<PAGE>
NICHOLAS APPLEGATE-Registered Trademark-
MUTUAL FUNDS, ANNUAL REPORT
ADVISORY 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
Income & Growth....................................................... 21
Balanced Growth....................................................... 26
Government Income..................................................... 32
Emerging Countries.................................................... 35
International Small Cap Growth........................................ 41
International Core Growth............................................. 46
Worldwide Growth...................................................... 51
The Portfolios'
Financial Highlights.................................................. 58
Statements of Assets and Liabilities.................................. 60
Statements of Operations.............................................. 62
Statements of Changes in Net Assets................................... 64
Notes to the Financial Statements..................................... 68
Notes to the Funds' Financial Statements................................ 80
Report of Independent Auditors
Nicholas-Applegate Mutual Funds....................................... 85
Nicholas-Applegate Investment Trust................................... 86
ANNUAL REPORT FOR NICHOLAS-APPLEGATE HIGH YIELD BOND FUND
</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 Advisory Portfolios. Distributor: Nicholas-Applegate
Securities.
<PAGE>
MINI CAP GROWTH FUND
ADVISORY 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 macroeconomic
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 ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE MINI
CAP GROWTH ADVISORY 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
ADVISORY PORTFOLIO RUSSELL 2000 GROWTH
<S> <C> <C>
7/12/95 $10,000.00 $10,000.00
9/95 11,024.00 10,729.62
12/95 11,480.00 10,889.86
3/96 12,680.00 11,515.40
6/96 14,864.00 12,188.22
9/96 14,384.00 12,084.01
12/96 14,778.33 12,116.39
3/97 13,174.86 10,837.22
6/97 16,356.99 12,739.14
9/97 20,911.16 14,893.82
12/97 19,239.91 13,672.62
3/31/98 22,251.14 15,297.78
</TABLE>
This graph compares a $10,000 investment in the Mini Cap Growth Advisory
Portfolio (Institutional) 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
ADVISORY 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
companies with market capitalizations below $500 million.
REVIEW AND OUTLOOK: In the midst of a volatile year for small company stocks,
the Nicholas-Applegate Emerging Growth Fund returned 47.0%, outperforming the
Russell 2000 Growth Index benchmark, which returned 47.0%. The Fund's relative
outperformance may be attributed largely to our selection of stocks of small
companies demonstrating positive, sustainable and timely growth.
The Fund delivered solid results 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,
largely among technology stocks affected by the region's financial woes.
However, the rally resumed shortly thereafter. The Fund benefited from superior
selection of stocks that benefited from the strong U.S. economy, falling
interest rates and an all-time high level of consumer confidence.
We invested in the stocks of several retailers exhibiting powerful earnings
growth. For example, Linens N Things Inc., a specialty retailer, performed well
on the strength of its sales trends and new store openings. Likewise, home
furnishings store Ethan Allen Interiors did well in light of an extremely strong
housing market and trend of consumers spending a significant portion of
disposable income on their homes.
While the technology sector experienced a great deal of volatility, the Fund
did very well by maintaining a focus on those 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 for the year.
Our outlook for the Emerging Growth Fund remains optimistic 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 great 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 ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
EMERGING GROWTH ADVISORY 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
47.01% 24.21% 16.04%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING GROWTH ADVISORY PORTFOLIO RUSSELL 2000 GROWTH INDEX
10/1/93 $10,000.00 $10,000.00
<S> <C> <C>
12/31/93 $9,988.55 $10,262.59
3/31/94 $9,378.52 $9,845.06
6/30/94 $8,678.90 $9,227.27
9/30/94 $9,593.48 $10,087.60
12/31/94 $9,606.03 $10,013.02
3/31/95 $10,159.76 $10,562.09
6/30/95 $11,317.62 $11,609.85
9/30/95 $12,700.77 $12,930.01
12/31/95 $13,019.28 $13,123.11
3/31/96 $14,094.27 $13,876.94
6/30/96 $15,477.82 $14,687.74
9/30/96 $15,885.92 $14,562.15
12/31/96 $15,553.45 $14,601.18
3/31/97 $13,244.03 $13,059.68
6/30/97 $16,216.15 $15,351.64
9/30/97 $19,369.02 $17,948.19
12/31/97 $17,348.28 $16,476.56
3/31/98 $19,470.08 $18,435.00
</TABLE>
This graph compares a $10,000 investment in the Emerging Growth Advisory
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 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 8/31/95.
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 contains 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 a widely regarded small-cap index of the 2,000 smaller 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
ADVISORY 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. companies with a mid-sized
market capitalization.
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.
The Fund returned 42.0% for the period, while its index, the Russell Mid Cap
Growth, returned 42.4%.
We maintained our bottom-up philosophy of selecting stocks of mid-sized
companies with strong fundamentals and poised to capitalize on positive change.
Technology stocks experienced a volatile period amid uncertainties regarding
the continuing effects of the Southeast Asian economic crisis. In the midst of
this 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. and Level One Communication which did not fare as
well. Especially during the period following the onset of Southeast Asia's
economic troubles, the Fund focused on investment in companies with little to no
exposure to the region.
Retail stocks did very well during the period, enjoying a strong domestic
economy, falling interest rates and a high level of consumer confidence. TJ Max,
Costco, and Dollar Tree stores all delivered strong returns for the Fund.
Toward the end of the year, we reduced our energy weighting because of the
negative effects of falling oil prices. We increased our weightings in the
financial services and consumer non-durables sectors.
Looking ahead, we remain optimistic. We continue to find mid-cap companies
with strong earnings growth and attractive relative valuations.
REPRESENTATIVE HOLDINGS
Allied Waste
Carnival
Centex
Chancellor Media
Costco
Peoplesoft
Robert Half International
Saville
TJX
Veritas DGC
- --------------------------------------------------------------------------------
14
<PAGE>
CORE GROWTH ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE CORE
GROWTH ADVISORY 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
42.00% 16.03% 19.19%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CORE GROWTH RUSSELL MID CAP
ADVISORY PORTFOLIO GROWTH INDEX
<S> <C> <C>
9/30/85 $10,000.00 $10,000.00
12/85 $12,466.54 $10,000.00
12/86 $16,521.83 $11,755.04
12/87 $17,072.51 $12,079.37
12/88 $19,187.60 $13,640.50
12/89 $25,633.99 $17,935.18
12/90 $25,756.56 $17,014.58
12/91 $39,960.61 $25,016.75
12/92 $45,263.92 $27,196.19
12/93 $54,328.19 $30,240.33
12/94 $48,410.76 $29,585.30
12/95 $66,921.22 $39,641.61
12/96 $77,673.77 $46,571.16
12/97 $90,250.08 $57,088.43
3/31/98 $101,243.47 $63,902.70
</TABLE>
This graph compares a $10,000 investment in Core Growth Advisory 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 on 6/30/94. 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
ADVISORY 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 Large Cap Growth Fund performed exceptionally well
during the period as stocks of large companies attained record highs. The Fund
returned 62.5% for the year, outperforming its benchmark the S&P 500 which
returned 48.0%.
Domestic large-cap stocks as an asset class benefited from investor worries
over the impact of the Southeast Asian economic crisis on the U.S. economy and
consequent flight to the perceived safety of the stocks of large companies.
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 strong
environment.
For example, many technology companies, while suffering a temporary setback
surrounding the Southeast Asian economic crisis in October, performed very well
for the year as a whole. The Fund 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 Inc., was another contributor to the Fund's solid
performance. Tellabs benefited by its continuing to sell computer parts to
China, a region not as affected by the Southeast 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 Inc., benefited from high demand for
motion pictures, as well as increasing its services to existing cable
subscribers. The Fund 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 in a healthy economic environment.
REPRESENTATIVE HOLDINGS
Airtouch
American Express
Compuware
Dayton Hudson
HBO
Tellabs
Time Warner
US West Media
Warner-Lambert
Worldcom
- --------------------------------------------------------------------------------
18
<PAGE>
LARGE CAP GROWTH ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
LARGE CAP GROWTH ADVISORY PORTFOLIO WITH THE RUSSELL 1000 GROWTH INDEX.
<TABLE>
<S> <C> <C>
TOTAL RETURN SINCE
1 YEAR SINCE INCEPTION INCEPTION
62.47% As of 03/31/98 51.59%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LARGE CAP GROWTH ADVISORY PORTFOLIO RUSSELL 1000 GROWTH INDEX
27-DEC-96 $10,000.00 $10,000.00
<S> <C> <C>
31-Jan-97 $10,888.65 $10,538.08
28-Feb-97 $10,706.64 $10,466.42
31-Mar-97 $10,385.44 $9,899.98
30-Apr-97 $10,781.58 $10,557.34
31-May-97 $11,991.43 $11,319.26
30-Jun-97 $12,430.41 $11,772.03
31-Jul-97 $13,982.87 $12,812.68
31-Aug-97 $13,661.67 $12,063.14
30-Sep-97 $14,357.60 $12,656.77
31-Oct-97 $14,336.19 $12,188.47
30-Nov-97 $14,158.22 $12,706.11
31-Dec-97 $14,373.72 $12,848.42
31-Jan-98 $14,599.99 $13,232.59
28-Feb-98 $15,946.85 $14,227.94
31-Mar-98 $16,873.50 $14,795.07
</TABLE>
This graph compares a $10,000 investment in the Large Cap Growth Advisory
Portfolio with the Russell 1000 Growth 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 7/21/97. 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 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.
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.
- --------------------------------------------------------------------------------
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>
INCOME & GROWTH FUND
ADVISORY 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 returned 31.5% 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.
During the fiscal year, the Fund continued to deliver returns consistent with
our objective of participating in the markets upswings, without as much of the
downswings. 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
with a level of customer service among the best in the industry.
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 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
- --------------------------------------------------------------------------------
21
<PAGE>
INCOME & GROWTH ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
INCOME & GROWTH ADVISORY 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
31.54% 17.16% 17.69%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INCOME AND GROWTH FIRST BOSTON INDEX
ADVISORY PORTFOLIO CONVERTIBLE
<S> <C> <C>
31-Dec-86 $10,000.00 $10,000.00
31-Dec-87 $9,663.34 $9,977.54
31-Dec-88 $11,555.85 $11,315.70
31-Dec-89 $14,800.60 $12,872.89
31-Dec-90 $15,035.29 $11,986.43
31-Dec-91 $20,751.93 $15,476.19
31-Dec-92 $22,736.71 $18,196.62
31-Dec-93 $28,832.09 $21,571.50
31-Dec-94 $26,576.57 $20,554.30
31-Dec-95 $32,416.83 $25,429.45
31-Dec-96 $39,126.14 $28,949.79
31-Dec-97 $48,155.46 $33,848.68
31-Mar-98 $52,218.49 $36,627.28
</TABLE>
This graph compares a $10,000 investment in Income & Growth Advisory Portfolio
with a similar investment in 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 on 8/31/95. 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.
- --------------------------------------------------------------------------------
22
<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.
- --------------------------------------------------------------------------------
23
<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.
- --------------------------------------------------------------------------------
24
<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.
- --------------------------------------------------------------------------------
25
<PAGE>
BALANCED GROWTH FUND
ADVISORY 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
James E. Kellerman,
Partner, Portfolio Manager
John J. Kane,
Partner, Senior Portfolio Manager
Malcom S. Day,
CFA, Portfolio Manager
Susan Malone,
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: Nicholas-Applegate's Balanced Growth Fund gained 40.2%
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.
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 interest
rates remained 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
- --------------------------------------------------------------------------------
26
<PAGE>
BALANCED GROWTH ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
BALANCED GROWTH ADVISORY 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
40.21% 21.90% 15.72%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED GROWTH BALANCED 60/40
ADVISORY PORTFOLIO INDEX
<S> <C> <C>
19-Apr-93 $10,000.00 $10,000.00
30-Jun-93 $11,052.00 $10,167.89
30-Sep-93 $11,690.00 $10,460.54
31-Dec-93 $11,360.00 $10,593.91
31-Mar-94 $10,978.00 $10,220.09
30-Jun-94 $10,329.00 $10,196.47
30-Sep-94 $10,871.00 $10,516.10
31-Dec-94 $10,680.00 $10,533.05
31-Mar-95 $11,371.00 $11,358.01
30-Jun-95 $12,423.00 $12,302.76
30-Sep-95 $13,418.00 $12,982.35
31-Dec-95 $13,229.00 $13,694.89
31-Mar-96 $13,695.00 $14,001.13
30-Jun-96 $14,508.00 $14,403.65
30-Sep-96 $15,058.00 $14,779.90
31-Dec-96 $15,460.00 $15,701.27
31-Mar-97 $14,690.00 $15,904.46
30-Jun-97 $16,693.00 $17,775.90
30-Sep-97 $19,072.00 $18,834.70
31-Dec-97 $18,781.21 $19,411.09
31-Mar-98 $20,596.14 $21,139.22
</TABLE>
This graph compares a $10,000 investment in the Balanced Growth Advisory
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 effective date of the Advisory Portfolio's
registration statement was on 8/31/95. 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.
- --------------------------------------------------------------------------------
27
<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.
- --------------------------------------------------------------------------------
28
<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.
- --------------------------------------------------------------------------------
29
<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.
- --------------------------------------------------------------------------------
30
<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.
- --------------------------------------------------------------------------------
31
<PAGE>
GOVERNMENT INCOME FUND
ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Fred S. Robertson,
Partner, Chief Investment Officer, Fixed Income
Susan Malone,
Portfolio Manager
James E. Kellerman,
Partner, Senior Portfolio Manager
Malcom Day,
CFA, Portfolio Manager
GOAL: The Nicholas-Applegate Government Income Fund seeks to maximize current
income by investing primarily in intermediate term debt securities of the U.S.
Government and its agencies and instrumentalities.*
REVIEW AND OUTLOOK: The Government Income Fund returned 12.8% for the fiscal
year and 7.9% for the three year period verses its benchmark the Lehman
Government Bond Index which returned 12.1% and 8.9% respectively.
In keeping with our long-term bullish outlook for the bond market, the Fund
had a higher level of interest rate sensitivity than did the Intermediate
Government Index. Declining interest rates enhanced the Fund's return throughout
the year.
We invested in US government or government agency backed mortgage issues which
significantly outperformed treasury securities. As interest rates declined, the
mortgage investments were concentrated in those securities which were less
exposed to prepayment risk.
Solid fundamentals and the opportunity for higher returns also made investment
in select international bond markets attractive. Our overseas bond holdings,
while small, significantly enhanced the Fund's returns.
The long-term trend toward disinflation in the US remains intact, fueled by
conservative fiscal policies, a vigilant Federal Reserve Board, and excess
global capacity, which inhibits price increases. As a result, the outlook for
the bond market remains favorable.
- ------------
*The government guarantee of the Fund's portfolio securities does not guarantee
the value of the Fund's shares. The Fund's share price will generally fluctuate
with changing interest rates or other market conditions.
- --------------------------------------------------------------------------------
32
<PAGE>
GOVERNMENT INCOME ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
GOVERNMENT INCOME ADVISORY PORTFOLIO WITH THE LEHMAN BROTHERS GOVERNMENT BOND
INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/98 SINCE
1 YEAR 3 YEARS INCEPTION
12.80% 8.34% 6.86%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GOVERNMENT INCOME LEHMAN BROTHERS
AVISORY PORTFOLIO GOVERNMENT BOND INDEX
<S> <C> <C>
19-Apr-93 $10,000.00 $10,000.00
30-Jun-93 $10,346.77 $10,249.56
30-Sep-93 $10,768.51 $10,582.10
31-Dec-93 $10,740.39 $10,546.44
31-Mar-94 $10,506.09 $10,228.83
30-Jun-94 $10,421.74 $10,111.52
30-Sep-94 $10,431.12 $10,154.40
31-Dec-94 $10,496.72 $10,190.82
31-Mar-95 $10,918.46 $10,670.35
30-Jun-95 $11,593.25 $11,332.37
30-Sep-95 $11,807.87 $11,532.20
31-Dec-95 $12,369.24 $12,058.96
31-Mar-96 $11,986.52 $11,785.18
30-Jun-96 $11,863.95 $11,840.65
30-Sep-96 $11,996.84 $12,040.75
31-Dec-96 $12,409.09 $12,392.06
31-Mar-97 $12,310.45 $12,291.38
30-Jun-97 $12,774.98 $12,716.45
30-Sep-97 $13,242.30 $13,142.35
31-Dec-97 $13,649.89 $13,579.00
31-Mar-98 $13,885.71 $13,783.95
</TABLE>
This graph compares a $10,000 investment in the Government Income Advisory
Portfolio with the Lehman Brothers Government 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 8/31/95. 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. Total return results would have been
lower had there been no deferral of fees and expenses in excess of expense
limitations.
The Lehman Brothers Government Bond Index is an unmanaged index composed of all
publicly issued, nonconvertible, domestic debt of the U.S. government or any
agency thereof, quasi-federal corporations or corporate debt guaranteed by the
U.S. government.
The Index reflects the reinvestment of interest income 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.
The government guarantee of the Fund's portfolio securities does not guarantee
the value of the Fund's shares. The Fund's share price will generally fluctuate
with changing interest rates or other market conditions.
- --------------------------------------------------------------------------------
33
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
AGENCY OBLIGATIONS -- 26.9%
- ---------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 8.5%
Pool # B00623
9.000%, 6/01/06.......................... $ 90,403 $ 94,047
Pool # 43 PG
6.500%, 12/17/22......................... 145,000 145,544
Pool # 2020E
7.000%, 1/15/28.......................... 550,000 565,641
----------
805,232
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 4.9%
Pool # 363503
9.500%, 6/01/05.......................... 122,881 129,178
Pool # 1994-27 PJ
6.500%, 6/25/23.......................... 255,000 255,556
Pool # 1996-59 K
6.500%, 7/25/23.......................... 80,000 79,200
----------
463,934
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES -- 9.6%
5.900%, 4/01/98............................ 917,000 917,000
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 1.2%
Pool # 357290
7.000%, 7/15/08.......................... 109,574 111,872
----------
TENNESSEE VALLEY AUTHORITY -- 2.7%
Tennessee Valley Authority - Global, Series
A
6.375%, 6/15/05.......................... 250,000 255,467
----------
TOTAL AGENCY OBLIGATIONS
(Cost $2,518,592)...................................... 2,553,505
----------
- ---------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS -- 13.7%
- ---------------------------------------------------------------------
AUSTRALIA -- 8.7%
Australian Government, Series 705
7.500%, 7/15/05.......................... 400,000 295,239
Queensland Treasury - Global
8.000%, 5/14/03.......................... 725,000 531,899
----------
827,138
----------
GERMANY -- 5.0%
German Government Unity Fund
8.000%, 1/21/02.......................... 790,000 479,808
----------
TOTAL FOREIGN BONDS
(Cost $1,318,359)...................................... 1,306,946
----------
<CAPTION>
NUMBER OF
SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
MUTUAL FUNDS -- 10.6%
- ---------------------------------------------------------------------
Blackrock 2001 Term Trust, Inc............. 59,700 $ 514,913
Blackrock Strategic Term Trust, Inc........ 57,400 495,075
----------
TOTAL MUTUAL FUNDS
(Cost $995,232)........................................ 1,009,988
----------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 48.0%
- ---------------------------------------------------------------------
U.S. TREASURY BONDS -- 23.3%
8.500%, 2/15/20............................ $1,710,000 2,221,666
----------
U.S. TREASURY NOTES -- 24.7%
6.250%, 1/31/02............................ 2,305,000 2,350,017
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,573,433)...................................... 4,571,683
----------
TOTAL INVESTMENTS -- 99.2%
(Cost $9,405,616)...................................... 9,442,122
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8%............ 74,725
----------
NET ASSETS -- 100.0%..................................... $9,516,847
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
34
<PAGE>
EMERGING COUNTRIES FUND
ADVISORY 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, based on the strength of our superior stock selection
and avoidance of stocks affected by the Asian economic crisis. The Fund returned
8.6% in the period, outperforming its benchmark, the MSCI Emerging Markets Free
Index, which dropped 13.4%.
Using our bottom-up stock selection process of investing company-by-company,
we were able to avoid much of the negative impact of the economic crisis in
Southeast Asia. We eliminated most of our holdings in this region on the basis
of their deteriorating fundamentals, prior to the beginning of the crisis.
The Fund was 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, benefiting 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 towards
restructuring and infrastructure rebuilding.
In South Africa, where companies have been freed from restrictions on
international investment, companies such as computer consultant Dimension Data,
performed very well for the Fund.
In Israel, we have invested in the stocks of start-up technology companies,
leveraging off a tax-exempt status.
Eastern European stocks also performed well in a environment of falling
interest rates and the benefits of the impending EMU. Gedeon Richter, a
Hungarian pharmaceutical company, and Banco Portugues de Investimento (BPI), a
Portuguese bank, were both strong performers during the 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
- --------------------------------------------------------------------------------
35
<PAGE>
EMERGING COUNTRIES ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
EMERGING COUNTRIES ADVISORY PORTFOLIO WITH THE MSCI EMERGING MARKETS FREE INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURN
As of 03/31/98 SINCE
1 YEAR 3 YEARS INCEPTION
8.60% 20.54% 13.86%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING COUNTRIES MSCI EMF
ADVISORY PORTFOLIO INDEX
<S> <C> <C>
28-Nov-94 $10,000.00 $10,000.00
31-Dec-94 9,552.88 9,374.37
31-Mar-95 8,804.82 8,211.76
30-Jun-95 10,128.98 9,064.06
30-Sep-95 10,756.66 9,005.87
31-Dec-95 10,206.36 8,884.48
31-Mar-96 11,332.76 9,437.90
30-Jun-96 12,493.55 9,831.83
30-Sep-96 12,760.11 9,476.56
31-Dec-96 13,035.12 9,420.69
31-Mar-97 14,198.97 10,217.90
30-Jun-97 16,337.01 11,092.35
30-Sep-97 16,931.86 10,097.83
31-Dec-97 14,342.61 8,328.68
31-Mar-98 15,419.39 8,844.52
</TABLE>
This graph compares a $10,000 investment in the Emerging Countries Advisory
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 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 Advisory
Portfolio commenced operations on 8/31/95.
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.
- --------------------------------------------------------------------------------
36
<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.
- --------------------------------------------------------------------------------
37
<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)
- ---------------------------------------------------------
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.
- --------------------------------------------------------------------------------
38
<PAGE>
- -------------------------------------------------------------------
<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.
- --------------------------------------------------------------------------------
39
<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.
- --------------------------------------------------------------------------------
40
<PAGE>
INTERNATIONAL SMALL CAP GROWTH FUND
ADVISORY 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 Grigolite,
Portfolio Manager
Pedro Marcal,
Partner, Portfolio Manager
Eswar Menon,
Portfolio Manager
Ernesto Ramos, Ph.D.,
Senior Portfolio Manager
John Tribolet, Portfolio Manager
GOAL: The International Small Cap Growth Fund seeks to maximize long-term
capital appreciation through investment in a portfolio of equity securities
primarily of small non-U.S. companies.
REVIEW AND OUTLOOK: The Nicholas-Applegate International Small Cap Growth Fund
outperformed its benchmark for the year with its strength largely attributable
to outstanding selection of European stocks. The Fund returned 36.9% for the
period while its benchmark, the Salomon EPAC/EMI, returned 7.8%.
Throughout the year, the Fund benefited from our avoidance of stocks affected
by the economic crisis in Southeast Asia in October.
In Europe, positive evidence of the coming EMU (European Monetary Union) may
be seen in falling interest rates, a shift toward equity investing and corporate
restructuring, especially in the banking and finance sectors. As beneficiaries
of these trends, Italian banks Banco Di Roma and Credito Italiano, performed
very well for the Fund throughout the year. Trends toward consolidation and
deregulation in European telecommunications companies led us to invest in Colt
Telecom, a telecommunications company in the United Kingdom that has expanded
across Europe into Spain and Switzerland. Irish telephone companies ESAT and
Global Telesystems are other holdings in the Fund that are benefiting from these
trends.
Ireland's, low inflation and falling interest rate environment, combined with
expectations of inclusion in the first round of EMU, contributed to many
excellent stock opportunities there.
In Japan, while the government has done little in the way of economic reform
to lead us to increase our relative underweight position there, our bottom-up
method has led us to invest in several Japanese technology companies that were
relatively unaffected by the Asian economic crisis. For example, Ibiden, a
producer of next generation plastic packaging for Intel microprocessors,
continued to be strong competitor in an environment of increasing globalization.
In Singapore, the Fund did well with the stocks of several technology Funds.
Natsteel Electronics, benefited from trends towards outsourcing. The company
makes printed circuit boards and provides outsourced contract manufacturing.
Our outlook for the Fund remains positive as we continue to find lucrative
stock opportunities in developed countries around the world.
REPRESENTATIVE HOLDINGS
Aixtron
Banco Di Roma
Benckiser NVB SHS NLG
Cap Gemini NV
Colt Telecom Group PLC
Global Telesystems Group
Misys Ord GBP.05
Ortivus AB B Shares Comm
Porsche AG
Telepizza
- --------------------------------------------------------------------------------
41
<PAGE>
INTERNATIONAL SMALL CAP GROWTH ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
INTERNATIONAL SMALL CAP GROWTH ADVISORY 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
36.90% 17.03% 8.89%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP SALOMON
GROWTH ADVISORY PORTFOLIO EPAC/EMI INDEX
<S> <C> <C>
6-07-90 $10,000.00 $10,000.00
6-30-90 $10,138.25 $10,135.00
12-31-90 $8,239.99 $8,303.82
6-30-91 $8,489.88 $8,511.83
12-31-91 $9,188.08 $8,857.15
6-30-92 $8,702.67 $8,329.44
12-31-92 $8,031.98 $7,557.32
6-30-93 $10,010.99 $9,479.41
12-31-93 $10,097.69 $9,764.47
6-30-94 $11,279.40 $11,128.80
12-31-94 $10,940.09 $11,685.83
6-30-95 $10,836.70 $10,573.78
12-31-95 $11,565.33 $11,197.92
6-30-96 $13,127.47 $12,376.53
12-31-96 $13,649.10 $11,922.57
6-30-97 $16,092.96 $12,529.00
12-31-97 $15,545.36 $10,697.60
3-31-98 $19,449.45 $12,592.89
</TABLE>
This graph compares a $10,000 investment in the International Small Cap Growth
Advisory 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 on 8/31/95. 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.
- --------------------------------------------------------------------------------
42
<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.
- --------------------------------------------------------------------------------
43
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP GROWTH FUND
<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.
- --------------------------------------------------------------------------------
44
<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.
- --------------------------------------------------------------------------------
45
<PAGE>
INTERNATIONAL CORE GROWTH FUND
ADVISORY 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 Grigolite,
Portfolio Manager
Pedro Marcal,
Partner, Portfolio Manager
Eswar Menon,
Portfolio Manager
Ernesto Ramos, Ph.D.,
Senior Portfolio Manager
John Tribolet,
Portfolio Manager
GOAL: The International Core Growth Fund seeks to maximize long-term capital
appreciation through investment in a portfolio of equity securities primarily of
mid- to large-sized non-U.S. companies.
REVIEW AND OUTLOOK: The Nicholas-Applegate International Core Growth Fund
outperformed its benchmark for the year, delivering a 36.6% return, versus 18.6%
for the MSCI EAFE.
Outstanding stock selection, particularly in Europe, contributed to
outstanding performance. Our process of selecting companies based on individual
merit played an integral role in the Fund's performance, especially in light of
the Southeast Asian economic crisis. By investing company-by-company, we avoided
stocks negatively affected by the crisis.
While many technology stocks experienced a setback in light of the Asian
economic crisis, we invested in the stocks that maintained solid fundamentals
and solid earnings growth. For example, stocks such as Nokia, a Finnish supplier
of telecommunications systems and the world's largest maker of mobile phones,
was among the Fund's best performers.
In Japan, we maintained an underweight position relative to the benchmark.
While the stocks of Japanese technology companies were also hard hit by the
Asian economic crisis, we continue to hold companies such as Sony, which has
performed very well in an environment of increasing globalization.
In Europe, positive evidence of the coming EMU (European Monetary Union) was
illustrated with falling interest rates, a shift toward equity investing and
corporate restructuring, especially in the banking and finance sectors.
In Ireland, low inflation, falling interest rates and expectations of
inclusion in the first round of EMU contributed to many excellent stock
opportunities. The Bank of Ireland benefited from this economic environment and
was a strong performer for the Fund.
The July 1, 1997 handover of Hong Kong to China created opportunities in many
"red chips" -- stocks of mainland Chinese companies listed in Hong Kong.
Our outlook for the Fund remains positive as we continue to find lucrative
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 AG, Germany
Nokia, Finland
Orange, United Kingdom
Raision Tehtaat Oy, Finland
Tabacalera, Spain
Telepizza, Spain
- --------------------------------------------------------------------------------
46
<PAGE>
INTERNATIONAL CORE GROWTH ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
INTERNATIONAL CORE GROWTH ADVISORY PORTFOLIO WITH THE MSCI EAFE INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
36.63% As of 03/31/98 41.28%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERNATIONAL CORE GROWTH
ADVISORY PORTFOLIO MSCI EAFE INDEX
<S> <C> <C>
12-27-96 $10,000.00 $10,000.00
01-31-97 10,984.04 9,629.74
02-28-97 11,081.56 9,787.66
03-31-97 11,303.19 9,822.90
04-30-97 11,462.77 9,874.96
05-31-97 12,526.59 10,517.82
06-30-97 13,244.68 11,097.35
07-31-97 14,095.74 11,277.13
08-31-97 13,351.06 10,434.73
09-30-97 14,335.10 11,019.07
10-31-97 13,147.16 10,171.71
11-30-97 12,996.45 10,067.95
12-31-97 13,164.89 10,155.54
01-31-98 13,643.62 10,619.65
02-28-98 14,574.47 11,301.12
03-31-98 15,443.26 11,649.19
</TABLE>
This graph compares a $10,000 investment in the International Core Growth
Advisory 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. 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 2/28/97.
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 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 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.
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.
- --------------------------------------------------------------------------------
47
<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.
- --------------------------------------------------------------------------------
48
<PAGE>
- -------------------------------------------------------------------
<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.
- --------------------------------------------------------------------------------
49
<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.
- --------------------------------------------------------------------------------
50
<PAGE>
WORLDWIDE GROWTH FUND
ADVISORY 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 Grigolite,
Portfolio Manager
Pedro Marcal,
Partner, Portfolio Manager
Eswar Menon,
Portfolio Manager
Ernesto Ramos, Ph.D.,
Senior Portfolio Manager
John 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 our superior stock
selection. The Fund returned 35.1% for the period, while its benchmark, the MSCI
World Index, returned 32.0%.
Domestically, the Fund benefited from the stocks of companies thriving in the
strong economic environment. A combination of low interest rates, a high level
of consumer confidence and an overall market that achieved the returns expected
by analysts for all of 1998 in just the first quarter contributed to the growth
of many domestic companies. The Gap, K-Mart and Costco were among the best
performing domestic holdings, benefiting from increased consumer spending.
Though the technology sector was hit hard by the Asian economic crisis, the
Fund benefited from our avoidance of stocks with little to no exposure to Asia.
Companies such as Nokia, 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 year. In Europe, anticipation of the European Monetary
Union (EMU) may be seen in positive changes such as falling interest rates, 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, performing very well for the Fund.
In Ireland, low inflation, falling interest rates and expectations of
inclusion in the first round of EMU contributed to our finding many excellent
stock opportunities. The Bank of Ireland benefited from this economic
environment and was a strong performer for the Fund.
We maintained the Fund's underweight position in Japan relative to the
benchmark as few companies met our strict criteria in an environment where the
government has done little to stimulate economic reform.
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
Bank Of Ireland GBP
British Pound Sterling
Credito Italiano
Costco Companies Inc.
Groupe Danone
Mannesmann Ag
Nokia Corp.
Raision Tehtaat Oy
Tabacalera
- --------------------------------------------------------------------------------
51
<PAGE>
WORLDWIDE GROWTH ADVISORY PORTFOLIO
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE
WORLDWIDE GROWTH ADVISORY PORTFOLIO WITH THE MSCI WORLD INDEX.
<TABLE>
<S> <C> <C>
ANNUALIZED TOTAL RETURNS
As of 03/31/98 SINCE
1 YEAR 3 YEARS INCEPTION
35.11% 22.33% 17.05%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WORLDWIDE GROWTH MSCI WORLD
ADVISORY PORTFOLIO INDEX
19-APR-93 $10,000.00 $10,000.00
<S> <C> <C>
30-Jun-93 10,532.26 10,283.06
30-Sep-93 11,365.59 10,765.74
31-Dec-93 11,430.11 10,940.63
31-Mar-94 11,978.49 11,007.30
30-Jun-94 11,774.19 11,338.33
30-Sep-94 12,376.34 11,581.61
31-Dec-94 11,741.94 11,498.33
31-Mar-95 11,903.23 12,017.66
30-Jun-95 12,591.40 12,530.40
30-Sep-95 13,774.19 13,212.41
31-Dec-95 13,494.62 13,839.58
31-Mar-96 14,301.08 14,402.82
30-Jun-96 15,290.32 14,820.99
30-Sep-96 15,301.08 15,018.73
31-Dec-96 15,967.74 15,705.98
31-Mar-97 16,129.03 15,751.02
30-Jun-97 18,537.64 18,121.07
30-Sep-97 20,365.59 18,639.41
31-Dec-97 18,783.49 18,179.79
31-Mar-98 21,791.96 20,783.77
</TABLE>
This graph compares a $10,000 investment in the Worldwide Growth Advisory
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 Portfolio commenced operations on
8/31/95. 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.
- --------------------------------------------------------------------------------
52
<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.
- --------------------------------------------------------------------------------
53
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
WORLDWIDE GROWTH FUND
<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.
- --------------------------------------------------------------------------------
54
<PAGE>
- -------------------------------------------------------------------
<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.
- --------------------------------------------------------------------------------
55
<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.
- --------------------------------------------------------------------------------
56
<PAGE>
(This page intentionally left blank)
- --------------------------------------------------------------------------------
57
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
ADVISORY SERIES PORTFOLIOS
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED DISTRIBUTIONS
VALUES AT INVESTMENT AND UNREALIZED FROM NET DISTRIBUTIONS
BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM CAPITAL
OF PERIOD (DEFICIT) ON INVESTMENTS INCOME 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............ 13.19 0.03 6.16 -- (0.11)
For the year ended 3/31/97............ 14.16 (0.07) (0.77) -- (0.13)
For the period ended 3/31/96*......... 12.50 (0.03) 1.69 -- --
CORE GROWTH(3)
For the year ended 3/31/98............ 18.01 (0.21) 7.48 -- (1.98)
For the year ended 3/31/97............ 17.99 (0.04) 0.32 -- (0.26)
For the year ended 3/31/96............ 13.66 (0.07) 4.86 -- (0.46)
For the period ended 3/31/95*......... 12.50 (0.02) 1.18 -- --
LARGE CAP GROWTH(4)
For the period ended 3/31/98*+++...... 12.50 (0.01) 3.26 $ (0.01) (0.08)
INCOME & GROWTH(2)
For the year ended 3/31/98............ 15.19 0.48 4.19 (0.48) (0.91)
For the year ended 3/31/97............ 13.72 0.42 1.50 (0.42) (0.03)
For the period ended 3/31/96*......... 12.50 0.17 1.22 (0.17) --
BALANCED GROWTH(3)
For the year ended 3/31/98++.......... 13.42 0.30 5.07 (0.31) --
For the year ended 3/31/97............ 12.69 0.24 0.73 (0.24) --
For the period ended 3/31/96*......... 12.50 0.15 0.19 (0.15) --
GOVERNMENT INCOME(2)
For the year ended 3/31/98++.......... 11.61 0.62 0.84 (0.62) (0.15)
For the year ended 3/31/97............ 12.44 0.70 (0.39) (0.71) (0.43)
For the period ended 3/31/96*......... 12.50 0.37 (0.06) (0.37) --
EMERGING COUNTRIES(2)
For the year ended 3/31/98++.......... 16.47 0.07 1.33 -- (0.11)
For the year ended 3/31/97............ 13.18 (0.04) 3.37 -- (0.04)
For the period ended 3/31/96*......... 12.50 0.01 0.67 -- --
INTERNATIONAL SMALL CAP GROWTH(2)
For the year ended 3/31/98............ 14.01 0.05 5.12 -- --
For the year ended 3/31/97............ 13.52 (0.06) 2.01 -- (1.46)
For the period ended 3/31/96*......... 12.50 0.01 1.01 -- --
INTERNATIONAL CORE GROWTH(5)
For the year ended 3/31/98+++......... 12.75 (0.04) 4.72 -- --
For the period ended 3/31/97*......... 12.50 -- 0.25 -- --
WORLDWIDE GROWTH(2)
For the year ended 3/31/98++.......... 15.00 (0.11) 5.29 -- (0.55)
For the year ended 3/31/97............ 13.27 0.01 1.72 -- --
For the period ended 3/31/96*......... 12.50 (0.04) 0.81 -- --
</TABLE>
- -----------------
(1) Commenced Operations on July 12, 1995.
(2) Commenced Operations on August 31, 1995.
(3) Commenced Operations on June 30, 1994.
(4) Commenced Operations on July 15, 1997.
(5) Commenced Operations on February 28, 1997.
* Annualized.
** Includes expenses allocated from the Master Trust Funds. See Notes to Funds'
Financial Statements for amounts.
+ Mini Cap Growth Institutional Portfolio
++ 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, Government
Income, Emerging Countries and Worldwide Growth would have been 39.49%,
9.89%, 7.83% and 30.87%, respectively.
+++ The total returns of these portfolios were linked to the total returns,
after adjusting for the expenses and sales charge, of the Institutional
Portfolios (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 Large Cap
Growth and International Core Growth would have been 25.28% and 36.63%,
respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
58
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
EXPENSES TO
RATIO OF EXPENSES TO AVERAGE NET
AVERAGE NET ASSETS, ASSETS, BEFORE
NET ASSET NET ASSETS AFTER EXPENSE EXPENSE
VALUES AT END AT END OF REIMBURSEMENT AND REIMBURSEMENT
OF PERIOD TOTAL RETURN PERIOD 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............ 19.27 47.01% 12,508,383 1.52% 2.39%
For the year ended 3/31/97............ 13.19 (6.03%) 1,013,030 1.51% 10.79%
For the period ended 3/31/96*......... 14.16 13.28% 313,634 1.49% 37.86%
CORE GROWTH(3)
For the year ended 3/31/98............ 23.30 42.00% 12,204,391 1.22% 1.95%
For the year ended 3/31/97............ 18.01 1.39% 13,115,276 1.25% 1.84%
For the year ended 3/31/96............ 17.99 35.37% 4,273,872 1.23% 2.84%
For the period ended 3/31/95*......... 13.66 9.28% 2,120,619 1.24% 3.52%
LARGE CAP GROWTH(4)
For the period ended 3/31/98*+++...... 15.66 62.47% 798,864 1.25% 10.45%
INCOME & GROWTH(2)
For the year ended 3/31/98............ 18.47 31.54% 7,080,465 1.22% 2.35%
For the year ended 3/31/97............ 15.19 14.13% 4,598,883 1.25% 2.90%
For the period ended 3/31/96*......... 13.72 11.13% 1,084,730 1.25% 9.21%
BALANCED GROWTH(3)
For the year ended 3/31/98++.......... 18.48 40.21% 165,613 1.26% 11.28%
For the year ended 3/31/97............ 13.42 7.60% 72,627 1.26% 126.75%
For the period ended 3/31/96*......... 12.69 2.77% 1,231 1.25% 3094.48%
GOVERNMENT INCOME(2)
For the year ended 3/31/98++.......... 12.30 12.80% 282,919 0.91% 37.81%
For the year ended 3/31/97............ 11.61 2.54% 1,241 0.88% 2789.64%
For the period ended 3/31/96*......... 12.44 2.48% 1,219 0.95% 3029.81%
EMERGING COUNTRIES(2)
For the year ended 3/31/98++.......... 17.76 8.60% 46,710,857 1.91% 2.43%
For the year ended 3/31/97............ 16.47 25.29% 8,660,367 1.91% 4.20%
For the period ended 3/31/96*......... 13.18 5.44% 350,058 1.90% 44.24%
INTERNATIONAL SMALL CAP GROWTH(2)
For the year ended 3/31/98............ 19.18 36.90% 8,810,241 1.66% 6.15%
For the year ended 3/31/97............ 14.01 15.03% 42,150 1.66% 151.33%
For the period ended 3/31/96*......... 13.52 8.16% 19,082 1.65% 531.72%
INTERNATIONAL CORE GROWTH(5)
For the year ended 3/31/98+++......... 17.43 36.63% 1,718,948 1.66% 3.18%
For the period ended 3/31/97*......... 12.75 2.00% 1,020 0.00% 2667.07%
WORLDWIDE GROWTH(2)
For the year ended 3/31/98++.......... 19.63 35.11% 644,752 1.61% 3.75%
For the year ended 3/31/97............ 15.00 12.87% 641,965 1.61% 34.99%
For the period ended 3/31/96*......... 13.27 6.32% 1,115 1.60% 3232.53%
<CAPTION>
RATIO OF NET
INVESTMENT INCOME (DEFICIT) TO
(DEFICIT) TO AVERAGE AVERAGE NET
NET ASSETS, AFTER ASSETS, BEFORE
EXPENSE EXPENSE
REIMBURSEMENT AND REIMBURSEMENT AND
FEE WAIVER** 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............ (1.52%) (2.39%)
For the year ended 3/31/97............ (1.02%) (10.31%)
For the period ended 3/31/96*......... (1.05%) (32.41%)
CORE GROWTH(3)
For the year ended 3/31/98............ (0.97%) (1.70%)
For the year ended 3/31/97............ (0.69%) (1.28%)
For the year ended 3/31/96............ (0.57%) (2.18%)
For the period ended 3/31/95*......... (0.33%) (1.61%)
LARGE CAP GROWTH(4)
For the period ended 3/31/98*+++...... (0.62%) (9.82%)
INCOME & GROWTH(2)
For the year ended 3/31/98............ 5.99% 4.87%
For the year ended 3/31/97............ 3.29% 1.61%
For the period ended 3/31/96*......... 3.59% (4.22%)
BALANCED GROWTH(3)
For the year ended 3/31/98++.......... 4.09% (5.94%)
For the year ended 3/31/97............ 2.15% (123.09%)
For the period ended 3/31/96*......... 2.16% (3090.46%)
GOVERNMENT INCOME(2)
For the year ended 3/31/98++.......... 10.52% (26.38%)
For the year ended 3/31/97............ 5.04% (2782.24%)
For the period ended 3/31/96*......... 5.23% (3021.56%)
EMERGING COUNTRIES(2)
For the year ended 3/31/98++.......... 1.06% 0.54%
For the year ended 3/31/97............ (0.87%) (3.20%)
For the period ended 3/31/96*......... 0.47% (35.33%)
INTERNATIONAL SMALL CAP GROWTH(2)
For the year ended 3/31/98............ (0.43%) (4.93%)
For the year ended 3/31/97............ (0.64%) (150.28%)
For the period ended 3/31/96*......... 0.33% (529.11%)
INTERNATIONAL CORE GROWTH(5)
For the year ended 3/31/98+++......... (0.47%) (1.99%)
For the period ended 3/31/97*......... 0.00% (2666.34%)
WORLDWIDE GROWTH(2)
For the year ended 3/31/98++.......... (0.47%) (2.61%)
For the year ended 3/31/97............ (0.91%) (34.23%)
For the period ended 3/31/96*......... (0.50%) (3231.44%)
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
59
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
ADVISORY SERIES PORTFOLIOS
<TABLE>
<CAPTION>
MINI CAP EMERGING CORE LARGE CAP
GROWTH+ GROWTH GROWTH GROWTH
<S> <C> <C> <C> <C>
-------------------------------------------------------------
ASSETS
Investments in Master Trust Fund, at
value*.............................. $ 82,164,598 $ 12,517,774 $ 12,194,825 $ 799,241
Receivable for shares of beneficial
interests sold...................... 12,946 206,161 5,000 --
Receivable for investments sold in
Master Trust Fund................... 267,424 2,000 2,838 --
Due from advisor...................... 45,502 8,775 24,652 9,021
Other assets.......................... -- -- -- --
-------------------------------------------------------------
Total assets........................ 82,490,470 12,734,710 12,227,315 808,262
-------------------------------------------------------------
LIABILITIES
Payable for investments purchased in
Master Trust Fund................... 12,946 206,161 5,000 --
Payable for shares of beneficial
interests repurchased............... 267,424 2,000 2,838 --
Accrued expenses...................... 88,170 18,166 15,086 9,398
-------------------------------------------------------------
Total liabilities................... 368,540 226,327 22,924 9,398
-------------------------------------------------------------
NET ASSETS.............................. $ 82,121,930 $ 12,508,383 $ 12,204,391 $ 798,864
-------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital....................... $ 53,762,454 $ 11,437,876 $ 8,788,736 $ 712,233
Accumulated undistributed net
investment income (deficit)......... (1,280,770) (44,859) (175,305) (705)
Accumulated undistributed net realized
gain (loss)......................... 2,365,460 (72,712) 484,696 1,133
Accumulated undistributed foreign
exchange gain (loss)................ -- -- -- --
Net unrealized foreign exchange gain
(loss).............................. -- -- -- --
Net unrealized appreciation on
investments......................... 27,274,786 1,188,078 3,106,264 86,203
-------------------------------------------------------------
Net assets.......................... $ 82,121,930 $ 12,508,383 $ 12,204,391 $ 798,864
-------------------------------------------------------------
Shares of beneficial interest, no par
value, issued and outstanding
(unlimited shares authorized)....... 3,278,934 649,154 523,707 51,005
-------------------------------------------------------------
COMPUTATION OF
Net asset value per share of
beneficial interest (Net assets/
Outstanding shares of beneficial
interest)........................... $ 25.05 $ 19.27 $ 23.30 $ 15.66
-------------------------------------------------------------
*Cost of investments in the Master Trust
Fund.................................. $ 47,503,134 $ 11,405,188 $ 7,285,112 $ 712,014
-------------------------------------------------------------
</TABLE>
- -------------
+ Mini Cap Growth Institutional Portfolio
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
60
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
INCOME & BALANCED GOVERNMENT EMERGING SMALL CAP INTERNATIONAL
GROWTH GROWTH INCOME COUNTRIES GROWTH CORE GROWTH
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
ASSETS
Investments in Master Trust Fund, at
value*.............................. $ 7,108,846 $164,392 $283,059 $46,691,430 $ 8,811,417 $ 1,721,452
Receivable for shares of beneficial
interests sold...................... 4,809 -- -- 506,424 719,500 51,700
Receivable for investments sold in
Master Trust Fund................... 6,057 -- -- 26,819 7,097 --
Due from advisor...................... 42,238 1,966 1,723 48,503 5,181 890
Other assets.......................... -- 12,153 37,861 -- 2,541 --
----------------------------------------------------------------------------------
Total assets........................ 7,161,950 178,511 322,643 47,273,176 9,545,736 1,774,042
----------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased in
Master Trust Fund................... 4,809 -- -- 506,424 719,500 51,700
Payable for shares of beneficial
interests repurchased............... 6,057 -- -- 26,819 7,097 --
Accrued expenses...................... 70,619 12,898 39,724 29,076 8,898 3,394
----------------------------------------------------------------------------------
Total liabilities................... 81,485 12,898 39,724 562,319 735,495 55,094
----------------------------------------------------------------------------------
NET ASSETS.............................. $ 7,080,465 $165,613 $282,919 $46,710,857 $ 8,810,241 $ 1,718,948
----------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital....................... $ 5,640,861 $138,183 $283,324 $45,981,868 $ 8,549,875 $ 1,544,648
Accumulated undistributed net
investment income (deficit)......... (232) 1 (84) 97,469 (150) (3,639)
Accumulated undistributed net realized
gain (loss)......................... 56,512 9,386 (2,177) (4,665,597) 2,362 (82,095)
Accumulated undistributed foreign
exchange gain (loss)................ -- 745 139 (91,344) (1,494) (3,012)
Net unrealized foreign exchange gain
(loss).............................. -- (88) 804 16 2,752 514
Net unrealized appreciation on
investments......................... 1,383,324 17,386 913 5,388,445 256,896 262,532
----------------------------------------------------------------------------------
Net assets.......................... $ 7,080,465 $165,613 $282,919 $46,710,857 $ 8,810,241 $ 1,718,948
----------------------------------------------------------------------------------
Shares of beneficial interest, no par
value, issued and outstanding
(unlimited shares authorized)....... 383,344 8,960 23,000 2,630,762 459,262 98,626
----------------------------------------------------------------------------------
COMPUTATION OF
Net asset value per share of
beneficial interest (Net assets/
Outstanding shares of beneficial
interest)........................... $ 18.47 $ 18.48 $ 12.30 $ 17.76 $ 19.18 $ 17.43
----------------------------------------------------------------------------------
*Cost of investments in the Master Trust
Fund.................................. $ 5,034,232 $133,713 $280,652 $45,690,900 $ 8,546,913 $ 1,544,648
----------------------------------------------------------------------------------
<CAPTION>
WORLDWIDE
GROWTH
<S> <C>
ASSETS
Investments in Master Trust Fund, at
value*.............................. $648,171
Receivable for shares of beneficial
interests sold...................... 7,604
Receivable for investments sold in
Master Trust Fund................... --
Due from advisor...................... 4,226
Other assets.......................... --
Total assets........................ 660,001
LIABILITIES
Payable for investments purchased in
Master Trust Fund................... 7,604
Payable for shares of beneficial
interests repurchased............... --
Accrued expenses...................... 7,645
Total liabilities................... 15,249
NET ASSETS.............................. $644,752
COMPOSITION OF NET ASSETS
Paid-in capital....................... $491,316
Accumulated undistributed net
investment income (deficit)......... (4,390)
Accumulated undistributed net realized
gain (loss)......................... 46,822
Accumulated undistributed foreign
exchange gain (loss)................ (3,698)
Net unrealized foreign exchange gain
(loss).............................. 26
Net unrealized appreciation on
investments......................... 114,676
Net assets.......................... $644,752
Shares of beneficial interest, no par
value, issued and outstanding
(unlimited shares authorized)....... 32,849
COMPUTATION OF
Net asset value per share of
beneficial interest (Net assets/
Outstanding shares of beneficial
interest)........................... $ 19.63
*Cost of investments in the Master Trust
Fund.................................. $468,048
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
61
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1998
- ------------------------------------------------------------------------
ADVISORY SERIES PORTFOLIOS
<TABLE>
<CAPTION>
MINI CAP EMERGING LARGE CAP
GROWTH+ GROWTH CORE GROWTH GROWTH++
<S> <C> <C> <C> <C>
-------------------------------------------------------------
INVESTMENT INCOME
Net investment income (deficit) from
Master Trust Fund................... $ (841,804) $ (22,612) $ (40,690) $ (312)
-------------------------------------------------------------
EXPENSES
Accounting fees....................... 43,656 2,405 8,200 78
Administration fees................... 5,000 5,000 976 503
Audit & tax fees...................... 17,303 1,545 3,767 46
Co-Administration fees................ 68,683 3,874 12,708 146
Insurance............................. 3,916 150 764 1
Legal fees............................ 8,916 2,678 5,281 27
Miscellaneous......................... 5,391 76 262 132
Organization costs.................... 1,758 622 8,057 --
Registration fees -- federal.......... 1,046 222 1,960 --
Registration fees -- state............ 17,331 3,555 8,052 410
Shareholder reporting fees............ 31,106 5,589 46,671 81
Shareholder servicing fees............ -- 9,686 31,770 308
Transfer agent fees................... 13,459 11,742 3,370 7,829
Trustees' fees........................ 1,270 1,270 1,270 877
-------------------------------------------------------------
Total expenses...................... 218,835 48,414 133,108 10,438
Less: Reimbursement to (from)
advisor............................. (115,811) (29,817) (79,245) (9,922)
Less: Co-Administration fees waived... (68,683) (3,874) (12,708) (146)
Add: Line of credit commitment fee.... 4,717 256 894 8
-------------------------------------------------------------
Net expenses........................ 39,058 14,979 42,049 378
-------------------------------------------------------------
Net investment income (deficit)... (880,862) (37,591) (82,739) (690)
-------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 5,702,809 (17,543) 1,058,728 1,336
Net realized foreign exchange gain
(loss).............................. -- -- -- --
Change in net unrealized foreign
exchange gain (loss)................ -- -- -- --
Change in net unrealized appreciation
of investments...................... 25,834,769 1,218,656 3,408,459 86,203
-------------------------------------------------------------
Net gain (loss) on investments.... 31,537,578 1,201,113 4,467,187 87,539
-------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $ 30,656,716 $ 1,163,522 $ 4,384,448 $ 86,849
-------------------------------------------------------------
</TABLE>
- -------------
+ Mini Cap Growth Institutional Portfolio
++ Commenced operations on July 15, 1997.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
62
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
INCOME & BALANCED GOVERNMENT EMERGING SMALL CAP INTERNATIONAL
GROWTH GROWTH INCOME COUNTRIES GROWTH CORE GROWTH
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
INVESTMENT INCOME
Net investment income (deficit) from
Master Trust Fund................... $ 187,051 $ 2,512 $ 2,372 $ 187,669 $ 1,095 $ (1,135)
----------------------------------------------------------------------------------
EXPENSES
Accounting fees....................... 3,816 71 28 15,318 219 512
Administration fees................... 1,415 164 169 4,855 212 746
Audit & tax fees...................... 2,212 49 16 6,983 527 189
Co-Administration fees................ 5,933 110 44 24,071 353 817
Insurance............................. 360 6 -- 1,316 -- 42
Legal fees............................ 4,527 142 8 14,309 53 766
Miscellaneous......................... 704 404 -- 2,780 425 374
Organization costs.................... 622 622 639 656 622 --
Registration fees -- federal.......... 922 21 -- 2,242 6 7
Registration fees -- state............ 9,934 60 6,529 11,851 29 6,369
Shareholder reporting fees............ 17,416 34 27 26,160 1,222 401
Shareholder servicing fees............ 14,832 276 110 60,178 882 2,042
Transfer agent fees................... 21,654 7,971 7,020 16,525 10,650 532
Trustees' fees........................ 1,270 1,270 1,270 1,270 1,270 1,270
----------------------------------------------------------------------------------
Total expenses...................... 85,617 11,200 15,860 188,514 16,470 14,067
Less: Reimbursement to (from)
advisor............................. (61,664) (10,759) (15,683) (92,229) (15,061) (10,800)
Less: Co-Administration fees waived... (5,933) (110) (44) (24,071) (353) (817)
Add: Line of credit commitment fee.... 414 8 2 1,630 23 54
----------------------------------------------------------------------------------
Net expenses........................ 18,434 339 135 73,844 1,079 2,504
----------------------------------------------------------------------------------
Net investment income (deficit)... 168,617 2,173 2,237 113,825 16 (3,639)
----------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 245,941 13,555 (1,982) (4,685,361) 3,789 (82,104)
Net realized foreign exchange gain
(loss).............................. -- 745 139 (87,842) (1,389) (3,010)
Change in net unrealized foreign
exchange gain (loss)................ -- (88) 804 26 2,757 514
Change in net unrealized appreciation
of investments...................... 1,180,413 17,338 937 5,334,689 253,301 262,519
----------------------------------------------------------------------------------
Net gain (loss) on investments.... 1,426,354 31,550 (102) 561,512 258,458 177,919
----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $ 1,594,971 $ 33,723 $ 2,135 $ 675,337 $ 258,474 $ 174,280
----------------------------------------------------------------------------------
<CAPTION>
WORLDWIDE
GROWTH
<S> <C>
INVESTMENT INCOME
Net investment income (deficit) from
Master Trust Fund................... $ (320)
EXPENSES
Accounting fees....................... 431
Administration fees................... 260
Audit & tax fees...................... 346
Co-Administration fees................ 709
Insurance............................. 44
Legal fees............................ 607
Miscellaneous......................... 39
Organization costs.................... 622
Registration fees -- federal.......... 179
Registration fees -- state............ 4,865
Shareholder reporting fees............ 43
Shareholder servicing fees............ 1,774
Transfer agent fees................... 6,188
Trustees' fees........................ 1,270
Total expenses...................... 17,377
Less: Reimbursement to (from)
advisor............................. (13,831)
Less: Co-Administration fees waived... (709)
Add: Line of credit commitment fee.... 50
Net expenses........................ 2,887
Net investment income (deficit)... (3,207)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 84,500
Net realized foreign exchange gain
(loss).............................. (2,657)
Change in net unrealized foreign
exchange gain (loss)................ 172
Change in net unrealized appreciation
of investments...................... 108,761
Net gain (loss) on investments.... 190,776
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $187,569
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
63
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------
ADVISORY SERIES PORTFOLIOS
<TABLE>
<CAPTION>
MINI CAP GROWTH+ EMERGING GROWTH
----------------------------- -----------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED MARCH ENDED MARCH ENDED MARCH ENDED MARCH
31, 1998 31, 1997 31, 1998 31, 1997
<S> <C> <C> <C> <C>
-------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ (880,862) $ (322,817) $ (37,591) $ (6,606)
Net realized gain (loss) from
security transactions............. 5,702,809 2,962,417 (17,543) (21,713)
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) 1,218,656 (61,991)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations.................... 30,656,716 924,143 1,163,522 (90,310)
-------------------------------------------------------------
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. -- -- -- --
Capital gain*....................... (5,282,913) (960,218) (17,729) (6,514)
-------------------------------------------------------------
Total Distributions............. (5,282,913) (960,218) (17,729) (6,514)
-------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 69,138,576 13,080,834 20,108,210 1,391,179
Proceeds from shares issued for
distribution reinvestment......... 4,472,132 754,309 17,715 6,514
Cost of shares repurchased.......... (45,574,203) (10,324,523) (9,776,365) (601,473)
-------------------------------------------------------------
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... 28,036,505 3,510,620 10,349,560 796,220
-------------------------------------------------------------
Total increase in net assets.... 53,410,308 3,474,545 11,495,353 699,396
-------------------------------------------------------------
NET ASSETS
BEGINNING OF PERIOD................... 28,711,622 25,237,077 1,013,030 313,634
-------------------------------------------------------------
END OF PERIOD......................... $ 82,121,930 $ 28,711,622 $ 12,508,383 $ 1,013,030
-------------------------------------------------------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 1,801,049 1,592,133 76,796 22,145
Shares sold........................... 3,242,406 724,572 1,102,868 94,608
Shares issued for distributions
reinvested.......................... 202,450 43,501 997 430
Shares repurchased.................... (1,966,971) (559,157) (531,507) (40,387)
-------------------------------------------------------------
Ending balance.................. 3,278,934 1,801,049 649,154 76,796
-------------------------------------------------------------
</TABLE>
- -------------
+ Mini Cap Growth Institutional Portfolio
++ Commenced Operations on July 15, 1997.
* See Financial Highlights for per share distribution amounts.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
64
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP
GROWTH
CORE GROWTH ------------- INCOME & GROWTH
----------------------------- FOR THE -----------------------------
FOR THE YEAR FOR THE YEAR PERIOD ENDED FOR THE YEAR FOR THE YEAR
ENDED MARCH ENDED MARCH MARCH 31, ENDED MARCH ENDED MARCH
31, 1998 31, 1997 1998++ 31, 1998 31, 1997
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS
Net investment income
(deficit)............... $ (82,739) $ (72,445) $ (690) $ 168,617 $ 99,601
Net realized gain (loss)
from security
transactions............ 1,058,728 558,099 1,336 245,941 152,145
Net realized foreign
exchange gain (loss).... -- -- -- -- --
Change in net unrealized
foreign exchange gain
(loss).................. -- -- -- -- --
Change in net unrealized
appreciation
(depreciation) of
investments............. 3,408,459 (1,064,428) 86,203 1,180,413 129,441
-----------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations..... 4,384,448 (578,774) 86,849 1,594,971 381,187
-----------------------------------------------------------------------------
DISTRIBUTIONS TO SHARES OF
BENEFICIAL INTEREST
Net investment income*.... -- -- (15) (168,740) (99,816)
Capital gain*............. (1,145,207) (168,885) (203) (321,839) (8,197)
-----------------------------------------------------------------------------
Total Distributions... (1,145,207) (168,885) (218) (490,579) (108,013)
-----------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Proceeds from shares
sold.................... 3,584,125 12,065,203 714,785 1,905,912 4,299,937
Proceeds from shares
issued for distribution
reinvestment............ 1,134,102 168,743 153 490,423 107,903
Cost of shares
repurchased............. (8,868,353) (2,644,883) (2,705) (1,019,145) (1,166,861)
-----------------------------------------------------------------------------
Increase (decrease) in
net assets derived
from transactions in
shares of beneficial
interest.............. (4,150,126) 9,589,063 712,233 1,377,190 3,240,979
-----------------------------------------------------------------------------
Total increase in net
assets.............. (910,885) 8,841,404 798,864 2,481,582 3,514,153
-----------------------------------------------------------------------------
NET ASSETS
BEGINNING OF PERIOD......... 13,115,276 4,273,872 -- 4,598,883 1,084,730
-----------------------------------------------------------------------------
END OF PERIOD............... $ 12,204,391 $ 13,115,276 $ 798,864 $ 7,080,465 $ 4,598,883
-----------------------------------------------------------------------------
CHANGES IN SHARES OF
BENEFICIAL INTEREST
Beginning balance........... 728,031 237,524 -- 302,819 79,061
Shares sold................. 170,070 619,082 51,175 111,297 292,321
Shares issued for
distributions
reinvested................ 55,785 8,425 11 28,400 7,215
Shares repurchased.......... (430,179) (137,000) (181) (59,172) (75,778)
-----------------------------------------------------------------------------
Ending balance........ 523,707 728,031 51,005 383,344 302,819
-----------------------------------------------------------------------------
<CAPTION>
BALANCED GROWTH
-----------------------------
FOR THE YEAR FOR THE YEAR
ENDED MARCH ENDED MARCH
31, 1998 31, 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS
Net investment income
(deficit)............... $ 2,173 $ 631
Net realized gain (loss)
from security
transactions............ 13,555 (4,148)
Net realized foreign
exchange gain (loss).... 745 --
Change in net unrealized
foreign exchange gain
(loss).................. (88) --
Change in net unrealized
appreciation
(depreciation) of
investments............. 17,338 9
Net increase
(decrease) in net
assets resulting
from operations..... 33,723 (3,508)
DISTRIBUTIONS TO SHARES OF
BENEFICIAL INTEREST
Net investment income*.... (2,188) (615)
Capital gain*............. -- --
Total Distributions... (2,188) (615)
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Proceeds from shares
sold.................... 67,581 74,911
Proceeds from shares
issued for distribution
reinvestment............ 3,310 614
Cost of shares
repurchased............. (9,440) (6)
Increase (decrease) in
net assets derived
from transactions in
shares of beneficial
interest.............. 61,451 75,519
Total increase in net
assets.............. 92,986 71,396
NET ASSETS
BEGINNING OF PERIOD......... 72,627 1,231
END OF PERIOD............... $ 165,613 $ 72,627
CHANGES IN SHARES OF
BENEFICIAL INTEREST
Beginning balance........... 5,413 97
Shares sold................. 3,525 5,271
Shares issued for
distributions
reinvested................ 128 45
Shares repurchased.......... (106) --
Ending balance........ 8,960 5,413
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
65
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- CONTINUED
- --------------------------------------------------------------------------------
ADVISORY SERIES PORTFOLIOS
<TABLE>
<CAPTION>
GOVERNMENT INCOME EMERGING COUNTRIES
----------------------------- -----------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED MARCH ENDED MARCH ENDED MARCH ENDED MARCH
31, 1998 31, 1997 31, 1998 31, 1997
<S> <C> <C> <C> <C>
-------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (deficit)..... $ 2,237 $ 71 $ 113,825 $ (16,586)
Net realized gain (loss) from
security transactions............. (1,982) 33 (4,685,361) 221,510
Net realized foreign exchange gain
(loss)............................ 139 -- (87,842) (3,283)
Change in net unrealized foreign
exchange gain (loss).............. 804 -- 26 (25)
Change in net unrealized
appreciation (depreciation) of
investments....................... 937 7 5,334,689 41,767
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations.................... 2,135 111 675,337 243,383
-------------------------------------------------------------
DISTRIBUTIONS TO SHARES OF BENEFICIAL
INTEREST
Net investment income*.............. (2,320) (72) -- --
Capital gain*....................... (203) (44) (187,543) (4,173)
-------------------------------------------------------------
Total Distributions............. (2,523) (116) (187,543) (4,173)
-------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Proceeds from shares sold........... 279,550 -- 51,065,387 8,292,819
Proceeds from shares issued for
distribution reinvestment......... 2,520 111 151,971 4,139
Cost of shares repurchased.......... (4) (84) (13,654,662) (225,859)
-------------------------------------------------------------
Increase (decrease) in net assets
derived from transactions in
shares of beneficial interest... 282,066 27 37,562,696 8,071,099
-------------------------------------------------------------
Total increase in net assets.... 281,678 22 38,050,490 8,310,309
-------------------------------------------------------------
NET ASSETS
BEGINNING OF PERIOD................... 1,241 1,219 8,660,367 350,058
-------------------------------------------------------------
END OF PERIOD......................... $ 282,919 $ 1,241 $ 46,710,857 $ 8,660,367
-------------------------------------------------------------
CHANGES IN SHARES OF BENEFICIAL INTEREST
Beginning balance..................... 107 98 525,746 26,554
Shares sold........................... 22,688 -- 2,910,075 513,026
Shares issued for distributions
reinvested.......................... 205 9 9,663 280
Shares repurchased.................... -- -- (814,722) (14,114)
-------------------------------------------------------------
Ending balance.................. 23,000 107 2,630,762 525,746
-------------------------------------------------------------
</TABLE>
- -------------
+++ Commenced Operations on February 28, 1997.
* See Financial Highlights for per share distribution amounts.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
66
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP INTERNATIONAL CORE GROWTH
GROWTH ----------------------------- WORLDWIDE GROWTH
----------------------------- FOR THE -----------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR PERIOD ENDED FOR THE YEAR FOR THE YEAR
ENDED MARCH ENDED MARCH ENDED MARCH MARCH 31, ENDED MARCH ENDED MARCH
31, 1998 31, 1997 31, 1998 1997+++ 31, 1998 31, 1997
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS
Net investment income
(deficit)............... $ 16 $ (178) $ (3,639) $ -- $ (3,207) $ (1,180)
Net realized gain (loss)
from security
transactions............ 3,789 1,679 (82,104) 9 84,500 (14,371)
Net realized foreign
exchange gain (loss).... (1,389) (97) (3,010) (2) (2,657) (1,040)
Change in net unrealized
foreign exchange gain
(loss).................. 2,757 (4) 514 -- 172 (146)
Change in net unrealized
appreciation
(depreciation) of
investments............. 253,301 2,421 262,519 13 108,761 5,807
---------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations..... 258,474 3,821 174,280 20 187,569 (10,930)
---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARES OF
BENEFICIAL INTEREST
Net investment income*.... -- -- -- -- -- --
Capital gain*............. -- (2,962) -- -- (23,268) --
---------------------------------------------------------------------------------------------
Total Distributions... -- (2,962) -- -- (23,268) --
---------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Proceeds from shares
sold.................... 8,543,873 20,400 1,808,824 -- 1,508,613 687,001
Proceeds from shares
issued for distribution
reinvestment............ -- 2,963 -- -- 23,268 --
Cost of shares
repurchased............. (34,256) (1,154) (265,176) -- (1,693,395) (35,221)
---------------------------------------------------------------------------------------------
Increase (decrease) in
net assets derived
from transactions in
shares of beneficial
interest.............. 8,509,617 22,209 1,543,648 -- (161,514) 651,780
---------------------------------------------------------------------------------------------
Total increase in net
assets.............. 8,768,091 23,068 1,717,928 20 2,787 640,850
---------------------------------------------------------------------------------------------
NET ASSETS
BEGINNING OF PERIOD......... 42,150 19,082 1,020 1,000 641,965 1,115
---------------------------------------------------------------------------------------------
END OF PERIOD............... $ 8,810,241 $ 42,150 $ 1,718,948 $ 1,020 $ 644,752 $ 641,965
---------------------------------------------------------------------------------------------
CHANGES IN SHARES OF
BENEFICIAL INTEREST
Beginning balance........... 3,008 1,411 80 80 42,808 84
Shares sold................. 458,377 1,453 115,512 -- 88,591 45,017
Shares issued for
distributions
reinvested................ -- 223 -- -- 1,377 --
Shares repurchased.......... (2,123) (79) (16,966) -- (99,927) (2,293)
---------------------------------------------------------------------------------------------
Ending balance........ 459,262 3,008 98,626 80 32,849 42,808
---------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
67
<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 statement.
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, 1998, Government Income Advisory Portfolio, Emerging Countries
Advisory Portfolio, and International Core Growth Advisory Portfolio had
available for Federal tax purposes $1,249, $4,122,382 and $78,557, respectively,
of unused capital loss carryovers which expire in 2006.
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.
- --------------------------------------------------------------------------------
68
<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.
SHAREHOLDER SERVICE PLAN
The Trust has approved a shareholder service plan under which Nicholas
Applegate Securities (the distributor), an affiliate of Nicholas-Applegate
Capital Management, is compensated 0.25% of the average daily net asset value of
the Advisory Series for non-distribution related expenses.
ADMINISTRATIVE SERVICES AGREEMENT
The Trust pays 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 Advisory Portfolio................ 1.50%
Core Growth Advisory Portfolio.................... 1.25%
Large Cap Growth Advisory Portfolio............... 1.25%
Income & Growth Advisory Portfolio................ 1.25%
Balanced Growth Advisory Portfolio................ 1.25%
Government Income Advisory Portfolio.............. 0.80%
Emerging Countries Advisory Portfolio............. 1.90%
International Small Cap Advisory Portfolio........ 1.65%
International Core Growth Advisory Portfolio...... 1.65%
Worldwide Growth Advisory Portfolio............... 1.60%
</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 Advisory Portfolio................ 115,031
Core Growth Advisory Portfolio.................... 217,279
Large Cap Growth Advisory Portfolio............... 10,068
Income & Growth Advisory Portfolio................ 136,318
Balanced Growth Advisory Portfolio................ 66,355
Government Income Advisory Portfolio.............. 73,677
Emerging Countries Advisory Portfolio............. 179,889
International Small Cap Growth Advisory
Portfolio........................................ 76,316
International Core Growth Advisory Portfolio...... 13,985
Worldwide Growth Advisory Portfolio............... 77,041
</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
- --------------------------------------------------------------------------------
69
<PAGE>
NICHOLAS-APPLEGATE MUTUAL FUNDS
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
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 and the Distributor.
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 Advisory Portfolio................ 20,134 9,820
Core Growth Advisory Portfolio.................... 3,667 9,014
Large Cap Growth Advisory Portfolio............... 715 3
Income & Growth Advisory Portfolio................ 1,906 1,019
Balanced Growth Advisory Portfolio................ 87 29
Government Income Advisory Portfolio.............. 280 -
Emerging Countries Advisory Portfolio............. 51,071 13,795
International Small Cap Advisory Portfolio........ 8,543 34
International Core Growth Advisory Portfolio...... 1,809 265
Worldwide Growth Advisory Portfolio............... 1,508 1,693
</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.
- --------------------------------------------------------------------------------
70
<PAGE>
(This page intentionally left blank)
- --------------------------------------------------------------------------------
71
<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
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
--------------------------------------------------------
ASSETS
Investments, at value*................ $ 83,149,982 $ 747,420,210 $ 490,210,906 $ 12,274,381
Foreign currencies, at value**........ -- -- -- --
Cash.................................. 978 -- 1,326 872
Receivable for investment securities
sold................................ 261,570 11,854,357 2,889,481 --
Receivable for interests sold......... 12,946 62,204,688 1,819,942 126,687
Dividends receivable.................. 760 154,994 67,510 2,714
Interest receivable................... 8,181 125,323 67,171 216
Due from advisor...................... 13,800 -- -- 2,900
Other assets.......................... -- -- -- --
--------------------------------------------------------
Total assets...................... 83,448,217 821,759,572 495,056,336 12,407,770
--------------------------------------------------------
LIABILITIES
Payable for investment securities
purchased........................... 457,169 7,408,934 6,746,903 125,403
Payable for interests repurchased..... 267,424 7,846,802 1,440,660 6,823
Accrued expenses...................... 125,348 718,450 66,015 16,197
Due to advisor........................ -- -- 299,820 --
Unrealized loss on forward currency
contracts........................... -- -- -- --
Line of credit........................ -- -- -- --
Cash overdraft........................ -- 52,689,460 -- --
--------------------------------------------------------
Total liabilities................. 849,941 68,663,646 8,553,398 148,423
--------------------------------------------------------
NET ASSETS............................ $ 82,598,276 $ 753,095,926 $ 486,502,938 $ 12,259,347
--------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital....................... $ 47,729,325 $ 335,434,815 $ 211,148,637 $ 10,067,294
Accumulated net investment income
(deficit)........................... (1,228,498) (13,574,277) (3,708,476) (2,853)
Accumulated net realized gain
(loss).............................. 8,664,060 173,656,050 166,800,398 540,202
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
--------------------------------------------------------
Net assets........................ $ 82,598,276 $ 753,095,926 $ 486,502,938 $ 12,259,347
--------------------------------------------------------
* Investments, at cost................. $ 55,716,593 $ 489,840,872 $ 377,948,527 $ 10,619,677
--------------------------------------------------------
** Foreign currencies, at cost.......... -- -- -- --
--------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
72
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME & BALANCED EMERGING INTERNATIONAL INTERNATIONAL
GROWTH GROWTH GOVERNMENT COUNTRIES SMALL CAP CORE GROWTH
FUND FUND INCOME FUND FUND GROWTH FUND FUND
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
ASSETS
Investments, at value*................ $ 250,814,551 $ 32,580,277 $ 9,442,122 $ 276,909,907 $ 84,296,355 $ 56,546,002
Foreign currencies, at value**........ -- 226 8 491,004 40,285 61
Cash.................................. -- -- 755 1,635 1,156 1,588
Receivable for investment securities
sold................................ 5,171,476 1,210,032 -- 3,574,790 1,401,954 149,676
Receivable for interests sold......... 1,659,439 330,246 55,669 1,899,945 1,091,982 2,802,668
Dividends receivable.................. 236,152 15,036 1,461 2,075,665 126,658 127,727
Interest receivable................... 1,058,473 120,589 82,534 460 -- 736
Due from advisor...................... -- -- 40,615 -- -- 2,081
Other assets.......................... -- -- -- 2,334,888 6,150 2,867
-----------------------------------------------------------------------------------
Total assets...................... 258,940,091 34,256,406 9,623,164 287,288,294 86,964,540 59,633,406
-----------------------------------------------------------------------------------
LIABILITIES
Payable for investment securities
purchased........................... 1,550,000 996,247 -- 4,791,102 3,882,254 1,380,520
Payable for interests repurchased..... 235,843 191,472 53,024 455,175 61,029 --
Accrued expenses...................... 36,110 14,400 36,007 220,108 61,949 27,833
Due to advisor........................ 153,724 13,773 -- 109,055 19,071 --
Unrealized loss on forward currency
contracts........................... -- 19,084 17,286 -- -- --
Line of credit........................ 3,000,491 -- -- -- -- --
Cash overdraft........................ 636,193 77,825 -- -- -- --
-----------------------------------------------------------------------------------
Total liabilities................. 5,612,361 1,312,801 106,317 5,575,440 4,024,303 1,408,353
-----------------------------------------------------------------------------------
NET ASSETS............................ $ 253,327,730 $ 32,943,605 $ 9,516,847 $ 281,712,854 $ 82,940,237 $ 58,225,053
-----------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital....................... $ 158,218,976 $ 16,585,886 $ 7,720,274 $ 251,487,861 $ 51,018,581 $ 49,895,553
Accumulated net investment income
(deficit)........................... 21,834,679 2,691,561 1,509,477 1,023,873 (341,593) (3,275)
Accumulated net realized gain
(loss).............................. 26,893,653 8,456,274 221,313 (5,151,924) 11,905,907 (528,897)
Accumulated net realized foreign
exchange gain (loss)................ -- 96,690 46,678 (1,026,601) (462,261) (136,556)
Net unrealized foreign exchange gain
(loss).............................. -- (19,415) (17,401) (582) 22,202 17,107
Net unrealized appreciation on
investments......................... 46,380,422 5,132,609 36,506 35,380,227 20,797,401 8,981,121
-----------------------------------------------------------------------------------
Net assets........................ $ 253,327,730 $ 32,943,605 $ 9,516,847 $ 281,712,854 $ 82,940,237 $ 58,225,053
-----------------------------------------------------------------------------------
* Investments, at cost................. $ 204,434,129 $ 27,447,668 $ 9,405,616 $ 241,529,680 $ 63,498,954 $ 47,564,881
-----------------------------------------------------------------------------------
** Foreign currencies, at cost.......... -- $ 235 $ 8 $ 501,211 $ 48,766 $ 71
-----------------------------------------------------------------------------------
<CAPTION>
WORLDWIDE
GROWTH
FUND
<S> <C>
ASSETS
Investments, at value*................ $ 136,259,351
Foreign currencies, at value**........ 38,506
Cash.................................. 1,275
Receivable for investment securities
sold................................ 3,744,481
Receivable for interests sold......... 8,479,530
Dividends receivable.................. 267,719
Interest receivable................... 2,294
Due from advisor...................... --
Other assets.......................... 7,934
Total assets...................... 148,801,090
LIABILITIES
Payable for investment securities
purchased........................... 2,912,969
Payable for interests repurchased..... 215,924
Accrued expenses...................... 25,388
Due to advisor........................ 110,444
Unrealized loss on forward currency
contracts........................... --
Line of credit........................ --
Cash overdraft........................ --
Total liabilities................. 3,264,725
NET ASSETS............................ $ 145,536,365
COMPOSITION OF NET ASSETS
Paid-in capital....................... $ 70,457,394
Accumulated net investment income
(deficit)........................... 236,552
Accumulated net realized gain
(loss).............................. 45,411,368
Accumulated net realized foreign
exchange gain (loss)................ 188,583
Net unrealized foreign exchange gain
(loss).............................. 7,150
Net unrealized appreciation on
investments......................... 29,235,318
Net assets........................ $ 145,536,365
* Investments, at cost................. $ 107,024,033
** Foreign currencies, at cost.......... $ 45,840
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
73
<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.
- --------------------------------------------------------------------------------
74
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
INCOME & BALANCED GOVERNMENT EMERGING SMALL CAP CORE
GROWTH GROWTH INCOME COUNTRIES GROWTH GROWTH
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................. $ 3,420,869 $ 170,631 $ 23,081 $ 4,201,465 $ 489,878 $ 306,591
Interest.............................. 4,307,627 729,420 443,803 688,015 110,764 103,829
-------------------------------------------------------------------------------------
Total income........................ 7,728,496 900,051 466,884 4,889,480 600,642 410,420
-------------------------------------------------------------------------------------
EXPENSES
Advisory fee.......................... 1,427,198 220,025 30,897 2,790,216 658,893 308,562
Accounting fee........................ 121,273 47,688 41,322 155,300 58,897 38,546
Administration fee.................... 59,961 8,236 2,468 69,993 20,585 9,857
Audit & tax fees...................... 21,627 7,136 3,332 45,205 19,472 4,836
Custodian fee......................... 38,709 24,756 35,130 548,541 183,956 63,560
Insurance............................. 12,856 2,061 502 14,752 4,408 1,858
Legal fee............................. 5,588 1,733 3,224 7,256 2,769 1,081
Miscellaneous......................... 29,317 3,720 10,011 18,582 13,382 12,427
Organization costs.................... 8,104 5,779 5,316 -- 529 --
Trustees' fee......................... 6,501 6,501 6,501 6,500 6,501 6,501
-------------------------------------------------------------------------------------
Total expenses...................... 1,731,134 327,635 138,703 3,656,345 969,392 447,228
Less: Reimbursement to (from)
advisor............................. -- (48,936) (92,358) (84,868) (79,886) (30,669)
-------------------------------------------------------------------------------------
Net expenses...................... 1,731,134 278,699 46,345 3,571,477 889,506 416,559
-------------------------------------------------------------------------------------
Net investment income
(deficit)..................... 5,997,362 621,352 420,539 1,318,003 (288,864) (6,139)
-------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 8,251,684 5,777,470 279,824 (16,745,182) 8,954,913 (671,153)
Net realized foreign exchange gain
(loss).............................. -- 96,690 46,678 (888,532) (455,981) (122,668)
Change in net unrealized foreign
exchange gain (loss)................ -- (19,406) (17,401) 12,005 28,868 18,429
Change in net unrealized appreciation
of investments...................... 35,936,585 3,156,828 159,414 30,103,293 14,340,358 8,922,576
-------------------------------------------------------------------------------------
Net gain on investments........... 44,188,269 9,011,582 468,515 12,481,584 22,868,158 8,147,184
-------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............. $50,185,631 $ 9,632,934 $ 889,054 $13,799,587 $ 22,579,294 $ 8,141,045
-------------------------------------------------------------------------------------
<CAPTION>
WORLDWIDE
GROWTH
FUND
<S> <C>
INVESTMENT INCOME
Dividends............................. $ 1,305,375
Interest.............................. 168,567
Total income........................ 1,473,942
EXPENSES
Advisory fee.......................... 1,251,181
Accounting fee........................ 83,526
Administration fee.................... 39,024
Audit & tax fees...................... 29,368
Custodian fee......................... 168,154
Insurance............................. 8,512
Legal fee............................. 4,515
Miscellaneous......................... 15,077
Organization costs.................... 6,630
Trustees' fee......................... 6,501
Total expenses...................... 1,612,488
Less: Reimbursement to (from)
advisor............................. (111,071)
Net expenses...................... 1,501,417
Net investment income
(deficit)..................... (27,475)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from security
transactions........................ 22,128,470
Net realized foreign exchange gain
(loss).............................. (385,313)
Change in net unrealized foreign
exchange gain (loss)................ 31,430
Change in net unrealized appreciation
of investments...................... 16,536,369
Net gain on investments........... 38,310,956
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............. $ 38,283,481
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
75
<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 MARCH YEAR ENDED
MARCH 31, MARCH 31, 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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
76
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
CORE GROWTH FUND LARGE CAP GROWTH FUND INCOME & GROWTH FUND
------------------------------ -------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR 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) $ 5,997,362 $ 4,199,481
Net realized gain
(loss) from
security
transactions.... 71,334,950 76,538,109 467,201 73,001 8,251,684 15,692,945
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) 35,936,585 (3,821,355)
----------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
operations.... 161,211,659 7,144,801 2,154,804 37,249 50,185,631 16,071,071
----------------------------------------------------------------------------------------
TRANSACTIONS IN
INTERESTS
Contributions by
partners........ 331,745,501 158,154,505 11,528,227 1,347,861 117,443,760 34,105,984
Withdrawals by
partners........ (439,228,153) (153,067,978) (2,742,842) (65,952 ) (44,953,063) (31,283,589)
----------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
from
transactions
in
interests..... (107,482,652) 5,086,527 8,785,385 1,281,909 72,490,697 2,822,395
----------------------------------------------------------------------------------------
Total increase
(decrease)
in net
assets...... 53,729,007 12,231,328 10,940,189 1,319,158 122,676,328 18,893,466
NET ASSETS
BEGINNING OF
PERIOD.......... 432,773,931 420,542,603 1,319,158 -- 130,651,402 111,757,936
----------------------------------------------------------------------------------------
END OF PERIOD..... $ 486,502,938 $ 432,773,931 $ 12,259,347 $ 1,319,158 $ 253,327,730 $ 130,651,402
----------------------------------------------------------------------------------------
<CAPTION>
BALANCED GROWTH FUND
-------------------------
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)....... $ 621,352 $ 661,170
Net realized gain
(loss) from
security
transactions.... 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..... 3,156,828 (768,824)
Net increase
(decrease) in
net assets
resulting from
operations.... 9,632,934 1,861,365
TRANSACTIONS IN
INTERESTS
Contributions by
partners........ 10,624,912 8,738,263
Withdrawals by
partners........ (12,326,211) (9,432,209)
Net increase
(decrease) in
net assets
from
transactions
in
interests..... (1,701,299) (693,946)
Total increase
(decrease)
in net
assets...... 7,931,635 1,167,419
NET ASSETS
BEGINNING OF
PERIOD.......... 25,011,970 23,844,551
END OF PERIOD..... $32,943,605 $ 25,011,970
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
77
<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>
GOVERNMENT INCOME FUND EMERGING COUNTRIES 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)................. $ 420,539 $ 333,374 $ 1,318,003 $ (342,535)
Net realized gain (loss)
from security
transactions.............. 279,824 (56,975) (16,745,182) 11,849,728
Net realized foreign
exchange gain (loss)...... 46,678 -- (888,532) (113,212)
Change in net unrealized
foreign exchange gain
(loss).................... (17,401) -- 12,005 (12,593)
Change in net unrealized
appreciation
(depreciation) of
investments............... 159,414 (49,150) 30,103,293 3,898,413
--------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations......... 889,054 227,249 13,799,587 15,279,801
--------------------------------------------------------
TRANSACTIONS IN INTERESTS
Contributions by partners... 11,600,167 5,988,848 187,793,085 143,835,272
Withdrawals by partners..... (9,225,979) (4,440,486) (78,216,702) (20,677,175)
--------------------------------------------------------
Net increase (decrease) in
net assets from
transactions in
interests............... 2,374,188 1,548,362 109,576,383 123,158,097
--------------------------------------------------------
Total increase
(decrease) in net
assets................ 3,263,242 1,775,611 123,375,970 138,437,898
NET ASSETS
BEGINNING OF PERIOD......... 6,253,605 4,477,994 158,336,884 19,898,986
--------------------------------------------------------
END OF PERIOD............... $ 9,516,847 $ 6,253,605 $ 281,712,854 $ 158,336,884
--------------------------------------------------------
</TABLE>
- -------------
+ Commenced operations on December 27, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
78
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP INTERNATIONAL CORE GROWTH
GROWTH FUND FUND WORLDWIDE GROWTH FUND
---------------------------- --------------------------- -----------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR 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)....... $ (288,864) $ (163,117) $ (6,139) $ 2,864 $ (27,475) $ (281,315)
Net realized gain
(loss) from
security
transactions.... 8,954,913 3,140,492 (671,153) 142,256 22,128,470 15,788,457
Net realized
foreign exchange
gain (loss)..... (455,981) (171,484) (122,668) (13,888) (385,313) (333,967)
Change in net
unrealized
foreign exchange
gain (loss)..... 28,868 (4,450) 18,429 (1,322) 31,430 (21,431)
Change in net
unrealized
appreciation
(depreciation)
of
investments..... 14,340,359 3,921,418 8,922,576 58,545 16,536,369 (2,434,302)
----------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
operations.... 22,579,295 6,722,859 8,141,045 188,455 38,283,481 12,717,442
----------------------------------------------------------------------------------------
TRANSACTIONS IN
INTERESTS
Contributions by
partners........ 144,137,687 37,692,390 82,773,370 4,487,783 172,434,860 34,174,758
Withdrawals by
partners........ (146,663,288) (5,334,333) (37,358,238) (7,362 ) (168,997,352) (43,419,850)
----------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
from
transactions
in
interests..... (2,525,601) 32,358,057 45,415,132 4,480,421 3,437,508 (9,245,092)
----------------------------------------------------------------------------------------
Total increase
(decrease)
in net
assets...... 20,053,694 39,080,916 53,556,177 4,668,876 41,720,989 3,472,350
NET ASSETS
BEGINNING OF
PERIOD.......... 62,886,544 23,805,628 4,668,876 -- 103,815,376 100,343,026
----------------------------------------------------------------------------------------
END OF PERIOD..... $ 82,940,238 $ 62,886,544 $ 58,225,053 $ 4,668,876 $ 145,536,365 $ 103,815,376
----------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
79
<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.
Income & Growth Fund seeks to maximize total return through investment
primarily in convertible and equity securities of U.S. companies.
Balanced Growth Fund seeks to provide a balance of long-term capital
appreciation and current income by investing approximately 60% of its total
assets in equity and convertible securities of primarily U.S. companies and 40%
of its total assets in debt securities, money market instruments and other
short-term investments.
Government Income Fund seeks to maximize current income through investment
primarily in intermediate-term debt securities of the U.S. government and its
agencies and instrumentalities.
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
SECURITIES TRANSACTIONS
Equity securities are valued at the last 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 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
- --------------------------------------------------------------------------------
80
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
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 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% 0.675% 0.65%
Income & Growth Fund.............................. 0.75% 0.675% 0.65%
Balanced Growth Fund.............................. 0.75% 0.675% 0.65%
Government Income Fund............................ 0.40% 0.35% 0.35%
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%
</TABLE>
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.
- --------------------------------------------------------------------------------
81
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
The cumulative unreimbursed amounts paid by Nicholas-Applegate on behalf of
the Funds, during the 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
Balanced Growth Fund.............................. 361,863
Government Income Fund............................ 432,938
Emerging Countries Fund........................... 174,212
International Small Cap Growth Fund............... 289,126
International Core Growth Fund.................... 36,365
Worldwide Growth Fund............................. 407,491
</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.
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
Income & Growth Fund.............................. 371,588 292,929
Balanced Growth Fund.............................. 74,169 75,690
Government Income Fund............................ 22,840 20,530
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
</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
Income & Growth
Fund.............. 204,434 46,887 507 46,380
Balanced Growth
Fund.............. 27,448 5,299 166 5,133
Government Income
Fund.............. 9,406 73 36 37
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
</TABLE>
- --------------------------------------------------------------------------------
82
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
D. OFF BALANCE SHEET RISKS AND DERIVATIVE INSTRUMENTS
The Master Trust's investment in foreign securities may entail risks due to
the potential of political and economic instability in the countries where the
securities are being offered. In addition, foreign exchange fluctuations could
affect the value of positions held. It is the Master Trust's policy to
continuously monitor its exposure to these risks.
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
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.
- --------------------------------------------------------------------------------
83
<PAGE>
NICHOLAS-APPLEGATE INVESTMENT TRUST
NOTES TO THE FUNDS' FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
H. SELECTED RATIO DATA
<TABLE>
<CAPTION>
RATIO OF NET RATIO OF NET
INVESTMENT INVESTMENT
RATIO OF RATIO OF INCOME INCOME
EXPENSES TO EXPENSES TO (DEFICIT) (DEFICIT)
AVERAGE NET AVERAGE NET TO AVERAGE NET TO AVERAGE NET
ASSETS, AFTER ASSETS, BEFORE ASSETS, AFTER ASSETS, BEFORE
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(RECOUPMENTS) (RECOUPMENTS) (RECOUPMENTS) (RECOUPMENTS) RATE
<S> <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%
For the year ended 3/31/97...................... 1.51% 1.71% (1.03%) (1.22%) 164.01%
For the period ended 3/31/96*................... 1.50% 2.02% (0.93%) (1.44%) 106.99%
EMERGING GROWTH FUND (2)
For the year ended 3/31/98...................... 1.13% 1.13% (0.55%) (0.55%) 91.66%
For the year ended 3/31/97...................... 1.10% 1.10% (0.64%) (0.64%) 112.90%
For the year ended 3/31/96...................... 1.11% 1.11% (0.57%) (0.57%) 129.59%
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%
For the year ended 3/31/97...................... 0.88% 0.88% (0.33%) (0.33%) 153.20%
For the year ended 3/31/96...................... 0.89% 0.89% (0.22%) (0.22%) 114.48%
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 period ended 3/31/98*................... 0.95% 2.19% (0.07%) (1.31%) 305.78%
INCOME & GROWTH FUND (3)
For the year ended 3/31/98...................... 0.91% 0.91% 3.15% 3.15% 159.59%
For the year ended 3/31/97...................... 0.95% 0.92% 3.49% 3.52% 166.84%
For the year ended 3/31/96...................... 0.95% 0.94% 3.94% 3.94% 144.97%
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%
For the year ended 3/31/97...................... 0.95% 1.21% 2.53% 2.27% 212.95%
For the year ended 3/31/96...................... 0.95% 1.37% 2.83% 2.37% 197.19%
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%
GOVERNMENT INCOME FUND (3)
For the year ended 3/31/98...................... 0.60% 1.80% 5.44% 4.25% 288.77%
For the year ended 3/31/97...................... 0.60% 2.07% 5.77% 4.30% 573.72%
For the year ended 3/31/96...................... 0.60% 2.75% 6.12% 4.00% 190.47%
For the year ended 3/31/95...................... 0.80% 2.21% 5.32% 3.91% 258.72%
For the period ended 3/31/94*................... 0.80% 2.80% 3.43% 1.43% 159.17%
EMERGING COUNTRIES FUND (5)
For the year ended 3/31/98...................... 1.60% 1.64% 0.59% 0.55% 243.47%
For the year ended 3/31/97...................... 1.60% 1.57% (0.47%) (0.44%) 176.20%
For the year ended 3/31/96...................... 1.60% 2.80% 0.30% (0.90%) 118.21%
For the period ended 3/31/95*................... 1.60% 1.81% 1.73% 1.52% 60.79%
INTERNATIONAL SMALL CAP GROWTH FUND (6)
For the year ended 3/31/98...................... 1.35% 1.47% (0.44%) (0.56%) 198.37%
For the year ended 3/31/97...................... 1.35% 1.38% (0.34%) (0.37%) 206.07%
For the year ended 3/31/96...................... 1.35% 1.98% 0.39% (0.24%) 141.02%
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%
For the period ended 3/31/97*................... 1.29% 2.25% 0.48% (0.47%) 75.53%
WORLDWIDE GROWTH FUND (2)
For the year ended 3/31/98...................... 1.20% 1.29% (0.02%) (0.11%) 201.70%
For the year ended 3/31/97...................... 1.20% 1.26% (0.27%) (0.33%) 181.81%
For the year ended 3/31/96...................... 1.20% 1.26% 0.31% 0.25% 132.20%
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%
<CAPTION>
AVERAGE BROKER
COMMISSIONS
PER SHARE
<S> <C>
- --------------------------------------------------
MINI CAP GROWTH FUND (1)
For the year ended 3/31/98...................... $ 0.0501
For the year ended 3/31/97...................... $ 0.0455
For the period ended 3/31/96*................... $ 0.0529
EMERGING GROWTH FUND (2)
For the year ended 3/31/98...................... $ 0.0528
For the year ended 3/31/97...................... $ 0.0520
For the year ended 3/31/96...................... $ 0.0523
For the year ended 3/31/95...................... $ --
For the period ended 3/31/94*................... $ --
CORE GROWTH FUND (3)
For the year ended 3/31/98...................... $ 0.0552
For the year ended 3/31/97...................... $ 0.0582
For the year ended 3/31/96...................... $ 0.0593
For the year ended 3/31/95...................... $ --
For the period ended 3/31/94*................... $ --
LARGE CAP GROWTH FUND (4)
For the period ended 3/31/98*................... $ 0.0584
INCOME & GROWTH FUND (3)
For the year ended 3/31/98...................... $ 0.0595
For the year ended 3/31/97...................... $ 0.0154
For the year ended 3/31/96...................... $ 0.0597
For the year ended 3/31/95...................... $ --
For the period ended 3/31/94*................... $ --
BALANCED GROWTH FUND (2)
For the year ended 3/31/98...................... $ 0.0600
For the year ended 3/31/97...................... $ 0.0586
For the year ended 3/31/96...................... $ 0.0594
For the year ended 3/31/95...................... $ --
For the period ended 3/31/94*................... $ --
GOVERNMENT INCOME FUND (3)
For the year ended 3/31/98...................... $ --
For the year ended 3/31/97...................... $ --
For the year ended 3/31/96...................... $ --
For the year ended 3/31/95...................... $ --
For the period ended 3/31/94*................... $ --
EMERGING COUNTRIES FUND (5)
For the year ended 3/31/98...................... $ 0.0014
For the year ended 3/31/97...................... $ 0.0021
For the year ended 3/31/96...................... $ 0.0022
For the period ended 3/31/95*................... $ --
INTERNATIONAL SMALL CAP GROWTH FUND (6)
For the year ended 3/31/98...................... $ 0.0086
For the year ended 3/31/97...................... $ 0.0098
For the year ended 3/31/96...................... $ 0.0128
For the year ended 3/31/95...................... $ --
For the period ended 3/31/94*................... $ --
INTERNATIONAL CORE GROWTH FUND (4)
For the year ended 3/31/98...................... $ 0.0128
For the period ended 3/31/97*................... $ 0.0106
WORLDWIDE GROWTH FUND (2)
For the year ended 3/31/98...................... $ 0.0221
For the year ended 3/31/97...................... $ 0.0078
For the year ended 3/31/96...................... $ 0.0187
For the year ended 3/31/95...................... $ --
For the period ended 3/31/94*................... $ --
</TABLE>
- --------------------
(1) Commenced operations on July 12, 1995.
(2) Commenced operations on October 1, 1993.
(3) Commenced operations on April 19, 1993.
(4) Commenced operations on December 27, 1996.
(5) Commenced operations on November 28, 1994.
(6) Commenced operations on December 31, 1993.
* Annualized
- --------------------------------------------------------------------------------
84
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------
ERNST & YOUNG LLP
515 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
PHONE: 213 977 3200
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
NICHOLAS-APPLEGATE MUTUAL FUNDS
We have audited the accompanying statements of assets and liabilities of the
Mini Cap Growth Institutional Portfolio and series of Advisory (formerly
Qualified) Portfolios of Nicholas-Applegate Mutual Funds (comprising
respectively, Emerging Growth Advisory Portfolio, Core Growth Advisory
Portfolio, Large Cap Growth Advisory Portfolio, Income and Growth Advisory
Portfolio, Balanced Growth Advisory Portfolio, Government Income Advisory
Portfolio, Emerging Countries Advisory Portfolio, International Small Cap Growth
(formerly "International Growth") Advisory Portfolio, International Core Growth
Advisory Portfolio, and Worldwide Growth Advisory 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 (except for Large Cap Growth
Advisory Portfolio which is for the fiscal year then ended) and the financial
highlights for each of the three fiscal years in the period then ended (except
for Large Cap Growth Advisory Portfolio which is for the fiscal year then ended
and International Core Growth Advisory Portfolio which is 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 the Mini Cap Growth Institutional Portfolio and of each of
the respective series of Advisory Portfolios of Nicholas-Applegate Mutual Funds
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 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
- --------------------------------------------------------------------------------
85
<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, Income & Growth Fund, Balanced Growth
Fund, Government Income Fund, Emerging Countries Fund, International Small Cap
Growth Fund (formerly "International Growth Fund"), International Core Growth
Fund, and Worldwide Growth 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
- --------------------------------------------------------------------------------
86
<PAGE>
NICHOLAS APPLEGATE-Registered Trademark-
MUTUAL FUNDS ANNUAL REPORT
HIGH YIELD BOND FUND by Company Tradition
[GRAPHIC]
ADVISORY SHARES
[PHOTO]
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAGE
<S> <C>
Review & Outlook........................................................ 1
Performance............................................................. 2
Schedule of Investments................................................. 3
Financial Highlights.................................................... 6
Statement of Assets & Liabilities....................................... 8
Statement of Operations................................................. 9
Statements of Changes in Net Assets..................................... 10
Notes to the Financial Statements....................................... 11
Report of Independent Auditors.......................................... 15
</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 High Yield Bond Fund. Distributor: Nicholas-Applegate
Securities.
- --------------------------------------------------------------------------------
<PAGE>
HIGH YIELD BOND FUND
- ------------------------------------------------------------------------
MANAGEMENT TEAM
Fred S. Robertson,
Partner, Chief Investment Officer,
Fixed Income
Douglas G. Forsyth, CFA,
Portfolio Manager
James E. Kellerman,
Partner, Portfolio Manager
Sandra K. Durn,
Portfolio Manager
Jan Friedli,
Portfolio Manager
Richard J. King, CFA,
Portfolio Manager
Susan Malone,
Portfolio Manager
GOAL: The Nicholas-Applegate High Yield Bond Fund seeks to deliver a high
level of current income and long-term capital growth by investing in a
diversified portfolio consisting primarily of U.S. corporate fixed-income
securities.
REVIEW AND OUTLOOK: The Nicholas-Applegate High Yield Bond Fund delivered
outstanding performance for the year, based on superior bond selection and the
powerful domestic economy. The Fund returned 26.1%, outperforming the First
Boston High Yield Index which returned 14.3%.
Continued domestic growth, stable interest rates, low inflation, high consumer
confidence and low unemployment proved ideal for high yield investing. Strong
inflows, combined with a record pace of new issues, drove the high yield market.
Expert bond selection was the primary factor driving outperformance. Holdings
boosting the Fund's advance included arts and crafts retailer Michael's Stores
and Orbital Sciences, a company operating low-Earth-orbit satellites to track
machinery and systems operations throughout the world.
We discover securities for the High Yield Bond Fund using the tools our equity
teams use to pick stocks. Companies must demonstrate the following criteria to
be included in the portfolio:
- - Potential for positive fundamental change leading to earnings and cash flow
growth, debt reduction and possible credit-rating upgrade
- - Ability to secure other sources of capital
- - Potential recognition as an acquisition target
- - Sustainability of growth
- - Timeliness of investment
Our outlook is bright for continued outperformance for the Fund, given current
positive market conditions. Moreover, our focus on company fundamentals
positions us to find attractive opportunities regardless of changes to the
macroeconomic environment.
REPRESENTATIVE HOLDINGS
Amresco
Bally Total Fitness
Chancellor Media
IDT
Michael's Stores
Musicland
Omnipoint
Orbital Sciences -- Orbcomm
Viacom
Winstar Communications
- --------------------------------------------------------------------------------
1
<PAGE>
HIGH YIELD BOND FUND
- ------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN NICHOLAS-APPLEGATE HIGH
YIELD BOND FUND'S ADVISORY SHARES WITH THE FIRST BOSTON HIGH YIELD INDEX.
<TABLE>
<S> <C> <C>
SINCE
1 YEAR ANNUALIZED TOTAL RETURNS INCEPTION
26.07% As of 03/31/98 24.08%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD BOND ADVISORY SHARES FIRST BOSTON HIGH YIELD INDEX
<S> <C> <C>
7/31/96 $10,000.00 $10,000.00
9/30/96 $10,619.37 $10,282.87
12/31/96 $11,114.86 $10,736.37
3/31/97 $11,362.61 $10,894.66
6/30/97 $12,195.95 $11,365.04
9/30/97 $13,209.46 $11,899.69
12/31/97 $13,457.21 $12,092.03
3/31/98 $14,324.32 $12,455.48
</TABLE>
This graph compares a $10,000 investment in the High Yield Bond Fund with the
First Boston High Yield 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. The Advisory Shares
calculate their performance based upon the historical performance of their
corresponding series ("Fund") of Nicholas-Applegate Investment Trust, adjusted
to reflect sales charges and Advisory Class operating expenses. The Portfolio
commenced operations on 2/27/98.
Total returns 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 Advisory Shares, 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 High Yield Index includes over 180 U.S. domestic issues with an
average maturity range of seven to ten years and with a minimum issues size of
$100 million.
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.
- --------------------------------------------------------------------------------
2
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998
- ------------------------------------------------------------------------
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
COMMON STOCKS -- 0.8%
- ---------------------------------------------------------------------------------------------------
COMPUTER NETWORKS -- 0.4%
Legato Systems, Inc............................................ 2,000 $ 118,750
------------
GAMING -- 0.4%
Rio Hotel and Casino, Inc.*.................................... 5,000 129,687
------------
TOTAL COMMON STOCK
(Cost $229,425)................................................................ 248,437
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 87.2%
- ---------------------------------------------------------------------------------------------------
BROADCASTING -- 7.8%
American Mobile Satellite
12.250%, 04/01/08................................................. $ 500,000 520,000
Fox Liberty Networks LLC
8.875%, 08/15/07.................................................. 250,000 260,000
Satelites Mexicanos SA
10.125%, 11/01/04................................................. 250,000 256,875
Source Media, Inc.
12.000%, 11/01/04................................................. 1,300,000 1,293,500
------------
2,330,375
------------
CATALOG RETAILING -- 5.1%
Brylane L.P., Series B
10.000%, 09/01/03................................................. 250,000 265,625
Shop At Home, Inc.
11.000%, 04/01/05................................................. 1,250,000 1,262,500
------------
1,528,125
------------
ELECTRONIC RETAILING -- 0.4%
Electronic Retailing Systems, Inc.
0.000%, 02/01/04*................................................. 200,000 116,000
------------
ENGINEERING SERVICES -- 0.9%
MSX International, Inc.
11.375%, 01/15/08................................................. 250,000 259,375
------------
ENTERTAINMENT -- 0.5%
Premier Parks, Inc.
0.000%, 04/01/08*................................................. 250,000 159,375
------------
EQUIPMENT -- 0.9%
Phase Metrics, Inc.
10.750%, 02/01/05................................................. 250,000 252,812
------------
FINANCIAL SERVICES -- 11.3%
AMRESCO, Inc.
9.875%, 03/15/05.................................................. 1,200,000 1,221,000
Bluegreen Corp.
10.500%, 04/01/08................................................. 750,000 751,875
CRIIMI MAE, Inc.
9.125%, 12/01/02.................................................. 750,000 754,687
MCII Holdings
0.000%, 11/15/02*................................................. 250,000 236,250
Px Escrow Corp.
0.000%, 02/01/06*................................................. 200,000 142,250
Resource America, Inc.
12.000%, 08/01/04................................................. 250,000 262,500
------------
3,368,562
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
FOOD PROCESSING -- 1.7%
Purina Mills, Inc.
9.000%, 03/15/10.................................................. $ 500,000 $ 516,250
------------
HOTELS AND MOTELS -- 0.9%
Extended Stay America
9.150%, 03/15/08.................................................. 250,000 251,875
------------
INDUSTRIAL -- 3.5%
Orbital Imaging Corp.
11.625%, 03/01/05................................................. 950,000 1,045,000
------------
MACHINERY -- 0.9%
Newcor Inc.
9.875%, 03/01/08.................................................. 250,000 253,125
------------
MOTION PICTURES -- 0.9%
Ascent Entertainment Group
0.000%, 12/15/04*................................................. 450,000 264,375
------------
MUSIC/CLUBS -- 0.9%
Imax Corp.
10.000%, 03/01/01................................................. 250,000 261,250
------------
PAPER AND PAPER PRODUCTS -- 1.7%
Plainwell, Inc.
11.000%, 03/01/08................................................. 500,000 506,250
------------
PRODUCERS/MANUFACTURING -- 2.3%
Associated Materials, Inc.
9.250%, 03/01/08.................................................. 200,000 205,500
Doskocil Manufacturing Co., Inc.
10.125%, 09/15/07................................................. 200,000 214,000
Foodmaker, Inc.
9.250%, 03/01/99.................................................. 18,000 18,225
Inter-City Products Corp.
9.750%, 03/01/00.................................................. 250,000 254,063
------------
691,788
------------
PUBLISHING -- 0.9%
Liberty Group Operating
9.375%, 02/01/08.................................................. 250,000 255,625
------------
RECREATIONAL CENTERS -- 1.1%
Bally Total Fitness Holding, Series B
9.875%, 10/15/07.................................................. 300,000 319,500
------------
SOFTWARE -- 3.3%
IDT Corp.
8.750%, 02/15/06.................................................. 875,000 873,906
------------
SPECIAL PURPOSE -- 1.0%
Pinnacle Holdings, Inc.
0.000%, 03/15/08.................................................. 500,000 313,125
------------
SPECIALTY RETAILING -- 4.6%
CompUSA, Inc.
9.500%, 06/15/00.................................................. 150,000 155,063
Maxim Group, Inc., Series B
9.250%, 10/15/07.................................................. 200,000 203,250
Michaels Stores, Inc.
10.875%, 06/15/06................................................. 100,000 112,000
Musicland Group
9.000%, 06/15/03.................................................. 500,000 495,000
Tuesday Morning Corp.
11.000%, 12/15/07................................................. 400,000 412,500
------------
1,377,813
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
3
<PAGE>
SCHEDULE OF INVESTMENTS AS OF MARCH 31, 1998 -- CONTINUED
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CORPORATE BONDS (Continued)
- ---------------------------------------------------------
<TABLE>
<S> <C> <C>
TELECOMMUNICATIONS -- 18.6%
Covad Comm Group
0.000%, 03/15/08*................................................. $ 500,000 $ 262,500
Global Telesystems Group
9.875%, 02/15/05.................................................. 625,000 646,094
Nextel Communications
0.000%, 09/15/07*................................................. 1,000,000 668,750
Nextlink Communications
0.000%, 04/15/08*................................................. 1,500,000 950,625
Omnipoint Corp.
11.625%, 08/15/06................................................. 750,000 826,875
ORBCOMM Global, LP, Series B
14.000%, 08/15/04................................................. 1,250,000 1,459,375
Sitel Corp.
9.250%, 03/15/06.................................................. 700,000 707,000
------------
5,521,219
------------
TELEPHONE -- 13.2%
21st Century Telecom Group
0.000%, 02/15/08*................................................. 250,000 147,500
Esprit Telecom Group PLC
11.500%, 12/15/07................................................. 750,000 825,938
Facilicom International
10.500%, 01/15/08................................................. 250,000 261,250
McLeodUSA, Inc.
8.375%, 03/15/08.................................................. 500,000 517,500
Qwest Communications International
0.000%, 10/15/07*................................................. 300,000 220,500
Teligent, Inc.
11.500%, 12/01/07................................................. 600,000 627,000
WinStar Communications, Inc.
0.000%, 10/15/05.................................................. 300,000 251,250
WinStar Communications, Inc.
0.000%, 03/01/07*................................................. 800,000 1,062,000
------------
3,912,938
------------
TRANSPORTATION -- 5.2%
Premier Cruises Ltd.
11.000%, 03/15/08................................................. 500,000 493,750
Trans World Airlines
11.500%, 12/15/04................................................. 1,000,000 1,060,000
------------
1,553,750
------------
TOTAL CORPORATE BONDS
(Cost $25,649,727)................................................................ 25,932,413
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
FOREIGN CORPORATE OBLIGATIONS -- 0.4%
- ---------------------------------------------------------------------------------------------------
INDONESIA -- 0.4%
PT Polysindo Eka Perkasa Interest Promissory Note*.................. $ 10,000 $ 5,900
PT Polysindo Eka Perkasa Interest Promissory Note*.................. 10,000 5,900
PT Polysindo Eka Perkasa Principal Promissory Note*................. 200,000 118,000
------------
129,800
------------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(Cost $129,766)................................................................... 129,800
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
PREFERRED STOCK -- 1.9%
- ---------------------------------------------------------------------------------------------------
BROADCASTING -- 1.0%
Chancellor Media, Inc., Series A, 12.25%....................... 2,000 284,500
------------
TELECOMMUNICATION SERVICES -- 1.0%
Dobson Communication Corp., 12.25%............................. 2,500 275,000
IXC Communciations, Inc., Series B, 12.50%..................... 70 8,540
------------
283,540
------------
TOTAL PREFERRED STOCK
(Cost $507,910)................................................................ 568,040
------------
- ---------------------------------------------------------------------------------------------------
MUTUAL FUND -- 0.0%
- ---------------------------------------------------------------------------------------------------
BOND FUNDS -- 0.0%
Nicholas Applegate High Yield Bond Fund Trust*
(Cost $1,000)................................................ 55 1,000
------------
- ---------------------------------------------------------------------------------------------------
WARRANTS -- 0.0%
- ---------------------------------------------------------------------------------------------------
ELECTRONIC INSTRUMENTS -- 0.0%
Electronic Retailing Systems, Inc.*
(Cost $12,219)............................................... 300 7,500
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 6.0%
- ---------------------------------------------------------------------------------------------------
Associates First Capital Corp.
6.050%, 04/01/98.................................................. $ 587 587,000
Merrill Lynch
6.050%, 04/01/98.................................................. 1,205 1,205,000
------------
TOTAL COMMERCIAL PAPER
(Cost $1,792,000)................................................................. 1,792,000
------------
TOTAL INVESTMENTS -- 96.4%
(Cost $28,322,047)................................................................ 28,679,190
OTHER ASSETS IN EXCESS OF OTHER
LIABILITIES -- 3.6%............................................................... 1,055,558
------------
NET ASSETS -- 100.0%................................................................ $ 29,734,778
------------
</TABLE>
- ---------------
* Non-Income Producing Security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
4
<PAGE>
(This page intentionally left blank)
- --------------------------------------------------------------------------------
5
<PAGE>
HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AT NET AND UNREALIZED FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT GAINS ON INVESTMENT FROM
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
A SHARES+
For the period ended March
31, 1998.................. $ 12.70 $ 0.01 $ 0.01 $ -- $ --
B SHARES+
For the period ended March
31, 1998.................. 12.69 0.01 0.01 -- --
C SHARES+
For the period ended March
31, 1998.................. 12.69 0.01 0.01 -- --
I SHARES++
For the year ended March 31,
1998 13.20 1.11 2.02 (1.15) (1.72)
For the period ended March
31, 1997.................. 12.50 0.74 0.95 (0.73) (0.26)
Q SHARES+
For the period ended March
31, 1998.................. 12.70 0.01 0.01 -- --
Portfolio Turnover Rate for
the Year Ended March 31,
1998 484.39%
Portfolio Turnover Rate for
the Period Ended March 31,
1997 465.32%
</TABLE>
- -----------------
+ Commenced Operations on March 27, 1998.
++ Commenced Operations on July 31, 1996.
* Annualized
** Represents total return for the four day period from March 27, 1998 through
March 31, 1998 for the A, B, C and Q shares (see Note A). The total return
for the period from February 27, 1998 through March 27, 1998 was 1.60%,
1.52%, 1.52% and 1.60%, respectively for the A, B, C and Q shares.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6
<PAGE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratio of Ratio of
Expenses to Expenses to
Average Net Average Net
Net Assets Assets, After Assets, Before
Net Asset at Expense Expense
Value at Total End of Reimbursement Reimbursement
End of Period Return** Period and Fee Waiver* and Fee Waiver*
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
A SHARES+
For the period ended March
31, 1998.................. $ 12.72 0.16% $ 4,690,089 1.06% 1.06%
B SHARES+
For the period ended March
31, 1998.................. 12.71 0.16% 8,891,534 1.69% 1.69%
C SHARES+
For the period ended March
31, 1998.................. 12.71 0.16% 4,814,892 1.66% 1.66%
I SHARES++
For the year ended March 31,
1998 13.46 25.49% 10,771,172 0.76% 2.66%
For the period ended March
31, 1997.................. 13.20 13.90% 4,607,559 0.75% 1.95%
Q SHARES+
For the period ended March
31, 1998.................. 12.72 0.16% 567,091 0.97% 0.97%
Portfolio Turnover Rate for
the Year Ended March 31,
1998
Portfolio Turnover Rate for
the Period Ended March 31,
1997
<CAPTION>
Ratio of Net Ratio of Net
Income to Income to
Average Net Average Net
Assets, After Assets, Before
Expense Expense
Reimbursement Reimbursement
and Fee Waiver* and Fee Waiver*
<S> <C> <C>
- ------------------------------
A SHARES+
For the period ended March
31, 1998.................. 7.22% 7.22%
B SHARES+
For the period ended March
31, 1998.................. 6.61% 6.61%
C SHARES+
For the period ended March
31, 1998.................. 6.91% 6.91%
I SHARES++
For the year ended March 31,
1998 8.28% 6.38%
For the period ended March
31, 1997.................. 8.47% 7.97%
Q SHARES+
For the period ended March
31, 1998.................. 7.53% 7.53%
Portfolio Turnover Rate for
the Year Ended March 31,
1998
Portfolio Turnover Rate for
the Period Ended March 31,
1997
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
7
<PAGE>
HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
AS OF MARCH 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at value*................ $28,679,190
Cash.................................. 376
Interest receivable................... 362,104
Shares sold........................... 4,425,185
Due from advisor...................... 20,117
-----------
Total assets........................ 33,486,972
-----------
LIABILITIES
Investment securities purchased....... 3,714,571
Shares repurchased.................... 91
Accrued expenses...................... 37,532
-----------
Total liabilities................... 3,752,194
-----------
NET ASSETS $29,734,778
-----------
COMPOSITION OF NET ASSETS
Paid-in capital....................... $29,114,851
Accumulated net investment income..... 12,705
Accumulated net realized gain......... 250,079
Net unrealized appreciation on
investments and foreign exchange.... 357,143
-----------
NET ASSETS.............................. $29,734,778
-----------
*INVESTMENTS AT COST.................. $28,322,047
-----------
NET ASSETS
A shares.............................. $ 4,690,089
B shares.............................. 8,891,534
C shares.............................. 4,814,892
I shares.............................. 10,771,172
Q shares.............................. 567,091
-----------
Total............................... $29,734,778
-----------
SHARES OUTSTANDING (NO PAR VALUE,
UNLIMITED SHARES AUTHORIZED)
A shares.............................. 368,665
B shares.............................. 699,624
C shares.............................. 378,767
I shares.............................. 800,128
Q shares.............................. 44,587
-----------
Total............................... 2,291,771
-----------
NET ASSET VALUE
A shares (Maximum Offering Price of
$13.35)............................. $ 12.72
B shares.............................. $ 12.71
C shares.............................. $ 12.71
I shares.............................. $ 13.46
Q shares.............................. $ 12.72
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8
<PAGE>
HIGH YIELD BOND FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Dividends............................. $ 23,168
Interest.............................. 523,889
-----------
Total income........................ 547,057
EXPENSES
Advisory fee.......................... 36,505
Accounting fee........................ 42,098
Administration fee.................... 6,119
Audit fee............................. 4,284
Co-Administration fee................. 5,938
Custodian fee......................... 24,725
Distribution fee...................... 1,090
Insurance fee......................... 566
Legal fee............................. 2,131
Miscellaneous......................... 2,566
Registration fee- Federal............. 1,200
Registration fee - State.............. 9,516
Shareholder reporting fee............. 1,456
Shareholder servicing fee............. 386
Transfer agent fee.................... 12,391
Trustees' fee......................... 7,686
-----------
Total expenses...................... 158,657
Reimbursement from advisor............ (105,541)
Co-Administration fee waiver.......... (5,938)
Line of credit commitment fee......... 401
-----------
Net expenses........................ 47,579
-----------
Net investment income............. 499,478
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN EXCHANGE
Net realized gain from security
transactions........................ 551,791
Change in net unrealized appreciation
of investments and foreign
exchange............................ 310,375
-----------
Net gain on investments........... 862,166
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS..................... $ 1,361,644
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
9
<PAGE>
HIGH YIELD BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
MARCH 31, MARCH 31,
1998 1997+
<S> <C> <C>
-----------------------------
INCREASE IN NET ASSETS:
OPERATIONS
Net investment income............... $ 499,478 $ 248,226
Net realized gain from security
transactions....................... 551,791 329,760
Change in net unrealized
appreciation (depreciation) of
investments and foreign exchange... 310,375 (23,773)
-----------------------------
Increase in net assets from
operations...................... 1,361,644 554,213
-----------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
I shares.......................... (516,768) (246,559)
Capital gains
I shares.......................... (551,174) (88,423)
-----------------------------
Change in net assets from
shareholder distributions....... (1,067,942) (334,982)
-----------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold (See Note
F)................................. 27,096,275 4,551,209
Value of shares reinvested.......... 237,690 37,643
Cost of shares repurchased.......... (2,500,448) (201,524)
-----------------------------
Increase in net assets derived
from capital share
transactions..................... 24,833,517 4,387,328
-----------------------------
Total increase in net assets.... 25,127,219 4,606,559
NET ASSETS
BEGINNING OF THE PERIOD............... 4,607,559 1,000
-----------------------------
END OF THE PERIOD..................... $ 29,734,778 $ 4,607,559
-----------------------------
CHANGE IN SHARES OUTSTANDING
Beginning share balances.............. 349,046 80
Shares sold (See Note F).............. 2,118,195 361,395
Shares reinvested..................... 17,883 2,861
Shares repurchased.................... (193,353) (15,290)
-----------------------------
Ending share balances........... 2,291,771 349,046
-----------------------------
</TABLE>
- -------------
+ Commenced Operations on July 31, 1996.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10
<PAGE>
HIGH YIELD BOND FUND
NOTES TO THE FINANCIAL STATEMENTS
- ------------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
High Yield Bond Fund (the "Fund") is a series of Nicholas-Applegate Mutual
Funds (the "Trust"), a diversified, open-end management investment company
organized as a Delaware business trust , and offers five classes of shares
namely, A, B, C, I and Q.
Prior to March 27, 1998, the Fund's capital consisted of only Institutional
class. On March 27, 1998, the Fund combined with a similar high yield bond fund
started on February 28, 1998, which was also a series of the Trust (the
"Acquiree"), whose capital consisted of classes A, B, C and Q. The shareholders
of the Acquiree effectively exchanged their shares in the Acquiree for equal
amounts of shares in the respective classes of the Fund in a tax-free exchange.
The Acquiree's net assets at that date, $16,364,513, including $70,541 of
unrealized appreciation, $28,328 of undistributed net investment income and
$8,125 of undistributed net realized gains from investment transactions, were
combined with those of the Fund. The aggregate net assets of the Fund and the
Acquiree immediately before the acquisition were $10,692,136 and $16,364,513,
respectively.
INVESTMENT OBJECTIVE
High Yield Bond Fund seeks a high level of current income and capital growth
through investments primarily in lower rated debt securities and convertible
securities rated below investment grade by a nationally recognized statistical
rating agency.
SECURITIES TRANSACTIONS
Equity securities are valued at the last 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 directions of the 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 Fund. 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
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of their taxable income to their shareholders. Accordingly, no
federal income tax provisions are required if the Funds continue to comply with
such requirements.
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.
The character of distributions made during the year (or period where
appropriate) from net investment income or net realized gains may differ from
- --------------------------------------------------------------------------------
11
<PAGE>
HIGH YIELD BOND FUND
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
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 describes each Fund'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 in the financial statements and accompanying notes. Actual
results could differ from those estimates.
ALLOCATION OF EXPENSES
Expenses arising in connection with a specific class of shares are allocated
directly. All other expenses are allocated pro rata based on relative net
assets.
B. TRANSACTIONS WITH AFFILIATES
ADVISORY AGREEMENTS
The investment advisor to the Trust is Nicholas-Applegate Capital Management
("Nicholas-Applegate" or "Investment Advisor"). The advisory fee is computed
daily at an annual rate of 0.60% of average daily net assets of the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Trust has adopted a distribution plan whereby Nicholas-Applegate
Securities (the "Distributor"), an affiliate of Nicholas-Applegate Capital
Management, is compensated for distribution-related expenses at an annual rate,
payable monthly, of 0.25%, 0.75% and 0.75% of the average daily net assets of
the Fund's A, B and C Shares, respectively.
Under a distribution agreement, the Distributor who is the principal
underwriter for the sale of shares of the Fund, retains a portion of any
contingent deferred sales load on redemptions for the Fund, and retains a
portion of the initial sales load imposed on purchases of shares of the Class A
Shares. This agreement may be terminated by either party upon 60 days' written
notice.
The Trust has adopted a shareholder service plan under which the Distributor
is also compensated for non-distribution related expenses at an annual rate, as
follows: 0.10%, 0.25% and 0.25% of the average daily net asset value of the A,
B, and C shares, respectively.
ADMINISTRATIVE SERVICES AGREEMENT
The Fund pays the Investment Advisor for co-administrative services at an
annual rate of 0.10% of average daily net assets of the Fund. These fees are in
addition to the administrative fees charged by Investment Company Administration
Corporation.
EXPENSE LIMITATIONS
Nicholas-Applegate and the Trust have undertaken to limit the Fund's expenses
to certain annual levels. Overall operating expenses for the 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. The Fund will reimburse the Investment Adviser in subsequent
years when operating expenses (before reimbursement) are less than the
applicable percentage limitation.
<TABLE>
<S> <C>
Class A 1.10%
Class B 1.75%
Class C 1.75%
Class I 0.75%
Class Q 1.00%
</TABLE>
For the year ended March 31, 1998, expense reimbursements recorded by the Fund
were related to expenses incurred by Class I prior to the acquisition discussed
in Note A.
These percentages are based on the average net assets of the classes,
exclusive of interest, taxes brokerage commissions, and other costs incurred in
connection with portfolio securities transactions, capital expenditures, and
extraordinary expenses.
- --------------------------------------------------------------------------------
12
<PAGE>
HIGH YIELD BOND FUND
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
The cumulative unreimbursed amount paid by Nicholas-Applegate on behalf of
Class I, during the inception of the Fund to March 31, 1998 was $130,661.
Effective March 31, 1998, Nicholas-Applegate agreed to amend the expense
reimbursement agreement to limit the possible recoupment period of any expense
reimbursements to five years from the year of the reimbursement, and subject to
the Fund's ability to effect such reimbursement and remain in compliance with
applicable expense limitations.
RELATED PARTIES
Certain officers of the Trust are also officers of the Investment Adviser and
the Distributor.
C. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investment securities, other than
short-term obligations, were $54,671,555 and $33,566,349, respectively, for the
fiscal year ended March 31, 1998.
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>
GROSS GROSS NET
TAX UNREALIZED UNREALIZED UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
- -------------- ----------- ----------- -----------
<S> <C> <C> <C>
$ 28,322,047 $ 420,472 $ 63,329 $ 357,143
</TABLE>
D. OFF BALANCE SHEET RISKS AND DERIVATIVE INSTRUMENTS
The Fund's investments 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 policy of the Fund to continuously
monitor its exposure to these risks.
The Fund may utilize forward foreign currency exchange contracts as part of
its strategy of preserving capital. Upon entering into forward foreign currency
contracts, the Fund is 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 Fund recognizes a
realized gain or loss when the contract is sold. The forward value of amounts
due to the Fund netted against the forward value of the currency to be delivered
by the Fund and the remaining amount is shown as receivable (payable) for
unrealized gain (loss) on forward currency contracts open in the financial
statements. There were no open forward foreign currency contracts outstanding at
March 31, 1998.
E. CREDIT FACILITY
The Fund participates 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 Fund has agreed to pay commitment fees
on its pro rata portion of the Facility. Interest is charged to the Fund at a
rate based on 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 period ended
March 31, 1998 was $0.
- --------------------------------------------------------------------------------
13
<PAGE>
HIGH YIELD BOND FUND
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
F. CAPITAL SHARE TRANSACTIONS
The Fund currently offers five classes of shares, namely, A, B, C, I and Q.
Transactions in capital shares for the year ended March 31, 1998 were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I CLASS Q
-------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Capital share transactions:
Proceeds from shares sold............. $ 2,188,791 $ 1,136,299 $ 907,549 $ 6,471,123 $ 28,000
Proceeds from shares issued in
connection with acquisition (See
Note A)............................. 4,153,263 7,772,553 3,900,531 -- 538,166
Value of shares reinvested............ -- -- -- 237,690 --
Cost of shares repurchased............ (1,658,997) (30,039) (91) (811,321) --
-------------- ------------- ------------- ------------- -----------
Increase in net assets derived from
capital share transactions.......... $ 4,683,057 $ 8,878,813 $ 4,807,989 $ 5,897,492 $ 566,166
-------------- ------------- ------------- ------------- -----------
-------------- ------------- ------------- ------------- -----------
Change in Shares Outstanding
Beginning share balances.............. -- -- -- 349,046 --
Shares sold........................... 173,791 89,467 71,467 492,047 2,205
Shares issued in connection with
acquisition (See Note A)............ 326,993 612,536 307,307 -- 42,382
Shares reinvested..................... -- -- -- 17,883 --
Shares repurchased.................... (132,119) (2,379) (7) (58,848) --
-------------- ------------- ------------- ------------- -----------
Ending share balances................. 368,665 699,624 378,767 800,128 44,587
-------------- ------------- ------------- ------------- -----------
-------------- ------------- ------------- ------------- -----------
</TABLE>
- --------------------------------------------------------------------------------
14
<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 statement of assets and liabilities,
including the schedule of investments, of High Yield Bond Fund (the "Fund"), a
series of Nicholas-Applegate Mutual Funds, as of March 31, 1998, and the related
statement of operations for the fiscal year then ended, the statements of
changes in net assets and the financial highlights for each of the two fiscal
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with 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. 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 and financial highlights referred to
above present fairly, in all material respects, the financial position of High
Yield Bond Fund as of March 31, 1998, the results of its operations for the
fiscal year then ended, and the changes in its net assets and the financial
highlights 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
- --------------------------------------------------------------------------------
15
<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
800-551-8643
Nicholas-Applegate Securities, Distributor
www.nacm.com
ANN98Q
