------------
4,514,950
-------------
PORTUGAL -- 7.0%
BPI-SGPS, S.A.............................. 204,100 7,850,853
Jeronimo Martins, SGPS, S.A................ 74,200 3,052,008
Ibersol SGPS S.A.*......................... 16,400 1,385,505
Portugal Telecom S.A....................... 92,475 4,810,043
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
</TABLE>
PORTUGAL (CONTINUED)
<TABLE>
<S> <C> <C>
Telecel-Comunicacaoes Pessoais S.A.*....... 17,600 $ 2,732,149
-------------
19,830,558
-------------
RUSSIA -- 3.1%
Gazprom -- ADR............................. 136,200 2,887,440
Kubanelectrosvyaz*......................... 43,700 655,500
Kuzbassenergo*............................. 932,000 400,760
Lukoil Holding -- ADR...................... 40,900 2,875,025
Unified Energy Systems -- ADR*............. 54,500 1,784,875
-------------
8,603,600
-------------
SINGAPORE -- 1.2%
Datacraft Asia, Ltd........................ 473,100 1,532,844
Elec & Eltek International Co., Ltd........ 196,700 1,170,365
Venture Manufacturing, Ltd.*............... 168,000 624,168
-------------
3,327,377
-------------
SOUTH AFRICA -- 6.1%
ABSA Group, Ltd............................ 471,300 4,279,129
Barlow, Ltd................................ 294,700 2,397,899
Dimesion Data Holdings, Ltd................ 476,778 3,051,496
First SA Food Holdings, Ltd.*.............. 505,200 511,329
Investec Group, Ltd........................ 54,500 2,768,875
Pick' n Pay Stores, Ltd.................... 789,533 1,324,018
South African Breweries, Ltd............... 93,364 2,768,196
-------------
17,100,942
-------------
SRI LANKA -- 0.5%
Ceylon Brewery Ltd......................... 125,700 140,946
John Keells Holdings ltd................... 297,500 1,346,247
-------------
1,487,193
-------------
TAIWAN -- 0.1%
Compal Electronics Inc..................... 98,800 395,307
-------------
TURKEY -- 3.0%
Adana Cimento Sanayii T.A.S................ 1,352,000 89,003
Akbank T.A.S............................... 31,471,043 2,298,359
Alcatel Teletas Telekomunikasyon Endustri
ve Ticaret A.S........................... 9,896,000 1,078,981
Enka Holding Yatirim A.S................... 2,334,000 1,248,397
Migros Turk T.A.S.......................... 1,624,000 1,436,590
Tofas Turk Otomobil Fabrikasi A.S.......... 19,430,000 939,332
Turkiye Garanti Bankasi A.S................ 31,350,000 1,238,275
-------------
8,328,937
-------------
UNITED STATES OF AMERICA -- 1.7%
Central Asia Investment Co.*............... 48,567 437,103
Forsoft Ltd.*.............................. 104,700 2,015,475
Global Telesystems Group, Inc.*............ 25,500 1,192,125
Harken Energy Corp.*....................... 192,200 1,237,287
-------------
4,881,990
-------------
VENEZUELA -- 1.0%
F.V.I. Fondo de Valores Inmobiliarios
S.A.C.A. -- ADR*......................... 85,180 883,742
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
39
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
EMERGING COUNTRIES FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
VENEZUELA (CONTINUED)
<TABLE>
<S> <C> <C>
Corporacion Venezolana de Cementos S.A.C.A.
I........................................ 80,000 $ 121,955
Corporacion Venezolana de Cementos S.A.C.A.
II....................................... 1,107,633 1,688,515
-------------
2,694,212
-------------
TOTAL COMMON STOCKS
(Cost $231,823,680)..................................... 267,582,737
-------------
- --------------------------------------------------------------------------
EQUITY SWAPS -- (0.1)%
- --------------------------------------------------------------------------
COLOMBIA -- (0.1)%
Bavaria S.A. -- Equity Swap
(Cost $0)................................ 2,306,226 (381,025)
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- --------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.4%
- --------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 04/01/98......................... $ 6,346,000 6,346,000
Merrill Lynch & Co.
6.050%, 04/01/98......................... 562,000 562,000
-------------
TOTAL COMMERCIAL PAPER
(Cost $6,908,000)....................................... 6,908,000
-------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.0%
- --------------------------------------------------------------------------
J.P. Morgan & Co., Inc. $2,798,000 at 5.92%
(Agreement dated 03/31/98; to be
repurchased at $2,798,460 on on 04/01/98
collateralized by $2,870,000 FNMA Notes,
5.97% due 04/05/01 (Value $2,938,242)
(Cost $2,798,000)........................ $ 2,798,000 $ 2,798,000
-------------
- --------------------------------------------------------------------------
RIGHTS/WARRANTS -- 0.0%
- --------------------------------------------------------------------------
BRAZIL -- 0.0%
Companhia Paulista de Forca de Luz --
Rights
(Cost $0)................................ 44,171 2,195
-------------
TOTAL INVESTMENTS -- 98.3%
(Cost $241,529,680)..................................... 276,909,907
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.7%............. 4,802,947
-------------
NET ASSETS -- 100.0%...................................... $ 281,712,854
-------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
40
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
EMERGING COUNTRIES FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Airlines.................................... 0.9%
Alcoholic Beverages......................... 3.2
Automobiles................................. 0.6
Beverages/Soft Drinks....................... 2.4
Broadcasting................................ 2.0
Building Materials.......................... 1.5
Chemicals................................... 0.5
Closed End/Country Funds.................... 0.1
Coal Mining................................. 0.6
Computers/Office Automation................. 1.2
Department/Discount Stores.................. 1.5
Drugs/Pharmaceuticals....................... 3.6
Electronic Data Processing.................. 0.7
Electric Utilities.......................... 5.0
Entertainment............................... 2.9
Finance Companies........................... 0.3
Financial Services.......................... 3.4
Food Chains................................. 2.9
Gas Utilities............................... 0.5
Grocery Products............................ 0.6
Homebuilding................................ 0.7
Industrial Engineering/Construction......... 2.1
Integrated Oil Companies.................... 0.9
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Investment Companies........................ 3.9%
Machinery/Equipment......................... 1.7
Metals...................................... 0.6
Military/Defense Technology................. 0.1
Money Center Banks.......................... 2.9
Oil/Gas Production.......................... 4.8
Other Commercial/Industrial Services........ 0.2
Other Consumer Non-Durables................. 0.5
Other Consumer Services..................... 0.3
Other Production/Manufacturing.............. 1.8
Paper....................................... 1.3
Pipelines................................... 0.1
Real Estate Development/Investment.......... 2.1
Regional/Commercial Banks................... 10.9
Rental/Leasing Companies.................... 0.4
Restaurants................................. 0.8
Semiconductors/Electric Companies........... 2.8
Software.................................... 4.2
Telecommunication Equipment................. 4.2
Telephone................................... 16.4
Tobacco Products............................ 0.2
Other Assets in Excess of Liabilities....... 1.7
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
41
<PAGE>
INTERNATIONAL SMALL CAP GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Lawrence S. Speidell,
CFA, Partner, Director of Global/Systematic Portfolio Management and Research
Loretta J. Morris,
Partner, Portfolio Manager
Alex Muromcew,
Portfolio Manager
Melisa A. Grigolite,
Portfolio Manager
Pedro Marcal,
Partner, Portfolio Manager
Eswar Menon,
Portfolio Manager
Ernesto Ramos, Ph.D.,
Senior Portfolio Manager
John N. Tribolet,
Portfolio Manager
GOAL: The International Small Cap Growth Fund seeks to maximize long-term
capital appreciation through investing in a portfolio of equity securities
primarily of small, non-U.S. companies.
REVIEW AND OUTLOOK: Exceptional stock selection in smaller-capitalized
companies in Europe boosted returns for the Nicholas-Applegate International
Small Cap Fund, which far outpaced its benchmark for the fiscal year ending
March 31, 1998. The Fund returned 37.0% during the period while the Salomon
EPAC/EMI (Europe Pacific Australasia Composite/Extended Market Index) advanced
7.8%.
In Europe, benefits of the scheduled European Monetary Union (EMU) were
evident in falling interest rates and a shift toward equity investing and
corporate restructuring, especially in the banking and finance sectors. As
beneficiaries of these trends, the Fund's holdings in Italian banks Banco Di
Roma and Credito Italiano, turned in strong returns.
The thrust toward consolidation and deregulation in telecommunications
companies led us to invest in Colt Telecom, a United Kingdom-based firm that has
expanded its operations across Europe, particularly into Spain and Switzerland.
Ireland-based telephone companies ESAT and Global Telesystems were other
holdings in the Fund that were able to take advantage of favorable developments
in the region.
Throughout the year, the Fund benefited from our avoidance of stocks affected
by the economic crisis in Southeast Asia.
In Japan, the government did little in the way of economic reform to inspire
investor confidence, or lead us to increase our relative underweight position.
However, our bottom-up approach helped us uncover companies that were relatively
unaffected by Japan's woes or the Asian economic crisis. For example, Ibiden, a
producer of next generation plastic packaging for Intel microprocessors, was one
of the Fund's holdings. Ibiden continues to be a strong global player in the
high-tech precision equipment sector.
Technology holdings in Singapore, such as Natsteel Electronics, were also
among the Fund's holdings. Natsteel, which makes printed circuit boards and
provides contract manufacturing, was a beneficiary of the global trend toward
outsourcing.
Looking ahead, we remain optimistic in our outlook for the Fund, as we
continue to find promising opportunities in developed countries around the
world.
REPRESENTATIVE HOLDINGS
Aixtron, Germany
Banco Di Roma, Italy
Benckiser, Netherlands
Cap Gemini, Netherlands
Colt Telecom Group, United Kingdom
Global Telesystems Group, Ireland
Misys Ord GBP.05, United Kingdom
Ortivus AB B Shares Comm, Sweden
Porsche, Germany
- --------------------------------------------------------------------------------
42
<PAGE>
INTERNATIONAL SMALL CAP GROWTH INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
INTERNATIONAL SMALL CAP GROWTH INSTITUTIONAL PORTFOLIO WITH THE SALOMON EPAC EMI
INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/98 SINCE
1 YEAR 5 YEARS INCEPTION
37.02% 17.29% 9.14%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP SALOMON EPAC
GROWTH INSTITUTIONAL PORTFOLIO EMI INDEX
<S> <C> <C>
6-07-90 $250,000.00 $250,000.00
6-30-90 253,508.33 253,375.00
12-31-90 209,211.19 207,595.54
6-30-91 225,592.75 212,795.64
12-31-91 220,956.09 221,428.65
6-30-92 225,491.10 208,235.89
12-31-92 199,945.80 187,284.92
6-30-93 258,884.82 236,985.21
12-31-93 238,402.04 244,111.79
6-30-94 279,984.47 278,219.91
12-31-94 279,984.47 267,145.81
6-30-95 277,882.19 264,344.48
12-31-95 285,933.80 279,947.91
6-30-96 330,318.73 309,413.14
12-31-96 346,843.24 298,064.13
6-30-97 409,436.85 313,224.92
12-31-97 395,704.11 267,439.98
3-31-98 495,301.28 314,822.14
</TABLE>
This graph compares a $250,000 investment in the International Small Cap Growth
Institutional Portfolio with the Salomon EPAC EMI Index, on a cumulative and
average annual total return 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 12/31/93. Limited partnership returns are restated to reflect all fees
and expenses applicable to the Portfolio. 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
The Salomon EPAC Extended Market Index ("EMI") is an unmanaged index. It is a
top-down, float capitalization-weighted index that includes shares of about
2,821 companies in 22 countries excluding Canada and the United States.
Companies within the Index are smaller capitalization companies with available
float market capitalizations greater than U.S. $100 million. Only issues that
are legally and practically available to outside investors are included in the
Index.
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.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's Share price is expected to be
more volatile than that of a U.S. only fund.
- --------------------------------------------------------------------------------
43
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMON STOCKS -- 98.0%
- ---------------------------------------------------------------------------------
ARGENTINA -- 0.3%
Disco S.A. -- ADR*......................... 6,900 $ 277,725
-------------
BELGIUM -- 0.8%
Barco N.V.................................. 2,465 637,107
-------------
BRAZIL -- 0.9%
Petroleo Brasileiro S.A. -- Preferred...... 1,500,000 356,185
Telecomunicacoes de Sao Paulo S.A. --
Preferred................................ 1,151,000 369,478
-------------
725,663
-------------
CANADA -- 4.0%
ATI Technologies, Inc.*.................... 19,900 811,599
JDS Fitel Inc.*............................ 14,000 765,401
Newcourt Credit Group, Inc................. 15,300 763,854
Yogen Fruz World Wide Inc.*................ 136,290 967,935
-------------
3,308,789
-------------
FINLAND -- 1.7%
Huhtamaki.................................. 6,700 364,098
Raisio Group PLC........................... 7,300 1,048,339
-------------
1,412,437
-------------
FRANCE -- 6.7%
Altran Technologies S.A.................... 6,000 760,206
Bouygues S.A............................... 4,000 697,259
Cap Gemini Sogeti S.A...................... 5,200 611,005
Coflexip S.A. -- ADR....................... 15,000 926,250
Dassault Systemes S.A...................... 14,600 587,941
Genset S.A. -- ADR*........................ 32,900 954,100
Synthelabo S.A............................. 4,800 666,270
TRANSGENE S.A. -- ADR*..................... 24,900 378,169
-------------
5,581,200
-------------
GERMANY -- 8.4%
Adidas AG.................................. 6,000 1,067,408
Aixtron AG*................................ 4,900 1,258,557
Kiekert AG................................. 16,000 668,347
Pfeiffer Vacuum Technology AG -- ADR....... 14,000 874,125
Porsche AG................................. 950 2,121,568
Wella Aktiengesellschaft AG -- Preferred... 1,100 942,769
-------------
6,932,774
-------------
HONG KONG -- 1.9%
Peak International Ltd.*................... 21,900 555,712
Novel Denim Holdings Ltd.*................. 14,200 388,725
Smartone Telecommunications................ 224,000 634,585
-------------
1,579,022
-------------
HUNGARY -- 1.4%
Gedeon Richter -- GDR*..................... 3,800 399,866
Gedeon Richter Rt.*........................ 1,800 189,410
OTP Bank Rt................................ 11,600 590,065
-------------
1,179,341
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
INDIA -- 0.4%
Infosys Technologies Ltd................... 8,000 $ 370,352
-------------
IRELAND -- 2.1%
Bank of Ireland............................ 1 9
Esat Telecom Group PLC -- ADR*............. 36,200 1,013,600
Ryanair Holdings PLC -- ADR*............... 20,700 765,900
-------------
1,779,509
-------------
ISRAEL -- 1.0%
Formula Systems Ltd.*...................... 7,600 310,980
NICE-Systems Ltd. -- ADR*.................. 11,300 519,800
-------------
830,780
-------------
ITALY -- 5.1%
Banca di Roma SpA*......................... 790,000 1,332,651
Credito Italiano SpA....................... 200,000 988,002
Italgas SpA................................ 195,000 980,953
La Rinascente SpA.......................... 87,000 930,675
-------------
4,232,281
-------------
JAPAN -- 7.2%
Argotechnos 21Corp......................... 7,000 110,235
Circle K Japan Co., Ltd.................... 900 37,120
Cresco Ltd................................. 15,400 209,027
Fuji Soft ABC, Inc......................... 15,200 496,974
Ibiden Co., Ltd............................ 40,000 518,931
Keyence Corp............................... 2,800 386,349
Kinden Corp................................ 24,000 311,359
Matsumotokiyoshi Co........................ 15,000 528,680
Meitec Corp................................ 22,000 687,958
Mimasu Semiconductor Industry Co........... 21,100 294,306
Nichiei Co., Ltd........................... 5,390 476,952
Orix Corp.................................. 6,200 421,234
Rohm Co., Ltd.............................. 3,000 274,463
Sony Chemicals Corp........................ 26,000 438,692
Tokyo Seimitsu Co., Ltd.................... 18,000 456,239
Tsudakoma Corp............................. 121,000 282,195
-------------
5,930,714
-------------
MEXICO -- 1.4%
Cifra S.A. de C.V. -- C.................... 281,800 504,195
Corporacion Interamericana de
Entretenimiento S.A.*.................... 88,900 690,927
-------------
1,195,122
-------------
NETHERLANDS -- 9.3%
Baan Co., N.V.............................. 15,000 717,376
Benckiser N.V. -- B*....................... 21,500 1,187,065
Benckiser N.V. -- B*....................... 2,800 154,000
Cap Gemini N.V............................. 24,000 1,473,607
CMG PLC.................................... 2,600 116,613
Fugro N.V.................................. 25,000 983,364
Internatio-Muller N.V...................... 32,250 1,147,874
Nutreco Holding NV......................... 32,400 1,072,395
Smit International N.V..................... 28,000 870,349
-------------
7,722,643
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
44
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
NORWAY -- 4.3%
ContextVision AB*.......................... 20,000 $ 354,143
Merkantildata ASA.......................... 25,000 1,242,781
Petroleum Geo-Services ASA*................ 4,100 239,309
Petroleum Geo-Services ASA -- ADR*......... 11,300 670,937
Tomra Systems ASA.......................... 38,900 1,030,662
-------------
3,537,832
-------------
PAKISTAN -- 0.3%
Hub Power Co............................... 254,000 270,389
-------------
PORTUGAL -- 3.7%
BPI -- SGPS, S.A........................... 19,400 746,235
Ibersol SGPS S.A.*......................... 8,800 743,442
Jeronimo Martins, SGPS, S.A................ 20,100 826,757
Telecel-Comunicacaoes Pessoais S.A.*....... 5,000 776,179
-------------
3,092,613
-------------
SINGAPORE -- 2.2%
Creative Technology Ltd.*.................. 17,000 382,500
Datacraft Asia Ltd......................... 161,000 521,640
Natsteel Electronics Ltd.*................. 192,000 373,312
Singapore Technologies Engineering Ltd.*... 656,372 581,202
-------------
1,858,654
-------------
SOUTH AFRICA -- 0.7%
Dimension Data Holdings Ltd................ 88,125 564,022
-------------
SPAIN -- 5.1%
Fomento de Construcciones y Contratas
S.A...................................... 18,800 993,820
Grupo Acciona S.A.......................... 4,500 905,673
Tele Pizza, S.A.*.......................... 15,600 2,300,103
-------------
4,199,596
-------------
SWEDEN -- 2.2%
Ortivus AB*................................ 36,000 1,247,393
Spectra Physics AB-A....................... 27,300 546,391
-------------
1,793,784
-------------
SWITZERLAND -- 4.4%
Disetronic Holding AG...................... 300 871,773
Kuoni Reisen Holdings AG................... 200 1,003,621
Logitech International S.A.*............... 5,000 783,874
Mettler-Toledo International Inc.*......... 46,000 1,020,625
-------------
3,679,893
-------------
TURKEY -- 0.3%
Tofas Turk Otomobil Fabrikasi A.S.......... 4,380,000 211,748
-------------
UNITED KINGDOM -- 17.0%
Admiral PLC................................ 52,300 821,072
Amvescap PLC............................... 76,900 831,893
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Arriva PLC................................. 106,100 $ 869,714
British Aerospace PLC...................... 155 5,108
British Energy PLC......................... 87,900 772,413
British Land Corp. PLC..................... 51,100 641,787
Capita Group PLC........................... 139,400 1,049,303
CMG PLC.................................... 11,800 520,680
COLT Telecom Group PLC*.................... 62,300 1,485,616
ECsoft Group PLC -- ADR*................... 30,600 765,000
FKI PLC.................................... 109,800 372,337
Guardian Royal Exchange PLC................ 66,200 473,917
Hays PLC................................... 45,200 812,169
Misys PLC.................................. 32,600 1,614,821
National Express Group PLC................. 50,100 714,383
Orange PLC*................................ 183,700 1,170,502
Virgin Express Holdings PLC -- ADR*........ 50,400 1,197,000
-------------
14,117,715
-------------
UNITED STATES OF AMERICA -- 5.2%
Getty Images, Inc.......................... 37,700 947,212
Global TeleSystems Group, Inc.*............ 27,000 1,262,250
Optimal Robotics Corp.*.................... 41,700 573,375
Shire Pharmaceuticals Group PLC -- ADR*.... 47,400 1,016,138
Syntel, Inc.*.............................. 11,600 475,600
-------------
4,274,575
-------------
VENEZUELA -- 0.0%
C.A. La Electricidad de Caracas............ 2 2
-------------
TOTAL COMMON STOCKS
(Cost $60,514,954).......................................... 81,296,282
-------------
- ---------------------------------------------------------------------------------
RIGHTS/WARRANTS -- 0.0%
- ---------------------------------------------------------------------------------
FRANCE -- 0.0%
Cap Gemini S.A. Rights* (Cost $0).......... 5,200 16,073
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.6%
- ---------------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 4/01/1998
(Cost $2,984,000)........................ $ 2,984,000 2,984,000
-------------
TOTAL INVESTMENTS -- 101.6%
(Cost $63,498,954).......................................... 84,296,355
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.6%)............... (1,356,118)
-------------
NET ASSETS -- 100.0%.......................................... $ 82,940,237
-------------
</TABLE>
- ---------------
* Non-Income Producing Securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
45
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Advertising................................. 1.1%
Agriculture................................. 1.3
Airlines.................................... 2.4
Automobiles................................. 0.3
Automotive Equipment........................ 3.4
Biotechnology............................... 1.6
Chemicals................................... 1.6
Computers/Office Automation................. 3.9
Department/Discount Stores.................. 0.6
Drugs/Pharmaceuticals....................... 2.7
Electric Utilities.......................... 1.7
Entertainment............................... 0.8
Finance Companies........................... 5.1
Food Chains................................. 1.0
Gas Utilities............................... 1.2
Grocery Products............................ 1.7
Industrial Engineering/Construction......... 6.4
Investment Companies........................ 1.9
Machinery/Equipment......................... 2.8
Medical Supplies............................ 2.6
Military/Defense Technology................. 0.7
Money Center Banks.......................... 2.8
Oilfield Services/Equipment................. 2.6
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Other Commercial/Industrial Services........ 1.7%
Other Communication......................... 3.2
Other Consumer Services..................... 1.2
Other Production/Manufacturing.............. 2.8
Other Retail Trade.......................... 2.6
Other Transportation........................ 1.9
Property-Casualty Insurance................. 0.6
Real Estate Development/Investment.......... 0.8
Recreational Equipment...................... 1.3
Regional/Commercial Banks................... 0.7
Rental/Leasing Companies.................... 0.5
Restaurants................................. 4.7
Semiconductors/Electric Companies........... 5.8
Soaps/Cosmetics............................. 1.1
Software.................................... 8.7
Specialty Stores............................ 2.2
Telecommunication Equipment................. 2.3
Telecommunication Services.................. 5.4
Telephone................................... 2.0
Textiles.................................... 0.5
Wholesale Distribution...................... 1.4
Liabilities in Excess of Other Assets....... (1.6)
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
46
<PAGE>
INTERNATIONAL CORE GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Lawrence S. Speidell,
CFA, Partner, Director of Global/Systematic Portfolio Management and Research
Loretta J. Morris,
Partner, Portfolio Manager
Alex Muromcew,
Portfolio Manager
Melisa A. Grigolite,
Portfolio Manager
Ernesto Ramos, Ph.D.,
Senior Portfolio Manager
Pedro Marcal,
Partner, Portfolio Manager
Eswar Menon,
Portfolio Manager
John N. Tribolet,
Portfolio Manager
GOAL: The International Core Growth Fund seeks to maximize long-term capital
appreciation through investing in a portfolio of equity securities primarily of
mid- to large-sized non-U.S. companies.
REVIEW AND OUTLOOK: Favorable economic trends in Europe provided an excellent
investment backdrop for the Nicholas-Applegate International Core Growth Fund
from April 1, 1997 through March 31, 1998. During the period, the Fund delivered
outstanding returns, climbing 36.9% versus an 18.6% gain for the MSCI EAFE
Index. Stock selection, particularly in Europe, combined with the Fund's
underweight position in Japan relative to the Index, were key to the portfolio's
strong advance.
Nicholas-Applegate's bottom-up process of selecting companies based on their
individual merit played an integral part in the Fund's performance. In this
light, we were able to avoid stocks that were negatively affected by the Asian
economic crisis.
During the fiscal year, the Fund's holdings were concentrated in Europe, as we
found many stocks meeting our investment criteria. As countries move toward
economic integration on January 1, 1999, favorable trends are sweeping
throughout the region.
The benefits of the European Monetary Union (EMU) were evident in falling
interest rates, deregulation of industries, corporate restructuring and
consolidations, and a renewed focus on enhancing shareholder value.
Stocks such as Nokia, a Finland-based supplier of telecommunications systems
and the world's largest maker of mobile phones, was among the Fund's best
performers. We also own Bank of Ireland, a financial services group serving
personal, commercial, and industrial customers in Ireland, the United Kingdom,
and the United States.
In Japan, we retained an underweight position relative to the benchmark,
contributing to the Fund's outperformance. The stocks we held were concentrated
on those with little or no exposure to the domestic economy, and those which
have a proven track record of outpacing the market due to their global
competitiveness. One such company is Sony Corp., a world leader in consumer
electronics that has diversified successfully into media and high value added
computer parts and peripherals.
Our outlook for the Fund remains extremely positive as we continue to find
promising stock opportunities in developed countries around the world.
REPRESENTATIVE HOLDINGS
AXA UAP, France
Banco di Roma, Italy
Bank of Ireland GDP, Ireland
Bayerische Motoren Werk, Germany
Mannesmann, Germany
Nokia, Finland
Orange, United Kingdom
Raision Tehtaat Oy, Finland
Tabacalera, Spain
Telepizza, Spain
- --------------------------------------------------------------------------------
47
<PAGE>
INTERNATIONAL CORE GROWTH INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
INTERNATIONAL CORE GROWTH INSTITUTIONAL PORTFOLIO WITH THE MSCI EAFE INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
36.91% As of 3/31/98 41.52%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL CORE GROWTH INSTITUTIONAL
PORTFOLIO MSCI EAFE INDEX
<S> <C> <C>
12-27-96 $250,000.00 $250,000.00
01-31-97 274,599.99 240,743.38
02-28-97 277,199.99 244,691.57
03-31-97 282,599.98 245,572.46
04-30-97 286,599.99 246,873.99
05-31-97 313,199.99 262,945.49
06-30-97 331,200.00 277,433.78
07-31-97 352,400.02 281,928.21
08-31-97 334,000.00 260,868.17
09-30-97 358,600.00 275,476.79
10-31-97 328,800.00 254,292.63
11-30-97 325,131.31 251,698.84
12-31-97 329,722.39 253,888.62
01-31-98 341,826.12 265,491.33
02-28-98 365,198.85 282,527.91
03-31-98 386,902.09 291,229.77
</TABLE>
This graph compares a $250,000 investment in the International Core Growth
Institutional Portfolio with the MSCI EAFE Index, on a cumulative and average
annual total return 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
The Morgan Stanley Capital International ("MSCI") Europe, Australia, Far East
("EAFE") Index is an unmanaged index that is a generally accepted benchmark for
major overseas markets. The Index weightings represent the relative
capitalizations of the major overseas markets included in the index on a U.S.
dollar adjusted basis.
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.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's Share price is expected to be
more volatile than that of a U.S. only fund.
- --------------------------------------------------------------------------------
48
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
INTERNATIONAL CORE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMON STOCKS -- 94.2%
- ---------------------------------------------------------------------------------
AUSTRALIA -- 1.3%
News, Ltd. -- ADR.......................... 4,800 $ 129,300
Telstra Corp., Ltd......................... 153,500 395,983
The News Corp., Ltd........................ 34,200 226,120
-------------
751,403
-------------
BRAZIL -- 1.0%
Telecomunicacoes de Sao Paulo S.A. --
Preferred................................ 864,000 277,349
Telecomunicacoes do Rio de Janeiro S.A..... 2,000,000 282,309
-------------
559,658
-------------
CANADA -- 1.0%
Newcourt Credit Group, Inc................. 11,800 589,116
-------------
DENMARK -- 1.5%
Tele Danmark A/S -- B...................... 9,500 862,458
-------------
FINLAND -- 3.3%
Nokia Oyj Corp. -- ADR..................... 9,500 1,025,406
Raisio Group PLC........................... 6,200 890,370
-------------
1,915,776
-------------
FRANCE -- 11.0%
AXA -- UAP................................. 10,000 1,029,748
Banque Nationale de Paris S.A.............. 7,500 582,865
Bouygues S.A............................... 3,400 592,670
Cap Gemini Sogeti S.A...................... 4,400 517,005
Compagnie Financiere de Paribas S.A. --
A........................................ 4,300 435,157
Dassault Systemes S.A...................... 11,400 459,077
Etablissements Economiques du Casino
Guichard-Perrachon S.A................... 10,000 674,501
Groupe Danone -- ADR....................... 17,500 842,187
Synthelabo S.A............................. 5,400 749,553
Total S.A. -- B............................ 4,500 540,376
-------------
6,423,139
-------------
GERMANY -- 9.6%
Adidas AG.................................. 3,400 604,864
Bayerische Motoren Werke AG................ 800 900,646
Bayerische Motoren Werke AG................ 6,700 478,587
Deutsche Bank AG........................... 5,600 419,847
Deutsche Lufthansa AG...................... 21,100 443,829
Mannesmann AG.............................. 1,400 1,012,902
Porsche AG................................. 320 714,633
SAP AG..................................... 1,200 477,576
Volkswagen AG.............................. 710 555,917
-------------
5,608,801
-------------
HONG KONG -- 2.4%
China Telecom, Ltd.*....................... 186,000 376,894
Dairy Farm International Holdings, Ltd. --
ADR...................................... 263,700 316,440
HSBC Holdings PLC.......................... 8,800 269,177
Hutchison Whampoa, Ltd..................... 35,000 246,191
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
HONG KONG (CONTINUED)
<TABLE>
<S> <C> <C>
Sun Hung Kai Properties, Ltd............... 31,000 $ 211,053
-------------
1,419,755
-------------
HUNGARY -- 1.6%
OTP Bank Rt................................ 5,500 279,772
Magyar Tavkozlesi Rt. -- ADR*.............. 8,400 261,450
Richter Gedeon Rt.......................... 3,900 410,389
-------------
951,611
-------------
IRELAND -- 1.8%
Bank of Ireland............................ 26,910 532,029
Ryanair Holdings PLC -- ADR*............... 13,300 492,100
-------------
1,024,129
-------------
ISRAEL -- 1.2%
Formula Systems, Ltd.*..................... 4,600 188,225
New Dimension Software, Ltd. -- ADR*....... 5,100 113,794
NICE-Systems, Ltd. -- ADR*................. 8,200 377,200
-------------
679,219
-------------
ITALY -- 6.5%
Banca di Roma SpA*......................... 555,000 936,229
Credito Italiano SpA....................... 170,000 839,802
La Rinascente SpA.......................... 35,300 377,618
Luxottica Group SpA -- ADR................. 5,400 505,913
Telecom Italia SpA......................... 72,400 570,543
Telecom Italia Mobile SpA.................. 102,500 550,773
-------------
3,780,878
-------------
JAPAN -- 5.9%
Advantest Corp............................. 4,290 278,277
Bridgestone Corp........................... 13,000 294,411
Credit Saison Co., Ltd..................... 11,000 243,343
Ibiden Co., Ltd............................ 25,000 324,332
Keyene Corp................................ 1,800 248,367
Minebea Co., Ltd........................... 25,000 273,713
Nichiei Co., Ltd........................... 3,520 311,478
Nippon Telegraph & Telephone Corp.......... 370 307,984
Orix Corp.................................. 3,800 258,176
Rohm Co., Ltd.............................. 2,000 182,976
Sankyo Co., Ltd............................ 10,000 277,463
Sony Corp.................................. 5,100 432,167
-------------
3,432,687
-------------
MEXICO -- 0.9%
Cifra S.A. de C.V. -- C.................... 121,199 216,850
Corporation Interamericana de
Entretenimiento S.A.*.................... 42,100 327,200
-------------
544,050
-------------
NETHERLANDS -- 4.6%
Aegon NV................................... 8 973
AKZO Nobel NV.............................. 3,800 771,965
ASM Lithography Holding NV -- ADR*......... 5,600 517,650
Baan Co., NV*.............................. 10,360 495,468
CMG, PLC -- ADR............................ 1,800 80,732
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
49
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
INTERNATIONAL CORE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
NETHERLANDS (CONTINUED)
<TABLE>
<S> <C> <C>
Hagemeyer NV............................... 8,800 $ 426,348
Internatio -- Muller NV.................... 11,400 405,760
-------------
2,698,896
-------------
NORWAY -- 1.5%
Petroleum Geo-Services ASA -- ADR*......... 14,550 863,906
-------------
PORTUGAL -- 3.4%
BPI-SGPS, S.A.............................. 17,300 665,457
Jeronimo Martins, SGPS, S.A.*.............. 13,900 571,738
Portugal Telecom S.A....................... 9,450 491,537
Telecel-Comunicacaoes Pessoais S.A.*....... 1,600 248,377
-------------
1,977,109
-------------
RUSSIA -- 0.3%
Gazprom -- ADR............................. 7,700 163,240
-------------
SINGAPORE -- 1.7%
Natsteel Electronics, Ltd.*................ 109,000 211,932
Singapore Technologies Engineering,
Ltd.*.................................... 393,659 348,576
Straits Steamship Land, Ltd................ 295,000 407,350
-------------
967,858
-------------
SOUTH AFRICA -- 0.7%
Dimension Data Holdings, Ltd.*............. 60,058 384,386
-------------
SPAIN -- 7.4%
Argentaria S.A............................. 6,020 498,439
Banco Bilbao Vizcaya S.A................... 10,500 492,866
Fomento de Construcciones y Contratas
S.A...................................... 3,200 169,161
Grupo Acciona S.A.......................... 2,000 402,521
Tabacalera S.A. -- A....................... 8,500 953,886
Telefonica de Espana -- ADR................ 4,500 595,125
Tele Pizza S.A.*........................... 8,230 1,213,452
-------------
4,325,450
-------------
SWEDEN -- 2.8%
Nordbanken Holding AB*..................... 50,900 337,454
Ortivus AB*................................ 15,000 519,747
Telefonaktiebolaget LM Ericsson -- ADR..... 16,600 789,538
-------------
1,646,739
-------------
SWITZERLAND -- 5.4%
Credit Suisse Group........................ 2,800 560,191
Kuoni Reisen Holdings AG................... 90 451,630
Nestle S.A................................. 300 573,245
Novartis AG................................ 230 407,050
Swiss Reinsurance Co....................... 300 659,044
Union Bank of Switzerland.................. 300 490,003
-------------
3,141,163
-------------
TURKEY -- 0.2%
Tofas Turk Otomobil Fabrikasi AS*.......... 2,660,000 128,596
-------------
UNITED KINGDOM -- 16.1%
Amvescap PLC............................... 55,000 594,982
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Bank of Ireland............................ 40,900 $ 807,506
British Aerospace PLC...................... 16,400 540,477
British Energy PLC......................... 68,000 597,544
British Land Corp. PLC..................... 32,700 410,693
British Petroleum Co. PLC.................. 34,000 490,789
CMG PLC.................................... 8,000 353,004
Glaxo Wellcome PLC......................... 14,500 390,205
Guardian Royal Exchange PLC................ 47,100 337,183
Hays PLC................................... 30,000 539,050
Lloyds TSB Group PLC....................... 34,300 533,603
Misys PLC.................................. 14,371 711,858
National Grid Holdings PLC................. 44,030 260,275
Orange PLC*................................ 148,100 943,666
Rolls-Royce PLC............................ 84,000 392,457
Standard Chartered Bank PLC................ 39,700 575,395
Unilever PLC............................... 34,500 326,419
Viridian Group PLC......................... 40,680 358,323
Zeneca Group PLC........................... 5,500 237,072
-------------
9,400,501
-------------
UNITED STATES OF AMERICA -- 1.1%
Syntel, Inc.*.............................. 15,000 615,000
-------------
TOTAL COMMON STOCK
(Cost $45,887,890).......................................... 54,855,524
-------------
- ---------------------------------------------------------------------------------
WARRANT/RIGHTS -- 0.0%
- ---------------------------------------------------------------------------------
FRANCE
Cap Gemini SA -- Rights* (Cost $0)......... 4,400 13,600
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------------------------
CORPORATE BONDS -- 0.1%
- ---------------------------------------------------------------------------------
UNITED KINDGOM
Viridian Group PLC Loan Notes
7.650%, 02/14/03
(Cost $35,991)........................... $ 45,200 35,878
- ---------------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.8%
- ---------------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 04/01/98
(Cost $1,641,000)........................ 1,641,000 1,641,000
-------------
TOTAL INVESTMENTS -- 97.1%
(Cost $47,564,881).......................................... 56,546,002
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.9%................. 1,679,051
-------------
NET ASSETS -- 100.0%.......................................... $ 58,225,053
-------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
50
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
INTERNATIONAL CORE GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Aerospace................................... 1.6%
Airlines.................................... 1.6
Automobiles................................. 4.8
Automotive Equipment........................ 0.5
Chemicals................................... 1.3
Computers/Office Automation................. 0.7
Consumer Electrical......................... 0.7
Department/Discount Stores.................. 0.4
Drugs/Pharmaceuticals....................... 4.2
Electric Utilities.......................... 2.2
Electronic Instruments...................... 0.9
Entertainment............................... 0.6
Finance Companies........................... 4.4
Food Chains................................. 1.0
Grocery Products............................ 6.2
Industrial Engineering/Contruction.......... 2.0
Investment Companies........................ 1.0
Machinery/Equipment......................... 2.2
Medical Supplies............................ 1.8
Military/Defense Technology................. 0.6
Money Center Banks.......................... 10.1
Multi-Line Insurers......................... 2.9
Oil/Gas Production.......................... 2.1
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Oilfield Services/Equipment................. 1.5%
Other Commercial/Industrial Services........ 1.7
Other Consumer Durables..................... 0.7
Other Consumer Services..................... 0.8
Other Production/Manufacturing.............. 0.4
Other Retail Trade.......................... 0.6
Property-Casualty Insurance................. 0.6
Publishing.................................. 0.6
Real Estate Development/Investment.......... 1.8
Recreational Equipment...................... 1.0
Regional/Commercial Banks................... 5.2
Rental/Leasing Companies.................... 0.4
Restaurants................................. 2.1
Semiconductors/Electric Companies........... 2.1
Software.................................... 6.2
Telecommunication Equipment................. 3.8
Telecommunication Services.................. 3.4
Telephone................................... 7.2
Textiles.................................... 0.9
Tobacco Products............................ 1.6
Wholesale Distribution...................... 0.7
Other Assets in Excess of Liabilities....... 2.9
-----
NET ASSETS.................................. 100.0%
-----
-----
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
51
<PAGE>
WORLDWIDE GROWTH FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Catherine Somhegyi,
Partner, Chief Investment Officer, Equities
Lawrence S. Speidell,
CFA, Partner, Director of Global/Systematic Portfolio Management and Research
Loretta J. Morris,
Partner, Portfolio Manager
Alex Muromcew,
Portfolio Manager
Andrew B. Gallagher,
Partner, Portfolio Manager
Melisa A. Grigolite,
Portfolio Manager
Aaron M. Harris,
Portfolio Manager
Pedro V. Marcal,
Partner, Portfolio Manager
Eswar Menon,
Portfolio Manager
Ernesto Ramos, Ph.D.,
Senior Portfolio Manager
John N. Tribolet,
Portfolio Manager
GOAL: The Nicholas-Applegate Worldwide Growth Fund seeks to maximize long-term
capital appreciation through investing in a portfolio of growth stocks of U.S.
and international companies.
REVIEW AND OUTLOOK: The Nicholas-Applegate Worldwide Growth Fund outperformed
its benchmark during the fiscal year on the strength of superior stock
selection. The Fund returned 35.1% for the period, while its benchmark, the MSCI
World Index, returned 32.0%.
In the United States, a combination of low interest rates, a high level of
consumer confidence, and a record-breaking climb for stocks contributed to the
growth of many domestically held companies. In this environment, the Fund
benefited from holdings that thrived as a result of increased consumer spending
and sales. The Gap, as well as discounters such as K-Mart and Costco, were among
the Fund's best-performing U.S. holdings.
Though the technology sector was hit hard by the Asian economic crisis, the
Fund benefited from avoidance of stocks with little to no exposure to Asia.
Companies such as Nokia, a Finnish supplier of telecommunications systems and
the world's largest maker of mobile phones, delivered strong results for the
fiscal year.
Stock selection in Europe was a major factor in the Fund's outstanding
performance during the fiscal year. In Europe, benefits of the impending
European Monetary Union (EMU) were seen in falling interest rates and a shift
toward equity investing and corporate restructuring, especially in the banking
and financial sectors. Italian banks Credito Italiano and Banco di Roma were
both beneficiaries of these trends, and performed very well for the Fund.
In Ireland, low inflation, falling interest rates and expectations of
inclusion in EMU provided many stock-specific opportunities. The Bank of Ireland
benefited from this economic environment and was a strong performer for the
Fund.
In Japan, the government did little to stimulate economic reform and the
country remained mired in sluggish economic growth. The Fund maintained its
underweight position relative to the benchmark which helped relative returns.
Few Japanese companies met our strict investment criteria.
As we continue to find stocks around the world benefiting from positive
change, our outlook for the Fund remains extremely positive.
REPRESENTATIVE HOLDINGS
Banco Di Roma, Italy
Bank Of Ireland, Ireland
Costco Companies, United States
Credito Italiano, Italy
Groupe Danone, France
Mannesmann, Germany
Orange, United Kingdom
Nokia, Finland
Raision Tehtaat Oy, Finland
Tabacalera, Spain
- --------------------------------------------------------------------------------
52
<PAGE>
WORLDWIDE GROWTH INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
WORLDWIDE GROWTH INSTITUTIONAL PORTFOLIO WITH THE MSCI WORLD INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/98 SINCE
1 YEAR 3 YEARS INCEPTION
35.08% 22.54% 17.30%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WORLDWIDE GROWTH MSCI WORLD
INSTITUTIONAL
PORTFOLIO INDEX
<S> <C> <C>
19-Apr-93 $250,000.00 $250,000.00
31-Dec-93 250,600.00 273,515.66
31-Mar-94 263,000.00 275,182.42
30-Jun-94 258,600.00 283,458.30
30-Sep-94 272,200.00 289,540.37
31-Dec-94 258,091.09 287,458.30
31-Mar-95 262,104.94 300,441.60
30-Jun-95 277,357.61 313,260.12
30-Sep-95 303,648.39 330,310.26
31-Dec-95 297,700.90 345,989.58
31-Mar-96 315,501.56 360,070.55
30-Jun-96 337,394.33 370,524.84
30-Sep-96 337,803.52 375,468.33
31-Dec-96 352,799.84 392,649.45
31-Mar-97 357,071.62 393,775.48
30-Jun-97 410,594.64 453,026.83
30-Sep-97 451,302.33 465,985.28
31-Dec-97 474,947.92 454,494.69
31-Mar-98 550,619.67 519,594.22
</TABLE>
This graph compares a $250,000 investment in the Worldwide Growth Institutional
Portfolio with the Morgan Stanley Capital International ("MSCI") World Index, on
a cumulative and average annual total return basis. The Portfolio calculates its
performance based upon the historical performance of its corresponding series
("Fund") of Nicholas-Applegate Investment Trust, adjusted to reflect sales
charges and Portfolio operating expenses. The effective date of the
Institutional Portfolio's registration statement was on 10/1/93. 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
MSCI World Index consists of more than 1,400 securities listed on exchanges in
the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The Index is
a market-value weighted combination of countries and is unmanaged.
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.
Investments in overseas markets pose special risks, including currency
fluctuation and political risks, and the Fund's Share price is expected to be
more volatile than that of a U.S. only fund.
- --------------------------------------------------------------------------------
53
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS -- 91.6%
- ----------------------------------------------------------------------------
AUSTRALIA -- 0.4%
The News Corp. Ltd......................... 79,200 $ 523,647
------------
BRAZIL -- 1.0%
Petroleo Brasileiro S.A. PN................ 1,950,000 463,040
Telecomunicacoes Brasileiras S.A. -- ADR... 3,500 454,344
Telecomunicacoes de Sao Paulo S.A. --
Preferred................................ 1,455,000 467,064
------------
1,384,448
------------
CANADA -- 0.7%
Newcourt Credit Group, Inc................. 19,300 963,555
------------
DENMARK -- 1.1%
Tele Danmark A/S -- B...................... 17,000 1,543,346
------------
FINLAND -- 2.6%
Nokia Oyj Corp. -- ADR..................... 18,000 1,942,875
Raisio Group PLC........................... 13,000 1,866,904
------------
3,809,779
------------
FRANCE -- 7.2%
AXA-UAP.................................... 14,000 1,441,647
Banque Nationale de Paris S.A.............. 13,000 1,010,299
Bouygues S.A............................... 5,000 871,574
Cap Gemini Sogeti S.A...................... 8,200 963,508
Compagnie Financiere de Paribas S.A. -- A.. 10,000 1,011,994
Compagnie Francaise de Petroleum Total S.A.
-- B..................................... 8,000 960,668
Dassault Systemes S.A...................... 21,800 877,884
Etablissements Economiques du Casino
Guichard-Perrachon S.A................... 10,000 674,501
Groupe Danone -- ADR....................... 36,000 1,732,500
Synthelabo S.A............................. 7,000 971,643
------------
10,516,218
------------
GERMANY -- 6.2%
Adidas AG.................................. 5,800 1,031,828
Bayerische Motoren Werke AG................ 1,000 1,125,807
Deutsche Bank AG........................... 18,100 1,357,006
Deutsche Lufthansa AG...................... 71,000 1,493,452
Mannesmann AG.............................. 2,800 2,025,804
SAP AG..................................... 2,600 1,034,748
Volkswagen AG.............................. 1,270 994,387
------------
9,063,032
------------
HONG KONG -- 1.7%
China Telecom Ltd.*........................ 305,000 618,026
Dairy Farm International Holdings, Ltd..... 724,000 868,800
HSBC Holdings PLC.......................... 18,300 559,766
Hutchison Whampoa Ltd...................... 65,600 461,432
------------
2,508,024
------------
HUNGARY -- 1.4%
Magyar Tavkozlesi Rt. -- ADR*.............. 23,600 734,550
OTP Bank Rt................................ 12,900 656,193
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
HUNGARY (CONTINUED)
<TABLE>
<S> <C> <C>
Richter Gedeon Rt.......................... 6,600 $ 694,505
------------
2,085,248
------------
INDIA -- 0.3%
Bombay Suburban Electric Supply Co.,
Ltd...................................... 2,500 13,272
HDFC Bank Ltd.............................. 250,000 452,429
------------
465,701
------------
IRELAND -- 0.0%
Bank of Ireland............................ 0 17
------------
ISRAEL -- 0.4%
Formula Systems Ltd.*...................... 15,300 626,052
------------
ITALY -- 6.1%
Banca di Roma SpA*......................... 1,195,000 2,015,845
Credito Italiano SpA....................... 475,000 2,346,505
Italgas SpA................................ 215,000 1,081,563
Luxottica Group SpA -- ADR................. 10,000 936,875
Telecom Italia SpA......................... 130,300 1,026,820
Telecom Italia Mobile SpA.................. 260,300 1,398,694
------------
8,806,302
------------
JAPAN -- 3.4%
Bridgestone Corp........................... 27,000 611,469
Ibiden Co., Ltd............................ 73,000 947,049
Nichiei Co., Ltd........................... 9,240 817,631
Nippon Telegraph & Telephone Corp.......... 70 58,267
Orix Corp.................................. 10,500 713,380
SMC Corp................................... 5,500 408,733
Sony Corp.................................. 16,000 1,355,820
------------
4,912,349
------------
MEXICO -- 0.6%
Cifra S.A. de C.V. -- C.................... 224,599 401,853
Corporation Interamericana de
Entretenimiento S.A...................... 65,000 505,177
------------
907,030
------------
NETHERLANDS -- 2.9%
AKZO Nobel NV.............................. 6,000 1,218,892
ASM Lithography Holding N.V................ 12,000 1,109,250
Baan Co., NV*.............................. 21,000 1,005,375
CMG PLC -- (United Kingdom)................ 3,400 152,493
Hagemeyer NV............................... 15,300 741,265
------------
4,227,275
------------
NORWAY -- 1.6%
Tomra Systems ASA.......................... 44,500 1,179,035
Petroleum Geo-Services ASA -- ADR*......... 20,300 1,205,312
------------
2,384,347
------------
PORTUGAL -- 1.9%
BPI-SGPS, S.A.............................. 26,000 1,000,109
Estabelecimentos Jeronimo Martins & Filho
S.A...................................... 20,200 830,870
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
54
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCKS (Continued)
- ---------------------------------------------------------
PORTUGAL (CONTINUED)
<TABLE>
<S> <C> <C>
Portugal Telecom S.A....................... 19,000 $ 988,276
------------
2,819,255
------------
RUSSIA -- 0.3%
Gazprom -- ADR............................. 23,700 502,440
------------
SINGAPORE -- 0.5%
Singapore Technologies Engineering Ltd.*... 819,000 725,205
------------
SOUTH AFRICA -- 0.7%
Dimension Data Holdings Ltd................ 146,071 934,890
South African Breweries Ltd................ 175 5,189
------------
940,079
------------
SPAIN -- 4.6%
Argentaria S.A............................. 12,380 1,025,028
Banco Bilbao Vizcaya S.A................... 21,500 1,009,201
Fomento de Construcciones y Contratas
S.A...................................... 20,000 1,057,255
Grupo Acciona S.A.......................... 4,000 805,043
Tabacalera SA -- A......................... 16,300 1,829,217
Telefonica de Espana -- ADR................ 7,800 1,031,550
------------
6,757,294
------------
SWEDEN -- 1.7%
Astra AB................................... 133 2,693
Nordbanken Holding AB...................... 155,325 1,029,766
Telefonaktiebolaget LM Ericsson -- ADR..... 30,200 1,436,387
------------
2,468,846
------------
SWITZERLAND -- 3.8%
Credit Suisse Group........................ 5,000 1,000,341
Nestle S.A................................. 600 1,146,489
Novartis AG................................ 565 999,928
Swiss Reinsurance Co....................... 650 1,427,930
Union Bank of Switzerland.................. 600 980,006
------------
5,554,694
------------
UNITED KINGDOM -- 11.0%
Amvescap PLC............................... 90,000 973,607
Bank of Ireland............................ 83,012 1,638,940
British Aerospace PLC...................... 29,887 984,954
British Energy PLC......................... 110,700 972,766
British Land Corp. PLC..................... 69,700 875,392
British Petroleum Co. PLC.................. 46,000 664,008
CMG PLC.................................... 15,400 679,532
Glaxo Wellcome PLC......................... 28,200 758,881
Guardian Royal Exchange PLC................ 91,700 656,469
Hays PLC................................... 47,200 848,106
Lloyds TSB Group PLC....................... 50,500 785,626
Misys PLC.................................. 21,585 1,069,200
National Grid Holdings PLC................. 81,175 479,850
Orange PLC*................................ 192,200 1,224,663
Rolls-Royce PLC............................ 160,000 747,537
Standard Chartered Bank PLC................ 57,200 829,033
Unilever PLC............................... 48,300 456,987
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Viridian Group PLC......................... 92,810 $ 817,502
Zeneca Group PLC........................... 11,800 508,627
------------
15,971,680
------------
UNITED STATES OF AMERICA -- 29.5%
AirTouch Communications, Inc.*............. 26,800 1,311,525
ALZA Corp.................................. 35,000 1,568,437
AmSouth Bancorporation..................... 16,900 998,156
BMC Software, Inc.......................... 8,900 745,931
Cendant Corp............................... 34,000 1,347,250
CIENA Corp.*............................... 29,200 1,244,650
Computer Sciences Corp..................... 23,600 1,298,000
Compuware Corp.*........................... 25,000 1,234,375
Costco Companies, Inc.*.................... 32,600 1,744,100
Dayton Hudson Corp......................... 12,300 1,082,400
Federal National Mortgage Association...... 11,800 746,350
Federal-Mogul Corp......................... 9,200 489,325
Gannett Co., Inc........................... 17,800 1,279,375
Gap, Inc................................... 30,100 1,354,500
General Motors Corp. -- H.................. 29,400 1,330,350
HBO & Co................................... 19,500 1,177,312
Kmart Corp.*............................... 83,600 1,395,075
Loral Space and Communications Ltd.*....... 52,800 1,475,100
MBNA Corp.................................. 12,750 456,609
McDonald's Corp............................ 16,900 1,014,000
Merck & Co., Inc........................... 10,300 1,322,262
Merrill Lynch & Co., Inc................... 5,500 456,500
PNC Bank Corp.............................. 15,000 899,062
Qlogic Corp.*.............................. 16,000 568,000
Schlumberger, Ltd.......................... 19,100 1,446,825
State Street Corp.......................... 18,300 1,245,544
Sterling Commerce, Inc.*................... 20,500 950,687
Tekelec, Inc............................... 11,600 526,350
Tele-Communications TCI Ventures Group --
A........................................ 68,000 1,194,250
Tele-Communications, Inc. -- A*............ 41,600 1,293,500
Tellabs, Inc.*............................. 22,500 1,510,312
The Equitable Cos., Inc.................... 12,200 688,538
Tyco International Ltd..................... 24,500 1,338,313
U.S. West Media Group, Inc.*............... 34,000 1,181,500
United Healthcare Corp..................... 21,200 1,372,700
Warner-Lambert Co.......................... 8,300 1,413,594
Wellpoint Health Networks, Inc.*........... 11,000 742,500
WorldCom, Inc.*............................ 34,300 1,477,044
------------
42,920,301
------------
VENEZUELA -- 0.0%
C.A. La Electricidad de Caracas S.A.C.A.... 2 2
------------
TOTAL COMMON STOCK
(Cost $104,175,961)...................................... 133,386,166
------------
- ----------------------------------------------------------------------------
WARRANT/RIGHTS -- 0.0%
- ----------------------------------------------------------------------------
FRANCE
Cap Gemini Rights*
(Cost $0) 8,200 25,345
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
55
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
FOREIGN BONDS -- 0.1%
- -------------------------------------------------------------------------------
UNITED KINDGOM
Viridian Group PLC Loan Notes
7.650%, 02/14/03
(Cost $112,072) $ 140,900 $ 111,840
------------
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 1.9%
- -------------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 04/01/98
(Cost $2,736,000) 2,736,000 $ 2,736,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -- 93.6%
(Cost $107,024,033) $136,259,351
OTHER ASSETS IN EXCESS OF LIABILITIES -- 6.4% 9,277,014
------------
NET ASSETS -- 100.0% $145,536,365
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
56
<PAGE>
SCHEDULE OF INVESTMENTS BY INDUSTRY AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Aerospace................................... 1.2%
Airlines.................................... 1.0
Apparel..................................... 0.9
Automobiles................................. 1.5
Automotive Equipment........................ 0.8
Cable TV.................................... 1.7
Cellular Telecommunication.................. 0.9
Chemicals................................... 0.8
Computers/Office Automation................. 0.6
Computer Services........................... 2.5
Consumer Electrical......................... 0.9
Data Processing............................. 0.7
Department/Discount Stores.................. 3.2
Diversified Manufacturing................... 0.9
Drug Delivery Systems....................... 1.1
Drugs/Pharmaceuticals....................... 4.6
Electric Utilities.......................... 2.0
Entertainment............................... 0.4
Fiber Optics................................ 0.9
Finance Companies........................... 3.7
Financial Services.......................... 1.9
Gas Utilities............................... 0.7
Grocery Products............................ 4.2
Industrial Engineering/Construction......... 1.9
Investment Companies........................ 1.6
Life/Health Insurance....................... 0.5
Machinery/Equipment......................... 1.7
Managed Health Care/HMO's................... 1.5
Medical Supplies............................ 0.6
Medical Information Systems................. 0.8
<CAPTION>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------------------------------------------- -------------
<S> <C>
Military/Defense Technology................. 0.5%
Money Center Banks.......................... 6.9
Multi-Line Insurers......................... 1.0
Multi-Media................................. 0.9
Oil/Gas Production.......................... 1.8
Oilfield Services/Equipment................. 1.8
Other Commercial/Industrial Services........ 1.2
Other Consumer Durables..................... 0.5
Other Production/Manufacturing.............. 0.3
Property Casualty Insurance................. 0.5
Publishing.................................. 0.4
Real Estate Development/Investment.......... 0.6
Recreational Products....................... 0.7
Recycling................................... 0.8
Regional/Commercial Banks................... 6.2
Reinsurance................................. 1.0
Rental/Leasing Companies.................... 0.5
Retail/Food................................. 1.2
Retail/Hypermarkets......................... 0.6
Satellite Telecommunication................. 1.9
Semiconductors/Electric Companies........... 1.4
Software.................................... 4.6
Telecommunication Equipment................. 3.0
Telecommunication Services.................. 1.3
Telephone................................... 6.3
Textiles.................................... 0.6
Tobacco Products............................ 1.4
Other Assets in Excess of Liabilities....... 6.4
------
NET ASSETS.................................. 100.00%
------
------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
57
<PAGE>
FULLY DISCRETIONARY FIXED INCOME FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Fred S. Robertson,
Partner, Chief Investment Officer, Fixed Income
James E. Kellerman,
Partner, Portfolio Manager
Richard J. King,
CFA, Portfolio Manager
Malcom S. Day,
CFA, Portfolio Manager
GOAL: The Nicholas-Applegate Fully Discretionary Fixed Income Fund seeks to
maximize long-term total return from a portfolio of investment grade
fixed-income securities with an average portfolio duration between two and eight
years.
REVIEW AND OUTLOOK: For much of the 12-month period ending March 31, 1998, the
positive, long-term fundamentals for the U.S. fixed income market were countered
by mixed, short-term signals. The period was characterized by the contradictory
presence of low inflation and declining long-term interest rates along with
tight labor markets, economic strength, and low unemployment.
The Asian economic and monetary crises also affected the fixed income market
as expectations for tighter monetary policy gave way to forecasts of an imminent
easing. While the Federal Reserve Board left interest rates unchanged during the
period, the bond market fluctuated amid shifting investor perception in the
months following the Asian crises.
The Nicholas-Applegate Fully Discretionary Fixed Income Fund was up 12.6% in
the period versus a 12.4% gain for the Lehman Government/Corporate Index.
As a result of conflicting near-term economic signs, we maintained a neutral
interest-rate position for much of the period. Sector and security selection
were primarily responsible for the Fund's outperformance versus the Index. Our
overweighted position in mortgage securities and the purchase of select
corporate and international bonds added value.
Recognizing the potentially damaging consequences of increased mortgage
prepayments as interest rates declined, we concentrated our mortgage exposure in
sub-sectors such as commercial mortgages, which have less prepayment risk. The
mortgage sector continues to offer significant yield premiums over U.S.
Treasuries.
Integrating the resources of our equity investment team in the analysis of
corporate fundamentals resulted in solid corporate bond issue selection. Our
exposure to this sector contributed to the Fund's outperformance.
International exposure was also a key factor in the Fund's advance. Fully
hedged bond positions in Europe and Australia contributed positively to returns.
A variety of factors, including low inflation and declining interest rates ahead
of European Monetary Union, enhanced the environment for European bonds.
Australian bonds benefited from a weakened economy in the wake of the Asian
crises and the Australian government's fiscal budget surplus.
Looking ahead, we believe the long-term prospects for fixed income investing
remain promising based upon conservative U.S. fiscal policy and increased global
competition which is contributing to a disinflationary trend. However, in the
short-to-intermediate term, a relatively strong economy, strong money growth,
and tight labor markets create an environment where interest rates may need to
be raised to preserve the deflationary trend. While maintaining our current
neutral stance on interest rates, we seek to add value through tactical yield-
curve decisions and by identifying opportunities among diverse sectors,
including mortgages, corporates, and international bonds.
- --------------------------------------------------------------------------------
58
<PAGE>
FULLY DISCRETIONARY FIXED INCOME INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
FULLY DISCRETIONARY FIXED INCOME INSTITUTIONAL PORTFOLIO WITH THE LEHMAN
BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
12.60% As of 03/31/98 8.92%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FULLY LEHMAN BROTHERS
DISCRETIONARY GOVERNMENT/
FIXED INCOME CORPORATE
FUND BOND INDEX
<S> <C> <C>
8/31/95 $250,000.00 $250,000.00
9/30/95 $257,850.00 $252,550.00
12/31/95 $272,032.00 $264,319.00
3/31/96 $263,762.00 $258,134.00
6/30/96 $264,975.00 $259,321.00
9/30/96 $270,010.00 $263,885.00
12/31/96 $278,245.00 $271,960.00
3/31/97 $276,858.00 $269,621.00
6/30/97 $287,277.00 $279,390.88
9/30/97 $296,747.92 $289,185.35
12/31/97 $304,716.75 $298,470.90
3/31/98 $311,741.66 $303,010.41
</TABLE>
This graph compares a $250,000 investment in the Fully Discretionary Fixed
Income Institutional Portfolio with the Lehman Brothers Government/Corporate
Bond Index, on a cumulative and average annual total return basis. All return
calculations reflect the reinvestment of income 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
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.
Index returns reflect the reinvestment of income 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.
- --------------------------------------------------------------------------------
59
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
FULLY DISCRETIONARY FIXED INCOME FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------
PREFERRED STOCK -- 0.6%
- ----------------------------------------------------------------------------------
IXC Communications, Inc. Series B, 12.50%
(Cost $79,689)........................... 79 $ 96,380
-------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 7.2%
- ----------------------------------------------------------------------------------
U.S. TREASURY BONDS -- 3.5%
6.500%, 11/15/26........................... $ 325,000 346,837
8.500%, 2/15/20............................ 160,000 207,875
-------------
554,712
-------------
U.S. TREASURY NOTES -- 3.7%
6.250%, 1/31/02............................ 580,000 591,327
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,114,288)............................................ 1,146,039
-------------
</TABLE>
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------
AGENCY OBLIGATIONS -- 13.9%
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION, DISCOUNT NOTES -- 1.8%
5.900%, 04/01/98......................... 284,000 284,000
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 5.7%
Pool #380032
10.000%, 10/01/03........................ 81,267 85,876
Pool #200112
9.500%, 11/01/05......................... 226,866 241,327
Pool #E60820
7.000%, 07/01/10......................... 161,734 165,221
Pool #E20197
7.000%, 10/01/10......................... 18,096 18,486
Pool #E20207
7.000%, 12/01/10......................... 222,553 227,351
Pool #E62135
7.000%, 12/01/10......................... 6,427 6,556
Pool #2020, E
7.000%, 01/15/28......................... 150,000 154,266
------------
899,083
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 4.1%
Pool #303481
10.000%, 10/01/05........................ 104,640 111,143
Pool #303758
9.500%, 07/01/06......................... 101,208 106,736
Pool #303262
9.500%, 05/01/07......................... 120,784 127,031
Pool #273114
6.500%, 02/01/09......................... 296,779 298,649
------------
643,559
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 2.3%
Pool #780236
7.000%, 07/15/08......................... 203,519 207,141
Pool #780287
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
</TABLE>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
<TABLE>
<S> <C> <C>
7.000%, 12/15/08......................... $ 30,529 $ 31,123
Pool #50700
11.500%, 02/15/12........................ 8,898 10,156
Pool #64054
11.500%, 02/15/13........................ 3,853 4,366
Pool #068958
11.500%, 07/15/13........................ 5,867 6,717
Pool #141741
11.000%, 11/15/15........................ 8,836 10,043
Pool #299705
8.500%, 02/15/21......................... 13,323 14,177
Pool #357254
7.500%, 09/15/23......................... 43,927 45,134
Pool #368781
6.500%, 10/15/23......................... 33,578 33,368
------------
362,225
------------
TOTAL AGENCY OBLIGATIONS
(Cost $2,138,665).......................................... 2,188,867
------------
- -------------------------------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES -- 14.9%
- -------------------------------------------------------------------------------
COMMERCIAL MORTGAGE OBLIGATIONS -- 11.9%
Captiva CBO, 1997-1A, A
6.860%, 11/30/09......................... 250,000 251,699
DLJ Commercial Mortgage Corp., 1998-CF1,
A1B
6.410%, 02/15/08......................... 270,000 270,000
DLJ Mortgage Acceptance Corp., 1997-CF2,
A1B
6.820%, 09/15/07......................... 300,000 308,156
Merrill Lynch Mortgage Investment, 1997
5.938%, 04/01/10......................... 298,498 298,468
Morgan Stanley Capital I, 1998-WF1, A2
6.5500%, 12/15/07........................ 450,000 454,219
Nomura Asset Securities Corp., 1998 D6, A1B
6.590%, 03/15/30......................... 300,000 304,406
------------
1,886,948
------------
FINANCIAL SERVICES -- 0.9%
Triangle Funding, Ltd., 1997-2A, 1
5.880%, 10/15/00......................... 145,000 144,728
------------
MORTGAGE HOME EQUITY -- 2.1%
Amresco Residential Securities Mortgage
Loan Trust 1996-3 A5
7.550%, 02/25/23......................... 320,000 327,050
------------
TOTAL CMO'S AND ASSET BACKED SECURITIES
(Cost $2,358,491).......................................... 2,358,726
------------
- -------------------------------------------------------------------------------
CORPORATE BONDS -- 36.8%
- -------------------------------------------------------------------------------
AIRLINES -- 0.3%
Trans World Airlines
11.375%, 03/01/06........................ 50,000 50,500
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
60
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
ELECTRONICS -- 0.9%
Rockwell International Corp.
5.200%, 01/15/45......................... $ 200,000 $ 149,895
------------
FINANCIAL SERVICES -- 8.2%
American General Institutional Capital,
Series A
7.570%, 12/01/45......................... 215,000 223,383
American Resource Corp., Series B
7.450%, 12/15/25......................... 175,000 189,383
Amresco, Inc., Series 98-A
9.875%, 03/15/05......................... 50,000 51,000
Countrywide Capital III, Series B
8.050%, 06/15/27......................... 100,000 110,118
Countrywide Home Loan, Series MTNE
7.260%, 05/10/04......................... 250,000 258,985
CRIIMI MAE, Inc.
9.125%, 12/01/02......................... 100,000 100,500
Hutchison Whampoa Financial, Series C
7.500%, 08/01/27......................... 200,000 180,642
Lehman Brothers, Inc.
6.625%, 02/15/08......................... 180,000 179,410
------------
1,293,421
------------
INSURANCE -- 0.8%
Jackson National Life Insurance Co.
8.150%, 03/15/27......................... 110,000 122,634
------------
INVESTMENT SERVICES -- 1.0%
MCN Investment Corp.
6.300%, 04/02/01......................... 160,000 160,227
------------
GROCERY PRODUCTS -- 0.7%
Archer-Daniels-Midland
6.950%, 12/15/47......................... 105,000 106,697
------------
MACHINERY -- 0.7%
Interlake Corp.
12.125%, 03/01/02........................ 100,000 103,000
------------
MISCELLANEOUS FINANCIAL -- 0.3%
MCII Holding
0.000%, 11/15/02*........................ 50,000 47,250
------------
MULTIMEDIA -- 0.7%
American Lawyer Media
9.750%, 12/15/07......................... 100,000 105,250
------------
MULTILINE INSURANCE -- 0.8%
Travelers Group
6.875%, 2/15/49.......................... 130,000 126,790
------------
THEATRES/ENTERTAINMENT -- 2.3%
IMAX Corp.
10.000%, 03/01/01........................ 350,000 365,750
------------
NATURAL GAS/UTILITIES -- 1.8%
KN Energy, Inc.
6.450%, 03/01/03......................... 120,000 120,096
KN Energy, Inc.
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
</TABLE>
NATURAL GAS/UTILITIES (CONTINUED)
<TABLE>
<S> <C> <C>
7.450%, 03/01/47......................... $ 160,000 $ 161,251
------------
281,347
------------
OIL -- 1.6%
LASMO, Inc.
6.750%, 12/15/07......................... 250,000 246,875
------------
OIL WELL SERVICES -- 1.4%
Petroleum Geological Services
7.125%, 03/30/28......................... 225,000 225,713
------------
PRODUCERS/MANUFACTURING -- 1.0%
Doskocil Manufacturing Co., Inc.
10.125%, 09/15/07........................ 100,000 107,000
Figgie International, Inc.
9.875%, 10/01/99......................... 50,000 52,000
------------
159,000
------------
RENTAL-AUTO -- 1.5%
Hertz Corp.
7.000%, 01/15/28......................... 250,000 243,615
------------
RETAILING-CATALOG -- 1.3%
Brylane L.P., Series B
10.000%, 09/01/03........................ 200,000 212,000
------------
SOFTWARE -- 0.3%
IDT Corp.
8.750%, 02/15/06......................... 50,000 49,938
------------
SPECIALTY RETAILING -- 2.4%
CompUSA, Inc.
9.500%, 06/15/00......................... 187,000 193,779
Michaels Stores, Inc.
10.875%, 06/15/06........................ 100,000 112,000
Musicland Group
9.000%, 06/15/03......................... 75,000 74,250
------------
380,029
------------
STEEL PRODUCERS -- 1.1%
Russel Metals, Inc.
10.250%, 06/15/00........................ 170,000 176,375
------------
TELECOMMUNICATIONS -- 1.3%
Cable & Wireless Communications
6.375%, 03/06/03......................... 200,000 200,114
------------
TELEPHONE -- 3.8%
AT&T Capital Corp., Series MTN3
6.520%, 05/14/99......................... 50,000 50,393
BellSouth Telecommunications, Inc.
7.000%, 12/01/45......................... 215,000 226,567
US West Capital Funding, Inc.
7.900%, 02/01/27......................... 140,000 157,643
US West Capital Funding, Inc.
7.950%, 02/01/47......................... 150,000 171,000
------------
605,603
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
61
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
FULLY DISCRETIONARY FIXED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TRANSPORTATION (NON-RAIL) -- 1.0%
Federal Express
7.600%, 07/01/47......................... $ 150,000 $ 157,067
------------
UTILITIES-ELECTRIC -- 0.9%
Yorkshire Power Finance
6.154%, 02/25/03......................... 140,000 138,865
------------
WASTE MANAGEMENT -- 0.7%
WMX Technologies, Inc.
7.100%, 08/01/26......................... 110,000 113,988
------------
TOTAL CORPORATE BONDS
(Cost $5,750,943).......................................... 5,821,943
------------
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -- 13.8%
- -------------------------------------------------------------------------------
AUSTRALIA -- 9.2%
Australian Government, Series 705
7.500%, 07/15/05......................... 900,000 664,287
Queensland Treasury-Global
8.000%, 05/14/03......................... 1,080,000 792,346
------------
1,456,633
------------
GERMANY -- 4.6%
German Unity Fund
8.000%, 01/21/02......................... 1,200,000 728,822
------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $2,245,252).......................................... 2,185,455
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
FOREIGN CORPORATE OBLIGATIONS -- 1.1%
- -------------------------------------------------------------------------------
INDONESIA -- 0.4%
PT Polysindo Interest*..................... $ 5,000 $ 2,950
PT Polysindo Interest*..................... 5,000 2,950
PT Polysindo Principal*.................... 100,000 59,000
------------
64,900
------------
MALAYSIA -- 0.7%
Tenaga Nasional Berhad
7.625%, 04/29/07......................... 120,000 107,107
------------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(Cost $173,863)............................................ 172,007
------------
- -------------------------------------------------------------------------------
MUTUAL FUNDS -- 9.2%
- -------------------------------------------------------------------------------
Blackrock 2001 Term Trust, Inc............. 82,500 711,563
Blackrock Strategic Term Trust, Inc........ 86,500 746,063
------------
TOTAL MUTUAL FUNDS
(Cost $1,414,457) 1,457,626
------------
TOTAL INVESTMENTS -- 97.5%
(Cost $15,275,648)......................................... 15,427,043
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.5%................ 399,266
------------
NET ASSETS -- 100.0%......................................... $ 15,826,309
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
62
<PAGE>
SHORT-INTERMEDIATE FIXED INCOME FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Fred S. Robertson,
Partner, Chief Investment Officer, Fixed Income
James E. Kellerman,
Partner, Portfolio Manager
Richard J. King,
CFA, Portfolio Manager
Malcom S. Day,
CFA, Portfolio Manager
GOAL: The Nicholas-Applegate Short-Intermediate Fixed Income Fund seeks
primarily to preserve principal and liquidity and, secondarily, to realize a
relatively high level of current income from a portfolio of investment grade
fixed-income securities with a maximum dollar-weighted maturity of five years.
REVIEW AND OUTLOOK: For much of the 12-month period ending March 31, 1998, the
positive, long-term fundamentals for the U.S. fixed income market were countered
by mixed, short-term signals. The period was characterized by the contradictory
presence of low inflation and declining long-term interest rates along with
tight labor markets, economic strength, and low unemployment.
The Asian economic and monetary crises also affected the fixed income market
as expectations for tighter monetary policy gave way to forecasts of an imminent
easing. While the Federal Reserve Board left interest rates unchanged during the
period, the bond market fluctuated amid shifting investor perception in the
months following the Asian crises.
The Nicholas-Applegate Short-Intermediate Fixed Income Fund was up 7.5% in the
period versus an identical gain for the Merrill Lynch 1-3 Year Government Index.
Given the conflicting fundamentals evident in the fixed income market during
the period, we typically positioned the Fund to maintain a relatively neutral
interest-rate exposure. In the wake of the Asian crises, we increased the
barbelled nature of the Fund to take advantage of the flattening yield curve.
With a flat yield curve among shorter-maturity securities, we sought to
enhance returns and increase the Fund's yield by investing in short-term
mortgages and collateralized mortgage obligations (CMOs). Mortgages and
asset-backed securities continue to offer significant yield premiums over
Treasuries. Lower market volatility reduced the risk of prepayment associated
with declining interest rates. To further protect against prepayment risk, we
concentrated our exposure in securities with less prepayment sensitivity.
At March-end, mortgage and asset-backed securities comprised more than 70% of
the Fund's holdings.
Looking ahead, we believe the prospects for fixed income investing remain
promising based upon disinflation trends, decelerating government spending, and
improved global efficiencies. However, in the short-to-intermediate term, a
relatively strong economy, strong money growth, and tight labor markets create
an environment where interest rates may need to be raised to preserve the
deflationary trend. While maintaining our current neutral stance on interest
rates due to short-term concerns, we continue to seek to add value through
tactical yield-curve decisions and sector and issue selection.
- --------------------------------------------------------------------------------
63
<PAGE>
SHORT-INTERMEDIATE FIXED INCOME INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
SHORT-INTERMEDIATE FIXED INCOME INSTITUTIONAL PORTFOLIO WITH THE MERRILL LYNCH
1-3 YEAR TREASURY INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
7.50% As of 03/31/98 7.05%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SHORT INTERMEDIATE MERRILL LYNCH 1-3 YEAR
FIXED INCOME FUND TREASURY INDEX
<S> <C> <C>
8/31/95 $250,000.00 $250,000.00
9/95 $255,700.00 $251,200.00
12/95 $262,374.00 $257,505.00
3/96 $263,318.00 $258,381.00
6/96 $265,636.00 $260,990.00
9/96 $270,098.00 $265,297.00
12/96 $275,095.00 $270,364.00
3/97 $277,288.00 $272,148.00
6/97 $283,596.22 $278,141.96
9/97 $288,701.86 $283,593.66
12/97 $293,441.74 $288,325.28
3/31/98 $298,077.52 $292,578.72
</TABLE>
This graph compares a $250,000 investment in the Short-Intermediate Fixed Income
Institutional Portfolio with the Merrill Lynch 1-3 Year Treasury Index, on a
cumulative and average annual total return basis. All return calculations
reflect the reinvestment of income 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
The Merrill Lynch 1-3 Year Treasury is an index consisting of all public U.S.
Treasury obligations having maturities from one to 2.99 years. It includes
income and distributions 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.
- --------------------------------------------------------------------------------
64
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------
AGENCY OBLIGATIONS -- 55.1%
- ----------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION, DISCOUNT NOTES -- 3.4%
5.900%, 04/01/98........................... $ 468,000 $ 468,000
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 27.8%
Pool #380062
9.500%, 11/01/04......................... 175,746 185,631
Pool #380032
10.000%, 10/01/03........................ 71,055 75,085
Pool #B00455
9.000%, 12/01/03......................... 518,118 536,988
Pool #1472E
6.250%, 02/15/05......................... 185,396 185,569
Pool #380078
9.000%, 04/01/05......................... 378,965 397,025
Pool #20012
9.500%, 11/01/05......................... 101,566 108,040
Pool #504019
9.000%, 03/01/06......................... 189,183 196,307
Pool #B00623
9.000%, 06/01/06......................... 455,362 473,719
Pool #504132
9.000%, 07/01/06......................... 306,278 319,616
WMF Huntoon Paige
5.150%, 01/01/07......................... 191,378 185,337
Pool #G10453
9.000%, 06/01/07......................... 338,369 357,054
Pool #555287
9.750%, 05/01/11......................... 243,900 262,726
Pool #1552 EA
5.850%, 01/15/17......................... 185,000 184,595
Pool #1836 D
6.250%, 04/15/26......................... 300,000 301,125
-----------
3,768,817
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 6.4%
Pool #50155
10.000%, 12/01/03........................ 5,470 5,833
Pool #070722
9.000%, 01/01/06......................... 257,406 271,134
Pool #303758
9.500%, 07/01/06......................... 257,371 271,429
Pool #2454
14.750%, 10/01/12........................ 5,572 6,779
Pool #G93-40 D
5.700%, 07/25/16......................... 200,000 198,562
Pool #1993-136 PB
6.000%, 03/25/19......................... 120,000 119,400
-----------
873,137
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 17.5%
Pool #780328
10.000%, 10/15/06........................ 356,803 379,773
Pool #780306
9.000%, 11/15/06......................... 290,976 303,343
Pool #780182
9.000%, 01/15/08......................... 440,733 459,188
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------
</TABLE>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
<TABLE>
<S> <C> <C>
Pool #357290
7.000%, 07/15/08......................... $ 801,050 $ 817,848
Pool #387501
7.000%, 03/15/09......................... 184,369 188,298
Pool #384159
7.000%, 05/15/09......................... 73,461 75,021
Pool #780369
7.000%, 09/15/09......................... 74,587 76,166
Pool #064054
11.500%, 02/15/03........................ 3,854 4,366
Pool #059779
11.500%, 03/15/13........................ 2,590 2,956
Pool #780179
12.000%, 10/15/15........................ 50,927 59,242
Pool #141741
11.000%, 11/15/15........................ 6,213 7,062
Pool #200947
9.500%, 12/15/17......................... 4,246 4,614
-----------
2,377,877
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $7,423,112)...................................... 7,487,831
-----------
- ----------------------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES -- 24.7%
- ----------------------------------------------------------------------
AUTOMOBILES -- 3.4%
Honda Receivables Grantor Trust 1997-A A
5.850%, 02/15/03......................... 91,552 91,366
Mitsubishi Motors Credit of America
Automobile Trust 1997-1 A2
5.790%, 05/15/00......................... 315,000 315,098
Premier Auto Trust 1995-3 A4
6.100%, 07/06/99......................... 50,106 50,221
-----------
456,685
-----------
CREDIT CARDS -- 8.8%
American Express Credit Account Master
Trust 1997-1 A
6.400%, 04/15/05......................... 400,000 405,687
Signet Credit Card Master Trust 1993-1 A
5.200%, 02/15/02......................... 285,000 283,931
First Bank Corporate Credit Card Master
Trust 1997-1 A
6.400%, 02/15/03......................... 320,000 323,900
NationsBank Credit Card Master Trust 1995-1
A
6.450%, 04/15/03......................... 185,000 187,137
-----------
1,200,655
-----------
FINANCIAL SERVICES -- 3.0%
Navistar Financial Corp. Owner Trust 1997-B
A2
5.956%, 01/15/00......................... 195,000 195,305
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
65
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FIXED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CMO'S AND ASSET-BACKED SECURITIES (Continued)
- ---------------------------------------------------------
FINANCIAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Triangle Funding, Ltd. 1997-2X 1
5.890%, 10/15/03......................... $ 215,000 $ 214,597
-----------
409,902
-----------
MORTGAGE HOME EQUITY -- 7.7%
The Money Store Residential Trust 1998-I A2
6.200%, 03/15/00......................... 135,000 134,958
The Money Store Residential Trust 1998-I A3
6.215%, 02/15/11......................... 270,000 269,578
Vanderbilt Mortgage Finance 1998-A
6.265%, 10/07/11......................... 145,000 144,547
Residential Funding Mortgage Sec. I
1993-S47
5.650%, 12/25/23......................... 245,812 242,778
Residential Asset Securitization Trust
1997-A2 A4
7.125%, 04/25/27......................... 250,000 251,016
-----------
1,042,877
-----------
MORTGAGE RESIDENTIAL -- 1.8%
IMC Home Equity Loan Trust 1997-5 A5
6.610%, 06/20/13......................... 245,000 245,727
-----------
TOTAL CMO'S AND ASSET BACKED SECURITIES
(Cost $3,350,565)...................................... 3,355,846
-----------
- ----------------------------------------------------------------------
CORPORATE BONDS -- 6.3%
- ----------------------------------------------------------------------
FINANCIAL SERVICES -- 1.5%
Lehman Brothers Holdings E
6.625%, 12/27/02......................... 200,000 202,356
-----------
NATURAL GAS/UTILITIES -- 1.2%
KN Energy, Inc.
6.300%, 03/01/01......................... 135,000 135,035
KN Energy, Inc.
6.450%, 03/01/03......................... 35,000 35,028
-----------
170,063
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------
OIL WELL SERVICES -- 2.3%
Enserch Corp.
6.250%, 01/01/03......................... $ 320,000 $ 317,722
-----------
TELECOMMUNICATIONS -- 1.3%
Cable & Wireless Communications
6.375%, 03/06/03......................... 170,000 170,097
-----------
TOTAL CORPORATE BONDS
(Cost $858,317)........................................ 860,238
-----------
<CAPTION>
NUMBER OF
SHARES
<S> <C> <C>
- ----------------------------------------------------------------------
MUTUAL FUNDS -- 9.5%
- ----------------------------------------------------------------------
Blackrock 2001 Term Trust, Inc............. 72,000 621,000
Blackrock Strategic Term Trust, Inc........ 77,400 667,575
-----------
TOTAL MUTUAL FUNDS
(Cost $1,247,338)...................................... 1,288,575
-----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------
VARIABLE RATE OBLIGATIONS -- 3.4%
- ----------------------------------------------------------------------
BANK -- 3.4%
BankAmerica Capital Trust III
6.164%, 01/15/27......................... 120,000 117,618
Chase Capital II
6.152%, 02/01/27......................... 120,000 115,279
NationsBank Capital Trust III
6.144%, 01/15/27......................... 120,000 117,150
Wachovia Capital Trust II
6.094%, 01/15/27......................... 120,000 116,880
-----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $472,580)........................................ 466,927
-----------
TOTAL INVESTMENTS -- 99.1%
(Cost $13,351,912)..................................... 13,459,417
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.9%............ 127,852
-----------
NET ASSETS -- 100.0%..................................... $13,587,269
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
66
<PAGE>
STRATEGIC INCOME FUND
INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Fred S. Robertson,
Partner, Chief Investment Officer, Fixed Income
Douglas G. Forsyth,
CFA, Portfolio Manager
Jan Friedli,
Portfolio Manager
Alan J. Brochstein,
Portfolio Manager
Malcom S. Day,
CFA, Portfolio Manager
Richard J. King,
CFA, Portfolio Manager
GOAL: The Nicholas-Applegate Strategic Income Fund seeks to provide a high
level of current income and long-term capital appreciation through investment in
diverse sectors of global bond markets.
REVIEW AND OUTLOOK: In the United States, little evidence of inflation, strong
economic growth, solid corporate earnings, and declining long-term interest
rates contributed to a positive investment environment during the 12-month
period ending March 31, 1998.
Internationally, fixed income-market returns varied widely. The spread of the
Asian monetary and economic crises in the final quarter of 1997 created an
extremely difficult environment for emerging debt markets, particularly in
October. The impact of the crises was not exclusive to South East Asian
countries as investors ignored country-specific fundamentals and emerging debt
markets around the world suffered declines.
Conversely, some developed international markets delivered solid results in
the period, particularly in Europe where low inflation and falling interest
rates ahead of European Monetary Union enhanced the environment for European
bonds. As we identified attractive opportunities overseas, we eliminated our
exposure to U.S. convertible bonds in December.
In a global environment characterized by extremes, security selection was
critical to the Fund's outperformance. During the period, the Fund was up 20.1%
versus a 17.2% gain for an equal-weighted composite of the Lehman
Mortgage-Backed Securities Index, the First Boston High Yield Index, and the JP
Morgan Emerging Markets Bond Index+.
All three of the Fund's asset classes performed well during the 12-month
period and contributed to the Fund's solid gains. Mortgage securities continue
to offer attractive yield premiums over U.S. Treasuries. While rising wages and
lower interest rates triggered an increase in mortgage prepayments, we
concentrated our mortgage exposure in sub-sectors such as commercial mortgages,
which have less prepayment risk.
Among emerging market debt holdings, shorter-maturity securities and
securities of higher quality issuers such as Poland and Panama, as well as low
exposure to lower credit countries such as Brazil and Russia, helped relative
returns late in 1997 in the wake of the Asian crises. As the international
environment improved in the first months of 1998, we increased our exposure to
countries with greater risk/reward profiles such as Brazil. The Fund benefited
from this exposure.
Our high yield bond holdings also added to the Fund's gains. Our bottom-up
approach to high yield investing and focus on company fundamentals resulted in
value-added issue selection. Among the Fund's top-performing high yield bonds in
the period were Qwest, Musicland, and Chancellor Media.
While we have concerns regarding the potential for additional rounds of credit
deterioration in the short term caused by the weak Japanese economy and rising
defaults, our long-term outlook for fixed income investing remains bright. Low
inflation, sound fiscal policies, and the worldwide disinflationary trend
contribute to our optimism.
- --------------------------------------------------------------------------------
67
<PAGE>
STRATEGIC INCOME INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $250,000 INVESTMENT IN NICHOLAS-APPLEGATE
STRATEGIC INCOME INSTITUTIONAL PORTFOLIO WITH A MODEL INDEX CONSISTING OF 1/3
LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX, 1/3 FIRST BOSTON CONVERTIBLE
INDEX AND 1/3 FIRST BOSTON HIGH YIELD BOND INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
20.06% As of 03/31/98 18.86%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STRATEGIC INCOME
INSTITUTIONAL
PORTFOLIO MODEL INDEX
<S> <C> <C>
31-Jul-96 $250,000.00 $250,000.00
30-Sep-96 $264,175.16 $258,997.00
31-Dec-96 $272,990.92 $267,792.00
31-Mar-97 $277,664.93 $269,691.00
30-Jun-97 $298,228.33 $284,677.00
30-Sep-97 $314,100.27 $301,187.00
31-Dec-97 $318,703.02 $302,348.00
31-Mar-98 $333,370.96 $315,140.00
</TABLE>
This graph compares a $250,000 investment in the Strategic Income Institutional
Portfolio with a model index consisting of 1/3 Lehman Brothers Mortgage-Backed
Securities Index, 1/3 First Boston Convertible Index and 1/3 First Boston High
Yield Bond Index, on a cumulative return 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 the Investment Adviser
has agreed to waive or defer its management fees and to pay other operating
expenses otherwise payable by the Portfolio, subject to possible later
reimbursement during a five year period. Total return results may have been
lower had there been no waiver or deferral.
The Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index
consisting of fixed-rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation
(FHLMC) and Federal National Mortgage Association (FNMA).
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.
The First Boston High Yield Index is an unmanaged index that generally includes
over 180 issues with an average maturity range of seven to ten years with a
minimum capitalization of $100 million. All issues are individually
trader-priced monthly.
Index returns 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.
- --------------------------------------------------------------------------------
68
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
PREFERRED STOCKS -- 4.7%
- -------------------------------------------------------------------------------
BROADCASTING -- 1.7%
Chancellor Media, Series A, 12.250%........ 500 $ 71,125
------------
TELECOMMUNICATIONS -- 3.0%
IXC Communications Inc., Series B,*
12.500%.................................. 1,060 129,320
------------
TOTAL PREFERRED STOCKS
(Cost $169,511)............................................ 200,445
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS -- 21.9%
- -------------------------------------------------------------------------------
BROADCAST SERVICES -- 1.8%
Source Media, Inc.
12.000%, 11/01/04........................ $ 75,000 74,625
------------
BUILDING -- RESIDENTIAL/COMMERCIAL -- 0.9%
Standard Pacific Corp.
10.500%, 03/01/00........................ 37,000 39,035
------------
ELECTRONIC INSTRUMENTS -- 1.0%
Electronic Retailing System, Inc.
0.000%, 02/01/04*........................ 75,000 43,500
------------
FINANCIAL SERVICES -- 4.6%
Cowen Financial Corp.
11.875%, 10/01/03........................ 80,000 91,200
Resource America, Inc.
12.000%, 08/01/04........................ 100,000 105,000
------------
196,200
------------
PRODUCERS/MANUFACTURING -- 2.5%
Doskocil Manufacturing Co., Inc.
10.125%, 09/15/07........................ 50,000 53,500
Associated Materials, Inc.
9.250%, 03/01/08......................... 50,000 51,375
------------
104,875
------------
RESTAURANTS -- 0.4%
Foodmaker, Inc.
9.250%, 03/01/99......................... 18,000 18,225
------------
SOFTWARE -- 1.8%
IDT Corp.
8.750%, 02/15/06......................... 75,000 74,906
------------
SPECIALTY RETAILING -- 4.9%
CompUSA, Inc.
9.500%, 06/15/00......................... 50,000 51,687
Musicland Group
9.000%, 06/15/03......................... 75,000 74,250
Michaels Stores, Inc.
10.875%, 06/15/06........................ 75,000 84,000
------------
209,937
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 4.0%
Sitel Corp.
9.250%, 03/15/06......................... $ 50,000 $ 50,500
Telesystem International Wireless
0.000%, 06/30/07*........................ 100,000 69,875
Teligent, Inc.
11.500%, 12/01/07........................ 50,000 52,250
------------
172,625
------------
TOTAL CORPORATE BONDS
(Cost $906,849)............................................ 933,928
------------
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS -- 27.4%
- -------------------------------------------------------------------------------
ARGENTINA -- 9.3%
City of Buenos Aires
10.500%, 05/28/04........................ 200,000 187,250
Republic of Argentina
11.750%, 02/12/07........................ 200,000 207,750
------------
395,000
------------
BRAZIL -- 4.6%
Republic of Brazil
10.125%, 05/15/27........................ 200,000 198,250
------------
KAZAKHSTAN -- 4.8%
Republic of Kazakhstan
9.250%, 12/20/99......................... 200,000 202,500
------------
MEXICO -- 4.1%
United Mexican States
11.375%, 09/15/16........................ 150,000 176,250
------------
RUSSIA -- 4.6%
Ministry Finance of Russia
9.250%, 11/27/01......................... 200,000 195,625
------------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $1,091,444).......................................... 1,167,625
------------
- -------------------------------------------------------------------------------
FOREIGN CORPORATE OBLIGATIONS -- 10.4%
- -------------------------------------------------------------------------------
ARGENTINA -- 2.2%
CIA International Telecommunications
10.375%, 08/01/04........................ 100,000 91,250
------------
BRAZIL -- 4.5%
Banco Nacional de Desenvolvimento Economico
E Social
9.000%, 09/24/07......................... 200,000 192,500
------------
INDONESIA -- 1.5%
PT Polysindo Eka Perkasa Interest
Promissory Note*......................... 50 2,950
PT Polysindo Eka Perkasa Interest
Promissory Note*......................... 50 2,950
PT Polysindo Eka Perkasa Principal
Promissory Note*......................... 1,000 59,000
------------
64,900
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
69
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
FOREIGN CORPORATE OBLIGATIONS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
RUSSIA -- 2.2%
Tafneft Finance PLC
9.000%, 10/29/02......................... $ 100,000 $ 92,000
------------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(Cost $419,876)............................................ 440,650
------------
- -------------------------------------------------------------------------------
AGENCY OBLIGATIONS -- 18.3%
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 12.9%
Pool 380003
9.500%, 06/01/02......................... 21,829 22,584
Pool 380062
9.500%, 11/01/04......................... 53,032 56,016
Pool 504019
9.000%, 03/01/06......................... 37,836 39,261
Pool 1734 E
6.000%, 10/15/06......................... 65,000 64,898
Pool E48322
6.500%, 07/01/08......................... 105,224 105,635
Pool E62975
6.500%, 03/01/11......................... 198,277 199,826
Pool 1590 G
6.000%, 10/15/21......................... 60,000 59,137
------------
547,357
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 5.4%
Pool 2468
10.500%, 12/01/00........................ 67,093 69,788
Pool 50319
9.500%, 06/01/05......................... 44,585 47,414
Pool G1993 - 40 D
5.700%, 07/25/16......................... 65,000 64,533
Pool G1994 - 9 PH
6.500%, 09/01/21......................... 50,000 50,437
------------
232,172
------------
TOTAL AGENCY OBLIGATIONS
(Cost $768,664)............................................ 779,529
------------
- -------------------------------------------------------------------------------
CMO'S AND ASSET-BACKED SECURITIES -- 3.9%
- -------------------------------------------------------------------------------
MORTGAGE COMMERCIAL -- 2.8%
Blackrock Capital Finance LP, 1997 - R3,
AWAC
6.278%, 11/25/37....................... 48,675 49,055
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
</TABLE>
MORTGAGE COMMERCIAL (CONTINUED)
<TABLE>
<S> <C> <C>
Morgan Stanley Capital I, 1998 - WF1, X2
1.115%, 01/15/18....................... $ 1,500,000 $ 67,500
------------
116,555
------------
MORTGAGE RESIDENTIAL -- 1.1%
Residential Asset Securitization Trust
1998/A5 A3
6.750%, 04/25/28......................... 50,000 47,352
------------
TOTAL CMO'S AND ASSET-BACKED SECURITIES
(Cost $161,165)............................................ 163,907
------------
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------
MUTUAL FUNDS -- 9.8%
- -------------------------------------------------------------------------------
Blackrock 2001 Term Trust, Inc............. 25,000 215,626
Blackrock Strategic Term Trust, Inc........ 23,500 202,687
------------
TOTAL MUTUAL FUNDS
(Cost $405,370)............................................ 418,313
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.5%
- -------------------------------------------------------------------------------
J.P. Morgan & Co., Inc. $108,000 at
5.92%, (Agreement dated 03/31/98 to be
repurchased at $108,017.76 on 04/01/98,
collateralized by $110,000 FNMA Notes,
6.74%, due 05/07/01) (Value
$116,386.72)
(Cost $108,000).......................... $ 108,000 108,000
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- -------------------------------------------------------------------------------
WARRANTS -- 0.1%
- -------------------------------------------------------------------------------
Electronic Retailing Systems, Inc.*
(Cost $6,109)............................ 150 3,750
------------
TOTAL INVESTMENTS -- 99.0%
(Cost $4,036,988).......................................... 4,216,147
OTHER ASSETS IN EXCESS OF LIABILTIES -- 1.0%................. 41,634
------------
NET ASSETS -- 100.0%......................................... $ 4,257,781
------------
</TABLE>
- ---------------
* Non-Income Producing Security
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
70
<PAGE>
(This page intentionally left blank)
- --------------------------------------------------------------------------------
71
<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 DISTRIBUTIONS
BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM
OF PERIOD (DEFICIT) ON INVESTMENTS INCOME CAPITAL GAINS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
MINI CAP GROWTH(1)
For the year ended
3/31/98................... $ 15.94 $ (0.17) $ 10.93 $ -- $ (1.65)
For the year ended
3/31/97................... 15.85 (0.17) 0.84 -- (0.58)
For the period ended
3/31/96*.................. 12.50 (0.05) 3.40 -- --
EMERGING GROWTH(2)
For the year ended
3/31/98................... 11.06 (0.03) 5.10 -- (1.96)
For the year ended
3/31/97................... 15.10 (0.08) (0.31) -- (3.65)
For the year ended
3/31/96................... 11.58 (0.11) 4.45 -- (0.82)
For the year ended
3/31/95................... 11.38 (0.05) 0.95 -- (0.70)
For the period ended
3/31/94*.................. 12.50 (0.04) (0.69) -- (0.39)
CORE GROWTH(3)
For the year ended
3/31/98................... 15.39 (0.07) 6.00 -- (4.16)
For the year ended
3/31/97................... 16.26 (0.08) 0.49 -- (1.28)
For the year ended
3/31/96................... 12.62 (0.03) 4.47 -- (0.80)
For the year ended
3/31/95................... 12.68 (0.01) 0.38 -- (0.43)
For the period ended
3/31/94*.................. 12.50 (0.01) 0.92 -- (0.73)
LARGE CAP GROWTH(4)
For the year ended
3/31/98................... 13.00 (0.02) 7.55 0.00 (4.03)
For the period ended
3/31/97*.................. 12.50 -- 0.50 -- --
VALUE(5)
For the year ended
3/31/98................... 15.06 (0.00) 8.27 -- (1.43)
For the period ended
3/31/97*.................. 12.50 1.50 3.11 (1.44) (0.61)
INCOME & GROWTH(3)
For the year ended
3/31/98................... 14.97 0.47 4.20 (0.47) (0.53)
For the year ended
3/31/97................... 14.45 0.51 1.51 (0.52) (0.98)
For the year ended
3/31/96................... 11.86 0.53 2.59 (0.53) --
For the year ended
3/31/95................... 13.39 0.54 (0.85) (0.54) (0.68)
For the period ended
3/31/94*.................. 12.50 0.42 2.12 (0.42) (1.23)
BALANCED GROWTH(2)
For the year ended
3/31/98+.................. 13.94 0.34 5.14 (0.37) (1.39)
For the year ended
3/31/97................... 14.20 0.36 0.75 (0.33) (1.04)
For the year ended
3/31/96................... 12.01 0.37 2.19 (0.37) --
For the year ended
3/31/95................... 11.71 0.22 0.30 (0.22) --
For the period ended
3/31/94*.................. 12.50 0.08 (0.79) (0.08) --
EMERGING COUNTRIES(6)
For the year ended
3/31/98................... 17.45 0.09 1.23 -- (1.62)
For the year ended
3/31/97................... 14.02 (0.06) 3.62 (0.05) (0.13)
For the year ended
3/31/96................... 10.91 -- 3.16 (0.05) --
For the period ended
3/31/95*.................. 12.50 0.08 (1.66) (0.01) --
INTERNATIONAL SMALL CAP
GROWTH(7)
For the year ended
3/31/98................... 17.02 (0.13) 5.50 -- (3.94)
For the year ended
3/31/97................... 15.05 -- 2.28 (0.08) (0.23)
For the year ended
3/31/96................... 13.09 0.06 2.02 (0.12) --
For the year ended
3/31/95................... 13.47 0.02 (0.22) (0.06) (0.12)
For the period ended
3/31/94*.................. 12.50 0.01 0.96 -- --
INTERNATIONAL CORE GROWTH(4)
For the year ended
3/31/98................... 14.13 (0.02) 5.12 -- (0.68)
For the period ended
3/31/97*.................. 12.50 -- 1.63 -- --
WORLDWIDE GROWTH(2)
For the year ended
3/31/98+.................. 14.21 0.25 4.56 -- (1.12)
For the year ended
3/31/97................... 15.42 (0.12) 2.08 -- (3.17)
For the year ended
3/31/96................... 13.06 0.06 2.58 (0.28) --
For the year ended
3/31/95................... 13.15 (0.01) (0.04) (0.04) --
For the period ended
3/31/94*.................. 12.50 -- 0.65 -- --
FULLY DISCRETIONARY FIXED
INCOME(8)
For the year ended
3/31/98................... 12.54 0.84 0.70 (0.84) (0.14)
For the year ended
3/31/97................... 12.72 0.79 (0.17) (0.80) --
For the period ended
3/31/96*.................. 12.50 0.45 0.47 (0.44) (0.26)
SHORT-INTERMEDIATE FIXED
INCOME(8)
For the year ended
3/31/98................... 12.66 0.83 0.10 (0.83) --
For the year ended
3/31/97................... 12.79 0.79 (0.13) (0.79) --
For the period ended
3/31/96*.................. 12.50 0.37 0.29 (0.37) --
STRATEGIC INCOME(9)
For the year ended
3/31/98................... 13.06 0.95 1.53 (0.95) (1.15)
For the period ended
3/31/97*.................. 12.50 0.61 0.76 (0.61) (0.20)
</TABLE>
- --------------------
(1) Commenced operations on July 12, 1995.
(2) Commenced operations on October 1, 1993.
(3) Commenced operations on April 19, 1993.
(4) Commenced operations on December 27, 1996.
(5) Commenced operations on April 30, 1996.
(6) Commenced operations on November 28, 1994.
(7) Commenced operations on December 31, 1993.
(8) Commenced operations on August 31, 1995.
(9) Commenced operations on July 31, 1996.
* Annualized
** Includes expenses allocated from the Master Trust Fund. See Notes to funds'
financial Statements for amounts.
+ The total returns of these portfolios were linked to the total returns, after
adjusting for the expenses and sales charge, of Portfolios A (the "Linking
Portfolios") of their respective series of the Nicholas-Applegate Mutual
Funds. Without linking to the Linking Portfolios, the total returns for the
fiscal year ended March 31, 1998 of Balanced Growth and Worldwide Growth
would have been 40.38% and 25.97%, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
72
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF RATIO OF
EXPENSES TO EXPENSES TO
AVERAGE NET AVERAGE NET
ASSETS, AFTER ASSETS, BEFORE
NET ASSET EXPENSE EXPENSE
VALUES AT TOTAL NET ASSETS AT REIMBURSEMENT REIMBURSEMENT
END OF PERIOD RETURN END OF PERIOD AND FEE WAIVER** AND FEE WAIVER**
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
MINI CAP GROWTH(1)
For the year ended
3/31/98................... $ 25.05 68.89% $ 82,121,930 1.57% 1.83%
For the year ended
3/31/97................... 15.94 3.90% 28,711,622 1.56% 1.99%
For the period ended
3/31/96*.................. 15.85 26.80% 25,237,077 1.55% 2.46%
EMERGING GROWTH(2)
For the year ended
3/31/98................... 14.17 47.38% 257,599,100 1.19% 1.44%
For the year ended
3/31/97................... 11.06 (5.66%) 167,230,059 1.17% 1.26%
For the year ended
3/31/96................... 15.10 38.27% 224,077,027 1.16% 1.20%
For the year ended
3/31/95................... 11.58 8.69% 206,695,605 1.18% 1.24%
For the period ended
3/31/94*.................. 11.38 (6.06%) 165,939,862 1.17% 1.18%
CORE GROWTH(3)
For the year ended
3/31/98................... 17.16 42.49% 169,411,722 0.97% 1.19%
For the year ended
3/31/97................... 15.39 1.74% 156,443,417 1.00% 1.02%
For the year ended
3/31/96................... 16.26 35.81% 149,969,371 0.98% 1.06%
For the year ended
3/31/95................... 12.62 3.30% 72,825,771 0.99% 1.07%
For the period ended
3/31/94*.................. 12.68 6.84% 77,947,252 0.97% 1.14%
LARGE CAP GROWTH(4)
For the year ended
3/31/98................... 16.50 63.32% 2,555,538 1.01% 3.67%
For the period ended
3/31/97*.................. 13.00 4.00% 1,292,965 1.00% 4.99%
VALUE(5)
For the year ended
3/31/98................... 21.90 57.78% 10,259,674 1.01% 2.46%
For the period ended
3/31/97*.................. 15.06 26.77% 3,062,377 1.00% 3.34%
INCOME & GROWTH(3)
For the year ended
3/31/98................... 18.64 31.78% 80,083,585 0.97% 1.20%
For the year ended
3/31/97................... 14.97 14.37% 18,343,841 1.00% 1.37%
For the year ended
3/31/96................... 14.45 26.69% 17,239,363 1.00% 1.53%
For the year ended
3/31/95................... 11.86 (2.02%) 12,506,203 1.00% 1.48%
For the period ended
3/31/94*.................. 13.39 20.18% 18,331,546 0.99% 1.50%
BALANCED GROWTH(2)
For the year ended
3/31/98+.................. 17.66 40.38% 991,969 1.01% 3.44%
For the year ended
3/31/97................... 13.94 7.46% 709,692 1.00% 7.37%
For the year ended
3/31/96................... 14.20 21.45% 625,350 1.00% 9.90%
For the year ended
3/31/95................... 12.01 4.56% 283,586 1.00% 20.66%
For the period ended
3/31/94*.................. 11.71 (5.66%) 142,745 0.99% 43.16%
EMERGING COUNTRIES(6)
For the year ended
3/31/98................... 17.15 8.77% 88,062,897 1.66% 2.02%
For the year ended
3/31/97................... 17.45 25.48% 56,917,892 1.65% 1.87%
For the year ended
3/31/96................... 14.02 29.06% 6,877,500 1.65% 3.59%
For the period ended
3/31/95*.................. 10.91 (12.64%) 2,020,615 1.65% 2.14%
INTERNATIONAL SMALL CAP
GROWTH(7)
For the year ended
3/31/98................... 18.45 37.02% 42,850,765 1.41% 1.94%
For the year ended
3/31/97................... 17.02 15.25% 48,504,553 1.40% 1.68%
For the year ended
3/31/96................... 15.05 15.99% 20,245,194 1.40% 2.44%
For the year ended
3/31/95................... 13.09 (1.54%) 16,923,561 1.40% 1.92%
For the period ended
3/31/94*.................. 13.47 7.60% 3,668,113 1.40% 2.35%
INTERNATIONAL CORE GROWTH(4)
For the year ended
3/31/98................... 18.55 36.91% 32,305,002 1.41% 1.92%
For the period ended
3/31/97*.................. 14.13 13.04% 4,593,482 1.40% 3.14%
WORLDWIDE GROWTH(2)
For the year ended
3/31/98+.................. 17.90 35.08% 11,686,355 1.36% 1.87%
For the year ended
3/31/97................... 14.21 13.18% 2,655,712 1.35% 3.05%
For the year ended
3/31/96................... 15.42 20.37% 3,613,140 1.35% 2.60%
For the year ended
3/31/95................... 13.06 (0.34%) 4,086,668 1.35% 2.50%
For the period ended
3/31/94*.................. 13.15 5.20% 2,981,559 1.34% 3.58%
FULLY DISCRETIONARY FIXED
INCOME(8)
For the year ended
3/31/98................... 13.10 12.60% 15,758,988 0.46% 1.64%
For the year ended
3/31/97................... 12.54 4.98% 15,865,442 0.45% 3.74%
For the period ended
3/31/96*.................. 12.72 5.49% 4,413,386 0.45% 6.45%
SHORT-INTERMEDIATE FIXED
INCOME(8)
For the year ended
3/31/98................... 12.76 7.50% 13,534,562 0.36% 1.51%
For the year ended
3/31/97................... 12.66 5.30% 5,363,962 0.35% 2.86%
For the period ended
3/31/96*.................. 12.79 5.33% 4,725,591 0.35% 3.17%
STRATEGIC INCOME(9)
For the year ended
3/31/98................... 13.44 20.06% 4,241,035 0.76% 3.62%
For the period ended
3/31/97*.................. 13.06 11.07% 4,205,509 0.77% 2.33%
<CAPTION>
RATIO OF NET RATIO OF NET
INCOME (DEFICIT) TO INCOME (DEFICIT) TO
AVERAGE NET AVERAGE NET
ASSETS, AFTER ASSETS, BEFORE
EXPENSE EXPENSE
REIMBURSEMENT REIMBURSEMENT
AND FEE WAIVER** AND FEE WAIVER**
<S> <C> <C>
- ------------------------------
MINI CAP GROWTH(1)
For the year ended
3/31/98................... (2.51%) (2.77%)
For the year ended
3/31/97................... (1.08%) (1.30%)
For the period ended
3/31/96*.................. (0.98%) (1.36%)
EMERGING GROWTH(2)
For the year ended
3/31/98................... (1.16%) (1.41%)
For the year ended
3/31/97................... (0.72%) (0.81%)
For the year ended
3/31/96................... (0.62%) (0.66%)
For the year ended
3/31/95................... (0.58%) (0.64%)
For the period ended
3/31/94*.................. (0.83%) (0.84%)
CORE GROWTH(3)
For the year ended
3/31/98................... (0.72%) (0.94%)
For the year ended
3/31/97................... (0.45%) (0.47%)
For the year ended
3/31/96................... (0.32%) (0.40%)
For the year ended
3/31/95................... (0.06%) (0.14%)
For the period ended
3/31/94*.................. (0.07%) (0.24%)
LARGE CAP GROWTH(4)
For the year ended
3/31/98................... (0.17%) (2.82%)
For the period ended
3/31/97*.................. (0.06%) (1.68%)
VALUE(5)
For the year ended
3/31/98................... 2.33% 0.87%
For the period ended
3/31/97*.................. 1.64% 0.59%
INCOME & GROWTH(3)
For the year ended
3/31/98................... 6.25% 6.01%
For the year ended
3/31/97................... 3.43% 3.03%
For the year ended
3/31/96................... 3.88% 3.34%
For the year ended
3/31/95................... 4.28% 3.80%
For the period ended
3/31/94*.................. 3.36% 2.85%
BALANCED GROWTH(2)
For the year ended
3/31/98+.................. 4.21% 1.77%
For the year ended
3/31/97................... 2.49% (3.63%)
For the year ended
3/31/96................... 2.74% (5.74%)
For the year ended
3/31/95................... 2.06% (17.60%)
For the period ended
3/31/94*.................. 1.59% (40.58%)
EMERGING COUNTRIES(6)
For the year ended
3/31/98................... 1.15% 0.79%
For the year ended
3/31/97................... (0.52%) (0.76%)
For the year ended
3/31/96................... 0.29% (1.41%)
For the period ended
3/31/95*.................. 1.73% 1.24%
INTERNATIONAL SMALL CAP
GROWTH(7)
For the year ended
3/31/98................... (0.91%) (1.44%)
For the year ended
3/31/97................... (0.38%) (0.63%)
For the year ended
3/31/96................... 0.34% (0.07%)
For the year ended
3/31/95................... 0.19% (0.33%)
For the period ended
3/31/94*.................. 0.36% (0.59%)
INTERNATIONAL CORE GROWTH(4)
For the year ended
3/31/98................... (0.12%) (0.63%)
For the period ended
3/31/97*.................. 0.43% (0.41%)
WORLDWIDE GROWTH(2)
For the year ended
3/31/98+.................. (0.31%) (0.83%)
For the year ended
3/31/97................... (0.43%) (2.06%)
For the year ended
3/31/96................... 0.20% (0.99%)
For the year ended
3/31/95................... 0.05% (1.10%)
For the period ended
3/31/94*.................. 0.05% (2.19%)
FULLY DISCRETIONARY FIXED
INCOME(8)
For the year ended
3/31/98................... 12.80% 11.62%
For the year ended
3/31/97................... 6.12% 4.71%
For the period ended
3/31/96*.................. 6.39% 2.63%
SHORT-INTERMEDIATE FIXED
INCOME(8)
For the year ended
3/31/98................... 13.03% 11.88%
For the year ended
3/31/97................... 6.18% 4.95%
For the period ended
3/31/96*.................. 5.81% (4.01%)
STRATEGIC INCOME(9)
For the year ended
3/31/98................... 14.04% 11.18%
For the period ended
3/31/97*.................. 6.97% 6.36%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
73
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
INSTITUTIONAL SERIES PORTFOLIOS
<TABLE>
<CAPTION>
MINI CAP EMERGING LARGE CAP INCOME &
GROWTH GROWTH CORE GROWTH GROWTH VALUE GROWTH
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
ASSETS
Investments in Master Trust Fund, at
value*.............................. $82,164,598 $257,751,807 $169,529,821 $2,547,447 $10,250,391 $80,129,067
Receivable for shares of beneficial
interests sold...................... 12,946 6,206,735 50 730 -- 100
Receivable for investments sold in
Master Trust Fund................... 267,424 6,342,064 406,935 6,823 -- 28,645
Due from advisor...................... 45,502 23,706 -- 13,310 15,058 --
Other assets.......................... -- -- -- -- -- --
-----------------------------------------------------------------------------
Total assets........................ 82,490,470 270,324,312 169,936,806 2,568,310 10,265,449 80,157,812
-----------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased in
Master Trust Fund................... 12,946 6,206,735 50 730 -- 100
Payable for shares of beneficial
interest repurchased................ 267,424 6,342,064 406,935 6,823 -- 28,645
Due to advisor........................ -- -- 27,222 -- -- 18,262
Accrued Expenses...................... 88,170 176,413 90,877 5,219 5,775 27,220
-----------------------------------------------------------------------------
Total liabilities................... 368,540 12,725,212 525,084 12,772 5,775 74,227
-----------------------------------------------------------------------------
NET ASSETS.............................. $82,121,930 $257,599,100 $169,411,722 $2,555,538 $10,259,674 $80,083,585
-----------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital....................... 53,762,454 196,485,680 135,484,546 2,037,327 7,733,094 69,493,556
Accumulated undistributed net
investment income (deficit)......... (1,280,770) (5,653,738) (1,840,367) (2,468) 27,089 (5,038)
Accumulated undistributed net realized
gain (loss)......................... 2,365,460 (21,896,426) (1,611,676) 97,115 143,236 (1,127,997)
Accumulated undistributed foreign
exchange gain (loss)................ -- -- -- -- -- --
Net unrealized foreign exchange gain
(loss).............................. -- -- -- -- -- --
Net unrealized appreciation on
investments......................... 27,274,786 88,663,584 37,379,219 423,564 2,356,255 11,723,064
-----------------------------------------------------------------------------
Net assets.......................... $82,121,930 $257,599,100 $169,411,722 $2,555,538 $10,259,674 $80,083,585
-----------------------------------------------------------------------------
Shares of beneficial interest, no par
value, issued and outstanding
(unlimited shares authorized)....... 3,278,934 18,180,077 9,871,462 154,904 468,460 4,295,417
-----------------------------------------------------------------------------
COMPUTATION OF
Net asset value per share of
beneficial interest (Net
assets/Outstanding shares of
beneficial interest)................ $ 25.05 $ 14.17 $ 17.16 $ 16.50 21.90 $ 18.64
-----------------------------------------------------------------------------
*Cost of investments in the Master Trust
Fund................................. $47,503,134 $ 99,751,319 $ 77,478,587 $1,595,686 $ 6,904,186 $60,264,596
-----------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
74
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL FULLY
BALANCED EMERGING SMALL CAP INTERNATIONAL WORLDWIDE DISCRETIONARY
GROWTH COUNTRIES GROWTH CORE GROWTH GROWTH FIXED INCOME
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
ASSETS
Investments in Master Trust Fund, at
value*.............................. $ 997,545 $88,076,465 $42,853,636 $ 32,312,372 $11,691,758 $ 15,769,663
Receivable for shares of beneficial
interests sold...................... -- 18 4,092 -- 2,778,105 1,440
Receivable for investments sold in
Master Trust Fund................... -- 846 -- -- -- --
Due from advisor...................... 4,186 33,255 40,306 9,966 6,871 1,949
Other assets.......................... -- -- -- -- -- --
--------------------------------------------------------------------------------
Total assets........................ 1,001,731 88,110,584 42,898,034 32,322,338 14,476,734 15,773,052
--------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased in
Master Trust Fund................... -- 18 4,092 -- 2,778,105 1,440
Payable for shares of beneficial
interest repurchased................ -- 846 -- -- -- --
Due to advisor........................ -- -- -- -- -- --
Accrued Expenses...................... 9,762 46,823 43,177 17,336 12,274 12,624
--------------------------------------------------------------------------------
Total liabilities................... 9,762 47,687 47,269 17,336 2,790,379 14,064
--------------------------------------------------------------------------------
NET ASSETS.............................. $ 991,969 $88,062,897 $42,850,765 $ 32,305,002 $11,686,355 $ 15,758,988
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital....................... 755,649 82,542,447 29,953,497 28,042,378 9,462,674 15,352,634
Accumulated undistributed net
investment income (deficit)......... (39) 256,482 (695,103 ) (18,891 ) (96,107) 14
Accumulated undistributed net realized
gain (loss)......................... 91,527 (5,718,403) 1,806,612 (1,048,020 ) 559,443 127,089
Accumulated undistributed foreign
exchange gain (loss)................ 2,772 (340,473) (658,920 ) (103,371 ) (30,288) 151,328
Net unrealized foreign exchange gain
(loss).............................. (543) (248) 10,484 10,059 611 (22,935)
Net unrealized appreciation on
investments......................... 142,603 11,323,092 12,434,195 5,422,847 1,790,022 150,858
--------------------------------------------------------------------------------
Net assets.......................... $ 991,969 $88,062,897 $42,850,765 $ 32,305,002 $11,686,355 $ 15,758,988
--------------------------------------------------------------------------------
Shares of beneficial interest, no par
value, issued and outstanding
(unlimited shares authorized)....... 56,158 5,135,768 2,322,516 1,741,249 652,798 1,202,616
--------------------------------------------------------------------------------
COMPUTATION OF
Net asset value per share of
beneficial interest (Net
assets/Outstanding shares of
beneficial interest)................ $ 17.66 $ 17.15 $ 18.45 $ 18.55 $ 17.90 $ 13.10
--------------------------------------------------------------------------------
*Cost of investments in the Master Trust
Fund................................. $ 596,409 $75,722,548 $21,138,290 $ 26,954,919 $8,392,856 $ 13,974,244
--------------------------------------------------------------------------------
<CAPTION>
SHORT-
INTERMEDIATE STRATEGIC
FIXED INCOME INCOME
<S> <C> <C>
ASSETS
Investments in Master Trust Fund, at
value*.............................. $ 13,532,610 $4,226,190
Receivable for shares of beneficial
interests sold...................... 14 25,015
Receivable for investments sold in
Master Trust Fund................... 1,306 --
Due from advisor...................... 5,012 21,003
Other assets.......................... -- --
Total assets........................ 13,538,942 4,272,208
LIABILITIES
Payable for investments purchased in
Master Trust Fund................... 14 25,015
Payable for shares of beneficial
interest repurchased................ 1,306 --
Due to advisor........................ -- --
Accrued Expenses...................... 3,060 6,158
Total liabilities................... 4,380 31,173
NET ASSETS.............................. $ 13,534,562 $4,241,035
COMPOSITION OF NET ASSETS
Paid-in capital....................... 13,522,486 3,963,919
Accumulated undistributed net
investment income (deficit)......... (471 ) (227)
Accumulated undistributed net realized
gain (loss)......................... (94,503 ) 99,490
Accumulated undistributed foreign
exchange gain (loss)................ -- --
Net unrealized foreign exchange gain
(loss).............................. -- --
Net unrealized appreciation on
investments......................... 107,050 177,853
Net assets.......................... $ 13,534,562 $4,241,035
Shares of beneficial interest, no par
value, issued and outstanding
(unlimited shares authorized)....... 1,060,314 315,618
COMPUTATION OF
Net asset value per share of
beneficial interest (Net
assets/Outstanding shares of
beneficial interest)................ $ 12.76 $ 13.44
*Cost of investments in the Master Trust
Fund................................. $ 12,272,549 $3,069,358
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
75
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1998
- ------------------------------------------------------------------------
INSTITUTIONAL SERIES PORTFOLIOS
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE LARGE CAP INCOME &
GROWTH GROWTH GROWTH GROWTH VALUE GROWTH
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
INVESTMENT INCOME
Net investment income (deficit) from
Master Trust Fund................... $ (841,804) $ (1,288,646) $ (483,356) $ (793 ) $ 82,696 $ 1,708,905
-------------------------------------------------------------------------------
EXPENSES
Accounting fees....................... 43,656 148,805 98,664 1,191 4,418 34,472
Administration fees................... 5,000 5,000 11,577 4,850 5,000 9,702
Audit & tax fees...................... 17,303 113,833 77,699 499 2,666 9,925
Co-Administration fees................ 68,683 231,964 152,793 1,852 6,943 54,144
Insurance............................. 3,916 14,311 9,292 100 396 3,429
Legal fees............................ 8,916 21,988 6,463 268 814 5,493
Miscellaneous......................... 5,391 17,266 10,961 105 140 2,528
Organization costs.................... 1,758 3,480 14,178 -- 2,640 7,914
Registration fees -- federal.......... 1,046 869 3,999 347 730 161
Registration fees -- state............ 17,331 11,491 11,085 7,316 4,659 9,214
Shareholder reporting fees............ 31,106 106,105 35,304 878 1,140 9,518
Transfer agent fees................... 13,459 19,469 10,755 8,484 13,730 13,185
Trustees' fees........................ 1,270 1,270 1,270 1,270 1,270 1,270
-------------------------------------------------------------------------------
Total expenses...................... 218,835 695,851 444,040 27,160 44,546 160,955
Less: Reimbursement to (from)
advisor............................. (115,811) (347,903) (176,970) (24,382 ) (34,132) (78,651)
Less: Co-Administration fees waived... (68,683) (231,964) (152,793) (1,852 ) (6,943) (54,144)
Add: Line of credit commitment fee.... 4,717 16,166 10,770 129 473 3,658
-------------------------------------------------------------------------------
Net expenses........................ 39,058 132,150 125,047 1,055 3,944 31,818
-------------------------------------------------------------------------------
Net investment income (deficit)... (880,862) (1,420,796) (608,403) (1,848 ) 78,752 1,677,087
-------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 5,702,809 19,936,816 22,622,123 457,639 589,196 731,644
Net realized foreign exchange gain
(loss).............................. -- -- -- -- -- --
Change in net unrealized foreign
exchange gain (loss)................ -- -- -- -- -- --
Change in net unrealized appreciation
of investments...................... 25,834,769 66,819,210 31,369,805 458,679 2,119,154 10,225,027
-------------------------------------------------------------------------------
Net gain on investments............. 31,537,578 86,756,026 53,991,928 916,318 2,708,350 10,956,671
-------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............ $ 30,656,716 $ 85,335,230 $ 53,383,525 $ 914,470 $2,787,102 $12,633,758
-------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
76
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL FULLY
BALANCED EMERGING SMALL CAP CORE WORLDWIDE DISCRETIONARY
GROWTH COUNTRIES GROWTH GROWTH GROWTH FIXED INCOME
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
INVESTMENT INCOME
Net investment income (deficit) from
Master Trust Fund................... $18,188 $ 437,634 $ (176,124 ) $ (9,169 ) $(10,269) $ 902,822
-----------------------------------------------------------------------------
EXPENSES
Accounting fees....................... 546 45,741 27,849 13,595 4,830 9,091
Administration fees................... 1,017 12,540 22,911 25,755 2,100 5,000
Audit & tax fees...................... 365 35,446 29,831 4,607 2,219 20
Co-Administration fees................ 848 71,242 42,917 21,566 7,598 14,040
Insurance............................. 55 4,167 2,477 1,341 466 846
Legal fees............................ 119 8,748 2,976 3,064 1,115 919
Miscellaneous......................... 418 4,465 3,884 1,527 452 294
Organization costs.................... -- 5,566 4,698 -- -- 1,466
Registration fees -- federal.......... 30 12,099 6,714 1,219 -- 3,336
Registration fees -- state............ 5,677 10,061 7,455 7,327 5,865 1,376
Shareholder reporting fees............ 393 24,252 33,783 10,027 3,637 22,547
Transfer agent fees................... 8,907 28,313 11,728 7,742 14,456 12,076
Trustees' fees........................ 1,270 1,271 1,270 1,270 1,270 1,270
-----------------------------------------------------------------------------
Total expenses...................... 19,645 263,911 198,493 99,040 44,008 72,281
Less: Reimbursement to (from)
advisor............................. (18,372 ) (157,048) (134,118 ) (66,691 ) (25,013) (51,218)
Less: Co-Administration fees waived... (848 ) (71,242) (42,917 ) (21,566 ) (7,598) (14,040)
Add: Line of credit commitment fee.... 59 4,973 3,068 1,448 516 989
-----------------------------------------------------------------------------
Net expenses........................ 484 40,594 24,526 12,231 11,913 8,012
-----------------------------------------------------------------------------
Net investment income (deficit)... 17,704 397,040 (200,650 ) (21,400 ) (22,182) 894,810
-----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 147,843 (3,680,106) 7,163,821 (105,248 ) 782,735 445,811
Net realized foreign exchange gain
(loss).............................. 2,772 (285,046) (308,056 ) (89,660 ) (20,076) 75,080
Change in net unrealized foreign
exchange gain (loss)................ (543 ) 5,688 15,626 11,360 1,237 (23,873)
Change in net unrealized appreciation
of investments...................... 111,449 8,948,453 7,158,809 5,365,147 1,416,386 269,650
-----------------------------------------------------------------------------
Net gain on investments............. 261,521 4,988,989 14,030,200 5,181,599 2,180,282 766,668
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............ $279,225 $5,386,029 $ 13,829,550 $ 5,160,199 $2,158,100 $ 1,661,478
-----------------------------------------------------------------------------
<CAPTION>
SHORT-
INTERMEDIATE STRATEGIC
FIXED INCOME INCOME
<S> <C> <C>
INVESTMENT INCOME
Net investment income (deficit) from
Master Trust Fund................... $ 815,049 $ 291,720
EXPENSES
Accounting fees....................... 8,042 2,676
Administration fees................... 5,000 5,000
Audit & tax fees...................... 1,661 1,751
Co-Administration fees................ 12,454 4,142
Insurance............................. 919 240
Legal fees............................ 1,039 1,171
Miscellaneous......................... 3,759 210
Organization costs.................... 1,465 --
Registration fees -- federal.......... 343 1,119
Registration fees -- state............ 1,178 8,477
Shareholder reporting fees............ 8,875 577
Transfer agent fees................... 10,435 16,285
Trustees' fees........................ 1,270 1,270
Total expenses...................... 56,440 42,918
Less: Reimbursement to (from)
advisor............................. (37,759 ) (36,705)
Less: Co-Administration fees waived... (12,454 ) (4,142)
Add: Line of credit commitment fee.... 875 292
Net expenses........................ 7,102 2,363
Net investment income (deficit)... 807,947 289,357
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ (49,687 ) 283,198
Net realized foreign exchange gain
(loss).............................. -- --
Change in net unrealized foreign
exchange gain (loss)................ -- --
Change in net unrealized appreciation
of investments...................... 143,949 172,178
Net gain on investments............. 94,262 455,376
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............ $ 902,209 $ 744,733
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
77
<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 FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
-----------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ (880,862) $ (322,817) $ (1,420,796) $ (1,318,817)
Net realized gain (loss) from
security transactions............. 5,702,809 2,962,417 19,936,816 40,968,639
Net realized foreign exchange gain
(loss)............................ -- -- -- --
Change in net unrealized foreign
exchange gain (loss).............. -- -- -- --
Change in net unrealized
appreciation (depreciation) of
investments....................... 25,834,769 (1,715,457) 66,819,210 (41,243,766)
-----------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations.................... 30,656,716 924,143 85,335,230 (1,593,944)
-----------------------------------------------------------
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. -- -- -- --
Capital gain*....................... (5,282,913) (960,218) (32,260,858) (37,468,037)
-----------------------------------------------------------
Total distributions............. (5,282,913) (960,218) (32,260,858) (37,468,037)
-----------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 69,138,576 13,080,834 189,400,743 70,456,223
Proceeds from shares issued for
distribution reinvestment......... 4,472,132 754,309 30,980,160 33,951,298
Cost of shares repurchased.......... (45,574,203) (10,324,523) (183,086,234) (122,192,508)
-----------------------------------------------------------
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... 28,036,505 3,510,620 37,294,669 (17,784,987)
-----------------------------------------------------------
Total increase (decrease) in net
assets........................ 53,410,308 3,474,545 90,369,041 (56,846,968)
NET ASSETS
BEGINNING OF PERIOD................... 28,711,622 25,237,077 167,230,059 224,077,027
-----------------------------------------------------------
END OF PERIOD......................... $ 82,121,930 $ 28,711,622 $ 257,599,100 $ 167,230,059
-----------------------------------------------------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 1,801,049 1,592,133 15,120,583 14,834,897
Shares sold........................... 3,242,406 724,572 14,212,349 5,471,066
Shares issued for distributions
reinvested.......................... 202,450 43,501 2,375,782 2,681,778
Shares repurchased.................... (1,966,971) (559,157) (13,528,637) (7,867,158)
-----------------------------------------------------------
Ending balance.................... 3,278,934 1,801,049 18,180,077 15,120,583
-----------------------------------------------------------
</TABLE>
- -------------
* See Financial Highlights for per share distribution amounts.
+ Commenced operations on December 27, 1996.
++ Commenced operations on April 30, 1996.
+++ Commenced operations on July 31, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
78
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP GROWTH VALUE
CORE GROWTH --------------------------- --------------------------
---------------------------- FOR THE FOR THE
FOR THE FOR THE FOR THE PERIOD FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997+ 1998 1997++
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ (608,403) $ (807,350) $ (1,848) $ (192 ) $ 78,752 $ 38,054
Net realized gain (loss) from
security transactions............. 22,622,123 24,083,173 457,639 71,363 589,196 278,762
Net realized foreign exchange gain
(loss)............................ -- -- -- -- -- --
Change in net unrealized foreign
exchange gain (loss).............. -- -- -- -- -- --
Change in net unrealized
appreciation (depreciation) of
investments....................... 31,369,805 (21,156,642) 458,679 (35,115 ) 2,119,154 237,101
-------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations.................... 53,383,525 2,119,181 914,470 36,056 2,787,102 553,917
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. -- -- (428) -- (63,521) (26,196)
Capital gain*....................... (32,727,125) (13,534,098) (431,887) -- (619,777) (104,945)
-------------------------------------------------------------------------------------
Total distributions............. (32,727,125) (13,534,098) (432,315) -- (683,298) (131,141)
-------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 53,115,867 57,722,183 2,299,980 1,321,861 5,455,630 2,647,153
Proceeds from shares issued for
distribution reinvestment......... 32,405,271 13,248,640 108,962 -- 683,297 131,141
Cost of shares repurchased.......... (93,209,233) (53,081,860) (1,628,524) (65,952 ) (1,045,434) (139,693)
-------------------------------------------------------------------------------------
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... (7,688,095) 17,888,963 780,418 1,255,909 5,093,493 2,638,601
-------------------------------------------------------------------------------------
Total increase (decrease) in net
assets........................ 12,968,305 6,474,046 1,262,573 1,291,965 7,197,297 3,061,377
NET ASSETS
BEGINNING OF PERIOD................... 156,443,417 149,969,371 1,292,965 1,000 3,062,377 1,000
-------------------------------------------------------------------------------------
END OF PERIOD......................... $ 169,411,722 $156,443,417 $ 2,555,538 $1,292,965 $10,259,674 $3,062,377
-------------------------------------------------------------------------------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 10,163,057 9,221,300 99,421 80 203,339 80
Shares sold........................... 3,262,811 3,328,373 151,871 104,530 284,117 204,389
Shares issued for distributions
reinvested.......................... 2,167,577 774,774 7,739 -- 36,737 (10,167)
Shares repurchased.................... (5,721,983) (3,161,390) (104,127) (5,189 ) (55,733) 9,037
-------------------------------------------------------------------------------------
Ending balance.................... 9,871,462 10,163,057 154,904 99,421 468,460 203,339
-------------------------------------------------------------------------------------
<CAPTION>
INCOME & GROWTH
--------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ 1,677,087 $ 600,726
Net realized gain (loss) from
security transactions............. 731,644 2,239,627
Net realized foreign exchange gain
(loss)............................ -- --
Change in net unrealized foreign
exchange gain (loss).............. -- --
Change in net unrealized
appreciation (depreciation) of
investments....................... 10,225,027 (495,107)
Net increase (decrease) in net
assets resulting from
operations.................... 12,633,758 2,345,246
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. (1,679,051) (606,762)
Capital gain*....................... (2,257,675) (1,113,316)
Total distributions............. (3,936,726) (1,720,078)
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 60,694,323 2,424,480
Proceeds from shares issued for
distribution reinvestment......... 3,556,387 1,702,546
Cost of shares repurchased.......... (11,207,998) (3,647,716)
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... 53,042,712 479,310
Total increase (decrease) in net
assets........................ 61,739,744 1,104,478
NET ASSETS
BEGINNING OF PERIOD................... 18,343,841 17,239,363
END OF PERIOD......................... $ 80,083,585 $18,343,841
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 1,225,160 1,193,034
Shares sold........................... 3,503,331 162,499
Shares issued for distributions
reinvested.......................... 204,577 114,716
Shares repurchased.................... (637,651) (245,089)
Ending balance.................... 4,295,417 1,225,160
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
79
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- CONTINUED
- --------------------------------------------------------------------------------
INSTITUTIONAL SERIES PORTFOLIOS
<TABLE>
<CAPTION>
BALANCED GROWTH
--------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31,
1998 1997
<S> <C> <C>
--------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ 17,704 $ 15,860
Net realized gain (loss) from
security transactions.............. 147,843 37,219
Net realized foreign exchange gain
(loss)............................. 2,772 --
Change in net unrealized foreign
exchange gain (loss)............... (543) --
Change in net unrealized
appreciation (depreciation) of
investments........................ 111,449 (15,084 )
--------------------------
Net increase (decrease) in net
assets resulting from
operations...................... 279,225 37,995
--------------------------
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. (19,054) (14,573 )
Capital gain*....................... (70,159) (42,381 )
--------------------------
Total distributions............. (89,213) (56,954 )
--------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 113,245 333,652
Proceeds from shares issued for
distribution reinvestment.......... 88,586 56,905
Cost of shares repurchased.......... (109,566) (287,256 )
--------------------------
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... 92,265 103,301
--------------------------
Total increase (decrease) in net
assets.......................... 282,277 84,342
NET ASSETS
BEGINNING OF PERIOD................... 709,692 625,350
--------------------------
END OF PERIOD......................... $ 991,969 $ 709,692
--------------------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 50,910 44,039
Shares sold........................... 6,924 22,505
Shares issued for distributions
reinvested.......................... 5,350 3,853
Shares repurchased.................... (7,026) (19,487 )
--------------------------
Ending balance.................... 56,158 50,910
--------------------------
</TABLE>
- -------------
* See Financial Highlights for per share distribution amounts.
+ Commenced operations on December 27, 1996.
++ Commenced operations on April 30, 1996.
+++ Commenced operations on July 31, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
80
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP INTERNATIONAL CORE GROWTH
EMERGING COUNTRIES GROWTH --------------------------
---------------------------- --------------------------- FOR THE
FOR THE FOR THE FOR THE FOR THE FOR THE PERIOD
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997 1998 1997+
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ 397,040 $ (150,126) $ (200,650) $ (148,043) $ (21,400) $ 2,509
Net realized gain (loss) from
security transactions.............. (3,680,106) 4,904,364 7,163,821 2,759,222 (105,248) 139,496
Net realized foreign exchange gain
(loss)............................. (285,046) (45,337) (308,056) (140,129) (89,660) (13,711 )
Change in net unrealized foreign
exchange gain (loss)............... 5,688 (5,843) 15,626 (3,275) 11,360 (1,301 )
Change in net unrealized
appreciation (depreciation) of
investments........................ 8,948,453 1,820,754 7,158,809 3,025,858 5,365,147 57,700
-------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations...................... 5,386,029 6,523,812 13,829,550 5,493,633 5,160,199 184,693
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. -- -- -- (223,045) -- --
Capital gain*....................... (6,562,875) (194,973) (7,618,866) (568,944) (1,082,268) --
-------------------------------------------------------------------------------------
Total distributions............. (6,562,875) (194,973) (7,618,866) (791,989) (1,082,268) --
-------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 36,845,701 55,734,073 10,259,992 25,838,052 31,163,454 4,415,151
Proceeds from shares issued for
distribution reinvestment.......... 5,812,038 169,281 6,778,949 773,378 1,028,071 --
Cost of shares repurchased.......... (10,335,888) (12,191,801) (28,903,413) (3,053,715) (8,557,936) (7,362 )
-------------------------------------------------------------------------------------
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... 32,321,851 43,711,553 (11,864,472) 23,557,715 23,633,589 4,407,789
-------------------------------------------------------------------------------------
Total increase (decrease) in net
assets.......................... 31,145,005 50,040,392 (5,653,788) 28,259,359 27,711,520 4,592,482
NET ASSETS
BEGINNING OF PERIOD................... 56,917,892 6,877,500 48,504,553 20,245,194 4,593,482 1,000
-------------------------------------------------------------------------------------
END OF PERIOD......................... $ 88,062,897 $ 56,917,892 $ 42,850,765 $48,504,553 $ 32,305,002 $4,593,482
-------------------------------------------------------------------------------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 3,262,451 490,586 2,849,347 1,345,544 325,024 80
Shares sold........................... 2,098,718 3,450,932 562,317 1,639,856 1,878,191 325,489
Shares issued for distributions
reinvested.......................... 382,371 10,803 455,575 47,675 65,944 --
Shares repurchased.................... (607,772) (689,870) (1,544,723) (183,728) (527,910) (545 )
-------------------------------------------------------------------------------------
Ending balance.................... 5,135,768 3,262,451 2,322,516 2,849,347 1,741,249 325,024
-------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
81
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- CONTINUED
- --------------------------------------------------------------------------------
INSTITUTIONAL SERIES PORTFOLIOS
<TABLE>
<CAPTION>
WORLDWIDE GROWTH
---------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31,
1998 1997
<S> <C> <C>
---------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ (22,182) $ (10,931)
Net realized gain (loss) from
security transactions.............. 782,735 563,530
Net realized foreign exchange gain
(loss)............................. (20,076) (8,783)
Change in net unrealized foreign
exchange gain (loss)............... 1,237 (522)
Change in net unrealized
appreciation (depreciation) of
investments........................ 1,416,386 (201,276)
---------------------------
Net increase (decrease) in net
assets resulting from
operations...................... 2,158,100 342,018
---------------------------
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. -- --
Capital gain*....................... (542,247) (429,300)
---------------------------
Total distributions............. (542,247) (429,300)
---------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 49,390,340 5,125,124
Proceeds from shares issued for
distribution reinvestment.......... 536,101 421,075
Cost of shares repurchased.......... (42,511,651) (6,416,345)
---------------------------
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... 7,414,790 (870,146)
---------------------------
Total increase (decrease) in net
assets.......................... 9,030,643 (957,428)
NET ASSETS
BEGINNING OF PERIOD................... 2,655,712 3,613,140
---------------------------
END OF PERIOD......................... $ 11,686,355 $ 2,655,712
---------------------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 186,939 234,347
Shares sold........................... 3,023,399 353,391
Shares issued for distributions
reinvested.......................... 34,789 30,293
Shares repurchased.................... (2,592,329) (431,092)
---------------------------
Ending balance.................... 652,798 186,939
---------------------------
</TABLE>
- -------------
* See Financial Highlights for per share distribution amounts.
+ Commenced operations on December 27, 1996.
++ Commenced operations on April 30, 1996.
+++ Commenced operations on July 31, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
82
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY DISCRETIONARY SHORT INTERMEDIATE STRATEGIC INCOME
FIXED INCOME FIXED INCOME --------------------------
--------------------------- --------------------------- FOR THE
FOR THE FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997 1998 1997+++
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ 894,810 $ 272,061 $ 807,947 $ 316,594 $ 289,357 $ 182,428
Net realized gain (loss) from
security transactions.............. 445,811 (139,003) (49,687) (50,351) 283,198 220,210
Net realized foreign exchange gain
(loss)............................. 75,080 75,392 -- -- -- --
Change in net unrealized foreign
exchange gain (loss)............... (23,873) -- -- -- -- --
Change in net unrealized
appreciation (depreciation) of
investments........................ 269,650 10,904 143,949 (6,461) 172,178 5,675
------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations...................... 1,661,478 219,354 902,209 259,782 744,733 408,313
------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. (892,591) (276,382) (808,721) (316,105) (289,745) (182,267 )
Capital gain*....................... (156,503) -- -- -- (346,334) (57,584 )
------------------------------------------------------------------------------------
Total distributions............. (1,049,094) (276,382) (808,721) (316,105) (636,079) (239,851 )
------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 4,978,031 11,803,710 9,403,730 1,516,862 335,660 4,223,875
Proceeds from shares issued for
distribution reinvestment.......... 1,048,960 276,378 808,691 316,102 100,418 16,398
Cost of shares repurchased.......... (6,745,829) (571,004) (2,135,309) (1,138,270) (509,206) (204,226 )
------------------------------------------------------------------------------------
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... (718,838) 11,509,084 8,077,112 694,694 (73,128) 4,036,047
------------------------------------------------------------------------------------
Total increase (decrease) in net
assets.......................... (106,454) 11,452,056 8,170,600 638,371 35,526 4,204,509
NET ASSETS
BEGINNING OF PERIOD................... 15,865,442 4,413,386 5,363,962 4,725,591 4,205,509 1,000
------------------------------------------------------------------------------------
END OF PERIOD......................... $ 15,758,988 $15,865,442 $ 13,534,562 $ 5,363,962 $ 4,241,035 $4,205,509
------------------------------------------------------------------------------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 1,265,138 346,945 423,739 369,411 321,942 80
Shares sold........................... 385,596 940,990 739,286 118,278 24,845 336,500
Shares issued for distributions
reinvested.......................... 80,778 21,906 63,425 24,862 7,637 1,254
Shares repurchased.................... (528,896) (44,703) (166,136) (88,812) (38,806) (15,892 )
------------------------------------------------------------------------------------
Ending balance.................... 1,202,616 1,265,138 1,060,314 423,739 315,618 321,942
------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
83
<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 commenced operations on April 19,
1993. The Trust offers 56 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 Advisory (formerly
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 17 investment vehicles (the "Funds"). For
a description of the investment objectives of each Fund, see Note A to the
accompanying Funds' financial statements.
INVESTMENT INCOME AND REALIZED AND UNREALIZED GAINS AND LOSSES
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 securities transactions and foreign currency of
the Fund are allocated pro rata among the investors in the Fund at the time of
such determination.
PORTFOLIO SHARE VALUATION
The net asset value per portfolio share is determined each business day at the
close of regular trading on the New York Stock Exchange by dividing a
portfolio's net assets by the number of its shares outstanding.
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.
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, and capital loss carryforwards.
As of March 31, Short-Intermediate Fixed Income Institutional Portfolio had
available for Federal tax purposes $47,734 and $52,304 of unused capital loss
carryovers which expire in 2005 and 2006, respectively.
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. The prospectus
for the Nicholas-Applegate Mutual Funds describe each Portfolio's policies with
respect to declaration and payment of dividends and distribution of capital
gains.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
84
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
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.
ADMINISTRATIVE SERVICES AGREEMENT
Effective November 15, 1996, the Trust agreed to pay the Investment Adviser
for Co-Administrative services at an annual rate of 0.10% of average daily net
assets of each of the Portfolios. These fees are in addition to the
administrative fees charged by Investment Company Administration Corporation. In
addition, the Investment Adviser has agreed to waive these fees if the related
Portfolio's expenses before reimbursement is greater that the expense
limitation.
EXPENSE LIMITATIONS
Nicholas-Applegate and the Trust have undertaken to limit the Portfolios'
expenses to the following annual levels through March 31, 1999. 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 and 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%
Value Institutional Portfolio.......... 1.00%
Large Cap Growth Institutional
Portfolio............................. 1.00%
Income & Growth Institutional
Portfolio............................. 1.00%
Balanced Growth Institutional
Portfolio............................. 1.00%
Emerging Countries Institutional
Portfolio............................. 1.65%
International Small Cap Growth
Institutional Portfolio............... 1.40%
International Core Growth Institutional
portfolio............................. 1.40%
Worldwide Growth Institutional
Portfolio............................. 1.35%
Fully Discretionary Institutional Fixed
Income Portfolio...................... 0.45%
Short-Intermediate Institutional Fixed
Income Portfolio...................... 0.35%
Strategic Income Institutional
Portfolio............................. 0.75%
</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, including
Co-Administration Fees, on behalf of the Portfolios, during the periods from
inception (respectively) to March 31, 1998, are as follows:
<TABLE>
<S> <C>
Mini Cap Growth Institutional
Portfolio.......................... $ 280,836
Emerging Growth Institutional
Portfolio.......................... 920,460
Core Growth Institutional
Portfolio.......................... 620,201
Large Cap Institutional Portfolio... 31,433
Value Institutional Portfolio....... 65,416
Income & Growth Institutional
Portfolio.......................... 419,695
Balanced Growth Institutional
Portfolio.......................... 165,523
Emerging Countries Institutional
Portfolio.......................... 375,846
International Small Cap Growth
Institutional Portfolio............ 425,003
International Core Growth
Institutional Portfolio............ 93,179
Worldwide Growth Institutional
Portfolio.......................... 197,853
Fully Discretionary Institutional
Fixed Income Portfolio............. 159,998
Short-Intermediate Institutional
Fixed Income Portfolio............. 147,880
Strategic Income Institutional
Portfolio.......................... 56,961
</TABLE>
- --------------------------------------------------------------------------------
85
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
Effective March 31, 1998, Nicholas-Applegate agreed to amend the expense
reimbursement agreement to limit the period within which Nicholas-Applegate may
recoup the above amounts from the Funds, to no later than March 31, 2003. In
addition, the possible recoupment period of any expense reimbursements in each
year subsequent to 1998 will be limited to five years from the year of the
reimbursement. Such recoupments are subject to the Funds' ability to effect such
reimbursement and remain in compliance with applicable expense limitations.
RELATED PARTIES
Certain officers of the Trust and the Master Trust are also officers of the
Investment Adviser.
3. INVESTMENT TRANSACTIONS
Additions and reductions in the investments in the respective Master Trust
Funds for the fiscal year ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
(000S) (000S)
----------- -----------
<S> <C> <C>
Mini-Cap Growth Institutional
Portfolio....................... $ 69,265 $ 46,528
Emerging Growth Institutional
Portfolio....................... 189,696 184,681
Core Growth Institutional
Portfolio....................... 53,407 93,883
Large Cap Growth Institutional
Portfolio....................... 2,313 1,975
Value Institutional Portfolio.... 5,483 1,087
Income & Growth Institutional
Portfolio....................... 60,801 11,685
Balanced Growth Institutional
Portfolio....................... 133 133
Emerging Countries Institutional
Portfolio....................... 36,978 11,245
International Small Cap Growth
Institutional Portfolio......... 10,375 29,875
International Core Growth
Institutional Portfolio......... 31,219 8,673
Worldwide Growth Institutional
Portfolio....................... 49,415 42,553
Fully Discretionary Institutional
Fixed Income Portfolio.......... 4,978 6,746
Short-Intermediate Institutional
Fixed Income Portfolio.......... 9,439 2,188
Strategic Income Institutional
Portfolio....................... 354 1,101
</TABLE>
4. CREDIT FACILITY
The Portfolios participate in a $75 million redemption credit facility
("Facility") to be utilized for temporary or emergency purposes, including the
financing of redemptions. In connection therewith, the Portfolios have agreed to
pay commitment fees on its pro rata portion of the Facility. Interest is charged
to the Portfolios at rates based on prevailing market rates in effect at the
time of borrowings. At March 31, 1998, there were no outstanding borrowings
under the Facility. The maximum amount borrowed under this line of credit at any
time during the fiscal year ended March 31, 1998 was $0.
5. SUBSEQUENT EVENT
In 1998, the Board of Trustees of the Nicholas-Applegate Mutual Funds (the
"Trust") and the Nicholas-Applegate Investment Trust (the "Master Trust")
approved a plan to reorganize the current master-feeder structure into a new
multi-class fund structure, subject to the necessary shareholder approvals. Upon
the effective date of the reorganization, which is planned to take place
subsequent to March 31, 1998, all assets and liabilities of the master-feeder
funds will be transferred to the corresponding multi-class funds, and
shareholders of the Trust will effectively exchange their shares in the Trust
for equal amounts of shares in the respective multi-class funds in a tax free
exchange.
- --------------------------------------------------------------------------------
86
<PAGE>
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- --------------------------------------------------------------------------------
87
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- Continued
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES FOR THE NICHOLAS-APPLEGATE INVESTMENT TRUST
MARCH 31, 1998
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE LARGE CAP INCOME &
GROWTH GROWTH GROWTH GROWTH VALUE GROWTH
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
ASSETS
Investments, at value*................ $ 83,149,982 $747,420,210 $490,210,906 $12,274,381 $10,241,217 $250,814,551
Foreign currencies, at value**........ -- -- -- -- -- --
Cash.................................. 978 -- 1,326 872 106 --
Receivable for investment securities
sold................................ 261,570 11,854,357 2,889,481 -- 54,998 5,171,476
Receivable for interests sold......... 12,946 62,204,688 1,819,942 126,687 -- 1,659,439
Dividends receivable.................. 760 154,994 67,510 2,714 14,288 236,152
Interest receivable................... 8,181 125,323 67,171 216 170 1,058,473
Due from advisor...................... -- -- -- 698 430 --
Other assets.......................... -- -- -- -- -- --
------------------------------------------------------------------------------
Total assets........................ 83,434,417 821,759,572 495,056,336 12,405,568 10,311,209 258,940,091
------------------------------------------------------------------------------
LIABILITIES
Payable for investment securities
purchased........................... 457,169 7,408,934 6,746,903 125,403 -- 1,550,000
Payable for interests repurchased..... 267,424 7,846,802 1,440,660 6,823 -- 235,843
Accrued expenses...................... 36,577 718,450 66,015 13,995 16,855 36,110
Due to advisor........................ 74,971 -- 299,820 -- -- 153,724
Unrealized loss on forward currency
contracts........................... -- -- -- -- -- --
Line of credit........................ -- -- -- -- -- 3,000,491
Cash overdraft........................ -- 52,689,460 -- -- -- 636,193
------------------------------------------------------------------------------
Total liabilities................... 836,141 68,663,646 8,553,398 146,221 16,855 5,612,361
------------------------------------------------------------------------------
NET ASSETS.............................. $ 82,598,276 $753,095,926 $486,502,938 $12,259,347 $10,294,354 $253,327,730
------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital....................... 47,729,325 335,434,815 211,148,637 10,067,294 6,925,323 158,218,976
Accumulated net investment income
(deficit)........................... (1,228,498) (13,574,277) (3,708,476) (2,853) 122,874 21,834,679
Accumulated net realized gain (loss).. 8,664,060 173,656,050 166,800,398 540,202 876,400 26,893,653
Accumulated net realized foreign
exchange gain (loss)................ -- -- -- -- -- --
Net unrealized foreign exchange gain
(loss).............................. -- -- -- -- -- --
Net unrealized appreciation on
investments......................... 27,433,389 257,579,338 112,262,379 1,654,704 2,369,757 46,380,422
------------------------------------------------------------------------------
Net assets.......................... $ 82,598,276 $753,095,926 $486,502,938 $12,259,347 $10,294,354 $253,327,730
------------------------------------------------------------------------------
* Investments, at cost................ $ 55,716,593 $489,840,872 $377,948,527 $10,619,677 $7,871,460 $204,434,129
------------------------------------------------------------------------------
** Foreign currencies, at cost........ $ -- $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
88
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL FULLY
BALANCED EMERGING SMALL CAP CORE WORLDWIDE DISCRETIONARY
GROWTH COUNTRIES GROWTH GROWTH GROWTH FIXED INCOME
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value*................ $32,580,277 $276,909,907 $ 84,296,355 $ 56,546,002 $136,259,351 $ 15,427,043
Foreign currencies, at value**........ 226 491,004 40,285 61 38,506 37
Cash.................................. -- 1,635 1,156 1,588 1,275 687
Receivable for investment securities
sold................................ 1,210,032 3,574,790 1,401,954 149,676 3,744,481 828,670
Receivable for interests sold......... 330,246 1,899,945 1,091,982 2,802,668 8,479,530 1,440
Dividends receivable.................. 15,036 2,075,665 126,658 127,727 267,719 --
Interest receivable................... 120,589 460 -- 736 2,294 182,875
Due from advisor...................... -- -- -- 2,081 -- 14,193
Other assets.......................... -- 2,334,888 6,150 2,867 7,934 12,278
----------------------------------------------------------------------------------------
Total assets........................ 34,256,406 287,288,294 86,964,540 59,633,406 148,801,090 16,467,223
----------------------------------------------------------------------------------------
LIABILITIES
Payable for investment securities
purchased........................... 996,247 4,791,102 3,882,254 1,380,520 2,912,969 597,923
Payable for interests repurchased..... 191,472 455,175 61,029 -- 215,924 --
Accrued expenses...................... 14,400 220,108 61,949 27,833 25,388 20,361
Due to advisor........................ 13,773 109,055 19,071 -- 110,444 --
Unrealized loss on forward currency
contracts........................... 19,084 -- -- -- -- 22,630
Line of credit........................ -- -- -- -- -- --
Cash overdraft........................ 77,825 -- -- -- -- --
----------------------------------------------------------------------------------------
Total liabilities................... 1,312,801 5,575,440 4,024,303 1,408,353 3,264,725 640,914
----------------------------------------------------------------------------------------
NET ASSETS.............................. $32,943,605 $281,712,854 $ 82,940,237 $ 58,225,053 $145,536,365 $ 15,826,309
----------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital....................... 16,585,886 251,487,861 51,018,581 49,895,553 4,774,264 14,020,624
Accumulated net investment income
(deficit)........................... 2,691,561 1,023,873 (341,593) (3,275) 236,552 1,239,530
Accumulated net realized gain (loss).. 8,456,274 (5,151,924) 11,905,907 (528,897) 45,411,368 285,146
Accumulated net realized foreign
exchange gain (loss)................ 96,690 (1,026,601) (462,261) (136,556) 188,583 152,629
Net unrealized foreign exchange gain
(loss).............................. (19,415) (582) 22,202 17,107 7,150 (23,015)
Net unrealized appreciation on
investments......................... 5,132,609 35,380,227 20,797,401 8,981,121 29,235,318 151,395
----------------------------------------------------------------------------------------
Net assets.......................... $32,943,605 $281,712,854 $ 82,940,237 $ 58,225,053 $145,536,365 $ 15,826,309
----------------------------------------------------------------------------------------
* Investments, at cost................ $27,447,668 $241,529,680 $ 63,498,954 $ 47,564,881 $107,024,033 $ 15,275,648
----------------------------------------------------------------------------------------
** Foreign currencies, at cost........ $ 235 $ 501,211 $ 48,766 $ 71 $ 45,840 $ 37
----------------------------------------------------------------------------------------
<CAPTION>
SHORT-
INTERMEDIATE STRATEGIC
FIXED INCOME INCOME
FUND FUND
<S> <C> <C>
ASSETS
Investments, at value*................ $ 13,459,417 $4,216,147
Foreign currencies, at value**........ -- --
Cash.................................. 9,653 399
Receivable for investment securities
sold................................ -- 49,135
Receivable for interests sold......... 14 --
Dividends receivable.................. -- --
Interest receivable................... 87,286 65,734
Due from advisor...................... 22,531 16,019
Other assets.......................... 30,403 3,746
Total assets........................ 13,609,304 4,351,180
LIABILITIES
Payable for investment securities
purchased........................... -- 47,492
Payable for interests repurchased..... 1,306 25,015
Accrued expenses...................... 20,729 20,892
Due to advisor........................ -- --
Unrealized loss on forward currency
contracts........................... -- --
Line of credit........................ -- --
Cash overdraft........................ -- --
Total liabilities................... 22,035 93,399
NET ASSETS.............................. $ 13,587,269 $4,257,781
COMPOSITION OF NET ASSETS
Paid-in capital....................... 12,319,542 3,092,831
Accumulated net investment income
(deficit)........................... 1,254,644 478,880
Accumulated net realized gain (loss).. (94,422) 506,911
Accumulated net realized foreign
exchange gain (loss)................ -- --
Net unrealized foreign exchange gain
(loss).............................. -- --
Net unrealized appreciation on
investments......................... 107,505 179,159
Net assets.......................... $ 13,587,269 $4,257,781
* Investments, at cost................ $ 13,351,912 $4,036,988
** Foreign currencies, at cost........ $ -- $ --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
89
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE LARGE CAP
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
------------------------------------------------------------
INVESTMENT INCOME
Dividends............................. $ 51,201 $ 1,788,415 $ 1,098,195 $ 21,862
Interest.............................. 150,007 2,071,470 1,517,304 16,501
------------------------------------------------------------
Total income........................ 201,208 3,859,885 2,615,499 38,363
------------------------------------------------------------
EXPENSES
Advisory fee.......................... 866,987 6,613,874 3,422,148 32,530
Accounting fee........................ 58,551 351,134 260,887 31,557
Administration fee.................... 21,454 34,905 142,263 1,487
Audit & tax fees...................... 9,225 138,860 88,275 620
Custodian fee......................... 64,691 255,880 91,870 19,002
Insurance............................. 4,439 43,624 30,861 221
Legal fee............................. 2,356 21,662 16,316 741
Miscellaneous......................... 6,261 8,044 7,729 2,417
Organization costs.................... 1,758 14,447 16,342 --
Trustees' fee......................... 6,501 6,501 6,501 6,501
------------------------------------------------------------
Total expenses...................... 1,042,223 7,488,931 4,083,192 95,076
Less: Reimbursement to (from)
advisor............................. 5,098 -- (9,400) (53,872)
------------------------------------------------------------
Net expenses........................ 1,047,321 7,488,931 4,073,792 41,204
------------------------------------------------------------
Net investment income (deficit)... (846,113) (3,629,046) (1,458,293) (2,841)
------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 5,745,984 52,691,131 71,334,950 467,201
Net realized foreign exchange gain
(loss).............................. -- -- -- --
Change in net unrealized foreign
exchange gain (loss)................ -- -- -- --
Change in net unrealized appreciation
of investments...................... 25,972,882 211,279,518 91,335,002 1,690,444
------------------------------------------------------------
Net gain on investments........... 31,718,866 263,970,649 162,669,952 2,157,645
------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $ 30,872,753 $ 260,341,603 $ 161,211,659 $ 2,154,804
------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
90
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
INCOME & BALANCED EMERGING SMALL CAP CORE WORLDWIDE
VALUE GROWTH GROWTH COUNTRIES GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................. $ 140,355 $ 3,420,869 $ 170,631 $ 4,201,465 $ 489,878 $ 306,591 $ 1,305,375
Interest.............................. 9,064 4,307,627 729,420 688,015 110,764 103,829 168,567
------------------------------------------------------------------------------------------
Total income........................ 149,419 7,728,496 900,051 4,889,480 600,642 410,420 1,473,942
------------------------------------------------------------------------------------------
EXPENSES
Advisory fee.......................... 52,328 1,427,198 220,025 2,790,216 658,893 308,562 1,251,181
Accounting fee........................ 40,929 121,273 47,688 155,300 58,897 38,546 83,526
Administration fee.................... 2,194 59,961 8,236 69,993 20,585 9,857 39,024
Audit & tax fees...................... 683 21,627 7,136 45,205 19,472 4,836 29,368
Custodian fee......................... 20,200 38,709 24,756 548,541 183,956 63,560 168,154
Insurance............................. 468 12,856 2,061 14,752 4,408 1,858 8,512
Legal fee............................. 366 5,588 1,733 7,256 2,769 1,081 4,515
Miscellaneous......................... 2,961 29,317 3,720 18,582 13,382 12,427 15,077
Organization costs.................... -- 8,104 5,779 -- 529 -- 6,630
Trustees' fee......................... 6,501 6,501 6,501 6,500 6,501 6,501 6,501
------------------------------------------------------------------------------------------
Total expenses...................... 126,630 1,731,134 327,635 3,656,345 969,392 447,228 1,612,488
Less: Reimbursement to (from)
advisor............................. (60,348) -- (48,936) (84,868) (79,886) (30,669) (111,071)
------------------------------------------------------------------------------------------
Net expenses........................ 66,282 1,731,134 278,699 3,571,477 889,506 416,559 1,501,417
------------------------------------------------------------------------------------------
Net investment income (deficit)... 83,137 5,997,362 621,352 1,318,003 (288,864) (6,139) (27,475)
------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 594,277 8,251,684 5,777,470 (16,745,182) 8,954,913 (671,153) 22,128,470
Net realized foreign exchange gain
(loss).............................. -- -- 96,690 (888,532) (455,981) (122,668) (385,313)
Change in net unrealized foreign
exchange gain (loss)................ -- -- (19,406) 12,005 28,868 18,429 31,430
Change in net unrealized appreciation
of investments...................... 2,129,781 35,936,585 3,156,828 30,103,293 14,340,358 8,922,576 16,536,369
------------------------------------------------------------------------------------------
Net gain on investments........... 2,724,058 44,188,269 9,011,582 12,481,584 22,868,158 8,147,184 38,310,956
------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $2,807,195 $50,185,631 $9,632,934 $13,799,587 $ 22,579,294 $8,141,045 $38,283,481
------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
91
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE NICHOLAS-APPLEGATE INVESTMENT TRUST
FOR THE YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
FULLY SHORT-
DISCRETIONARY INTERMEDIATE STRATEGIC
FIXED INCOME FIXED INCOME INCOME
FUND FUND FUND
<S> <C> <C> <C>
------------------------------------------
INVESTMENT INCOME
Dividends............................. -- -- $ 62,734
Interest.............................. $ 962,673 $ 855,995 260,203
------------------------------------------
Total income........................ 962,673 855,995 322,937
------------------------------------------
EXPENSES
Advisory fee.......................... 63,462 37,524 24,977
Accounting fee........................ 43,202 42,703 38,296
Administration fee.................... 4,398 3,898 1,297
Audit & tax fees...................... 1,531 1,965 1,298
Custodian fee......................... 24,045 19,968 22,580
Insurance............................. 845 822 281
Legal fee............................. 835 908 209
Miscellaneous......................... 12,278 15,669 9,647
Organization costs.................... -- 1,465 --
Trustees' fee......................... 6,501 6,501 6,501
------------------------------------------
Total expenses...................... 157,097 131,423 105,086
Less: Reimbursement to (from)
advisor............................. (100,689) (93,900) (75,946)
------------------------------------------
Net expenses........................ 56,408 37,523 29,140
------------------------------------------
Net investment income (deficit)... 906,265 818,472 293,797
------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 446,519 (50,050) 285,197
Net realized foreign exchange gain
(loss).............................. 75,485 -- --
Change in net unrealized foreign
exchange gain (loss)................ (23,963) -- --
Change in net unrealized appreciation
of investments...................... 271,552 144,731 173,395
------------------------------------------
Net gain on investments........... 769,593 94,681 458,592
------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $ 1,675,858 $ 913,153 $ 752,389
------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
92
<PAGE>
(This page intentionally left blank)
- --------------------------------------------------------------------------------
93
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
MINI CAP GROWTH FUND EMERGING GROWTH FUND
-------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
----------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (deficit)....... $ (846,113) $ (309,093) $ (3,629,046) $ (3,743,018)
Net realized gain (loss) from security
transactions........................ 5,745,984 2,973,970 52,691,131 96,622,117
Net realized foreign exchange gain
(loss).............................. -- -- -- --
Change in net unrealized foreign
exchange gain (loss)................ -- -- -- --
Change in net unrealized appreciation
(depreciation) of investments....... 25,972,882 (1,699,744) 211,279,518 (114,330,357)
----------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations........................ 30,872,753 965,133 260,341,603 (21,451,258)
----------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners............. 69,265,182 13,388,281 2,244,783,785 626,817,132
Withdrawals by partners............... (46,528,074) (10,628,968) (2,253,591,995) (687,889,723)
----------------------------------------------------------
Net increase (decrease) in net
assets from transactions in
interests......................... 22,737,108 2,759,313 (8,808,210) (61,072,591)
----------------------------------------------------------
Total increase (decrease) in net
assets.......................... 53,609,861 3,724,446 251,533,393 (82,523,849)
NET ASSETS
BEGINNING OF PERIOD................... 28,988,415 25,263,969 501,562,533 584,086,382
----------------------------------------------------------
END OF PERIOD......................... $ 82,598,276 $ 28,988,415 $ 753,095,926 $ 501,562,533
----------------------------------------------------------
</TABLE>
- ---------------
+ Commenced operations on December 27, 1996.
++ Commenced operations on April 30, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
94
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP GROWTH FUND VALUE FUND
CORE GROWTH FUND ----------------------- -----------------------
---------------------------- FOR THE FOR THE
FOR THE FOR THE FOR THE PERIOD FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997+ 1998 1997++
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS
Net investment income
(deficit)............ $ (1,458,293) $ (1,567,011) $ (2,841) $ (12 ) $ 83,137 $ 39,737
Net realized gain
(loss) from security
transactions......... 71,334,950 76,538,109 467,201 73,001 594,277 282,123
Net realized foreign
exchange gain
(loss)............... -- -- -- -- -- --
Change in net
unrealized foreign
exchange gain
(loss)............... -- -- -- -- -- --
Change in net
unrealized
appreciation
(depreciation) of
investments.......... 91,335,002 (67,826,297) 1,690,444 (35,740 ) 2,129,781 239,976
------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations.... 161,211,659 7,144,801 2,154,804 37,249 2,807,195 561,836
------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by
partners............. 331,745,501 158,154,505 11,528,227 1,347,861 5,482,612 2,673,153
Withdrawals by
partners............. (439,228,153) (153,067,978) (2,742,842) (65,952 ) (1,086,886) (143,556)
------------------------------------------------------------------------------
Net increase
(decrease) in net
assets from
transactions in
interests.......... (107,482,652) 5,086,527 8,785,385 1,281,909 4,395,726 2,529,597
------------------------------------------------------------------------------
Total increase
(decrease) in net
assets........... 53,729,007 12,231,328 10,940,189 1,319,158 7,202,921 3,091,433
NET ASSETS
BEGINNING OF PERIOD.... 432,773,931 420,542,603 1,319,158 -- 3,091,433 --
------------------------------------------------------------------------------
END OF PERIOD.......... $ 486,502,938 $ 432,773,931 $12,259,347 $1,319,158 $10,294,354 $3,091,433
------------------------------------------------------------------------------
<CAPTION>
INCOME & GROWTH FUND BALANCED GROWTH FUND
-------------------------- -------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS
Net investment income
(deficit)............ $ 5,997,362 $ 4,199,481 $ 621,352 $ 661,170
Net realized gain
(loss) from security
transactions......... 8,251,684 15,692,945 5,777,470 1,969,019
Net realized foreign
exchange gain
(loss)............... -- -- 96,690 --
Change in net
unrealized foreign
exchange gain
(loss)............... -- -- (19,406) --
Change in net
unrealized
appreciation
(depreciation) of
investments.......... 35,936,585 (3,821,355 ) 3,156,828 (768,824)
Net increase
(decrease) in net
assets resulting
from operations.... 50,185,631 16,071,071 9,632,934 1,861,365
TRANSACTIONS IN INTERESTS
Contributions by
partners............. 117,443,760 34,105,984 10,624,912 8,738,263
Withdrawals by
partners............. (44,953,063) (31,283,589 ) (12,326,211) (9,432,209)
Net increase
(decrease) in net
assets from
transactions in
interests.......... 72,490,697 2,822,395 (1,701,299) (693,946)
Total increase
(decrease) in net
assets........... 122,676,328 18,893,466 7,931,635 1,167,419
NET ASSETS
BEGINNING OF PERIOD.... 130,651,402 111,757,936 25,011,970 23,844,551
END OF PERIOD.......... $253,327,730 $130,651,402 $ 32,943,605 $25,011,970
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
95
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
INTERNATIONAL
EMERGING COUNTRIES FUND SMALL CAP GROWTH FUND
-------------------------- -------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
-----------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (deficit)....... $ 1,318,003 $ (342,535) $ (288,864) $ (163,117)
Net realized gain (loss) from security
transactions........................ (16,745,182) 11,849,728 8,954,913 3,140,492
Net realized foreign exchange gain
(loss).............................. (888,532) (113,212) (455,981) (171,484)
Change in net unrealized foreign
exchange gain (loss)................ 12,005 (12,593) 28,868 (4,450)
Change in net unrealized appreciation
(depreciation) of investments....... 30,103,293 3,898,413 14,340,358 3,921,418
-----------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations........................ 13,799,587 15,279,801 22,579,294 6,722,859
-----------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners............. 187,793,085 143,835,272 144,137,687 37,692,390
Withdrawals by partners............... (78,216,702) (20,677,175) (146,663,288) (5,334,333)
-----------------------------------------------------
Net increase (decrease) in net
assets from transactions in
interests......................... 109,576,383 123,158,097 (2,525,601) 32,358,057
-----------------------------------------------------
Total increase (decrease) in net
assets.......................... 123,375,970 138,437,898 20,053,693 39,080,916
NET ASSETS
BEGINNING OF PERIOD................... 158,336,884 19,898,986 62,886,544 23,805,628
-----------------------------------------------------
END OF PERIOD......................... $281,712,854 $158,336,884 $ 82,940,237 $62,886,544
-----------------------------------------------------
</TABLE>
- ---------------
+ Commenced operations on December 27, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
96
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
CORE GROWTH FUND FULLY DISCRETIONARY SHORT-INTERMEDIATE
------------------------ WORLDWIDE GROWTH FUND FIXED INCOME FUND FIXED INCOME FUND
FOR THE --------------------------- ------------------------ ------------------------
FOR THE PERIOD FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998 1997+ 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS
Net investment income
(deficit)............ $ (6,139) $ 2,864 $ (27,475) $ (281,315) $ 906,265 $ 277,107 $ 818,472 $ 322,048
Net realized gain
(loss) from security
transactions......... (671,153) 142,256 22,128,470 15,788,457 446,519 (139,545) (50,050) (50,498)
Net realized foreign
exchange gain
(loss)............... (22,668) (13,888 ) (385,313) (333,967) 75,485 76,282 -- --
Change in net
unrealized foreign
exchange gain
(loss)............... 18,429 (1,322 ) 31,430 (21,431) (23,963) 966 -- --
Change in net
unrealized
appreciation
(depreciation) of
investments.......... 8,922,576 58,545 16,536,369 (2,434,302) 271,552 9,408 144,731 (6,618)
---------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations.... 8,141,045 188,455 38,283,481 12,717,442 1,675,858 224,218 913,153 264,932
---------------------------------------------------------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by
partners............. 82,773,370 4,487,783 172,434,860 34,174,758 4,978,029 11,828,709 9,439,557 1,638,177
Withdrawals by
partners............. (37,358,238) (7,362 ) (168,997,352) (43,419,850) (6,745,963) (574,627) (2,188,080) (1,241,693)
---------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets from
transactions in
interests.......... 45,415,132 4,480,421 3,437,508 (9,245,092) (1,767,934) 11,254,082 7,251,477 396,484
---------------------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets........... 53,556,177 4,668,876 41,720,989 3,472,350 (92,076) 11,478,300 8,164,630 661,416
NET ASSETS
BEGINNING OF PERIOD.... 4,668,876 -- 103,815,376 100,343,026 15,918,385 4,440,085 5,422,639 4,761,223
---------------------------------------------------------------------------------------------------------
END OF PERIOD.......... $ 58,225,053 $4,668,876 $ 145,536,365 $103,815,376 $15,826,309 $15,918,385 $13,587,269 $ 5,422,639
---------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
97
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE NICHOLAS-APPLEGATE INVESTMENT TRUST
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND
-------------------------
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
MARCH 31, MARCH 31,
1998 1997+++
<S> <C> <C>
-------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (deficit)....... $ 293,797 $ 185,083
Net realized gain (loss) from security
transactions........................ 285,197 221,714
Net realized foreign exchange gain
(loss).............................. -- --
Change in net unrealized foreign
exchange gain (loss)................ -- --
Change in net unrealized appreciation
(depreciation) of investments....... 173,395 5,764
-------------------------
Net increase (decrease) in net
assets resulting from
operations........................ 752,389 412,561
-------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners............. 354,762 4,249,875
Withdrawals by partners............... (1,101,919 ) (409,887 )
-------------------------
Net increase (decrease) in net
assets from transactions in
interests......................... (747,157 ) 3,839,988
-------------------------
Total increase (decrease) in net
assets.......................... 5,232 4,252,549
NET ASSETS
BEGINNING OF PERIOD................... 4,252,549 --
-------------------------
END OF PERIOD......................... $4,257,781 $ 4,252,549
-------------------------
</TABLE>
- ---------------
+++ Commenced operations on July 31, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
98
<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 17 investment vehicles (each a "Fund" and collectively the
"Funds") as of March 31, 1998. Up to five Portfolios of Nicholas-Applegate
Mutual Funds invest in the respective Funds of the Master Trust to achieve their
investment objective.
The investment objectives of the Funds are as follows:
Mini Cap Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies with less than $100
million in market capitalization.
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.
Large Cap Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in equity securities of U.S. companies with market
capitalizations above $3 billion whose earnings and prices are expected to grow
faster than the Standard & Poor's 500 Index.
Value Fund seeks to maximize long-term capital appreciation through investment
primarily in equity securities of U.S. companies with market capitalizations
above $5 billion.
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.
Emerging Countries Fund seeks to maximize long-term capital appreciation
through investment primarily in equity securities of companies in developing
countries of the world.
International Small Cap Growth Fund seeks to maximize long-term capital
appreciation through investment primarily in equity securities of international
companies with smaller to middle market capitalizations.
International Core Growth Fund seeks to maximize long-term capital
appreciation through investment primarily in equity securities of international
companies with larger market capitalizations.
Worldwide Growth Fund seeks to maximize long-term capital appreciation through
investment primarily in growth stocks of U.S. and foreign companies
Fully Discretionary Fixed Income Fund seeks to maximize total return through
investment primarily in investment grade fixed-income securities with an average
portfolio duration between two and eight years.
Short-Intermediate Fixed Income Fund seeks to preserve principal and liquidity
and realize a relatively high level of current income through investment
primarily in investment grade fixed-income securities with an average
dollar-weighted portfolio maturity of two to five years.
Strategic Income Fund seeks to provide a high level of current income by
investing primarily in convertible, lower rated and mortgage-backed debt
securities.
- --------------------------------------------------------------------------------
99
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
SECURITIES TRANSACTIONS
Equity securities are valued at the closing sale price (for exchange-listed
and NASDAQ national market system securities) or the mean between the closing
bid and asked prices (if lacking any sales and for over-the-counter securities).
Debt securities generally are valued at the quoted bid 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 accounted for on the trade date. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend income is recognized on the ex-dividend date, except that
certain dividends from foreign securities are recorded as soon as the
information is available to the Funds. Interest income is recorded on the
accrual basis. Discounts and premiums on securities purchased are accreted and
amortized over the life of the respective securities.
FOREIGN CURRENCY TRANSLATION
Values of investments denominated in foreign currencies are converted into
U.S. dollars using the spot market rate of exchange at the time of valuation.
Purchases and sales of investments and dividend and interest income are
translated into U.S. dollars using the spot market rate of exchange prevailing
on the respective dates of such translations. The gain or loss resulting from
changes in foreign exchange rates is included with net realized and unrealized
gain or loss from investments, as appropriate.
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.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENT
The investment adviser to the Master Trust is Nicholas-Applegate Capital
Management ("Nicholas-Applegate" or "Investment Adviser"). The advisory fee is
computed daily based upon the following
- --------------------------------------------------------------------------------
100
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
percentages of each Fund's average daily net assets:
<TABLE>
<CAPTION>
FIRST $500 NEXT $500 EXCESS OF
FUND MILLION MILLION $1 BILLION
- ---------------------------------- ------------- ------------- ------------
<S> <C> <C> <C>
Mini Cap Growth Fund.............. 1.25% 1.25% 1.25%
Emerging Growth Fund.............. 1.00% 1.00% 1.00%
Core Growth Fund.................. 0.75% 0.675% 0.65%
Large Cap Growth Fund............. 0.75% 0.75% 0.75%
Value Fund........................ 0.75% 0.75% 0.75%
Income & Growth Fund.............. 0.75% 0.675% 0.65%
Balanced Growth Fund.............. 0.75% 0.675% 0.65%
Emerging Countries Fund........... 1.25% 1.25% 1.25%
International Small Cap Growth
Fund............................. 1.00% 0.90% 0.85%
International Core Growth Fund.... 1.00% 0.90% 0.85%
Worldwide Growth Fund............. 1.00% 0.90% 0.85%
Fully Discretionary Fixed Income
Fund............................. See Footnote 1
Short-Intermediate Fixed Income
Fund............................. See Footnote 1
Strategic Income Fund............. 0.60% 0.60% 0.60%
</TABLE>
- -----------------
(1) The advisory fee for Fully Discretionary Fixed Income Fund is computed as
follows: 0.45% of the first $500 million of the Fund's average net assets, 0.40%
of the next $250 million of average net assets, and 0.35% of average net assets
in excess of $750 million. The advisory fee for Short-Intermediate Fixed Income
Fund is computed a follows: 0.30% of the first $250 million of the Fund's
average net assets and 0.25% of average net assets in excess of $250 million.
EXPENSE LIMITATIONS
Nicholas-Applegate and the Master Trust have undertaken to limit the Funds'
expenses to certain annual levels through March 31, 1999. In subsequent years,
overall operating expenses for each Fund will not fall below the percentage
limitation until the Investment Adviser has been fully reimbursed for fees
foregone or expenses paid by the Investment Adviser under this agreement, as
each Fund will reimburse the Investment Adviser in subsequent years when
operating expenses (before reimbursement) are less than the applicable
percentage limitation.
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the period from inception (respectively) to March 31, 1998,
are as follows:
<TABLE>
<CAPTION>
FUND
- ---------------------------------------------
<S> <C>
Mini Cap Growth Fund......................... $ 95,381
Core Growth Fund............................. 9,400
Large Cap Growth Fund........................ 61,779
Value Fund................................... 90,483
Balanced Growth Fund......................... 361,863
Emerging Countries Fund...................... 174,212
International Small Cap Growth Fund.......... 289,126
International Core Growth Fund............... 36,365
Worldwide Growth Fund........................ 407,491
Fully Discretionary Fixed Income Fund........ 204,758
Short-Intermediate Fixed Income Fund......... 195,869
Strategic Income Fund........................ 103,281
</TABLE>
Effective March 31, 1998, Nicholas-Applegate agreed to amend the expense
reimbursement agreement to limit the period within which Nicholas-Applegate may
recoup the above amounts from the Funds, to no later than March 31, 2003. In
addition, the possible recoupment period of any expense reimbursements in each
year subsequent to 1998 will be limited to five years from the year of the
reimbursement. Such recoupments are subject to the Funds' ability to effect such
reimbursement and remain in compliance with applicable expense limitations.
- --------------------------------------------------------------------------------
101
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the fiscal year ended March 31, 1998, were as
follows (in 000's):
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- -------------------------------- ----------- -----------
<S> <C> <C>
Mini Cap Growth Fund............ $ 97,045 $ 74,544
Emerging Growth Fund............ 615,097 587,651
Core Growth Fund................ 879,447 973,993
Large Cap Growth Fund........... 21,636 13,248
Value Fund...................... 7,963 3,780
Income & Growth Fund............ 371,588 292,929
Balanced Growth Fund............ 74,169 75,690
Emerging Countries Fund......... 611,978 503,718
International Small Cap Growth
Fund........................... 126,676 128,068
International Core Growth
Fund........................... 120,878 78,860
Worldwide Growth Fund........... 245,666 255,361
Fully Discretionary Fixed Income
Fund........................... 55,251 54,817
Short-Intermediate Fixed Income
Fund........................... 32,371 22,847
Strategic Income Fund........... 13,457 13,809
</TABLE>
At March 31, 1998, 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
FUND INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
- ------------------ ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Mini Cap Growth
Fund............. $ 55,717 $ 28,067 $ 634 $ 27,433
Emerging Growth
Fund............. 489,841 262,881 5,302 257,579
Core Growth Fund.. 377,949 116,342 4,080 112,262
Large Cap Growth
Fund............. 10,620 1,735 80 1,655
Value Fund........ 7,871 2,458 88 2,370
Income & Growth
Fund............. 204,434 46,887 507 46,380
Balanced Growth
Fund............. 27,448 5,299 166 5,133
Emerging Countries
Fund............. 241,530 41,672 6,292 35,380
International
Small Cap Growth
Fund............. 63,499 21,696 899 20,797
International Core
Growth Fund...... 47,565 9,683 702 8,981
Worldwide Growth
Fund............. 107,024 30,023 788 29,235
Fully
Discretionary
Fixed Income
Fund............. 15,276 244 93 151
Short-Intermediate
Fixed Income
Fund............. 13,352 121 13 108
Strategic Income
Fund............. 4,037 192 13 179
</TABLE>
- --------------------------------------------------------------------------------
102
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
D. OFF BALANCE SHEET RISKS AND DERIVATIVE INSTRUMENTS
The Masters Trust's investment in foreign securities may entail risks due to
the potential of political and economic instability in the countries where the
securities are being offered. In addition, foreign exchange fluctuations could
affect the value of positions held. It is the Master Trust's policy to
continuously monitor its exposure to these risks.
Some of the Funds may utilize forward foreign currency exchange contracts for
the purpose of hedging against foreign exchange risk. Upon entering into forward
foreign currency contracts, the Funds are required to deposit with the broker an
amount of cash or cash equivalents equal to the amount of the contract. The
daily changes in the contract are recorded as unrealized gains or losses. The
Funds recognize a realized gain or loss when the contract is sold.
E. SECURITIES LENDING
The Funds may loan securities to certain brokers, dealers and other financial
institutions who pay the Funds negotiated lenders' fees. The Funds receive cash
collateral, letters of credit or U.S. Government securities in an amount equal
to 102% of the market value of the loaned securities at the inception of each
loan. The loans will be collateralized at all times in an amount equal to at
least 100% of the market value of the securities loaned. At March 31, 1998, the
market value of securities loaned and the collateral received for each fund is
as follows:
<TABLE>
<CAPTION>
MARKET VALUE OF
SECURITIES COLLATERAL
FUND LOANED AMOUNT
- -------------------------------- --------------- ----------
<S> <C> <C>
Mini Cap Growth Fund............ $ 5,913,281 $6,049,175
Emerging Growth Fund............ 77,437,581 79,867,849
Core Growth Fund................ 41,081,548 42,269,676
Large Cap Growth Fund........... 158,950 163,200
Value Fund...................... 88,125 94,000
Income & Growth Fund............ 3,325,875 3,418,700
Balanced Growth Fund............ 432,903 436,800
Emerging Countries Fund......... 14,353,632 15,136,200
International Small Cap Growth
Fund........................... 4,087,255 4,218,400
International Core Growth
Fund........................... 1,517,894 1,547,400
Worldwide Growth Fund........... 3,796,960 3,849,600
</TABLE>
F. BORROWING AGREEMENT
The Income & Growth Fund had an unsecured bank line of credit at March 31,
1998. The Fund borrowed $3,000,000 at a rate of 8.5%. The principal plus
interest were repaid on April 1, 1998.
G. SUBSEQUENT EVENT
In 1998, the Board of Trustees of the Nicholas-Applegate Mutual Funds (the
"Trust") and the Nicholas-Applegate Investment Trust (the "Master Trust")
approved a plan to reorganize the current master-feeder structure into a new
multi-class fund structure, subject to the necessary shareholder approvals. Upon
the effective date of the reorganization, which is planned to take place
subsequent to March 31, 1998, all assets and liabilities of the master-feeder
funds will be transferred to the corresponding multi-class funds, and
shareholders of the Trust will effectively exchange their shares in the Trust
for equal amounts of shares in the respective multi-class funds in a tax free
exchange.
- --------------------------------------------------------------------------------
103
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTE TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
H. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF NET RATIO OF NET
RATIO OF RATIO OF INVESTMENT INVESTMENT
EXPENSES TO EXPENSES TO INCOME (DEFICIT) INCOME (DEFICIT)
AVERAGE NET AVERAGE NET TO AVERAGE NET TO AVERAGE NET
ASSETS, AFTER ASSETS, BEFORE ASSETS, AFTER ASSETS, BEFORE AVERAGE
EXPENSES TO EXPENSE EXPENSE EXPENSE PORTFOLIO BROKER
REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS TURNOVER COMMISSIONS
(RECOUPMENTS) (RECOUPMENTS) (RECOUPMENTS) (RECOUPMENTS) RATE PER SHARE
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
MINI CAP GROWTH FUND(1)
For the year ended 3/31/98............ 1.51% 1.50% (1.22%) (1.21%) 113.45% $0.0501
For the year ended 3/31/97............ 1.51% 1.71% (1.03%) (1.22%) 164.01% $0.0455
For the period ended 3/31/96*......... 1.50% 2.02% (0.93%) (1.44%) 106.99% $0.0529
EMERGING GROWTH FUND(2)
For the year ended 3/31/98............ 1.13% 1.13% (0.55%) (0.55%) 91.66% $0.0528
For the year ended 3/31/97............ 1.10% 1.10% (0.64%) (0.64%) 112.90% $0.0520
For the year ended 3/31/96............ 1.11% 1.11% (0.57%) (0.57%) 129.59% $0.0523
For the year ended 3/31/95............ 1.12% 1.11% (0.53%) (0.52%) 100.46% --
For the period ended 3/31/94*......... 1.12% 1.16% (0.80%) (0.84%) 50.51% --
CORE GROWTH FUND(3)
For the year ended 3/31/98............ 0.89% 0.89% (0.32%) (0.32%) 199.54% $0.0552
For the year ended 3/31/97............ 0.88% 0.88% (0.33%) (0.33%) 153.20% $0.0582
For the year ended 3/31/96............ 0.89% 0.89% (0.22%) (0.22%) 114.48% $0.0593
For the year ended 3/31/95............ 0.89% 0.89% 0.05% 0.05% 98.09% --
For the period ended 3/31/94*......... 0.92% 0.92% (0.03%) (0.03%) 84.84% --
LARGE CAP GROWTH FUND(4)
For the year ended 3/31/98............ 0.95% 2.19% (0.07%) (1.31%) 305.78% $0.0584
For the period ended 3/31/97*......... 0.91% 3.32% 0.00% (2.41%) 320.73% $0.0594
VALUE FUND(5)
For the year ended 3/31/98............ 0.95% 1.81% 1.19% 0.33% 55.14% $0.0600
For the period ended 3/31/97*......... 0.95% 2.24% 1.70% 0.41% 139.27% $0.0589
INCOME & GROWTH FUND(3)
For the year ended 3/31/98............ 0.91% 0.91% 3.15% 3.15% 159.59% $0.0595
For the year ended 3/31/97............ 0.95% 0.92% 3.49% 3.52% 166.84% $0.0154
For the year ended 3/31/96............ 0.95% 0.94% 3.94% 3.94% 144.97% $0.0597
For the year ended 3/31/95............ 0.93% 0.95% 4.37% 4.35% 125.51% --
For the period ended 3/31/94*......... 0.94% 0.97% 3.51% 3.48% 177.52% --
BALANCED GROWTH FUND(2)
For the year ended 3/31/98............ 0.95% 1.12% 2.12% 1.95% 260.03% $0.0600
For the year ended 3/31/97............ 0.95% 1.21% 2.53% 2.27% 212.95% $0.0586
For the year ended 3/31/96............ 0.95% 1.37% 2.83% 2.37% 197.19% $0.0594
For the year ended 3/31/95............ 0.95% 1.33% 2.13% 1.75% 110.40% --
For the period ended 3/31/94*......... 0.94% 1.37% 1.93% 1.50% 85.43% --
EMERGING COUNTRIES FUND(6)
For the year ended 3/31/98............ 1.60% 1.64% 0.59% 0.55% 243.47% $0.0014
For the year ended 3/31/97............ 1.60% 1.57% (0.47%) (0.44%) 176.20% $0.0021
For the year ended 3/31/96............ 1.60% 2.80% 0.30% (0.90%) 118.21% $0.0022
For the period ended 3/31/95*......... 1.60% 1.81% 1.73% 1.52% 60.79% --
INTERNATIONAL SMALL CAP GROWTH FUND(7)
For the year ended 3/31/98............ 1.35% 1.47% (0.44%) (0.56%) 198.37% $0.0086
For the year ended 3/31/97............ 1.35% 1.38% (0.34%) (0.37%) 206.07% $0.0098
For the year ended 3/31/96............ 1.35% 1.98% 0.39% (0.24%) 141.02% $0.0128
For the year ended 3/31/95............ 1.35% 1.85% 0.24% (0.26%) 74.88% --
For the period ended 3/31/94*......... 1.35% 2.28% 0.41% (0.52%) 23.71% --
INTERNATIONAL CORE GROWTH FUND(4)
For the year ended 3/31/98............ 1.35% 1.45% (0.02%) (0.12%) 274.21% $0.0128
For the period ended 3/31/97*......... 1.29% 2.25% 0.48% (0.47%) 75.53% $0.0106
WORLDWIDE GROWTH FUND(2)
For the year ended 3/31/98............ 1.20% 1.29% (0.02%) (0.11%) 201.70% $0.0221
For the year ended 3/31/97............ 1.20% 1.26% (0.27%) (0.33%) 181.81% $0.0078
For the year ended 3/31/96............ 1.20% 1.26% 0.31% 0.25% 132.20% $0.0187
For the year ended 3/31/95............ 1.20% 1.30% 0.24% 0.14% 98.54% --
For the period ended 3/31/94*......... 1.20% 1.36% 0.01% (0.15%) 95.09% --
FULLY DISCRETIONARY FIXED INCOME FUND(8)
For the year ended 3/31/98............ 0.40% 1.11% 6.43% 5.71% 406.62% --
For the year ended 3/31/97............ 0.40% 2.27% 6.17% 4.30% 190.41% --
For the period ended 3/31/96*......... 0.45% 2.69% 6.44% 4.12% 60.06% --
SHORT INTERMEDIATE FIXED INCOME FUND(8)
For the year ended 3/31/98............ 0.30% 1.05% 6.54% 5.79% 197.10% --
For the year ended 3/31/97............ 0.30% 1.87% 6.23% 4.66% 132.30% --
For the period ended 3/31/96*......... 0.30% 1.36% 5.85% 4.77% 114.38% --
STRATEGIC INCOME FUND(9)
For the year ended 3/31/98............ 0.70% 2.52% 7.06% 5.23% 326.07% $0.0564
For the period ended 3/31/97*......... 0.70% 1.66% 7.02% 6.07% 211.63% $0.0600
</TABLE>
- --------------------
(1) Commenced operations on July 12, 1995.
(2) Commenced operations on October 1, 1993.
(3) Commenced operations on April 19, 1993.
(4) Commenced operations on December 27, 1996.
(5) Commenced operations on April 30, 1996.
(6) Commenced operations on November 28, 1994.
(7) Commenced operations on December 31, 1993.
(8) Commenced operations on August 31, 1995.
(9) Commenced operations on July 31, 1996.
* Annualized
- --------------------------------------------------------------------------------
104
<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
series of Institutional Portfolios of Nicholas-Applegate Mutual Funds
(comprising respectively, Mini Cap Growth Institutional Portfolio, Emerging
Growth Institutional Portfolio, Core Growth Institutional Portfolio, Large Cap
Growth Institutional Portfolio, Value Institutional Portfolio, Income & Growth
Institutional Portfolio, Balanced Growth Institutional Portfolio, Emerging
Countries Institutional Portfolio, International Small Cap Growth Institutional
(formerly "International Growth") Portfolio, International Core Growth
Institutional Portfolio, Worldwide Growth Institutional Portfolio, Fully
Discretionary Fixed Income Institutional Portfolio, Short-Intermediate Fixed
Income Institutional Portfolio and Strategic Income Institutional Portfolio)
(hereinafter the "Portfolios"), as of March 31, 1998, and the related statements
of operations for the fiscal year then ended, the statements of changes in net
assets for each of the two fiscal years in the period then ended and the
financial highlights for each of the three fiscal years in the period then
ended, except for Large Cap Growth Institutional Portfolio, Value Institutional
Portfolio, International Core Growth Institutional Portfolio and Strategic
Income Institutional Portfolio, which are for each of the two fiscal years in
the period 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 financial highlights for each of the two fiscal years in the
period ended March 31, 1995 were audited by other auditors whose report dated
May 12, 1995 expressed an unqualified opinion on those 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 financial statements and the 1996, 1997 and 1998 financial
highlights referred to above present fairly, in all material respects, the
financial position of each of the respective series of Institutional Portfolios
of Nicholas-Applegate Mutual Funds as of March 31, 1998, the results of their
operations for the fiscal year then ended, changes in their net assets for each
of the two fiscal years in the period then ended and the financial highlights
for each of the three fiscal years in the period then ended, as described in the
first paragraph, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
May 15, 1998
- --------------------------------------------------------------------------------
105
<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, Large Cap Growth Fund, Value Fund, Income & Growth Fund,
Balanced Growth Fund, Emerging Countries Fund, International Small Cap Growth
Fund (formerly "International Growth Fund"), International Core Growth Fund,
Worldwide Growth Fund, Fully Discretionary Fixed Income Fund, Short-Intermediate
Fixed Income Fund and Strategic Income Fund (hereinafter the "Funds"), as of
March 31, 1998, and the related statements of operations for the fiscal year
then ended, and the statements of changes in net assets for each of the two
fiscal years in the period 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 selected ratio
data for each of the two fiscal years in the period ended March 31, 1995 were
audited by other auditors whose report dated May 12, 1995 expressed an
unqualified opinion on those selected ratio data.
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, 1998, by correspondence with
the custodians and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective Funds of
Nicholas-Applegate Investment Trust as of March 31, 1998, the results of their
operations for the fiscal year then ended, and changes in their net assets for
each of the two fiscal years in the period then ended, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
May 15, 1998
- --------------------------------------------------------------------------------
106
<PAGE>
TRUSTEES OF NICHOLAS-APPLEGATE MUTUAL FUNDS
------------------------------------------
Fred C. Applegate, CHAIRMAN
Dr. Arthur B. Laffer
Charles E. Young
OFFICERS
--------
Arthur E. Nicholas, PRESIDENT
Peter J. Johnson, VICE PRESIDENT
Thomas Pindelski, TREASURER
E. Blake Moore, Jr., SECRETARY
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
INVESTMENT MANAGER
------------------
Nicholas-Applegate Capital Management
DISTRIBUTOR
-----------
Nicholas-Applegate Securities
CUSTODIAN
---------
PNC Bank
TRANSFER AGENT
--------------
State Street Bank & Trust Company
<PAGE>
NICHOLAS APPLEGATE-Registered Trademark-
MUTUAL FUNDS
600 West Broadway
San Diego, California 92101
800-551-8033
Nicholas-Applegate Securities, Distributor
www.nacm.com
ANN98I
