NICHOLAS APPLEGATE INSTITUTIONAL FUNDS, 485APOS, 2000-11-30

NICHOLAS APPLEGATE INSTITUTIONAL FUNDS
485APOS, 2000-11-30

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<PAGE>

As filed with the Securities and Exchange Commission
on November 30, 2000

1933 Act File No. 333-71469
1940 Act File No. 811-07384

--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------------------

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. ___ / /
POST-EFFECTIVE AMENDMENT NO. 5 /X/
---

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 23

----------------------------

NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS
(Exact name of registrant as specified in its charter)

--------------------------
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(Address, including zip code, of Principal Executive Offices)

---------------------------

CHARLES H. FIELD, JR.
C/O NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 WEST BROADWAY, 30TH FLOOR
SAN DIEGO, CALIFORNIA 92101
(name and address of agent for service)

COPY TO:

DEBORAH A. WUSSOW
C/O NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
600 WEST BROADWAY, SUITE 2900
SAN DIEGO, CALIFORNIA 92101

/ / immediately upon filing pursuant to paragraph (b)
/ / on _________ pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(i)
/ / on _________ pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii) on September 1, 1999
/ / on _________ pursuant to paragraph (a)(ii), of Rule 485
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment

--------------------------------------

<PAGE>
[NICHOLAS APPLEGATE LOGO]

INSTITUTIONAL FUNDS PROSPECTUS

INSTITUTIONAL SHARES

------------------------------------

GLOBAL FUNDS

Worldwide Growth
Global Blue Chip
Global Growth & Income
Global Technology
Global Health Care
International Core Growth
International Small Cap Growth
Emerging Countries
Pacific Rim
Latin America

US FUNDS

Large Cap Growth
Mid Cap Growth
Small Cap Growth
Mini Cap Growth
Value
Convertible

FIXED INCOME FUNDS

Short Intermediate
High Quality Bond
High Yield Bond

AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
DETERMINED THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE,
NOR HAS IT APPROVED OR DISAPPROVED THESE SECURITIES. IT IS A CRIMINAL OFFENSE
TO STATE OTHERWISE.

FEBRUARY 1, 2001

---------------------------------------
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
A FUND BY FUND LOOK AT GOALS,
STRATEGIES, RISKS AND HISTORICAL
PERFORMANCE.
GLOBAL FUNDS
Worldwide Growth 1
Global Blue Chip 3
Global Growth & Income 5
Global Technology 7
Global Health Care 9
International Core Growth 11
International Small Cap Growth 13
Emerging Countries 15
Pacific Rim 17
Latin America 19

US FUNDS
Large Cap Growth 21
Mid Cap Growth 23
Small Cap Growth 25
Mini Cap Growth 27
Value 29
Convertible 31

FIXED INCOME FUNDS
Short Intermediate 33
High Quality Bond 35
High Yield Bond 37
--------------------------------------------------------------------------------

POLICIES AND INSTRUCTIONS FOR
OPENING, MAINTAINING, AND REDEEMING
SHARES FROM AN ACCOUNT IN ANY
FUND.

SIMPLIFIED ACCOUNT INFORMATION
Opening an Account 39
Buying Shares 39
Exchanging Shares 40
Selling Shares 40
Signature Guarantees 41
YOUR ACCOUNT
Transaction Policies 42
Features and Account Policies 43

--------------------------------------------------------------------------------
FURTHER INFORMATION THAT APPLIES
TO THE FUNDS AS A GROUP.

ORGANIZATION AND MANAGEMENT
Investment Adviser 44
Investment Adviser Compensation 44
Expense Waivers 44
Multi Class Structure 45
Shareholder Services 45
Portfolio Trades 45
Portfolio Turnover 45
Portfolio Management 45

--------------------------------------------------------------------------------

PRINCIPAL STRATEGIES, RISKS AND OTHER
INFORMATION 51

FINANCIAL HIGHLIGHTS 56

PRIOR PERFORMANCE OF CERTAIN FUNDS 60

FOR MORE INFORMATION Back Cover
<PAGE>
1

WORLDWIDE GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests in companies located throughout the world.

The Investment Adviser focuses on a "bottom-up" analysis on the financial
conditions and competitiveness of individual companies worldwide. In analyzing
specific companies for possible investment, the Fund's Investment Adviser
ordinarily looks for several of the following characteristics: above-average per
share earnings growth; high return on invested capital; a healthy balance sheet;
sound financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
Investment Adviser considers whether to sell a particular security when any of
those factors materially changes.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

The Fund normally invests at least 75% of its assets in equity securities. The
Fund invests at least 65% of its total assets in securities of issuers located
in at least three different countries, one of which may be the United States.
When in the opinion of the Investment Adviser, greater investment opportunities
exist the Fund may also invest in countries with emerging securities markets.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / STOCK MARKET VOLATILITY--The prices of equity securities change in response
to many factors, including the historical and prospective earnings of the
issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions, and market liquidity. Stock prices are
unpredictable, may fall suddenly and may continue to fall for extended
periods.

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

CURRENCY EXCHANGE RATES--The dollar value of the Fund's foreign investments
will be affected by changes in the exchange rates between the dollar and
the currencies in which those investments are traded.

POLITICAL AND ECONOMIC CONDITIONS--The value of the Fund's foreign
investments may be adversely affected by political and social instability
in their home countries and by changes in economic or taxation policies in
those countries.

REGULATIONS--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available
information about foreign companies than about U.S. companies.

MARKETS--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and their prices may be more volatile than U.S. securities.

/ / SMALLER ISSUERS--Investments in small-capitalization companies entail
greater risk because these companies may have unproven track records,
limited product or service base, limited access to capital and may be more
likely to fail than larger more established companies. Information regarding
smaller companies may be less available, incomplete or inaccurate, and their
securities may trade less frequently than those of larger companies.

/ / SECURITIES LENDING--There is the risk that when lending portfolio
securities, the securities may not be available to the Fund on a timely
basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

<PAGE>
2

WORLDWIDE GROWTH FUND

[GRAPHIC]PAST PERFORMANCE

The two tables below show the Fund's annual returns and its long-term
performance. The graph shows how the Fund's total return has varied from year to
year, while the table shows performance over time. This information provides
some indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns compare with those of a broad measure of market performance.

Average annual return is determined by taking the Fund's performance over a
given period and expressing it as an average annual rate. All figures assume
dividend reinvestment. Past performance does not indicate future results.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR 5 YEARS (4/19/93)
<S> <C> <C> <C>
------------------------------------------------------------------
FUND
MSCI WORLD INDEX
</TABLE>

INDEX: MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX IS AN UNMANAGED
TOTAL RETURN PERFORMANCE BENCHMARK. IT 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 UNMANAGED.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.00%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.42%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.42%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.05%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.37%
</TABLE>

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$144 $465 $819 $1,870
</TABLE>
<PAGE>
3

GLOBAL BLUE CHIP FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal, it
invests globally in blue chip companies with large stock market capitalizations.
Generally, these companies have an established history of earnings, easy access
to credit, good industry position, and a reputation as a global leader in their
industry.

In analyzing specific companies for possible investment, the Fund's Investment
Adviser ordinarily looks for several of the following characteristics: above-
average per share earnings growth; high return on invested capital; a healthy
balance sheet; sound financial and accounting policies and overall financial
strength; strong competitive advantages; effective research and product
development and marketing; development of new technologies; efficient service;
pricing flexibility; strong management; and general operating characteristics
that will enable the companies to compete successfully in their respective
markets. The Investment Adviser considers whether to sell a particular security
when any of those factors materially changes.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 300% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

The Fund normally invests 75% of its assets in equity securities. The Fund
normally invests at least 65% of its total assets in blue chip companies located
in at least three different countries, one of which may be the United States.
When in the opinion of the Investment Adviser, greater investment opportunities
exist, the Fund may also invest in companies located in countries with emerging
securities markets.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

<PAGE>
4

GLOBAL BLUE CHIP FUND

[GRAPHIC]PAST PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (9/30/97)
<S> <C> <C>
--------------------------------------------------------------
FUND
MSCI WORLD INDEX
</TABLE>

INDEX: THE 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 UNMANAGED.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.80%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 1.02%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.82%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.49%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.33%
</TABLE>

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$140 $552 $1,005 $2,352
</TABLE>
<PAGE>
5

GLOBAL GROWTH & INCOME FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY
The Fund seeks maximum long-term capital appreciation and current income. In
pursuing this goal, the Fund invests in the stocks and bonds of companies
located throughout the world.

The Fund's Investment Adviser actively manages a blended portfolio of U.S. and
foreign equity and fixed income securities. It spreads the Fund's investments
throughout the world.

The Investment Adviser actively manages the fixed income portion to take
advantage of current interest rate and bond market trends. When evaluating any
bond, the Investment Adviser selects bonds based upon a "top down" analysis of
economic trends. Its investment philosophy emphasizes interest rate decisions
and shifts among sectors of the bond market. It also analyzes credit quality,
the yield to maturity of the security, and the effect the security will have on
the average yield to maturity of the Fund's bond portfolio. The Investment
Adviser seeks to add value by positioning portfolio securities among various
market sectors and maturities along the yield curve.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 300% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

The Fund normally invests at least 60% of its assets in equity securities. The
Fund will invest the remainder in debt securities of any maturity issued by
foreign companies, foreign governments and their agencies and instrumentalities.
Normally at least 65% of its total assets are invested in at least three
countries, one of which may be the U.S.

When in the opinion of the Investment Adviser, greater investment opportunities
exist, the Fund may also invest in companies located in countries with emerging
securities markets.

[GRAPHIC]PRIMARY RISKS
Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

/ / FIXED INCOME SECURITIES--The value of bonds changes as interest rates
fluctuate: if rates rise, the prices of bonds fall; if rates fall, their
prices rise.
<PAGE>
6

GLOBAL GROWTH & INCOME FUND

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

[GRAPHIC]PAST PERFORMANCE
The two tables below show the Fund's annual returns and its long-term
performance. The graph shows how the Fund's total return has varied from year to
year, while the table shows performance over time. This information provides
some indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns compare with those of a broad measure of market performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (6/30/97)
<S> <C> <C>
--------------------------------------------------------------
FUND
MSCI WORLD INDEX
</TABLE>

INDEX: THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX IS AN
UNMANAGED TOTAL-RETURN PERFORMANCE BENCHMARK. IT 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 UNMANAGED.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.85%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 2.21%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 3.06%
---------------------------------------------------------------------------------
Waiver of fund expenses (1.68%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.38%
</TABLE>

EXAMPLE:
THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$145 $836 $1,599 $3,865
</TABLE>
<PAGE>
7

GLOBAL TECHNOLOGY FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests primarily in the equity securities of U.S. and foreign
companies with business operations in technology and technology-related
industries. These companies may include, for example, companies that develop,
produce and distribute products or services in the computer, semi-conductor,
electronics, communications, health care, and biotechnology sectors. From time
to time the Fund may invest in shares of companies through initial public
offerings ("IPOs").

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 300% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

The Fund normally invests at least 75% of its assets in technology related
equity securities. Normally, at least 65% of its assets will be invested in
companies located in at least three different countries, one of which may be the
United States. When in the opinion of the Investment Adviser greater investment
opportunities exist the Fund may also invest in companies located in countries
with emerging securities markets.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / SECTOR RISK--Is the possibility that the technology sector may perform
differently than other sectors or as the market as a whole. The Fund's
performance will be more susceptible to any economic, business or other
developments which generally affect the technology sector.

/ / SMALLER ISSUERS--Investments in small-capitalization companies entails
greater risk because these companies may have unproven track records,
limited product or service base, limited access to capital and may be more
likely to fail than larger more established companies. Information regarding
smaller companies may be less available, incomplete or inaccurate, and their
securities may trades less frequently than those of larger companies.

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

/ / IPOS--have the potential to produce, and have in fact produced, substantial
gains for the Fund. There is no assurance that IPOs or that IPOs will
continue to have the same effect on performance as Fund assets grow.
Therefore investors should not rely on these past gains as an indication of
future performance.

<PAGE>
8

GLOBAL TECHNOLOGY FUND

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

For further explanation, see "Principal Strategies, Risks and Other Information"
starting on page 51.

[GRAPHIC]PAST PERFORMANCE

The two tables below provide some indication of the risks of investing in the
Fund by showing how the Fund's average annual returns compare with those of a
broad measure of market performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (7/31/98)
<S> <C> <C>
--------------------------------------------------------------
FUND
MERRILL LYNCH GLOBAL TECHNOLOGY
100 INDEX
</TABLE>

INDEX: THE UNMANAGED MERRILL LYNCH GLOBAL TECHNOLOGY INDEX TRACKS THE
PERFORMANCE OF THE 100TH LARGEST SECURITIES IN THE GLOBAL TECHNOLOGY SECTOR.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.00%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.42%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.42%
---------------------------------------------------------------------------------
Waiver of fund expenses 0.00%
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.42%
</TABLE>

EXPENSE WAIVERS: Through the fiscal year ending March 31, 2001, the Investment
Adviser has contractually agreed to waive or defer its management fees and to
pay other operating expenses otherwise payable by the Fund, subject to possible
later reimbursement during a three year period. The Investment Adviser may not
amend the fee waiver agreement without the consent of the Fund. See "Expense
Waivers" on page 44.
EXAMPLE:
THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$149 $470 $824 $1,875
</TABLE>
<PAGE>
9

GLOBAL HEALTH CARE FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY
The Fund seeks maximum long-term capital appreciation.

In pursuing this goal, the Fund invests primarily in the equity securities of
U.S. and foreign companies with business operations in the health care and
health care-related industries. The Fund considers the health care sector to
include any company that designs, manufactures, or sells products or services
used for or in connection with health care or medicine (such as pharmaceutical
companies, biotechnology research firms, companies that sell medical products
and companies that own or operate health care facilities). Such companies derive
at least 50 percent of their revenues or profits from goods produced or sold,
investments made, or services performed in the health care sector. Because the
Fund is non-diversified, it may invest a significant portion of its assets in
the securities of a single issuer, or a small number of issuers.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 300% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS
The Fund will normally invest at least 75% of its assets in health care sector
equity securities. Normally, the Fund will invest at least 65% of its assets in
the equity securities of companies located in at least three different
countries, including the United States, and may invest a significant portion of
its assets in the securities of U.S. issuers. The Fund may invest up to 35% of
its total assets in equity securities of other companies the Investment Adviser
believes will benefit from developments in the health care industry. When in the
opinion of the Investment Adviser greater investment opportunities exist, the
Fund may also invest in companies located in countries with emerging securities
markets.

[GRAPHIC]PRIMARY RISKS
Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / NON-DIVERSIFICATION--Because the Fund will be able to invest its assets in a
small number of issuers, the Fund is more susceptible to any single
economic, political or regulatory event affecting those issuers than is a
diversified fund.

/ / SECTOR RISK--The value of the Funds shares is particularly vulnerable to
factors affecting the health care industry, such as substantial government
regulation. Government regulation may impact the demand for products and
services offered by health care companies. Also, the products and services
offered by the health care companies may be subject to rapid obsolescence
caused by scientific advances and technological innovations. Because the
Fund focuses its investments in the health care industry, the value of your
shares may rise and fall more than the value of shares of a fund that
invests more broadly.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

/ / SECURITIES LENDING--There is the risk that when lending portfolio
securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose
the opportunity to sell the securities at a desirable price.

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

CURRENCY EXCHANGE RATES--The dollar value of the Fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.

POLITICAL AND ECONOMIC CONDITIONS--The value of the Fund's foreign
investments may be adversely affected by political and social instability in
their home countries and by changes in economic or taxation policies in those
countries.

GLOBAL HEALTH CARE FUND

/ / IPOS--have the potential to produce, and have in fact produced, substantial
gains for the Fund. There is no assurance that IPOs will continue to have
the same effect on performance as Fund assets grow. Therefore investors
should not rely on the Fund's past gains as an indication of future
performance.

[GRAPHIC]PAST PERFORMANCE

The two tables below provide some indication of the risks of investing in the
Fund by showing how the Fund's average annual returns compare with those of a
broad measure of market performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

INDEX: THE UNMANAGED RUSSELL 3000 HEALTHCARE INDEX TRACKS THE PERFORMANCE OF
COMPANIES INVOLVED IN MEDICAL SERVICES OR HEALTHCARE IN THE RUSSELL 3000 INDEX.
THE HEALTHCARE SECTOR IS COMPOSED OF BIOTECHNOLOGY RESEARCH AND PRODUCTIONS,
DRUGS, HOSPITAL SUPPLIES, MEDICAL SERVICES AND MISCELLANEOUS HEALTHCARE
INDUSTRIES.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.00%
----------------------------------------------------------------------------
Distribution (12b-1) fee None
----------------------------------------------------------------------------
Other expenses 0.45%
----------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (BEFORE WAIVERS) 1.45%
----------------------------------------------------------------------------
Waiver of fund expenses (0.04%)
----------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.41%
</TABLE>

EXAMPLE:
THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.
The example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your shares at the end of those
periods.
The example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses are after waivers for the 1 year period, and
before waivers for the 3 year period. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$148 $476 $837 $1,910
</TABLE>
<PAGE>
11

INTERNATIONAL CORE GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests primarily in large capitalized companies ("large cap stocks")
located in over 50 countries worldwide. In the opinion of the Fund's Investment
Adviser large cap stocks are those whose stock market capitalizations are
predominantly in the top 75% of publicly traded companies as measured by stock
market capitalizations in each country. Generally for investments in U.S. stocks
this means those with market capitalizations greater than U.S. $5 billion
measured at the time of purchase. In foreign markets, the capitalization range
for large capitalization stocks will generally be lower than the U.S. and will
vary. The market capitalization ranges of the large cap stocks in which the Fund
invests may fluctuate greatly due to changing currency values, differences in
the size of the respective economies, and movements in the local stock markets.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

The Fund normally invests at least 75% of its assets in equity securities. In
addition, the Fund spreads its investments among countries, with at least 65% of
its assets invested in companies located in at least three foreign countries.
When in the opinion of the Investment Adviser greater investment opportunities
exist the Fund may also invest in companies located in countries with emerging
securities markets. The Fund may invest up to 35% of its assets in U.S.
companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

<PAGE>
12

INTERNATIONAL CORE GROWTH FUND

[GRAPHIC]PAST PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (12/27/96)
<S> <C> <C>
--------------------------------------------------------------
FUND
MSCI EAFE
</TABLE>

INDEX: MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX
(MSCI EAFE) IS AN UNMANAGED TOTAL-RETURN PERFORMANCE BENCHMARK. IT IS A
CAPITALIZATION-WEIGHTED INDEX REPRESENTATIVE OF THE STOCK MARKET STRUCTURE OF
EUROPE AND THE PACIFIC BASIN. THE INDEX IS UNMANAGED.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.00%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.40%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.40%
---------------------------------------------------------------------------------
Waiver of fund expenses 0.00%
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.40%
</TABLE>

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$147 $463 $812 $1,849
</TABLE>
<PAGE>
13

INTERNATIONAL SMALL CAP GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests primarily in smaller-capitalized companies ("small cap stocks")
located in over 50 countries worldwide. In the opinion of the Fund's Investment
Adviser small cap stocks are those whose stock market capitalization's are
predominantly in the bottom 25% of publicly traded companies as measure by stock
market capitalizations in each country. Generally, for investments in U.S.
stocks this means those companies with stock market capitalizations of U.S.
$2.5 billion and less as measured at time of purchase. In foreign markets the
capitalization ranges for small cap stocks will generally be lower than the U.S.
and will vary. The market capitalization ranges of small cap stocks in which the
Fund invests may fluctuate greatly due to changing currency values, differences
in the size of the respective economies, and movements in the local stock
markets.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS
The Fund normally invests 75% of its assets in equity securities. Under normal
conditions, the Fund invests at least 65% of its total assets in small-cap
securities of issuers located in at least three countries outside the United
States. When in the opinion of the Investment Adviser greater investment
opportunities exist the Fund may also invest in companies located in countries
with emerging securities markets. The Fund may invest up to 35% of its total
assets in U.S. issuers.

[GRAPHIC]PRIMARY RISKS
Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.
<PAGE>
14

INTERNATIONAL SMALL CAP GROWTH FUND

See "Principal Strategies, Risks and Other Information" starting on page 51.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR 5 YEARS (12/31/97)
<S> <C> <C> <C>
----------------------------------------------------------------
FUND
SALOMON EPAC/
EMI
</TABLE>

INDEX: SOLOMON EPAC EMI IS AN UNMANAGED TOTAL-RETURN PERFORMANCE BENCHMARK. THE
INDEX THAT INCLUDES SHARES OF ABOUT 2,821 COMPANIES IN 22 COUNTRIES EXCLUDING
CANADA AND THE U.S. COMPANIES WITHIN THE INDEX ARE SMALLER CAPITALIZATION
COMPANIES DEFINED AS THE BOTTOM 20% OF THE UNIVERSE.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<S> <C>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management fee 1.00%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.45%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.45%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.04%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.41%
</TABLE>

<S> <C> <C> <C>
Year 1 Year 3 Year 5 Year 10
$148 $476 $837 $1,910
</TABLE>
<PAGE>
15

EMERGING COUNTRIES FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests primarily in stocks of companies located in countries with
emerging securities markets--that is, countries with securities markets which
are, in the opinion of the Investment Adviser, less sophisticated than more
developed markets in terms of participation, analyst coverage, liquidity and
regulation. These are markets which have yet to reach a level of maturity
associated with developed foreign stock markets, especially in terms of
participation by investors.

The Investment Adviser seeks companies in the early stages of development,
believed to be undergoing a basic change in operations. The Investment Adviser
currently selects portfolio securities from an investment universe of
approximately 6,000 foreign companies in over 35 emerging markets.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective. The Fund may also lend portfolio securities on a
short-term basis, up to 30% of its total assets. The Investment Adviser expects
a high portfolio turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

The Fund normally invests at least 75% of its assets in equity securities. In
addition, the Fund spreads its investment among countries. Normally, at least
65% of its assets will be invested in companies located in at least three
foreign countries with emerging securities markets. The Fund may invest up to
35% of its assets in U.S. companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

EMERGING SECURITIES MARKETS--Foreign securities risks are magnified in
countries with emerging securities markets since these countries may have
unstable governments and less established markets. These markets tend to be
less liquid and more volatile, and offer less regulatory protection for
investors. The economies of emerging countries may be predominantly based
on only a few industries or dependent on revenue from particular
commodities, international aid or other assistance.

EMERGING COUNTRIES FUND

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

[GRAPHIC]PAST PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR 5 YEAR (11/28/94)
<S> <C> <C> <C>
---------------------------------------------------------------
FUND
MSCI EMF FREE

THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 6/30/00 WAS (8.67%).

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN
LOWER IF THE INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF
THE FUND'S EXPENSES. SEE "EXPENSE WAIVERS" FOR ADDITIONAL
INFORMATION.
</TABLE>

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.25%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.52%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.77%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.10%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.67%
</TABLE>

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$175 $575 $1,016 $2,327
</TABLE>
<PAGE>
17

PACIFIC RIM FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY
The Fund seeks long-term growth of capital. In pursuing this goal, the Fund
invests primarily in the stocks of companies located within the Pacific Rim. The
Investment Adviser considers the following Pacific Rim countries: Australia,
China, Japan, India, Indonesia, South Korea, Malaysia, New Zealand, the
Phillippines, Singapore and Taiwan.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 400% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS
Normally, the Fund invests at least 65% of its total assets in equity securities
of companies that satisfy at least one of the following criteria: (i) they
derive 50% or more of their total revenue from goods produced, sales made or
services provided in one or more Pacific Rim countries; (ii) they are organized
under the laws of a Pacific Rim country; (iii) they maintain 50% or more of
their assets in one or more Pacific Rim countries; or (iv) the principal trading
market for a class of their securities is in a Pacific Rim country.

The Fund intends to invest in securities of issuers located in at least three
Pacific Rim countries. Although the Fund intends to allocate its investments
among at least three countries, the Fund may emphasize the securities of issuers
located in any one country in the Pacific Rim where the Investment Adviser
believes there is potential for above average capital appreciation.

[GRAPHIC]PRIMARY RISKS
Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

EMERGING SECURITIES MARKETS--To the extent that the Fund invests in
countries with emerging markets, the foreign securities risks are magnified
since these countries may have unstable governments and less established
markets. These markets tend to be less liquid and more volatile, and offer
less regulatory protection for investors. The economies of emerging
countries may be predominantly based on only a few industries or dependent
on revenue from particular commodities, international aid or other
assistance.

REGION SPECIFIC RISKS--The Fund's performance is expected to be closely
tied to economic and political conditions in Asia and the Pacific Rim. A
number of countries through out the region are currently experiencing
economic difficulties and significant declines in values in their financial
markets. The unsettled conditions of several Asian and Pacific Rim
financial markets has also affected, and could continue to affect, emerging
markets in other countries and regions.

/ / SECURITIES LENDING--There is the risk that when lending portfolio
securities, the securities may not
<PAGE>
18

PACIFIC RIM FUND

be available to the Fund on a timely basis and the Fund may, therefore, lose
the opportunity to sell the securities at a desirable price.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR 12/31/97
<S> <C> <C>
--------------------------------------------------------------
FUND
MSCI PACIFIC
</TABLE>

INDEX: THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) PACIFIC INDEX (MSCI
PACIFIC) IS COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 6
DEVELOPED MARKET COUNTRIES IN THE PACIFIC BASIN, INCLUDING, AUSTRALIA, HONG
KONG, JAPAN, MALAYSIA, NEW ZEALAND, AND SINGAPORE. THE INDEX IS CALCULATED
WITHOUT DIVIDENDS OR WITH GROSS DIVIDENDS REINVESTED IN BOTH U.S DOLLARS AND
LOCAL CURRENCY. THE INDEX IS UNMANAGED.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.00%
----------------------------------------------------------------------------------
Distribution (12b-1) fee None
----------------------------------------------------------------------------------
Other expenses (before waivers) 5.25%
----------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 6.25%
----------------------------------------------------------------------------------
Waiver of fund expenses (4.63%)
----------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.62%
</TABLE>

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$170 $1,583 $3,141 $7,769
</TABLE>
<PAGE>
19

LATIN AMERICA FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks long-term growth of capital. In pursuing this goal, the Fund
invests in the securities of companies located in the Latin American countries
of South America, Central America and Mexico. Because the Fund is
non-diversified, it may invest a significant portion of its assets in the
securities of a single issuer or a small number of issuers.

In analyzing specific companies throughout Latin America for possible
investment, the Fund's Investment Adviser ordinarily looks for several of the
following characteristics: above-average per share earnings growth; high return
on invested capital; a healthy balance sheet; sound financial and accounting
policies and overall financial strength; strong competitive advantages;
effective research and product development and marketing; development of new
technologies; efficient service; pricing flexibility; strong management; and
general operating characteristics that will enable the companies to compete
successfully in their respective markets. The Investment Adviser considers
whether to sell a particular security when any of those factors materially
changes.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective. The Fund may also lend portfolio securities on a
short-term or long-term basis, up to 30% of its total assets. The Investment
Adviser expects a high portfolio turnover rate of 400% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS
Normally, the Fund invests at least 65% of its total assets in equity securities
of issuers that satisfy at least one of the following criteria: (i) they derive
50% or more of their total revenue from goods produced, sales made or services
performed in one or more Latin American countries, (ii) they are organized under
the laws of a Latin American country; (iii) they maintain 50% or more of their
assets in one or more Latin American countries, or (iv) the principal trading
market for a class of their securities is in a Latin American country.

[GRAPHIC]PRIMARY RISKS
Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

EMERGING SECURITIES MARKETS--The foreign securities risks are magnified in
countries with emerging securities markets since these countries may have
unstable governments and less established markets. These markets tend to be
less liquid and more volatile, and offer less regulatory protection for
investors. The economies of emerging countries may be predominantly based
on only a few industries or dependent on revenue from particular
commodities, international aid or other assistance.

REGION SPECIFIC RISKS--The Fund's performance is expected to be closely
tied to economic and political conditions in Latin America. A number of
Latin American countries are currently experiencing economic difficulties
and significant declines in values in their financial markets. The
unsettled conditions of several Latin American financial markets has also
affected and could continue to affect emerging markets in other countries
and regions.

/ / SECURITIES LENDING--There is the risk that when lending portfolio
securities, the securities may not
<PAGE>
20

LATIN AMERICA FUND
be available to the Fund on a timely basis and the Fund may, therefore, lose
the opportunity to sell the securities at a desirable price.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (11/28/97)
<S> <C> <C>
-------------------------------------------------------------------
FUND
MSCI LATIN
AMERICA

INDEX: THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) LATIN
AMERICA INDEX IS COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET
STRUCTURE OF 7 EMERGING MARKET COUNTRIES IN LATIN AMERICA,
INCLUDING ARGENTINA, CHILE, COLUMBIA, BRAZIL, MEXICO FREE, PERU AND
VENEZUELA. THE INDEX IS UNMANAGED.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER
IF THE INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S
EXPENSES. SEE "EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.
</TABLE>

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.25%
----------------------------------------------------------------------------------
Distribution (12b-1) fee None
----------------------------------------------------------------------------------
Other expenses (before waivers) 2.68%
----------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 3.93%
----------------------------------------------------------------------------------
Waiver of fund expenses (2.17%)
----------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.76%
</TABLE>

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$185 $1,073 $2,053 $4,964
</TABLE>
<PAGE>
21

LARGE CAP GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks long-term capital appreciation. In pursuing this goal, the Fund
invests primarily in stocks from a universe of U.S. companies with large market
capitalizations. Generally, large companies are those with market
capitalizations corresponding to the upper 90% of the Russell 1000 Growth Index
as measured at the time of purchase. As of June 30, 2000 the upper 90% of the
Russell 1000 Growth Index included companies with market capitalizations of
$8.3 billion and above. Capitalization of companies held by the Fund may
fluctuate greatly as the market moves upwards or downwards.

The Investment Adviser expects a high portfolio turnover rate of 200% or more.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 65% of its total assets in large
capitalization equity securities.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

For further explanation, see "Principal Strategies, Risks and Other Information"
starting on page 51.

[GRAPHIC]PAST PERFORMANCE

The following tables show the Fund's annual returns and its long-term
performance. The graph shows how the Fund's total return has varied from year to
year, while the table shows performance over time. This information provides
some indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns compare with those of a broad measure of market performance.

<PAGE>
22

LARGE CAP GROWTH FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (12/27/96)
<S> <C> <C>
-----------------------------------------------------------------
FUND
RUSSELL 1000 GROWTH
</TABLE>

INDEX: THE RUSSELL 1000 GROWTH IS AN UNMANAGED INDEX CONTAINING THOSE COMPANIES
AMONG THE RUSSELL 1000 INDEX 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 IS COMPRISED OF THE 3,000 LARGEST U.S. COMPANIES
AS DETERMINED BY TOTAL MARKET CAPITALIZATION. THE RUSSELL 1000 GROWTH IS
CONSIDERED GENERALLY REPRESENTATIVE OF THE MARKET FOR LARGE CAP STOCKS.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.75%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.45%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.20%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.19%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.01%
</TABLE>

EXAMPLE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$106 $377 $676 $1,564
</TABLE>
<PAGE>
23

MID CAP GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests in stocks from a universe of U.S. companies with midsize market
capitalizations. Generally, mid sized companies are those with market
capitalizations corresponding to the middle 90% of the Russell MidCap Growth
Index as measured at the time of purchase. As of June 30, 2000 the middle 90% of
the Russell MidCap Growth Index included companies with market capitalizations
between $2.0 billion and $20.0 billion. Capitalization of companies held by the
Fund may fluctuate greatly as the market moves upwards or downwards and the
Investment Adviser may continue to hold an investment for future capital gain
opportunities even if the company is no longer "midcap."

The Investment Adviser expects a high portfolio turnover rate of 200% or more.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 75% of its total assets in common stocks of
U.S. mid capitalization companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

[GRAPHIC]PAST PERFORMANCE

<PAGE>
24

MID CAP GROWTH FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

INDEX: THE RUSSELL MIDCAP GROWTH INDEX MEASURES THE PERFORMANCE OF THOSE
COMPANIES AMONG THE 800 SMALLEST IN THE RUSSELL 1000 INDEX WITH HIGHER THAN
AVERAGE PRICE-TO-BOOK RATIOS AND FORECASTED GROWTH. THE RUSSELL MIDCAP GROWTH
INDEX IS CONSIDERED GENERALLY REPRESENTATIVE OF THE U.S. MARKET FOR MID CAP
STOCKS. THE INDEX IS UNMANAGED.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.75%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.34%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.09%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.08%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.01%
</TABLE>

EXAMPLE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$106 $352 $624 $1,431
</TABLE>
<PAGE>
25

SMALL CAP GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal the
Fund invests in stocks from a universe of U.S. companies with small market
capitalizations. Generally, small companies are those with market
capitalizations corresponding to the middle 90% of the Russell 2000 Growth Index
as measured at the time of purchase. As of June 30, 2000 the middle 90% of the
Russell 2000 Growth Index included companies with market capitalizations between
$287 million and $2.0 billion. Capitalization of companies held by the Fund may
fluctuate greatly as the market moves upwards or downwards and the Investment
Adviser may continue to hold an investment for further capital growth
opportunities even if the company is no longer "small cap".

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

[GRAPHIC]PRINCIPAL INVESTMENTS
Normally, the Fund invests at least 75% of its total assets in common stocks of
small capitalization U.S. companies.

[GRAPHIC]PRIMARY RISKS
Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

See "Principal Strategies, Risks and Other Information" starting on page 51.

[GRAPHIC]PAST PERFORMANCE
The following tables show the Fund's annual returns and its long-term
performance, The graph shows how the Fund's total return has varied from year to
year, while the table shows performance over time. This information provides
some indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns compare with those of a broad measure of market performance.

SMALL CAP GROWTH FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR 5 YEARS (10/1/93)
<S> <C> <C> <C>
------------------------------------------------------------------------
FUND
RUSSELL 2000 GROWTH
</TABLE>

INDEX: 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 IN AN UNMANAGED INDEX AND IS A
WIDELY REGARDED SMALL-CAP INDEX OF THE 2,000 SMALLEST SECURITIES IN THE
RUSSELL 3000 INDEX WHICH COMPRISES THE 3,000 LARGEST U.S. SECURITIES AS
DETERMINED BY TOTAL MARKET CAPITALIZATION.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.00%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.38%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers)+ 1.38%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.19%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.19%
</TABLE>

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$125 $437 $781 $1,803
</TABLE>
<PAGE>
27

MINI CAP GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing its goal, the
Fund invests primarily in common stocks of U.S. companies with "mini" market
capitalizations. Generally, these companies are those with market
capitalizations of $750 million and less as measured at the time of purchase
that offer superior growth prospects. Capitalization of companies held by the
Fund may fluctuate greatly as the market moves upwards or downwards and the
Investment Adviser may continue to hold an investment for further capital growth
opportunities even if the company is no longer "mini cap".

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 65% of its total assets in common stocks of
"mini" capitalization companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

For further explanation, see "Principal Strategies, Risks and Other Information"
starting on page 51.

[GRAPHIC]PAST PERFORMANCE

MINI CAP GROWTH FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (7/12/95)
<S> <C> <C>
-------------------------------------------------------------------
FUND
RUSSELL 2000 GROWTH
</TABLE>

INDEX: THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED INDEX CONTAINING THOSE
SECURITIES IN THE RUSSELL 2000 INDEX WITH A GREATER-THAN-AVERAGE GROWTH
ORIENTATION. COMPANIES IN THIS INDEX GENERALLY HAVE HIGHER PRICE-TO-BOOK AND
PRICE-EARNINGS RATIOS. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX AND IS A
WIDELY REGARDED SMALL-CAP INDEX OF THE 2,000 SMALLEST SECURITIES IN THE RUSSELL
3000 INDEX WHICH COMPRISES THE 3,000 LARGEST U.S. SECURITIES AS DETERMINED BY
TOTAL MARKET CAPITALIZATION.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.25%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.51%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.76%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.19%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.57%
</TABLE>

EXAMPLE:
THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$165 $563 $1,002 $2,306
</TABLE>
<PAGE>
29

VALUE FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks long-term capital appreciation. In pursuing its goal, the Fund
invests primarily in large U.S. companies that, in the opinion of the Investment
Adviser, are undervalued in the market place relative to other financial
measurements. The Fund emphasizes equity securities of undervalued, large U.S.
companies with market capitalizations generally above $5 billion.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 80% of its total assets in common stocks of
large U.S. companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / VALUE INVESTING--The determination that a stock is undervalued is
subjective; the market may not agree, and the stock's price may not rise to
what the Investment Adviser believes is its full value. It may even decrease
in value. However, because the Fund's focus on undervalued stocks, the
Fund's downside risk may be less than with small company stocks since value
stocks are in theory already underpriced.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

[GRAPHIC]PAST PERFORMANCE

<PAGE>
30

VALUE FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (4/30/96)
<S> <C> <C>
--------------------------------------------------------------
FUND
S&P 500
</TABLE>

INDEX: THE STANDARD AND POOR'S 500 INDEX (S&P 500) IS AN UNMANAGED INDEX
COMPRISED OF 500 U.S. INDUSTRIAL, TRANSPORTATION, UTILITY AND FINANCIAL
COMPANIES AND IS CONSIDERED TO BE GENERALLY REPRESENTATIVE OF THE U.S. STOCK
MARKET.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS) (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.75%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.51%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.26%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.24%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.02%
</TABLE>

EXAMPLE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$107 $392 $706 $1,638
</TABLE>
<PAGE>
31

CONVERTIBLE FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum total return, consisting of capital appreciation and
current income. In pursuing its goal, the Fund invests primarily in income
producing equity securities of companies with market capitalizations above $500
million.

The Investment Adviser evaluates each security's investment characteristics as a
fixed income instrument as well as its potential for capital appreciation. The
Investment Adviser seeks to capture approximately 70-80% of the upside
performance of the underlying equities with 50% or less of the downside
exposure.

In analyzing specific companies for possible investment, the Fund's Investment
Adviser ordinarily looks for several of the following characteristics: above-
average per share earnings growth; high return on invested capital; a healthy
balance sheet; sound financial and accounting policies and overall financial
strenght; strong competitive advantages; effective research and product
development and marketing; development of new technologies; efficient service;
pricing flexibility; strong management; and general operating characteristics
that will enable the companies to compete successfully in their respective
markets. The Investment Adviser considers whether to sell a particular security
when any of those factors materially changes.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 65% of its total assets in income-producing
equity securities. Equity securities include common stocks, preferred stocks,
and securities (including debt securities) that are convertible into common
stock. It may also invest in securities issued by the U.S. government and its
agencies and instrumentalities.

The Fund may also invest up to 35% of its net assets in debt securities rated
below investment grade. For a description of these ratings, see "Bond Quality"
beginning on page 54.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / CONVERTIBLE SECURITIES RISKS--Convertible securities have the investment
characteristics of both equity and debt securities. These securities are
often rated below investment grade or not rated because they fall below debt
obligations and just above common equity in order of preference or priority
on the issuer's balance sheet. Hence an issuer with investment grade senior
debt may issue convertible securities with ratings less than investment
grade or not rated.

/ / FIXED INCOME SECURITIES RISKS--The value of bonds changes as interest rates
fluctuate: if rates rise, the prices of bonds fall; if rates fall, their
prices rise.

BELOW AND LOW INVESTMENT GRADE BONDS--usually offer higher yields and
generally have more risk and volatility than higher-rated securities
because of reduced creditworthiness and greater chance of default by the
issuer. Convertible securities rated below investment grade and other bonds
may be subject to some of the same risks as those inherent in below
investment grade debt. Accordingly, these below investment grade bonds and
bonds rated in the lowest category of investment grade are considered
predominantly speculative and are subject to greater volatility and risk of
loss than investment grade securities, particularly in deteriorating
economic periods.

/ / STOCK MARKET VOLATILITY--The prices of securities change in response to many
factors, including the historical and prospective earnings of the issuer,
the value of its assets, general economic conditions, interest rates,
investor perceptions, and market liquidity. Stock prices are unpredictable,
may fall suddenly and may continue to fall for extended periods.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

CONVERTIBLE FUND

See "Principal Strategies, Risks and Other Information" starting on page 51.

[GRAPHIC]PAST PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

INDEX: 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 RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS) (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.75%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.52%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.27%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.24%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.03%
</TABLE>

EXAMPLE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$108 $395 $711 $1,652
</TABLE>
<PAGE>
33

SHORT INTERMEDIATE FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks to preserve principal and liquidity while seeking a relatively
high level of current income. In pursuing this goal, the Fund invests primarily
in a portfolio of short-to-intermediate-term bonds expected to generate a
greater return than the return on one-to three-year U.S. Treasury obligations.

When evaluating any bond, the Investment Adviser selects bonds based upon a "top
down" analysis of economic trends. Its investment philosophy emphasizes interest
rate decisions and shifts among sectors of the bond market. It also analyzes
credit quality, the yield to maturity of the security, and the effect the
security will have on the average yield to maturity of the Fund. The Investment
Adviser seeks to add value by positioning portfolio securities among various
market sectors and maturities along the yield curve. The Investment Adviser
expects a high portfolio turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 80% of its total assets in an actively
managed portfolio of debt obligations issued by U.S. and foreign corporations,
U.S. and foreign governments, and their agencies and instrumentalities which are
rated investment grade, or of comparable quality if unrated. All such
obligations are payable in U.S. dollars or, if not payable in U.S. dollars, are
fully hedged into U.S. dollars. The duration of the Fund will be between one and
four years.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / INTEREST RATES--Interest rate risk is the risk that the value of the Fund's
investments will go down when interest rates rise. Normally the value of the
Fund's investments varies inversely with changes in interest rates so that
in periods of rising interest rates, the value of the Fund's portfolio
declines.

/ / MATURITY--Generally, longer-term securities are more susceptible to changes
in value as a result of interest rate changes than are shorter-term
securities.

/ / CREDIT RISK--Credit risk refers to the risk that an issuer of a bond may
default with respect to the payment of principal and interest. The lower a
bond is rated, the more it is considered to be a speculative or risky
investment.

/ / PREPAYMENT RISK--Prepayment risk is commonly associated with pooled debt
securities, such as mortgage-backed securities and asset-backed securities,
but may affect other debt securities as well. When the underlying debt
obligations are prepaid ahead of schedule, the return on the security will
be lower than expected. Prepayment rates usually increase when interest
rates are falling.

/ / INFLATION RISK--There is a possibility that the rising prices of goods and
services may have the effect of offsetting the Fund's real return. This is
likely to have a greater impact on the returns of bond funds, which
historically have had more modest returns in comparison to equity funds.

/ / FOREIGN EXPOSURE--Foreign securities and securities issued by U.S. entities
with substantial foreign operations can involve additional risks relating to
political, economic or regulatory conditions in foreign countries. All of
these factors can make foreign investments more volatile than U.S.
investments.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

<PAGE>
34

SHORT INTERMEDIATE FUND

[GRAPHIC]PAST PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (8/31/95)
<S> <C> <C>
-----------------------------------------------------------------
FUND
MERRILL LYNCH
1-3 YEAR TREASURY
</TABLE>

INDEX: THE MERRILL LYNCH 1-3 YEAR TREASURY IS AN UNMANAGED INDEX CONSISTING OF
ALL PUBLIC U.S. TREASURY OBLIGATIONS HAVING MATURITIES FROM ONE TO 2.99 YEARS.
THE INDEX IS UNMANAGED AND CONSIDERED GENERALLY REPRESENTATIVE OF THE MARKET FOR
INTERMEDIATE GOVERNMENT BOND SECURITIES

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS) (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.30%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.65%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 0.95%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.61%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 0.34%
</TABLE>

EXAMPLE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$36 $251 $487 $1,190
</TABLE>
<PAGE>
35

HIGH QUALITY BOND FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum total return. In pursuing this goal, the Fund invests
primarily in high quality bonds.

The Fund's Investment Adviser seeks to outperform the total return of an index
of Lehman Aggregate Bond Index through an actively managed diversified portfolio
of debt securities.

When evaluating any bond, the Investment Adviser selects bonds based upon a "top
down" analysis of economic trends. Its investment philosophy emphasizes
interest-rate decisions and shifts among sectors of the bond market. It also
analyzes credit quality, the yield-to-maturity of the security, and the effect
the security will have on the Fund. The Investment Adviser expects a high
portfolio turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 65% of its net assets in bonds of U.S. and
foreign corporations and governments. These bonds are rated in the top two
investment grades, or are of comparable quality if unrated. They include bonds,
notes, mortgage-backed and asset-backed securities with rates that are fixed,
variable or floating. The dollar weighted average portfolio duration of the Fund
will range from two to eight years. The Fund may invest up to 30% of its total
assets in securities payable in foreign currencies.

The Fund may invest up to 20% of its total assets in debt securities rated below
investment grade ("high risk bonds"). For a description of these ratings, see
"Bond Quality" beginning on page 54. The Fund may also use options, futures
contracts and interest rate and currency swaps as hedging techniques.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / MATURITY--Generally, longer-term securities are more susceptible to changes
in value as a result of interest-rate changes than are shorter-term
securities.

/ / HIGH RISK BONDS--Generally lower grade securities offer higher yields and
have more risk and volatility than higher-rated securities because of
reduced creditworthiness and greater chance of default by the issuer.
securities rated below investment grade and other bonds may be subject to
some of the same risks as those inherent in below investment grade debt.
Accordingly, these high risk bonds and bonds rated in the lowest category of
investment grade are considered predominantly speculative and are subject to
greater volatility and risk of loss than investment grade securities,
particularly in deteriorating economic periods.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 51.

<PAGE>
36

HIGH QUALITY BOND FUND

[GRAPHIC]PAST PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

INDEX: THE LEHMAN BROTHERS AGGREGATE BOND INDEX (LEHMAN AGGREGATE BOND) IS
COMPOSED OF SECURITIES FROM LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX,
MORTGAGE-BACKED SECURITIES INDEX, AND ASSET-BACKED SECURITIES INDEX. THE INDEX
IS UNMANAGED.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS) (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.45%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.69%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.14%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.67%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 0.47%
</TABLE>

EXAMPLE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$49 $307 $591 $1,435
</TABLE>
<PAGE>
37

HIGH YIELD BOND FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks a high level of current income and capital growth. In pursuing
its goal, the Fund invests primarily in lower-rated debt securities.

When evaluating any bond, the Investment Adviser selects bonds based upon a
combination of both "top-down" analysis of economic trends and "bottom-up"
analysis that evaluates the financial condition and competitiveness of
individual companies. It also analyzes credit quality, the yield to maturity of
the security, and the effect the security will have on the average yield to
maturity of the Fund. The Investment Adviser believes it can lower the risks of
investing in lower-rated debt through these professional management techniques
and through diversification. The Investment Adviser expects a high portfolio
turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 65% of its total assets in high risk bonds
debt and convertible securities rated below investment grade, or of comparable
quality if unrated. There is no limit on either the portfolio maturity or the
acceptable rating of securities bought by the Fund. For a description of these
ratings, see "Bond Quality" beginning on page 54. Securities may bear rates that
are fixed, variable or floating.

The Fund invests in companies of all sizes, but currently intends to invest
principally in companies with market capitalizations above $100 million. The
Fund may also invest up to 35% of its total assets in equity securities of U.S.
and foreign companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / LOW AND BELOW INVESTMENT GRADE BONDS--The bonds in which the Fund invests
have a higher default risk than investment grade bonds. Below investment
grade bonds are almost always uncollateralized and subordinated to other
debt that an issuer has outstanding.

/ / LIQUIDITY--The liquidity of individual corporate bonds varies considerabley.
Low and below investment grade corporate bonds have less liquidity than
higher rataed investment grade bonds, which may make it more difficult for
the Fund to sell or buy at a favorable price and time.

/ / ECONOMIC--Low and below investment grade corporate bond returns are
sensitive to changes in the economy. The value of the Fund's portfolio may
decline in tandem with a drop in the overall value of the stock market based
on negative developments in the U.S. and global economies.

/ / INTEREST RATES--The returns of low and below investment grade bonds are
sensitive to changes in prevailing interest rates. An increase in interest
rates may result in a decrease in the value of the Fund's shares.
Accordingly, below investment grade bonds and bonds rated in the lowest
category of investment grade are considered predominantly speculative.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

For further explanation, see "Principal Strategies, Risks and Other Information"
starting on page 51.

[GRAPHIC]PAST PERFORMANCE

HIGH YIELD BOND FUND

Fund's performance from year to year and by showing how the Fund's average
annual returns compare with those of a broad measure of market performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (7/31/96)
<S> <C> <C>
-------------------------------------------------------------------
FUND
FIRST BOSTON HIGH
YIELD BOND
</TABLE>

INDEX: THE CREDIT SUISSE FIRST BOSTON HIGH YIELD BOND INDEX INCLUDES OVER 180
U.S. DOMESTIC ISSUERS WITH AND AVERAGE MATURITY RANGE OF SEVEN TO TEN YEARS AND
WITH A MINIMUM ISSUE SIZE OF $100 MILLION. THE INDEX IS UNMANAGED AND CONSIDERED
GENERALLY REPRESENTATIVE OF THE U.S. MARKET FOR HIGH YIELD BONDS.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER IF THE
INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S EXPENSES. SEE
"EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<S> <C>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS) (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management fee 0.60%
---------------------------------------------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.71%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.31%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.50%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 0.81%
</TABLE>

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<S> <C> <C> <C>
Year 1 Year 3 Year 5 Year 10
$85 $381 $707 $1,677
</TABLE>
<PAGE>
39

SIMPLIFIED ACCOUNT INFORMATION

<TABLE>
<CAPTION>
OPENING AN ACCOUNT
<S> <C>
This is the minimum
initial investment $250,000
-----------------------------------------------------------------------------------------------------------------------------------
Use this type of
application New Account Form or IRA Application
-----------------------------------------------------------------------------------------------------------------------------------
Before completing Each Fund offers a variety of features, which are described in the "Your Account" section of this
the application prospectus. Please read this section before completing the application.
-----------------------------------------------------------------------------------------------------------------------------------
Completing the If you need assistance, contact your financial representative,
application or call us at (800) 551-8043.
-----------------------------------------------------------------------------------------------------------------------------------
Mail application and check, payable to: NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS,
If you are sending money PO BOX 8326, BOSTON, MA 02266-8326. Send private courier or overnight delivery service to: Boston
by CHECK Financial Services, c/o Nicholas-Applegate, 66 Brocks Drive, Braintree, MA 02184. The Trust will not
accept third-party checks.
-----------------------------------------------------------------------------------------------------------------------------------
Please read the bank wire or ACH section under the "Buying Shares" section below. You will need to
If you are sending money obtain an account number with the Trust by sending a completed application to: NICHOLAS-APPLEGATE
by BANK WIRE or ACH INSTITUTIONAL FUNDS, PO BOX 8326, BOSTON, MA 02266-8326. To receive your account number, contact your
financial representative or call us at (800) 551-8043.

<CAPTION>
BUYING SHARES
<S> <C>
The price you will The Trust is generally open on days that the New York Stock Exchange is open. All transactions received
receive in good order before the market closes (normally 4:00 p.m. Eastern time) receive that day's NAV.
-----------------------------------------------------------------------------------------------------------------------------------
Instruct your bank to wire the amount you wish to invest to:
STATE STREET BANK & TRUST CO.--ABA #011000028
If you are sending money DDA #9904-645-0
by BANK WIRE STATE STREET BOS, ATTN: MUTUAL FUNDS
CREDIT: NICHOLAS-APPLEGATE [FUND NAME], [YOUR NAME], [ACCOUNT NAME OR NUMBER]
-----------------------------------------------------------------------------------------------------------------------------------
Call your bank to ensure (1) that your bank supports ACH, and (2) this feature is active on your bank
account. To establish this option, either complete the appropriate sections when opening an account,
If you are sending money contact your financial representative, or call us at (800) 551-8043 for further information. To initiate
by ACH an ACH purchase,
call the Trust at (800) 551-8043.
</TABLE>

<PAGE>
40

SIMPLIFIED ACCOUNT INFORMATION
<TABLE>
<CAPTION>
EXCHANGING SHARES
<S> <C>
This is the minimum
exchange amount to open a $250,000
new account
-----------------------------------------------------------------------------------------------------------------------------------
The Trust is open on days that the New York Stock Exchange is open. All transactions received in good
The price you will order before the market closes (normally 4:00 p.m. Eastern time) receive that day's NAV. Redemption
receive proceeds normally are wired or mailed within one business day after receiving a request in proper form.
Payment may be delayed up to seven days.
-----------------------------------------------------------------------------------------------------------------------------------
The exchange must be to an account with the same registration. If you intend to keep money in the Fund
you are exchanging from, make sure that you leave an amount equal to or greater than the Fund's minimum
Things you should know account size (see the "Opening an Account" section). To protect other investors, the Trust may limit the
number of exchanges you can make.
-----------------------------------------------------------------------------------------------------------------------------------
Contact your financial representative, or call us at (800) 551-8043. The Trust will accept a request by
How to request an phone if this feature was previously established on your account. See the "Your Account" section for
exchange by PHONE further information.
-----------------------------------------------------------------------------------------------------------------------------------
Please put your exchange request in writing, including: the name on the account, the name of the Fund
and the account number you are exchanging from, the shares or dollar amount you wish to exchange, and
How to request an the Fund you wish to exchange to.
exchange by MAIL Mail this request to: Nicholas-Applegate Institutional Funds,
PO BOX 8326, BOSTON, MA 02266-8326.
</TABLE>

<TABLE>
<CAPTION>
SELLING OR REDEEMING SHARES
IN WRITING BY PHONE
<S> <C> <C>
-----------------------------------------------------------------------------
Selling shares by phone is a service option which
must be established on your account prior to
making a request. See the "Your Account" section,
or contact your financial representative, or call
Certain requests may require a SIGNATURE the Trust at (800) 551-8043 for further
Things you should know GUARANTEE. See the next section for further information. The maximum amount which may be
information. You may sell up to the full account requested by phone, regardless of account size, is
value. $50,000. Amounts greater than that must be
requested in writing. If you wish to receive your
monies by bank wire, the minimum request is
$5,000.
---------------------------------------------------------------------------------------------------------------------------------
If you purchased shares through a financial representative or plan administrator/ sponsor, you should
call them regarding the most efficient way to sell shares. If you bought shares recently by check,
payment may be delayed until the check clears, which may take up to 15 calendar days from the date of
purchase. Sales by a corporation, trust or fiduciary may have special requirements. Please contact
your financial representative, a plan administrator/sponsor or us for further information.
</TABLE>

<PAGE>
41

<TABLE>
<CAPTION>
SELLING OR REDEEMING SHARES
IN WRITING BY PHONE
<S> <C> <C>
-----------------------------------------------------------------------------
The Trust is open on days that the New York Stock Exchange is open.
The price you will All transactions received in good order before the market closes
receive (normally 4:00 p.m. Eastern time) receive that day's NAV.
---------------------------------------------------------------------------------------------------------------------------------
Please put your request in writing, including: the
name of the account owners, account number and
Fund you are redeeming from, and the share or
dollar amount you wish to sell, signed by all Contact your financial representative, or call us
If you want to receive account owners. Mail this request to: at (800) 551-8043. The proceeds will be sent to
your monies by BANK WIRE NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS, PO BOX the existing bank wire address listed on the
8326, BOSTON, MA 02266-8326. The check will be account.
sent to the existing bank wire address listed on
the account.
---------------------------------------------------------------------------------------------------------------------------------
Contact your financial representative, or call us
at (800) 551-8043. The proceeds will be sent in
If you want to receive accordance with the existing ACH instructions on
your monies by ACH Please call us at (800) 551-8043. the account and will generally be received at your
bank two business days after your request is
received.
---------------------------------------------------------------------------------------------------------------------------------
The Trust intends to pay in cash for all shares of a Fund redeemed, but the Trust reserves the right
to make payment wholly or partly in shares of readily marketable investment securities. When the Trust
makes a redemption in kind, a shareholder may incur brokerage costs in converting such securities to
cash and assumes the market risk during the time required to convert the securities to cash. The Trust
Redemption in Kind has elected to be governed by the provisions of Rule 18f-1 under the Investment Company Act, pursuant
to which it is obligated to pay in cash all requests for redemptions by any shareholder of record,
limited in amount with respect to each shareholder during any 90-day period to the lesser of $250,000
or 1% of the net asset value of the Trust at the beginning of such period.
</TABLE>

<TABLE>
<CAPTION>
SIGNATURE GUARANTEES
<S> <C>
A signature guarantee from a financial institution is required to verify the authenticity of an
A definition individual's signature. It can usually be obtained from a broker, commercial or savings bank, or credit
union.
-----------------------------------------------------------------------------------------------------------------------------------
A signature guarantee is needed when making a written request for
the following reasons:
1. When selling more than $50,000 worth of shares;
2. When you want a check or bank wire sent to a name or address
When you need one that is not currently listed on the account;
3. To sell shares from an account controlled by a corporation,
partnership, trust or fiduciary; or
4. If your address was changed within the last 60 days.
</TABLE>

<PAGE>
42

YOUR ACCOUNT

[GRAPHIC]TRANSACTION POLICIES

PURCHASE OF SHARES. Shares are offered at net asset value without a sales
charge. The minimum initial investment for opening an account is $250,000, and
the minimum subsequent investment is $10,000. The minimum investment may be
waived for purchases of shares made by current or retired directors, trustees,
partners, officers and employees of the Trust, the Distributor, the Investment
Adviser and its general partner, certain family members of the above persons,
and trusts or plans primarily for such persons, or, at the discretion of the
Distributor.

PRICING OF SHARES. The net asset value per share ("NAV") of the Fund is
determined each business day at the close of regular trading on the New York
Stock Exchange (usually 4 p.m. Eastern time) by dividing the value of the Funds'
net assets by the number of its shares outstanding.

Securities traded in foreign countries may not take place on all business days
of the New York Stock Exchange, and may occur in various foreign markets on days
which are not business days of the New York Stock Exchange. Accordingly, a
Fund's NAV may change on days when the U.S. markets are closed whereby a
shareholder of the Fund will not be able to sell their shares.

NAV is based on the market value of the securities in a Fund's portfolio. If the
methods utilized by the Investment Adviser to value the Fund's portfolio
securities do not accurately reflect current market value, portfolio securities
are valued at fair value as determined in good faith by or under policies
established by the Trust's Board of Trustees.

BUY AND SELL PRICES. When you buy shares, you pay the NAV, as described earlier.
When you sell shares, you receive the NAV. Your financial institution may charge
you a fee to execute orders on your behalf.

EXECUTION OF REQUESTS. Each Fund is open on the days the New York Stock Exchange
is open, usually Monday-Friday. Buy and sell requests are executed at the NAV
next calculated after your request is received in good order by the transfer
agent or another agent designated by the Trust. The Fund reserves the right to
refuse any purchase order.

Each Fund reserves the right to reject any purchase or to suspend or modify the
continuous offering of its shares. Your financial representative is responsible
for forwarding payment promptly to the transfer agent. The Trust reserves the
right to cancel any buy request if payment is not received within three days.

In unusual circumstances, any Fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to seven business days
or longer, as allowed by federal securities laws.

PURCHASE OF SHARES JUST BEFORE RECORD DATE. If you buy shares of the Funds just
before the record date for a distribution (the date that determines who receives
the distribution), we will pay that distribution to you. When a distribution is
paid out of the value of each share of the Fund decreases by the amount of the
distribution to reflect the payout. The distribution you receive makes up the
decrease in share value. As explained under the Taxability of Dividends section,
the distribution may be subject to income or capital gains taxes. The timing of
your purchase means that part of your investment came back to you as taxable
income.

EXCHANGES. On any business day you may exchange all or a portion of your shares
for shares of any other available Fund of the same share class. To protect the
interest of other investors in a Fund, the Trust may cancel the exchange
privileges of any parties that, in the opinion of the Investment Adviser, are
using market-timing strategies that adversely affect the Fund. Guidelines for
exchanges are available from the Distributor upon request. The Trust may also
refuse any exchange order.

REDEMPTIONS IN KIND. When a Fund elects to satisfy a redemption request with
securities, the shareholder assumes the responsibility of selling the securities
as well as a market risk of an unfavorable market movement during the time
required to convert the securities to cash.

TELEPHONE TRANSACTIONS. For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition the Trust will take measures to
verify the identity of the caller, such as asking for name, account number,
Social Security or taxpayer ID number and other relevant information. If these
measures are not taken, your Fund may be responsible for any losses that may
occur in your account due to an unauthorized telephone call.

At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.

CERTIFICATED SHARES. Shares of the Trust are electronically recorded. The Trust
does not normally issue certificated shares.

SALES IN ADVANCE OF PURCHASE PAYMENTS. When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the Fund will not release the proceeds to you
until your purchase payment clears. This may take up to fifteen calendar days
after the purchase.
<PAGE>
43

[GRAPHIC]FEATURES AND ACCOUNT POLICIES

The services referred to in this section may be terminated or modified at any
time upon 60 days' written notice to shareholders. Shareholders seeking to add
to, change or cancel their selection of available services should contact the
transfer agent.

RETIREMENT PLANS. You may invest in each Fund through various retirement plans,
including IRAs, Roth IRAs, Simplified Employee Plan (SEP) IRAs, 403(b) plans,
457 plans, and all qualified retirement plans. For further information about any
of the plans, agreements, applications and annual fees, contact the Distributor,
your financial representative or plan sponsor. To determine which retirement
plan is appropriate for you, consult your tax adviser.

ACCOUNT STATEMENTS. Shareholders will receive periodic statements reporting all
account activity, including systematic transactions, dividends and capital gains
paid.

DIVIDENDS. The Funds generally distribute most or all of their net earnings in
the form of dividends. Each Fund pays dividends of net investment income as
follows:

<TABLE>
<CAPTION>
ANNUALLY QUARTERLY MONTHLY
<S> <C> <C>
Worldwide Growth Global Growth & High Yield Bond
Global Blue Chip Income
Global Technology Convertible
Global Health Care High Quality Bond
International Core Growth Short Intermediate
International Small Cap
Emerging Countries
Pacific Rim
Latin America
Large Cap Growth
Mid Cap Growth
Small Cap Growth
Mini Cap Growth
Value
</TABLE>

Any net capital gains are distributed annually.

DIVIDEND REINVESTMENTS. If you choose this option, or if you do not indicate any
choice, your dividends will be reinvested on the ex-dividend date.
Alternatively, you can choose to have a check for your dividends mailed to you.
Interest will not accrue or be paid on uncashed dividend checks.

TAXABILITY OF DIVIDENDS. Dividends you receive from a Fund, whether reinvested
or taken as cash, are generally taxable. Dividends from a Fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.

Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.

The tax information statement that is mailed to you details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.

TAXABILITY OF TRANSACTIONS. Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.

Federal tax law requires you to provide the Fund with your taxpayer
identification number and certifications as to your tax status. If you fail to
do this, or if you are otherwise subject to backup withholding, the Fund will
withhold and pay to the U.S. Treasury 31% of your distributions and sale
proceeds. Dividends of net investment income and short-term capital gains paid
to a nonresident foreign shareholder generally will be subject to a U.S.
withholding tax of up to 30%. This rate may be lower, depending on any tax
treaty the U.S. may have with the shareholder's country.

SMALL ACCOUNTS. If you draw down a non-retirement account so that its total
value is less than $250,000, you may be asked to purchase more shares within 60
days. If you do not take action, the Fund may close out your account and mail
you the proceeds. Your account will not be closed if its drop in value is due to
Fund performance.

AUTOMATIC INVESTMENT PLAN. You may make regular monthly or quarterly investments
in each Fund through automatic withdrawals of specified amounts from your bank
account once an automatic investment plan is established. See the account
application for further details about this service or call the Transfer Agent at
1-800-551-8043.

CROSS-REINVESTMENT. You may cross-reinvest dividends or dividends and capital
gains distributions paid by one Fund into another Fund, subject to conditions
outlined in the Statement of Additional Information and the applicable
provisions of the qualified retirement plan.
<PAGE>
44

ORGANIZATION AND MANAGEMENT

THE INVESTMENT ADVISER

Investment decisions for the Funds are made by the Fund's Investment Adviser,
Nicholas-Applegate Capital Management (the "Investment Adviser"), subject to
direction by the Trustees. The Investment Adviser continually conducts
investment research and supervision for each Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the Fund.

Founded in 1984, the Investment Adviser currently manages over $40 billion of
discretionary assets for numerous clients, including employee benefit plans,
corporations, public retirement systems and unions, university endowments,
foundations, and other institutional investors and individuals. The Investment
Adviser's address is 600 West Broadway, Suite 2900, San Diego, California 92101.

Criterion Investment Management LLC ("Criterion") serves as sub-adviser to the
High Quality Bond and Short Intermediate Funds. Organized in April 1999,
Criterion is registered under the Investment Advisers Act of 1940. Its principal
address is 1990 Post Oak Boulevard, Houston, Texas 77056. Criterion previously
was the fixed income asset management division of the Investment Adviser and now
provides investment advice to the Fund and approximately 80 other separate
institutional clients with approximately $9 billion in assets under management.

As compensation for Criterion's services under the subadvisory agreement, the
Investment Adviser pays Criterion a monthly subadvisory fee at an annual rate of
.25% of each of the High Quality Bond and Short Intermediate Fund's average
daily net assets.

The International Small Cap, Global Technology and Emerging Countries Funds,
invest in the Indian stock markets through Nicholas-Applegate Southeast Asia
Fund, Ltd a subsidiary company of each of the Funds and incorporated under the
laws of Mauritius (the "Mauritius Subsidiary"). The Mauritius Subsidiary is
entitled to benefit from the double taxation treaty between India and Mauritius
and invest in India in what the Investment Adviser considers to be the most
efficient way currently available. The Fund and Mauritius Subsidiary will be
treated as one entity, and their holdings of investments are aggregated, for the
purposes of applying the investment and borrowing restrictions. All investments
made by the Mauritius Subsidiary will form part of the assets of the Fund and
will be disclosed in the schedule of investments of the Fund.

INVESTMENT ADVISER COMPENSATION

Each Fund pays the Investment Adviser a monthly fee pursuant to an investment
advisory agreement. Each of the following Funds pays an advisory fee monthly at
the following annual rates of their average net assets:

<TABLE>
<S> <C>
Large Cap Growth 0.75%
Value Fund 0.75%
Global Technology Fund 1.00%
Global Health Care Fund 1.00%
Mini Cap Growth Fund 1.25%
Pacific Rim Fund 1.00%
Small Cap Growth Fund 1.00%
Global Growth & Income Fund 0.85%
Global Blue Chip Fund 0.80%
Emerging Countries Fund 1.25%
Latin America Fund 1.25%
High Yield Bond Fund 0.60%
</TABLE>

The Worldwide Growth, International Core Growth and International Small Cap
Growth Funds each pays monthly at the following annual rates:

1.00% on the first $500 million
0.90% on the next $500 million
0.85% on net assets in excess of $1 billion

The Short Intermediate Fund pays monthly at the following annual rates:

0.30% on the first $250 million
0.25% on net assets in excess of $250 million

The High Quality Bond Fund pays monthly at the following annual rates:

0.45% on the first $500 million
0.40% on the next $250 million
0.35% on net assets in excess of $750 million

The Mid Cap Growth, and Convertible Funds each pays monthly at the following
annual rates:

0.75% of the first $500 million
0.675% on the next $500 million
0.65% on net assets in excess of $1 billion

EXPENSE WAIVERS

The Investment Adviser has agreed to waive its fees and absorb other operating
expenses of the Funds so that total operating expenses, excluding taxes,
interest, brokerage, the expenses incurred from the creation and operation of
the Mauritius entity and extraordinary expenses, do not exceed the percentages,
as set forth below, for the Class I shares of each Fund through March 31, 2001.
In subsequent years, overall operating expenses for each Fund will not fall
below the applicable percentage limitation until the Investment Adviser has been
fully reimbursed for fees foregone and expenses paid under the expense
limitation agreement, as each Fund will reimburse the Investment Adviser in
subsequent years when operating expenses (before reimbursement) are less than
the applicable percentage limitation.

Small Cap Growth Fund 1.17%
Mid Cap Growth Fund 1.00%
Large Cap Growth Fund 1.00%
Value Fund 1.00%
Emerging Countries Fund 1.65%
International Core Growth Fund 1.40%
High Quality Bond Fund 0.45%
<PAGE>
45

Mini Cap Growth Fund 1.56%
Global Technology 1.40%
Global Health Care 1.40%
International Small Cap Growth Fund 1.40%
Worldwide Growth Fund 1.35%
Global Growth & Income Fund 1.35%
Latin America Fund 1.65%
Pacific Rim Fund 1.40%
Convertible Fund 1.00%
Global Blue Chip Fund 1.20%
High Yield Bond Fund 0.75%
Short Intermediate Fund 0.35%

MULTI CLASS STRUCTURE

Certain Funds also offer Class R Shares, which have different service charges
and other expenses that may affect their performance. You can obtain more
information about these other share classes from the Distributor.

SHAREHOLDER SERVICES

The Investment Adviser may make additional payments from its own resources to
intermediaries for providing certain services for shareholders and for the
maintenance of shareholder accounts. This in no way affects the advisory fee
paid by each of the Funds. Contact the Investment Adviser for more information.

PORTFOLIO TRADES

The Investment Adviser is responsible for the Fund's portfolio transactions. In
placing portfolio trades, the Investment Adviser may use brokerage firms that
provide research services to the Fund, or that sell shares of the Fund but only
when the Investment Adviser believes no other firm offers a better combination
of quality execution (e.g., timeliness and completeness) and favorable price.

PORTFOLIO TURNOVER

To the extent that the Investment Adviser actively trades the Fund's portfolio
securities in an attempt to achieve the Fund's investment goal, such trading may
cause the Fund to have an increased portfolio turnover rate of 300% or more,
which is likely to generate shorter-term gains (losses) for its shareholders,
which are taxed at a higher rate than longer-term gains (losses). Actively
trading portfolio securities may have an adverse impact on the Fund's
performance.

PORTFOLIO MANAGEMENT

The Investment Adviser emphasizes a team approach to portfolio management.

[GRAPHIC]PORTFOLIO TEAMS

EQUITY MANAGEMENT--INTERNATIONAL/GLOBAL

ARTHUR E. NICHOLAS, MANAGING PARTNER

CHIEF EXECUTIVE OFFICER

Since 1984; prior investment management experience with Pacific Century
Advisers, Security Pacific Bank and San Diego Trust & Savings Bank

B.S.--San Diego State University

CATHERINE SOMHEGYI, PARTNER

CHIEF INVESTMENT OFFICER--GLOBAL EQUITY MANAGEMENT

Since 1987; prior investment management experience with Professional Asset
Securities, Inc. and Pacific Century Advisers

M.B.A and B.S.--University of Southern California

WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH,
EMERGING COUNTRIES, GLOBAL GROWTH & INCOME, GLOBAL TECHNOLOGY, GLOBAL HEALTH
CARE, GLOBAL BLUE CHIP, LATIN AMERICA AND PACIFIC RIM

ANDREW B. GALLAGHER, PARTNER

PORTFOLIO MANAGER

Since 1992; 7 years prior investment management experience with Pacific Century
Advisors and Sentinel Asset Management

M.B.A.--San Diego State University; B.A.--University of California, Irvine

WORLDWIDE GROWTH AND GLOBAL TECHNOLOGY

RANDALL S. KAHN, CFA, PARTNER

PORTFOLIO MANAGER

Since 1999; 12 years prior investment experience with American Century
Investments, Daiwa Securities America, Inc. and Daiwa Securities Co., LTD.

B.A.--University of California, Berkley; M.B.A.--University of Chicago

INTERNATIONAL CORE GROWTH, GLOBAL TECHNOLOGY, GLOBAL GROWTH & INCOME,
INTERNATIONAL SMALL CAP GROWTH, WORLDWIDE GROWTH, PACIFIC RIM AND GLOBAL BLUE
CHIP

<PAGE>
46

ORGANIZATION AND MANAGEMENT

PEDRO V. MARCAL, PARTNER

PORTFOLIO MANAGER

Since 1996; Assistant Portfolio Manager 1994-1996; 5 years prior investment
management experience with A.B. Laffer, V.A. Canto & Associates, and A-Mark
Precious Metals

B.A.--University of California, San Diego

EMERGING COUNTRIES, WORLDWIDE GROWTH, GLOBAL BLUE CHIP, GLOBAL GROWTH & INCOME,
INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH, PACIFIC RIM AND
GLOBAL TECHNOLOGY

LORETTA J. MORRIS, PARTNER

PORTFOLIO MANAGER

Since 1990; 10 years prior investment management experience with Collins
Associates

Attended California State University, Long Beach

WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH,
GLOBAL TECHNOLOGY, GLOBAL BLUE CHIP, AND GLOBAL GROWTH & INCOME

ERNESTO RAMOS, PH.D., PARTNER

PORTFOLIO MANAGER

Since 1995; 1994-1995 Research Manager; 14 years prior investment management and
quantitative research experience with Batterymarch Financial Management;
Bolt Beranek & Newman Inc.; and Harvard University

PH.D. Harvard University; B.S.--Massachusetts Institute of Technology

EMERGING COUNTRIES, LATIN AMERICA, WORLDWIDE GROWTH, GLOBAL GROWTH & INCOME,
INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH AND GLOBAL BLUE CHIP

LARRY SPEIDELL, CFA, PARTNER

DIRECTOR OF GLOBAL/SYSTEMATIC PORTFOLIO MANAGEMENT AND RESEARCH

Since 1994; 23 years prior investment management experience with Batterymarch
Financial Management and Putnam Management Company

M.B.A.--Harvard University; B.E.--Yale University

WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, GLOBAL GROWTH & INCOME,
INTERNATIONAL SMALL CAP GROWTH, EMERGING COUNTRIES, GLOBAL BLUE CHIP, LATIN
AMERICA AND PACIFIC RIM

JASON CAMPBELL

PORTFOLIO MANAGER

Since 1998; prior experience with San Diego State University Economics
Department

M.A. and B.A.--San Diego State University; Pontificia Universidade Catolica do
Rio de Janeiro

EMERGING COUNTRIES, INTERNATIONAL SMALL CAP GROWTH, INTERNATIONAL CORE GROWTH,
GLOBAL BLUE CHIP, GLOBAL GROWTH & INCOME, WORLDWIDE GROWTH AND GLOBAL TECHNOLOGY

MICHAEL P. CARROLL

PORTFOLIO MANAGER

Since 1998; 3 years prior investment experience with Morgan Stanley Dean Witter
and the University of Notre Dame Investment Office

B.B.A.--University of Notre Dame

WORLDWIDE GROWTH

PAUL E. CLUSKEY

PORTFOLIO MANAGER

Since 1998; 4 years prior investment experience at SEI Investments and Piper
Jaffray, Inc.

B.S.--New York University

GLOBAL HEALTH CARE

JESSICA GONCALVES

PORTFOLIO MANAGER

Since 1999; 1997-1999 Assistant Portfolio Manager; 1996-1997 Investment Analyst;
1995-1996 Investment Assistant; 3 years prior experience with Eaton Vance
Management and Union Capital Advisors

Attended University of Pennsylvania

EMERGING COUNTRIES, INTERNATIONAL SMALL CAP GROWTH, INTERNATIONAL CORE GROWTH,
GLOBAL BLUE CHIP, GLOBAL GROWTH & INCOME AND WORLDWIDE GROWTH

MELISA A. GRIGOLITE

PORTFOLIO MANAGER

Since 1996; 1993-1996 International Analyst; 1991-1993 Account Administrator;
prior experience with SGPA Architecture and Planning

M.S.--San Diego State University; B.S.--Southwest Missouri State University

WORLDWIDE GROWTH, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH,
GLOBAL HEALTH CARE, GLOBAL BLUE CHIP, AND GLOBAL GROWTH & INCOME
<PAGE>
47

TRISHA C. SCHUSTER, CFA

PORTFOLIO MANAGER

Since 1998; 4 years prior investment experience with Bel Air Advisors/Bear
Stearns and Farmers
Insurance Company

B.A.--University of California, Los Angeles; M.B.A.--University of California,
Irvine

GLOBAL HEALTH CARE

CHRISTOPHER ANGIOLETTI

INVESTMENT ANALYST

Since 1999; 3 years prior investment experience with Sterling Johnston Capital
Management, Inc.; Volpe, Brown, Whelan & Co., LLC; and Oppenheimer & Co.
Inc.

B.A.--University of California, Los Angeles; J.D.--Vanderbilt University School
of Law

INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH, WORLDWIDE GROWTH,
GLOBAL BLUE CHIP, GLOBAL GROWTH & INCOME AND GLOBAL TECHNOLOGY

JON BORCHARDT

INVESTMENT ANALYST

Since 1996; 1994-1996 Senior Account Administrator; 5 years prior investment
management experience with Union Bank

B.A. University of San Francisco

INTERNATIONAL CORE GROWTH, WORLDWIDE GROWTH, GLOBAL BLUE CHIP, GLOBAL GROWTH &
INCOME AND INTERNATIONAL SMALL CAP GROWTH

JOHN L. BRACKEN, JR.,

INVESTMENT ANALYST

Since 1999; 2 years prior investment experience with Ashworth, Inc.

B.S.--Wake Forest University; M.B.A.--Pepperdine University

INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, WORLDWIDE GROWTH, GLOBAL
BLUE CHIP, GLOBAL GROWTH & INCOME AND PACIFIC RIM

JOHN CASARIETTI

INVESTMENT ANALYST

Since 2000; 1998-2000 International Account Administrator; 4 years prior
experience with Interbank Funding Group and Barron Chase Securities

B.S.--The University of Southern California

EMERGING COUNTRIES

REBECCA K. HAGSTROM, CFA

INVESTMENT ANALYST

Since 2000; 5 years prior experience with Prudential Global Asset Management;
Prudential Capital Group and Prudential Realty Group

B.S. -- Georgia Institute of Technology

EMERGING COUNTRIES

THEODORA JAMISON

INVESTMENT ANALYST

Since 1999; 2 years prior investment experience with Donaldson, Lufkin &
Jenrette and A.G. Edwards & Sons Inc.

B.S.--Menlo College

EMERGING COUNTRIES, LATIN AMERICA, WORLDWIDE GROWTH, INTERNATIONAL SMALL CAP,
GLOBAL BLUE CHIP, GLOBAL GROWTH & INCOME AND INTERNATIONAL CORE GROWTH

DAVID LOPEZ

INVESTMENT ANALYST

Joined firm in 1996; 1999 responsible for research and portfolio analysis

B.A.--San Diego State University

INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, WORLDWIDE GROWTH, GLOBAL
BLUE CHIP, GLOBAL GROWTH & INCOME AND PACIFIC RIM

EVAN C. LUNDQUIST

INVESTMENT ANALYST

Since 2000; 7 years prior experience with First American Asset Management, First
American Technology Fund team

B.A.--Saint Mary's College

GLOBAL TECHNOLOGY

ANDREW C. PARMET

INVESTMENT ANALYST

Since 1999, 6 years prior investment experience with Indosuez W.I. Carr
Securities; Natwest Securities Corp.; United Malayan Banking Corporation
Securities Ltd.; and Jardine Fleming Securities Ltd.

A.B.--Harvard University

EMERGING COUNTRIES, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP,
WORLDWIDE GROWTH, GLOBAL BLUE CHIP, GLOBAL GROWTH & INCOME AND PACIFIC RIM
<PAGE>
48

ORGANIZATION AND MANAGEMENT

JACOB POZHARNY, PH.D.

SENIOR QUANTITATIVE ANALYST

Since 1999; 3 years prior experience with Bank Credit Analyst research group and
the Federal Reserve Bank of San Francisco

Ph.D. and M.S.--University of California at Riverside; M.S. and B.A.--University
of California at Santa Cruz

INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, WORLDWIDE GROWTH, GLOBAL
GROWTH & INCOME AND GLOBAL BLUE CHIP

ERIC SAGMEISTER

INVESTMENT ANALYST

Since 2000; 1995-2000 Trade Settlement Coordinator; Previously with Qualcomm
Communications.

B.A.--San Diego State University

INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP GROWTH AND WORLDWIDE GROWTH

ROLF SCHILD

INVESTMENT ANALYST

Since 1997; previous investment experience with Raiffeisen Bank, Switzerland

M.B.A. and B.S.--Basel University, Switzerland

INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALL CAP, GLOBAL BLUE CHIP, GLOBAL
GROWTH & INCOME AND WORLDWIDE GROWTH

EQUITY MANAGEMENT--U.S.

ARTHUR E. NICHOLAS, MANAGING PARTNER

CHIEF EXECUTIVE OFFICER

Since 1984; prior investment management experience with Pacific Century
Advisers, Security Pacific Bank and San Diego Trust & Savings Bank

B.S.--San Diego State University

CATHERINE SOMHEGYI, PARTNER

CHIEF INVESTMENT OFFICER--GLOBAL EQUITY MANAGEMENT

Since 1987; prior investment management experience with Professional Asset
Securities, Inc. and Pacific Century Advisers

M.B.A and B.S.--University of Southern California

LARGE CAP GROWTH, VALUE, SMALL CAP GROWTH, MINI CAP GROWTH, CONVERTIBLE AND MID
CAP GROWTH

THOMAS BLEAKLEY, PARTNER

PORTFOLIO MANAGER

Since 1995; 3 years prior investment management experience with Twentieth
Century Investors and Dell Computer Corporation

M.B.A.--University of Texas--Boston University;

SMALL CAP GROWTH AND MINI CAP GROWTH

WILLIAM H. CHENOWETH, CFA, PARTNER

PORTFOLIO MANAGER

Since 1998; 12 years prior investment experience with Turner Investment
Partners, Inc., and Jefferson-Pilot Corporation

M.B.A. and B.B.A.--Emory University

MID CAP GROWTH AND LARGE CAP GROWTH

DOUGLAS FORSYTH, CFA, PARTNER

PORTFOLIO MANAGER

Since 1994; 3 years prior investment management experience with AEGON USA

B.B.A.--University of Iowa

CONVERTIBLE

ANDREW B. GALLAGHER, PARTNER

PORTFOLIO MANAGER

Since 1992; 7 years prior investment management experience with Pacific Century
Advisors and Sentinel Asset Management

M.B.A.--San Diego State University; B.A.--University of California, Irvine

LARGE CAP GROWTH AND MID CAP GROWTH

JOHN J. KANE, PARTNER

PORTFOLIO MANAGER--U.S. SYSTEMATIC

Since 1994; 25 years prior investment management and economics experience with
ARCO Investment Management Company and General Electric Company

M.A. and B.A.--Columbia University; M.B.A.--University of California, Los
Angeles

VALUE

JOHN C. MCCRAW, PARTNER

PORTFOLIO MANAGER

Since 1995; 1992-1995 Assistant Portfolio Manager, prior investment management
experience with Nations Bank

M.B.A.--University of California, Irvine; B.A.--Flagler College

SMALL CAP GROWTH AND MINI CAP GROWTH
<PAGE>
49

LARRY SPEIDELL, CFA, PARTNER

DIRECTOR OF GLOBAL/SYSTEMATIC PORTFOLIO MANAGEMENT AND RESEARCH

Since 1994; 23 years prior investment management experience with Batterymarch
Financial Management and Putnam Management Company

M.B.A.--Harvard University; B.E.--Yale University

VALUE

MARK STUCKELMAN, PARTNER

PORTFOLIO MANAGER

Since 1995; 5 years prior investment management experience with Wells Fargo Bank
Investment Management Group; Fidelity Management Trust Co.; and BARRA

M.B.A.--University of Pennsylvania/Wharton School; B.A.--University of
California, Berkeley

VALUE

MICHAEL P. CARROLL

PORTFOLIO MANAGER

Since 1998; 3 years prior investment experience with Morgan Stanley Dean Witter
and the University of Notre Dame Investment Office

B.B.A.--University of Notre Dame

LARGE CAP GROWTH AND MID CAP GROWTH

PAUL E. CLUSKEY

PORTFOLIO MANAGER

Since 1998; 4 years prior investment experience at SEI Investments and Piper
Jaffray, Inc.

B.S.--New York University

MINI CAP GROWTH AND SMALL CAP GROWTH

JOHN GRAVES

INVESTMENT ANALYST

Since 1997; 9 years previous experience with San Diego County District
Attorney's Office and
Imperial Savings

M.B.A.--San Diego State University; B.A.--Hunter College

VALUE

KELLY KO, CFA

PORTFOLIO MANAGER

Since 2000; 14 years prior experience with Hughes Investment Management and
Security Pacific Investment Research, Financial Management and Trust
Investment Division

M.B.A.--Duke University, Fuqua School of Business; B.S.--University of Southern
California

VALUE

KENNETH H. LEE, CFA

PORTFOLIO MANAGER

Since 1999; 9 years prior investment experience with Wells Fargo Bank and Dean
Witter Reynolds/ Lederer Quantitative Research

B.A.--University of California, Davis; attended Yonsei University, South Korea

MID CAP GROWTH AND LARGE CAP GROWTH

TRISHA C. SCHUSTER, CFA

PORTFOLIO MANAGER

Since 1998; 4 years prior investment experience with Bel Air Advisors/Bear
Stearns and Farmers
Insurance Company

B.A.--University of California, Los Angeles; M.B.A.--University of California,
Irvine

MID CAP GROWTH AND LARGE CAP GROWTH

WILLIAM BRETT STICKNEY

PORTFOLIO MANAGER

Since June 1999; 10 years prior investment experience with ABN AMRO, Inc.; Cowen
& Company and Wayne Hummer & Company

M.M. Candidate--Northwestern University, J.L. Kellogg School of Management;
B.S.--Miami University

CONVERTIBLE

MICHAEL E. YEE

PORTFOLIO MANAGER

Since 1998; 1996-1998 Domestic & Global Portfolio Account Administrator;
1995-1996 Client Service Representative

M.B.A.--San Diego State Univesity; B.S.--University of California, San Diego

CONVERTIBLE

MICHAEL P. GIGGIE

INVESTMENT ANALYST

Since 2000; previous experience with PPG Industries, Inc.

M.B.A.--Indiana University; B.S.--United States Naval Academy

SMALL CAP GROWTH AND MINI CAP GROWTH

EVAN C. LUNDQUIST

INVESTMENT ANALYST

Since 2000; 7 years prior experience with First American Asset Management, First
American Technology Fund team

B.A.--Saint Mary's College

MID CAP GROWTH AND LARGE CAP GROWTH
<PAGE>
50

ORGANIZATION AND MANAGEMENT

JOHN MAZUR

INVESTMENT ANALYST

Since 1999; 1 year prior investment experience and 7 years of experience in the
Biotech industry

M.B.A.--The Wharton School, University of Pennsylvania; B.S.--University of
Southern California; attended Texas A&M University

SMALL CAP GROWTH AND MINI CAP GROWTH

THOMAS J. SMITH, CFA

INVESTMENT ANALYST

Since 1998; 1995-1998 Account Administrator; 4 years prior investment experience
with Wells Fargo Bank and Dean Witter Reynolds

B.A.--San Diego State University

LARGE CAP GROWTH AND MID CAP GROWTH

HIGH YIELD BOND--MANAGEMENT TEAM

ARTHUR E. NICHOLAS, MANAGING PARTNER

CHIEF EXECUTIVE OFFICER

Since 1984; prior investment management experience with Pacific Century
Advisers, Security Pacific Bank and San Diego Trust & Savings Bank

B.S.--San Diego State University.

CATHERINE SOMHEGYI, PARTNER

CHIEF INVESTMENT OFFICER

Since 1987; prior investment management experience with Professional Asset
Securities, Inc. and Pacific Century Advisers

M.B.A. and B.S.--University of Southern California.

DOUGLAS FORSYTH, CFA, PARTNER

PORTFOLIO MANAGER

Since 1994; 3 years prior investment management experience with AEGON USA

B.B.A.--University of Iowa

WILLIAM L. STICKNEY

PORTFOLIO MANAGER

Since 1999; 10 years prior investment experience with ABN AMRO, Inc.; Cowen &
Company; and Wayne Hummer & Company

M.B.A. Candidate--Northwestern University, J.L. Kellogg School of Management;
B.S.--Miami University

MICHAEL E. YEE

PORTFOLIO MANAGER

Since 1998; 1996-1998 Domestic and Global Portfolio Account Administrator;
1995-1996 Client Service Representative

M.B.A.--San Diego State University; B.S.--University of California, San Diego

JUSTIN KASS

INVESTMENT ANALYST

Since 2000; Prior experience with Universal Studios, Ocean Realty and Center for
Cooperatives

M.B.A.--The Anderson School at University of California, Los Angeles;
B.S.--University of California, Davis

SUB-ADVISORY FIXED INCOME TEAM

FRED S. ROBERTSON, III, PARTNER

CHIEF INVESTMENT OFFICER--FIXED INCOME

Since 1995; 22 years prior investment management experience with Criterion
Investment Management Company and DuPont Chemical Pension Fund

M.B.A.--College of William and Mary; B.S.--Cornell University

HIGH QUALITY BOND AND SHORT INTERMEDIATE

JAMES E. KELLERMAN, PARTNER

PORTFOLIO MANAGER

Since 1995; 20 years prior investment management experience with Criterion
Investment Management Company and Brown Brothers Harriman and Equitable Life
Insurance Co.

M.B.A.--St. John's University; B.B.A.--Susquehanna University

HIGH QUALITY BOND AND SHORT INTERMEDIATE

MALCOM S. DAY, CFA

PORTFOLIO MANAGER

Since 1995; 3 years prior investment management experience with Payden & Rygel

M.B.A.--University of California, Los Angeles; B.S.--Northern University

HIGH QUALITY BOND

SUSAN MALONE

PORTFOLIO MANAGER

Since 1996; 7 years prior investment management experience with BEA Associates

M.B.A.--New York University; B.S.--Carnegie Mellon University

SHORT INTERMEDIATE AND HIGH QUALITY BOND
<PAGE>
51

PRINCIPAL STRATEGIES, RISKS AND OTHER INFORMATION

MORE ABOUT THE FUNDS

Each Fund's goal and principal investment strategies, and the main risks of
investing in the Funds, are summarized at the beginning of this prospectus. More
information on investment strategies, investments and risks appears in this
section. Except as noted below, each Fund's investment strategy may be changed
without shareholder approval. There can, of course, be no assurance that any
Fund will achieve its investment goal.

Please note that each Fund may also use strategies and invest in securities that
are not described in the Statement of Additional Information. Of course, the
Investment Adviser may decide, as a matter of investment strategy, not to use
the investments and investment techniques described below and in the Statement
of Additional Information at any particular time.

INTERNATIONAL INVESTMENT RISKS AND CONSIDERATIONS

FOREIGN SECURITIES. The Worldwide Growth, Global Blue Chip, Global Growth &
Income, Global Technology, Global Health Care, International Core Growth,
International Small Cap Growth, Emerging Countries, Pacific Rim and Latin
America invest in foreign securities as a principal strategy. The remainder of
the Funds may invest in foreign securities as a non-principal strategy. The
Funds do not consider ADRs and other similar receipts or shares to be foreign
securities.

CURRENCY FLUCTUATIONS. When a Fund invests in instruments issued by foreign
companies, the principal, income and sales proceeds may be paid to the Fund in
local foreign currencies. A reduction in the value of local currencies relative
to the U.S. dollar could mean a corresponding reduction in the value of a Funds'
investments. Also, a Fund may incur costs when converting from one currency to
another.

SOCIAL, POLITICAL AND ECONOMIC FACTORS. The economies of many of the countries
where the Funds may invest may be subject to a substantially greater degree of
social, political and economic instability than the United States. This
instability might impair the financial conditions of issuers or disrupt the
financial markets in which the Funds invest.

The economies of foreign countries may differ significantly from the economy of
the United States as to, for example, the rate of growth of gross domestic
product or rate of inflation. Governments of many foreign countries continue to
exercise substantial control over private enterprise and own or control many
companies. Government actions could have a significant impact on economic
conditions in certain countries which could affect the value of the securities
in the Funds.

For example, with respect to the Mauritius Subsidiary, the Indian Revenue
authorities from time to time re-examine the eligibility of Mauritius entities
to tax relief granted under treaty between India and Mauritius. Under the terms
of the treaty, entities such as the Mauritius Subsidiary are not taxed on income
from capital gains arising in India on the sale of Indian securities, a rate
which can be as high as 30%. While the Funds expect to continue to utilize the
Mauritius Subsidiary and rely on the treaty and its benefits, there is no
guarantee that Indian Revenue authorities will continue to allow treaty
benefits. In that instance, those Funds could be liable for Indian taxes for the
entire period during which the Mauritius Subsidiary held Indian securities.

INFLATION. Certain foreign countries, especially many emerging countries, have
experienced substantial, and in some periods extremely high and volatile, rates
of inflation. Rapid fluctuations in inflation rates and wage and price controls
may continue to have unpredictable effects on the economies, companies and
securities markets of these countries.

DIFFERENCES IN SECURITIES MARKETS. The securities markets in foreign countries
have substantially less trading volume than the markets in the United States and
debt and equity securities of many companies listed on such markets may be less
liquid and more volatile than comparable securities in the United States. Some
of the stock exchanges in foreign countries, to the extent that established
markets exist, are in the earlier stages of their development. The limited
liquidity of certain securities markets may affect the ability of each Fund to
buy and sell securities at the desired price and time.

Trading practices in certain foreign countries are also significantly different
from those in the United States. Although brokerage commissions are generally
higher than those in the U.S., the Investment Adviser will seek to achieve the
most favorable net results. In addition, securities settlements and clearance
procedures may be less developed and less reliable than those in the United
States. Delays in settlement could result in temporary periods in which the
assets of the Funds are not fully invested, or could result in a Fund being
unable to sell a security in a falling market.
<PAGE>
52

PRINCIPAL STRATEGIES, RISKS AND OTHER INFORMATION

CUSTODIAL AND REGISTRATION PROCEDURES. Systems for the registration and transfer
of securities in foreign markets can be less developed than similar systems in
the United States. There may be no standardized process for registration of
securities or a central registration system to track share ownership. The
process for transferring shares may be cumbersome, costly, time-consuming and
uncertain.

GOVERNMENT SUPERVISION OF SECURITIES MARKETS. Disclosure and regulatory
standards in many foreign countries are, in many respects, less stringent than
those in the United States. There may be less government supervision and
regulation of securities exchanges, listed companies, investors, and brokers in
foreign countries than in the United States, and enforcement of existing
regulations may be extremely limited.

FINANCIAL INFORMATION AND REPORTING STANDARDS. Issuers in foreign countries are
generally subject to accounting, auditing, and financial standards and
requirements that differ, in some cases materially, from those in the United
States. In particular, the assets and profits appearing in financial statements
may not reflect their financial position or results in the way they would be
reflected had the statements been prepared in accordance with U.S. generally
accepted accounting principles. Consequently, financial data may not reflect the
true condition of those issuers and securities markets.

GENERAL FIXED INCOME SECURITIES RISKS

The Global Growth & Income, Convertible, Short-Intermediate, High Quality Bond
and High Yield Bond Funds invest in debt securities as a principal strategy. The
remainder of the Funds may invest in debt securities as a non-principal
strategy. The debt securities in which the Funds invest may be of any maturity.
Fixed income securities are subject to the following risks:

MARKET RISK. Prices of fixed income securities rise and fall in response to
interest rate changes for similar securities. Generally, when interest rates
rise, prices of fixed income securities fall. Interest rate changes have a
greater affect on fixed income securities with longer durations.

CREDIT RISK. Credit risk is the possibility that an issuer will default (the
issuer fails to repay interest and principal when due). If an issuer defaults,
the Fund will lose money.

Many fixed income securities receive credit ratings from companies such as
Standard & Poor's and Moody's Investor Services. Fixed income securities receive
different credit ratings depending on the rating company's assessment of the
likelihood of default by the issuer. The lower the rating of the fixed income
security, the greater the credit risk.

Lower rated fixed income securities generally compensate for greater credit risk
by paying interest at a higher rate. The difference between the yield of the
security and the yield of a U.S. Treasury security with a comparable maturity
(the "spread") measures the additional interest received for taking risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating is
lowered, or the security is perceived to have an increased credit risk. An
increase in the spread will cause the price of the security to decline.

CALL RISK. Call risk is the possibility that an issuer may redeem a fixed income
security before maturity ("call") at a price below it's current market price. An
increase in the likelihood of a call may reduce the security's price. If a fixed
income security is called, the Fund may have to reinvest the proceeds in other
fixed income securities with lower interest rates, higher credit risks, or other
less favorable characteristics.

LIQUIDITY RISKS. Fixed income securities that have noninvestment grade credit
ratings, have not been rated or that are not widely held may trade less
frequently than other securities. This may increase the price volatility of
these securities.

FOREIGN RISKS. Foreign debt securities pose additional risks because foreign
economic or political conditions may be less favorable than those of the United
States. Foreign financial markets may also have fewer investor protections. Debt
securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S. investors. Due to these risk factors, foreign debt
securities may be more volatile and less liquid than similar securities traded
in the U.S.

INVESTMENT GRADE BOND RISK. The debt securities in which the High Quality Bond
Fund invests as a principal strategy will be rated "Baa" or higher by Moody's
Investors Service, Inc. or "BBB" or higher by Standard & Poor's Corporation or
unrated if determined by the Investment Adviser to be of comparable quality. In
the event the rating of a debt security held by the Fund is downgraded below
investment grade, the Investment Adviser will sell the security as promptly as
possible.
<PAGE>
53

BELOW INVESTMENT GRADE BOND RISKS

The Global Growth & Income, Convertible, High Quality Bond and High Yield Bond
Funds invest in debt securities rated below investment grade as a principal
strategy. The remainder of the Funds may invest in debt securities rated below
investment grade as a non-principal strategy. These securities usually offer
higher yields than higher-rated securities but are also subject to more risk
than higher-rated securities.

Lower-rated or unrated debt obligations are more likely to react to developments
affecting market and credit risks than are more high-rated securities, which
react primarily to movements in interest rates. In the past, economic downturns
or increases in interest rates caused a higher incidence of default by issuers
of lower-rated securities.

In some cases, such obligations may be highly speculative, and may have poor
prospects for reaching investment grade. To the extent the issuer defaults, the
Fund may incur additional expenses in order to enforce its rights or to
participate in a restructuring of the obligation. In addition, the prices of
lower-rated securities generally tend to be more volatile and the market less
liquid than those of higher-rated securities. Consequently, the Funds may at
times experience difficulty in liquidating their investments at the desired
times and prices.

REPURCHASE AGREEMENTS AND RISKS

Each Fund may enter into repurchase agreements as a non-principal investment
strategy. A repurchase agreement is the purchase by the Fund of a security that
a seller has agreed to buy back, usually within one to seven days. The seller's
promise to repurchase the security is fully collateralized by securities equal
in value to 102% of the purchase price, including accrued interest. If the
seller defaults and the collateral value declines, the Fund might incur a loss.
If the seller declares bankruptcy, the Fund may not be able to sell the
collateral at the desired time. The Funds enter into these agreements only with
brokers, dealers, or banks that meet credit quality standards established by the
Board of Trustees.

TEMPORARY INVESTMENTS AND RISKS

Each Fund may, from time to time, invest all of its assets in short-term
instruments when the Investment Adviser determines that adverse market,
economic, political or other conditions call for a temporary defensive posture.
Such a defensive position may result in a Fund failing to achieve its investment
objective.

LENDING OF PORTFOLIO SECURITIES' RISK

In order to generate additional income, each of the Funds may lend portfolio
securities, on a short-term or a long-term basis, up to 30% of a Fund's total
assets to broker/dealers, banks, or other institutional borrowers of securities.
A Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the Adviser has determined are creditworthy and under
guidelines established by the Directors and will receive collateral in the form
of cash or U.S. government securities equal to least 102% of the value of the
securities loaned.

There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

HEDGING TRANSACTION RISKS

Each of the Funds may trade in derivative contracts to hedge portfolio holdings
on a non-principal basis. Hedging activities are intended to reduce various
kinds of risks. For example, in order to protect against certain events that
might cause the value of its portfolio securities to decline, the Fund can buy
or sell a derivative contract (or a combination of derivative contracts)
intended to rise in value under the same circumstances. Hedging activities will
not eliminate risk, even if they work as they are intended to. In addition,
these strategies are not always successful, and could result in increased
expenses and losses to the Fund. The Fund may trade in the following types of
derivative contracts.

FUTURES CONTRACTS provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a price, date, and
time specified when the contract is made. Futures contracts traded OTC are
frequently referred to as forward contracts. Entering into a contract to buy is
commonly referred to as buying or purchasing a contract or holding a long
position. Entering into a contract to sell is commonly referred to as selling a
contract or holding a short position. Futures are considered to be commodity
contracts. The Fund can buy or sell futures contracts on portfolio securities or
indexes and engage in foreign currency forward contracts.

OPTIONS are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at
<PAGE>
54

PRINCIPAL STRATEGIES, RISKS AND OTHER INFORMATION
the end of, a specified period of time. A call option gives the holder (buyer)
the right to purchase the underlying asset from the seller (writer) of the
option. A put option gives the holder the right to sell the underlying asset to
the writer of the option. The writer of the option receives a payment, or
"premium," from the buyer, which the writer keeps regardless of whether the
buyer uses (or exercises) the option.

When the Fund uses financial futures and options on financial futures as hedging
devices, much depends on the ability of the portfolio manager to predict market
conditions based upon certain economic analysis and factors. There is a risk
that the prices of the securities subject to the futures contracts may not
correlate perfectly with the prices of the securities in the Fund's portfolio.
This may cause the futures contract and any related options to react differently
than the portfolio securities to market changes. In addition, the portfolio
managers could be incorrect in their expectations about the direction or extent
of market factors such as interest rate movements. In these events, the Fund may
lose money on the futures contracts or options.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the Investment Adviser will
consider liquidity before entering into options transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.

BOND QUALITY

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes are most unlikely to impair the fundamentally strong
position of such issues.

Aa - Bonds rated Aa are judged to be high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.

A - Bonds Rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba - Bonds rated Ba are judged to have speculative elements; their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.

B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.

C - Bonds rated C are the lowest-rated class of bonds, and such issues can be
regarding as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modified 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
<PAGE>
55

DESCRIPTION OF S&P'S CORPORATE BOND RATINGS

AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business financial or economic conditions, it is not likely to have the capacity
to pay interest and repay principal. The CCC rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied B or B-
Rating.

CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
<PAGE>
56

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand the Funds'
financial performance for the period since commencement of operations. Certain
information reflects financial results for a share of the predecessor
Institutional Portfolio outstanding throughout each period indicated. The total
returns in the table represent the rate that an investor would have earned [or
lost] on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The figures have been audited by Ernst & Young L.L.P. with
respect to the fiscal year ended March 31, 2000 and March 31, 1999 and the prior
three fiscal years, if any, and by another independent auditor with respect to
commencement of operations through March 31, 1995. Please read in conjunction
with the Trust's 2000 Annual Report which are available upon request.

<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM:
--------------------------------- -------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING INCOME (LOSS) (1) GAINS (LOSSES) OPERATIONS INCOME CAPITAL GAINS
<S> <C> <C> <C> <C> <C> <C>

U.S. EQUITY FUNDS
LARGE CAP GROWTH
For the period ended
9/30/00 (4) $49.86 $(0.19) $(2.68) $(2.87) $ -- $ --
For the period 5/7/99
through 3/31/00 29.18 (0.14) 20.82 20.68 -- --
For the period 4/1/99
through 5/7/99 (4) 26.89 (0.01) 2.30 2.29 -- --
For the year ended
3/31/99 16.50 0.01 10.53 10.54 -- (0.15)
For the year ended
3/31/98 13.00 (0.02) 7.55 7.53 -- (4.03)
12/27/96 (commenced) to
3/31/97 12.50 -- 0.50 0.50 -- --
MID CAP GROWTH
For the period ended
9/30/00 (4) $41.51 $(0.13) $(0.65) $(0.78) $ -- $ --
For the period 5/7/99
through 3/31/00 19.44 (0.15) 22.22 22.01 -- --
For the period 4/1/99
through 5/7/99 (4) 19.17 (0.01) 0.28 0.27 -- --
For the year ended
3/31/99 17.16 (0.10) 2.76 2.66 -- (0.65)
For the year ended
3/31/98 15.39 (0.07) 6.00 5.93 -- (4.16)
For the year ended
3/31/97 16.26 (0.08) 0.49 0.41 -- (1.28)
For the year ended
3/31/96 12.62 (0.03) 4.47 4.44 -- (0.80)
SMALL CAP GROWTH
For the period ended
9/30/00 (4) $27.03 $(0.03) $(3.27) $(3.30) $ -- $ --
For the period 5/7/99
through 3/31/00 14.02 (0.12) 13.51 13.39 -- (0.38)
For the period 4/1/99
through 5/7/99 (4) 13.53 (0.01) 0.50 0.49 -- --
For the year ended
3/31/99 14.17 (0.14) 0.17 0.03 -- (0.67)
For the year ended
3/31/98 11.06 (0.03) 5.10 5.07 -- (1.96)
For the year ended
3/31/97 15.10 (0.08) (0.31) (0.39) -- (3.65)
For the year ended
3/31/96 11.58 (0.11) 4.45 0.94 -- (0.82)
MINI CAP GROWTH
For the period ended
9/30/00 (4) $42.54 $(0.20) $(5.40) $ 5.60 $ -- $ --
For the year ended
3/31/00 20.24 (0.35) 27.92 27.57 -- (5.27)
For the year ended
3/31/99 25.05 (0.42) (3.05) 3.47 -- (1.34)
For the year ended
3/31/98 15.94 (0.17) 10.93 10.76 -- (1.65)
For the year ended
3/31/97 15.85 (0.17) 0.84 0.67 -- (0.58)
7/12/95 (commenced) to
3/31/96 12.50 (0.05) 3.40 3.35 -- --
VALUE
For the period ended
9/30/00 (4) $21.74 $ 0.10 $ 1.17 $ 1.27 $ -- $ --
For the period 5/7/99
through 3/31/00 22.99 0.18 (1.30) (1.12) (0.13) --
For the period 4/1/99
through 5/7/99 (4) 20.90 (0.01) 2.10 2.09 -- --
For the year ended
3/31/99 21.90 0.13 0.80 0.93 (0.12) (1.81)
For the year ended
3/31/98 15.06 -- 8.27 8.27 -- (1.43)
4/30/96 (commenced) to
3/31/97 12.50 1.50 3.11 4.61 (1.44) (0.61)
CONVERTIBLE
For the period ended
9/30/00 (4) $33.67 $ 0.36 $(0.49) $ 0.13 $(0.34) $ --
For the period 5/7/99
through 3/31/00 22.21 0.49 11.44 11.93 (0.47) --
For the period 4/1/99
through 5/7/99 (4) 21.53 0.05 0.63 0.68 -- --
For the year ended
3/31/99 18.64 0.50 3.11 3.61 (0.54) (0.18)
For the year ended
3/31/98 14.97 0.47 4.20 4.67 (0.47) (0.53)
For the year ended
3/31/97 14.45 0.51 1.51 2.02 (0.52) (0.98)
For the year ended
3/31/96 11.86 0.53 2.59 3.12 (0.53) --
U.S. FIXED INCOME FUNDS
SHORT INTERMEDIATE
For the period ended
9/30/00 (4) $12.44 $ 0.42 $ 0.07 $ 0.49 $(0.45) $ --
For the year ended
3/31/00 12.72 0.76 (0.29) 0.47 (0.75) --
For the year ended
3/31/99 12.76 0.79 (0.04) 0.75 (0.79) --
For the year ended
3/31/98 12.66 0.83 0.10 0.93 (0.83) --
For the year ended
3/31/97 12.79 0.79 (0.13) 0.66 (0.79) --
8/31/95 (commenced) to
3/31/96 12.50 0.37 0.29 0.66 (0.37) --
HIGH QUALITY BOND
For the period ended
9/30/00 (4) $12.11 $ 0.41 $ 0.06 $ 0.47 $(0.43) $ --
For the period 5/7/99
through 3/31/00 12.66 0.73 (0.56) 0.17 (0.72) --
For the period 4/1/99
through 5/7/99 (4) 12.71 0.08 (0.05) (0.03) (0.08) --
For the year ended
3/31/99 13.10 0.83 (0.05) 0.78 (0.78) (0.39)
For the year ended
3/31/98 12.54 0.84 0.70 1.54 (0.84) (0.14)
For the year ended
3/31/97 12.72 0.79 (0.17) 0.62 (0.80) --
8/31/95 (commenced) to
3/31/96 12.50 0.45 0.47 0.92 (0.44) (0.26)
HIGH YIELD BOND
For the period ended
9/30/00 (4) $11.95 $ 0.61 $(0.45) $ 0.16 $(0.60) $ --
For the period 5/7/99
through 3/31/00 12.58 1.05 (0.64) 0.41 (1.04) --
For the period 4/1/99
through 5/7/99 (4) 12.37 0.13 0.18 0.31 (0.10) --
For the year ended
3/31/99 13.46 1.25 (1.06) (0.19) (1.28) --
For the year ended
3/31/98 13.20 1.11 2.02 3.13 (1.15) (1.72)
7/31/96 (commenced) to
3/31/97 12.50 0.74 0.95 1.69 (0.73) (0.26)
</TABLE>

----------------------------------------

(1) Prior to April 1, 1999, net investment income per share was calculated
by taking the difference in undistributed net investment income per
share at the beginning and end of the period, adjusted for per share
distributions. Beginning April 1, 1999, net investment income per share
is calculated by dividing net investment income for the period by the
average shares outstanding during the period.
(2) Total returns are not annualized for periods less than one year.
(3) Ratios are annualized for periods of less than one year. Expense
reimbursements reflect voluntary reductions to total expenses, as
discussed in the notes to financial statements. Such amounts would
decrease net investment income (loss) ratios had such reductions not
occurred.
(4) Unaudited.
(5) Net expenses include certain items not subject to expense reimbursement.

<PAGE>
57

NET ASSET NET ASSETS, NET
VALUE, TOTAL ENDING INVESTMENT
ENDING RETURN (2) (IN 000'S) INCOME (LOSS)
<S> <C> <C> <C> <C>

U.S. EQUITY FUNDS
LARGE CAP GROWTH
For the period ended
9/30/00 (4) $46.99 (5.68%) $ 67,951 (0.68%)
For the period 5/7/99
through 3/31/00 49.86 70.86% 37,982 (0.44%)
For the period 4/1/99
through 5/7/99 (4) 29.18 8.52% 6,043 (0.40%)
For the year ended
3/31/99 26.89 64.28% 5,940 (0.01%)
For the year ended
3/31/98 16.50 63.32% 2,556 (0.17%)
12/27/96 (commenced) to
3/31/97 13.00 4.00% 1,293 (0.06%)
MID CAP GROWTH
For the period ended
9/30/00 (4) $40.73 (1.86%) $240,426 (0.70%)
For the period 5/7/99
through 3/31/00 41.51 113.48% 252,377 (0.60%)
For the period 4/1/99
through 5/7/99 (4) 19.44 1.41% 128,710 (0.70%)
For the year ended
3/31/99 19.17 16.09% 165,014 (0.44%)
For the year ended
3/31/98 17.16 42.49% 169,412 (0.72%)
For the year ended
3/31/97 15.39 1.74% 156,443 (0.45%)
For the year ended
3/31/96 16.26 35.81% 149,969 (0.32%)
SMALL CAP GROWTH
For the period ended
9/30/00 (4) $23.73 (12.21%) $258,691 (0.24%)
For the period 5/7/99
through 3/31/00 27.03 96.49% 276,556 (0.68%)
For the period 4/1/99
through 5/7/99 (4) 14.02 3.70% 197,120 (0.87%)
For the year ended
3/31/99 13.53 1.03% 213,149 (0.71%)
For the year ended
3/31/98 14.17 47.38% 257,599 (1.16%)
For the year ended
3/31/97 11.06 (5.66%) 167,230 (0.72%)
For the year ended
3/31/96 15.10 38.27% 224,077 (0.62%)
MINI CAP GROWTH
For the period ended
9/30/00 (4) $36.94 (13.16%) $ 91,610 (1.10%)
For the year ended
3/31/00 42.54 151.76% 92,221 (1.32%)
For the year ended
3/31/99 20.24 (13.78%) 53,593 (1.18%)
For the year ended
3/31/98 25.05 68.89% 82,122 (2.51%)
For the year ended
3/31/97 15.94 3.90% 28,712 (1.08%)
7/12/95 (commenced) to
3/31/96 15.85 26.80% 25,237 (0.98%)
VALUE
For the period ended
9/30/00 (4) $23.01 5.79% $ 35,511 0.93%
For the period 5/7/99
through 3/31/00 21.74 (4.87%) 23,185 0.97%
For the period 4/1/99
through 5/7/99 (4) 22.99 10.00% 27,818 0.45%
For the year ended
3/31/99 20.90 4.43% 15,322 0.87%
For the year ended
3/31/98 21.90 57.78% 10,260 2.33%
4/30/96 (commenced) to
3/31/97 15.06 26.77% 3,062 1.64%
CONVERTIBLE
For the period ended
9/30/00 (4) $33.20 (0.36%) $152,731 2.30%
For the period 5/7/99
through 3/31/00 33.67 54.31% 114,655 2.02%
For the period 4/1/99
through 5/7/99 (4) 22.21 3.16% 90,843 2.15%
For the year ended
3/31/99 21.53 19.93% 88,590 2.67%
For the year ended
3/31/98 18.64 31.78% 80,084 6.25%
For the year ended
3/31/97 14.97 14.37% 18,344 3.43%
For the year ended
3/31/96 14.45 26.69% 17,239 3.88%
U.S. FIXED INCOME FUNDS
SHORT INTERMEDIATE
For the period ended
9/30/00 (4) $12.48 3.96% $ 20,136 6.48%
For the year ended
3/31/00 12.44 3.80% 21,136 6.03%
For the year ended
3/31/99 12.72 6.02% 18,467 6.11%
For the year ended
3/31/98 12.76 7.50% 13,535 13.03%
For the year ended
3/31/97 12.66 5.30% 5,364 6.18%
8/31/95 (commenced) to
3/31/96 12.79 5.33% 4,726 5.81%
HIGH QUALITY BOND
For the period ended
9/30/00 (4) $12.15 4.01% $ 17,385 6.93%
For the period 5/7/99
through 3/31/00 12.11 1.41% 19,909 6.67%
For the period 4/1/99
through 5/7/99 (4) 12.66 0.26% 18,187 6.45%
For the year ended
3/31/99 12.71 6.14% 15,735 6.41%
For the year ended
3/31/98 13.10 12.60% 15,759 12.80%
For the year ended
3/31/97 12.54 4.98% 15,865 6.12%
8/31/95 (commenced) to
3/31/96 12.72 5.49% 4,413 6.39%
HIGH YIELD BOND
For the period ended
9/30/00 (4) $11.51 1.32% $ 22,098 10.33%
For the period 5/7/99
through 3/31/00 11.95 3.39% 21,552 9.97%
For the period 4/1/99
through 5/7/99 (4) 12.58 2.75% 11,412 10.66%
For the year ended
3/31/99 12.37 1.69% 11,319 9.79%
For the year ended
3/31/98 13.46 25.49% 10,771 8.28%
7/31/96 (commenced) to
3/31/97 13.20 13.90% 4,608 8.47%

<CAPTION>
RATIOS TO AVERAGE NET ASSETS (3)
--------------------------------------------------------
FUND'S
EXPENSE PORTFOLIO NET ASSETS,
TOTAL (REIMBURSEMENTS)/ NET TURNOVER
EXPENSES RECOUPMENT EXPENSES (5) RATE
<S> <C> <C> <C> <C>
U.S. EQUITY FUNDS
LARGE CAP GROWTH
For the period ended
9/30/00 (4) 1.03% (0.03%) 1.00% 63%
For the period 5/7/99
through 3/31/00 1.20% (0.19%) 1.01% 154%
For the period 4/1/99
through 5/7/99 (4) 0.98% -- 0.98% 18%
For the year ended
3/31/99 1.63% (0.65%) 0.98% 253%
For the year ended
3/31/98 3.67% (2.66%) 1.01% 306%
12/27/96 (commenced) to
3/31/97 4.99% (3.99%) 1.00% 321%
MID CAP GROWTH
For the period ended
9/30/00 (4) 1.02% (0.01%) 1.01% 75%
For the period 5/7/99
through 3/31/00 1.09% (0.08%) 1.01% 110%
For the period 4/1/99
through 5/7/99 (4) 0.99% -- 0.99% 25%
For the year ended
3/31/99 1.04% (0.08%) 0.96% 154%
For the year ended
3/31/98 1.19% (0.22%) 0.97% 200%
For the year ended
3/31/97 1.02% (0.02%) 1.00% 153%
For the year ended
3/31/96 1.06% (0.08%) 0.98% 114%
SMALL CAP GROWTH
For the period ended
9/30/00 (4) 1.33% (0.14%) 1.19% 45%
For the period 5/7/99
through 3/31/00 1.38% (0.19%) 1.19% 84%
For the period 4/1/99
through 5/7/99 (4) 1.17% -- 1.17% 18%
For the year ended
3/31/99 1.35% (0.10%) 1.25% 90%
For the year ended
3/31/98 1.44% (0.25%) 1.19% 92%
For the year ended
3/31/97 1.26% (0.09%) 1.17% 113%
For the year ended
3/31/96 1.20% (0.04%) 1.16% 130%
MINI CAP GROWTH
For the period ended
9/30/00 (4) 1.62% (0.04%) 1.58% 54%
For the year ended
3/31/00 1.76% (0.19%) 1.57% 141%
For the year ended
3/31/99 1.70% (0.11%) 1.59% 115%
For the year ended
3/31/98 1.83% (0.26%) 1.57% 113%
For the year ended
3/31/97 1.99% (0.43%) 1.56% 164%
7/12/95 (commenced) to
3/31/96 2.46% (0.91%) 1.55% 107%
VALUE
For the period ended
9/30/00 (4) 1.29% (0.24%) 1.05% 71%
For the period 5/7/99
through 3/31/00 1.26% (0.24%) 1.02% 143%
For the period 4/1/99
through 5/7/99 (4) 2.48% (1.50%) 0.98% 7%
For the year ended
3/31/99 2.11% (1.12%) 0.99% 147%
For the year ended
3/31/98 2.46% (1.45%) 1.01% 55%
4/30/96 (commenced) to
3/31/97 3.34% (2.34%) 1.00% 139%
CONVERTIBLE
For the period ended
9/30/00 (4) 1.04% (0.03%) 1.01% 51%
For the period 5/7/99
through 3/31/00 1.27% (0.24%) 1.03% 149%
For the period 4/1/99
through 5/7/99 (4) 0.99% -- 0.99% 11%
For the year ended
3/31/99 1.07% (0.11%) 0.96% 138%
For the year ended
3/31/98 1.20% (0.23%) 0.97% 160%
For the year ended
3/31/97 1.37% (0.37%) 1.00% 167%
For the year ended
3/31/96 1.53% (0.53%) 1.00% 145%
U.S. FIXED INCOME FUNDS
SHORT INTERMEDIATE
For the period ended
9/30/00 (4) 0.92% (0.53%) 0.39% 236%
For the year ended
3/31/00 0.95% (0.61%) 0.34% 162%
For the year ended
3/31/99 1.34% (1.00%) 0.34% 104%
For the year ended
3/31/98 1.51% (1.15%) 0.36% 197%
For the year ended
3/31/97 2.86% (2.51%) 0.35% 132%
8/31/95 (commenced) to
3/31/96 3.17% (2.82%) 0.35% 114%
HIGH QUALITY BOND
For the period ended
9/30/00 (4) 1.33% (0.86%) 0.47% 155%
For the period 5/7/99
through 3/31/00 1.14% (0.67%) 0.47% 161%
For the period 4/1/99
through 5/7/99 (4) 0.39% -- 0.39% 22%
For the year ended
3/31/99 1.15% (0.72%) 0.43% 274%
For the year ended
3/31/98 1.64% (1.18%) 0.46% 407%
For the year ended
3/31/97 3.74% (3.29%) 0.45% 190%
8/31/95 (commenced) to
3/31/96 6.45% (6.00%) 0.45% 60%
HIGH YIELD BOND
For the period ended
9/30/00 (4) 1.22% (0.45%) 0.77% 60%
For the period 5/7/99
through 3/31/00 1.31% (0.50%) 0.81% 113%
For the period 4/1/99
through 5/7/99 (4) 0.58% (0.02%) 0.56% 25%
For the year ended
3/31/99 1.09% (0.41%) 0.68% 242%
For the year ended
3/31/98 2.66% (1.90%) 0.76% 484%
7/31/96 (commenced) to
3/31/97 1.95% (1.20%) 0.75% 465%
</TABLE>

----------------------------------------
<PAGE>
58

FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DISTRIBUTIONS FROM:
--------------------------------- -------------------------
NET ASSET NET NET REALIZED TOTAL FROM NET NET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED
BEGINNING INCOME (LOSS) (1) GAINS (LOSSES) OPERATIONS INCOME CAPITAL GAINS
<S> <C> <C> <C> <C> <C> <C>

GLOBAL EQUITY FUNDS
WORLDWIDE GROWTH
For the period ended
9/30/00 (4) $38.70 $(0.06) $ (4.18) $ (4.24) $ -- $ --
For the period 5/7/99
through 3/31/00 23.77 (0.14) 15.07 14.93 -- --
For the period 4/1/99
through 5/7/99 (4) 22.26 (0.02) 1.53 1.51 -- --
For the year ended
3/31/99 17.90 0.67 5.16 5.83 (0.64) (0.83)
For the year ended
3/31/98 14.21 0.25 4.56 4.81 -- (1.12)
For the year ended
3/31/97 15.42 (0.12) 2.08 1.96 -- (3.17)
For the year ended
3/31/96 13.06 0.06 2.58 2.64 (0.28) --
GLOBAL BLUE CHIP
For the period ended
09/30/00 (4) $31.91 $ -- $ (2.98) $ (2.98) $ -- $ --
For the year ended
3/31/00 20.48 (0.21) 19.90 19.69 -- (8.26)
For the year ended
3/31/99 14.81 (0.05) 5.86 5.81 -- (0.14)
9/30/97 (commenced) to
3/31/98 12.50 -- 2.31 2.31 -- --
GLOBAL GROWTH & INCOME
For the period ended
9/30/00 (4) $19.15 $ 0.01 $ (2.08) $ (2.07) $(0.01) $ --
For the year ended
3/31/00 15.21 0.07 7.66 7.73 (0.12) (3.67)
For the year ended
3/31/99 14.25 0.22 1.55 1.77 (0.13) (0.68)
6/30/97 (commenced) to
3/31/98 12.50 0.34 3.86 4.20 (0.34) (2.11)
GLOBAL TECHNOLOGY
For the period ended
9/30/00 (4) $138.95 $(0.65) $(12.17) $ (12.82) $ -- $ --
For the year ended
3/31/00 44.64 (1.09) 108.81 107.72 -- $(13.41)
7/31/98 (commenced) to
3/31/99 12.50 (0.05) 32.19 32.14 -- --
GLOBAL HEALTH CARE
For the period ended
9/30/00 (4) $30.91 $(0.11) $ 11.87 $ 11.76 $ -- $ --
9/1/99 (commenced) to
3/31/00 12.50 (0.10) 18.52 18.42 (0.01) --
INTERNATIONAL EQUITY
FUNDS
INTERNATIONAL CORE GROWTH
For the period ended
9/30/00 (4) $31.88 $ 0.06 $ (4.80) $ (4.47) $ -- $ --
For the period 5/7/99
through 3/31/00 20.61 (0.09) 11.38 11.30 (0.02) --
For the period 4/1/99
through 5/7/99 (4) 19.73 (0.02) 0.90 0.89 -- --
For the year ended
3/31/99 18.55 -- 1.18 1.18 -- --
For the year ended
3/31/98 14.13 (0.02) 5.12 5.10 -- (0.68)
12/27/96 (commenced) to
3/31/97 12.50 -- 1.63 1.63 -- --
INTERNATIONAL SMALL CAP
GROWTH
For the period ended
9/30/00 (4) $51.19 $(0.04) $ (6.84) $ 6.88 $ -- $ --
For the period 5/7/99
through 3/31/00 22.38 (0.24) 29.26 29.02 -- (0.21)
For the period 4/1/99
through 5/7/99 (4) 21.12 (0.01) 1.27 1.26 -- --
For the year ended
3/31/99 18.45 0.03 3.22 3.19 -- (0.58)
For the year ended
3/31/98 17.02 (0.13) 5.50 5.37 -- (3.94)
For the year ended
3/31/97 15.05 -- 2.28 2.28 (0.08) (0.23)
For the year ended
3/31/96 13.09 0.06 2.02 2.08 (0.12) --
EMERGING COUNTRIES
For the period ended
9/30/00 (4) $23.69 $(0.24) $ (5.66) $ 5.42 $ 0.00 $ --
For the period 5/7/99
through 3/31/00 15.88 (0.10) 7.91 7.81 -- --
For the period 4/1/99
through 5/7/99 (4) 13.44 (0.02) 2.46 2.44 -- --
For the year ended
3/31/99 17.15 (0.01) (3.63) (3.69) -- (0.07)
For the year ended
3/31/98 17.45 0.09 1.23 1.32 -- (1.62)
For the year ended
3/31/97 14.02 (0.06) 3.67 3.61 (0.05) (0.13)
For the year ended
3/31/96 10.91 -- 3.16 3.16 (0.05) --
PACIFIC RIM
For the period ended
9/30/00 (4) $25.45 $(0.18) $ (4.24) $ 4.42 $ -- $ --
For the year ended
3/31/00 12.33 (0.11) 16.15 16.04 -- (2.92)
For the year ended
3/31/99 12.66 (0.07) (0.26) (0.33) -- --
12/31/97 (commenced) to
3/31/98 12.50 0.02 0.14 0.16 -- --
LATIN AMERICA
For the period ended
9/30/00 (4) $20.65 $(0.04) $ (3.37) $ (3.41) $ -- $ --
For the year ended
3/31/00 11.56 0.03 9.06 9.09 -- --
For the year ended
3/31/99 13.92 0.06 (2.27) (2.21) (0.15) --
11/28/97 (commenced) to
3/31/98 12.50 0.15 1.27 1.42 -- --
</TABLE>

----------------------------------------

<PAGE>
59

<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS (3)
---------------------------------------------------------- FUND'S
NET ASSET NET ASSETS, NET EXPENSE PORTFOLIO
VALUE, TOTAL ENDING INVESTMENT TOTAL (REIMBURSEMENTS)/ NET TURNOVER
ENDING RETURN (2) (IN 000'S) INCOME (LOSS) EXPENSES RECOUPMENT EXPENSES (5) RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>

GLOBAL EQUITY FUNDS
WORLDWIDE GROWTH
For the period ended
9/30/00 (4) $ 34.46 (10.93%) $164,247 (0.34%) 1.33% 0.03% 1.36% 97%
For the period 5/7/99
through 3/31/00 38.70 62.81% 188,731 (0.54%) 1.42% (0.05%) 1.37% 168%
For the period 4/1/99
through 5/7/99 (4) 23.77 6.78% 108,457 (0.84%) 1.29% -- 1.29% 21%
For the year ended
3/31/99 22.26 34.28% 74,523 0.19% 1.51% (0.17%) 1.34% 247%
For the year ended
3/31/98 17.90 35.08% 11,686 (0.31%) 1.87% (0.51%) 1.36% 202%
For the year ended
3/31/97 14.21 13.18% 2,656 (0.43%) 3.05% (1.70%) 1.35% 182%
For the year ended
3/31/96 15.42 20.37% 3,613 0.20% 2.60% (1.25%) 1.35% 132%
GLOBAL BLUE CHIP
For the period ended
09/30/00 (4) $ 28.93 (9.34%) $ 20,298 0.01% 1.72% (0.46%) 1.26% 182%
For the year ended
3/31/00 31.91 110.64% 24,742 (0.81%) 1.82% (0.49%) 1.33% 348%
For the year ended
3/31/99 20.48 39.55% 10,414 (0.31%) 3.14% (1.81%) 1.33% 419%
9/30/97 (commenced) to
3/31/98 14.81 18.48% 7,320 (0.06%) 2.14% (0.94%) 1.20% 238%
GLOBAL GROWTH & INCOME
For the period ended
9/30/00 (4) $ 17.07 (10.79%) $ 5,200 0.09% 2.57% (1.14%) 1.43% 163%
For the year ended
3/31/00 19.15 55.69% 8,202 0.42% 3.06% (1.68%) 1.38% 295%
For the year ended
3/31/99 15.21 13.13% 5,589 1.64% 4.37% (2.96%) 1.41% 328%
6/30/97 (commenced) to
3/31/98 14.25 36.25% 6,065 7.13% 2.45% (1.09%) 1.36% 413%
GLOBAL TECHNOLOGY
For the period ended
9/30/00 (4) $126.13 (9.19%) $305,594 (1.07%) 1.36% 0.05% 1.41% 192%
For the year ended
3/31/00 138.95 259.92% 405,318 (1.06%) 1.42% -- 1.42% 357%
7/31/98 (commenced) to
3/31/99 44.64 257.20% 24,094 (0.84%) 4.12% (2.69%) 1.43% 254%
GLOBAL HEALTH CARE
For the period ended
9/30/00 (4) $ 42.67 38.00% $167,775 (0.64%) 1.31% 0.02% 1.33% 371%
9/1/99 (commenced) to
3/31/00 30.91 147.42% 125,355 (0.69%) 1.45% (0.04%) 1.41% 327%
INTERNATIONAL EQUITY
FUNDS
INTERNATIONAL CORE GROWTH
For the period ended
9/30/00 (4) $ 27.14 (14.87%) $305,577 0.38% 1.31% 0.10% 1.41% 118%
For the period 5/7/99
through 3/31/00 31.88 54.78% 303,536 (0.36%) 1.38% 0.02% 1.40% 171%
For the period 4/1/99
through 5/7/99 (4) 20.61 4.46% 117,365 (0.97%) 1.39% -- 1.39% 30%
For the year ended
3/31/99 19.73 6.43% 107,890 (0.01%) 1.59% (0.24%) 1.35% 214%
For the year ended
3/31/98 18.55 36.91% 32,305 (0.12%) 1.92% (0.51%) 1.41% 274%
12/27/96 (commenced) to
3/31/97 14.13 13.04% 4,593 0.43% 3.14% (1.74%) 1.40% 76%
INTERNATIONAL SMALL CAP
GROWTH
For the period ended
9/30/00 (4) $ 44.31 (13.44%) $277,233 (0.18%) 1.33% 0.08% 1.41% 87%
For the period 5/7/99
through 3/31/00 51.19 130.09% 270,159 (0.73%) 1.45% (0.04%) 1.41% 151%
For the period 4/1/99
through 5/7/99 (4) 22.38 5.97% 71,738 (0.37%) 1.39% -- 1.39% 23%
For the year ended
3/31/99 21.12 17.97% 69,077 (0.30%) 1.53% (0.15%) 1.38% 146%
For the year ended
3/31/98 18.45 37.02% 42,851 (0.91%) 1.94% (0.53%) 1.41% 198%
For the year ended
3/31/97 17.02 15.25% 48,505 (0.38%) 1.68% (0.28%) 1.40% 206%
For the year ended
3/31/96 15.05 15.99% 20,245 0.34% 2.44% (1.04%) 1.40% 141%
EMERGING COUNTRIES
For the period ended
9/30/00 (4) $ 17.79 (24.91%) $282,317 (0.21%) 1.71% (0.03%) 1.68% 99%
For the period 5/7/99
through 3/31/00 23.69 49.18% 300,085 (0.62%) 1.77% (0.10%) 1.67% 180%
For the period 4/1/99
through 5/7/99 (4) 15.88 18.07% 178,902 (1.22%) 1.64% -- 1.64% 34%
For the year ended
3/31/99 13.44 (21.22%) 140,318 0.11% 1.97% (0.30%) 1.67% 213%
For the year ended
3/31/98 17.15 8.77% 88,063 1.15% 2.02% (0.36%) 1.66% 243%
For the year ended
3/31/97 17.45 25.48% 56,918 (0.52%) 1.87% (0.22%) 1.65% 176%
For the year ended
3/31/96 14.02 29.06% 6,878 0.29% 3.59% (1.94%) 1.65% 118%
PACIFIC RIM
For the period ended
9/30/00 (4) $ 21.03 (17.37%) $ 2,330 (1.66%) 8.68% (6.63%) 2.05% 861%
For the year ended
3/31/00 25.45 136.92% 3,821 (0.55%) 6.25% (4.63%) 1.62% 424%
For the year ended
3/31/99 12.33 (2.69%) 1,099 (0.67%) 14.68% (13.11%) 1.57% 450%
12/31/97 (commenced) to
3/31/98 12.66 1.28% 1,197 0.74% 4.50% (3.10%) 1.40% 86%
LATIN AMERICA
For the period ended
9/30/00 (4) $ 17.24 (16.59%) $ 4,443 (0.41%) 3.55% (1.83%) 1.72% 245%
For the year ended
3/31/00 20.65 78.67% 5,277 0.20% 3.93% (2.17%) 1.76% 463%
For the year ended
3/31/99 11.56 (15.78%) 1,774 0.95% 14.61% (12.97%) 1.64% 575%
11/28/97 (commenced) to
3/31/98 13.92 11.14% 1,184 3.33% 5.20% (3.55%) 1.65% 188%
</TABLE>

----------------------------------------
<PAGE>
60

PRIOR PERFORMANCE OF CERTAIN FUNDS AND THEIR PREDECESSORS

The following tables set forth historical performance information for the
Mid Cap Growth, Convertible and International Small Cap Growth Funds (the
"Funds") as their respective pool of assets converted from one form of legal
entity to another. Each Fund's performance includes historical performance of
comparable managed institutional separate accounts ("Institutional Accounts")
managed by the Investment Adviser prior to the Funds' inception. The Funds'
performance also includes historical performance for a predecessor fund. The
Investment Adviser has advised the Trust that the Institutional Accounts were
operated with materially equivalent investment objectives, policies, strategies
and restrictions as the Funds.

The Mid Cap Growth Fund performance includes performance information for
Whitehall Partners, a California limited partnership whose total assets were
transferred to the Mid Cap Growth Fund in April 1993. The Convertible Fund
includes performance information for Coventry Partners, a California limited
partnership whose total assets were transferred to the Convertible Fund in April
1993. The International Small Cap Growth Fund includes performance information
for Huntington Partners, a California limited partnership whose assets were
transferred to the International Small Cap Growth Fund in January 1994.

Until July 24, 1998, the Funds were organized in the Nicholas-Applegate
"master-feeder" investment structure. Under that structure, the
Nicholas-Applegate Mutual Funds invested all of their assets in corresponding
portfolios, or series, of the Nicholas-Applegate Investment Trust (the "Trust").
On July 24, 1998, the "master-feeder" arrangement was reorganized into
multi-class structure in which the Nicholas-Applegate Mutual Funds invested in
securities directly and offered various classes of shares.

In May 1999, the Trust became the successor entity to the assets of the
Class I shares of the Nicholas-Applegate Mutual Funds when, substantially all of
those "Institutional" assets transferred to the Trust. The investment objective,
policies and limitations of the portfolios of the Trust are identical in every
respect to the corresponding portfolios of the Nicholas-Applegate Mutual Funds.
The investment management fees and expense limitations are also identical.

The performance returns for the Institutional Accounts have been adjusted to
reflect the deduction of the fees and expenses of the Funds and, for the period
preceding the period the reorganization of the Trust, the proportionate shares
of the operating expenses of the corresponding master funds of the Master Trust
(including advisory fees), and give effect to transaction costs as well as
reinvestment of income and gains. However, the prior investment partnerships
were not registered under the Investment Company Act and were therefore not
subject to the investment restrictions imposed by the Act; if they had been so
registered, their performance might have been lower.

The performance results presented may not necessarily equal the return
experienced by any particular shareholder or partner as a result of the timing
of investments and redemptions. In addition, the results do not reflect the
effect of income or excise taxes on any shareholder, partner or trust
beneficiary.
<PAGE>
61

<TABLE>
<CAPTION>
INTERNATIONAL SMALL
MID CAP GROWTH CONVERTIBLE CAP GROWTH
PERFORMANCE PERFORMANCE PERFORMANCE
RUSSELL CS FIRST INTERNATIONAL SALOMON
MID CAP MID CAP BOSTON SMALL CAP EPAC/
GROWTH GROWTH CONVERTIBLE CONVERTIBLE GROWTH EMI
YEAR FUND INDEX(1) FUND INDEX(2) FUND INDEX(3)
<S> <C> <C> <C> <C> <C> <C>
1985(4) 24.74% n/a n/a n/a n/a n/a
1986(4) 32.85 17.55% n/a n/a n/a n/a
1987 3.59 2.76 (3.12)% (0.22)% n/a n/a
1988 12.67 12.92 19.88 13.41 n/a n/a
1989 33.92 31.48 28.39 13.76 n/a n/a
1990(4) 0.73 (5.13) 1.84 (6.89) (17.48)% (16.96)%
1991 55.52 47.03 38.36 29.11 11.78 6.66
1992 13.55 8.71 9.84 17.58 (12.36) (15.42)
1993 19.77 11.19 27.08 18.55 26.03 30.34
1994 (10.52) (2.17) (7.59) (4.72) 8.61 9.44
1995(4) 38.57 33.99 22.26 23.72 6.00 4.79
1996 16.46 17.48 21.02 13.84 18.27 6.47
1997 16.66 22.54 23.30 16.92 14.09 (10.27)
1998 14.65 17.86 21.54 6.55 36.34 14.14
1999 99.11 51.31 51.50 42.28 128.11 42.28
Last year(5) 98.20 60.37 51.58 34.92 56.61 2.62
Last 5 years(5) 31.13 24.64 25.57 16.43 33.27 5.11
Last 10 years(5) 26.39 22.82 21.43 16.58 20.08 6.00
Since inception(5) 24.18 18.19 18.40 13.04 16.77 3.39
</TABLE>

1 The Russell Midcap 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
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 Midcap Growth Index is
considered generally representative of the U.S. market for midcap stocks.
The average market capitalization is approximately $4 billion, the median
market capitalization is approximately $2.5 billion, and the largest
company in the Index had an approximate market capitalization of $8.7
billion. This 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. The Index was not available
until 1986.
2 The CS 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 markups, or
other expenses of investing.
3 The Salomon EPAC Extended Market Index ("EMI") is an unmanaged index that
includes shares of approximately 2,800 companies in 22 countries
excluding Canada and the United States. Companies included in the Index
are smaller capitalization companies with available float market
capitalizations greater than U.S. $100 million. Only issuers that are
legally and practically available to outside investors are included in
the Index. 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.
4 Performance Inception dates are as follows: Whitehall Partners Core
Growth--September 30, 1985; Mid Cap Growth Fund--April 19, 1993; Coventry
Partners Income and Growth--December 31, 1986; Convertible
Fund--April 19, 1993; Huntington Partners International Small Cap
Growth--June 7, 1990; International Small Cap Growth Fund--January 3,
1994.
5 Through September 30, 2000.

<PAGE>
(This page has been left blank intentionally.)
<PAGE>
NEW ACCOUNT FORM (NON-IRA)
INSTITUTIONAL SHARES
FOR AN IRA ACCOUNT APPLICATION, CALL 800 - 551-8643.
N I C H O L A S-A P P L E G A T E-REGISTERED TRADEMARK-

MAIL TO:
Nicholas-Applegate Institutional Funds
PO Box 8326
Boston, MA 02266-8326
800 - 551-8043

1. YOUR ACCOUNT REGISTRATION
--------------------------------------------------------------------------------
PLEASE PRINT. COMPLETE ONE SECTION ONLY. Joint account owners will be registered
joint tenants with the right of survivorship unless otherwise indicated. It is
the shareholder(s) responsibility to specify ownership designations which comply
with applicable state law.

<TABLE>
<S> <C> <C> <C> <C>
/ / INDIVIDUAL OR JOINT ACCOUNT
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ - _ _ _ _
First Name Middle Initial Last Name Social Security Number
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ - _ _ _ _
Joint Tenant (IF ANY) Middle Initial Last Name Social Security Number
/ / GIFT OR TRANSFER TO MINOR (UGMA/UTMA)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Custodian's First Name (ONLY ONE) Middle Initial Last Name
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Minor's First Name (ONLY ONE) Middle Initial Last Name
_ _ _ _ _ - _ _ - _ _ _ _
_ _ - _ _ - _ _
Minor's State of Residence Minor's Date of Birth Minor's Social Security
Number
</TABLE>

<TABLE>
<S> <C> <C>
/ / TRUST, CORPORATION, PARTNERSHIP OR OTHER ENTITY (CORPORATE RESOLUTION REQUIRED)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Name of Trust, Corporation or Other Entity
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ - _ _ _ _
Trustee Name(s) or Type of Entity Date of Trust Agreement
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _
Name of Beneficiary (OPTIONAL) Taxpayer Identification Number
</TABLE>

2. YOUR ADDRESS
--------------------------------------------------------------------------------
Do you have any other identically registered Nicholas-Applegate accounts?
/ / Yes / / No

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Street Address or PO Box Number Apartment Number
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
City State Zip
_ _ _ - _ _ _ - _ _ _ _
Area Code Home Phone
_ _ _ - _ _ _ - _ _ _ _
Area Code Business Phone
CITIZENSHIP:
/ / U.S.
/ / Resident Alien
/ / Non-resident Alien
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Specify Country (if not U.S.)

3. YOUR INVESTMENT
--------------------------------------------------------------------------------
Please select your fund. See prospectus for investment minimums.

<TABLE>
<CAPTION>
CLASS AMOUNT
<S> <C> <C>
---------------------------------------------------------
Convertible I(1204) / / $
---------------------------------------------------------
Emerging Countries I(1205) / / $
---------------------------------------------------------
Global Blue Chip I(943) / / $
---------------------------------------------------------
Global Growth & Income I(970) / / $
---------------------------------------------------------
Global Health Care I(1256) / / $
---------------------------------------------------------
Global Technology I(437) / / $
---------------------------------------------------------
High Quality Bond I(1207) / / $
---------------------------------------------------------
High Yield Bond I(1206) / / $
---------------------------------------------------------
International Core Growth I(1208) / / $
---------------------------------------------------------
International Small Cap Growth I(1209) / / $
---------------------------------------------------------
Large Cap Growth I(1210) / / $
---------------------------------------------------------
Latin America I(787) / / $
---------------------------------------------------------
Mid Cap Growth I(1211) / / $
---------------------------------------------------------
Mini Cap Growth I(753) / / $
---------------------------------------------------------
Pacific Rim I(789) / / $
---------------------------------------------------------
Short Intermediate I(182) / / $
---------------------------------------------------------
Small Cap Growth I(1212) / / $
---------------------------------------------------------
Value I(1213) / / $
---------------------------------------------------------
Worldwide Growth I(1214) / / $
---------------------------------------------------------
Other $
---------------------------------------------------------
TOTAL $
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
</TABLE>

4. YOUR METHOD OF PAYMENT
--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
/ / BY CHECK: Payable to NICHOLAS-APPLEGATE
INSTITUTIONAL FUNDS / / BY EXCHANGE: Fund name from which
(Third party checks will NOT be accepted.) you are exchanging _ _ _ _ _ _ _ _ _ _ _ _ _
/ / BY WIRE: Please call 1-800-551-8043 for your
account number / / BY CONFIRM TRADE ORDER: Trade Order # _ _ _ _ _ _ _ _ _ _ _ _ _
</TABLE>

<PAGE>
5. YOUR DIVIDEND AND CAPITAL GAIN PAYMENT OPTIONS
--------------------------------------------------------------------------------
Distributions will automatically be reinvested in additional shares of your
Fund(s) unless you check the box(es) below.
DIVIDENDS (CHECK ONE) / / Reinvest / / Cash CAPITAL GAINS (CHECK
ONE) / / Reinvest / / Cash

/ / CROSS FUND REINVESTMENT+ (OPTIONAL)--Reinvest all dividends and capital
gains into an existing account in another Nicholas-Applegate Fund.

+MUST BE SAME ACCOUNT TYPE AND CLASS OF SHARES.

SERVICE OPTIONS
--------------------------------------------------------------------------------
6. TELEPHONE REDEMPTIONS AND EXCHANGES
--------------------------------------------------------------------------------
This allows you to use the telephone to redeem or exchange shares, unless you
check the box below. Redemptions will be made payable to the registered owner(s)
and mailed to the address of record. Maximum redemption by telephone is $50,000.

/ / I do not want telephone redemption privilege. / / I do not want telephone
exchange privilege.

7. SYSTEMATIC INVESTMENT--TO MY MUTUAL FUND ACCOUNT VIA ACH
--------------------------------------------------------------------------------
/ / Check this box to invest on a regular basis from your bank account. Please
complete "Checking Account Information" (SECTION 10).

<TABLE>
<S> <C> <C> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ $_ _ ,_ _ _ ._ _ _ _ _ _
Fund Name Amount Day* Monthly Quarterly (JAN/APRIL/JULY/OCT)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ $_ _ ,_ _ _ ._ _ _ _ _ _
Fund Name Amount Day* Monthly Quarterly (JAN/APRIL/JULY/OCT)
</TABLE>

*IF YOU DO NOT PROVIDE A DATE, THEN IT WILL DEFAULT TO THE 15TH OF THE MONTH.

8. SYSTEMATIC EXCHANGES--FROM ONE NICHOLAS-APPLEGATE MUTUAL FUND ACCOUNT TO
ANOTHER
--------------------------------------------------------------------------------
/ / Check this box to exchange on a regular basis from one Nicholas-Applegate
account to another.

<TABLE>
<S> <C> <C> <C> <C> <C>
FROM:
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ $_ _ ,_ _ _ ._ _ _ _ _ _
Fund Name Amount Day* Monthly Quarterly (JAN/APRIL/JULY/OCT)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Account Number (IF KNOWN)
TO:
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ $_ _ ,_ _ _ ._ _ _ _ _ _
Fund Name Amount Day* Monthly Quarterly (JAN/APRIL/JULY/OCT)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Account Number (IF KNOWN)
</TABLE>

*IF YOU DO NOT PROVIDE A DATE, THEN IT WILL DEFAULT TO THE 15TH OF THE MONTH.
<PAGE>
9. SYSTEMATIC WITHDRAWAL--FROM MY MUTUAL FUND ACCOUNT VIA ACH OR CHECK
--------------------------------------------------------------------------------
/ / Check this box to withdraw on a regular basis from my mutual fund account.
Please complete "Checking Account Information" below (SECTION 10):

<TABLE>
<S> <C> <C> <C> <C> <C>
BY ACH TO MY BANK ACCOUNT
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ $_ _ ,_ _ _ ._ _ _ _ _ _
Fund Name Amount Day* Monthly Quarterly (JAN/APRIL/JULY/OCT)
BY CHECK (DO NOT NEED TO COMPLETE
SECTION 10)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ $_ _ ,_ _ _ ._ _ _ _ _ _
1 5
Fund Name Amount Day* Monthly Quarterly (JAN/APRIL/JULY/OCT)
</TABLE>

SEND PROCEEDS TO:
/ / Address of record
/ / Special Payee (LIST BELOW)

<TABLE>
<S> <C> <C> <C> <C>
INDIVIDUAL OR JOINT ACCOUNT
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
First Name Middle Initial Last Name
</TABLE>

<TABLE>
<S> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
Address City State Zip
</TABLE>

*IF YOU DO NOT PROVIDE A DATE, THEN IT WILL DEFAULT TO THE 15TH OF THE MONTH.

10. CHECKING ACCOUNT INFORMATION--FOR ACH OR REDEMPTIONS BY WIRE
--------------------------------------------------------------------------------
Must be completed for Sections 7 and 9. PLEASE ATTACH A VOIDED CHECK OR DEPOSIT
SLIP.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Name of Institution

<TABLE>
<S> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
Address City State Zip
</TABLE>

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Bank ABA Routing Number Bank Account Number
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Any joint owner of your bank account who is NOT a joint owner of your fund
account(s) must sign above.

11. DUPLICATE STATEMENTS
--------------------------------------------------------------------------------
/ / I wish to have a duplicate statement sent to the interested party listed
below.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Name of Interested Party

<TABLE>
<S> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
Address City State Zip
</TABLE>

(SEE REVERSE)
<PAGE>
12. SIGNATURES
--------------------------------------------------------------------------------
BY SIGNING THIS NEW ACCOUNT FORM BELOW, I ASSURE THAT:

/ / I have received and read the prospectus for each of the Funds in which I am
investing, and I believe each investment is suitable for me. I understand
that the prospectus terms are incorporated into this New Account Form by
reference.
/ / I authorize Nicholas-Applegate Institutional Funds, their affiliates and
agents to act on any instructions believed to be genuine for any service
authorized on this form. I agree they will not be liable for any resulting
loss or expense.
/ / I am of legal age in my state and have the authority and legal capacity to
purchase mutual fund shares.
/ / I understand that neither the fund(s) nor the distributor,
Nicholas-Applegate Securities, is a bank and that fund shares are not
obligations of or guaranteed by any bank or insured by the FDIC.

/ / I understand that the Investment Adviser may pay a service fee of up to .25%
from its own resources to intermediaries for their efforts and commitment to
the Nicholas-Applegate Institutional Funds.

/ / I understand that mutual funds involve risks, including possible loss of
principal.

I CERTIFY, UNDER PENALTIES OF PERJURY, THAT:
1. The Social Security or Taxpayer Identification Number shown on this form is
correct. (If I fail to give the correct number or to sign this form,
Nicholas-Applegate Institutional Funds may reject or redeem my investment. I
may also be subject to any applicable IRS Backup Withholding for all
distributions and redemptions.)
2. / / I am NOT currently subject to IRS Backup Withholding because (a) I have
not been notified of it or (b) notification has been revoked.
/ / I am currently subject to IRS Backup Withholding.
I agree that neither Nicholas-Applegate Securities, the Trust, nor any of their
affiliates will be responsible for the authenticity of any instructions given
and shall be fully indemnified as to and held harmless from any and all direct
and indirect liabilities, losses, or costs resulting from acting upon such
transactions.

<TABLE>
<S> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ - _ _ _ _
Shareowner, Custodian, Trustee or Authorized Officer Date
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ - _ _ _ _
Joint Owner, Custodian, Trustee or Authorized Officer Date
</TABLE>
<PAGE>
F O R M O R E I N F O R M A T I O N

More information on these Funds is available
free upon request, including the following:

ANNUAL/SEMI-ANNUAL REPORT

Describes the Funds' performance, lists portfolio
holdings and contains a letter from the Funds'
Investment Adviser discussing recent market
conditions and investment strategies that
significantly affected the Funds' performance
during the last fiscal year.

STATEMENT OF ADDITIONAL
INFORMATION (SAI)

Provides more details about the Funds and their
policies. A current SAI is on file with the
Securities and Exchange Commission (SEC) and
is incorporated by reference (is legally considered
part of this prospectus).

TO OBTAIN INFORMATION:

BY TELEPHONE

Call 1-800-551-8643

BY MAIL Write to:

Nicholas-Applegate Institutional Funds
600 West Broadway, Suite 3000
San Diego, CA 92101

BY E-MAIL Send your request to www.nacm.com

ON THE INTERNET Text versions of the Funds'
documents can be viewed online or downloaded from:

SEC

http://www.sec.gov

You can also obtain copies by visiting the SEC's
Public Reference Room in Washington, DC
(phone 1-800-SEC-0330) or sending your request
and a duplicating fee to the SEC's Public
Reference Section, Washington, DC 20549-6009

N I C H O L A S-A P P L E G A T E-REGISTERED
TRADEMARK-

600 West Broadway
San Diego, CA 92101
800-551-8643
Nicholas-Applegate Securities, Distributor
Visit us at www.nacm.com

Nicholas-Applegate Institutional Funds

SEC file number: 333-71469

MFPRI0201

<PAGE>

[NICHOLAS APPLEGATE LOGO]

INSTITUTIONAL FUNDS PROSPECTUS

RETIREMENT SHARES

------------------------------------

GLOBAL FUNDS

International Core Growth
Emerging Countries

US FUNDS

Large Cap Growth
Mid Cap Growth
Small Cap Growth
Value

FIXED INCOME FUNDS

High Quality Bond
High Yield Bond

FEBRUARY 1, 2001

GLOBAL FUNDS
International Core Growth 1
Emerging Countries 3
US FUNDS
Large Cap Growth 5
Mid Cap Growth 7
Small Cap Growth 9
Value 11
FIXED INCOME FUNDS
High Quality Bond 13
High Yield Bond 15
--------------------------------------------------------------------------------

POLICIES AND INSTRUCTIONS FOR
OPENING, MAINTAINING AND
REDEEMING SHARES FROM AN ACCOUNT
IN ANY FUND.

SIMPLIFIED ACCOUNT INFORMATION
Opening an Account 17
Buying Shares 17
Exchanging Shares 18
Selling or Redeeming Shares 18
Signature Guarantees 19

YOUR ACCOUNT
Transaction Policies 20
Features and Account Policies 21

--------------------------------------------------------------------------------
FURTHER INFORMATION THAT APPLIES
TO THE FUNDS AS A GROUP.

ORGANIZATION AND MANAGEMENT
Investment Adviser 22
Investment Adviser Compensation 22
Expense Waivers 22
Multi Class Structure 23
Shareholder Services and
Distribution Plans 23
Portfolio Turnover 23
Portfolio Trades 23
Portfolio Management 23

--------------------------------------------------------------------------------

PRINCIPAL STRATEGIES, RISKS AND OTHER
INFORMATION 28

FINANCIAL HIGHLIGHTS 34

PRIOR PERFORMANCE OF CERTAIN FUNDS 36

FOR MORE INFORMATION Back Cover
<PAGE>
1

INTERNATIONAL CORE GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests primarily in large capitalized companies ("large cap stocks")
located in over 50 countries worldwide. In the opinion of the Fund's Investment
Adviser large cap stocks are those whose stock market capitalizations are
predominantly in the top 75% of publicly traded companies as measured by stock
market capitalizations in each country. Generally for investments in U.S. stocks
this means those with market capitalizations greater than U.S. $5 billion
measured at time of purchase. In foreign markets the range for large cap stocks
will generally be lower than the U.S. and will vary. The market capitalization
ranges of the large cap stocks in which the Fund invests may fluctuate greatly
due to changing currency values, differences in the size of the respective
economies, and movements in the local stock markets.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective.

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets. The Investment Adviser expects a high portfolio
turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 28.
<PAGE>
2

INTERNATIONAL CORE GROWTH FUND

[GRAPHIC]PAST PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (12/27/96)
<S> <C> <C>
--------------------------------------------------------------
FUND
MSCI EAFE
</TABLE>

THE FUND COMMENCED INVESTMENT OPERATIONS ON DECEMBER 27, 1996, WITH THE OFFERING
OF CLASS I SHARES AND SUBSEQUENTLY OFFERED CLASS R SHARES ON MAY 21, 1999. THE
PERFORMANCE SHOWN ABOVE INCLUDES THE PERFORMANCE OF THE FUND'S CLASS I SHARES
FOR PERIODS PRIOR TO THE OFFERING OF CLASS R SHARES. THIS BLENDED CLASS R AND
CLASS I SHARE PERFORMANCE HAS BEEN ADJUSTED TO TAKE INTO ACCOUNT THE EXPENSES
APPLICABLE TO CLASS R SHARES, RATHER THAN THE LOWER EXPENSES APPLICABLE TO
CLASS I SHARES. THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN
LOWER IF THE INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S
EXPENSES. SEE "EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.00%
--------------------------------------------------------------------------------------
Distribution (12b-1) fee+ 0.00%
--------------------------------------------------------------------------------------
Other expenses (before waivers) 0.65%
--------------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.65%
--------------------------------------------------------------------------------------
Waiver of fund expenses 0.00%
--------------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.65%

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$173 $546 $958 $2,180
</TABLE>
<PAGE>
3

EMERGING COUNTRIES FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY
The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests primarily in stocks of companies located in countries with
emerging securities markets--that is, countries with securities markets which
are, in the opinion of the Investment Adviser, less sophisticated than more
developed markets in terms of participation, analyst coverage, liquidity and
regulation. These are markets which have yet to reach a level of maturity
associated with developed foreign stock markets, especially in terms of
participation by investors.

The Investment Adviser seeks companies in the early stages of development
believed to be undergoing a basic change in operations. The Investment Adviser
selects portfolio securities from an investment universe of approximately 6,000
foreign companies in over 35 emerging markets.

The Investment Adviser allocates the Fund's assets among securities of countries
that are expected to provide the best opportunities for meeting the Fund's
investment objective. The Fund may also lend portfolio securities on a
short-term or long-term basis, up to 30% of its total assets. The Investment
Adviser expects a high portfolio turnover rate of 200% or more.

[GRAPHIC]PRINCIPAL INVESTMENTS

The Fund normally invests 75% of its assets in equity securities. Normally, at
least 65% of its assets will be invested in companies located in at least three
foreign countries with emerging securities markets. The Fund may invest up to
35% of its assets in U.S. companies.

[GRAPHIC]PRIMARY RISKS
Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / FOREIGN SECURITIES RISKS--The prices of foreign securities may be further
affected by other factors, including:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 28.
<PAGE>
4

EMERGING COUNTRIES FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (11/28/94)
<S> <C> <C>
-------------------------------------------------------------------
FUND
MSCI EMF FREE
</TABLE>

INDEX: THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX
(MSCI EMF) IS 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. THE INDEX IS UNMANAGED.
THE FUND COMMENCED INVESTMENT OPERATIONS ON NOVEMBER 28, 1994, WITH THE OFFERING
OF CLASS I SHARES AND SUBSEQUENTLY OFFERED CLASS R SHARES ON MAY 21, 1999. THE
PERFORMANCE SHOWN ABOVE INCLUDES THE PERFORMANCE OF THE FUND'S CLASS I SHARES
FOR PERIODS PRIOR TO THE OFFERING OF CLASS R SHARES. THIS BLENDED CLASS R AND
CLASS I SHARE PERFORMANCE HAS BEEN ADJUSTED TO TAKE INTO ACCOUNT THE EXPENSES
APPLICABLE TO CLASS R SHARES, RATHER THAN THE LOWER EXPENSES APPLICABLE TO
CLASS I SHARES. THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN
LOWER IF THE INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S
EXPENSES. SEE "EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.

[GRAPHIC]INVESTOR FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.25%
---------------------------------------------------------------------------------
Distribution (12b-1) fee+ 0.00%
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.74%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.99%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.05%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.94%
</TABLE>

+ Class R Shares have adopted a 12b-1 Plan that may pay a fee to the Distributor
at an annual rate of up to 0.25% of their average daily net assets. The Fund
has no current intention of activating the Plan and will give shareholders
60-days notice prior to activation of the Plan. See "Shareholder Services and
Distribution Plans."
EXPENSE WAIVERS: Through the fiscal year ending March 31, 2001, the Investment
Adviser has contractually agreed to waive or defer its management fees and to
pay other operating expenses otherwise payable by the Fund, subject to possible
later reimbursement during a three year period. The Investment Adviser may not
amend the fee waiver agreement without the consent of the Fund. See "Expense
Waivers" on page 22.
EXAMPLE:
THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$204 $653 $1,149 $2,623
</TABLE>
<PAGE>
5

LARGE CAP GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks long-term capital appreciation. In pursuing this goal, the Fund
invests primarily in stocks from a universe of U.S. companies with large market
capitalizations. Generally, large capitalization companies are those with market
capitalizations corresponding to the upper 90% of the Russell 1000 Growth Index
as measured at the time of purchase. As of June 30, 2000 the upper 90% of the
Russell 1000 Growth Index included companies with market capitalizations of
$8.3 billion and above. Capitalization of companies held by the Fund may
fluctuate greatly as the market moves upwards or downwards.

The Investment Adviser expects a high portfolio turnover rate of 200% or more.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 65% of its total assets in large
capitalization equity securities.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

To the extent the Fund is overweighted in certain market sectors compared to
the Russell 1000 Growth Index, the Fund may be more volatile than the Index.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

For further explanation, see "Principal Strategies, Risks and Other Information"
starting on page 28.

[GRAPHIC]PAST PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:
<PAGE>
6

LARGE CAP GROWTH FUND

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)(1)
<S> <C>
Management fee 0.75%
---------------------------------------------------------------------------------
Distribution (12b-1) fee+ 0.00%
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.67%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.42%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.15%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.27%
</TABLE>

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$133 $454 $808 $1,859
</TABLE>
<PAGE>
7

MID CAP GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum long-term capital appreciation. In pursuing this goal,
the Fund invests in stocks from a universe of U.S. companies with midsize market
capitalizations. Generally, midsize companies are those with market
capitalizations corresponding to the middle 90% of the Russell MidCap Growth
Index as measured at the time of purchase. As of June 30, 2000 the middle 90% of
the Russell MidCap Growth Index included companies with market capitalizations
between $2.0 billion and $20.0 billion. Capitalization of companies held by the
Fund may fluctuate greatly as the market moves upwards or downwards and the
Investment Adviser may continue to hold an investment for further capital gain
opportunities even if the company is no longer "midcap."

The Investment Adviser expects a high portfolio turnover rate of 200% or more.
The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 75% of its total assets in common stocks of
U.S. mid capitalization companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / SMALLER ISSUERS--Investments in smaller-capitalization companies entail
greater risk because these companies may have unproven track records,
limited product or service base, limited access to capital and may be more
likely to fail than larger more established companies. Information regarding
smaller companies may be less available, incomplete or inaccurate, and their
securities may trade less frequently than those of larger companies.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 28.

[GRAPHIC]PAST PERFORMANCE

MID CAP GROWTH FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

INDEX: THE RUSSELL MIDCAP GROWTH INDEX MEASURES THE PERFORMANCE
OF THOSE COMPANIES AMONG THE 800 SMALLEST IN THE RUSSELL 1000
INDEX WITH HIGHER THAN AVERAGE PRICE-TO-BOOK RATIOS AND
FORECASTED GROWTH. THE RUSSELL MIDCAP GROWTH INDEX IS CONSIDERED
GENERALLY REPRESENTATIVE OF THE U.S. MARKET FOR MID CAP STOCKS.
THE INDEX IS UNMANAGED.

THE FUND COMMENCED INVESTMENT OPERATIONS ON APRIL 19, 1993, WITH
THE OFFERING OF CLASS I SHARES AND SUBSEQUENTLY OFFERED CLASS R
SHARES ON MAY 21, 1999. THE PERFORMANCE SHOWN ABOVE INCLUDES THE
PERFORMANCE OF THE FUND'S CLASS I SHARES FOR PERIODS PRIOR TO
THE OFFERING OF CLASS R SHARES. THIS BLENDED CLASS R AND
CLASS I SHARE PERFORMANCE HAS BEEN ADJUSTED TO TAKE INTO ACCOUNT
THE EXPENSES APPLICABLE TO CLASS R SHARES, RATHER THAN THE LOWER
EXPENSES APPLICABLE TO CLASS I SHARES.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN
LOWER IF THE INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE
FUND'S EXPENSES. SEE "EXPENSE WAIVERS" FOR ADDITIONAL
INFORMATION".
</TABLE>

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.75%
---------------------------------------------------------------------------------
Distribution (12b-1) fee+ 0.00%
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.48%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.23%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.21%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.02%

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$107 $385 $692 $1,603
</TABLE>
<PAGE>
9

SMALL CAP GROWTH FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund may also lend portfolio securities on a short-term or long-term basis,
up to 30% of its total assets.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 75% of its total assets in common stocks of
small capitalization U.S. companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

See "Principal Strategies, Risks and Other Information" starting on page 28.

[GRAPHIC]PAST PERFORMANCE

The following two tables show the Fund's annual returns and its long-term
performance, The graph shows how the Fund's total return has varied from year to
year, while the table shows performance over time. This information provides
some indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns compare with those of a broad measure of market performance.

SMALL CAP GROWTH FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

INDEX: 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 IN AN UNMANAGED INDEX AND IS A WIDELY REGARDED
SMALL-CAP INDEX OF THE 2,000 SMALLEST SECURITIES IN THE
RUSSELL 3000 INDEX WHICH COMPRISES THE 3,000 LARGEST U.S.
SECURITIES AS DETERMINED BY TOTAL MARKET CAPITALIZATION.

THE FUND COMMENCED INVESTMENT OPERATIONS ON OCTOBER 1, 1993, WITH
THE OFFERING OF CLASS I SHARES AND SUBSEQUENTLY OFFERED CLASS R
SHARES ON MAY 21, 1999. THE PERFORMANCE SHOWN ABOVE INCLUDES THE
PERFORMANCE OF THE FUND'S CLASS I SHARES FOR PERIODS PRIOR TO THE
OFFERING OF CLASS R SHARES. THIS BLENDED CLASS R AND CLASS I SHARE
PERFORMANCE HAS BEEN ADJUSTED TO TAKE INTO ACCOUNT THE EXPENSES
APPLICABLE TO CLASS R SHARES, RATHER THAN THE LOWER EXPENSES
APPLICABLE TO CLASS I SHARES.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER
IF THE INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S
EXPENSES. SEE "EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.
</TABLE>

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 1.00%
---------------------------------------------------------------------------------
Distribution (12b-1) fee+ 0.00%
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.62%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.62%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.20%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.42%

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$149 $516 $920 $2,119
</TABLE>
<PAGE>
11

VALUE FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 80% of its total assets in common stocks of
large U.S. companies.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 28.

[GRAPHIC]PAST PERFORMANCE

The following two tables show the Fund's annual returns and its long-term
performance. The graph shows how the Fund's total return has varied from year to
year, while the table shows performance over time. This information provides
some indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns compare with those of a broad measure of market performance.

VALUE FUND

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (4/30/96)
<S> <C> <C>
--------------------------------------------------------------
FUND
S&P 500

INDEX: THE STANDARD AND POOR'S 500 INDEX (S&P 500) IS AN
UNMANAGED INDEX COMPRISED OF 500 U.S. INDUSTRIAL,
TRANSPORTATION, UTILITY AND FINANCIAL COMPANIES AND IS
CONSIDERED TO BE GENERALLY REPRESENTATIVE OF THE U.S. STOCK
MARKET.

THE FUND COMMENCED INVESTMENT OPERATIONS ON APRIL 30, 1996,
WITH THE OFFERING OF CLASS I SHARES AND SUBSEQUENTLY OFFERED
CLASS R SHARES ON MAY 21, 1999. THE PERFORMANCE SHOWN ABOVE
INCLUDES THE PERFORMANCE OF THE FUND'S CLASS I SHARES FOR
PERIODS PRIOR TO THE OFFERING OF CLASS R SHARES. THIS BLENDED
CLASS R AND CLASS I SHARE PERFORMANCE HAS BEEN ADJUSTED TO
TAKE INTO ACCOUNT THE EXPENSES APPLICABLE TO CLASS R SHARES,
RATHER THAN THE LOWER EXPENSES APPLICABLE TO CLASS I SHARES.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.75%
----------------------------------------------------------------------------
Distribution (12b-1) fee+ 0.00%
----------------------------------------------------------------------------
Other expenses (before waivers) 0.77%
----------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.52%
----------------------------------------------------------------------------
Waiver of fund expenses (0.26%)
----------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.26%

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD SHOWN, AND BEFORE
WAIVERS FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR
LOWER, BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$132 $476 $855 $1,982
</TABLE>
<PAGE>
13

HIGH QUALITY BOND FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks maximum total return. In pursuing this goal, the Fund invests
primarily in high quality bonds.

The Fund's Investment Adviser seeks to outperform the total return of the Lehman
Aggregate Bond Index through an actively managed diversified portfolio of debt
securities.

[GRAPHIC]PRINCIPAL INVESTMENTS

The Fund may invest up to 20% of its total assets in debt securities rated below
investment grade ("high risk bonds"). For a description of these ratings, see
"Bond Quality" beginning on page 26. The Fund may also use options, futures
contracts and interest rate and currency swaps as hedging techniques.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / MATURITY--Generally, longer-term securities are more susceptible to changes
in value as a result of interest-rate changes than are shorter-term
securities.

/ / HIGH RISK BONDS--Generally lower grade securities offer higher yields and
have more risk and volatility than higher-rated securities because of
reduced creditworthiness and greater chance of default by the issuer.
Securities rated below investment grade and other bonds may be subject to
some of the same risks as those inherent in below investment grade debt.
Accordingly, these high risk bonds and bonds rated in the lowest category of
investment grade are considered predominantly speculative and are subject to
greater volatility and risk of loss than investment grade securities,
particularly in deteriorating economic periods.

/ / PREPAYMENT RISK--Prepayment risk is commonly associated with pooled debt
securities, such as mortgage-backed securities and asset-backed securities,
but may affect other debt securities as well. When the underlying debt
obligations are prepaid head of schedule, the return on the security will be
lower than expected. Prepayment rates usually increase when interest rates
are falling.

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

See "Principal Strategies, Risks and Other Information" starting on page 28.
<PAGE>
14

HIGH QUALITY BOND FUND

[GRAPHIC]PAST PERFORMANCE

The two tables show the Fund's annual returns and its long-term performance. The
graph shows how the Fund's total return has varied from year to year, while the
table shows performance over time. This information provides some indication of
the risks of investing in the Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual returns compare
with those of a broad measure of market performance.
Average annual return is determined by taking the Fund's performance over a
given period and expressing it as an average annual rate. All figures assume
dividend reinvestment. Past performance does not indicate future results.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/00
SINCE INCEPTION
1 YEAR (8/31/95)
<S> <C> <C>
--------------------------------------------------------------
FUND
LEHMAN AGGREGATE
BOND

INDEX: THE LEHMAN BROTHERS AGGREGATE BOND INDEX (LEHMAN
AGGREGATE BOND) IS COMPOSED OF SECURITIES FROM LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX, MORTGAGE-BACKED SECURITIES
INDEX, AND ASSET-BACKED SECURITIES INDEX. THE INDEX IS
UNMANAGED.

THE FUND COMMENCED INVESTMENT OPERATIONS ON AUGUST 31, 1995,
WITH THE OFFERING OF CLASS I SHARES AND SUBSEQUENTLY OFFERED
CLASS R SHARES ON MAY 21, 1999. THE PERFORMANCE SHOWN ABOVE
INCLUDES THE PERFORMANCE OF THE FUND'S CLASS I SHARES FOR
PERIODS PRIOR TO THE OFFERING OF CLASS R SHARES. THIS BLENDED
CLASS R AND CLASS I SHARE PERFORMANCE HAS BEEN ADJUSTED TO
TAKE INTO ACCOUNT THE EXPENSES APPLICABLE TO CLASS R SHARES,
RATHER THAN THE LOWER EXPENSES APPLICABLE TO CLASS I SHARES.

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.45%
---------------------------------------------------------------------------------
Distribution (12b-1) fee+ 0.00%
---------------------------------------------------------------------------------
Other expenses (before waivers) 0.94%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.39%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.69%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 0.70%

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD SHOWN, AND BEFORE
WAIVERS FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR
LOWER, BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
<S> <C> <C> <C>
$74 $388 $734 $1,763
</TABLE>
<PAGE>
15

HIGH YIELD BOND FUND

[GRAPHIC]GOAL AND PRINCIPAL STRATEGY

The Fund seeks a high level of current income and capital growth. In pursuing
its goal, the Fund invests primarily in lower-rated debt securities.

[GRAPHIC]PRINCIPAL INVESTMENTS

Normally, the Fund invests at least 65% of its total assets in high risk bonds
debt and convertible securities rated below investment grade, or of comparable
quality if unrated. There is no limit on either the portfolio maturity or the
acceptable rating of securities bought by the Fund. For a description of these
ratings, see "Bond Quality" beginning on page 31. Securities may bear rates that
are fixed, variable or floating.

[GRAPHIC]PRIMARY RISKS

Because you could lose money by investing in the Fund, be sure to read all risk
disclosures carefully before investing. The Fund is primarily subject to the
following risks:

/ / ACTIVE PORTFOLIO TRADING--A high portfolio turnover rate is likely to
generate more taxable short-term gains for shareholders and may have an
adverse effect on the Fund's performance.

For further explanation, see "Principal Strategies, Risks and Other Information"
starting on page 28.

[GRAPHIC]PAST PERFORMANCE

HIGH YIELD BOND FUND

Fund's performance from year to year and by showing how the Fund's average
annual returns compare with those of a broad measure of market performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

BEST QUARTER: WORST QUARTER:

THE FUND COMMENCED INVESTMENT OPERATIONS ON JULY 31, 1996, WITH THE
OFFERING OF CLASS I SHARES AND SUBSEQUENTLY OFFERED CLASS R SHARES
ON JULY 24, 2000. THE PERFORMANCE SHOWN ABOVE INCLUDES THE
PERFORMANCE OF THE FUND'S CLASS I SHARES FOR PERIODS PRIOR TO THE
OFFERING OF CLASS R SHARES. THIS BLENDED CLASS R AND CLASS I SHARE
PERFORMANCE HAS BEEN ADJUSTED TO TAKE INTO ACCOUNT THE EXPENSES
APPLICABLE TO CLASS R SHARES, RATHER THAN THE LOWER EXPENSES
APPLICABLE TO CLASS I SHARES.

INDEX: THE CREDIT SUISSE FIRST BOSTON HIGH YIELD BOND INDEX
INCLUDES OVER 180 U.S. DOMESTIC ISSUERS WITH AND AVERAGE MATURITY
RANGE OF SEVEN TO TEN YEARS AND WITH A MINIMUM ISSUE SIZE OF
$100 MILLION. THE INDEX IS UNMANAGED AND CONSIDERED GENERALLY
REPRESENTATIVE OF THE U.S. MARKET FOR HIGH YIELD BONDS.

THE RETURNS IN BOTH THE CHART AND THE TABLE WOULD HAVE BEEN LOWER
IF THE INVESTMENT ADVISER HAD NOT REDUCED A PORTION OF THE FUND'S
EXPENSES. SEE "EXPENSE WAIVERS" FOR ADDITIONAL INFORMATION.
</TABLE>

[GRAPHIC]INVESTOR FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS) (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<S> <C>
Management fee 0.60%
---------------------------------------------------------------------------------
Distribution (12b-1) fee+ 0.00%
---------------------------------------------------------------------------------
Other expenses (before waivers)++ 0.81%
---------------------------------------------------------------------------------
Total annual fund operating expenses (before waivers) 1.41%
---------------------------------------------------------------------------------
Waiver of fund expenses (0.41%)
---------------------------------------------------------------------------------
TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS) 1.00%

++ Other expenses are based on estimated amounts for the current fiscal year
ending March 2001.

EXAMPLE:

THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES
THAT YOU INVEST $10,000 IN THE FUND'S SHARES FOR THE TIME PERIODS INDICATED AND
THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO
ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES ARE AFTER WAIVERS FOR THE 1 YEAR PERIOD, AND BEFORE WAIVERS
FOR THE OTHER PERIODS SHOWN. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER,
BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:

<TABLE>
<CAPTION>
Year 1 Year 3
<S> <C>
$111 $181
</TABLE>
<PAGE>
17

SIMPLIFIED ACCOUNT INFORMATION

<TABLE>
<CAPTION>
OPENING AN ACCOUNT
FOR THIS TYPE OF ACCOUNT REGULAR INVESTMENT PARTICIPANTS IN QUALIFIED RETIREMENT PLANS
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
This is the minimum
initial investment $250,000 Contact your plan administrator or sponsor.
---------------------------------------------------------------------------------------------------------------------------------
Use this type of
application New Account Form or IRA Application
---------------------------------------------------------------------------------------------------------------------------------
Before completing Each Fund offers a variety of features, which are described in the "Your Account" section of this
the application prospectus. Please read this section before completing the application.
---------------------------------------------------------------------------------------------------------------------------------
Completing the If you need assistance, contact your financial representative, or call us at
application (800) 551-8043.
---------------------------------------------------------------------------------------------------------------------------------
If you are a participant
in Make purchases through your plan administrator or sponsor, who is responsible for transmitting orders.
a qualified retirement
plan
---------------------------------------------------------------------------------------------------------------------------------
Mail application and check, payable to: NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS,
If you are sending money PO BOX 8326, BOSTON, MA 02266-8326. Send private courier or overnight delivery service to: Boston
by CHECK Financial Services, c/o Nicholas-Applegate, 66 Brocks Drive, Braintree, MA 02184. The Trust will not
accept third-party checks.
---------------------------------------------------------------------------------------------------------------------------------
Please read the bank wire or ACH section under the "Buying Shares" section below. You will need to
If you are sending money obtain an account number with the Trust by sending a completed application to: NICHOLAS-APPLEGATE
by BANK WIRE or ACH INSTITUTIONAL FUNDS, PO BOX 8326, BOSTON, MA 02266-8326. To receive your account number, contact your
financial representative or call us at (800) 551-8043.
</TABLE>

<TABLE>
<CAPTION>
BUYING SHARES
FOR THIS TYPE OF ACCOUNT REGULAR INVESTMENT PARTICIPANTS IN QUALIFIED RETIREMENT PLANS
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
The Trust is generally open on days that the New York Stock Exchange is open.
The price you will All transactions received in good order before the market closes
receive (normally 4:00 p.m. Eastern time) receive that day's NAV.
---------------------------------------------------------------------------------------------------------------------------------
If you are a participant
in Make purchases through your plan administrator or sponsor,
a qualified retirement who is responsible for transmitting orders.
plan
---------------------------------------------------------------------------------------------------------------------------------
Instruct your bank to wire the amount you wish to invest to:
STATE STREET BANK & TRUST CO.--ABA #011000028
If you are sending money DDA #9904-645-0
by BANK WIRE STATE STREET BOS, ATTN: MUTUAL FUNDS
CREDIT: NICHOLAS-APPLEGATE [FUND NAME], [YOUR NAME], [ACCOUNT NAME OR NUMBER]
---------------------------------------------------------------------------------------------------------------------------------
Call your bank to ensure (1) that your bank supports ACH, and (2) this feature is active on your bank
If you are sending money account. To establish this option, either complete the appropriate sections when opening an account,
by ACH contact your financial representative, or call us at (800) 551-8043 for further information. To
initiate an ACH purchase, call the Trust at (800) 551-8043.
</TABLE>

<PAGE>
18

SIMPLIFIED ACCOUNT INFORMATION

<TABLE>
<CAPTION>
EXCHANGING SHARES
FOR THIS TYPE OF ACCOUNT REGULAR INVESTMENT PARTICIPANTS IN QUALIFIED RETIREMENT PLANS
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
This is the minimum
exchange amount to open a $250,000 Contact your plan administrator or sponsor.
new account
---------------------------------------------------------------------------------------------------------------------------------
The Trust is open on days that the New York Stock Exchange is open.
All transactions received in good order before the market closes
The price you will (normally 4:00 p.m. Eastern time) receive that day's NAV. Redemption proceeds normally are wired or
receive mailed within one business day after receiving a request in proper form. Payment may be delayed up to
seven days.
---------------------------------------------------------------------------------------------------------------------------------
If you are a participant
in Make exchanges through your plan administrator or sponsor,
a qualified retirement who is responsible for transmitting orders.
plan
---------------------------------------------------------------------------------------------------------------------------------
The exchange must be to an account with the same registration. If you intend to keep money in the Fund
Things you should know you are exchanging from, make sure that you leave an amount equal to or greater than the Fund's
minimum account size (see the "Opening an Account" section). To protect other investors, the Trust may
limit the number of exchanges you can make.
---------------------------------------------------------------------------------------------------------------------------------
Contact your financial representative, or call us at (800) 551-8043. The Trust will accept a request
How to request an by phone if this feature was previously established on your account. See the "Your Account" section
exchange by PHONE for further information.
---------------------------------------------------------------------------------------------------------------------------------
Please put your exchange request in writing, including: the name on the account, the name of the Fund
How to request an and the account number you are exchanging from, the shares or dollar amount you wish to exchange, and
exchange by MAIL the Fund you wish to exchange to. Mail this request to: NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS, PO BOX
8326, BOSTON, MA 02266-8326.
</TABLE>

<PAGE>
19

<TABLE>
<CAPTION>
SELLING OR REDEEMING SHARES
IN WRITING BY PHONE
<S> <C> <C>
-----------------------------------------------------------------------------
The Trust is open on days that the New York Stock Exchange is open.
The price you will All transactions received in good order before the market closes
receive (normally 4:00 p.m. Eastern time) receive that day's NAV.
---------------------------------------------------------------------------------------------------------------------------------
If you are a participant
in Make sales through your plan administrator or
a qualified retirement sponsor, who is responsible for transmitting orders.
plan
---------------------------------------------------------------------------------------------------------------------------------
Please put your request in writing, including: the
name of the account owners, account number and
Fund you are redeeming from, and the share or
dollar amount you wish to sell, signed by all Contact your financial representative, or call us
If you want to receive account owners. Mail this request to: at (800) 551-8043. The proceeds will be sent to
your monies by BANK WIRE NICHOLAS-APPLEGATE INSTITUTIONAL FUNDS, PO BOX the existing bank wire address listed on the
8326, BOSTON, MA 02266-8326. The proceeds will be account.
sent to the existing bank wire address listed on
the account.
---------------------------------------------------------------------------------------------------------------------------------
Contact your financial representative, or call us
at (800) 551-8043. The proceeds will be sent in
If you want to receive accordance with the existing ACH instructions on
your monies by ACH Please call us at (800) 551-8043. the account and will generally be received at your
bank two business days after your request is
received.
---------------------------------------------------------------------------------------------------------------------------------
The Trust intends to pay in cash for all shares of a Fund redeemed, but the Trust reserves the right
to make payment wholly or partly in shares of readily marketable investment securities. When the trust
makes a redemption in kind, a shareholder may incur brokerage costs in converting such securities to
cash and assumes the market risk during the time required to convert the securities to cash. However,
Redemption in Kind the Trust has elected to be governed by the provisions of Rule 18f-1 under the Investment Company Act,
pursuant to which it is obligated to pay in cash all requests for redemptions by any shareholder of
record, limited in amount with respect to each shareholder during any 90-day period to the lesser of
$250,000 or 1% of the net asset value of the Trust at the beginning of such period.
</TABLE>

<TABLE>
<CAPTION>
SIGNATURE GUARANTEES
<S> <C>
A signature guarantee from a financial institution is required to verify the authenticity of an
A definition individual's signature. It can usually be obtained from a broker, commercial or savings bank, or credit
union.
-----------------------------------------------------------------------------------------------------------------------------------
A signature guarantee is needed when making a written request for the following reasons:
1. When selling more than $50,000 worth of shares;
2. When you want a check or bank wire sent to a name or address
When you need one that is not currently listed on the account;
3. To sell shares from an account controlled by a corporation,
partnership, trust or fiduciary; or
4. If your address was changed within the last 60 days.
</TABLE>

<PAGE>
20

YOUR ACCOUNT

[GRAPHIC]TRANSACTION POLICIES

PURCHASE OF SHARES. Shares are offered at net asset value without a sales
charge. The minimum initial investment for opening an account for single and
omnibus accounts is $250,000, and the minimum subsequent investment is $10,000.
The minimum investment may be waived for purchases of shares made by current or
retired directors, trustees, partners, officers and employees of the Trust, the
Distributor, the Investment Adviser and its general partner, certain family
members of the above persons, and trusts or plans primarily for such persons,
or, at the discretion of the Distributor.

PURCHASE OF SHARES JUST BEFORE RECORD DATE. If you buy shares of the Funds just
before the record date for a distribution (the date that determines who receives
the distribution), the Fund will pay that distribution to you. When a
distribution is paid out the value of each share of the Fund decreases by the
amount of the distribution to reflect the payout. The distribution you receive
makes up the decrease in share value. As explained under the Taxability of
Dividends section following, the distribution may be subject to income or
capital gains taxes. The timing of your purchase means that part of your
investment came back to you as taxable income.

EXCHANGES. On any business day you may exchange all or a portion of your shares
for shares of any other available Fund of the same share class. To protect the
interests of other investors in a Fund, the Trust may cancel the exchange
privileges of any parties that, in the opinion of the Investment Adviser, are
using market-timing strategies that adversely affect the Fund. Guidelines for
exchanges are available from the Distributor upon request. The Trust may also
refuse any exchange order.

At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing.

CERTIFICATED SHARES. Shares of the Trust are electronically recorded. The Trust
does not normally issue certificated shares.

Fund will not release the proceeds to you until your purchase payment clears.
This may take up to fifteen calendar days after the purchase.

[GRAPHIC]FEATURES AND ACCOUNT POLICIES

ACCOUNT STATEMENTS. Shareholders will receive periodic statements reporting all
account activity, including systematic transactions, dividends and capital gains
paid.

DIVIDENDS. The Funds generally distribute most or all of their net earnings in
the form of dividends. Each Fund pays dividends of net investment income as
follows:

<TABLE>
<CAPTION>
ANNUALLY QUARTERLY MONTHLY
<S> <C> <C>
International Core Growth High Quality Bond High Yield Bond
Emerging Countries
Large Cap Growth
Mid Cap Growth
Small Cap Growth
Value
</TABLE>

Any net capital gains are distributed annually.

The tax information statement that is mailed to you details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.

Federal tax law requires you to provide the Fund with your taxpayer
identification number and certifications as to your tax status. If you fail to
do this, or if you are otherwise subject to backup withholding, the Fund will
withhold and pay to the U.S. Treasury 31% of your distributions and sale
proceeds. Dividends of net investment income and short-term capital gains paid
to a nonresident foreign shareholder generally will be subject to a
U.S. withholding tax of up to 30%. This rate may be lower, depending on any tax
treaty the U.S. may have with the shareholder's country.

SMALL ACCOUNTS. If you draw down a non-retirement account so that its total
value is less than the Fund minimum (see "Buying Shares" on page 15), you may be
asked to purchase more shares within 60 days. If you do not take action, the
Fund may close out your account and mail you the proceeds. Your account will not
be closed if its drop in value is due to Fund performance.

ORGANIZATION AND MANAGEMENT

THE INVESTMENT ADVISER

Investment decisions for the Funds are made by the Fund's Investment Adviser,
Nicholas-Applegate Capital Management (the "Investment Adviser"), subject to
direction by the Trustees. The Investment Adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the Fund.

Criterion Investment Management LLC ("Criterion") serves as sub-adviser to the
High Quality Bond Fund. Organized in April 1999, Criterion is registered under
the Investment Advisers Act of 1940. Its principal address is 1990 Post Oak
Boulevard, Houston, Texas 77056. Criterion previously was the fixed income asset
management division of the Investment Adviser and now provides investment advice
to the Fund and approximately 80 other separate institutional clients with
approximately $9 billion in assets under management.

As compensation for Criterion's services under the subadvisory agreement, the
Investment Adviser pays Criterion a monthly subadvisory fee at an annual rate of
.25% of the High Quality Bond Fund's average daily net assets.

The Emerging Countries Fund invests in the Indian stock markets through
Nicholas-Applegate Southeast Asia Fund, Ltd a subsidiary company of each of the
Funds and incorporated under the laws of Mauritius (the "Mauritius Subsidiary").
The Mauritius Subsidiary is entitled to benefit from the double taxation treaty
between India and Mauritius and invest in India in what the Investment Adviser
considers to be the most efficient way currently available. The Fund and
Mauritius Subsidiary will be treated as one entity, and their holdings of
investments are aggregated, for the purposes of applying the investment and
borrowing restrictions. All investments made by the Mauritius Subsidiary will
form part of the assets of the Fund and will be disclosed in the schedule of
investments of the Fund.

INVESTMENT ADVISER COMPENSATION

Large Cap Growth 0.75%
Value Fund 0.75%
Small Cap Growth Fund 1.00%
Emerging Countries Fund 1.25%
High Yield Bond Fund 0.60%

The International Core Growth Fund pays monthly at the following annual rates:

1.00% on the first $500 million
0.90% on the next $500 million
0.85% on net assets in excess of $1 billion

The High Quality Bond Fund pays monthly at the following annual rates:

0.45% on the first $500 million
0.40% on the next $250 million
0.35% on net assets in excess of $750 million

The Mid Cap Growth Fund pays monthly at the following annual rates:

0.75% of the first $500 million
0.675% on the next $500 million
0.65% on net assets in excess of $1 billion

EXPENSE WAIVERS

The Investment Adviser has agreed to waive its fees and absorb other operating
expenses of the Funds so that total operating expenses, excluding taxes,
interest, brokerage, the expenses incurred from the creation and operation of
the Mauritius entity and extraordinary expenses, do not exceed the percentages,
as set forth below, for the Class R shares of each Fund through March 31, 2001.
In subsequent years, overall operating expenses for each Fund will not fall
below the applicable percentage limitation until the Investment Adviser has been
fully reimbursed for fees foregone and expenses paid under the expense
limitation agreement, as each Fund will reimburse the Investment Adviser in
subsequent years when operating expenses (before reimbursement) are less than
the applicable percentage limitation.

Small Cap Growth Fund 1.42%
Mid Cap Growth Fund 1.25%
Large Cap Growth Fund 1.25%
Value Fund 1.25%
Emerging Countries Fund 1.90%
International Core Growth Fund 1.65%
High Quality Bond Fund 0.70%
High Yield Bond Fund 1.00%
<PAGE>
23

MULTI CLASS STRUCTURE

The Funds also offer Class I Shares, which have different sales charges and
other expenses that may affect their performance. You can obtain more
information about these other share classes from the Distributor.

SHAREHOLDER SERVICES AND
DISTRIBUTION PLANS

Each of the Funds has entered into a Shareholder Services Agreement with the
Distributor under which each Fund will reimburse the Distributor up to 0.25% of
the average daily assets of each of the Funds to pay financial institutions for
certain personal services for shareholders and for the maintenance of
shareholder accounts.

Each Fund has adopted a distribution plan in accordance with Rule 12b-1 under
the Investment Company Act. Class R Shares may pay a fee to the Distributor in
an amount computed at an annual rate of up to 0.25% of the average daily net
assets to finance any activity which is principally intended to result in the
sale of shares. The schedule of such fees and the basis upon which such fees
will be determined from time to time by the Distributor. The Funds have no
current intention to activate the 12b-1 Plan. Shareholders will be given a
60 day notice upon the Funds' determination to activate the Plan.

In addition, the Investment Adviser may make additional payments from its own
resources to intermediaries for providing certain services for shareholders and
for the maintenance of shareholder accounts. This in no way affects the advisory
fee paid by each of the Funds. Contact the Investment Adviser for more
information.

PORTFOLIO TURNOVER

PORTFOLIO TRADES

PORTFOLIO MANAGEMENT

The Investment Adviser emphasizes a team approach to portfolio management.

PORTFOLIO TEAMS

EQUITY MANAGEMENT--INTERNATIONAL/GLOBAL

ARTHUR E. NICHOLAS, MANAGING PARTNER

CHIEF EXECUTIVE OFFICER

Since 1984; prior investment management experience with Pacific Century
Advisers, Security Pacific Bank and San Diego Trust & Savings Bank

B.S.--San Diego State University

CATHERINE SOMHEGYI, PARTNER

CHIEF INVESTMENT OFFICER--GLOBAL EQUITY MANAGEMENT

Since 1987; prior investment management experience with Professional Asset
Securities, Inc. and Pacific Century Advisers

M.B.A and B.S.--University of Southern California

EMERGING COUNTRIES AND INTERNATIONAL CORE GROWTH

RANDALL S. KAHN, CFA, PARTNER

PORTFOLIO MANAGER

Since 1999; 12 years prior investment experience with American Century
Investments, Daiwa Securities America, Inc. and Daiwa Securities Co., LTD.

B.A.--University of California, Berkley

M.B.A.--University of Chicago

INTERNATIONAL CORE GROWTH

PEDRO V. MARCAL, PARTNER

PORTFOLIO MANAGER

Since 1996; Assistant Portfolio Manager 1994-1996; 5 years prior investment
management experience with A.B. Laffer, V.A. Canto & Associates, and A-Mark
Precious Metals

B.A.--University of California, San Diego

EMERGING COUNTRIES AND INTERNATIONAL CORE GROWTH

LORETTA J. MORRIS, PARTNER

PORTFOLIO MANAGER

Since 1990; 10 years prior investment management experience with Collins
Associates

Attended California State University, Long Beach;

INTERNATIONAL CORE GROWTH
<PAGE>
24

ORGANIZATION AND MANAGEMENT

ERNESTO RAMOS, PH.D., PARTNER

PORTFOLIO MANAGER

Ph.D.--Harvard University; B.S.--Massachusetts
Institute of Technology

EMERGING COUNTRIES AND INTERNATIONAL CORE GROWTH

LARRY SPEIDELL, CFA, PARTNER

DIRECTOR OF GLOBAL/SYSTEMATIC PORTFOLIO MANAGEMENT AND RESEARCH

Since 1994; 23 years prior investment management experience with Batterymarch
Financial Management and Putnam Management Company

M.B.A.--Harvard University; B.E.--Yale University

INTERNATIONAL CORE GROWTH AND EMERGING COUNTRIES

JASON CAMPBELL

PORTFOLIO MANAGER

Since 1998; prior experience with San Diego State University Economics
Department

M.A. and B.A.--San Diego State University; Pontificia Universidade Catolica do
Rio de Janeiro

EMERGING COUNTRIES AND INTERNATIONAL CORE GROWTH

JESSICA GONCALVES

PORTFOLIO MANAGER

Since 1999; 1997-1999 Assistant Portfolio Manager; 1996-1997 Investment Analyst;
1995-1996 Investment Assistant; 3 years prior experience with Eaton Vance
Management and Union Capital Advisors

Attended University of Pennsylvania

EMERGING COUNTRIES AND INTERNATIONAL CORE GROWTH

MELISA A. GRIGOLITE

PORTFOLIO MANAGER

Since 1996; 1993-1996 International Analyst; 1991-1993 Account Administrator;
prior experience with SGPA Architecture and Planning

M.S.--San Diego State University; B.S.--Southwest Missouri State University

INTERNATIONAL CORE GROWTH

CHRISTOPHER ANGIOLETTI

INVESTMENT ANALYST

Since 1999; 3 years prior investment experience with Sterling Johnston Capital
Management, Inc.; Volpe, Brown, Whelan & Co., LLC; and
Oppenheimer & Co. Inc.

B.A.--University of California, Los Angeles

J.D.--Vanderbilt University School of Law

INTERNATIONAL CORE GROWTH

JON BORCHARDT

INVESTMENT ANALYST

Since 1996; 1994-1996 Senior Account Administrator; 5 years prior investment
management experience with Union Bank

B.A.--University of San Francisco

INTERNATIONAL CORE GROWTH

JOHN L. BRACKEN, JR.,

INVESTMENT ANALYST

Since 1999; 2 years prior investment experience with Ashworth, Inc.

B.S.--Wake Forest University

M.B.A.--Pepperdine University

INTERNATIONAL CORE GROWTH

JOHN CASARIETTI

INVESTMENT ANALYST

Since 2000; 1998-2000 International Account Administrator; 4 years prior
experience with Interbank Funding Group and Barron Chase Securities

B.S.--The University of Southern California

EMERGING COUNTRIES AND INTERNATIONAL CORE GROWTH

REBECCA K. HAGSTROM, CFA

INVESTMENT ANALYST

Since 2000; 5 years prior experience with Prudential Global Asset Management;
Prudential Capital Group and Prudential Realty Group

B.S.--Georgia Institute of Technology

EMERGING COUNTRIES

THEODORA JAMISON

INVESTMENT ANALYST

Since 1999; 2 years prior investment experience with Donaldson, Lufkin &
Jenrette and A.G. Edwards & Sons Inc.

B.S.--Menlo College

EMERGING COUNTRIES AND INTERNATIONAL CORE GROWTH
<PAGE>
25

DAVID LOPEZ

INVESTMENT ANALYST

Joined firm in 1996; 1999 responsible for research and portfolio analysis

B.A.--San Diego State University

INTERNATIONAL CORE GROWTH

ANDREW C. PARMET

INVESTMENT ANALYST

Since 1999, 6 years prior investment experience with Indosuez W.I. Carr
Securities; Natwest Securities Corp.; United Malayan Banking Corporation
Securities Ltd.; and Jardine Fleming Securities Ltd.

A.B.--Harvard University

EMERGING COUNTRIES AND INTERNATIONAL CORE GROWTH

JACOB POZHARNY, PH.D.

SENIOR QUANTITATIVE ANALYST

Since 1999; 3 years prior experience with Bank Credit Analyst research group and
the Federal Reserve Bank of San Francisco

Ph.D. and M.S.--University of California at Riverside;

M.S. and B.A.--University of California at Santa Cruz

INTERNATIONAL CORE GROWTH

ERIC SAGMEISTER

INVESTMENT ANALYST

Since 2000; 1995-2000 Trade Settlement Coordinator; Previously with Qualcomm
Communications.

B.A.--San Diego State University

INTERNATIONAL CORE GROWTH

ROLF SCHILD

INVESTMENT ANALYST

Since 1997; previous investment experience with Raiffeisen Bank, Switzerland

M.B.A. and B.S.--Basel University, Switzerland

INTERNATIONAL CORE GROWTH

EQUITY MANAGEMENT--U.S.

ARTHUR E. NICHOLAS, MANAGING PARTNER

CHIEF EXECUTIVE OFFICER

Since 1984; prior investment management experience with Pacific Century
Advisers, Security Pacific Bank and San Diego Trust & Savings Bank

B.S.--San Diego State University

CATHERINE SOMHEGYI, PARTNER

CHIEF INVESTMENT OFFICER--GLOBAL EQUITY MANAGEMENT

Since 1987; prior investment management experience with Professional Asset
Securities, Inc. and Pacific Century Advisers

M.B.A and B.S.--University of Southern California

LARGE CAP GROWTH, VALUE, SMALL CAP GROWTH AND MID CAP GROWTH

THOMAS BLEAKLEY, PARTNER

PORTFOLIO MANAGER

Since 1995; 3 years prior investment management experience with Twentieth
Century Investors and Dell Computer Corporation

M.B.A.--University of Texas--Boston University

SMALL CAP GROWTH

WILLIAM H. CHENOWETH, CFA, PARTNER

PORTFOLIO MANAGER

Since 1998; 12 years prior investment management experience with Turner
Investment Partners, Inc., and Jefferson-Pilot Corporation

M.B.A. and B.B.A.--Emory University

MID CAP GROWTH AND LARGE CAP GROWTH

ANDREW B. GALLAGHER, PARTNER

PORTFOLIO MANAGER

Since 1992; 7 years prior investment management experience with Pacific Century
Advisors and Sentinel Asset Management

M.B.A.--San Diego State University; B.A.--University of California, Irvine

MID CAP GROWTH AND LARGE CAP GROWTH

JOHN J. KANE, PARTNER

PORTFOLIO MANAGER--U.S. SYSTEMATIC

Since 1994; 25 years prior investment management and economics experience with
ARCO Investment Management Company and General Electric Company

M.A. and B.A.--Columbia University; M.B.A.--University of California, Los
Angeles

VALUE

JOHN C. MCCRAW, PARTNER

PORTFOLIO MANAGER

Since 1995; 1992-1995 Assistant Portfolio Manager, prior investment management
experience with Nations Bank

M.B.A.--University of California, Irvine; B.A.--Flagler College

SMALL CAP GROWTH
<PAGE>
26

ORGANIZATION AND MANAGEMENT

LARRY SPEIDELL, CFA, PARTNER

DIRECTOR OF GLOBAL/SYSTEMATIC PORTFOLIO MANAGEMENT AND RESEARCH

Since 1994; 23 years prior investment management experience with Batterymarch
Financial Management and Putnam Management Company

M.B.A.--Harvard University; B.E.--Yale University

VALUE

MARK STUCKELMAN, PARTNER

PORTFOLIO MANAGER

Since 1995; 5 years prior experience investment management experience with Wells
Fargo Bank Investment Management Group; Fidelity Management Trust Co.; and
BARRA

M.B.A.--University of Pennsylvania/Wharton School; B.A.--University of
California, Berkley

VALUE

MICHAEL P. CARROLL

PORTFOLIO MANAGER

Since 1998; 3 years prior investment experience with Morgan Stanley Dean
Witter & Co. and The University of Notre Dame Investment Office

B.B.A.--University of Notre Dame

LARGE CAP GROWTH AND MID CAP GROWTH

PAUL E. CLUSKEY

PORTFOLIO MANAGER

Since 1998; 4 years prior investment management experience at SEI Investments
and Piper Jaffray, Inc.

B.S.--New York University

SMALL CAP GROWTH

JOHN GRAVES

INVESTMENT ANALYST

Since 1997; 9 years previous experience with San Diego County District
Attorney's Office and Imperial Savings

M.B.A.--San Diego State University; B.A.--Hunter College

VALUE

KELLY KO, CFA

PORTFOLIO MANAGER

Since 2000,14 years prior experience with Hughes Investment Management and
Security Pacific Investment Research, Financial Management and Trust
Investment Division

M.B.A.--Duke University, Fuqua School of Business; B.S.--University of Southern
California

VALUE

KENNETH H. LEE, CFA

PORTFOLIO MANAGER

Since 1999; 9 years prior investment experience with Wells Fargo Bank and Dean
Witter Reynolds/ Lederer Quantitative Research

B.A.--University of California, Davis; attended Yonsei University, South Korea

MID CAP GROWTH AND LARGE CAP GROWTH

TRISHA C. SCHUSTER, CFA

PORTFOLIO MANAGER

Since 1998; 4 years prior investment experience with Bel Air Advisors/Bear
Stearns and Farmers
Insurance Company

B.A.--University of California, Los Angeles;
M.B.A.--University of California, Irvine

MID CAP GROWTH AND LARGE CAP GROWTH

MICHAEL P. GIGGIE

INVESTMENT ANALYST

Since 2000, previous experience with PPG Industries, Inc.

M.B.A.--Indiana University; B.S.--United States Naval Academy

SMALL CAP GROWTH

EVAN C. LUNDQUIST

INVESTMENT ANALYST

Since 2000; 7 years prior experience with First American Asset Management, First
American Technology Fund team

B.A.--Saint Mary's College

LARGE CAP GROWTH AND MID CAP GROWTH,

JOHN MAZUR

INVESTMENT ANALYST

Joined firm in 1999; 1 year prior investment experience and 7 years of
experience in the Biotech industry

M.B.A.--The Wharton School, University of Pennsylvania; B.S.--University of
Southern California; attended Texas A&M University

SMALL CAP GROWTH

THOMAS J. SMITH, CFA

INVESTMENT ANALYST

Since 1998; 1995-1998 Account Administrator; 4 years prior investment experience
with Wells Fargo Bank and Dean Witter Reynolds

B.A.--San Diego State University

LARGE CAP GROWTH AND MID CAP GROWTH
<PAGE>
27

HIGH YIELD BOND--MANAGEMENT TEAM

ARTHUR E. NICHOLAS, MANAGING PARTNER

CHIEF EXECUTIVE OFFICER

Since 1984; prior investment management experience with Pacific Century
Advisers, Security Pacific Bank and San Diego Trust & Savings Bank

B.S.--San Diego State University

CATHERINE SOMHEGYI, PARTNER

CHIEF INVESTMENT OFFICER

Since 1987; prior investment management experience with Professional Asset
Securities, Inc. and Pacific Century Advisers

M.B.A. and B.S.--University of Southern California

DOUGLAS G. FORSYTH, CFA, PARTNER

PORTFOLIO MANAGER

Since 1994; 3 years prior investment management experience with AEGON USA.

B.A.--University of Iowa

WILLIAM L. STICKNEY

PORTFOLIO MANAGER

Since 1999; 10 years prior investment experience with ABN AMRO, Inc.; Cowen &
Company; and Wayne Hummer & Company

M.B.A. Candidate--Northwestern University, J.L. Kellogg School of Management;
B.S.--Miami University

MICHAEL E. YEE

PORTFOLIO MANAGER

Since 1998; 1996-1998 Domestic and Global Portfolio Account Administrator;
1995-1996 Client Service Representative

M.B.A--San Diego State University; B.S.--University of California, San Diego

JUSTIN KASS

INVESTMENT ANALYST

Since 2000; Prior experience with Universal Studios, Ocean Realty and Center for
Cooperatives

M.B.A.--The Anderson School at University of California, Los Angeles;
B.S.-University of California, Davis

FIXED INCOME--SUB ADVISORY MANAGEMENT TEAM

FRED S. ROBERTSON, III, PARTNER

CHIEF INVESTMENT OFFICER--FIXED INCOME

Since 1995; 22 years prior investment management experience with Criterion
Investment Management Company and DuPont Chemical Pension Fund

M.B.A.--College of William and Mary; B.S.--Cornell University

HIGH QUALITY BOND

JAMES E. KELLERMAN, PARTNER

PORTFOLIO MANAGER

Since 1995; 20 years prior investment management experience with Criterion
Investment Management Company and Brown Brothers Harriman and Equitable Life
Insurance Co.

M.B.A.--St. John's University; B.B.A.--Susquehanna University

HIGH QUALITY BOND

MALCOM S. DAY, CFA

PORTFOLIO MANAGER

Since 1995; 3 years prior investment management experience with Payden & Rygel

M.B.A.--University of California, Los Angeles; B.S.--Northern University

HIGH QUALITY BOND

SUSAN MALONE

PORTFOLIO MANAGER

Since 1996; 7 years prior investment management experience with BEA Associates

M.B.A.--New York University; B.S.--Carnegie Mellon University

HIGH QUALITY BOND
<PAGE>
28

PRINCIPAL STRATEGIES, RISKS AND OTHER INFORMATION

MORE ABOUT THE FUNDS

INTERNATIONAL INVESTMENT RISK AND CONSIDERATIONS

FOREIGN SECURITIES. The International Core Growth and Emerging Countries Funds
invest in foreign securities as a principal strategy. The remainder of the Funds
may invest in foreign securities as a non-principal strategy.

For example, with respect to the Mauritius Subsidiary, the Indian Revenue
authorities from time to time re-examine the eligibility of Mauritius entities
to tax relief granted under treaty between India and Mauritius. Under the terms
of the treaty, entities such as the Mauritius Subsidiary are not taxed on income
from capitial gains arising in India on the sale of Indian securities, a rate
which can be as high as 30%. While the Funds expect to continue to utilize the
Mauritius Subsidiary and rely on the treaty and its benefits, there is no
guarantee that Indian Revenue authorities will continue to allow treaty
benefits. In that instance, the Emerging Countries Fund could be liable for
Indian taxes for the entire period during which the Mauritius Subsidiary held
Indian securities.

central registration system to track share ownership. The process for
transferring shares may be cumbersome, costly, time-consuming and uncertain.

GENERAL FIXED INCOME SECURITIES' RISKS

The High Quality Bond and High Yield Bond Funds invest in debt securities as a
principal strategy. The remainder of the Funds may invest in debt securities as
a non-principal strategy. The debt securities in which the Funds invests may be
of any maturity. Fixed income securities are subject to the following risks:

CREDIT RISK. Credit risk is the possibility that an issuer will default (the
issuer fails to repay interest and principal when due). If an issuer defaults,
the Fund will lose money.

INVESTMENT GRADE BOND RISKS. The debt securities in which the High Quality Bond
Fund invests as a principal strategy will be rated "Baa" or higher by Moody's
Investors Service, Inc. or "BBB" or higher by Standard & Poor's Corporation or
unrated if determined by the Investment Adviser to be of comparable quality. In
the event the rating of a debt security held by the Fund is downgraded below
investment grade, the Investment Adviser will sell the security as promptly as
possible.

BELOW INVESTMENT GRADE BOND
RISKS

The High Yield Bond and High Quality Bond Funds invest in debt securities rated
below investment grade as a principal strategy. The remainder of the Funds may
invest in debt securities rated below investment
<PAGE>
30

PRINCIPAL STRATEGIES, RISKS AND OTHER INFORMATION
grade as a non-principal strategy. These securities usually offer higher yields
than higher-rated securities but are also subject to more risk than higher-rated
securities.

Lower-rated or unrated debt obligations are more likely to react to developments
affecting market and credit risks than are more high-rated securites, which
react primarily to movements in interest rates. In the past, economic downturns
or increases in interest rates caused a higher incidence of default by issuers
of lower-rated securities.

REPURCHASE AGREEMENTS AND RISKS.

TEMPORARY INVESTMENTS AND RISKS.

Each Fund may, from time to time, invest all of its assets in short-term
instruments when the Investment Adviser determines that adverse market,
economic, political or other market conditions call for a temporary defensive
posture. Such a defensive posture may result in a Fund failing to achieve its
investment objective.

LENDING OF PORTFOLIO SECURITIES' RISKS

HEDGING TRANSACTIONS RISKS

OPTIONS are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period of time. A call
option gives the holder (buyer) the right to purchase the underlying asset from
the seller (writer) of the option. A put option gives the holder the right to
sell the underlying asset to the writer of the option. The
<PAGE>
31

writer of the option receives a payment, or "premium," from the buyer, which the
writer keeps regardless of whether the buyer uses (or exercises) the option.

BOND QUALITY

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.

C - Bonds rated C are the lowest-rated class of bonds, and such issues can be
regarding as having extremely poor prospects of ever attaining any real
investment standing.

DESCRIPTION OF S&P'S CORPORATE BOND RATINGS

AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
<PAGE>
32

PRINCIPAL STRATEGIES, RISKS AND OTHER INFORMATION

CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
<PAGE>
33

(This page has been left blank intentionally.)
<PAGE>
34

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand the Funds'
financial performance for the period since commencement of operations. Certain
information reflects financial results for a share of the predecessor
Institutional Portfolio outstanding throughout each period indicated. The total
returns in the table represent the rate that an investor would have earned [or
lost] on an investment in the fund (assuming reinvestment of all dividends and
distributions). The figures have been audited by Ernst & Young L.L.P. with
respect to the fiscal year ended March 31, 2000. Please read in conjnunction
with the Trust's 2000 Annual Report which is available upon request.

<TABLE>
<CAPTION>
INCOME FROM LESS DISTRIBUTIONS FROM:
INVESTMENT OPERATIONS --------------------------
NET -------------------------------- DIVIDENDS
ASSET NET NET REALIZED TOTAL FROM FROM NET NET NET ASSET
VALUE, INVESTMENT AND UNREALIZED INVESTMENT INVESTMENT REALIZED VALUE,
BEGINNING INCOME (LOSS)(1) GAINS (LOSS) OPERATIONS INCOME CAPITAL GAINS ENDING
<S> <C> <C> <C> <C> <C> <C> <C>

INTERNATIONAL EQUITY FUNDS
INTERNATIONAL CORE GROWTH
6/1/99 (commenced) to
3/31/00 $20.01 ($0.20) $12.03 $11.83 $ -- $ -- $31.84
For the period
9/30/00(4) $31.84 $0.02 ($ 4.78) $ -- $ -- $27.08
EMERGING COUNTRIES
6/1/99 (commenced) to
3/31/00 $15.26 ($0.17) $ 8.58 $ 8.41 $ -- $ -- $23.67
For the period ended
09/30/00 (4) $23.67 ($0.34) ($ 5.62) ($ 5.96) $ -- $ -- $17.71

U.S. EQUITY FUNDS
LARGE CAP GROWTH
6/1/99 (commenced) to
3/31/00 $28.61 ($0.21) $21.37 $21.16 $ -- $ -- $49.77
For the period ended
9/30/00(4) $49.77 ($0.22) ($ 2.69) ($ 2.91) $ -- $ -- $46.86
MID CAP GROWTH
6/1/99 (commenced) to
3/31/00 $18.94 ($0.09) $22.66 $22.57 $ -- $ -- $41.51
For the period ended
9/30/00(4) $41.51 ($0.17) ($ 0.65) ($ 0.82) $ -- $ -- $40.69
SMALL CAP GROWTH
6/1/99 (commenced) to
3/31/00 $13.86 ($0.15) $13.69 $13.54 $ -- ($0.35) $27.05
For the period ended
9/30/00(4) $27.05 ($0.06) ($ 3.28) ($ 3.34) $ -- $ -- $23.71
VALUE
6/1/99 (commenced) to
3/31/00 $22.33 $0.12 ($ 0.71) ($ 0.59) $ -- $ -- $21.74
For the period ended
9/30/00(4) $21.74 $0.07 $ 1.16 ($ 1.23) $ -- $ -- $22.97

U.S. FIXED INCOME FUNDS
HIGH QUALITY BOND
6/1/99 (commenced) to
3/31/00 $12.66 $0.65 ($ 0.51) $ 0.14 ($0.68) $ -- $12.12
For the period ended
9/30/00(4) $12.12 $0.40 $ 0.07 ($ 0.47) ($0.42) $ -- $12.17
HIGH YIELD BOND
8/14/00 (commenced)
to 9/30/00(4) $ -- $0.15 $11.57 $11.72 ($0.21) $ -- $11.51
</TABLE>

----------------------------------------

(1) Net investment income per share is calculated by dividing net investment
income for the period by the average shares outstanding during the
period.

<PAGE>
35

<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS (3)
-------------------------------------------------------------- FUND'S
NET ASSETS, NET EXPENSE PORTFOLIO
TOTAL ENDING INVESTMENT TOTAL (REIMBURSEMENTS)/ NET TURNOVER
RETURN(2) (IN 000'S) INCOME (LOSS) EXPENSES RECOUPMENT EXPENSES RATE
<S> <C> <C> <C> <C> <C> <C> <C>

INTERNATIONAL EQUITY FUNDS
INTERNATIONAL CORE GROWTH
6/1/99 (commenced) to
3/31/00 59.14% $15,571 (0.82%) 1.61% 0.04% 1.65% 158%
For the period
9/30/00(4) (14.95%) $14,390 0.11% 1.56% 0.10% 1.66% 118%
EMERGING COUNTRIES
6/1/99 (commenced) to
3/31/00 55.11% $ 1 (1.26%) 1.99% (0.05%) 1.94% 178%
For the period ended
09/30/00 (4) (25.81%) $ 171(6) (0.31%) 1.90% 0.00% 1.90% 99%

U.S. EQUITY FUNDS
LARGE CAP GROWTH
6/1/99 (commenced) to
3/31/00 73.98% $83,785 (0.69%) 1.42% (0.15%) 1.27% 154%
For the period ended
9/30/00(4) (5.79%) $83,890 (0.93%) 1.28% (0.02%) 1.26% 63%
MID CAP GROWTH
6/1/99 (commenced) to
3/31/00 119.11% $ 14 (0.73%) 1.23% (0.21%) 1.02% 115%
For the period ended
9/30/00(4) (1.95%) $ 19 (0.94%) 1.27% (0.02%) 1.25% 75%
SMALL CAP GROWTH
6/1/99 (commenced) to
3/31/00 98.68% $ 5,861 (0.91%) 1.62% (0.20%) 1.42% 88%
For the period ended
9/30/00(4) (12.35%) $ 5,577 (0.50%) 1.57% (0.14%) 1.43% 45%
VALUE
6/1/99 (commenced) to
3/31/00 (2.21%) $ 7,700 (0.70%) 1.52% (0.26%) 1.26% 140%
For the period ended
9/30/00(4) 5.66% $ 9,055 0.67% 1.55% (0.25%) 1.30% 71%

U.S. FIXED INCOME FUNDS
HIGH QUALITY BOND
6/1/99 (commenced) to
3/31/00 1.20% $ 2,810 6.47% 1.39% (0.69%) 0.70% 162%
For the period ended
9/30/00(4) 3.89% $ 4,166 6.71% 1.59% (0.87%) 0.72% 155%
HIGH YIELD BOND
8/14/00 (commenced)
to 9/30/00(4) 1.16%(7) $ 160(6) 12.69% 1.48% (0.47%) 1.01% 60%
</TABLE>

----------------------------------------

(2) Total returns are not annualized for periods less than one year.
(3) Ratios are annualized for periods of less than one year. Expense
reimbursements reflect voluntary reductions to total expenses, as
discussed in the notes to financial statements. Such amounts would
decrease net investment income (loss) ratios had such reductions not
occurred.
(4) Unaudited

<PAGE>
36

PRIOR PERFORMANCE OF CERTAIN FUNDS AND THEIR PREDECESSORS

The following table sets forth historical performance information for the
Mid Cap Growth, Fund (the "Fund"), as its pool of assets converted from one
legal entity to another. The Fund's performance includes historical performance
for Whitehall Partners, a California limited partnership (the "Partnership")
which was an institutional separate account managed by the Investment Adviser
prior to the Fund's inception in April 1993. The Fund's performance also
includes historical performance of a predecessor fund. The Investment Adviser
has advised the Trust that the Partnership and predecessor Fund entities were
operated with materially equivalent investment objectives, policies, strategies
and restrictions as the Fund.

From April 1993 until July 24, 1998, the Fund was organized in the
Nicholas-Applegate "master-feeder" investment structure. Under that structure,
the Nicholas-Applegate Mutual Funds invested all of their assets in
corresponding portfolios, or series, of the Nicholas-Applegate Investment Trust
(the "Trust"). On July 24, 1998, the "master-feeder" arrangement was reorganized
into a multi-class structure in which the Nicholas-Applegate Mutual Funds
invested in securities directly and offered various classes of shares.

In May 1999, the Trust became the successor entity to the assets of the
Class I shares of the Nicholas-Applegate Mutual Funds when substantially all of
those "Institutional" assets transferred to the Trust. The investment
objectives, policies and limitations of the portfolios of the Trust are
identical in every respect to the corresponding portfolios of the
Nicholas-Applegate Mutual Funds. The investment management fees and expense
limitations are also identical.

The performance returns for the Partnership have been adjusted to reflect
the deduction of the fees and expenses of the Mid Cap Growth Fund Class R shares
and, for the period preceding the period the reorganization of the Trust, the
proportionate shares of the operating expenses of the corresponding master funds
of the Trust (including advisory fees), and give effect to transaction costs as
well as reinvestment of income and gains. However, the prior investment
partnership was not registered under the Investment Company Act and were
therefore not subject to the investment restrictions imposed by the Act; if it
had been so registered, its performance might have been lower.

<TABLE>
<CAPTION>
MID CAP GROWTH
PERFORMANCE
RUSSELL
MID CAP MID CAP
GROWTH GROWTH
YEAR FUND INDEX(1)
<S> <C> <C>
1985(2) 24.74% n/a
1986 32.85 17.55%
1987 3.59 2.76
1988 12.67 12.92
1989 33.92 31.48
1990 0.73 (5.13)
1991 55.52 47.03
1992 13.55 8.71
1993 19.77 11.19
1994 (10.52) (2.17)
1995 38.57 33.99
1996 16.46 17.48
1997 16.66 22.54
1998 14.65 17.86
1999 99.11 51.31
Last year(3) 98.00 60.37
Last 5 years(3) 30.97 24.64
Last 10 years(3) 26.14 22.82
Since inception(3) 23.92 18.15
</TABLE>

<PAGE>
(This page has been left blank intentionally.)
<PAGE>
NEW ACCOUNT FORM (NON-IRA)
RETIREMENT SHARES
FOR AN IRA ACCOUNT APPLICATION, CALL 800 - 551-8643.
N I C H O L A S-A P P L E G A T E-REGISTERED TRADEMARK-
MAIL TO:
Nicholas-Applegate Institutional Funds
PO Box 8326
Boston, MA 02266-8326
800 - 551-8043
1. YOUR ACCOUNT REGISTRATION
--------------------------------------------------------------------------------
PLEASE PRINT. COMPLETE ONE SECTION ONLY. Joint account owners will be registered
joint tenants with the right of survivorship unless otherwise indicated. It is
the shareholder(s) responsibility to specify ownership designations which comply
with applicable state law.

2. YOUR ADDRESS
--------------------------------------------------------------------------------
Do you have any other identically registered Nicholas-Applegate accounts?
/ / Yes / / No

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Street Address or PO Box Number Apartment Number
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
City State Zip
_ _ _ - _ _ _ - _ _ _ _
Area Code Home Phone
_ _ _ - _ _ _ - _ _ _ _
Area Code Business Phone
CITIZENSHIP:/ / U.S.
/ / Resident Alien
/ / Non-resident Alien
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Specify Country (if not U.S.)

3. YOUR INVESTMENT
--------------------------------------------------------------------------------
Please select your fund. See prospectus for investment minimums.

<TABLE>
<CAPTION>
CLASS AMOUNT
<S> <C> <C>
---------------------------------------------------------
Emerging Countries R(1216) / / $
---------------------------------------------------------
High Quality Bond R(1217) / / $
---------------------------------------------------------
High Yield Bond R(1218) / / $
---------------------------------------------------------
International Core Growth R(1220) / / $
---------------------------------------------------------
Large Cap Growth R(1221) / / $
---------------------------------------------------------
Mid Cap Growth R(1222) / / $
---------------------------------------------------------
Small Cap Growth R(1223) / / $
---------------------------------------------------------
Value R(1215) / / $
---------------------------------------------------------
TOTAL $
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
</TABLE>

4. YOUR METHOD OF PAYMENT
--------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
/ / BY CHECK: Payable to NICHOLAS-APPLEGATE
INSTITUTIONAL FUNDS
(Third party checks will NOT be / / BY EXCHANGE: Fund name from which
accepted.) you are exchanging _ _ _ _ _ _ _ _ _ _ _ _ _
/ / BY WIRE: Please call 1-800-551-8043 for your
account number / / BY CONFIRM TRADE ORDER: Trade Order # _ _ _ _ _ _ _ _ _ _ _ _ _
</TABLE>

+MUST BE SAME ACCOUNT TYPE AND CLASS OF SHARES.

*IF YOU DO NOT PROVIDE A DATE, THEN IT WILL DEFAULT TO THE 15TH OF THE MONTH.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ $_ _ ,_ _ _ ._ _ 1 5 _ _
Fund Name Amount Day* Monthly Quarterly (JAN/APRIL/JULY/OCT)
</TABLE>

SEND PROCEEDS TO:
/ / Address of record
/ / Special Payee (LIST BELOW)

<TABLE>
<S> <C> <C> <C> <C>
INDIVIDUAL OR JOINT ACCOUNT
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
First Name Middle Initial Last Name
</TABLE>

<TABLE>
<S> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
Address City State Zip
</TABLE>

*IF YOU DO NOT PROVIDE A DATE, THEN IT WILL DEFAULT TO THE 15TH OF THE MONTH.

<TABLE>
<S> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
Address City State Zip
</TABLE>

<TABLE>
<S> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
Address City State Zip
</TABLE>

(SEE REVERSE)
<PAGE>
12. DEALER INFORMATION
--------------------------------------------------------------------------------
HOME OFFICE INFORMATION (TO BE COMPLETED BY INVESTMENT REPRESENTATIVE)

<TABLE>
<S> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ - _ _ _ _
Dealer Name and Number (IF
KNOWN) Area Code Phone
</TABLE>

<TABLE>
<S> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
Home Office Address City State Zip
</TABLE>

BRANCH OFFICE INFORMATION

<TABLE>
<S> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ - _ _ _ _
Branch Office Number Area Code Phone
</TABLE>

<TABLE>
<S> <C> <C> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _
Branch Office Address City State Zip
</TABLE>

REPRESENTATIVE INFORMATION

<TABLE>
<S> <C>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Representative's Name Representative's Number
</TABLE>

13. SIGNATURES
--------------------------------------------------------------------------------
BY SIGNING THIS NEW ACCOUNT FORM BELOW, I ASSURE THAT:
/ / I have received and read the prospectus for each of the Funds in which I am
investing, and I believe each investment is suitable for me. I understand
that the prospectus terms are incorporated into this New Account Form by
reference.
/ / I authorize Nicholas-Applegate Institutional Funds, their affiliates and
agents to act on any instructions believed to be genuine for any service
authorized on this form. I agree they will not be liable for any resulting
loss or expense.
/ / I am of legal age in my state and have the authority and legal capacity to
purchase mutual fund shares.
/ / I understand that neither the fund(s) nor the distributor,
Nicholas-Applegate Securities, is a bank and that fund shares are not
obligations of or guaranteed by any bank or insured by the FDIC.

/ / I understand that the Investment Adviser may pay a service fee of up to .25%
from its own resources to intermediaries for their efforts and commitment to
Nicholas-Applegate Institutional Funds.

/ / I understand that mutual funds involve risks, including possible loss of
principal.
I CERTIFY, UNDER PENALTIES OF PERJURY, THAT:
1. The Social Security or Taxpayer Identification Number shown on this form is
correct. (If I fail to give the correct number or to sign this form,
Nicholas-Applegate Institutional Funds may reject or redeem my investment. I
may also be subject to any applicable IRS Backup Withholding for all
distributions and redemptions.)
2. / / I am NOT currently subject to IRS Backup Withholding because (a) I have
not been notified of it or (b) notification has been revoked.
/ / I am currently subject to IRS Backup Withholding.
I agree that neither Nicholas-Applegate Securities, the Trust, nor any of their
affiliates will be responsible for the authenticity of any instructions given
and shall be fully indemnified as to and held harmless from any and all direct
and indirect liabilities, losses, or costs resulting from acting upon such
transactions.

More information on these Funds is available
free upon request, including the following:

ANNUAL/SEMI-ANNUAL REPORT

STATEMENT OF ADDITIONAL
INFORMATION (SAI)

TO OBTAIN INFORMATION:

BY TELEPHONE

Call 1-800-551-8643

BY MAIL Write to:

Nicholas-Applegate Institutional Funds
600 West Broadway, Suite 3000
San Diego, CA 92101

BY E-MAIL Send your request to www.nacm.com

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N I C H O L A S-A P P L E G A T E-REGISTERED
TRADEMARK-

600 West Broadway
San Diego, CA 92101
800-551-8643
Nicholas-Applegate Securities, Distributor
Visit us at www.nacm.com

Nicholas-Applegate Institutional Funds

SEC file number: 333-71469

MFPRR0201

<PAGE>

Nicholas-Applegate-Registered Trademark- Institutional Funds
Institutional and Retirement Shares
600 West Broadway, 30th Floor
San Diego, California 92101
(800) 551-8643

STATEMENT OF ADDITIONAL INFORMATION
February 1, 2001

<TABLE>
<S> <C> <C>
Global Blue Chip Fund International Core Growth Fund Worldwide Growth Fund

Global Growth & Income Fund Emerging Countries Fund Global Technology Fund

Global Health Care Fund

Convertible Fund Pacific Rim Fund Mid Cap Growth Fund

Latin America Fund Large Cap Growth Fund Small Cap Growth Fund

Short Intermediate Fund Value Fund High Yield Bond Fund

Mini Cap Growth Fund High Quality Bond Fund International Small Cap Growth
</TABLE>

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the Funds' prospectuses dated February 1, 2001. This
SAI incorporates by reference the Funds' Annual Report. Obtain the prospectus
or the Annual Report without charge by calling 800-551-8643.

TABLE OF CONTENTS

Page
----
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Investment Objectives, Policies and Associated Risk Factors. . . . . . . . B-2
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . .B-16
Principal Holders of Securities. . . . . . . . . . . . . . . . . . . . . .B-18
Trustees and Principal Officers. . . . . . . . . . . . . . . . . . . . . .B-21
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-23
Custodian, Fund Accounting Agent and Administrators. . . . . . . . . . . .B-26
Transfer and Dividend Disbursing Agent
and Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . .B-26
Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-27
Shareholder Service Plan . . . . . . . . . . . . . . . . . . . . . . . . .B-27
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-27
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . .B-28
Purchase and Redemption of Fund Shares . . . . . . . . . . . . . . . . . .B-30
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . .B-32
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-32
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . .B-34
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . .B-37
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-50
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

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ORGANIZATION

Nicholas-Applegate Institutional Funds (the "Trust") is an open-end
management investment company currently offering a number of separate portfolios
(each a "Fund" and collectively the "Funds"). This Statement of Additional
Information contains information regarding the Institutional and Retirement
shares of these Funds. The Trust was organized in December 1992 as a business
trust under the laws of Delaware.

Prior to July 24, 1998, the Nicholas-Applegate mutual fund complex was
organized in a "master-feeder" investment structure. Under that structure, the
Nicholas-Applegate Mutual Funds invested all of their assets in corresponding
portfolios, or series, of the Nicholas-Applegate Institutional Funds. On July
24, 1998, the shareholders of the Nicholas-Applegate Mutual Funds approved a
plan that reorganized the "master-feeder" arrangement into a multi-class
structure in which the Nicholas-Applegate Mutual Funds invested in securities
directly and offered various classes of shares through multiple distribution
channels. At the same time the Trust was liquidated.

In May 1999, the Trust was reactivated and renamed Nicholas-Applegate
Institutional Funds to be the successor entity to the institutional assets of
Nicholas-Applegate Mutual Funds ("NAMF"). On that date, substantially all of the
institutional assets of the single-class series of NAMF were transferred to the
renamed Trust in a tax-free exchange for Class I shares of the corresponding
Funds of the Trust, which for accounting purposes is treated as a continuation
of the portfolios. Concurrently, substantially all institutional shareholders of
the multi-class series of NAMF exchanged their shares for corresponding Class I
shares of the respective Funds of the Trust, which has been accounted for as a
table exchange and a commencement of operations of those Funds.

The investment objectives, policies and limitations of the Funds of the Trust
were identical in every respect to the corresponding portfolios of the NAMF. The
investment management fees and expense limitations are also identical. The Trust
is authorized to issue an unlimited number of shares.

INVESTMENT OBJECTIVES, POLICIES AND ASSOCIATED RISK FACTORS

INVESTMENT OBJECTIVES

The investment objective of each Fund is described in the Prospectus. There
can, of course be no assurance that a Fund will achieve its investment
objective.

INVESTMENT POLICIES AND ASSOCIATED RISK FACTORS

The following supplements the discussion of the various investment strategies
and techniques employed by the Funds as set forth in the Prospectuses.

EQUITY SECURITIES:

COMMON STOCK is the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earning and assets after
the issuer pays its creditors and any preferred stockholders. As a result,
changes in an issuer's earnings directly influence the value of its common
stock.

PREFERRED STOCKS have the right to receive specified dividends or
distributions before the payment of dividends or distributions on common stock.
Some preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the stock.

WARRANTS give the Funds the option to buy the issuer's stock or other
equity securities at a specified price. The Funds may buy the designated shares
by paying the exercise price before the warrant expires. Warrants may become
worthless if the price of the stock does not rise above the exercise price by
the expiration date. Rights are the same as warrants, except they are typically
issued to existing stockholders.

DEPOSITORY RECEIPTS are receipts issued by an American bank or trust
company evidencing ownership of underlying securities issued by foreign
issuers. ADRs in registered form, are designed for use in U.S. securities
markets. Such depository receipts may be sponsored by the foreign issuer or
may be unsponsored. The Funds may also invest in European and Global
Depository Receipts ("EDRs" and "GDRs"), which in bearer form, are designed
for use in European securities markets, and in other instruments representing
securities of foreign companies. Such depository receipts may be sponsored
by the foreign issuer or may be unsponsored. Unsponsored depository receipts
are organized independently and without the cooperation of the foreign issuer
of the underlying securities; as a result, available information regarding
the issuer may not be as current as for sponsored depository receipts, and
the prices of unsponsored depository receipts may be more volatile than if
they were sponsored by the issuer of the underlying securities. ADRs may be
listed on a national securities exchange or may trade in the over-the-counter
market. ADR prices are denominated in U.S. dollars; the underling security
may be denominated in a foreign currency, although the underlying security
may be subject to foreign governmental taxes which would reduce the yield on
such securities.

CONVERTIBLE SECURITIES are fixed income securities that a Fund has the
option to exchange for equity securities at a specified conversion price. The
option allows the Fund to realize additional returns if the market price of the
equity securities exceeds the conversion price.

Convertible securities have lower yields than comparable fixed income
securities to compensate for the value of the conversion option. In addition,
the conversion price exceeds the market value of the underlying equity
securities at the time a convertible security is issued. Thus, convertible
securities may provide lower returns than non-convertible fixed-income
securities or equity securities depending upon

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changes in the price of the underlying equity securities. However, convertible
securities permit a Fund to realize some of the potential appreciation of the
underlying equity securities with less risk of losing its initial investment.

The Funds treat convertible securities as equity securities for purposes of
their investment policies and limitations, because of their unique
characteristics.

FIXED INCOME SECURITIES:

CORPORATE DEBT SECURITIES are fixed income securities issued by
businesses. Notes, bonds, debentures and commercial paper are the most
prevalent types of corporate debt security. The credit risks of corporate
debt securities vary widely among issuers.

ZERO COUPON SECURITIES do not pay interest or principal until final
maturity. Most debt securities provide periodic payments of interest
(referred to as a "coupon payment"). In contrast, investors buy zero coupon
securities at a price below the amount payable at maturity. The difference
between the price and the amount paid at maturity represents interest on the
zero coupon security. This increases the market and credit risk of a zero
coupon security, because an investor must wait until maturity before
realizing any return on the investment.

There are many forms of zero coupon securities. Some securities are
originally issued at a discount and are referred to as "zero coupon" or
"capital appreciation" bonds. Others are created by separating the right to
receive coupon payments from the principal due at maturity, a process known
as "coupon stripping." Treasury STRIPs, IOs, and POs are the most common
forms of "stripped" zero coupon securities. In addition, some securities
give the issuer the option to deliver additional securities in place of cash
interest payments, thereby increasing the amount payable at maturity. These
are referred to as "pay-in-kind" or "PIK" securities.

COMMERCIAL PAPER is an issuer's draft or note with a maturity of less
than nine months. Companies typically issue commercial paper to fund current
expenditures. Most issuers constantly reissue their commercial paper and use
the proceeds (or bank loans) to repay maturing paper. Commercial paper may
default if the issuer cannot continue to obtain liquidity in this fashion.
The sort maturity of commercial paper reduces both the market and credit risk
as compared to other debt securities of the same issuer.

BANK INSTRUMENTS are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Instruments denominated in U.S. dollars and issued by
non-U.S. branches of U.S. or foreign banks are commonly referred to as
Eurodollar instruments. Instruments denominated in U.S. dollars are issued by
U.S. branches of foreign banks are referred to as Yankee instruments.

DEMAND INSTRUMENTS are corporate debt securities that the issuer must repay
upon demand. Other demand instruments require a third party, such as a dealer
or bank, to repurchase the security for its face value upon demand. The Funds
treat demand instruments as short-term securities, even though their stated
maturity may extend beyond one year. Insurance contracts include guaranteed
investment contracts, funding agreements and annuities.

GOVERNMENT OBLIGATIONS include Treasury bills, certificates of
indebtedness, notes and bonds, and issues of such entities as the Government
National Mortgage Association ("GNMA"), Export-Import Bank of the United States,
Tennessee Valley Authority, Resolution Funding Corporation, Farmers Home
Administration, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Farm Credit Banks, Federal Land Banks, Federal Housing Administration,
Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage
Corporation, and the Student Loan Marketing Association. No

B-3
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assurances can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law.

VARIABLE AND FLOATING RATE INSTRUMENTS are generally not rated by credited
rating agencies; however, the Investment Adviser under guidelines established by
the Trust's Board of Trustees will determine what unrated and variable and
floating rate instruments are of comparable quality at the time of the purchase
to rated instruments eligible for purchase by the Funds. In making such
determinations, the Investment Adviser considers the earning power, cash flow
and other liquidity ratios of the issuers of such instruments (such issuers
include financial, merchandising, bank holding and other companies) and will
monitor their financial condition. An active secondary market may not exist
with respect to particular variable or floating rate instruments purchased by a
Fund. The absence of such an active secondary market could make it difficult
for a Fund to dispose of the variable or floating rate instrument involved in
the event of the issuer of the instrument defaulting on its payment obligation
or during periods in which a Fund is not entitled to exercise its demand rights,
and a Fund could, for these or other reasons, suffer a loss to the extent of the
default. Variable and floating rate instruments may be secured by bank letters
of credit.

FOREIGN SECURITIES:

Foreign securities are securities of issuers based outside the U.S. They
are primarily denominated in foreign currencies and traded outside of the United
States. In addition to the risks normally associated with equity and fixed
income securities, foreign securities are subject to country risk and currency
risks. Trading in certain foreign markets is also subject to liquidity risks.

FOREIGN EXCHANGE CONTRACTS are used by a Fund to convert U.S. dollars into
the currency needed to buy a foreign security, or to convert foreign currency
received from the sale of a foreign security into U.S. dollars ("spot currency
trades"). A Fund may also enter into derivative contracts in which a foreign
currency is an underlying asset. Use of these derivative contracts may increase
or decrease a Fund's exposure to currency risk.

FOREIGN GOVERNMENT SECURITIES generally consist of fixed income
securities supported by national, state, or provincial governments or similar
political subdivisions. Foreign government securities also include debt
obligations of supranational entities, such as international organizations
designed or supported by governmental entities to promote economic
reconstruction or development, international banking institutions and related
government agencies. Examples of these include, but are not limited to, the
International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank, the European Investment Bank and the Inter-American
Development Bank.

Foreign government securities also include fixed income securities of
"quasi-governmental agencies" which are either issued by entities that are
owned by a national, state or equivalent government or are obligations of a
political unit that are not backed by the national government's full faith
and credit and general taxing powers. Further, foreign government securities
include mortgage-related securities issued or guaranteed by national, state
or provincial governmental instrumentalities, including guasi-governmental
agencies.

B-4
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EURODOLLAR CONVERTIBLE SECURITIES are fixed income securities of a U.S.
issuer or a foreign issuer that are issued outside the United States and are
convertible into equity securities of the same or a different issuer. Interest
and dividends on Eurodollar securities are payable in U.S. dollars outside the
United States. Each Fund may invest without limitation in Eurodollar
convertible securities, subject to its investment policies and restrictions,
that are convertible into foreign equity securities listed, or represented by
ADRs listed, on the New York Stock Exchange or the American Stock Exchange or
convertible into publicly traded common stock of U.S. companies.

EURODOLLAR AND YANKEE DOLLAR INSTRUMENTS are bonds that pay interest and
principal in U.S. dollars held in banks outside the United States, primarily in
Europe. Eurodollar instruments are usually issued on behalf of multinational
companies and foreign governments by large underwriting groups composed of banks
and issuing houses from may countries. Yankee Dollar instruments are U.S.
dollar denominated bonds issued in the U.S. by foreign banks and corporations.

RISK MANAGEMENT AND RETURN ENHANCEMENT STRATEGIES

Each Fund may engage in various portfolio strategies, including using
derivatives, to reduce certain risks of its investments and to enhance return.
A Fund, and thus its investors, may lose money through any unsuccessful use of
these strategies. These strategies include the use of foreign currency forward
contracts, options, futures contracts and options thereon. A Fund's ability to
use these strategies may be limited by various factors, such as market
conditions, regulatory limits and tax considerations, and there can be no
assurance that any of these strategies will succeed. If new financial products
and risk management techniques are developed, each Fund may use them to the
extent consistent with its investment objectives and polices.

RISKS OF RISK MANAGEMENT AND RETURN ENHANCEMENT STRATEGIES. Participation
in the options and futures markets and in currency exchange transactions
involves investment risks and transaction costs to which a Fund would not be
subject absent the use of these strategies. A Fund, and thus its investors, may
lose money through any unsuccessful use of these strategies. If the Investment
Adviser's predictions of movements in the direction of the securities, foreign
currency or interest rate markets are inaccurate, the adverse consequences to a
Fund may leave the Fund in a worse position than if such strategies were not
used. Risk inherent in the use of options, foreign currency and futures
contracts and options on futures contracts include (1) dependence on the
Investment Adviser's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities being hedged; (3) the fact
that skills needed to use these strategies are different from those needed to
select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; (5) the risk that the
counterparty may be unable to complete the transaction; and (6) the possible
liability of a Fund to purchase or sell a portfolio security at a
disadvantageous time, due to the need for a Fund to maintain "cover" or to
segregate assets in connection with hedging transactions.

DERIVATIVES:

INDEX AND CURRENCY-LINKED SECURITIES are securities of companies that
call for interest payments and/or payment at maturity in different terms than
the typical note where the borrower agrees to make fixed interest payments and
to pay a fixed sum at maturity. Principal and/or interest payments on an

B-5
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index-linked note depend on the performance of one or more market indices, such
as the S&P 500 Index or a weighted index of commodity futures such as crude oil,
gasoline and natural gas. The Funds may also invest in "equity linked" and
"currency-linked" securities. At maturity, the principal amount of an
equity-linked debt security is exchanged for common stock of the issuer or is
payable in an amount based on the issuer's common stock price at the time of
maturity. Currency-linked securities are short-term or intermediate term
instruments having a value at maturity, and/or an interest rate, determined by
reference to one or more foreign currencies. Payment of principal or periodic
interest may be calculated as a multiple of the movement of one currency against
another currency, or against an index.

MORTGAGE-RELATED SECURITIES are derivative interests in pools of mortgage
loans made to U.S. residential home buyers, including mortgage loans made by
savings and loan institutions, mortgage bankers, commercial banks and others.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations.

U.S. MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of
mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their residential mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
sale of the underlying residential property, refinancing or foreclosure, net of
fees or costs which may be incurred. Some mortgage-related securities (such as
securities issued by the Government National Mortgage Association) are described
as "modified pass-thoughts." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.

The principal governmental guarantor of U.S. mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a wholly owned
United States Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the United States Government, the timely payment of principal and interest on
securities issued by institutions approved by GNMA (such as savings and loan
institutions, commercial banks and mortgage bankers) and backed by pools of
mortgages insured by the Federal Housing Agency or guaranteed by the Veterans
Administration.

Government-related grantors include the Federal National Mortgage
Association ("FNMA") and the Federal Home loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders and subject to general regulation by the Secretary of Housing and
Urban Development. FNMA purchases conventional residential mortgages not insure
or guaranteed by any government agency from a list of approved seller/services
which include state and federally chartered savings and loan associations,
mutual savings banks, commercial banks and credit unions and mortgage bankers.
FHLMC is a government-sponsored corporation created to increase availability of
mortgage credit for residential housing and owned entirely by private
stockholders. FHLMC issues participation certificates which represent interests
in conventional mortgages from FHLMC's national portfolio. Pass-through
securities issued by FNMA and participation certificates issued by FHLMC are
guaranteed as to timely payment of principal and interest by FNMA and FHLMC,
respectively, but are not backed by the full faith and credit of the United
States Government.

Although the underlying mortgage loans in a pool may have maturities of up
to 30 years, the actual average life of the pool certificates typically will be
substantially less because the mortgages will be subject to normal principal
amortization and may be prepaid prior to maturity. Prepayment rates vary widely
and may be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of the pool certificates. In the even higher than
anticipated prepayments of principal, a Fund may be subject to reinvestment in a
market

B-6
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of lower interest rates. Conversely, when interest rates are rising, the rate
of prepayments tends to decrease, thereby lengthening the actual average life of
the certificates. Accordingly, it is not possible to predict accurately the
average life of a particular pool.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs"). A domestic or foreign CMO in
which a Fund may invest is a hybrid between mortgage-backed bond and a mortgage
pass-through security. Like a bond, interest is paid, in most cases,
semiannually. CMOs may be collateralized by whole mortgage loans, but are more
typically collateralized by portfolios of mortgage pass through securities
guaranteed by GNMA, FHLMC, FNMA or equivalent foreign entities.

CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal and
interest received from the pool of underlying mortgages, including prepayments,
is first returned to the class having the earliest maturity date or highest
maturity. Classes that have longer maturity dates and lower seniority will
receive principal only after the higher class has been retired.

ASSET BACKED SECURITIES are payable from pools of obligations other than
mortgages. Almost any type of fixed income assets (including other fixed income
securities) may be used to create an asset backed security. However, most asset
backed securities involve consumer or commercial debts with maturities of less
than ten years. Asset backed securities may take the form of commercial paper or
notes, in addition to pass through certificates. Asset backed securities may
also resemble some types of CMOs, such as Floaters, Inverse Floaters, IOs and
POs.

Historically, borrowers are more likely to refinance their mortgage than
any other type of consumer debt or short term commercial debt. In addition, some
asset backed securities use prepayment to buy addition assets, rather than
paying off the securities. Therefore, although asset backed securities may have
some prepayment risks, they generally do not present the same degree of risk as
mortgage backed securities.

SYNTHETIC CONVERTIBLE SECURITIES are derivative positions composed of two
or more different securities whose investment characteristics, taken together,
resemble those of convertible securities. For example, a Fund may purchase a
non-convertible debt security and a warrant or option, which enables the Fund to
have a convertible-like position with respect to a company, group of companies
or stock index. Synthetic convertible securities are typically offered by
financial institutions and investment banks in private placement transactions.
Upon conversion, a Fund generally receives an amount in cash equal to the
difference between the conversion price and the then current value of the
underlying security. Unlike a true convertible security, a synthetic
convertible comprises two or more separate securities, each with its own market
value. Therefore, the market value of a synthetic convertible is the sum of the
values of its fixed-income component and its convertible component. For this
reason, the values of a synthetic convertible and a true convertible security
may respond differently to market fluctuations. A Fund only invests in
synthetic convertibles with respect to companies whose corporate debt securities
are rated "A" or higher by Moody's or "A" or higher by Standard and Poor's.

OPTIONS AND FUTURES:

OPTIONS are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period of time. A
call option gives the holder (buyer) the right to purchase the underlying asset
from the seller (writer) of the option. A put option gives the holder the right
to sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or "premium", from the buyer, which the writer keeps
regardless of whether the buyer uses (or exercises) the option.

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The Funds may:

- Buy call options on foreign currency in anticipation of an increase in the
value of the underlying asset.

- Buy put options on foreign currency, portfolio securities, and futures in
anticipation of a decrease in the value of the underlying asset.

- Write call options on portfolio securities and futures to generate income
from premiums, and in anticipation of a decrease or only limited increase in
the value of the underlying asset. If a call written by a Fund is exercised,
the Fund foregoes any possible profit from an increase in the market price of
the underlying asset over the exercise price plus the premium received. When
a Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.

STOCK INDEX OPTIONS. Each Fund may also purchase put and call options with
respect to U.S. and global stock indices. The Funds may purchase such options
as a hedge against changes in the values of portfolio securities or securities
which they intend to purchase or sell, or to reduce risks inherent in the
ongoing management of the Funds.

The distinctive characteristics of options on stock indices create certain
risks not found in stock options generally. Because the value of an index
option depends upon movements in the level of the index rather than the price of
a particular stock, whether the Fund will realize a gain or loss on the purchase
or sale of an option on an index depends upon movements in the level of stock
prices in the stock market generally rather than movements in the price of a
particular stock. Accordingly, successful use by a Fund of options on a stock
index depends on the Investment Adviser's ability to predict correctly movements
in the direction of the stock market generally. This requires different skills
and techniques than predicting changes in the price of individual stocks.

Index prices may be distorted if circumstances disrupt trading of certain
stocks included in the index, such as if trading were halted in a substantial
number of stocks included in the index. If this happens, A Fund could not be
able to close out options which it had purchased, and if restrictions on
exercise were imposed, a Fund might be unable to exercise an option it holds,
which could result in substantial losses to the Fund. The Funds purchase put or
call options only with respect to an index which the Investment Adviser believes
includes a sufficient number of stocks to minimize the likelihood of a trading
halt in the index.

FOREIGN CURRENCY OPTIONS. Each Fund may buy or sell put and call options
on foreign currencies. A put or call option on foreign currency gives the
purchaser of the option the right to sell or purchase a foreign currency at the
exercise price until the option expires. The Funds use foreign currency options
separately or in combination to control currency volatility. Among the
strategies employed to control currency volatility is an option collar. An
option collar involves the purchase of a put option and the simultaneous sale of
a call option on the same currency with the same expiration date but with
different exercise (or "strike") prices. Generally, the put option will have an
out-of-the-money strike price, while the call option will have either an
at-the-money strike price of an in-the-money strike prices. Foreign currency
options are derivative securities. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the ability of the
Funds to reduce foreign currency risk using such options.

As with other kinds of option transactions, writing options on foreign
currency constitutes only a partial hedge, up to the amount of the premium
received. The Funds could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against exchange
rate fluctuations; however, in the event of exchange rate movements adverse to a
Fund's position, the Fund may forfeit the entire amount of the premium plus
related transaction costs.

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FORWARD CURRENCY CONTRACTS. Each Fund may enter into forward currency
contracts in anticipation of changes in currency exchange rates. A forward
currency contract is an obligation to purchase or sell a specific currency at a
future date, which may be any fix number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. For
example, a Fund might purchase a particular currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. For example, a Fund might
purchase a particular currency or enter into a forward currency contract to
preserve the U.S. dollar price of securities it intends to or has contracted to
purchase. Alternatively, it might sell a particular currency on either a spot
or forward basis to hedge against an anticipated decline in the dollar value of
securities it intends to or has contracted to sell. Although this strategy
could minimize the risk of loss due to a decline in the value of the hedged
currency, it could also limit any potential gain from an increase in the value
of the currency.

FUTURES CONTRACTS provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a price, date, and
time specified when the contract is made. Futures contracts traded OTC are
frequently referred to as "forward contracts". Entering into a contract to buy
is commonly referred to as buying or purchasing a contract or holding a long
position. Entering into a contract to sell is commonly referred to as selling a
contract or holding a short position. Futures are considered to be commodity
contracts.

The Funds may buy and sell interest rate or financial futures, futures on
indices, foreign currency exchange contracts, forward foreign currency exchange
contracts, foreign currency options, and foreign currency futures contracts.

INTEREST RATE OR FINANCIAL FUTURES CONTRACTS. Each Fund may invest in
interest rate or financial futures contracts. Bond prices are established in
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures markets, a contract is made to purchase or sell a bond in the future for
a set price on a certain date. Historically, the prices for bonds established
in the futures markets have generally tended to move in the aggregate in concert
with cash market prices, and the prices have maintained fairly predictable
relationships.

The sale of an interest rate or financial future sale by a Fund obligates
the Fund, as seller, to deliver the specific type of financial instrument called
for in the contract at a specific future time for a specified price. A futures
contract purchased by a Fund obligates the Fund, as purchaser, to take delivery
of the specific type of financial instrument at a specific future time at a
specific price. The specific securities delivered or taken, respectively, at
settlement date, would not be determined until at or near that date. The
determination would be in accordance with the rules of the exchange on which the
futures contract sale or purchase was made.

Although interest rate or financial futures contracts by their terms call
for actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without delivery of securities. A Fund
closes out a futures contract sale by entering into a futures contract purchase
for the same aggregate amount of the specific type of financial instrument and
the same delivery date. If the price in the sale exceeds the price in the
offsetting purchase, the Fund receives the difference and thus realizes a gain.
If the offsetting purchase price exceeds the sale price, the Fund pays the
difference and realizes a loss. Similarly, the Fund closes out a futures
contract purchase by entering into a futures contract sale. If the offsetting
sale price exceeds the purchase price, the Fund realizes a gain, and if the
purchase price exceeds the offsetting sale price, the Fund realizes a loss.

OPTIONS ON FUTURES CONTRACTS. The Funds may purchase options on the
futures contracts they can purchase or sell, as describe above. A futures
option gives the holder, in return for the premium paid, the right to buy (call)
from or sell (put) to the writer of the option a futures contract at a specified
price at

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any time during the period of the option. Upon exercise, the writer of the
option is obligated to pay the difference between the cash value of the futures
contract and the exercise price. Like the buyer or seller of a futures
contract, the holder or writer of an option has the right to terminate its
position prior to the scheduled expiration of the option by selling, or
purchasing an option of the same series, at which time the person entering into
the closing transaction will realize a gain or loss. There is no guarantee that
such closing transactions can be effected.

Investments in futures options involve some of the same considerations as
investments in futures contracts (for example, the existence of a liquid
secondary market). In addition, the purchase of an option also entails the risk
that changes in the value of the underlying futures contract will not be fully
reflected in the value of the option. Depending on the pricing of the contract
will note be fully reflected in the value of the option. Depending on the
pricing of the option compared to either the futures contract upon which it is
based, or upon the price of the securities being hedged, an option may or may
not be less risky than ownership of the futures contract or such securities. In
general, the market prices of options are more volatile than the market prices
on the underlying futures contracts. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to the Funds because the
maximum amount at risk is limited to the premium paid for the options (plus
transaction costs).

Investments in futures options involve some of the same considerations as
investments in futures contracts (for example, the existence of a liquid
secondary market). In addition, the purchase of an option also entails the risk
that changes in the value of the underlying futures contact will not be fully
reflected in the value of the option. Depending on the pricing of the option
compared to either the futures contract upon which it is based, or upon the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options are more volatile than the market prices on the
underlying futures contracts. Compared to the purchase or sale of futures
contracts, however, the purchase of call or put options on futures contracts may
frequently involve less potential risk to the Funds because the maximum amount
at risk is limited to the premium paid for the options (plus transaction costs).

RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES CONTRACTS. There are several
risks related to the use of futures as a hedging device. One risk arises
because of the imperfect correlation between movements in the price of the
options or futures contract and movements in the price of the securities which
are the subject of the hedge. The price of the contract may move more or less
than the price of the securities being hedged. If the price of the contract
moves less than the price of the securities which are the subject of the hedge,
the hedge will not be fully effective, but if the price of the securities being
hedged has moved in an unfavorable direction, a Fund would be in a better
position than if it had not hedged at all. If the price of the security being
hedged has moved in a favorable direction, this advantage will be partially
offset by the loss on the contract. If the price of the future moves more than
the price of the hedged securities, the Fund will experience either a loss or a
gain on the contract which will not be completely offset by movements in the
price of the securities which are subject to the hedge.

When contracts are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead. If a Fund then decides not to invest in
securities or options at that time because of concern as to possible further
market decline or for other reasons, it will realize a loss on the contract that
is not offset by a reduction in the price of securities purchased.

Although the Funds intend to purchase or sell contracts only on exchanges
or boards of trade where there appears to be an active secondary market, there
is no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time. In such
event, it may not be possible to close a futures position, and in the event of
adverse price movements, the Funds would continue to be required to make daily
cash payments of variation margin.

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<PAGE>

Most United States futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end of
the trading session. Once the daily limit has been reached in a particular type
of futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses.

Successful use of futures by a Fund depends on the Investment Adviser's
ability to predict correctly movements in the direction of the market. For
example, if the Fund hedges against the possibility of a decline in the market
adversely affecting stocks held in its portfolio and stock prices increase
instead, the Fund will lose part or all of the benefit of the increased value of
the stocks which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.

In the event of the bankruptcy of a broker through which a Fund engages in
transactions in futures contracts or options, the Fund could experience delays
and losses in liquidating open positions purchased or sold through the broker,
and incur a loss of all or part of its margin deposits with the broker.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND RELATED OPTIONS

Excepts as described below under "Non Hedging Strategic Transactions", a
Fund will not engage in transactions in futures contracts or related options for
speculation, but only as a hedge against changes resulting from market
conditions in the values of securities held in a Fund's portfolio or which it
intends to purchase and where the transactions are economically appropriate to
the reduction of risks inherent in the ongoing management of the Fund. A Fund
may not purchase or sell futures or purchase related options if, immediately
thereafter, more than 25% of its net assets would be hedged. A Fund also may
not purchase or sell futures or purchase related options if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures positions and premiums paid for such options would exceed 5% of the
market value of the Fund's net assets.

Upon the purchase of futures contracts, a Fund will deposit an amount of
cash or liquid debt or equity securities, equal to the market value of the
futures contracts, in a segregated account with the Custodian or in a margin
account with a broker to collateralize the position and thereby insure that the
use of such futures is unleveraged.

These restrictions, which are derived from current federal and state
regulations regarding the use of options and futures by mutual funds, are not
"fundamental restrictions" and the Trustees of the Trust may change them if
applicable law permits such a change and the change is consistent with the
overall investment objective and policies of a Fund.

INTEREST RATE AND CURRENCY SWAPS:

For hedging purposes, each Fund may enter into interest rate and currency
swap transactions and purchase or sell interest rate and currency caps and
floors. An interest rate or currency swap involves an agreement between a Fund
and another party to exchange payments calculated as if they were interest on a
specified ("notional") principal amount (e.g., an exchange of floating rate
payments by one party for fixed rate payments by the other). An interest rate
cap or floor entitles the purchaser, in the exchange for a premium, to receive
payments of interest on a notional principal amount from the seller of the cap
or floor, to the extent that a specified reference rate exceeds or falls below a
predetermined level.

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CROSS-CURRENCY SWAPS. A cross-currency swap is a contract between two
counterparties to exchange interest and principal payments in different
currencies. A cross-currency swap normally has an exchange of principal at
maturity (the final exchange); and exchange of principal at the start of the
swap (the initial exchange) is optional. An initial exchange of notional
principal amounts at the spot exchange rate serves the same function as a spot
transaction in the foreign exchange market (for an immediate exchange of foreign
exchange risk). An exchange at maturity of notional principal amounts at the
spot exchange rate serves the same function as a forward transaction in the
foreign exchange market (for a future transfer of foreign exchange risk). The
currency swap market convention is to use the spot rate rather than the forward
rate for the exchange at maturity. The economic difference is realized through
the coupon exchanges over the life of the swap. In contrast to single currency
interest rate swaps, cross-currency swaps involve both interest rate risk and
foreign exchange risk.

SWAP OPTIONS. Each Fund may invest in swap options. A swap option is a
contract that gives a counterparty the right (but not the obligation) to enter
into a new swap agreement or to shorten, extend, cancel or otherwise change an
existing swap agreement, at some designated future time on specified terms. It
is different from a forward swap, which is a commitment to enter into a swap
that starts at some future date with specified rates. A swap option may be
structured European-style (exercisable on the pre-specified date) or
American-style (exercisable during a designated period). The right pursuant to
a swap option must be exercised by the right holder. The buyer of the right to
receive fixed pursuant to a swap option is said to own a call.

SECURITIES SWAPS. Each Fund may enter into securities swaps, a technique
primarily used to indirectly participate in the securities market of a country
from which a Fund would otherwise be precluded for lack of an established
securities custody and safekeeping system. The fund deposits an amount of cash
with its custodian (or the broker, if legally permitted) in an amount equal to
the selling price of the underlying security. Thereafter, the Fund pays or
receives cash from the broker equal to the change in the value of the underlying
security.

INTEREST RATE SWAPS. As indicated above, an interest rate swap is a
contract between two entities ("counterparties") to exchange interest payments
(of the same currency) between the parties. In the most common interest rate
swap structure, one counterparty agrees to make floating rate payments to the
other counterparty, which in turn makes fixed rate payments to the first
counterparty. Interest payments are determined by applying the respective
interest rates to an agreed upon amount, referred to as the "notional principal
amount." In most such transactions, the floating rate payments are tied to the
London Interbank Offered Rate, which is the offered rate for short-term
Eurodollar deposits between major international banks. As there is no exchange
of principal amounts, an interest rate swap is not in investment or a borrowing.

RISKS ASSOCIATED WITH SWAPS. The risks associated with interest rate and
currency swaps and interest rate caps and floors are similar to those described
above with respect to dealer options. In connection with such transactions, a
Fund relies on the other party to the transaction to perform its obligations
pursuant to the underlying agreement. If there were a default by the other
party to the transaction, the Fund would have contractual remedies pursuant to
the agreement, but could incur delays in obtaining the expected benefit of the
transaction or loss of such benefit. In the event of insolvency of the other
party, the Fund might be unable to obtain its expected benefit. In addition,
while each Fund will seek to enter into such transactional only with parties
which are capable of entering into closing transactions with the Fund, there can
be no assurance that a Fund will be able to close out such a transaction with
the other party, or obtain an offsetting position with any other party, at any
time prior to the end of the term of the underlying agreement. This may impair
a Fund's ability to enter into other transactions at a time when doing so might
be advantageous.

A Fund usually enter into such transactions on a "net" basis, with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
streams. The net amount of accrued on a daily

B-12
<PAGE>

basis, and an amount of cash or high-quality liquid securities having an
aggregate net asset value at least equal to the accrued excess is maintained in
a segregated account by the Trust's custodian. If a Fund enters into a swap on
other than a net basis, or sells caps or floors, the Fund maintains a segregated
account of the full amount accrued on a daily basis of the fund's obligations
with respect to the transaction. Such segregated accounts are maintained in
accordance with applicable regulations of the Commission.

A Fund will not enter into any of these transactions unless the unsecured
senior debt or the claims paying ability of the other party to the transaction
is rated at least "high quality" at the time of the purchase by at least one of
the established rating agencies (e.g., AAA or AA by S&P).

SPECIAL TRANSACTIONS

TEMPORARY INVESTMENTS. The Funds may temporarily depart from their
principal investment strategies in response to adverse market, economic,
political or other conditions by investing their assets in cash, cash items, and
short-term, higher quality debt securities. A Fund may do this to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. A defensive posture taken by a Fund may result in a
Fund failing to achieve its investment objective.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest
its assets in securities of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses.

"ROLL" TRANSACTIONS. Each Fund may enter into "roll" transactions, which
are the sale of GNMA certificates and other securities together with a
commitment to purchase similar, but not identical, securities at a later date
from the same party. During the roll period, a Fund forgoes principal and
interest paid on the securities. The Fund is compensated by the difference
between the current sales price and the forward price for the future purchase,
as well as by the interest earned on the cash proceeds of the initial sale.
Like when-issued securities or firm commitment agreements, roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the price at which the Fund is committed to purchase similar
securities. Additionally, in the even the buyer of securities under a roll
transaction files for bankruptcy or becomes insolvent, the Fund's use of the
proceeds of the transactions may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.

A Fund will engage in roll transactions for the purpose of acquiring
securities for its portfolio consistent with its investment objective and
policies and not for investment leverage. Nonetheless, roll transactions are
speculative techniques and are considered to be the economic equivalent of
borrowings by the Fund. To avoid leverage, the Fund will establish a segregated
account with its custodian in which it will maintain liquid assets in an amount
sufficient to meet is payment obligations with respect to these transactions. A
Fund will not enter into roll transactions if, as a result, more than 15% of the
fund's net assets would be segregated to cover such contracts.

NON-HEDGING STRATEGIC TRANSACTIONS

Each Fund's options, futures and swap transactions will generally be
entered into for hedging purposes--to protect against possible changes in the
market values of securities held in or to be purchased for the Fund's portfolio
resulting from securities markets, currency or interest rate fluctuations, to
protect the Fund's unrealized gains in the values of its portfolio securities,
to facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of the Fund's portfolio, or to establish a
position in the derivatives markets as a temporary substitute for purchase or
sale of particular securities. However, in addition to the hedging transactions
referred to above, the Short Intermediate, High

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<PAGE>

Quality Bond, Global Blue Chip, Pacific Rim, and Latin America Funds may enter
into options, futures and swap transactions to enhance potential gain in
circumstances where hedging is not involved. Each Fund's net loss exposure
resulting from transactions entered into for each purpose will not exceed 5% of
the Fund's net assets at any one time and, to the extent necessary, the Fund
will close out transactions in order to comply with this limitation. Such
transactions are subject to the limitations described above under "Options,"
"Futures Contracts," and "Interest Rate and Currency Swaps".

REPURCHASE AGREEMENTS are agreements are transactions in which a Fund buys
a security from a dealer or bank and agrees to sell the security back at a
mutually agreed upon time and price. Pursuant to such agreements, the Fund
acquires securities from financial institutions as are deemed to be creditworthy
by the Investment Adviser, subject to the seller's agreement to repurchase and
the Fund's agreement to resell such securities at a mutually agreed upon date
and price. The repurchase price generally equals the price paid by the Fund
plus interest negotiated on the basis of current short-term rates (which may be
more or less than the rate on the underlying portfolio security). Securities
subject to repurchase agreements will be held by the Fund's custodian or in the
Federal Reserve/Treasury Book-Entry System or an equivalent foreign system. The
seller under a repurchase agreement will be required to maintain the value of
the underlying securities at not less than 102% of the repurchase price under
the agreement . If the seller defaults on its repurchase obligation, the Fund
holding the repurchase agreement will suffer a loss to the extent that the
proceeds from a sale of the underlying securities is less than the repurchase
price under the agreement. Bankruptcy or insolvency of such a defaulting seller
may cause the Fund's rights with respect to such securities to be delayed or
limited. Repurchase agreements may be considered to be loans under the
Investment Company Act.

A Fund's custodian is required to take possession of the securities subject
to repurchase agreements. The Investment Adviser or the custodian will monitor
the value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements, which involve the sale of a security to a Fund and its agreement to
repurchase the security (or, in the case of mortgage-backed securities,
substantially similar but not identical securities) at a specified time and
price. A Fund will maintain in a segregated account with its custodian cash,
U.S. Government securities or other appropriate liquid securities in an amount
sufficient to cover its obligations under these agreements with broker-dealers
(no such collateral is required on such agreements with banks). Under the
Investment Company Act, these agreements may be considered borrowings by the
Funds, an are subject to the percentage limitations on borrowings describe
below. The agreements are subject to the same types of risks as borrowings.

WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS. Each
Fund may purchase securities on a "when-issued," forward commitment or delayed
settlement basis. In this event, a Fund's custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
a purchase commitment. In such a case, a Fund may be required subsequently to
place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash.

The Funds do not intend to engage in these transactions for speculative
purposes but only in furtherance of their investment objectives. Because a Fund
will set aside cash or liquid portfolio securities to satisfy its purchase
commitments in the manner described, the Fund's liquidity and the ability of the
Investment Adviser to manage it may be affected in the event the Fund's forward
commitments, commitments to purchase when-issued securities and delayed
settlements ever exceed 15% of the value of its net assets.

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<PAGE>

When a Fund engages in when-issued, forward commitments and delayed
settlement transactions, it relies on the other party to consummate the trade.
Failure of such party to do so may result in a Fund's incurring a loss or
missing an opportunity to obtain a price credited to be advantageous.

BORROWING. Each Fund may borrow money through lines of credit, reverse
repurchase agreements, and other techniques. All borrowings by a Fund cannot
exceed one-third of a Fund's total assets.

The use of borrowing by a Fund involves special risk considerations that
may not be associated with other funds having similar objectives and policies.
Since substantially all of a Fund's assets fluctuate in value, whereas the
interest obligation resulting form a borrowing remain fixed by the terms of the
Fund's agreement with its lender, the asset value per share of the Fund tends to
increase more when its portfolio securities increase in value and to decrease
more when its portfolio assets decrease in value than would otherwise be the
case if the Fund did not borrow funds. In addition, interest costs on
borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, the Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, each
Fund may lend portfolio securities in an amount up to 30% of total Fund
assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities. No lending may be made with any
companies affiliated with the Investment Manager. The Funds may lend
securities only to financial institutions such as banks, broker/ dealers and
other recognized institutional investors in amounts up to 30% of the Fund's
total assets. These loans earn income for the Funds and are fully
collateralized by cash, securities or letters of credit. The Funds invest
cash collateral in securities of other investment companies managed in
accordance with Rule 2a-7 of the Investment Company Act of 1940 ("money
market mutual funds"). The Funds might experience a loss if the financial
institution defaults on the loan.

The borrower at all times during the loan must maintain with the Fund cash
or cash equivalent collateral or provide to the Funds an irrevocable letter of
credit equal in value to at least 102% of the value of domestic and 105% of the
value of foreign securities loaned. During the time portfolio securities are on
loan, the borrower pays the Funds any interest paid on such securities, and the
Funds may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower who has
delivered equivalent collateral or a letter of credit. Loans are subject to
termination at the option of the Funds or the borrower at any time. The Funds
may pay reasonable administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the income earned on the collateral to the
borrower or placing broker. As with other extensions of credit, there are risks
of delay in recovery or even loss of rights in the collateral should the
borrower fail financially.
SHORT SALES. Certain Funds may make short sales of securities they own or
have the right to acquire at no added cost through conversion or exchange or
other securities they own (referred to as short sales "against the box") and
short sales of securities which they do not own or have the right to acquire.

In a short sale that is not "against the box," a Fund sells a security
which it does not own, in anticipation of a decline in the market value of the
security. To complete the sale, the Fund must borrow the security (generally
from the broker through which the short sale is made) in order to make delivery
to the buyer. The Fund must replace the security borrowed by purchasing it at
the market price at the time of replacement. The Fund is said to have a "short
position" in the securities sold until it delivers them to the broker. The
period during which the Fund has a short position can range from one day to more
than a year. Until the Fund replaces the security, the proceeds of the short
sale are retained by the broker, and the Fund must pay to the broker a
negotiated portion of any dividends or interest which accrue during the period
of the loan. To meet current margin requirements, the Fund must deposit with
the broker additional cash or securities so that it maintains with the broker a
total deposit equal to 150% of the current market value of the securities sold
short (100% of the current market value if a security is held in the account
that is convertible or exchangeable into the security sold short within 90 days
without restriction other than the payment of money).

Since a Fund in effect profits from a decline in the price of the
securities sold short without the need to invest the full purchase price of the
securities on the date of the short sale, the Fund's net asset value per share
tends to increase more when the securities it has sold short increase in value,
than would otherwise be the case if it had not engage in such short sale. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of any premium, dividends or interest the Fund may be required to pay
in connection with the short sale. Short sales theoretically involve unlimited
loss potential, as the market price of securities sold short may continually
increase, although a Fund may mitigate such losses by replacing the securities
sold short before the market price has increased significantly. Under adverse
market conditions the Fund might have difficulty purchasing securities to meet
its short sale delivery obligations, and might have to sell portfolio securities
to raise the capital necessary to meet its short sale obligations at a time when
fundamental investment considerations would not favor such sales.

As a matter of policy, the Trust's Board of Trustees has determined that no
Fund will make short sales of securities or maintain a short position if to do
so could create liabilities or require collateral

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<PAGE>

deposits and segregation of assets aggregating more than 25% of the Fund's total
assets, taken at market value.

ILLIQUID SECURITIES. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), securities which are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven days. Limitations
on resale may have an adverse effect on the marketability of portfolio
securities and the Fund night be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemption within seven days. The Fund might
also have to register such restricted securities in order to dispose of them,
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the Commission under the Securities
Act, the Trust's Board of Trustees has determined that such securities are not
illiquid securities notwithstanding their legal or contractual restrictions on
resale. In all other cases, however, securities subject to restrictions on
resale will be deemed illiquid. Investing in restricted securities eligible for
resale under Rule 144A could have the effect of increasing the level of
illiquidity in the Funds to the extent that qualified institutional buyers
become uninterested in purchasing such securities.

The Emerging Countries, Global Blue Chip, Global Health Care, Pacific
Rim, and Latin America Funds may invest in foreign securities that are
restricted against transfer within the United States or to United States
persons. Although securities subject to such transfer restrictions may be
marketable abroad, they may be less liquid than foreign securities of the
same class that are not subject to such restrictions. Unless these
securities are acquired directly from the issuer or its underwriter, the
Funds treat foreign securities whose principal market is abroad as not
subject to the investment limitation on securities subject to legal or
contractual restrictions on resale.

DIVERSIFICATION

Each Fund (except the Latin America and Global Health Care Funds) is
"diversified" within the meaning of the Investment Company Act. In order to
qualify as diversified, a Fund must diversify its holdings so that at all
times at least 75% of the value of its total assets is represented by: (1)
cash and cash items, Government securities and securities of other investment
companies; and (2) other securities except that the Fund may not invest more
than 5% of its total assets in the securities of any single issuer or own
more than 10% of the outstanding voting securities of any one issuer. The
Latin America and Global Health Care Funds are non-diversified funds for
Investment Company Act purposes but are diversified for Internal Revenue Code
purposes. Under the Internal Revenue Code the Funds must have at least 50% of
the value of their total assets represented by: (1) cash and cash items,
Government securities and securities of other investment companies; and (2)
other securities except that the Fund may not invest more than 5% of its
total assets in the securities of any single issuer or own more than 10% of
the outstanding voting securities of any one issuer.

To the extent that the Latin America and Global Health Care Funds invest
heavily in a single issuer, their performance could suffer significantly from
adverse events affecting that issuer. The value of an individual security or a
particular type of security can be more volatile than the market as a whole and
can perform differently than the value of the market as a whole.

INVESTMENT RESTRICTIONS

The Trust, on behalf of the Funds, has adopted the following fundamental
policies that cannot be changed without the affirmative vote of a majority of
the outstanding shares of the appropriate Fund (as defined in the Investment
Company Act).

All percentage limitations set forth below apply immediately after a
purchase or initial investment, and any subsequent change in any applicable
percentage resulting from market fluctuations will not require elimination of
any security from the relevant portfolio.

B-16
<PAGE>

The investment objective of each Fund is a fundamental policy. In
addition, no Fund:

1. May (except the Latin America and Global Health Care Funds) invest
in securities of any one issuer if more than 5% of the market value
of its total assets would be invested in the securities of such
issuer, except that up to 25% of a Fund's total assets may be
invested without regard to this restriction and a Fund will be
permitted to invest all or a portion of its assets in another
diversified, open-end management investment company with
substantially the same investment objective, policies and
restrictions as the Fund. This restriction also does not apply to
investments by a Fund in securities of the U.S. Government or any
of its agencies or instrumentalities. For the Latin America and
Global Health Care Funds with respect to 50% of the value of each
Fund's total assets, will not purchase securities of any one issuer
(other than cash, cash items, or securities issued or guaranteed by
the government of the United States or its agencies or
instrumentalities) if as a result more than 5% of the value of its
total assets would be invested in the securities of that issuer,
and the Fund will not acquire more than 10% of the outstanding
voting securities of any one issuer.

2. May purchase more than 10% of the outstanding voting securities, or of
any class of securities, or any one issuer, or purchase the securities
of any issuer for the purpose of exercising control or management,
except that a Fund will be permitted to invest all or a portion of
its assets in another diversified, open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Fund.

3. May (except the Global Health Care Fund) invest 25% or more of the
market value of its total assets in the securities of issuers in
any one particular industry, except that a Fund will be permitted
to invest all or a portion of its assets in another diversified,
open-end management investment company with substantially the same
investment objective, policies and restrictions as the Fund. This
restriction does not apply to investments by a Fund in securities
of the U.S. Government or its agencies and instrumentalities.

4. May purchase or sell real estate. However, a Fund may invest in
securities secured by, or issued by companies that invest in, real
estate or interest in real estate.

5. May make commercial loans of money, except that a Fund may purchase
debt instruments and certificates of deposit and enter into repurchase
agreements. Each Fund reserves the authority to make loans of its
portfolio securities in an aggregate amount not exceeding 30% of the
value of its total assets.

6. May borrow money on a secured or unsecured basis, provided that,
pursuant to the Investment Company Act, a Fund may borrow money if the
borrowing is made from a bank or banks and only to the extent that the
value of the Fund's total assets, less its liabilities other than
borrowings, is equal to at least 300% of all borrowings (including
proposed borrowings).

7. May pledge or in any way transfer as security from indebtedness any
securities owned or held by it, except to secure indebtedness
permitted by restriction 6 above. This restriction shall not prohibit
the Funds from engaging in options, futures and foreign currency
transactions.

8. May underwrite securities of other issuers, except insofar as it may
be deemed an underwriter under the Securities Act in selling portfolio
securities.

9. May invest more than 15% of the value of its net assets in securities
that at the time of purchase are illiquid.

10. May purchase securities on margin, except for initial and variation
margin on options and futures contracts, and except that a Fund may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of securities.

11. May engage in short sales (other than the Mid Cap Growth, Mini Cap
Growth, Small Cap Growth, Worldwide Growth, International Core Growth,
International Small Cap Growth,

B-17
<PAGE>

High Yield Bond, Global Blue Chip, Global Health Care, Pacific Rim
and Latin America Funds), except that a Fund may use such
short-term credits as are necessary for the clearance of
transactions.

12. May invest in securities of other investment companies, except (a)
that a Fund will be permitted to invest all or a portion of its assets
in another diversified, open-end management investment company with
the same investment objective, policies and restrictions as the Fund;
(b) in compliance with the Investment Company Act; or (c) as part of a
merger, consolidation, acquisition or reorganization involving the
Fund.

13. May issue senior securities, except that a Fund may borrow money as
permitted by restrictions 6 and 7 above. This restriction shall not
prohibit the Funds from engaging in short sales, options, futures and
foreign currency transactions.

14. May enter into transactions for the purpose of arbitrage, or invest in
commodities and commodities contracts, except that a Fund may invest
in stock index, currency and financial futures contracts and related
options in accordance with any rules of the Commodity Futures Trading
Commission.

15. May purchase or write options on securities, except for hedging
purposes (except in the case of the Short Intermediate, High
Quality Bond, Global Blue Chip, Global Health Care, Pacific Rim and
Latin America Funds, which may do so for non-hedging purposes) and
then only if (i) aggregate premiums on call options purchased by a
Fund do not exceed 5% of its net assets; (ii) aggregate premiums on
put options purchased by a Fund do not exceed 5% of its net assets;
(iii) not more than 25% of a Fund's net assets would be hedged; and
(iv) not more than 25% of a Fund's net assets are used as cover for
options written by the Fund.

OPERATING RESTRICTIONS

As a matter of operating (not fundamental) policy adopted by the Board of
Trustees of the Trust, no Fund:

1. May invest in interest in oil, gas or other mineral exploration or
development programs or leases, or real estate limited partnerships,
although a Fund may invest in the securities of companies which invest
in or sponsor such programs.

2. May lend any securities from its portfolio unless the value of the
collateral received therefor is continuously maintained in an amount
not less than 100% of the value of the loaned securities by marking to
market daily.

PRINCIPAL HOLDERS OF SECURITIES

As of November 10, 2000 the following persons held of record more than 5%
of the outstanding shares of the Funds:

Short Intermediate Fund Class I--Indiana State Council of Carpenters Health
& Welfare Fund C/O William A. Johnson Morris Association Inc. , PO Box 50440,
Indianapolis, IN 46250-0440 (47.51%); Community Hospital Foundation, PO Box 458,
Channelview, TX 77530-0458 (20.22%); State Street Bank & Trust Co., Custodian
for Leslie G McCraw Jr, 100 Chapman PL, Greenville, SC 29605-310 (10.01%).

Global Technology Fund Class I--Wake Forest University, PO Box 7354,
Winston Salem, NC 27109-7354 (9.21%); Clarence L. Elder & Barbara K. Elder
Joint Trustees, 1680 Lands End Road, Manalapan, FL 33462-4762 (6.26%).

B-18
<PAGE>

Mini Cap Growth Fund Class I--Charles Schwab & Co. Inc., 101 Montgomery
Street 11th Floor, San Francisco, California 94104-4122 (34.61%); The Lynde &
Harry Bradley Foundation Inc., PO Box 510860, Milwaukee, WI 53203-0153 (15.38%);
Northern Trust Company, FBO Ford Family Foundation, PO Box 92956, Chicago, Il
60675-2956 (14.74%); Arthur E. Nicholas, P.O. Box 2169, Del Mar, CA 92014-1469
(5.26%).

Latin America Fund Class I--Arthur E. Nicholas, PO Box 2169, Del Mar, CA
92014-1469 (93.63%).

Pacific Rim Fund Class I--Arthur E. Nicholas, PO Box 2169, Del Mar, CA
92014-1469 (83.81%).

Global Blue Chip Fund Class I --Arthur E. Nicholas, PO Box 2169, Del Mar
CA 92014-1469 (27.80%); City National Bank Trustee, FBO Nicholas-Applegate
401(K) Plan, 225 Broadway, FL5, San Diego, CA 92101-5029 (13.20%); Bidwell &
Co., 330 SW 6th Ave, Portland OR 97204-1702 (12.37%); Sherryl A. Nicholas
Trustee, Sherryl A. Nicholas Revocable Trust, P.O. Box 2295 Rancho Sante Fe,
CA 92067-2295 (9.32%); Solvay Co., 1537 Milton Ave Solvay, NY 13209-1670
(6.85%).

Global Growth & Income Fund Class I--Arthur E. Nicholas, PO Box 2169,
Del Mar, CA 92014-1469 (41.44%); Sherryl A. Nicholas Trustee, Sherryl A.
Nicholas Revocable Trust, PO Box 2295, Rancho Santa Fe, CA 9267-2295
(35.31%); Casten Family Foundation, Inc. Charitable Foundation, 8 E 3rd St.,
Hinsdale IL 60521-4401 (7.65%).

Convertible Fund Class I --Northern Trust Co, Trustee FBO Motion Picture
Industry, PO Box 92956, Chicago, IL 60675-2956 (28.18%); Austin Fire Fighters
Relief & Retirement Fund, 3301 Northland Drive #215, Austin, TX 79731-4951
(17.79%); Northern Trust Company Trustee FBO Screen Actors Guild C/D/A Health
Plan, P.O. Box 92956, Chicago, IL 60675-2956 (12.87%); Directors Guild of
America Producer Health Plan California Trust, 8436 W. 3rd Street, Suite 900,
Los Angeles, CA 90048-4189 (7.37%).

Emerging Countries Fund Class I--Lauer & Co., C/O The Glenmede Trust Co.,
1 Liberty Place Suite 1200, Philadelphia, PA 19103 (22.09%); Blue Cross & Blue
Shield of Florida, Inc. Attn: Performance Measurement Analyst, Banking &
Investment DC1-3, 4800 Deerwood Campus Parkway, Jacksonville, FL 32246-6498
(21.16%); University of Notre Dame, DU LAC Investment Office, Grace Hall,
Suite 900, Notre Dame, IN 46556 (12.20%); Northern Trust Co., Trustee, FBO
Knight-Ridder Master Retirement Trust, PO Box 92956, Chicago, IL 60675-2956
(5.02%).

Emerging Countries Fund Class R--Boston Financial Data Services, Corporate
Actions Audit Account #1, Nicholas-Applegate Fund, 2 Heritage Drive Floor 2,
Quincy, MA 02171-2144 (33.33%); Boston Financial Data Services, Corporate
Actions Audit Account #4, Nicholas-Applegate Fund, 2 Heritage Drive Floor 2,
Quincy, MA 02171-2144 (33.33%), Boston Financial Data Services, Corporate
Actions Audit Account #2, Nicholas-Applegate Fund, 2 Heritage Drive Floor 2,
Quincy, MA 02171-2144 (33.33%).

High Yield Bond Fund Class I--Austin Fire Fighters Relief and Retirement
Fund, 3301 Northland Dr. #215, Austin, TX 78731-4951 (40.26%); Sherryl A.
Nicholas Revocable Trust, PO Box 2295, Rancho Santa Fe, CA 92067-2295 (24.84%);
Wuesthoff Memorial Hospital Funded Depreciation, PO Box 565002, Rockledge, FL
39256-5002 (15.48%); Wuesthoff Memorial Hospital Pension Plan Master Trust,
Pension Plans Bargaining & Non-Bargaining, PO Box 565002, Rockledge, FL
32956-5002 (5.38%).

B-19
<PAGE>

High Quality Bond Fund Class I--Charles Schwab & Co., Inc., 101 Montgomery
Street, 11th Floor, San Francisco, CA 94104-4122 (42.43%); PGA Tour Employees
Retirement Plan 100 PGA Tour Blvd., Ponte Vedra, FL 32082-3046 (35.47%); Baker
Botts LLP, 910 Louisiana Street, Houston, TX 77002-4916 (17.96%).

High Quality Bond Fund Class R--CNA Trust Corporation Trustee, FBO Trust
Fund Advisors, PO Box 5024; Costa Mesa, CA 92628-5024 (99.98%).

International Core Growth Fund Class I--Chase Manhattan Bank Trustee,
Avon Products Inc. & Subsidiaries Master Retirement Trust, 1345 Avenue of the
Americas, New York, NY 10105-0302 (7.28%); Lor Pouley Investment Partnership
P.O. Box 647, Atlanta, GA 30801-0647 (7.02%); Bankers Trust Co, Trustee FBO
Super Value Inc 401(k) Trust 100 Plaza One #3048, Jersey City, NJ 07311-3999
(6.54%); State Street Bank & Trust Co., FBO Health Partners 401(k), 805
Pennsylvania Ave., Kansas City, MO 64105-1307 (5.78%); Jim Goad Trustee, Les
Schwab Profit Sharing Retirement Trust, P.O. Box 667, Prineville, Or.
97754-0667 (5.74%); Austin Fire Fighters Relief and Retirement Fund, 3301
Northland Dr. #215, Austin, TX 78731-4951 (5.19%).

International Core Growth Fund Class R--American Express Trust Co. FBO
American Express Retirement Services Plan, P.O. Box 534, Minneapolis, MN
55440-0534 (69.42%); CNA Trust Corp. Trustee FBO Trust Fund Advisor--Omnibus
Part, P.O. Box 5024, Costa Mesa, CA 92628-5024 (11.02%); State Board Trustee.
FBO Public Employees Detoned Compensation Program 172 E State St., STE 600,
Columbus, OH 43215-4321 (10.42%); Light & Co C/O AllFirst Trust Co., PO
Box 1596, Baltimore MD 21203-1596 (6.27%) Light & Co., C/O Allfirst Trust Co.,
Security Processing 109-911, P.O. Box 1596; Baltimore, MD 21203-1596 (6.27%).

International Small Cap Growth Fund Class I--First Tennessee Bank NA
Reinvestment Account, 165 Madison Avenue, Floor 7, Memphis, TN 38103-2723
(9.00%); The University of North Carolina at Chapel Hill, Foundation Investment
Fund Inc., Investment Office, 1512 E. Franklin Street, Suite 106, Chapel Hill,
NC 27514-2816 (8.41%); University of British Columbia Endowment Fund, 220 Dundas
Street, 2nd Floor, London Ontario Canada N6A 4s4 (7.14%); Lor Pouley Investment
Partnership P.O. Box 647, Atlanta, GA 30801-0647 (7.02%); Austin Fire Fighters
Relief & Retirement Fund, 3301 Northland Drive #215, Austin, TX 78731-4951
(5.79%); U.S. Bank National Association Custodian For Medtronic Inc., P.O.
Box 64010, St. Paul, MN 55164-0010 (5.31%); Northern Trust Custodian FBO
Christel DeHaan Trust, P.O. Box 92956, Chicago, Il 60675 (5.23%).

Large Cap Growth Fund Class I --Bidwell & Co., 330 SW 6th Ave, Portland,
OR 97204-1702 (11.94%); San Diego Museum of Art Endowment Fund/Non-Profit
Co., P.O. Box 122107, San Diego, CA 92112-2107 (11.45%); University of
Dallas, 1845 E. Northgate Dr., Irving, TX 75062-4736 (11.10%); Fort Hays
State University Endowment Association, 610 Park St. Hays, KS 67601-4010
(8.90%); Cenco, P.O. Box 10566, Birmingham, AL 35296-0001 (8.26%); Fifth
Third Bank Trustee FBO Gilmour Academy, P.O. Box 630074, Cincinnati, OH
45263-0091 (7.67%); San Diego Museum of Art Non-Profit Corporation, P.O. Box
122107, San Diego, CA 92112-2107 (5.73%).

Large Cap Growth Fund Class R--Fidelity Investments Institutional
Operations Co., Inc. as Agent for Certain Employee Retirement Plans, 100
Magellan Way KW1C, Covington, KY 41015-1999 (52.32%); CNA Trust Corporation
Trustee, FBO Trust Fund Advisors, PO Box 5024, Costa Mesa, CA 92628-5024
(45.90%).

Mid Cap Growth Fund Class I--Consumers Energy Company Employees Savings &
Incentive Plan, 212 W. Michigan Avenue, Jackson, MI 49201-2276 (44.32%);
Pacificorp Veba Trust, Attn: Kent Grether, 825 NE Multnomah Street, Suite 1900,
Portland, OR 97232-2135 (12.57%); Mac & Co, P.O. Box 3198, Pittsburgh, PA
15230-3198 (5.16%).

Mid Cap Growth Fund Class R--City National Bank, P.O. Box 60520, Los
Angeles, CA 90060-0520 (56.43%); CNA Trus Corp Trustee, FBO Southeastern Iron
Workers Annuity Plan, PO Box 5024 Costa Mesa, CA 92628-5024 (42.23%)

Small Cap Growth Fund Class I --Northern Trust Company Custodian FBO
Advocate, PO Box 92956, Chicago, IL 60675-2956 (25.89%); KPMG Peat Marwick,
Attn: Joe Geller, Partner and Employee Benifits, 3 Chestnut Ridge Road, BLDG-3,
Floor 2, Montvale, NJ 07645 (18.71%); Northern Trust Co. FBO Ford Family
Foundation, P.O. Box 92956, Chicago, IL 60675-2956 (5.68%).

Small Cap Growth Fund Class R--CNA Trust Corp., FBO Trust Fund Advisors,
PO Box 5024, Costa Mesa, CA 92628-5024 (90.39%); Putnam Fiduciary Trust Co.
Trustee FBO Holiday Corporate Profit Sharing Plan 859 Willard St., Quincy, MA
02169-7428 (9.08%).

B-20
<PAGE>

Value Fund Class I--The Investment Committee Trustee FBO Short Brothers
Pension Scheme, PO Box 241 Airport Road, Belfast BT3 9DZ, Northern Ireland
(35.31%); Pension Fund Trust Co., Trustee Fiducie Bombardier Trust, 800
Rene-Levesque West 29th Floor, Montreal, Canada H3B-1Y8 (22.02%); Baker Botts
LLP, 910 Louisiana Street, Houston, TX 77002-4916 (13.25%);Key Trust Company
Trustee fBO Bombardier Trust, P.O. Box 94871, Cleveland, OH 44101-4871 (11.25%);
Royal Trust Co., Trustee Foundation J. Armand Bombardier Trust, 800
Rene-Levesque West, 29th Floor, Montreal, Canada H3B-1Y8 (5.90%).

Value Fund Class R--CNA Trust Corp., Trustee FBO Trust Fund Advisors, PO
Box 5024, Costa Mesa, CA 92628-5024 (94.57%); CNA Trust Corp., Trustee FBO
Southeastern Iron Workers Annuity Plan, P.O. Box 5024 Costa Mesa, CA
92628-5024 (5.07%).

Worldwide Growth Fund Class I--The Investment Committee Trustee, FBO
Short Brothers Pension Scheme, PO Box 241 Airport Road, Belfast BT3 9DZ,
Northern Ireland (39.57%); Pension Fund Trust Co., Trustee Fiducie Bombardier
Trust, 800 Rene-Levesque West 29th Floor, Montreal, Canada H3B-1Y8 (24.68%);
Key Trust Company Trustee FBO Bombardier Trust, P.O. Box 94871, Cleveland, Oh
44101-4871 (12.61%); Royal Trust Co., Trustee Foundation J. Armand Bombardier
Trust, 800 Rene-Levesque West, 29th Floor, Montreal, Canada H3B-1Y8 (6.61%);
City of Pointe-Claire Pension Plan, 451 Boul St Jean, Point-Claire Quebec
Canada H9R-3J3 (5.68%).

Global Health Care Fund Class I--The Investment Committee FBO Short
Brothers Pesnion Scheme, 1501 McGill College Ave., 9th Floor, Montreal, Quebec,
Canada H3A 3M8 (14.07%); Wake Forest University, P.O. Box 7354; Winston-Salem,
NC 27109-7354 (9.69%); Pension Fund Trust Co. Trustee Bombardier Trust, 1501
McGill College Ave 9th Floor, Montreal Quebec Canada H3A 3M8 (8.78%).

As of March 31, 2000, the Trustees and officers of the Trust, as a group,
owned beneficially and of record less than 1% of the outstanding shares of each
of the Funds, except for the shares indicated above that are held by Arthur E.
Nicholas.

TRUSTEES AND PRINCIPAL OFFICERS

The business of the Funds is managed by the Trustees of the Trust who
elect officers who are responsible for the day-to-day operations of the Fund and
who execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also officers of the Investment Adviser, or officers
of the Funds' Distributor, Nicholas-Applegate Securities.

The names, addresses and ages of the Trustees and principal officers of
the Trust, including their positions and principal occupations during the past
five years, are shown below. Trustees whose names are followed by an asterisk
are "interested persons" of the Trust (as defined by the Investment Company
Act). Unless otherwise indicated, the address of each Trustee and officer is 600
West Broadway, 30th Floor, San Diego, California 92101.

JOHN J.P. MCDONNELL (48), PRESIDENT. Chief Operating Officer,
Nicholas-Applegate Capital Management (since July 1998). Formerly, Chief
Financial Officer, American Express Travel Related Services New York (April
1978-June 1998).

ARTHUR E. NICHOLAS (52), TRUSTEE AND CHAIRMAN OF THE BOARD.* Managing
Partner, Nicholas-Applegate Capital Management (since 1984), and Chairman /
President Nicholas-Applegate Securities. Director and Chairman of the Board of
Directors of Nicholas-Applegate Fund, Inc., a registered open-end investment
company (since 1987); Formerly, President and Chairman of Nicholas-Applegate
Mutual Funds (until 1999).

WALTER E. AUCH (77), TRUSTEE. 6001 North 62nd Place, Paradise Valley,
Arizona. Brinson Funds (since 1994), Salomon Smith Barney Concert Series
(since 1996); Advisors Group (since 1997); Smith Barney Trak Fund (since
1992); Pimco Advisors L.P., an investment manager (since 1994); and Banyan

B-21

<PAGE>

Realty Fund (since 1988) Legena Properties Fund (since 1987); and Senele Group
(since 1988), real estate investment trusts. Formerly, Chairman and Chief
Executive Officer, Chicago Board of Options Exchange (1979-1986); Senior
Executive Vice President, Director and Member of the Executive Committee,
PaineWebber, Inc. (until 1979). Formerly, Trustee Nicholas-Applegate Mutual
Funds (until 1999)/

DARLENE DEREMER DARLENE DEREMER (43), TRUSTEE. 155 South Street, Wrentham,
Massachusetts. Darlene DeRemer is Managing Director of NewRiver's Internet
Advisory Services Division. Prior merging with NewRiver in March of 2000,
Darlene was President and Founder, DeRemer Associates, a strategic and marketing
consulting firm for the financial services industry (since 1987). Formerly, Vice
President and Director, Asset Management Division, State Street Bank and Trust
Company, now referred to as State Street Global Advisers, (from 1982-1987), and
Vice President, T. Rowe Price & Associates (1979-1982); Director, Jurika &
Voyles Fund Group (since 1994), Founding member and Director, National Defined
Contribution Council (since 1997); Trustee, Boston Alzheimer's Association
(since 1998); Member, Boston Club (since 1998); Founder, Mutual Fund Cafe
Website. Editorial Board, National Association of Variable Annuities (Since
1997). Nicholas-Applegate Strategic Opportunities Ltd. (since 1994), and King's
Wood Montessori School (since 1995); Member of Advisory Board, Financial Women's
Association (since 1995). Formerly, Trustee of Nicholas-Applegate Mutual Funds
(until 1999).

GEORGE F. KEANE (70), TRUSTEE. 7408 Eaton Court, University Park,
Florida 34201. President Emeritus, The Common Fund, a non-profit investment
management organization representing educational institutions (since 1993),
after serving as President (from 1971-1992); Member of Investment Advisory
Committee, New York State Common Retirement Fund (since 1982); Director,
Northern Trust of Connecticut (since 1991); Consultant, Associated Energy
Managers (since 1994); Director, The Bramwell Funds, Inc. (since 1994);
Director and former Chairman of the Board, Trigen Energy Corporation (since
1994); Director Universal Stainless & Alloy Products Inc. (since 1994).
Director, United Water Services and affiliated companies (since 1996);
Director, Security Capital U.S. Real Estate (since 1997); Director, The
Universal Bond Fund (since 1997). Formerly, President, Endowment Advisers,
Inc. (1987 - 1992); Trustee, Nicholas-Applegate Mutual Funds (until 1999).

E. BLAKE MOORE, JR. (42), SECRETARY. General Counsel and Secretary,
Nicholas-Applegate Capital Management and Nicholas-Applegate Securities (since
1993); Treasurer (1998-1999) and Secretary (1994-1999), Nicholas-Applegate
Mutual Funds.

C. WILLIAM MAHER (39), TREASURER. Chief Financial Officer,
Nicholas-Applegate Capital Management and Nicholas-Applegate Securities (since
1999). Formerly Chief Financial Officer, Mitchell Hutchins Asset Management,
Inc. (1990-1998); Treasurer, Nicholas-Applegate Mutual Funds (1999).

CHARLES HENRY FIELD (45), ASSISTANT SECRETARY. Deputy General Counsel of
Nicholas-Applegate Capital Management since 1996. Formally, Legal Counsel of
Federated Investors and Vice President, Federated Securities Corporation,
Pittsburgh (1991-1996); Director (since 1996) Nicholas-Applegate Strategic
Opportunities Fund and Nicholas-Applegate U.S. Growth Equity Fund; Director
(since 2000) Nicholas-Applegate Southeast Asia Fund and Torrey Pines, Ltd.;
Assistant Secretary (1996-1999) to the former Nicholas-Applegate Mutual Funds.

THOMAS MUSCARELLA (44), ASSISTANT TREASURER. Director of Mutual Fund
Operations, Nicholas-Applegate Capital Management (since 1998). Formerly
Vice President-Mutual Fund Accounting, State Street Bank & Trust (1995-1998);
Senior Vice President -- Fund Administration and Control, Putnam
Investments (1990-1994).

Each Trustee of the Trust that is not an officer or affiliate of the
Trust, the Investment Adviser or the Distributor receives an aggregate annual
fee of $14,000 for services rendered as a Trustee of the Trust, and $1,000 for
each meeting attended ($2,000 per Committee meeting for Committee chairmen).
Each Trustee is also reimbursed for out-of-pocket expenses incurred as a
Trustee.

The following table sets forth the aggregate compensation paid by the
Trust for the fiscal year ended March 31, 2000, to the Trustees who are not
affiliated with the Investment Adviser and the aggregate compensation paid to
such Trustees for service on the Trust's board and that of all other funds in
the "Trust complex" (as defined in Schedule 14A under the Securities Exchange
Act of 1934):

B-22

<PAGE>

<TABLE>
<CAPTION>
Total Compensation
Aggregate Pension or Retirement Estimated from Trust and Trust
Compensation Benefits Accrued as Part Annual Benefits Complex Paid to
Name from Trust of Trust Expenses Upon Retirement Trustee
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter E. Auch $17,000 None N/A $17,000(19*)
Darlene DeRemer $18,000 None N/A $18,000(19*)
George F. Keane $18,000 None N/A $18,000(19*)
</TABLE>

*Indicates total number of funds in Trust complex.

INVESTMENT ADVISER

The Investment Adviser to the Trust is Nicholas-Applegate Capital
Management, a California limited partnership, with offices at 600 West
Broadway, 30th Floor, San Diego, California 92101.

The Investment Adviser was organized in August 1984 to manage
discretionary accounts investing primarily in publicly traded equity securities
and securities convertible into or exercisable for publicly traded equity
securities, with the goal of capital appreciation. On January 31, 2001 The
Investment Adviser was acquired by Allianz of America, Inc. ("AZOA"). Allianz
AG, the parent of AZOA, is a publicly traded German Aktiengesellschaft (a
German publicly traded company), which, together with its subsidiaries,
comprise the world's largest insurance group (the "Allianz Group"). Allianz
Group currently has assets under management of approximately $690 billion,
and in its last fiscal year wrote approximately $50 billion in gross
insurance premiums. Allianz AG's address is: Koeniginstrasse 28, D-80802,
Munich, Germany.

Personnel of the Investment Adviser may invest in securities for their
own accounts pursuant to a Code of Ethics that sets forth all partners' and
employees' fiduciary responsibilities regarding the Funds, establishes
procedures for personal investing, and restricts certain transactions. For
example, all personal trades in most securities require pre-clearance and
participation in initial public offerings is prohibited. In addition,
restrictions on the timing of all personal investing in relation to trades by
the Funds and on short-term trading having been adopted.

SUB INVESTMENT ADVISER

Criterion Investment Management LLC ("Criterion") serves as sub-adviser to
the Short Intermediate and High Quality Bond Funds under the general
supervision of the Investment Adviser. Organized in April 1999, Criterion is
registered under the Investment Advisers Act of 1940 and is a wholly owned
subsidiary of Westdeutsche Landesbank Girzozentrale. Its principal address is
1990 Post Oak Boulevard, Houston, Texas 77056. Criterion previously was the
fixed income asset management division of the Investment Adviser and now
provides investment advice to the Funds and approximately 80 other separate
institutional clients with approximately $9 billion in assets under
management.

As compensation for Criterion's services under the subadvisory
agreement, the Investment Adviser pays Criterion monthly, a subadvisory fee
at an annual rate of .25% of each Fund's average daily net assets. Net fees
paid or owned by the Investment Adviser in 1999 to Criterion for the High
Quality Bond and Short Intermediate Funds were $23,186 and $22,151,
respectively.

MAURITIUS SUBSIDIARY

For reasons of efficient portfolio management, the International Small Cap,
Global Technology and Emerging Countries Funds invest in the Southeast Asian
stock markets through the Nicholas-Applegate Southeast Asia Fund, Ltd. a
subsidiary of the Funds with offices located at 3rd Floor, Les Cascades, Edith
Cavell Street, Port Louis, Mauritius (the "Mauritius Subsidiary"). The Mauritius
Subsidiary, incorporated on October 29, 1999, is an "Offshore Company" for the
purposes of the Mauritius Offshore Business Activities Act 1992 and has a
certificate of tax residence from the Commissioner of Income Tax in Mauritius.
The directors of the Mauritius subsidiary are:

E. Blake Moore, Jr.
Charles H. Field, Jr.
John J.P. McDonnell
K. Dev Joory
Couldip B. Lala

B-23

<PAGE>

All Directors act in a non-executive capacity.

International Financial Services Limited ("IFS"), is a company incorporated
in Mauritius and licensed by the Mauritius Offshore Business Activities
Authority ("MOBAA") to provide, inter alia, company management services to
offshore companies, has been appointed as administrator, registrar and secretary
to the Mauritius Subsidiary at a fee of approximately $1,300 per month. This
appointment may be terminated by either party on three months' prior written
notice or in the other circumstances listed in the agreement. The Mauritius
Subsidiary indemnifies IFS against matters other than those arising by reason of
the negligence, bad faith, dishonesty, fraud or willful breach of duty of IFS or
its employees and agents.

Under a double-taxation treaty currently in effect between India and
Mauritius, corporate taxpayers who reside in Mauritius are exempt from Indian
capital gains tax; therefore direct investments made by the Mauritius
Subsidiary in India are not subject to Indian taxes. India currently imposes
a domestic capital gains tax at the rate of 30% for short-term gains and 10%
for long-term gains. There is no assurance that the tax treaty will remain in
effect in future years. If the treaty is rescinded the Funds will not be able
to avail upon the tax relief and may be subject to retroactive capital gains
taxes.

THE INVESTMENT ADVISORY AGREEMENT

Under the Investment Advisory Agreement between Trust and the
Investment Adviser with respect to the Funds, the Trust retains the Investment
Adviser to manage the Funds' investment portfolios, subject to direction of the
Trust's Board of Trustees. The Investment Adviser is authorized to determine
which securities are to be bought or sold by the Funds and in what amounts.

The Investment Advisory Agreement provides that the Investment Advisory
will not be liable for any error of judgment or for any loss suffered by a Fund
or the Trust in connection with the matters to the Investment Advisory Agreement
relates, except for liability resulting form willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of the Investment
Adviser's reckless disregard of its duties and obligations under the Investment
Advisory Agreement. The Trust has agreed to indemnity the Investment Adviser
against liabilities, costs and expenses that the Investment Adviser may incur in
connection with any action, suit, investigation or other proceeding arising out
of or otherwise based on any action actually or allegedly taken or omitted to be
taken by the Investment Adviser in connection with the performance of its duties
or obligations under the Investment Advisory Agreement or otherwise as
investment adviser of the Trust. The Investment Adviser is not entitled to
indemnification with respect to any liability to the Trust or its shareholders
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or of its reckless disregard of its duties and
obligations under the Investment Advisory Agreement.

The amounts of the advisory fees earned by the Investment Adviser and
reported below were for services provided to the master funds of the Master
Trust prior to the Reorganization. The amounts of the advisory fees earned by
the Investment Adviser for the fiscal years ended March 31, 1998, 1999 and 2000,
and the amounts of the reduction in fees and reimbursement of expenses by the
Investment Adviser (or recoupment of fees previously deferred and expenses
previously reimbursed) as a result of the expense limitations and fee waivers
described below under "Expense Limitation" were as follows:

B-24

<PAGE>

For Year Ended
March 31, 1998

<TABLE>
<CAPTION>
Fee Reductions
and Expense Reimbursements
Fund Advisory Fees (or Recoupments)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Global Blue Chip Fund $ 21,373 $ 25,177
International Core Growth Fund 308,562 30,669
Worldwide Growth Fund 1,251,181 111,071
International Small Cap Growth Fund 658,893 79,886
Global Growth & Income Fund 29,786 20,322
Emerging Countries Fund 2,790,216 84,868
Pacific Rim Fund 2,848 8,837
Latin America Fund 4,778 13,560
Large Cap Fund 32,530 53,872
Mid Cap Growth Fund 3,422,148 9,400
Value Fund 52,328 60,348
Small Cap Growth Fund 6,613,874 0
Mini Cap Growth Fund 866,987 (5,098)
Convertible Fund 1,427,198 0
Short Intermediate Fund 37,524 93,900
High Quality Bond Fund(1) 94,359 193,047
High Yield Bond Fund 36,505 111,479
</TABLE>

(1)Includes the advisory fees, fee reductions and expense reimbursements
of the Government Income Fund, the assets and liabilities of which were assigned
to and assumed by the High Quality Bond Fund pursuant to the Reorganization.

For Year Ended
March 31, 1999

<TABLE>
<CAPTION>
Fee Reductions
and Expense Reimbursements
Fund Advisory Fees (or Recoupments)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Global Blue Chip Fund 64,474 145,902
International Core Growth Fund 1,061,288 253,811
Worldwide Growth Fund 1,472,492 242,660
International Small Cap Growth Fund 1,149,529 168,199
Global Growth & Income Fund 46,259 161,466
Emerging Countries Fund 3,476,180 816,718
Pacific Rim Fund 10,116 132,636
Latin America Fund 12,038 124,861
Large Cap Growth Fund 178,627 154,098
Mid Cap Growth Fund 3,049,230 301,613
Value Fund 70,871 116,404
Small Cap Growth Fund 5,334,833 518,164
Mini Cap Growth fund 921,377 83,434
Convertible Fund 1,997,038 318,025
Short Intermediate Fund 44,439 149,179
High Quality Bond Fund 124,514 232,922
High Yield Bond Fund 466,926 318,323
Global Technology Fund 29,783 80,153
</TABLE>

<TABLE>
<CAPTION>
For Year Ended
March 31, 2000
Fee Reductions
and Expense Reimbursements
Fund Advisory Fees (or Recoupments)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Global Blue Chip Fund 128,590 78,076
International Core Growth Fund 1,730,163 (35,051)
Worldwide Growth Fund 1,391,630 73,822
International Small Cap Growth Fund 1,315,748 56,558
Global Growth & Income Fund 57,511 113,801
Emerging Countries Fund 2,497,173 207,942
Pacific Rim Fund 25,526 118,127
Latin America Fund 47,846 83,077
Global Health Care Fund 271,020 11,443
Large Cap Growth Fund 344,335 73,763
Mid Cap Growth Fund 1,172,637 131,914
Value Fund 246,907 79,755
Small Cap Growth Fund 2,019,763 388,726
Mini Cap Growth fund 880,167 130,916
Convertible Fund 417,743 134,536
Short Intermediate Fund 55,899 113,807
High Quality Bond Fund 84,863 126,523
High Yield Bond Fund 85,360 71,322
Global Technology Fund 1,390,764 2,985
</TABLE>

B-25

<PAGE>

CUSTODIAN, FUND ACCOUNTING AGENT AND ADMINISTRATORS

The Custodian, Fund Accounting and Administrator Agent for the Trust
is Brown Brothers Harriman & Co., Private Bankers ("BBH"), a New York Limited
Partnership established in 1818. BBH&Co. has offices worldwide and provides
services to Trust from its offices located at 40 Water Street, Boston,
Massachusetts 02109. As Custodian, Administrator and Fund Accounting Agent,
BBH&Co. is responsible for the custody of Trust's portfolio securities and
cash, maintaining the financial and accounting books and records of the
Trust, computing the Trust's net asset value per share and providing the
administration services required for the daily business operations of the
Trust. For its services, BBH received under the Administration Agreement
annual fees from each Fund equal to the Fund's pro rata portion (based on
each Funds net assets compared to the Trust's total net assets)of a fee equal
to 0.03% of the first $100 million of the Trust's average net assets, 0.02%
of the next $100 million, 0.01% thereafter, subject to a $25,000 annual
minimum and a $500,000 annual maximum. For the fiscal year ended March 31,
2000, for Fund Administration, BBH received aggregate compensation of
$458,332 for all of the series of the Trust.

Pursuant to an Administrative Services Agreement with the Trust, the
Investment Adviser is responsible for providing all administrative services
which are not provided by the BBH or by the Trust's Distributor, transfer
agents, accounting agents, independent accountants and legal counsel. These
services, are comprised principally of assistance in coordinating with the
Trust's various service providers, providing certain officers of the Trust,
responding to inquiries from shareholders which are directed to the Trust rather
than other providers, calculating performance data, providing various reports to
the Board of Trustees, and assistance in preparing reports, prospectuses, proxy
statements and other shareholder communications. The Agreement contains
provisions regarding liability and termination similar to those of the
Administration Agreement.

Under the Administrative Services Agreement, the Investment Adviser is
compensated at the annual rate of 0.10% of the average daily net assets of each
Fund.

TRANSFER AND DIVIDEND DISBURSING AGENT, AND
INDEPENDENT AUDITORS

State Street Bank and Trust Company, 2 Heritage Drive, 7th Floor, North
Quincy, Massachusetts, 02171, serves as the Transfer Agent and as the Dividend
Disbursing Agent for the Funds. The Transfer Agent provides customary transfer
agency services to the Trust, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, and related functions. The Dividend Disbursing
Agent provides customary dividend disbursing services to the Trust, including
payment of dividends and distributions and related functions.

B-26

<PAGE>

Ernst and Young, L.L.P., 725 South Figueroa Street, Los Angeles,
California 90017, serves as the independent auditors for the Trust, and in that
capacity examines the annual and financial statements of the Trust.

DISTRIBUTOR

Nicholas-Applegate Securities (the "Distributor"), 600 West Broadway, 30th
Floor, San Diego, CA 92101, is the principal underwriter and distributor for the
Trust and, in such capacity is responsible for distributing shares of the Funds.
The Distributor is a California limited partnership organized in 1992 to
distribute shares of registered investment companies. Its general partner is
Nicholas-Applegate Capital Management Holdings, L.P., the general partner of the
Investment Adviser.

Pursuant to its Distribution Agreement with the Trust, the Distributor
has agreed to use its best efforts to effect sales of the Funds, but is not
obligated to sell any specified number of shares. The Distribution Agreement
contains provisions with respect to renewal and termination similar to those in
the Investment Advisory Agreement discussed above. The minimum assets for
investors in the Funds may be waived from time to time. Pursuant to the
Distribution Agreement, the Trust has agreed to indemnify the Distributor to the
extent permitted by applicable law against certain liabilities under the
Securities Act.
SHAREHOLDER SERVICE PLAN

The Trust has also adopted a Shareholder Service Plan with respect to
the Class R shares of the Trust. Under the Shareholder Service Plan, the
Distributor is compensated at the annual rate of up to 0.25% of the average
daily net assets of each Fund attributable to the Class R shares of each Fund.

Support services include, among other things, establishing and
maintaining accounts and records relating to their clients that invest in Fund
shares; processing dividend and distribution payments from the Funds on behalf
of clients; preparing tax reports; arranging for bank wires; responding to
client inquiries concerning their investments in Funds shares; providing the
information to the Fund's necessary for accounting and subaccounting; preparing
tax reports, forms and related documents; forwarding shareholder communications
from the Trust (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to clients;
assisting in processing exchange and redemption requests from clients; assisting
clients in changing dividend options, account designations and addresses; and
providing such other similar services.

Pursuant to the Shareholder Service Plan, the Board of Trustees reviews at
least quarterly a written report of the service expenses incurred on behalf of
Class R shares of the Funds by the Distributor. The report includes an
itemization of the service expenses and the purposes of such expenditures.
Because the Trust offers Class R shares of numerous Funds which are subject to
Rule 12b-1 under the Investment Company Act, the selection and nomination of
Trustees who are not interested persons of the Trust is committed to the
Trustees who are not interested persons of the Trust.

The Shareholder Service Plan continues in effect from year to year,
provided that each such continuance is approved at least annually by vote of the
Board of Trustees of the Trust, including a majority of the Trustees who have no
direct or indirect financial interest in the operation of the Shareholder
Service Plan or in any agreement related to the Shareholder Service Plan (the
"Independent Trustees'), cast in person at a meeting called for the purpose of
voting on such continuance. The Shareholder Service Plan may be amended at any
time by the Board, provided that any material amendments of the terms of the
Plan will become effective only upon the approval by majority of the Board and a
majority of the Independent Trustees pursuant to a vote cast in person at a
meeting called for the purpose of voting on the Plan. The Shareholder Service
Plan may be terminated with respect to any Fund or class any time, without
penalty, by the Board.
DISTRIBUTION PLAN

Under a plan of distribution for the Trust with respect to the Class R
shares of the Funds (the "Distribution Plan") adopted pursuant to Rule 12b-1
under the Investment Company Act and distribution agreement (the "Distribution
Agreement"), the Distributor incurs the expense of distributing such shares of

B-27
<PAGE>

the Funds. The Distribution Plan provides for compensation to the Distributor
for the services it provides, and the costs and expenses it incurs, related to
marketing such Class R shares of the Funds. The Distributor is paid for: (a)
expenses incurred in connection with advertising and marketing such shares of
the Funds, including but not limited to any advertising by radio, television,
newspapers, magazines, brochures, sales literature, telemarketing or direct mail
solicitations; (b) periodic payments of fees or commissions for distribution
assistance made to one or more securities brokers, dealers or other industry
professionals such as investment advisers, accountants, estate planning firms
and the Distributor itself in respect of the average daily value of such shares
owned by clients of such service organizations, and (c) expenses incurred in
preparing, printing and distributing the Funds' prospectuses and statements of
additional information with respect to such shares.

The Distribution Plan continues in effect from year to year, provided
that each such continuance is approved at least annually by a vote of the Board
of Trustees of the Trust, including a majority vote of the Board of Trustees of
the Trust, including a majority vote of the Trustees of the Trust who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Distribution Plan or in any agreements related
to the Distribution Plan (the "Rule 12b-1 Trustees"), cast in person at a
meeting called for the purpose of voting on such continuance. The Distribution
Plan may be terminated at any time, without penalty, by the vote of a majority
of the Rule 12b-1 Trustees or by the vote of the holders of a majority of the
outstanding shares of such Fund. The Distribution Plan may not be amended to
increase materially the amounts to be paid by the R Class of shares of a Fund
for the services described therein without approval by a majority of such
outstanding shares of the Fund, and all material amendments are required to be
approved by the Board of Trustees in the manner described above. The
Distribution Plan will automatically terminate in the event of its assignment.
The Class R shares of the Fund will not be contractually obligated to pay
expenses incurred under the Distribution Plan if the Plan is terminated or not
continued with respect to such shares.

Under the Distribution Plan, the Distributor is compensated for
distribution-related expenses with respect to the Class R Shares of the Funds.
The Distributor is compensated at the annual rate of up to 0.25%, payable
monthly, based on the average daily net assets. The Distributor recovers the
distribution expenses it incurs through the receipt of compensation payments
from the Trust under the Distribution Plan.

If the Distributor incurs expenses greater than the maximum
distribution fees payable under the Distribution Plan, as described above, with
respect to Class R Shares of Fund, the Class will not reimburse the Distributor
for the excess in the subsequent fiscal year. However, because the Distributor
Plan is a "compensation-type" plan, the distribution fees are payable even if
the Distributor's actual distribution related expenses are less than the
percentages described above.

The Trust currently has no intention to activate the Distribution Plan.
Shareholders will be given a 60 day notice upon the Trust's determination to
activate the Plan.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to policies established by the Trust's Board of Trustees, the
Investment Adviser executes the Funds' portfolio transactions and allocated the
brokerage business. In executing such transactions, the

B-28
<PAGE>

Investment Adviser seeks to obtain the best price and execution for the Funds,
taking into account such factors as price, size of order, difficulty and risk of
execution and operational facilities of the firm involved. Securities in which
the Funds invest may be traded in the over-the-counter markets, and the Funds
deal directly with the dealers who make the markets in such securities except in
those circumstances where better prices and execution are available elsewhere.
The Investment Adviser negotiates commission rates with brokers or dealers based
on the quality or quantity of services provided in light of generally prevailing
rates, and while the Investment Adviser generally seeks reasonably competitive
commission rates, the Funds do not necessarily pay the lowest commissions
available. The Board of Trustees of the Trust periodically reviews the
commission rates and allocation of orders.

The Funds have no obligation to deal with any broker or group of
brokers in executing transactions in portfolio securities. Subject to obtaining
the best price and execution, brokers who sell shares of the Funds or provide
supplemental research, market and statistical information and other research
services and products to the Investment Adviser may receive orders for
transactions by the Funds. Such information, services and products are those
which brokerage houses customarily provide to institutional investors, and
include items such as statistical and economic data, research reports on
particular companies and industries, and computer software used for research
with respect on investment decisions. Information, services and products so
received are in addition to and not in lieu of the services required to be
performed by the Investment Adviser under the Investment Advisory Agreement, and
the expenses of the Investment Adviser are not necessary reduced as a result to
the receipt of such supplemental information, service and products. Such
information, services and products may be useful to the Investment Adviser in
providing services to clients other than the Trust, and not all such
information, services and products are used by the Investment Adviser, in
connection with the Funds. Similarly, such information, services and products
provided to the Investment Adviser by brokers and dealers through whom other
clients of the Investment Adviser effect securities transactions may be useful
to the Investment Adviser in providing services to the Funds. The Investment
Adviser may pay higher commissions on brokerage transactions for the Funds to
brokers in order to secure the information, services and products described
above, subject to review by the Trust's Board of Trustees from time to time as
to the extent and continuation of this practice.

Although the Investment Adviser makes investment decisions for the
Trust independently from those of its other accounts, investment of the kind
made by the Funds may often also be made by such other accounts. When the
Investment Adviser buys and sells the same security at substantially the same
time on behalf of the Funds and one or more other accounts managed by the
Investment Adviser, the Investment Adviser allocates available investments by
such means as, in its judgment, result in fair treatment. The Investment Adviser
aggregates orders for purchases and sales of securities of the same issuer on
the same day among the Funds and its other managed accounts, and the price paid
to or received by the Funds and those accounts is the average obtained in those
orders. In some cases, such aggregation and allocation procedures may affect
adversely the price paid or received by the Funds or the size of the position
purchased or sold by the Funds.

Securities trade in the over-the-counter market on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's commission or discount. On occasion, certain money market
instruments and agency securities may be purchased directly from the issuer, in
which case no commissions or discounts are paid.

During the fiscal year ended March 31, 2000, the following funds acquired
securities of their regular brokers and dealers (as defined in Rule 10b-1 under
the Investment Company Act) or their parents: Short Intermediate Fund--Morgan
Stanley Dean Witter & Co.($148,389); Global Growth & Income Fund--Morgan Stanley
Dean Witter & Co. ($75,438); Convertible Fund--Morgan Stanley Dean Witter &
Co.($2,411,346); High Quality Bond Fund--Merrill Lynch & Co. ($89,492);
International Core Growth Fund--UBS AG ($1,261,563); Worldwide Growth Fund--UBS
AG ($525,651); Value Fund--Lehman Brothers, Inc. ($805,100).

B-29
<PAGE>

The aggregate dollar amount of brokerage commission paid by the master fund
predecessors to the corresponding Funds during the last three fiscal years of
the Trust were as follows:

<TABLE>
<CAPTION>
YEAR ENDED

FUND March 31, 2000 March 31, 1999 March 31, 1998
---- ------------------------------------------------------------
<S> <C> <C> <C>
Global Blue Chip Fund 132,706 $80,702 $49,764
International Core Growth 1,768,343 1,150,595 464,615
Worldwide Growth Fund 880,213 1,166,321 1,065,153
International Small Cap Growth Fund 1,162,059 873,671 745,259
Global Growth & Income Fund 48,004 36,494 52,145
Emerging Countries Fund 2,700,556 3,945,783 3,634,338
Pacific Rim Fund 74,497 27,429 10,403
Latin America Fund 90,728 26,817 12,759
Global Health Care Fund 241,040 N/A N/A
Large Cap Fund 157,024 115,558 30,907
Mid Cap Growth Fund 227,055 1,291,517 1,809,755
Value Fund 118,370 33,759 14,316
Small Cap Growth Fund 253,317 974,722 1,002,867
Mini Cap Growth Fund 96,858 187,001 202,223
Global Technology Fund 1,216,506 40,689 0
Convertible Fund 34,134 158,049 130,017
Short Intermediate Fund 5,229 0 0
High Quality Bond Fund(1) 0 529 100
High Yield Bond Fund 1,857 11,304 1,896
</TABLE>

(1) The Government Income Fund, the assets and liabilities of which were
assigned to and assumed by the High Quality Bond Fund paid no brokerage fees in
the fiscal years ended March 31, 1998.

Of the total commissions paid during the fiscal year ended March 31,
2000, $287,355 (31.20%) were paid to firms which provided research,
statistical or other services to the Investment Adviser. The Investment
Adviser has not separately identified a portion of such commissions as
applicable to the provision of such research, statistical or otherwise.

PURCHASE AND REDEMPTION OF FUND SHARES

Shares of the Funds may be purchased and redeemed at their net asset
value without any initial or deferred sales charge.

The offering price is effective for orders received by the Transfer
Agent or any sub-transfer agent prior to the time of determination of net
asset value. The Trust has authorized one or more brokers to accept on its
behalf purchase and redemption orders. Such brokers are authorized to
designate other intermediaries to accept purchase and redemption orders on
the Trust's behalf. The Funds will have been deemed to have received a
purchase or redemption order when an authorized broker or, if applicable, a
broker's authorized designee, accepts the order. Customer orders will be
priced at the Fund's Net Asset Value next computed after they are accepted by
an authorized broker or the broker's authorized designees. Brokers/Dealers
are responsible for promptly transmitting purchase orders to the Transfer
Agent or a sub-transfer agent. The Trust reserves the right in its sole
discretion to suspend the continued offering of the Funds' shares and to
reject purchase orders in whole or in part when such rejection is in the best
interests of the Trust and the affected Funds. Payment for shares redeemed
will be made not more than seven days after receipt of a written or telephone
request in appropriate form, except as permitted by the Investment Company
Act and the rules thereunder. Such payment may be postponed or the right of
redemption suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on such Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund
of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the Securities and Exchange
Commission, by order, so permits.

B-30
<PAGE>

REDEMPTIONS IN KIND. Although the Funds intend to pay share redemptions in
cash, they reserve the right, as described below, to pay the redemption price in
whole or in part by a distribution of portfolio securities.

Because the Funds have elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940, the Funds are obligated to pay Share
redemptions to any one shareholder in cash only up to the lesser of $250,000
or 1% of the net assets represented by such share class during any 90-day
period. Any share redemption payment greater than this amount will also be in
cash unless the Funds' Board determines that payment should be in kind. In
such a case, the Fund will pay all or a portion of the remainder of the
redemption in portfolio securities, valued in the same way as the Fund
determines its NAV. The portfolio securities will be selected in a manner
that the Fund's Board deems fair and equitable and, to the extent available,
such securities will be readily marketable.

The Board of Trustees of the Trust has adopted redemption in-kind policies
for shareholders who are deemed affiliated persons of the Funds. Pursuant to
these policies a redemption in-kind will be processed so that it does not result
in a dissolution of shares of remaining shareholders. Furthermore, under these
policies the affiliated party will have no influence over the selection process
of securities to be redeemed in kind.

Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving the portfolio securities and selling them
before their maturity could receive less than the redemption value of the
securities and could incur certain transaction costs.

B-31

<PAGE>

SHAREHOLDER SERVICES

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS

A shareholder of one Fund may elect to cross-reinvest dividends or
dividends and capital gain distributions paid by that Fund (the "paying Fund")
into any other Fund of the same share class (the "receiving Fund") subject to
the following conditions: (i) the aggregate value of the shareholder's
account(s) in the paying Fund(s) must equal or exceed $5,000 (this condition is
waived if the value of the account in the receiving Fund equals or exceeds that
Fund's minimum initial investment requirement), (ii) as long as the value of the
account in the receiving Fund is below that Fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
Funds must be automatically reinvested in the receiving Fund, (iii) if this
privilege is discontinued with respect to a particular receiving Fund, the value
of the account in that Fund must equal or exceed the Fund's minimum initial
investment requirement or the Fund will have the right, if the shareholder fails
to increase the value of the account to such minimum within 60 days after being
notified of the deficiency, automatically to redeem the account and send the
proceeds to the shareholder. These cross-investments of dividends and capital
gain distributions will be at net asset value (without a sales charge).

AUTOMATIC WITHDRAWAL

The Transfer Agent arranges for the redemption by the Fund of
sufficient shares, deposited by the shareholder with the Transfer Agent, to
provide the withdrawal payment specified. Withdrawal payments should not be
considered as dividends, yield or income. Automatic investments may not be made
into a shareholder account from which there are automatic withdrawals.
Withdrawals of amounts exceeding reinvested dividends and distributions and
increases in share value will reduce the aggregate value of the shareholder's
account.

REPORTS TO INVESTORS

Each Fund will send its investors annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. In order to reduce duplicate mailing and printing expenses, the
Funds may provide one annual and semi-annual report and annual prospectus per
household. In addition, quarterly unaudited financial data are available from
the Funds upon request.

NET ASSET VALUE

The net asset value of a Fund is calculated by dividing (i) the value
of the securities held by the Fund, plus any cash or other assets, minus all the
Class' proportional interest in the Fund's liabilities (including accrued
estimated expenses on an annual basis) all liabilities allocable to such Class,
by the total number of class I or R shares of the Fund outstanding. The value of
the investments and assets of a Fund is determined each business day. Investment
securities, including ADRs and EDRs, that are traded on a stock exchange or on
the NASDAQ National Market System are valued at the last sale price as of the
close of business on the New York Stock Exchange (normally 4:00 P.M. New York
time) on the day the securities are being valued, or lacking any sales, at the
mean between the closing bid and asked prices. Securities listed or traded on
certain foreign exchanges whose operations are similar to the United States
over-the-counter market are valued at the price within the limits of the latest
available current bid and asked prices

B-32
<PAGE>

deemed by the Investment Adviser best to reflect fair value. A security which
listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for such security by the Investment
Adviser. Listed securities that are not traded on a particular day and other
over-the-counter securities are valued at the mean between the closing bid and
asked prices.

In the event the New York Stock Exchange or the national securities
exchange on which stock or stock options are traded adopt different trading
hours on either a permanent or temporary basis, the board of Trustees of Trust
will reconsider the time at which they compute net asset value. In addition, the
asset value of the Funds may be computed as of any time permitted pursuant to
any exemption, order or statement of the Commission or its staff.

The Funds value long-term debt obligations at the quoted bid prices for
such securities or, if such prices are not available, at prices for securities
or comparable maturity, quality and type; however, the Investment Adviser will
use, when it deems it appropriate, prices obtained for the day of valuation from
a bond pricing service, as discussed below. The Funds value debt securities with
maturities of 60 days or less at amortized cost if their term to maturity from
date of purchase is less that 60 days, or by amortizing, from the sixty-first
day prior to maturity, their value on the sixty-first day prior to maturity if
their term to maturity from date of purchase by the Fund is more than 60 days,
unless this is determined by the Board of Trustees of the Trust not to represent
fair value. The Funds value repurchase agreements at close plus accrued
interest.

The Funds value U.S. Government securities which trade in the
over-the-counter market at the last available bid prices, except that securities
with a demand feature exercisable within one to seven days are value at par.
Such valuations are based on quotations of one or more dealers that make markets
in the securities as obtained from such dealers, or on the evaluation of a
pricing service.

The Funds value options, futures contracts and options thereon, which
trade on exchanges, at their last sale or settlement price as of the close of
such exchanges or, if no sales are reported, at the mean between the last
reported bid and asked prices. If an options or futures exchange closes later
than 4:00 p.m. New York time, the options and futures traded on it are valued
based on the sale price, or on the mean between the bid and ask prices, as the
case may be, as of 4:00 p.m. New York time.

Trading in securities on foreign securities exchanges and
over-the-counter markets is normally completed well before the close of business
day in New York. In addition, foreign securities trading may not take place on
all business days in New York, and may occur in various foreign markets on days
which are not business days in New York and on which net asset value is not
calculated. The calculation of net asset value may to take place
contemporaneously with the determination of the prices of portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the calculation of net asset value
unless the Board of Trustees of the Trust deems that the particular event would
materially affect net asset value, in which case an adjustment will be made.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value into U.S.
dollars at the spot exchange rates at 11:00 a.m. New York time or at such other
rates as the Investment Adviser may determine to be appropriate in computing
net asset value.

Securities and assets for which market quotations are not readily
available, or for which the Trust's Board of Trustees or persons designated by
the Board determine that the foregoing methods do not accurately reflect current
market value, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Such valuations and procedures
will be reviewed periodically by the Board of Trustees.

The Trust may use a pricing service approved by its Board of Trustees.
Prices provided by such a service represent evaluations of the mean between
current bid and asked market prices, may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size

B-33
<PAGE>

trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, individual trading characteristics, indications of values from
dealers and other market data. Such services may use electronic data processing
techniques and/or a matrix system to determine valuations. The procedures of
such services are reviewed periodically by the officers of the Trust under the
general supervision and responsibility of its Board of Trustees, which may
replace a service at any time if it determines that it is in the best interests
of the Funds to do so.

DIVIDENDS, DISTRIBUTIONS AND TAXES

REGULATED INVESTMENT COMPANY

The Trust has elected to qualify each Fund as a registered investment
company under Subchapter M of the Code, and intends that each Fund will remain
so qualified.

As a regulated investment company, a Fund will not be liable for
federal income tax on its income and gains provided it distributes all of its
income and gains currently. Qualification as a regulated investment company
under the Code requires, among other things, that each Fund (a) derive at least
90% of it gross income form dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
foreign currencies, or other income (including, but not limited to, gains form
options, futures or forward contracts) derived with respect to its business of
investing in such securities or currencies; (b) for taxable years beginning
August 5, 1997 derive less than 30% of it gross income from the sale or other
disposition of stock, securities, options, futures, forward contracts, certain
foreign currencies and certain options, futures, and forward contracts on
foreign currencies held less than three months; (c) diversify its holdings so
that, at the end of each fiscal quarter, (i) at least 50% of the market value of
the Fund's assets is represented by cash, U.S. Government securities and
securities of other regulated investment companies, and other securities (for
purposes of this calculation generally limited, in respect of any one issuer, to
an amount not greater than 5% of the market value of the Fund's assets and 10%
of the outstanding voting securities of such issuer) and (ii) not more than 25%
of the value of its assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies), or two or more issuers which the Trust controls and which
are determined to be engaged in the same or similar trades or businesses; and
(d) distribute at least 90% of its investment company taxable income (which
includes dividends, interest, and net short-term capital gains in excess of net
long-term capital losses) each taxable year.

A Fund generally will be subject to a nondeductible excise tax of 4% to
the extent that it does not meet certain minimum distribution requirements as of
the end of each calendar year. To avoid the tax, a Fund must distribute during
each calendar year an amount equal to the sum of (1) at least 98% of it ordinary
income and net capital gain (not taking into account any capital gains or losses
as an exception) for the calendar year, (2) at least 98% of its capital gains in
excess of its capital losses (and adjusted for certain ordinary losses) for the
twelve month period ending on October 31 of the calendar year, and (3) all
ordinary income and capital gains for previous years that were not distributed
during such years. A distribution will be treated as paid on December 31 of the
calendar year if it is declared by the Fund in October, November, December of
that year to shareholders of record on a date in such a month and paid by the
Portfolio during January of the following year. Such distributions will be
taxable to shareholders (other that those not subject to federal income tax) in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received. To avoid the excise tax,
the Funds intend to make timely distributions of their income in compliance with
these requirements and anticipate that they will not be subject to the excise
tax.

Dividends paid by a Fund from ordinary income, and distributions of the
Fund's net realized short-term capital gains, are taxable to its shareholders as
ordinary income. Distributions to corporate shareholders will be eligible for
the 70% dividends received deduction to the extent that the income of the

B-34
<PAGE>

Funds is derived form dividends on common or preferred stock of domestic
corporations. Dividend income earned by a Fund will be eligible for the
dividends received deduction only if the Fund has satisfied a 46-day period
requirement (described below) with respect to the underlying portfolio
security (91 days in the case of dividends derived from preferred stock). In
addition, a corporate shareholder must have held it shares in the Fund for
not less than 46 days during the 90-day period that begins 45 days before the
stock becomes ex-dividend with respect to the dividend (91 days during the
180-day period that begins 90 days before the stock becomes ex-dividend with
respect to the dividend in the case of dividends derived from preferred
stock) in order to claim the dividend received deduction. Not later than 60
days after the end of the taxable year, the Fund will send to its
shareholders a written notice designating the amount of any distributions
made during such year which may be taken into account by its shareholders for
purposes of such deduction provisions of the code. Net capital gain
distributions are not eligible for the dividends received deduction.

BACKUP WITHHOLDING. Under certain provisions of the Internal Revenue Code
(the "Code"), the Funds may be required to withhold 31% of reportable dividends,
capital gains distributions and redemption payments ("backup withholding").
Generally, shareholders subject to backup withholding will be those for whom a
certified taxpayer identification number is not on file with the Fund or who, to
the Fund's knowledge, have furnished an incorrect number, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. When establishing an account, an investor must provide his or her
taxpayer identification number and certify under penalty of perjury that such
number is correct and that he or she is not otherwise subject to backup
withholding. Corporate shareholders and other shareholders specified in the Code
are exempt from backup withholding. Backup withholding is not an additional tax.
Any amounts withheld may be credited against a shareholder's U.S. federal income
tax liability.

NONRESIDENT ALIENS. Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
federal income tax withholding at a 30% rate on ordinary income dividends and
distributions and return of capital distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.

SPECIAL TAX CONSIDERATIONS

SECTION 1256 CONTRACTS. Many of the futures contract and forward
contracts used by the Funds are "section 1256 contracts." Any gains or losses
on section 1256 contracts are generally credited 60% long-term and 40%
short-term capital gains or losses ("60/40") although gains and losses from
hedging transactions, certain mixed straddles and certain foreign currency
transactions from such contracts may be treated as ordinary in character. Also,
section 1256 contracts held by the Funds at the end of each taxable year (and,
for purposes of the 4% excise tax, on certain other dates as prescribed under
the Code) are "marked to market" with the result that unrealized gains or losses
are treated as though they were realized and the resulting gain or loss is
treated as ordinary or 60/40 gain or loss, depending on the circumstances.

STRADDLE RULES. Generally, the hedging transactions and certain other
transactions in options, futures and forward contracts undertaken by the Funds
may result in "straddles" for U.S. federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by the Funds. In
addition, losses realized by a Fund on positions that are part of a straddle may
be deferred under the straddle rules, rather than being taken into account in
calculation the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences of transactions in options, futures and
forward contracts to the Funds are not entirely clear. The transactions may
increase the amount of shore-term capital gain realized by a Fund which is taxed
as ordinary income when distributed to shareholders.

The Funds may take one or more of the elections available under the
Code which are applicable to straddles. If the Funds may any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions.

Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to the shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions.

The qualifying income and diversification requirements applicable to
the Funds' assets may limit the extent to which the Funds will be able to engage
in transactions in options, futures contracts or forward contracts.

SECTIONS 988 GAINS AND LOSSES. Under the Code, gains or losses
attributable to fluctuations in exchange rates which occur between the time a
Fund accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund actually
collects such

B-35
<PAGE>

receivables or pays such liabilities generally are treated as ordinary income or
loss. Similarly, gains or losses on disposition of debt securities denominated
in foreign currency and on disposition of certain futures attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of
the Fund's investment company taxable income to be distributed to the
shareholders.

FOREIGN TAX. Foreign countries may impose withholding and other taxes
on other income received by a Fund form sources within those countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. In addition, the Investment Adviser intend to manage the Funds with the
intention of minimizing foreign taxation in cases where it is deemed prudent to
do so. If more than 50% of the value of a Fund's total assets at the close of
its taxable year consists of securities of foreign corporations, the Fund will
be eligible to elect to "pass-through" to the Fund's shareholders the amount of
foreign income and similar taxes paid by the Fund. Each shareholder will be
notified in writing within 60 days after the close of the Fund's taxable year
whether the foreign taxes paid by the Fund will be "pass-through" for that year.

Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the Fund elects pass-through
treatment, the source of the Fund's income flows through to shareholders of the
Fund. With respect to such election, the Fund treats gains from the sale of
securities as derived from the U.S. sources and certain currency fluctuation
gains, including fluctuation gains from foreign currency denominated debt
securities, receivables and payables as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit applies separately to foreign
source passive income, and to certain other types of income. Shareholders may be
unable to claim a credit for the full amount of their proportion at share of the
foreign taxes paid by the Fund. The foreign tax credit is modified for purposes
of the federal alternative minimum tax and can be used to offset only 90% of the
alternative minimum tax imposed on corporations and individuals and foreign
taxes generally are not deductible in computing alternative minimum taxable
income.

ORIGINAL ISSUE DISCOUNT. The Funds may treat some of the debt
securities (with a fixed maturity date of more than one year from the date of
issuance) they may acquire as issued originally at a discount. Generally, the
Funds treat the amount of the original issue discount ("OID") as interest income
and include it in income over the term of the debt security, even though they do
not receive payment of that amount until a later time, usually when the debt
security matures. The Funds treat a portion of the OID includable in income with
respect to certain high-yield corporation debt securities as a dividend for
federal income tax purposes.

The Funds may treat some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance) they may acquire in the
secondary market as having market discount. Generally, a Fund treats any gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount as ordinary interest income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. Market discount generally accrues in equal daily
installments. The Funds may make one or more of the elections applicable to debt
securities having market discount, which could affect the character and timing
the recognition of income.

The Funds generally must distribute dividends to shareholders
representing discount on debt securities that is currently includable in income,
even though the Funds have yet to receive cash representing such income. The
Funds may obtain cash to pay such dividends from sales proceeds of securities
held by the Funds.

B-36
<PAGE>

PERFORMANCE INFORMATION

The Trust may form time advertise total returns and yields for the
Funds, compare Fund performance to various indices, and publish rankings of the
Funds prepared by various ranking services. Any performance information should
be considered in light of the Fund's investment objective and policies,
characteristics and quality of its portfolio, and the market conditions during
the given period, and should not be considered to be representative of what may
be achieved in the future. For purposes of calculating the historical
performance of a Fund, the Trust will take into account the historical
performance of the series of the Trust corresponding to the Fund prior to the
Reorganization.

TOTAL RETURN

The total return for a Fund is computed by assuming a hypothetical
initial payment of $1,000. It is assumed that all investment are made at net
asset value (as opposed to market price) and that all of the dividends and
distributions by the Funds over the relevant time periods are invested at net
asset value. It is then assumed that, at the end of each period, the entire
amount is redeemed without regard to any redemption fees or costs. The average
annual total return is then determined by calculating the annual rate required
for the initial payment to grow to the amount which would been received upon
redemption. Total return does not take into account any federal or state
income taxes.

Total return is computed according to the following formula:

P(1 + T)n = ERV

Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years
ERV = ending redeemable value at the end of the period (or fractional
portion thereof) of a hypothetical $1,000 payment made at the
beginning of the period.

Yield

The yield for a Fund is calculated based on a 30-day or one-month
period, according to the following formula:

Yield = 2[(a - b + 1)6 -1]
-----
(c x d)

For purposes of this formula, "a" is total dividends and interest
earned during the period; "b" is total expenses accrued for the period (net of
reimbursements); "c" is the average daily number of shares outstanding during
the period that were entitled to receive dividends; and "d" is the maximum
offering price per share on the last day of the period.

Yields for the Funds for the 30-day period ended September 30, 2000
were as follows:

<TABLE>
<CAPTION>
Fund Class I
--------------------------------------------------
<S> <C>
Convertible Fund 0.00%
Short-Intermediate Fund 6.20%
High Quality Bond Fund 6.95%
High Yield Bond Fund 11.30%
</TABLE>

B-37
<PAGE>

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

- references to ratings, rankings, and financial publication and/or
performance comparison of Shares to certain indices;
- charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
- discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views
on how such developments could impact the Funds; and information about the
mutual fund industry from sources such as the Investment Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
condition, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:

Standard & Poor's Low-Priced Index compares a group of approximately twenty
actively traded stocks prices under 25% for one month periods and year-to-date.

Value Line Mutual Funds Survey, published by Value Line Publishing, Inc.,
analyzes price, yield, risk, and total return for equity and fixed income mutual
funds. The highest rating is One, and ratings are effective for one month.

CDR Mutual Fund Report, published by CDA Investment Technologies, Inc., analyzes
price, current yield, risk, total return, and average rate of return (average
annual compounded growth rate) over specified time periods for the mutual fund
industry.

Dow Jones Industrial Average (DJIA) represents share prices of selected blue
chip industrial corporations. The DJIA indicated daily changes in the average
price of stock of thes corporations. Because it represents the top corporations
of America, the DJIA index is a leading economic indicator for the stock market
at a whole.

Financial Publications. The Wall Street Journal, Business Week, Changing Times,
Financial World, Forbes, Fortune, and Money Magazines, among others--provide
performance statistics over specified time periods.

Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specified period of time.

Morningstar, Inc, an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Value, which rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

B-38
<PAGE>

Standard and Poor's Daily Stock Price Index of 500 Common Stocks (S&P500) is a
composite index of common stocks in industry, transportation, and financial and
public utility companies. The index can be used to compare to the total returns
of funds whose portfolios are invested primarily in common stocks. In addition,
the S&P 500 assumes reinvestment of all dividends paid by stocks listed on its
index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in the S&P figures.

Lipper Growth Fund Average is an average of the total returns of 580 growth
funds tracked by Lipper Analytical Services, Inc., an independent mutual fund
rating service.

Lipper Growth Fund Index is an average of the net asset-valuated total returns
for the top 30 growth funds tracked by Lipper Analytical Services, Inc., an
independent mutual fund rating service.

Strategic Insight Mutual Fund Research and Consulting, ranks funds in various
fund categories by making comparative calculations using total return. Total
return assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a specified
period of time. From time to time, the Funds will quote their Strategic Insight
ranking in the "growth funds" category in advertising and sales literature.

Mutual Fund Source Book, published by Morningstar, Inc., analyzes price, yield,
risk, and total return for equity and fixed income funds.

Value Line Composite Index, consists of approximately 1,700 common equity
securities. It is based on a geometric average of relative price changes of the
component stocks and does not include income.

Strategic Insight Growth Funds Index consists of mutual funds that invest in
well-established companies primarily for long-term capital gains rather than
current income.

PRIOR PERFORMANCE OF CERTAIN FUNDS AND THEIR PREDECESSORS

The following tables set forth historical performance information for
the Large Cap, Value, Mini Cap Growth, Short Intermediate, High Quality Bond and
High Yield Bond Funds. It includes historical performance information for the
Institutional and Qualified Portfolios which preceded the Funds prior to the
reorganization of the Trust in July 1998 and the Investment Adviser's composite
performance date relating to the historical performance of all institutional
private accounts managed by the Investment Adviser, since the dates indicated,
hat have investment objectives, policies, strategies and risks substantially
similar to those of such Funds. The composite data is provided to illustrate the
past performance of the Investment Adviser in managing substantially similar
accounts as measured against specified market indices and does not represent the
performance of the Funds. Investors should not consider this performance data as
an indication of future performance of the Funds or of the Investment Adviser.

B-39
<PAGE>

The Investment Adviser has advised the Trust that the net performance
results for the Funds are calculated as set forth above under "General
Information - Performance Information." All information set forth in the tables
below relies on data supplied by the Investment Adviser or from statistical
services, reports or other sources believed by the Investment Adviser to be
reliable. However, except as otherwise indicated, such information has not been
verified and is unaudited.

The Investment Adviser's composite performance data shown below were
calculated in accordance with recommended standards of the Association for
Investment Management and Research ("AIMR"(1)), retroactively applied to
all time periods. All returns presented were calculated on a total return basis
and include all dividends and interest, accrued income and realized and
unrealized gains and loses. All returns reflect the deduction of investment
advisory fees, brokerage commissions and execution costs paid by the Investment
Adviser's institutional private accounts, without provision for federal or state
income taxes. Custodial fees, if any, were not included in the calculation. The
Investment Adviser's composites include all actual, fee-paying, discretionary
institutional private accounts managed by the Investment Adviser that have
investment objective, policies, strategies and risks substantially similar to
those of the Large Cap, Value, Mini Cap Growth, Short Intermediate, High Quality
Bond and High Yield Bond Funds.

Securities transactions are accounted for on the trade date and accrual
accounting is utilized. Cash and equivalents are included in performance
returns. The monthly returns of the Investment Adviser's composites combine the
individual accounts' returns (calculated on a time-weighted rate of return that
is revalued whenever cash flows exceed $500) by asset-weighing each individual
account's asset value as of the beginning of the month. Quarterly and yearly
returns are calculated be geometrically linking the monthly and quarterly
returns, respectively. The yearly returns are computed geometrically linking the
returns of each quarter within the calendar year. Investors should be aware that
the SEC uses a methodology different from that used below to calculate
performance which, as with the use of any methodology different from that below,
could result in different performance data.

The institutional private accounts that are included in the Investment
Adviser's composites are not subject to the same types of expenses to which the
Large Cap, Value, Mini Cap Growth, Short Intermediate, High Quality Bond and
High Yield Bond Funds are subject nor to the diversification requirements,
specific tax restrictions and investment limitations imposed on the Funds by the
Investment Company Act or Subchapter M of the Internal Revenue Code.
Consequently, the performance results for the Investment Adviser's composites
had been subject to the same expenses as the Funds or had been regulated as
investment companies under the federal securities laws.

The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of investments
and redemptions. In addition, the effect of taxes on any investor will depend on
such person's tax status, and the results have not been reduced to reflect any
income tax which may have been payable.

The investment results presented below are not intended to predict or
suggest the returns that might be experienced by the Large Cap, Value, Mini Cap,
Short Intermediate, High Quality Bond or High Yield Bond Funds or an individual
investor investing in such Funds.

----------------------------------
(1)AIMR is a non-profit membership and education organization with more than
60,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.

B-40
<PAGE>

CLASS I SHARES OF THE FUNDS
VALUE PERFORMANCE

<TABLE>
<CAPTION>
INVESTMENT
ADVISER'S
YEAR VALUE FUND VALUE COMPOSITE S&P 500 INDEX(1)
---- ---------- --------------- ----------------
<S> <C> <C> <C>
1994(2) N/A 3.79% 5.32%
1995 N/A 30.79 37.60
1996(2) 24.25% 32.01 22.95
1997 40.55 40.55 33.36
1998 20.13 20.19 28.58
1999 4.43 4.39 18.46
Last Year(3) 11.86 12.22 13.29
Since Inception(3) 20.90 20.43 22.03
</TABLE>

-----------------------------------
(1)The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial, transportation, utility and financial companies, regarding as
generally representative of the U.S. stock market. The Index reflects the
reinvestment of income dividends and capital gain distributions, if any, but
does not reflect fees, brokerage commissions, or other expenses of investing.

(2)Inception dates are as follows: Value Composite - April 1, 1994; Value Fund -
April 30, 1996.

(3)Through September 30, 2000.

B-41
<PAGE>

Large Cap Growth Fund
Class I Shares

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Year Large Cap Growth Fund Investment Adviser Russell 1000 Growth
Composite Index(1)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995(2) N/A 35.38% 25.26%
---------------------------------------------------------------------------------------------------------
1996(2) (1.12%) 26.63 23.12
---------------------------------------------------------------------------------------------------------
1997 46.07 33.06 30.48
---------------------------------------------------------------------------------------------------------
1998 60.80 61.79 38.71
---------------------------------------------------------------------------------------------------------
1999 64.28 69.35 28.12
---------------------------------------------------------------------------------------------------------
Last Year(3) 58.32 56.03 23.29
---------------------------------------------------------------------------------------------------------
Since Inception(3) 52.42 45.76 26.63
---------------------------------------------------------------------------------------------------------
</TABLE>

--------------------

(1) The Russell 1000 Growth Index contains those companies among the Russell
1000 securities with a 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 is considered generally
representative of the U.S. market for large cap stocks. The Index reflects the
reinvestment of income dividends and capital gains distributions, if any, but
does not reflect fees, brokerage commissions, or other expenses of investing.

(2) Inception dates are as follows: Large Cap Growth Composite--April 1, 1995;
Large Cap Growth Fund--December 26, 1996.

(3) Through September 30, 2000.

B-42
<PAGE>

MINI CAP GROWTH FUND
CLASS I SHARES

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Year Mini Cap Growth Fund Investment Adviser Russell 2000 Growth
Composite Index(1)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1991(2) N/A 28.69% 14.77%
---------------------------------------------------------------------------------------------------------
1992 N/A 1.58 7.77
---------------------------------------------------------------------------------------------------------
1993 N/A 7.25 13.36
---------------------------------------------------------------------------------------------------------
1994 N/A (5.85) (2.43)
---------------------------------------------------------------------------------------------------------
1995(2) 14.80% 55.93 31.06
---------------------------------------------------------------------------------------------------------
1996 28.37 27.72 11.26
---------------------------------------------------------------------------------------------------------
1997 30.19 30.61 12.84
---------------------------------------------------------------------------------------------------------
1998 8.43 10.86 1.28
---------------------------------------------------------------------------------------------------------
1999 80.02 69.57 29.67
---------------------------------------------------------------------------------------------------------
Last 5 Years(3) 30.63 30.89 12.41
---------------------------------------------------------------------------------------------------------
Since Inception(3) 31.61 26.64 13.42
---------------------------------------------------------------------------------------------------------
</TABLE>

--------------------

(1) The Russell 2000 Growth Index contains those securities in the Russell 2000
Index with a greater than average growth orientation. Companies within the Index
generally have higher price-to-book and price-earnings ratios than the average
for all companies in the Russell 2000 Index is a widely regarded small cap index
of the 2,000 smallest securities in the Russell 3000 Index which comprises the
3,000 largest U.S. securities as determined by total market capitalization. The
Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.

(2) Inception dates are as follows: Mini Cap Composite August 1, 1991; Mini Cap
Growth Fund--July 12, 1995.

(3) Through September 30, 2000

B-43
<PAGE>

Short Intermediate
Class I Shares

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Year Short Intermediate Fund Investment Adviser Merrill Lynch 1-3 Year
Composite Treasury Index(1)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1984(2) N/A 13.60 13.78%
----------------------------------------------------------------------------------------------------------
1985 N/A 15.97 13.96
----------------------------------------------------------------------------------------------------------
1986 N/A 11.01 10.35
----------------------------------------------------------------------------------------------------------
1987 N/A 5.38 5.65
----------------------------------------------------------------------------------------------------------
1988 N/A 8.23 6.22
----------------------------------------------------------------------------------------------------------
1989 N/A 10.46 10.87
----------------------------------------------------------------------------------------------------------
1990 N/A 9.73 9.72
----------------------------------------------------------------------------------------------------------
1991 N/A 12.87 11.68
----------------------------------------------------------------------------------------------------------
1992 N/A 6.51 6.30
----------------------------------------------------------------------------------------------------------
1993 N/A 7.48 5.41
----------------------------------------------------------------------------------------------------------
1994 N/A 0.69 0.57
----------------------------------------------------------------------------------------------------------
1995(2) 4.95 10.53 10.99
----------------------------------------------------------------------------------------------------------
1996 4.85 5.09 4.99
----------------------------------------------------------------------------------------------------------
1997 6.67 6.98 6.65
----------------------------------------------------------------------------------------------------------
1998 6.85 6.77 6.99
----------------------------------------------------------------------------------------------------------
1999 6.02 4.09 6.08
----------------------------------------------------------------------------------------------------------
Last Year(3) 6.23 6.83 1.92
----------------------------------------------------------------------------------------------------------
Last 5 Years(3) 5.93 6.24 5.89
----------------------------------------------------------------------------------------------------------
Since Inception(3) 6.30 8.23 5.89
----------------------------------------------------------------------------------------------------------
</TABLE>

--------------------

(1) The Merrill Lynch 1-3 Year Treasury Index consists of all public U.S.
Treasury obligations having maturities from one to 3 years. The Index Includes
income and distributions but does not reflect fees, brokerage commissions or
other expenses of investing.

(2) Inception dates are as follows: Short Intermediate Composite--January 1,
1984; Short Intermediate Fund--August 31, 1995.

(3) Through September 30, 2000.

B-44
<PAGE>

High Quality Bond Fund
Class I Shares

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Year High Quality Bond Fund Investment Adviser Lehman Brothers
Composite Government/Corporate Bond
Index(1)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1984(2) N/A 16.22 15.00%
-----------------------------------------------------------------------------------------------------------
1985(2) N/A 22.49 21.30
-----------------------------------------------------------------------------------------------------------
1986 N/A 16.62 15.59
-----------------------------------------------------------------------------------------------------------
1987 N/A 3.06 2.31
-----------------------------------------------------------------------------------------------------------
1988 N/A 8.34 7.52
-----------------------------------------------------------------------------------------------------------
1989 N/A 13.01 14.23
-----------------------------------------------------------------------------------------------------------
1990 N/A 8.84 8.29
-----------------------------------------------------------------------------------------------------------
1991 N/A 17.88 16.13
-----------------------------------------------------------------------------------------------------------
1992 N/A 7.85 7.57
-----------------------------------------------------------------------------------------------------------
1993 N/A 12.80 11.06
-----------------------------------------------------------------------------------------------------------
1994 N/A (3.65) (3.51)
-----------------------------------------------------------------------------------------------------------
1995(2) 8.81% 17.19 19.24
-----------------------------------------------------------------------------------------------------------
1996 2.29 3.50 2.89
-----------------------------------------------------------------------------------------------------------
1997 9.52 9.99 9.75
-----------------------------------------------------------------------------------------------------------
1998 8.54 7.78 9.47
-----------------------------------------------------------------------------------------------------------
1999 6.14 (0.62) 6.54
-----------------------------------------------------------------------------------------------------------
Last Year(3) 6.59 7.23 6.99
-----------------------------------------------------------------------------------------------------------
Last 5 Years(3) 6.28 6.46 6.47
-----------------------------------------------------------------------------------------------------------
Since Inception(3) 6.83 7.52 6.56
-----------------------------------------------------------------------------------------------------------
</TABLE>

--------------------

(1) The Lehman Brothers Government/Corporate Bond Index is a blend of the Lehman
Brothers Government Bond Index and the Lehman Brothers Corporate Bond Index. The
Government Bond Index includes all public obligations of the U.S. Treasury
(excluding flower bonds and foreign-traded issues), its agencies and
quasi-federal corporations, and corporate debt guaranteed by the U.S.
Government. The Corporate Bond Index includes all publicly issued, fixed rate,
non-convertible investment grade U.S. dollar denominated corporate debt
registered with the Securities and Exchange Commission; it also includes debt
issued or guaranteed by foreign sovereign governments, municipalities, and
governmental or international agencies. The Index includes income from
distributions but does not reflect fees, brokerage commissions or other expenses
of investing.

(2) Inception dates are as follows: Discretionary U.S. Composite--January 1,
1984; High Quality Bond Fund (formerly Fully discretionary Fixed Income
Fund)--August 31, 1995.

(3) Through September 30, 2000.

B-45
<PAGE>

High Yield Bond Fund
Class I Shares

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Year High Yield Bond Fund Investment Adviser CS First Boston
Composite High Yield Bond
Index(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994(2) N/A 1.45% 0.09%
------------------------------------------------------------------------------------
1995 N/A 19.40 17.38
------------------------------------------------------------------------------------
1996 11.33 21.87 12.42
------------------------------------------------------------------------------------
1997 21.40 21.74 12.63
------------------------------------------------------------------------------------
1998 4.52 2.72 0.58
------------------------------------------------------------------------------------
1999(2) 1.69 (0.67) (0.75)
------------------------------------------------------------------------------------
Last Year(3) 5.31 5.67 1.92
------------------------------------------------------------------------------------
Since Inception(3) 11.34 11.61 6.90
------------------------------------------------------------------------------------
</TABLE>

--------------------

(1) The CS First Boston High Yield Bond Index includes over 180 U.S. domestic
issues with an average maturity range of seven to ten years and with a minimum
issue size of $100 million. The Index reflects the reinvestment of income, if
any, but does not reflect fees, dealer markups, or other expense of investing.

(2) Inception dates are as follow: High Yield Bond Composite--April 1, 1994;
High Yield Bond Fund--July 31, 1999; High Yield Bond Fund Class R
Shares--8/11/2000.

(3) Through September 30, 2000.

B-46
<PAGE>

Value Fund
Class R Shares

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Year Value Fund Investment Adviser S&P 500 Index(1)
Composite
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994(2) N/A 3.79% 5.32%
--------------------------------------------------------------------------------------------------------
1995 N/A 30.79 37.60
--------------------------------------------------------------------------------------------------------
1996 24.11 32.01 22.95
--------------------------------------------------------------------------------------------------------
1997 40.13 40.55 33.36
--------------------------------------------------------------------------------------------------------
1998(2) 19.85 20.09 28.58
--------------------------------------------------------------------------------------------------------
1999(2) 4.19 4.39 18.46
--------------------------------------------------------------------------------------------------------
Last Year(3) 11.57 12.22 13.29
--------------------------------------------------------------------------------------------------------
Since Inception(3) 20.61 20.43 22.03
--------------------------------------------------------------------------------------------------------
</TABLE>

--------------------

(1) The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial, transporation, utility and financial companies. The Index is
regarded as generally representative of the U.S. stock market. The Index
reflects the reinvestment of income dividends and capital gains distributions,
if any, but does not reflect fees, brokerage commissions, or other expenses of
investing.

(2) Inception dates are as follows: Value Composite--April 1, 1994; Value
Fund--August 1, 1998; Value Fund Class R Shares--May 21, 1999.

(3) Through September 30, 2000.

B-47
<PAGE>

Large Cap Growth Fund
Class R Shares

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Year Large Cap Growth Fund Investment Adviser Russell 1000 Growth
Composite Index(1)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995(2) N/A 35.38% 25.26%
---------------------------------------------------------------------------------------------------------
1996(2) (1.03%) 26.63 23.12
---------------------------------------------------------------------------------------------------------
1997 45.67 33.06 30.48
---------------------------------------------------------------------------------------------------------
1998 60.34 61.75 38.71
---------------------------------------------------------------------------------------------------------
1999(2) 63.82 69.35 28.12
---------------------------------------------------------------------------------------------------------
Last Year(3) 57.94 56.03 23.29
---------------------------------------------------------------------------------------------------------
Since Inception(3) 52.09 45.76 26.63
---------------------------------------------------------------------------------------------------------
</TABLE>

--------------------

(1) The Russell 1000 Growth Index contains those companies among the Russell
1000 Index with a higher than average price-to-book ratio and forecasted growth.
The Russell 1000 Index contains the top 1000 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 is considered generally
representative of the U.S. market for large cap stocks. The Index reflects the
reinvestment of income dividends and capital gains distributions, if any, but
does not reflect fees, brokerage commissions, or other expenses of investing.

(2) Inception dates are as follows: Large Cap Growth Composite--April 1, 1995;
Large Cap Growth Fund--December 27, 1996; Large Cap Growth Fund Class R
Shares--May 21, 1999.

(3) Through September 30, 2000.

B-48
<PAGE>

High Quality Bond Fund
Class R Shares

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Year High Quality Bond Fund Investment Adviser Lehman Brothers
Composite Government/Corporate Bond
Index(1)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1984(2) N/A 16.22 15.00%
-----------------------------------------------------------------------------------------------------------
1985 N/A 22.49 21.30
-----------------------------------------------------------------------------------------------------------
1986 N/A 16.62 15.59
-----------------------------------------------------------------------------------------------------------
1987 N/A 3.06 2.31
-----------------------------------------------------------------------------------------------------------
1988 N/A 8.34 7.52
-----------------------------------------------------------------------------------------------------------
1989 N/A 13.01 14.23
-----------------------------------------------------------------------------------------------------------
1990 N/A 8.84 8.29
-----------------------------------------------------------------------------------------------------------
1991 N/A 17.88 16.13
-----------------------------------------------------------------------------------------------------------
1992 N/A 7.85 7.57
-----------------------------------------------------------------------------------------------------------
1993 N/A 12.80 11.06
-----------------------------------------------------------------------------------------------------------
1994 N/A (3.65) (3.51)
-----------------------------------------------------------------------------------------------------------
1995(2) 8.81 17.19 19.24
-----------------------------------------------------------------------------------------------------------
1996 2.29 3.50 2.89
-----------------------------------------------------------------------------------------------------------
1997 9.52 9.99 9.75
-----------------------------------------------------------------------------------------------------------
1998 8.54 7.78 9.47
-----------------------------------------------------------------------------------------------------------
1999(2) 1.96 (0.62) (2.15)
-----------------------------------------------------------------------------------------------------------
Last Year(3) 6.34 7.23 6.99
-----------------------------------------------------------------------------------------------------------
Last 5 Years(3) 6.45 6.46 6.47
-----------------------------------------------------------------------------------------------------------
Since Inception(3) 7.00 7.52 6.56
-----------------------------------------------------------------------------------------------------------
</TABLE>

--------------------

(2) Inception dates are as follows: Discretionary U.S. Composite--January 1,
1984; High Quality Bond Fund (formerly Fully discretionary Fixed Income
Fund)--August 31, 1995; Class R shares--May 21, 1999.

(3) Through September 30, 2000.

B-49
<PAGE>

High Yield Bond Fund
Class R Shares

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Year High Yield Bond Fund Investment Adviser CS First Boston
Composite High Yield Bond
Index(1)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994(2) N/A 1.45% 0.09%
------------------------------------------------------------------------------------
1995 N/A 19.40 17.38
------------------------------------------------------------------------------------
1996 11.33 21.87 12.42
------------------------------------------------------------------------------------
1997 21.40 21.74 12.63
------------------------------------------------------------------------------------
1998 4.52 2.72 0.58
------------------------------------------------------------------------------------
1999(2) 1.69 (0.67) (0.75)
------------------------------------------------------------------------------------
Last Year(3) 5.06 5.67 1.92
------------------------------------------------------------------------------------
Since Inception(3) 11.05 11.61 6.90
------------------------------------------------------------------------------------
</TABLE>

--------------------

(2) Inception dates are as follow: High Yield Bond Composite--April 1, 1994;
High Yield Bond Fund--July 31, 1999; High Yield Bond Fund Class R
Shares--August 11, 2000

(3) Through September 30, 2000.

B-50
<PAGE>

MISCELLANEOUS

SHARES OF BENEFICIAL INTEREST

On any matter submitted to a vote of shareholders of the Trust, all
shares then entitled to vote will be voted by the affected series unless
otherwise required by the Investment Company Act, in which case all shares of
the Trust will be voted in the aggregate. For example, a change in a Fund's
fundamental investment policies would be voted upon by shareholders of that
Fund, as would the approval of any advisory or distribution contract for the
Fund. However, all shares of the Trust may vote together in the election or
selection of Trustees, principal underwriters and accountants for the Trust.

Rule 18f-2 under the Investment Company Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
any investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by a majority of the outstanding shares
of the series of the Trust affected by the matter. Under Rule 18f-2, a series is
presumed to be affected by a matter, unless the interests of each series in the
matter are identical or the matter does not affect any interest of such series.
Under Rule 18f-2 the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a Fund only if approved by a majority of its outstanding shares. However, the
rule also provides that the ratification of independent public accountants, the
approval of principal underwriting contracts and the election of directors may
be effectively acted upon by the shareholders of the Trust voting without regard
to the Fund.

As used in the Funds' prospectus and in this Statement of Additional
Information, the term "majority," when referring to approvals to be obtained
from shareholders of a Fund, means the vote of the lesser of (i) 67% of the
shares of the Fund represented at a meeting if the holders of more than 50% of
the outstanding shares of the Fund are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of the Fund. Shareholders are entitled
to one vote for each full share held and fractional votes for fractional shares
held. Unless otherwise provided by law (for example, by Rule 18f-2 discussed
above) or by the Trust's Declaration of Trust or Bylaws, the Trust may take or
authorize any action upon the favorable vote of the holders of more than 50% of
the outstanding shares of the Trust.

The Trust will dispense the annual meetings of shareholders in any year
in which it is not required to elect Trustees under the Investment Company Act.
However, the Trust undertakes to hold a special meeting of its shareholders for
the purpose of voting on the question of removal of a Trustee or Trustees if
requested in writing by the holders of at least 10% of the Trust's outstanding
voting securities, and to assist in communicating with other shareholders as
required by Section 16(c) of the Investment Company Act.

Each share of each Fund represents an equal proportional interest in
the Fund and is entitled to such dividends and distributions out of the income
earned on the assets allocable to the Fund as are declared in the discretion of
the Trustees. In the event of the liquidation or dissolution of the Trust,
shareholders of a Fund are entitled to receive the assets attributable to the
Fund that are available for distribution, and a distribution of any general
assets not attributable to a particular Fund that are available for distribution
in such manner and on such basis as the Trustees in their sole discretion may
determine.

Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and nonassessable by the Trust.

DECLARATION OF TRUST

The Declaration of Trust of the Trust provides that obligations of the
Trust are no binding upon its Trustees, officers, employees and agents
individually and that the Trustees, officers, employees and agents

B-51
<PAGE>

will not be liable to the Trust or its investors for any action or failure to
act, but nothing in the Declaration of Trust protects a Trustee, officer,
employee or agent against any liability to the Trust or its investors to which
the Trustee, officer, employee or agent would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of his
or her duties. The Declaration of Trust also provides that the debts,
liabilities, obligations and expenses incurred, contracted for or existing with
respect to a designated Fund shall be enforceable against the assets and
property of such Fund only, and not against the assets or property of any other
Fund or the investors therein.

B-52

<PAGE>

APPENDIX A

DESCRIPTION OF SECURITIES RATINGS

The following paragraphs summarize the descriptions for the rating symbols of
securities.

COMMERCIAL PAPER

The following paragraphs summarize the description for the rating
symbols of commercial paper:

MOODY'S INVESTORS SERVICE, INC.

Moody's short-term debt ratings, which are also applicable to
commercial paper investments permitted to be made by the Trust, are opinions of
the ability to issuers to repay punctually their senior debt obligations which
have an original maturity not exceeding one year. Moody's employs the following
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:

PRIME 1: Issuers (or related supporting institutions) rated PRIME-1
have a superior ability for repayment of short-term promissory obligations.
PRIME-1 repayment ability will often be evidenced by the following
characteristics: (a) leading market positions in well-established industries;
(b) high rates of return on funds employed; (c) conservative capitalization
structures with moderate reliance on debt and ample asset protection; (d) broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and (e) well-established access to a range of financial markets and
assured sources of alternate liquidity.

PRIME 2: Issuers rated PRIME-2 (or related supporting institutions)
have a strong ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited above in the
PRIME-1 category, but to a lesser degree. Earning trends and coverage ratios,
while sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.

PRIME 3: Issuers rated PRIME-3 (or related supporting institutions)
have an acceptable ability for repayment of short-term debt obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.

STANDARD & POOR'S CORPORATION

Standard & Poor's ratings are a current assessment of likelihood of
timely payment of debt having an original maturity of no more than 365 days. The
ratings are based on current information furnished to Standard & Poor's by the
issuer and obtained by Standard & Poor's from other sources it considers
reliable. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. Issues within the "A"
category are delineated with the numbers 1, 2, and 3 to indicate the relative
degree of safety, as follows:

A-1: This designation indicates the degree of safety regarding timely
payment is overwhelming or very strong. Those issuers determined to possess
overwhelming safety characteristics are denoted with a "PLUS" (+) designation.

A-2: Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated A-1.

A-1

<PAGE>

A-3: Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

B: Issues rated "B" are regarded as only having an adequate capacity
for timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.

C: Issues rated "C" are regarded as having a doubtful capacity for
payment.

FITCH INVESTORS SERVICES, INC.

F-1+: Exceptionally strong credit quality. Commercial paper assigned
this rating is regarded as having the strongest degree of assurance for timely
payment.

F-1: Very strong credit quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.

F-2: Good credit rating. Commercial paper assigned this rating has a
satisfactory degree of assurance for timely payment but the margin of safety is
not as great as for issuers assigned F-1+ and F-1 RATINGS.

F-3: Fair credit quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely payment is
adequate, however, near term adverse changes could cause these securities to be
rated below investment grade.

DUFF & PHELPS

The three rating categories for Duff & Phelps for investment grade
commercial paper are "Duff 1," "Duff 2" and "Duff 3." Duff & Phelps employs
three designations, "Duff 1+," "Duff 1" and "Duff 1-" within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

DUFF 1+: Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.

DUFF 1: Debt possesses very highly certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.

DUFF 1-: Debt possesses high certainty of timely payment. Liability
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.

DUFF 2: Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.

DUFF 3: Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.

DUFF 4: Debt possesses speculative investment characteristics.

DUFF 5: Issuer has failed to meet scheduled principal and/or interest
payments.

A-2

<PAGE>

THOMSON BANKWATCH

Thomson BankWatch commercial paper ratings assess the likelihood of an
untimely payment of principal or interest of debt having a maturity of one year
or less which is issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
ratings used by Thomson BankWatch:

TBW-1: This designation represents Thomson BankWatch's highest rating
category and indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis.

TBW-2: This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."

TBW-3: This designation represents the lowest investment grade category
and indicates that while the debt is more susceptible to adverse developments
(both internal and external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is considered adequate.

IBCA

IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings.

A1+: Obligations are supported by the highest capacity for timely
repayment.

A1: Obligations are supported by a strong capacity for timely
repayment.

A2: Obligations are supported by a satisfactory capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.

A3: Obligations are supported by an adequate capacity for timely
repayment. Such capacity is more susceptible to adverse changes in business,
economic or financial conditions than for obligations in higher categories.

CORPORATE BONDS

DUFF & PHELPS

The following summarizes the ratings used by Duff & Phelps for
corporate and municipal long-term debt:

AAA: Debt is considered to be of the highest credit quality. The
risk factors are negligible being only slightly more than for risk-free U.S.
Treasury debt.

AA: Debt is considered of high credit quality. Protections factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.

A: Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.

BBB: Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.

A-3

<PAGE>

BB, B, CCC, DD AND DP: Debt that possesses one of these rating is
considered to be below investment grade. Although below investment grade, debt
rated "BB" is deemed likely to meet obligations when due. Debt rated "B"
possesses the risk that obligations will not be met when due. Debt rated "CCC"
is well below investment grade and has considerable uncertainty as to timely
payment of principal interest or preferred dividends. Debt rated "DD" is
defaulted debt obligations, and the rating "DP" represents preferred stock with
dividend arrearages.

To provide more detailed indications of credit quality, the "AA", "A",
"BBB", "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

FITCH INVESTORS SERVICE, INC.

The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:

AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+."

A: Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB: Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligation in
higher categories.

BB, B, CCC, CC, C, DDD, DD, AND D: Bonds that possess one of these
ratings are considered by Fitch to be speculative investments. The ratings "BB"
to "C" represent Fitch's assessment of the likelihood of timely payment of
principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating "DDD" to "D" is an
assessment of the ultimate recovery value through reorganization or liquidation.

To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "C" may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within these major rating
categories.

IBCA

IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for long-term debt ratings:

AAA: Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.

A-4

<PAGE>

AA: Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk albeit not very significantly.

A: Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.

BB, B, CCC, CC AND C: Obligations that are assigned one of these
ratings where it is considered that speculative characteristics are present.
"BB" represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation and
indicates that the obligations are currently in default.

IBCA may append a rating of plus (+) or minus (-) to a rating to denote
relative status within major rating categories.

A-5
<PAGE>

THOMSON BANKWATCH

Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long-term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:

AAA: This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is very high.

AA: This designation indicates a superior ability to repay principal
and interest on a timely basis with limited incremental risk versus issues rated
in the highest category.

A: This designation indicates that the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

BBB: This designation represents Thomson BankWatch's lowest investment
grade category and indicates an acceptable capacity to repay principal and
interest. Issues rated "BBB" are, however, more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

BB, B, CCC, AND CC: These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely repayment
of principal and interest. "BB" indicates the lowest degree of speculation and
"CC" the highest degree.

D: This designation indicates that the long-term debt is in default.

PLUS(+) OR MINUS(-): The ratings from "AAA" though "CC" may include a
plus or minus sign designation which indicates where within the respective
category the issue is placed.

A-6

<PAGE>

PART C

ITEM 23. EXHIBITS.

(a)(1) Certificate of Trust of Registrant--filed as Exhibit
1.1 to Amendment No. 1 to the Registrant's Form N-1A
Registration Statement ("Amendment No. 1") on March
17, 1993 and incorporated herein by reference.

(a)(2) Certificate of Amendment of Certificate of Trust of
Registrant--filed as Exhibit 1.2 to Amendment No. 1
to the Registrant's Form N-1A Registration Statement
on March 17, 1993 and incorporated herein by
reference.

(a)(3) Declaration of Trust of Registrant--filed as Exhibit
1 to Registrant's Form N1-A Registration Statement on
December 31, 1992 and incorporated herein by
reference.

(a)(4) Amended and Restated Declaration of Trust of
Registrant--filed as Exhibit 1.4 to Amendment No. 1
to the Registrant's Form N-1A Registration Statement
on March 17, 1993 and incorporated herein by
reference.

(a)(5) Amended and Restated Declaration of Trust dated
February 19, 1999--filed as Exhibit 5(a) to the
Registrant's Form N-1A Registration Statement on May
6, 1999 and incorporated herein by reference.

(a)(6) Amendment No. 1 to the Amended and Restated
Declaration of Trust dated February 19,1999--
filed as Exhibit (a)(6) to the Registrant's Form
N-1A Registration Statement on June 18, 1999 and
incorporated herein by reference.

(b)(1) Amended Bylaws of Registrant--filed as Exhibit 2 to
Amendment No. 2 to the Registrant's Form N-1A
Registration Statement on April 6, 1993 and
incorporated herein by reference.

(2)(b) Amended Bylaws of Registrant dated February 19,
1999--filed as Exhibit 2(b) to the Registrant's Form
N-1A Registration Statement on May 6, 1999 and
incorporated herein by reference.

(d)(1) Investment Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management--filed as
Exhibit (d) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.

(d)(2) Form of letter agreement dated August 31, 1999
between Registrant and Nicholas-Applegate Capital
Management adding the Global Health Care Fund to the
Investment Advisory Agreement--filed as Exhibit
(d)(2) to the Registrant's Form N-1A Registration
Statement on June 18, 1999 and incorporated herein
by reference.

(d)(3) Form of Sub Investment Advisory Agreement between
Registrant and Criterion Investment Management
LLC--filed as Exhibit (d)(3) to Post-Effective
Amendment No. 4 on May 25, 2000 and incorporated
herein by reference.

(d)(4) Proposed Investment Advisory Agreement between
Registrant and Nicholas-Applegate Capital Management.

(d)(5) Proposed Sub Investment Advisory Agreement between
Registrant and Criterion Investment Management LLC.

(e)(1) Distribution Agreement between Registrant and
Nicholas-Applegate Securities dated May 10,
1999--filed as Exhibit (e) to the Registrant's Form
N-1A Registration Statement on May 6, 1999 and
incorporated herein by reference.

(e)(2) Distribution Agreement between Registrant and
Nicholas-Applegate Securities.

(f) None.

(g)(1) Custodian Services Agreement between Registrant and
Brown Brothers Harriman & Co.--filed as Exhibit 1(g)
to the Registrant's Form N-1A Registration Statement
on May 6, 1999 and incorporated herein by reference.

(g)(2) Foreign Custody Agreement between Registrant and
Brown Brothers Harriman & Co.--filed as Exhibit
(2)(g) to the Registrant's Form N-1A Registration
Statement on May 6, 1999 and incorporated herein by
reference.

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<PAGE>

(g)(3) Amendment to Custodian Services Agreement between
Registrant and Brown Brothers Harriman & Co.--filed
as Exhibit (3)(g) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.

(g)(4) Cash Management Authorization Services Agreement
between Registrant and Brown Brothers Harriman &
Co.--filed as Exhibit (4)(g) to the Registrant's Form
N-1A Registration Statement on May 6, 1999 and
incorporated herein by reference.

(g)(5) Form of letter agreement between Registrant and Brown
Brothers Harriman & Co. adding the Global Health Care
Fund to the Foreign Custody Agreement dated May 1,
1999--filed as Exhibit (g)(5) to Post-Effective
Amendment #4 on May 25, 2000 and incorporated
herein by reference.

(g)(6) Form of letter agreement between Registrant and Brown
Brothers Harriman & Co. adding the Global Health Care
Fund to Custodian Services Agreement dated May 1,
1999--filed as Exhibit (g)(6) to Post-Effective
Amendment #4 on May 25, 2000 and incorporated
herein by reference.

(g)(7) Form of letter agreement between Registrant and Brown
Brothers Harriman & Co. adding the Global Health Care
fund to the Cash Management Authorization Services
Agreement dated May 1, 1999--filed as Exhibit (g)(7)
to Post-Effective Amendment #4 on May 25, 2000 and
incorporated herein by reference.

(h)(1) Administration and Fund Accounting Agency Agreement
between Registrant and Brown Brothers Harriman & Co.
--filed as Exhibit (1)(h) to the Registrant's Form
N-1A Registration Statement on May 6, 1999 and
incorporated herein by reference.

(h)(2) Administration Services Agreement between Registrant
and Nicholas-Applegate Capital Management--filed as
Exhibit (2)(h) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.

(h)(3) License Agreement between Registrant and
Nicholas-Applegate Capital Management--filed as
Exhibit (3)(h) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.

(h)(4) Expense Reimbursement agreement between Registrant
and Nicholas-Applegate Capital Management--filed as
Exhibit No. (4)(h) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.

(h)(5) Transfer Agency and Service Agreement between
Registrant and State Street Bank and Trust
Company--filed as Exhibit No. (5)(h) to the
Registrant's Form N-1A Registration Statement on May
27, 1999 and incorporated herein by reference.

(h)(6) Shareholder Service Plan between Registrant and
Nicholas-Applegate Securities for Class Q
Shares--filed as Exhibit No. (6)(h) to the
Registrant's Form N-1A Registration Statement on May
6, 1999 and incorporated herein by reference.

(h)(7) Form of letter agreement between Registrant and Brown
Brothers Harriman & Co. adding Global Health Care
Fund to the Administration and Fund Accounting Agency
Agreement dated May 1, 1999--filed as Exhibit (h)(7)
to Post-Effective Amendment #4 on May 25, 2000 and
incorporated herein by reference.

(h)(8) Form of letter agreement between Registrant and
Nicholas-Applegate Capital Management adding Global
Health Care Fund to the Expense Reimbursement
Agreement--filed as Exhibit (h)(8) to the
Registrant's Form N-1A Registration Statement on
June 18, 1999 and incorporated herein by reference.

(h)(9) Form of letter agreement between Registrant and State
Street Bank and Trust Company adding Global Health
Care Fund to the Transfer Agency and Service
Agreement--filed as Exhibit (h)(9) to the
Registrant's Form N-1A Registration Statement on
June 18, 1999 and incorporated herein by reference.

(h)(10) Credit Agreement between Registrant and
BankBoston, N.A. dated December 21, 1999--filed as
Exhibit (h)(10) to Post-Effective Amendment #4 on
May 25, 2000 and incorporated herein by reference.

(h)(11) Master Securities Lending Agreement between
Registrant and Goldman, Sachs & Co. dated July 22,
1999--filed as Exhibit (h)(11) to Post-Effective
Amendment #4 on May 25, 2000 and incorporated
herein by reference.

(h)(12) Proposed Administrative Services Agreement between
Registrant and Nicholas-Applegate Capital Management

(i) Opinion of Counsel.

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<PAGE>

(j) Consent of independent auditors.

(k) Not Applicable

(l) Investment Letter of initial investor in
Registrant--filed as Exhibit (l) to the Registrant's
Form N-1A Registration Statement on May 27, 1999 and
incorporated herein by reference.

(m) Form of Rule 12b-1 Plan for Class Q Shares--filed as
Exhibit (m) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.

(n) Rule 18f-3 Plan between Registrant and
Nicholas-Applegate Capital Management--filed as
Exhibit (o) to the Registrant's Form N-1A
Registration Statement on May 6, 1999 and
incorporated herein by reference.

(p) Code of Ethics--filed as Exhibit (p) to
Post-Effective Amendment #4 on May 25, 2000 and
incorporated herein by reference.

(q) Limited Powers of Attorney of Trustees--Filed as an
Exhibit to Amendment No. 12 to Registrant's Form N-1A
Registration Statement on August 1, 1994 and
incorporated herein by reference.

(q)(1) Limited Power of Attorney of Walter E. Auch--Filed as
an Exhibit to Amendment No. 14 to Registrant's Form
N-1A Registration Statement on September 26, 1994 and
incorporated herein by reference.

(q)(2) Limited Power of Attorney of John J.P. McDonnell--
filed as Exhibit (p)(2) to the Registrant's Form
N-1A Registration Statement on June 18, 1999 and
incorporated herein by reference.

(q)(3) Certified Resolution of Board of Trustees of
Registrant regarding Limited Power of Attorney of
John J.P. McDonnell--filed as Exhibit (p)(3) to the
Registrant's Form N-1A Registration Statement on
June 18, 1999 and incorporated herein by reference.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Arthur E. Nicholas is a member of the Board of Trustees of Registrant,
and also one of the seven members of the Board of Directors of
Nicholas-Applegate Fund, Inc., a registered investment company organized under
the laws of Maryland. Accordingly, Registrant and Nicholas-Applegate Fund, Inc.
may be deemed to be under common control.

ITEM 25. INDEMNIFICATION

Article V of Registrant's Declaration of Trust, included as Exhibit
(a)(5) hereto and incorporated herein by reference, provides for the
indemnification of Registrant's trustees, officers, employees and agents.

Indemnification of the Registrant's Investment Adviser and Placement
Agent is provided for, respectively, in Section 8 of the Investment Advisory
Agreement.

Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions. In no
event will Registrant indemnify any of its trustees, officers, employees or
agents against any liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties or by reason of his reckless disregard of the duties
involved in the conduct of his office or under his agreement with

C-3
<PAGE>

Registrant. Registrant will comply with Rule 484 under the Securities Act of
1933 and Release 11330 under the Investment Company Act in connection with any
indemnification.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Nicholas-Applegate Capital Management, the Investment Adviser to the
Trust, is a California limited partnership and is an indirect wholly owned
subsidiary of Allianz AG, INC. During the three fiscal years ended
December 31, 2000, the Investment Adviser has engaged principally in the
business of providing investment services to institutional and other clients.
All of the additional information required by this Item 26 with respect to
the Investment Adviser is set forth in the Form ADV, as amended, of
Nicholas-Applegate Capital Management (File No. 801-21442), which is
incorporated herein by reference.

ITEM 27. PRINCIPAL UNDERWRITERS

(a) Nicholas-Applegate Securities does not act as a principal underwriter,
depositor or investment adviser to any investment company other than
Registrant.

(b) Nicholas-Applegate Securities, the Distributor of the shares of
Registrant's Funds, is a California limited partnership and its general
partner is Allianz of America, INC. Information is furnished below with
respect to the officers, partners and directors of the Registrant and
Nicholas-Applegate Securities.

The principal business address of such persons is 600 West Broadway, 30th Floor,
San Diego, California 92101, except as otherwise indicated below.

<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Positions in Offices
Business Address Principal Underwriter with Registrant
---------------- --------------------- ---------------
<S> <C> <C>
Arthur E. Nicholas President Chairman of the Board & Trustee

John J.P. McDonnell None President

E. Blake Moore, Jr. General Counsel Secretary

C. William Maher Chief Financial Officer Treasurer
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act and the rules promulgated thereunder
will be maintained either at the offices of the Registrant (600 West Broadway,
30th Floor, San Diego, California 92101); the Investment Adviser,
Nicholas-Applegate Capital Management (600 West Broadway, 30th Floor, San Diego,
California 92101); the Administrator and Custodian, Brown Brothers Harriman &
Co. (40 Water Street, Boston, MA 02109).

ITEM 29. MANAGEMENT SERVICES.

None.

ITEM 30. UNDERTAKINGS.

None.

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<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has dully caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of San Diego,
and the state of California on this 30th day of November, 2000.

Nicholas-Applegate Institutional Funds

By: John J.P. McDonnell*
-----------------------------------
John J.P. McDonnell
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on November 30, 2000.

John J.P. McDonnell* President
--------------------------------
John J.P. McDonnell

Arthur E. Nicholas* Chairman of the Board & Trustee
--------------------------------
Arthur E. Nicholas

/s/ C. William Maher Principal Financial and Accounting
-------------------------------- Officer
C. William Maher

/s/ E. Blake Moore, Jr.
-------------------------------- Secretary
E. Blake Moore, Jr.

Walter E. Auch* Trustee
--------------------------------
Walter E. Auch

Darlene Deremer* Trustee
--------------------------------
Darlene Deremer

George F. Keane* Trustee
--------------------------------
George F. Keane

* /s/ E. Blake Moore, Jr.
------------------------------
By: E. Blake Moore, Jr.
Attorney In Fact
<PAGE>

Exhibit Index

(d) (4) Proposed Investment Advisory Agreement between Registrant and
Nicholas-Applegate Capital Management.

(d) (5) Proposed Sub Investment Advisory Agreement between Registrant and
Criterion Investment Management LLC.

(e) (2) Distribution Agreement between Registrant and
Nicholas-Applegate Securities.

(H) (12) Administrative Services Agreement between Registrant and
Nicholas-Applegate Capital Management

(I) Opinion of Counsel

(J) Consent of Ernst & Young LLP